Akamai's (NASDAQ:AKAM) Q1 Earnings Results: Revenue In Line With Expectations, Stock Soars On Optimistic Guidance

Kayode Omotosho /
2023/05/09 4:04 pm EDT

Web content delivery and security company Akamai (NASDAQ:AKAM) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 1.33% year on year to $915.7 million. Guidance for next quarter's revenue was $930 million at the midpoint, which is 1.06% above the analyst consensus. Akamai made a GAAP profit of $97.1 million, down on its profit of $119.2 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) Q1 FY2023 Highlights:

  • Revenue: $915.7 million vs analyst estimates of $912.1 million (small beat)
  • EPS (non-GAAP): $1.40 vs analyst estimates of $1.32 (6.01% beat)
  • Revenue guidance for Q2 2023 is $930 million at the midpoint, above analyst estimates of $920.2 million
  • Free cash flow of $11.3 million, down 95.9% from previous quarter
  • Gross Margin (GAAP): 60.5%, down from 63.2% same quarter last year

"Akamai had a strong start to 2023, with both revenue and earnings above our expectations," said Dr. Tom Leighton, Chief Executive Officer.

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 unimpressive over the last two years, growing from quarterly revenue of $842.7 million in Q1 FY2021, to $915.7 million.

Akamai Total Revenue

Akamai's quarterly revenue was only up 1.33% year on year, which might disappoint some shareholders. But the revenue actually decreased by $12.1 million in Q1, compared to $45.9 million increase in Q4 2022. However, Akamai's sales do seem to have a seasonal pattern to them, and considering management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates Akamai is expecting revenue to grow 2.95% year on year to $930 million, slowing down from the 5.92% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 4.56% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


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 60.5% in Q1.

Akamai Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.61 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.

Key Takeaways from Akamai's Q1 Results

Sporting a market capitalization of $12.4 billion, more than $751.9 million 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.

It was good to see Akamai provide revenue outlook exceeding analysts’ expectations. And we were also glad that EPS exceeded expectations this quarter. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company is up 5.12% on the results and currently trades at $83 per share.

Should you invest in Akamai 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.

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