Cloud security growth powers up Akamai financials

Cloud security growth powers up Akamai financials

Akamai's traditional media content delivery business has remained under pressure

Akamai Technologies topped analysts' estimates for first-quarter revenue and profit on Monday as it reaped the benefits of an aggressive push to cloud security and its business of speeding up media content delivery stabilised.

The company also forecast current-quarter revenue and profit above Wall Street's expectations, pushing its shares up 3.3 per cent to US$74 in extended trading.

Akamai's traditional media content delivery business has remained under pressure as many of its large customers such as Apple Inc and Inc develop in-house capabilities to handle their web traffic.

Revenue from the big six internet platform customers fell 14 per cent to US$44 million in the first quarter, but overall media and carrier division revenue rose six per cent to US$316 million.

"The big six are now less than seven per cent of our revenue overall and they are no longer having the impact on our revenue growth that they did before," CEO Tom Leighton told Reuters on a post earnings call.

Revenue from Akamai's cloud security business surged 36 per cent to US$149 million. Sales growth in the unit has averaged about 33 per cent in the last five quarters.

The results come after the company in March settled with activist hedge fund Elliott Management Corp and agreed to add two directors, including former chief information security officer Tom Killalea.

The company also set up a financial operation committee to lift its operating margin to 30 per cent by 2020.

"With the recent involvement of Elliott Management, margins now look poised to reverse the downward trend seen over recent years," Morgan Stanley analysts wrote in a pre-earnings note.

The company, which has already cut 5 percent of its global workforce, could announce reduction in facilities at its Analyst Day on June 26, Leighton said on a call with analysts.

Akamai forecast second-quarter revenue of US$658 million to US$670 million and adjusted profit of 79 cents to 83 cents per share.

Analysts on average had estimated revenue of US$656.8 million and profit of 70 cents per share.

Revenue rose 11.4 per cent to US$668.7 million in the first quarter, beating estimate of US$654 million

But net income fell 28 per cent to US$53.7 million on a US$15 million restructuring charge and US$23 million settlement related to a legal dispute.

Excluding items, earnings were 79 cents per share, topping estimate of 70 cents, according to Thomson Reuters I/B/E/S.

(Reporting by Sonam Rai in Bengaluru: Editing by Arun Koyyur and Sriraj Kalluvila)


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