Why Is Akamai (AKAM) Stock Rocketing Higher Today

Adam Hejl /
2023/08/09 2:42 pm EDT

What Happened:

Shares of web content delivery and security company Akamai (NASDAQ:AKAM) jumped 10.1% in the afternoon session after the company reported a "beat and raise" quarter. Second quarter results beat analysts' expectations for revenue and earnings per share. The topline growth benefitted from strong demand for security and segmentation solutions, with the security segment growing by 14% year on year. Notably, demand for Guardicore (segmentation solution) grew 60% year on year and is expected to reach $100M run rate by Q3'23. 

Looking ahead, the company raised its revenue and EPS guidance for the full year. The improved guidance partly benefits from the announced partnership with channel partner, WWT to sell Akamai's security solutions. Overall, it was a stronger quarter for the company despite the challenges faced by tech companies this quarter due to a tougher macro environment.

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What is the market telling us:

Akamai's shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. Moves this big are very rare for Akamai and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move was three months ago, when the stock gained 7.18% on the news that the company reported a 'beat and raise' first quarter. Revenue, operating income, adjusted EBITDA, and earnings per share (EPS) all beat Consensus estimates. However gross margin deteriorated and free cash flow declined compared to recent quarters. Regardless, revenue guidance for the next quarter came in above Consensus. Additionally, the company increased full year guidance at the midpoint for revenue, operating margin, and EPS. This was a solid quarter.

Akamai is up 22.1% since the beginning of the year. Investors who bought $1,000 worth of Akamai's shares 5 years ago would now be looking at an investment worth $1,350.

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