Akamai Earnings: Quarter Highlighted by Strong Compute, Deteriorating Delivery, and Weak Margins

Accelerating growth in compute revenue—one of the two areas behind Akamai’s bright long-term prospects—wasn’t enough to quell the market’s disappointment with modestly weaker security growth, margin contraction, and a slight reduction in full-year guidance. The plummeting of delivery revenue, which we expect to be in long-term decline, showed no signs of improvement. However, nothing in the third quarter’s results changes our long-term expectations for Akamai, and we are maintaining our $100 fair value estimate.