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Can Akamai Technologies, Inc. (NASDAQ:AKAM) Sustain the Fresh Momentum?

Akamai Technologies, Inc. (NASDAQ:AKAM) just reported financial results for the third quarter ended September 30, 2018 this week. Shares bolted higher in a big move that flies straight in the face of the type of action we have seen from this side of the market so far this earnings season. Cloud has been considered perhaps the most overvalued area. In other words, it’s the ripe fruit dangling off the high branch of the tree, and therefore, something shorts love to go after with a baseball bat and a ladder.

Perhaps that type of exposure was exactly what was sitting the market, because the squeeze in the stock in reaction to the report had the feeling of a move happening like a grenade blowing up in the face of heavy short interest.

Akamai Technologies, Inc. (NASDAQ:AKAM) hit the tape with record revenues of $670 million, up 7% year-over-year and up 8% when adjusted for foreign exchange, Cloud Security Solutions revenue grew 37%, now nearly $700 million annualized run rate, and GAAP EPS of $0.64, up 73% year-over-year, and non-GAAP EPS of $0.94, up 47% year-over-year.

That’ll do it.

“We are very pleased with our excellent results in the third quarter, which includes 37% year-over-year growth in our security business and tremendous growth in our earnings,” said Dr. Tom Leighton, Chief Executive Officer. “We are also pleased to report our fourth consecutive quarter of non-GAAP operating margin improvement.  We are well on our way to achieving our 30% margin goal in 2020, while continuing to invest in innovation and new products to drive future growth.”

Note that the Company also announced that its Board of Directors authorized a new $1.1 billion share repurchase program, effective from November 1, 2018 through December 31, 2021, which is in addition to $124 million remaining on its prior authorization.

According to the release, the Company’s goal for the new program is to continue to return to shareholders a significant percentage of Akamai’s free cash flow while preserving its flexibility for other strategic opportunities.

As we see it, in a better market context, this would be a chase. But we aren’t looking for a V-bottom in the market on this corrective move, so you may have a shot at it at more attractive levels as a consequence of index movement.


Satellite Imagery

Akamai Technologies, Inc. (NASDAQ:AKAM) trumpets itself as a company that provides cloud services for delivering, optimizing, and securing content and business applications over the Internet in the United States and internationally.

The company offers Web and mobile performance solutions, such as Ion, a situational performance solution; Dynamic Site Accelerator that helps in consistent Website performance; Image Manager that automatically optimizes online images; CloudTest to conduct load testing and other analysis of Websites in a pre-production environment; mPulse that provides real-time Website performance data to provide insight about end-user experiences on a Website; and Global Traffic Management, a fault-tolerant solution.

It also provides cloud security solutions, including Web Application Protector to safeguard Web assets from Web application and distributed denial of service; Kona Site Defender, a cloud computing security solution; Bot Manager Premier to identify bots; Fast DNS, which translates human-readable domain names into numerical IP addresses; Prolexic Routed to protect Web- and IP-based applications; and Client Reputation for protection against DDoS and Web application attacks.

In addition, the company offers enterprise security solutions, including Enterprise Application Access that enables remote access to applications; and Enterprise Threat Protector to enable enterprise security teams to identify, block, and mitigate targeted threats.

Further, it provides network operator solutions, including Aura Licensed CDN, Aura Managed CDN, and Intelligent DNS solutions, as well as professional services and solutions; media delivery solutions, such as adaptive delivery, download delivery, infinite media acceleration, media services, and media analytics solutions; and NetStorage, a cloud storage solution.

The company sells its solutions through direct sales and service organization; and channel partners.

In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($1.9B against $1.1B).

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