Increased Web Traffic, Demand for Security Solutions Boost Akamai Q1 Results (CDSA)

Stronger than expected traffic levels on Akamai’s platform and the continued strong performance of the company’s security solutions helped drive the strong results that it saw in the first quarter (ended March 31), according to CEO and co-founder Tom Leighton.

“Traffic on our platform increased dramatically in March as enterprises turned to Akamai to move more of their operations online” amid the coronavirus pandemic, he said April 28 on an earnings call.

“Despite the cancellation or postponement of major sporting events” including March Madness college basketball in the U.S. and Champions League Soccer in Europe, Akamai traffic increased about 30% over a four-week period at the end of Q1, he told analysts. Traffic peaked at 167 terabits per second, “more than double the peak” in Q1 2019, he said, echoing what he said during the recent online Edge Live Virtual Summit 2020.

“Performance is also critical as businesses move the majority of their operations online,” Leighton said on the earnings call, adding: “Although some other companies have experienced cases of performance degradation and even extended outages in recent months, I’m very happy to report that Akamai’s performance has remained consistent and strong over the past quarter. In fact, our measurements indicate that the page download times provided by our industry leading Ion service has significantly improved over the past year. This is in spite of the large increase in traffic, and is a direct result of our relentless efforts to improve the performance of our services.”

Akamai reported total Q1 revenue grew 8% from a year ago to $764 million, while profit increased 15% to $123.1 million (75 cents a share) from $119.1 million (73 cents a share).

Revenue from Akamai’s Media and Carrier division grew 8% to $358 million, company CFO Ed McGowan said on the call. “The outperformance in media was primarily due to the surge in traffic from” over-the-top (OTT) video, gaming, social media and news and information sites “as more and more people around the world began to shelter in place,” he said.

Meanwhile, revenue from the company’s Web division increased 8% to $406 million, while Cloud Security Solutions revenue jumped 26% to $240 million. Revenue from the company’s Internet Platform customers was $45 million, down 5%, but “in line with our expectations,” McGowan said.

Cloud Security Solutions sales continued to be “led by our flagship services” for distributed denial of service (DDoS) DDoS prevention, application-layer firewall and bot management, Leighton told analysts. “We also saw a strong surge in bookings for our next-gen Zero Trust enterprise security solutions,” he noted.

“The strong demand we saw in Q1 for our security and media services more than offset the reduced revenue we received from companies that have been hit hardest by the pandemic, especially in the travel and hospitality vertical,” Leighton pointed out.

Akamai also “played an important role in helping to support websites and applications associated with response to the pandemic, and the Akamai Foundation is providing sustainable financial assistance for numerous relief efforts around the world,” Leighton said.

One major advantage that Akamai has is that it is “in a position where almost all of our employees can work remotely, and we’ve been doing that successfully for the last two months,” he told analysts.

The company also “implemented special measures to protect employees who need to travel, for example, to a data or operation center, and we’re doing what we can to help employees who face especially challenging situations as a result of the pandemic,” he said.

“As businesses and consumers around the globe adjust their routines in the interest of public health, the Internet is being used at a scale that the world has never experienced,” he noted, adding: “In addition to the hundreds of millions of people who’ve been working from home, governments are leveraging the internet to keep citizens informed and to provide economic assistance. Houses of worship are streaming services and communities are engaging online to relieve the social isolation felt by many. And of course, education, commerce and entertainment are now almost entirely online.”

Akamai expects the elevated traffic to its platform will “continue to have a positive impact on our Q2 results,” according to McGowan. “However, we anticipate that traffic levels may start to moderate if life begins return to normal, and as the warmer summer months get underway in our larger markets,” he predicted.