Last Update 20 Jan 26

Fair value Increased 6.25%

AKAM: Fair Outlook As Security And Compute Transition Reaches Key Inflection Point

Analysts have lifted their price target for Akamai Technologies by about US$6 to roughly US$101, citing a stronger profit outlook, a slightly lower required return, and growing conviction in the company’s transition toward security, compute, and AI infrastructure offerings.

Analyst Commentary

Recent Street research on Akamai highlights a mix of enthusiasm around its shift toward security, compute, and AI infrastructure, alongside some caution about the investment needed to support that shift.

Bullish Takeaways

Bullish analysts point to Akamai's evolution from a pure content delivery network to a broader cloud infrastructure and security platform, arguing that this supports higher long term growth expectations and justifies higher price targets, with some recent targets in the US$100 to US$115 range.
Several reports highlight traction in security and compute infrastructure, including AI inferencing use cases and API security. These analysts see those areas as important drivers for future revenue mix and potential margin resilience.
Some bullish analysts argue that moderating pressure in delivery, combined with stable security and faster growth in compute, creates what they view as an "inflection point" in the story. In their view, execution on the newer portfolio could be better reflected in valuation over time.
One research note specifically flags increased demand for AI infrastructure as a key opportunity, suggesting that Akamai's existing network footprint and newer compute offerings could position it to capture workloads that support higher quality growth than legacy delivery alone.

Bearish Takeaways

Bearish analysts focus on the cost side of Akamai's transition, pointing out that the move deeper into security and compute requires an extended period of capex and opex. They note this could weigh on profitability metrics before revenue growth reflects those investments.
There is caution that the investment thesis around consolidation and better CDN pricing is not yet fully proven. In their view, this limits how much credit the stock should get today for future margin or growth improvements tied to that theme.
Some more cautious research prefers to see further evidence of sustained traction in compute and security, especially with large customers, before taking a more positive stance. This implies that execution milestones and customer wins remain key catalysts for sentiment.
Earlier, more cautious takes also underscored the risk that if growth in the newer security and compute lines does not materialize as expected, the heavier investment cycle could lead to a less attractive risk reward profile at higher valuation levels.

What's in the News

Akamai launched ISV Catalyst, a referral-based partner program for independent software vendors to build, market, and sell solutions on its cloud platform, offering benefits such as no referral fees in the first year, co-marketing, and visibility through Akamai sales channels and directories (Key Developments).
The company announced Akamai Inference Cloud, an AI inference platform that runs on NVIDIA-based infrastructure across Akamai's distributed edge network, designed to support low-latency, real-time AI workloads closer to users and devices (Key Developments).
Akamai entered a collaboration with Visa that combines Visa's Trusted Agent Protocol with Akamai's edge-based behavioral intelligence to help merchants authenticate AI agents, manage fraud risk, and accept agent-driven commerce at scale across Visa-accepting locations (Key Developments).
Vindral became one of the first five partners in Akamai's ISV Catalyst program, pairing its ultra-low-latency streaming stack with Akamai's infrastructure to target use cases in sports, auctions, iGaming, and live events (Key Developments).
Akamai reported revenue guidance for the fourth quarter of 2025 of US$1,065 million to US$1,085 million and full-year 2025 revenue guidance of US$4.178 billion to US$4.198 billion, and also reported that it had completed a share repurchase of 10,229,826 shares for US$819.51 million under its May 9, 2024 buyback plan (Key Developments).

Valuation Changes

Fair Value Estimate moved from US$95.20 to US$101.16, signaling a modestly higher central value in the model.
Discount Rate edged from 10.34% to 10.21%, reflecting a slightly lower required return in the updated assumptions.
Revenue Growth adjusted from 6.13% to 6.99%, indicating a higher modeled growth rate in future revenues.
Net Profit Margin shifted from 15.67% to 17.27%, with the model now using a higher long term profitability level.
Future P/E moved from 20.73x to 19.52x, implying a somewhat lower valuation multiple applied to projected earnings.

