Episode Details

Akamai Technologies, Inc. (AKAM) Q2 2026 — Q2 2026 (ended June 30): revenue $1,099.7M +5.4% (bar $1,091M, a beat); non-GAAP EPS $1.59 vs a $1.57 bar - a beat, and DOWN 8% YoY; GAAP EPS $0.52, down 27%; non-GAAP operating margin 25% vs 30%. Security $604M +10%, Cloud Infrastructure $99M +39%, Delivery $396M -6%. The 8-K was accepted 4:07pm ET Thursday Aug 6, so Friday Aug 7 is the reaction session: -6.76% to $110.54. Akamai beat on revenue and on earnings, announced $2.8B of signed multi-year AI cloud contracts including one worth over $600M across four years, and fell 6.76% the next session. The beat is the most misleading number in the release: $1.59 cleared a $1.57 bar, but it is down 8% year over year against a bar Akamai itself set 10% below last year, and the FY2026 guide of $6.725 at the midpoint is a 5.5% DECLINE from 2025's actual $7.12. Three findings the coverage missed: the margin guide has walked 27% -> 26% -> 25.5% since February; $615.7M of first-half buybacks produced ZERO share reduction (diluted shares rose 5.8% to 153.7M); and the cash flow statement shows flat capex of $225.8M while Akamai's own accrual table shows $346.5M, 32% of revenue against 21%, bridged by a $148M payables build. THE CALL: SELL (4/5, A GOOD BUSINESS WHOSE CHEAP MULTIPLE IS AN ADD-BACK - NOT ONE CELL OF OUR VALUATION GRID CLEARS THE SHARE PRICE) — base-case value ~$81.0 vs ~$110.54 today. KEY METRICS: - CALL: SELL 4/5, fair value $81 vs the $110.54 Aug 7 close (-26.7%). Bull $105, bear $50 - the bull case is still BELOW the price. We would look again under $75. - Street: Hold, 52 analysts (25 buy / 25 hold / 2 sell), avg target $154.14. Dated Aug 7: UBS $125, RBC $135, Baird $140, Piper $140, Guggenheim $190 - four cuts, one raise, averaging $146. What to watch: UP: Security is $604M and 55% of revenue growing 10%; Cloud Infrastructure Services grew 39% to $99M and management disclosed over $2.8B of multi-year CIS contracts signed year to date, including one worth more than $600M over four years with a US technology company for robotics development; cloud infrastructure now out-adds Delivery's decline in dollars for the first time (+$27.9M vs -$24.2M); $4.616B of cash and marketable securities; the stock is already 31% below its May 13 high of $161.14. DOWN: non-GAAP operating margin fell to 25% from 30% and the FY guide was cut twice; FY2026 non-GAAP EPS is guided to FALL 5.5% after rising 10% in 2025; accrual capex hit 32% of revenue and Akamai deleted the capex line from its guidance table after February's 23-25%; incremental gross margin on the growth is roughly zero (revenue +$56.2M, cost of revenue +$59.4M); stock compensation is 13.3% of revenue and the share count rose despite $615.7M of buybacks; the guidance share assumption was raised from 147M to 150M. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.