Akamai Is Back!
Shares of Akamai Technologies (NAS: AKAM) are up more than 8% in early trading after reporting better-than-expected third quarter results last night:
Q3 2012 Estimate
Q3 2012 Actual
Actual Growth (YOY)
All segments improved. Cloud infrastructure revenue rose 22% over last year's Q3, partially due to greater adoption of Akamai's KONA online security services. As a group, cloud infrastructure now accounts for 58% of revenue, CFO James Benson said during a conference call with analysts.
Content delivery grew 23%. In that group, and media and entertainment grew fastest, at 26%, thanks to the rising popularity of high-definition video delivered over the Internet.
Revenue from enterprise clients using Akamai to deliver private data using hybrid clouds -- i.e., shared environments where in-house infrastructure combines with an off-site data center -- grew 22%. Among the remaining verticals, commerce grew 21%, public sector 20%, and high tech 17%.
Content delivery gains proved to be the most surprising, CEO Paul Sagan said in an interview yesterday, in that the growth couldn't be directly traced just to the Olympics or online viewership of the presidential debates. Users simply expect more from the Internet; Akamai's CDN helps deliver.
Think about that for a moment. Even as Netflix (NAS: NFLX) substitutes Akamai for its own content delivery network and Verizon (NYS: VZ) plunges into the market , the company's legacy network remains just as important today as it was at Akamai's founding in 1998.
Does that mean you should be a buyer at these levels? For the first time in a while, I'd say yes. I'm making an outperform CAPScall on the stock on the theory that, in surviving recent trials, Akamai has proven its network isn't as susceptible to substitutes as I feared.
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The article Akamai Is Back! originally appeared on Fool.com.Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of, and had a long term call options position in, Netflix at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool owns shares of Netflix. Motley Fool newsletter services have recommended buying shares of Netflix. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.