Web content delivery and security company Akamai (NASDAQ:AKAM) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 2.9% year on year to $1.02 billion. The company expects next quarter’s revenue to be around $1.02 billion, coming in 1.1% above analysts’ estimates. Its non-GAAP profit of $1.70 per share was 8.6% above analysts’ consensus estimates.
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Akamai (AKAM) Q1 CY2025 Highlights:
- Revenue: $1.02 billion vs analyst estimates of $1.01 billion (2.9% year-on-year growth, in line)
- Adjusted EPS: $1.70 vs analyst estimates of $1.57 (8.6% beat)
- Adjusted Operating Income: $307 million vs analyst estimates of $285.2 million (30.2% margin, 7.7% beat)
- The company slightly lifted its revenue guidance for the full year to $4.13 billion at the midpoint from $4.1 billion
- Management slightly raised its full-year Adjusted EPS guidance to $6.25 at the midpoint
- Operating Margin: 15.2%, down from 16.9% in the same quarter last year
- Free Cash Flow Margin: 5.4%, down from 17.7% in the previous quarter
- Market Capitalization: $12.11 billion
"Akamai delivered a solid start to the year with our results meeting or exceeding expectations," said Dr. Tom Leighton, Akamai's Chief Executive Officer.
Company Overview
Founded in 1999 by two engineers from MIT, Akamai (NASDAQ:AKAM) provides software for organizations to efficiently deliver web content to their customers.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Akamai’s 4.5% annualized revenue growth over the last three years was weak. This was below our standard for the software sector and is a poor baseline for our analysis.
This quarter, Akamai grew its revenue by 2.9% year on year, and its $1.02 billion of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 4.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and suggests its products and services will face some demand challenges.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Akamai’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between Akamai’s products and its peers.
Key Takeaways from Akamai’s Q1 Results
We enjoyed seeing Akamai beat analysts’ EBITDA expectations this quarter. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. On the other hand, revenue was just in line. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 1.4% to $84.35 immediately after reporting.
Is Akamai an attractive investment opportunity right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
