NET - Akamai: Warning Flags Leading Into Q1 Earnings
2024-05-06 15:19:51 ET
Summary
- Software stocks had a strong 2023 but now many companies are struggling to meet elevated investor expectations.
- While Akamai's revenue growth and profit margins have rebounded somewhat in recent quarters, several of its peers reported disappointing first quarter results.
- Akamai continues to invest aggressively in its compute and security businesses, but the outcome of this is highly uncertain.
- Growth investments are probably necessary given the changing competitive landscape, but this is chewing up much of Akamai's free cash flow.
- A weak quarter coupled with high capex could see Akamai's stock fall further.
Akamai's ( AKAM ) pursuit of cloud computing has created some hype around the stock in recent quarters. It is not clear that this is warranted, though. Akamai's pursuit of cloud computing is a risky strategic move due to the upfront costs involved and comes in an uncertain macro environment where many companies are gambling on infrastructure build-outs....
Akamai: Warning Flags Leading Into Q1 Earnings