Akamai Releases Q4 2015 Earnings Report

Akamai has released its Q4 2015 earnings report, highlighting its year over year performance and security solutions revenue growth of 16% and 17% in 2015 year over year. Similarly, their fastest growing sector, cloud security solutions revenue, was up 46% in Q4 and 50% in 2015 year over year. Service and support solutions revenue also increased 18% year over year in Q4 and 16% in 2015 over 2014. However, they did see a drop in media delivery solutions revenue in Q4 of 2% year over year but an overall increase in 2015 of 7% year over year.

Though this 2% Q4 drop in media delivery may initially be overshadowed by the overall yearly increase in revenue, executives reported during their earnings conference call that their top two media companies are investing in do-it-yourself (DIY) content delivery and Akamai’s revenue from these companies will decrease from 13% of total revenue to 6% by mid-2016. Though they emphasized their overall increase of 7% in this sector, this 7% drop in revenue is sure to take a toll on their bottom line.

Furthermore, Akamai reported that it has yet to make a return on investment for the building out of its network in 2015 in anticipation for one of these large companies’ launch of a media network that would be carried over Akamai’s network.

Akamai’s Q4 revenue reached $579 million, surpassing the $569 estimate, and rising 8% over Q4 2014 and 12% in 2015 over 2014. Q1 2016 revenues are expected to follow Q4 to Q1 trends and fall slightly due to the loss of high levels of electronic shopping traffic. First quarter revenues are expected to be approximately $554 million to $570 million with EPS between 61 and 64 cents. Akamai will be focusing both on security and OTT content delivery in the 2016 and expanding their focus into mobile applications optimization and enterprise security.

In the US, where their two large media companies are based, Q4 revenue increased 5% in Q4 year over year and 12% in 2015 year over year. International revenue also increased by 17% in Q4 year over year and 27% when adjusted for foreign exchange. 2015 showed an 11% increase in international revenue and 24% when adjusted for foreign exchange, influenced significantly by the strong dollar.

GAAP income decreased 10% in Q4, Q4 operating margins decreased 4%, and 2015 income decreased 5% compared to 2014. Non-GAAP operations for the year saw decreases of 4%, 4%, and 1% year over year, respectively. Net GAAP income fell 9% in Q4, while non-GAAP increased 1% in 2015 compared to 2014.

Additionally, CEO Tom Leighton announced that Akamai will be starting a $1 billion stock buyback plan (in addition to the previous $303 million stock buyback program) that will be implemented opportunistically from February 9, 2016 to December 31, 2018 to maximize returns to investors.

Beginning in Q2 2016, Akamai will also be making organizational changes, allowing people that work directly with customers to interact more with developers to create a product that will more accurately fit customers’ needs. Layoffs are not, however, expected as a result of this change. In after-hours trading, Akamai stocks are up 15.57% to $45.73 after ending the day down 3.44%.

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