Surging demand for secure, low-latency cloud and edge infrastructure, driven by AI and cybersecurity needs, positions Akamai for continued top-line and margin growth through value-added solutions.
Strategic investments in security, compute, and disciplined capital allocation are expanding market reach and supporting sustainable improvements in shareholder returns.
Rising investment needs, customer concentration, and intensifying competition threaten profits and market share, while core CDN revenues decline amid industry commoditization.

Catalysts

About Akamai Technologies

Engages in the provision of security, delivery, and cloud computing solutions in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Rampant growth in data consumption, driven by AI-powered applications, video, and real-time use cases, is creating strong demand for Akamai's cloud infrastructure and edge compute offerings; this is illustrated by accelerating CIS (Cloud Infrastructure Services) ARR (annual recurring revenue), with 40–45% growth targeted for year-end 2025, pointing to robust forward revenue acceleration as large signed deals start to contribute.
The proliferation of AI applications requiring secure, ultra-low-latency infrastructure benefits Akamai's globally distributed platform-evidenced by new AI Gateway and Firewall for AI offerings-which positions the company to capture new AI-driven workloads, supporting both future top-line growth and potentially higher net margins via value-added solutions.
Persistent escalation of cybersecurity threats and high-profile ransomware attacks are fueling enterprise demand for micro-segmentation and Zero Trust security, where Akamai claims market leadership and is seeing high double-digit ARR growth in these particular solutions, suggesting sustained momentum for security-driven revenue and margin expansion.
Akamai's continued investment and go-to-market transformation in security and compute, including expanded sales capacity and channel partnerships, should enable it to tap further into the expanding addressable market for cloud and edge security, likely contributing to both top-line growth and long-term earnings leverage as these businesses scale.
Active capital allocation through ongoing share repurchases and disciplined cash management supports EPS growth even at moderate revenue increases, enhancing shareholder returns and providing a structural tailwind for future per-share earnings.

Akamai Technologies Earnings and Revenue Growth

Akamai Technologies Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Akamai Technologies's revenue will grow by 6.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 10.4% today to 15.7% in 3 years time.
Analysts expect earnings to reach $765.1 million (and earnings per share of $5.53) by about September 2028, up from $424.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $444.5 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.7x on those 2028 earnings, down from 26.4x today. This future PE is lower than the current PE for the US IT industry at 29.0x.
Analysts expect the number of shares outstanding to decline by 4.55% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.34%, as per the Simply Wall St company report.

Akamai Technologies Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The delivery (CDN) segment, historically Akamai's core business, continues to face headwinds and is projected to decline at mid-single digits over the longer term, highlighting a maturing and potentially shrinking revenue source due to ongoing industry commoditization and competition, which could limit topline revenue growth.
Increasing capital expenditures (CapEx) and investments required to expand compute capacity and support large new contracts-especially in cloud and edge computing-may suppress net margins and profitability if the new offerings don't achieve sufficient scale or if customer ramp-up is slower than projected; management acknowledged operating margin is expected to decrease in the second half as these investments ramp.
The company's compute revenue and projected acceleration in cloud infrastructure services growth remain heavily dependent on a small number of large contracts, with actual revenue realization subject to client application migration schedules beyond Akamai's control; this customer concentration risk introduces potential volatility in future earnings and cash flows.
Margin pressures may increase as partner-sourced compute solutions grow; Akamai expects increased sales from qualified compute partner (QCP) solutions to drag on overall gross margin due to structurally lower partner margins, which could erode earnings quality even if revenue grows.
Intensifying industry competition from hyperscale cloud providers, ongoing migration of enterprise workloads to integrated cloud/CDN/security stacks at Amazon, Microsoft, and Google, and the possibility of technology shifts (e.g., decentralized architectures or network infrastructure advances) may erode Akamai's market share and pricing power over the long term, pressuring both revenue and profit growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $95.205 for Akamai Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $133.0, and the most bearish reporting a price target of just $66.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.9 billion, earnings will come to $765.1 million, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 10.3%.
Given the current share price of $78.16, the analyst price target of $95.2 is 17.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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