What Happened?
Shares of web content delivery and security company Akamai (NASDAQ:AKAM) fell 13.7% in the afternoon session after the company reported weak third quarter earnings, with revenue guidance for the next quarter falling below Wall Street's estimates. Also, the company recorded underwhelming sales growth during the quarter primarily due to softer-than-expected performance in the delivery segment, which saw a significant slowdown in traffic growth across key verticals like video streaming and gaming.
Profitability was also weak as margins declined across the board, partly impacted by restructuring costs, which included an $82 million charge related to workforce reductions aimed at refocusing resources on growth areas like cloud computing and security. Overall, this was a softer quarter.
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What The Market Is Telling Us
Akamai’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. Moves this big are rare for Akamai and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 11.2% on the news that the company reported weak first-quarter earnings results. Although its EPS beat Wall Street's estimates, its full-year revenue guidance missed analysts' expectations, sending the stock down. Company outlooks have been the big focus during the earnings season.
On the bright side, the Board authorized a new three-year, $2.0 billion share repurchase program. Overall, the results could have been better.
Akamai is down 23.3% since the beginning of the year, and at $89.69 per share, it is trading 30.1% below its 52-week high of $128.32 from February 2024. Investors who bought $1,000 worth of Akamai’s shares 5 years ago would now be looking at an investment worth $1,061.
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