Karishma Vanjani and Adam Levine

Akamai Technologies stock took a hit Friday morning as investors likely remain unimpressed with its near-term story.

On Thursday, the cloud-services company Akamai posted adjusted earnings of $1.66 a share for the fourth quarter on revenue of $1.02 billion. Earnings were ahead of the FactSet consensus of $1.52 a share, while revenue was in line.

The outlook is weighing on shares more. Akamai is a major player in the delivery of internet content, but the segment has seen large revenue declines due to a broader slowdown in internet traffic. Akamai has been shifting revenue to its security and computing segment.

Akamai projected 2025 revenue of $4 billion to $4.20 billion, below the average Wall Street estimate of $4.26 billion.

It expects a year-over-year decline of 10% in delivery revenue in 2025, better than the 15% fall in 2024 and declines seen in prior years as more customers have been willing to sign multiyear contracts with predictable pricing.

One reason for the soft revenue guidance was TikTok, Akamai's largest customer. Given its the tenuous position politically in the U.S., TikTok has decided to do some of its own content delivery, rather than relying on Akamai.

While analysts were anticipating this shift, the scale took them by surprise. "TikTok is much larger than I or anyone thought," analyst Rudy Kessinger of Davidson told Barron's.

Jeff Van Rhee, analyst at Craig Hallum Capital, echoed this position. The "TikTok incremental revenue headwind of $60 million in 2025 and another $40 million over the following few years, is substantially more headwind than was expected," he told Barron's. "The new contract with TikTok is much smaller in scope, not nearly offsetting the headwinds mentioned above."

It also established ambitious three- to five-year goals that included an inorganic total revenue growth of over 10%, substantially above the 2.7% growth expected in 2025 at the midpoint.

The stock fell 15% to $83.29 on Friday intraday trading, on pace for its largest one-day percent decrease since May 2017 when it fell 15.5%. That would be the lowest close since May 9, 2023, when it closed at $78.88, according to Dow Jones Market Data.

J.P. Morgan has a Sell rating on Akamai stock. "Our overall conclusion is that while we laud the long-term targets, which will be commendable if achieved, growth in the near-term remains challenged and below where Akamai and investors want it to be," the firm said, lowering its target for price to $72 from $76.

Guggenheim's analyst John DiFucci titled his note "Great Story, But Need to Execute." DiFucci has a Buy rating on Akamai stock and encourages investors to remain patient. He expects the stock to go to $133.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com and Adam Levine at adam.levine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 21, 2025 14:09 ET (19:09 GMT)

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