Akamai Technologies Stock Plunges 21.73%: What Happened?

Akamai Technologies, Inc. (AKAM) shares tumbled 21.73% to $76.73 on Friday, marking the stock's second consecutive day of losses. The cybersecurity and cloud computing company reported better-than-expected fourth-quarter earnings, but its forward-looking projections overshadowed the Q4 results. Akamai forecast current-quarter revenue between $1.00 billion and $1.02 billion and full-year revenue between $4.00 billion and $4.20 billion, both below consensus estimates. Adjusted EPS is forecast between $1.54 and $1.59 for the first quarter and $6.00 to $6.40 for 2025, below expectations of $1.66 and $6.81, respectively.

Akamai's guidance for the first quarter and full year was lower than expected, with adjusted EPS forecast between $1.54 and $1.59 for the first quarter and $6.00 to $6.40 for 2025, below expectations of $1.66 and $6.81, respectively. The company's shares sank to their lowest level since May 2023.

Akamai Technologies' stock price decline can be attributed to several factors:

1. Weaker-than-expected forward-looking projections: Akamai's guidance for the first quarter and full year fell short of analysts' expectations, leading to a significant drop in the stock price.
2. Market sentiment: The broader market was also down on Friday, with the S&P 500 Index falling 1.71% to 6,013.13 and the Dow Jones Industrial Average falling 1.69% to 43,428.02. This negative sentiment may have contributed to Akamai's stock price decline.
3. Economic uncertainty: Weak economic reports, including a preliminary report from S&P Global that U.S. business activity is nearing stall-speed, and consumer sentiment dropping to a 15-month low, may have also impacted investor confidence in Akamai's prospects.
4. Disappointing guidance: Akamai's guidance for the first quarter and full year was lower than expected, with adjusted EPS forecast between $1.54 and $1.59 for the first quarter and $6.00 to $6.40 for 2025, below expectations of $1.66 and $6.81, respectively.

Despite reporting better-than-expected fourth-quarter results, with revenue of $1.020 billion, up 3% year-over-year, and adjusted EPS of $1.66, up 2% from the same period last year, Akamai's stock price fell due to investors focusing on the company's disappointing forward-looking projections.

Akamai Technologies' revenue and earnings growth have been relatively stable compared to its peers in the cybersecurity and cloud computing sectors. In 2024, Akamai's revenue grew by 4.7% year-over-year, while its earnings per share (EPS) decreased by 7.8%. Although Akamai's revenue growth was lower than some of its peers, such as CrowdStrike (up 21% in 2024) and Zscaler (up 18% in 2024), its earnings growth was more in line with the industry average.

However, Akamai's guidance for the first quarter and full year of 2025 fell short of analysts' expectations, leading to a sharp decline in Akamai's stock price. On February 20, 2025, Akamai reported fourth-quarter 2024 results that topped estimates, but its forward-looking projections overshadowed the Q4 results. The company said it expects current-quarter revenue between $1.00 billion and $1.02 billion and full-year revenue between $4.00 billion and $4.20 billion, both below consensus estimates.

The disappointing guidance led to a sharp decline in Akamai's stock price, with shares tumbling 21.73% to $76.73 on February 21, 2025. This decline was the stock's second consecutive day of losses and led to Akamai having the sharpest drop in the S&P 500, even though the cybersecurity and cloud computing company reported stronger profit than analysts expected.

Investor sentiment towards Akamai Technologies has been negatively impacted by the company's guidance for 2025, as well as broader market concerns about economic growth and inflation. The company's shares have been volatile in recent months, reflecting investor uncertainty about its growth prospects and the broader market conditions. Despite the recent decline, Akamai's stock price is still up for the young year so far and is not far from its all-time high set earlier this week.