Shares of Akamai (NASDAQ:AKAM) stock are down more than 10% after the company reported first-quarter earnings. Akamai operates as a cloud services and cybersecurity company for business applications over the internet.
For the period, revenue came in at $904 million, up 7% year-over-year (YOY) and beating the consensus estimate of $903.4 million. Meanwhile, earnings per share (EPS) tallied in at $1.39, falling short of the estimate of $1.42 per share. However, the company also lowered its guidance for Q2, causing AKAM stock to plunge. Revenue guidance for the next quarter is between $890 million and $905 million, compared to the analyst estimate of $938.66 million.
With that in mind, let’s dive into the details of Akamai’s earnings.
Why Is AKAM Stock Down Today?
During Q1, Akamai announced that it would suspend all sales in Russia and Belarus. The company also terminated business with “state-majority-owned Russian and Belarusian customers.”
CEO Dr. Tom Leighton commented on Akamai’s quarter:
“Despite a challenging global environment and the headwinds associated with the strengthening U.S. dollar, Akamai delivered results in line with our Q1 guidance […] Q1 results were led by the very strong performance of our Security and Compute product groups, which now make up the majority of our revenue, growing at 25% year-over-year and 27% when adjusted for foreign exchange.”
According to Raymond James analyst Frank Louthan, Akamai’s weak guidance is due to $45 million from “currency headwinds,” $36 million from the sales suspension in Russia and Belarus and $65 million from “slower traffic growth.” This loss is offset by a $100 million revenue contribution from the company’s Linode subsidiary, bringing total losses to $46 million.
Wall Street was clearly unimpressed with the company’s earnings. Specifically, two analysts downgraded their price targets for AKAM stock.
Two Analysts Downgrade Akamai Following Earnings
- Morgan Stanley has a price target of $118 for AKAM stock. Analyst Keith Weiss lowered his target from $130 upon reviewing earnings. Weiss believes that foreign exchange headwinds, the reduction of business in Europe, higher taxes and slowing traffic volume will all negatively affect Akamai.
- Raymond James has a price target of $115. Analyst Frank Louthan lowered his target from $118 after earnings, which he attributed to “slowing traffic growth.” However, his outlook for the next year is positive, if the company can benefit from foreign exchange transactions and see higher margins and growth from Linode.
- Finally, Akamai has an average price target of $136.13 among 15 analysts with coverage of the stock.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.