Akamai the Runaway Train

To some, Akamai is a runaway train blowing it out in the financial metrics. To others like Zachs Equity Research, they give Akamai a Rank #4, which means to “Sell”. Zach published the following statement “however, intense competition has kept pricing under tremendous pressure, which is a significant headwind, going forward”. Zach is cool, but this rating is based on a mathematical formula, and there’s a big chance the math might be out of whack, as the picture below illustrates.

Many experts have stated that Akamai’s prices and margins are under pressure, due to intense competition from the likes of Level 3, EdgeCast, and so on. Even Akamai has gone on record and stated this a few times. However, is it possible Akamai is playing psychological games with us? We should expect Akamai to say pricing and margins are under pressure, in order to keep Wall Street at bay, and not raise expectations. What is Akamai supposed to say, “we’re actually dominating the competition in the margin and pricing business”. Akamai is great at playing the Wall Street game, giving investors just enough to chew on, and keeping its stock price stable.

AkamaiRev
AkamaiRev

In 2013, Akamai generated $1.57B in annual revenue. In 2014, Akamai is likely to reach $2B in annual revenue. That means Akamai grew its revenue $400M+ in one year, which is probably the same amount of growth, if not more, than the rest of the CDN industry. What does mean for the CDN Ecosystem? Akamai is a runaway train, and not one including Limelight, Amazon or Level 3 has been able to stop them.

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