Akamai Technologies Stock Drops as Slowing Traffic Growth Weighs on Guidance

Akamai Technologies (AKAM) posted quarterly earnings that came in ahead of Wall Street forecasts but provided guidance that fell short of expectations, sending shares in the software infrastructure company tumbling more than 10% ahead of the opening bell Friday morning.

In the first three months of the year, the company posted adjusted earnings of $1.64 per share, edging past the $1.61-a-share consensus. Revenue in the period of $987 million grew 8% from a year earlier but missed forecasts of $989 million as weakness in the company’s legacy content-delivery unit offset strength in its security-software and cloud-computing businesses.

For the current quarter ending in June, the company guided revenue between $967 million and $986 million and adjusted earnings from $1.51 to $1.56 per share, with the high end of each forecast missing estimates, which Wall Street had pegged at $1 billion and $1.63 a share, respectively.

Turning to the full-year outlook, the company expects net sales of between $3.95 billion and $4.02 billion, below the $4.08 billion consensus. It anticipates adjusted earnings of $6.20 to $6.40 per share, whereas analysts had expected $6.73 a share.

The company said its outlook reflects a stronger dollar, a large social media customer rationalizing costs, and slowing traffic growth across the industry, adding that it also accounts for improvements in its security and compute businesses.

Monitor This Chart Area Amid Earnings-Driven Selling

Since topping out at over $129 in early February, Akamai shares have undergone a significant correction, falling around 20% in the past three months. Moreover, the 50-day moving average (MA) crossed below the 200-day MA in late April to form an ominous death cross, a chart pattern technical analysts interpret as marking the start of a new downtrend. 

However, amid Friday’s anticipated weakness, investors should monitor an area on the chart between $89 and $94, where the price may find buying interest in a zone of support from prior price action between November 2022 to August last year.

Akamai shares were down 10.7% at $91.50 at around 7:00 a.m. ET.

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As of the date this article was written, the author does not own any of the above securities.