Akamai Technologies Inc., the content delivery network firm that’s morphing into a cloud infrastructure services provider, delivered better-than-expected financial results today as it gears up to take on the likes of Amazon Web Services Inc. and Google Cloud.

The company reported fourth-quarter net income of $128.7 million, down from the $160.5 million profit it delivered in the same period last year. Earnings before certain costs such as stock compensation came to $1.37 per share, beating Wall Street’s forecast of $1.27 per share. Meanwhile, Akamai’s revenue increased 2.5%, to $927.8 million, well ahead of the analysts’ target of $904.7 million.

Akamai Chief Executive Tom Leighton (pictured) said he was pleased with the company’s results, which were driven by strong seasonal traffic, the ongoing success of its security solutions and the growth of its cloud computing offerings.

Akamai made its name as a content delivery network provider and later expanded into security, but has recently moved to take on giants such as AWS in the cloud computing business. The company doubled down on its cloud computing plans after acquiring the infrastructure-as-a-service platform provider Linode LLC for about $900 million in February last year. Then, just this week, Akamai followed that up with the launch of its new Akamai Connected Cloud offering.

Its cloud infrastructure offering spans 4,100 locations across 134 countries, placing compute, storage, database and other essential cloud services closer to large populations, industries and information technology centers. The company claims it’s the most “widely distributed” cloud infrastructure platform in the world, enabling developers to build and deploy more performant cloud workloads with single-digit-millisecond latencies and global reach.

The company is looking to serve customers in areas such as the media, gaming, software-as-a-service, retail and government industries. It’s hoping to attract them not only through the capabilities of Akamai Connected Cloud, but also through aggressive pricing.

“As we look forward to 2023, we are optimistic about our leadership position as the most widely distributed cloud platform with leading solutions for delivery, security and cloud computing,” Leighton said.

Obviously, Akamai is unlikely to present a serious threat to the likes of AWS anytime soon, but there’s no denying that cloud is an encouraging growth opportunity for the company. Its nascent cloud compute business delivered $112 million in revenue during the past quarter, up 61% from a year ago, making it the fastest-growing of its three main business segments. In contrast, security revenue grew by 10%, to $400 million, while content delivery revenue fell 12%, to $415 million.

Holger Mueller of Constellation Research Inc. said that if it wasn’t clear why Akamai was willing to spend $1.5 billion on acquiring Linode and another company, Guardicore, in recent times, the reason has become all too apparent now.

“Akamai’s CDN revenue is going down, and so it wanted to move into the adjacent markets of cloud and security,” the analyst said. “Its security and especially its cloud revenues are now growing fast. So instead of this being a sad story of a giant fallen from grace, Akamai is doing well, and more relevant than ever. Likely it will pass the inflection point, where its security revenue eclipses the delivery revenue in the coming quarter. Overall it’s a just-in-time diversification by Akamai’s management.”

Akamai is clearly making every effort to grow its cloud business, but it may still struggle to satisfy its backers on Wall Street. For the first quarter of fiscal 2023, it’s guiding for earnings of between $1.30 and $1.34 per share on revenue of between $900 million and $915 million. The midpoint of both estimates is just below Wall Street’s forecast of $1.33 in earnings and $917.4 million in revenue.

Akamai’s stock initially gained just over a percentage point in extended trading, only to see that erased after announcing its guidance.

Photo: Akamai