Akamai's solid Q3 led by media, security revenue growth

Financial earnings increase
GAAP income from operations was $117 million, a 28% increase from the third quarter of 2017. (Getty/FroYo_92)

Akamai posted third-quarter revenues of $670 million, up 7% year over year, on the strength of growth in its media business and cloud security products.

Web Division revenue was $357 million, up 8% year over year, and Media and Carrier Division revenue was $313 million, up 6% year over year. The big story came from Cloud Security Solutions where $169 million in revenue represented 37% year-over-year growth.

U.S. revenue remained mostly flat at around $413 million, but international revenue was up 21% annually to $257 million.

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"We are very pleased with our excellent results in the third quarter, which includes 37% year-over-year growth in our security business and tremendous growth in our earnings," said Akamai CEO Tom Leighton, Ph.D., in a statement. "We are also pleased to report our fourth consecutive quarter of non-GAAP operating margin improvement. We are well on our way to achieving our 30% margin goal in 2020, while continuing to invest in innovation and new products to drive future growth."

GAAP income from operations was $117 million, a 28% increase from the third quarter of 2017. GAAP net income was $108 million, a 68% increase from the third quarter of 2017.

RELATED: Akamai's lower prices lead to Q2 CDN revenue growth

Oppenheimer analyst Timothy Horan said security growth was likely helped along by Nominum and bundled pricing, but that the same bundle discounts likely ate into legacy CDN revenues somewhat.

“We expect solid traffic growth to continue, but security is going to be virtually all the incremental revenue growth. New emerging technology adds long-term opportunities (blockchain, IoT),” wrote Horan in a research note.

Cowen analyst Colby Synesael said Akamai’s security business push is helping drive profit growth.

“Its shift in strategy, led by its Security business, with a greater focus on profitability is proving out and resulting in significant FCF growth. We believe its stock is meaningfully undervalued and reiterate our Outperform rating,” wrote Synesael in a research note.

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