2344

Akamai (NASDAQ:AKAM) Surprises With Q4 Sales


Radek Strnad /
2022/02/15 4:13 pm EST
Add to Watchlist

Web content delivery and security company Akamai (NASDAQ:AKAM) announced better-than-expected results in the Q4 FY2021 quarter, with revenue up 6.98% year on year to $905.3 million. Akamai made a GAAP profit of $160.5 million, improving on its profit of $113.3 million, in the same quarter last year.

Is now the time to buy Akamai? Access our full analysis of the earnings results here, it's free.

Akamai (AKAM) Q4 FY2021 Highlights:

  • Revenue: $905.3 million vs analyst estimates of $896.3 million (1% beat)
  • EPS (non-GAAP): $1.49 vs analyst estimates of $1.42 (4.97% beat)
  • Free cash flow of $317.7 million, up 16.1% from previous quarter
  • Gross Margin (GAAP): 64%, in line with same quarter last year

"Akamai's outstanding fourth quarter performance capped off an excellent year on both the top and bottom lines," said Dr. Tom Leighton, Chief Executive Officer of Akamai.

Founded in 1999 by two engineers from MIT, Akamai (NASDAQ:AKAM) provides software for organizations to efficiently deliver web content to their customers.

The amount of content on the internet is exploding, whether it is music, movies and or e-commerce stores. Consumer demand for this content creates network congestion, much like a digital traffic jam which drives demand for specialized content delivery networks (CDN) services that alleviate potential network bottlenecks.

Sales Growth

As you can see below, Akamai's revenue growth has been moderate over the last year, growing from quarterly revenue of $846.2 million, to $905.3 million.

Akamai Total Revenue

Akamai's quarterly revenue was up 6.98% year on year. We can see that the company increased revenue by $45 million quarter on quarter accelerating up on $7.5 million in Q3 2021.

There are others doing even better than Akamai. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Akamai's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 64% in Q4.

Akamai Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.64 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Akamai's Q4 Results

Sporting a market capitalization of $17.9 billion, more than $1.07 billion in cash and with positive free cash flow over the last twelve months, we're confident that Akamai has the resources it needs to pursue a high growth business strategy.

Akamai topped analysts’ revenue expectations this quarter, even if just narrowly. That feature of these results really stood out as a positive. Overall, this quarter's results were in line with expectations. The company is down 0.62% on the results and currently trades at $110.25 per share.

Akamai may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.