Akamai (NASDAQ:AKAM, news, filings),the 800lb gorilla of content delivery, raised guidance this morning for the fourth quarter and fiscal year. Revenue is now expected to be $230-235M, up quite substantially from the earlier projection of $217-224M. Earnings per share of $0.42-0.43 are likewise expected to exceed the previous range of $0.39-0.41. Mid-quarter increases in guidance have been rare in this recession to say the least, and so this is very welcome news. Does this mean the CDN industry has shifted back into gear?
The CDN segment has seen its share of revenue softness, with Akamai itself seeing a couple declining quarters before seeing the start of a recovery in the third quarter. According to CFO JD Sherman today, “We have been seeing stronger volume growth this quarter as compared to the same quarter last year in our commerce and media verticals, and we anticipate this trend will continue through the end of the year.” That would seem to imply a nice, broad recovery is under way.
If Akamai is seeing this burst, one has to wonder if the others in the sector aren’t seeing the same thing – good news for Level 3 Communications (NYSE:LVLT, news, filings), Limelight Networks (NASDAQ:LLNW, news, filings) and the rest of the cast perhaps. I haven’t seen much to indicate this is a rapid shift in market share, so perhaps it is that the pie is finally getting bigger.
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Rob, I’m not sure if the pie is getting bigger, and I don’t necessarily believe that this means the CDN industry as a whole stands to benefit from a strong quarter. I think it’s quite possible that Akamai has just seen a large uptick in some customers or verticals that it might not have accounted for in its previous projections.
For instance, Hulu performed well above everyone’s expectations in October, with the number of streams it served growing by 47%. And the e-commerce vertical, which Akamai pretty much owns, has had a pretty robust holiday season so far. Notice also that unlike previous years, there have been few reports of e-commerce blackouts or slow response times among the bigger players, which could mean that they’re relying more high-margin dynamic site acceleration products than in the past, also a possible revenue booster.
So this forecast could be Akamai-specific, and not necessarily indicative of a solid quarter for the CDN market in general.
Could be, so far we have only the one datapoint. I suppose we won’t really know until late January. Still, the whole sector is kind of due for a break, aren’t they?
Either these clowns have mastered silicon economics with their NON OWNED NETWORK, or they were LOW BALLING the hell out of their expected losses due to competition in Q4 before they decided to bite the bullet.