Earnings Preview: Akamai

Apr.25.12 | About: Akamai Technologies, (AKAM)

Akamai (NASDAQ:AKAM) is expected to report Q1 earnings after the market close on Wednesday, April 25, with a conference call scheduled for 4:30 pm ET.


The consensus estimate is 38c for EPS and $310.70M for revenue, according to First Call. Akamai is coming off better-than-expected Q4 earnings results, a new CFO back in February, and its March purchase of startup Cotendo. Guidance provided for Q1 is EPS of 36c-39c on revenue of $305M-$313M. The focus seems to be on the Contendo acquisition, acquired on March 6. Akamai hasn't provided financial details for Cotendo, however, analysts contend that the deal could lift guidance because the startup sold premium products. Buying Cotendo should also ease pricing pressure for some value-added content delivery services, analysts say. Some put Akamai's Q2 contribution from Cotendo at $7.5M-$10M.

Analyst Views

Pacific Crest analyst Chad Bartley expects Q2 revenue guidance of roughly $315M-$325M, which includes roughly $10M from Cotendo. Citigroup is looking for $312M in revenue, $135M in EBITDA, and 38c in normalized EPS, which is generally in-line with the Street and within the guidance range. Based on intra-quarter channel checks and their model sensitivity work, Citigroup views Street Q1 estimates as reasonable, with materially greater likelihood of upside than downside variance. Citigroup analyst Mark Mahaney "remains concerned about an increasingly competitive environment, especially where larger, well-funded companies, like Amazon are gaining traction." Akamai's main rivals have been Limelight Networks (NASDAQ:LLNW) and Level 3 Communications (NASDAQ:LVLT). It's also seeing stiffer competition from Amazon.com's (NASDAQ:AMZN) Amazon Web Services and phone companies AT&T (NYSE:T) and Verizon Communications (NYSE:VZ).