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This Undervalued Cloud Security Player Is Ready to Float on August 7 Earnings
Noah Zelvis
July 30, 2025
Akamai Technologies (NASDAQ: AKAM) has spent much of 2025 in reverse. Shares are down 17% year to date and nearly 18% over the past 12 months, significantly underperforming the broader tech sector.
With the next earnings report due August 7 and the stock trading at just 0.60x its Morningstar fair value estimate, investors may be wondering whether Akamai is a value trap or a misunderstood winner.
The answer may depend on how much faith you have in the company’s evolution. Once known strictly for content delivery network (CDN) services, Akamai has transformed into a security and cloud infrastructure firm.
Security now represents more than 50% of revenue, up from just 12% in 2015, and management expects growth to be driven increasingly by enterprise demand for edge computing and zero-trust cybersecurity solutions.
The near-term outlook has softened somewhat, partly due to a slowdown from Akamai’s largest customer, but the long-term story remains compelling.
With the stock sitting near multi-year lows and guidance appearing conservative, Akamai could surprise to the upside and re-rate higher if it shows progress on its high-margin growth engines.
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Strategic Positioning: From CDN to Cybersecurity Powerhouse
Akamai still earns the bulk of its revenue from its global network of edge servers, which support faster and more secure content delivery.
But while CDN once represented the company’s core business, it’s now the foundation for a broader product suite focused on cybersecurity and edge computing.
Since 2015, Akamai has aggressively shifted toward higher-value services. The security segment now contributes over 50% of total revenue, with a growing portion of customers subscribing to multiple security tools.
From bot mitigation to DDoS protection and zero-trust access, Akamai’s platform has grown into a critical tool for enterprise clients.
The 2022 acquisition of Linode allowed Akamai to extend its reach into the developer-focused cloud infrastructure space.
With over 4,300 points of presence worldwide, Akamai is well-positioned to meet the low-latency demands of edge computing, especially as 5G adoption expands.
Action: Accumulate shares under $80 ahead of the August 7 earnings call. Watch for updates on new customer growth in security and compute. |
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Valuation: Deep Discount With Room to Re-Rate
At ~$79, Akamai trades more than 40% below Morningstar’s $135 fair value estimate and at a forward P/E of just ~20, despite its recurring revenue model, strong margins, and improving earnings profile.
For long-term investors, this discount may represent an opportunity to buy a high-quality tech infrastructure name with stable free cash flow and a growing presence in cybersecurity, one of the most resilient areas in enterprise software.
Other valuation signals are supportive:
PEG ratio under 1.0, implying earnings growth exceeds valuation
No dividend, but ample reinvestment into cloud and edge growth
Analyst price targets range from $105 to $116, offering 30-45% upside
Action: Consider AKAM a mid-cap rebound candidate with a margin of safety. Look to build a position between $75 and $80.s. |
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Earnings Momentum: What to Watch on August 7
Akamai has beaten EPS expectations in three of the last four quarters, including a 17.8% surprise in Q4 2024 and 4.76% in Q1 2025. For the upcoming quarter, analysts expect earnings of $0.98 per share, compared to $1.06 a year ago.
Key metrics to monitor:
Growth in security and compute revenue, which rose 16% YoY last quarter
CDN revenue trajectory, it was down 18% YoY, but may be stabilizing
Customer churn related to the firm’s largest client
Gross margins, which have remained resilient even during revenue softness
Management has reaffirmed its multi-year target of 51% EPS growth by 2028, suggesting that recent headwinds are seen as temporary.
Action: Add AKAM to your Q2 earnings watchlist. Strong security revenue or better-than-feared CDN trends could trigger a sharp reversal. |
Why This Setup Could Mark a Turning Point
Akamai has underperformed for reasons that may already be priced in. Revenue softness linked to a DIY shift by its largest customer has been disclosed for multiple quarters.
Foreign exchange headwinds are also broadly understood. But what hasn’t changed is the growth in multi-product adoption, edge computing demand, and the firm’s low-beta appeal.
Combine that with:
A recent market cap of just $11.6 billion
No dividend to support (i.e., reinvestment optionality)
Industry tailwinds from cybersecurity and AI edge workloads
…and you have the setup for a classic value story.
Action: Look to initiate or add under $80, targeting a 12-month price range of $105–$115 as the market resets expectations. |
Risks: What Could Go Wrong
Despite the positives, Akamai faces several real headwinds that investors should monitor:
CDN Pricing Pressure: This legacy business still makes up about one-third of total revenue and remains in secular decline, with hyperscalers building their own delivery networks.
Customer Concentration: Akamai’s largest client is shifting to a self-service model, impacting revenue by 1–2% annually over the next few years.
Cloud Competition: The Linode acquisition positions Akamai in the IaaS race, but competing with AWS, Azure, and Google Cloud will be difficult.
Muted Guidance: Management’s tone has been cautious, citing forex, traffic trends, and conservative client spending.
Valuation Traps: While the stock looks cheap on a fair value basis, sentiment is still weak and technicals are fragile.
Action: Set an alert near $72 for downside technical support. If guidance misses again, be patient before scaling in further.
Final Word: A Reset With Long-Term Upside
Akamai may not be flashy, but it has real value. Its low-beta profile, strong security tailwinds, and edge infrastructure footprint offer a rare mix of defensive stability and strategic growth.
While 2025 has been a reset year, the long-term shift toward AI-driven security and distributed computing keeps Akamai relevant and potentially undervalued.
This stock likely won’t deliver triple-digit returns in a quarter, but it may quietly outperform from here, especially if the upcoming earnings report beats modest expectations.
Action Recap: ✅ Accumulate shares below $80 ahead of August 7 earnings ✅ Build a position between $75–$80 as a margin-of-safety play ✅ Target $105–$115 over 12 months if security growth trends hold ✅ Watch Q2 earnings for signs of customer expansion in non-CDN segments ✅ Set downside alerts near $72 and reassess on technical breakdown |
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider