COVID-19 Crisis To Help Akamai Replicate $300 Million+ Revenue Growth From The Past 2 Years?

As per Trefis estimates, the coronavirus pandemic could indeed aid Akamai’s (NASDAQ: AKAM) revenue growth across both its segments. The company’s revenue comprises of two segments i.e. Web Division and Media & Carrier Division. Akamai’s revenue has risen from $2.5 billion in 2017 to $2.9 billion in 2019, up by more than 15% in 2 years. The Web Division has seen higher growth over this period due to the company’s incremental adoption of cloud security solutions. In Q1 2020, Akamai’s revenue was recorded at $764 million, up by 8% y-o-y. Further, we believe that despite the economic slowdown, the lockdown situation calls for an increasing need for web servers, and cloud security solutions, as online activity has seen a surge over the past couple of months, and this could help Akamai maintain its revenue growth over the next 2 years. For the year 2020, Trefis estimates total revenue growth to come in at almost 6%.

We expect Akamai’s revenue to grow from $2.9 billion in 2019 to $3.2 billion in 2021 as detailed in our interactive dashboard, Akamai Revenues:  How Does AKAM Make Money? 

Company Overview and General Reference

• Akamai operates a worldwide network of over 200,000 servers, that help their customers deliver Internet content faster to their end users.
• The company estimates that it delivers 15-30% of the global web traffic.
• Websites like Apple, Yahoo!, NBC, ESPN, the NBA, and Verizon Wireless, use Akamai for content delivery, which means that some of the content you view when visiting these sites is delivered from a nearby Akamai server, rather than the company’s own servers.

Overview of Company Revenues

Akamai reported $2.9 billion in total revenues for full-year 2019. This includes 2 operating segments:

• Web Division: $1.6 billion in 2019 (~55% of total revenues). Segment revenue growth over the last couple of years has been due to increase in the sales of cloud security solutions such as Kona Site Defender, Prolexic, and Bot Manager.
• Media and Carrier Division: $1.3 billion in 2019 (~45% of total revenues). Segment revenue growth over the last couple of years has been due to increase in web traffic and the sale of cloud security solutions.

Web Division segment will remain the highest contributor to revenue

• Revenue from Web division segment has increased from $1.3 billion in 2017 to $1.6 billion in 2019.
• By 2021, the division revenue is projected to grow to $1.8 billion.
• This ~$200 million growth is expected to make up a majority of the total ~$300 million estimated growth in Akamai’s revenue.
• Higher revenues are likely to be derived from an increased sale of cloud security solutions, amidst a growing need for internet security.

Media and Carrier Division to see stable revenues 

• Revenue from Media and Carrier division has increased from $1.2 billion in 2017 to $1.3 billion in 2019.
• By 2021, the division revenue is projected to grow to just $1.4 billion.
• Over the next couple of years, increasing online traffic is likely to support revenues despite an economic slowdown.

Conclusion

• Spread of coronavirus and the resultant lockdown could prove to be positive news for companies like Akamai. As web traffic rises, cloud security solutions will see growing demand, leading to a growth in Akamai’s revenues.
• In fact, the next few quarters could likely see revenue growth for Akamai, across both its operating segments.

While Akamai’s revenue could see growth over the next couple of years, here’s an analysis of how Verisign, another internet company, has performed over the past 2 years.

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