Akamai: A Utility In Tech’s Clothing (NASDAQ:AKAM)

Thesis Summary

Akamai Technologies Inc. (AKAM) provides CDN and cloud services. It has been around for over 20 years and is a leader in cybersecurity and edge computing. While the stock is fully priced, we believe that it is still a good company to add to your portfolio. Akamai has “utility-like” characteristics that make its revenues reliable and secure. Furthermore, the company will enjoy continued growth thanks to cybersecurity and its pioneering Edge Platform.

Akamai Opens New HQ In Cambridge | Bostonomix

Source: wbur.org

Company Overview

Akamai Technologies provides CDN and cloud services for delivering content around the internet. It provides the necessary infrastructure to companies around the world to deliver data in a fast and secure way. The company has been around since the days of the tech bubble and has a long track record of growth and profitability. The latest quarterly numbers are no different, and we can gain some insight into the direction the market and business is going:

Source: Investor Relations

YoY, revenues are up 11% after accounting for foreign exchange. The company operates in two main segments; Web Division, and Media and Carrier Division. The service provided is essentially the same, but the profile of the clients and specific needs are different. Web Division serves data to “traditional” HTML websites, such as Airbnb Inc. (AIRB). Meanwhile, Media and Carrier provide services to clients like the NBA and Riot Games. Revenues are split quite evenly between these two segments at $418M and $375M, respectively, in the latest quarter. However, the Media and Carrier grew at 16%, more than twice as fast as the Web.

Perhaps though, a more interesting breakdown of revenues would be by service and geography. Akamai has established itself as a leader in the cybersecurity space. Cloud Security Solutions brought in $266M and grew 23% YoY. Geographically, U.S. revenue was $437 million, up 6% year over year, while international revenue came in at $355 million, an 18% increase.

In terms of revenue growth, the company has achieved a very reasonable 12% CAGR over the last 10 years. The appeal of the steady double-digit growth, though, is at least matched, if not outweighed, by that of the balance sheet.

Source: Investor Relations

With $742M in cash, over $2 billion in short-term assets, and only $3.4 billion in total liabilities, Akamai has an above-average balance sheet. The question for investors is whether the company can maintain the last few years’ levels of growth in the future. The area is getting incredibly competitive, but the company enjoys some significant advantages and also new growth opportunities.

Strengths and Opportunities

The strength of the balance sheet, as mentioned above, is a big plus. The other thing we love about Akamai is its distribution of revenues, giving investors good exposure to the international market. But what surely separates Akamai from its peers are two things; its vast and established network and its leadership in cybersecurity and edge computing.

Akamai has over 300,000 servers around the world. This level of infrastructure is unrivaled and is what allows the

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