QS Research · Michael Burry's Scion Capital analyst template · 2006
AKAMAI TECHNOLOGIES INC (AKAM)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $83.71 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case +4% · downside -33% · upside +22%
The market is pricing AKAM at 21.5x TTM EV/EBIT and 31.1x GAAP P/E (34.7x operating tax-normalized) for a business whose revenue grew 6% in Q3 2026 while GAAP operating margin fell to 10% from 16% and GAAP EPS fell 21%, so the low 1.95x EV/Sales and 7.5x GAAP EBITDA are a profitability-and-capex discount, not a mispricing: capex is 78% of GAAP EBITDA and stock pay is 97% of FCF (N48, N44). The bull case is real but back-end loaded — $19.90B of RPO (4.53x TTM revenue), the $11.6B seven-year Anthropic agreement, ~$14B of 2026 CIS commitments, 2027 CIS revenue guided to $1.1-1.3B and 2028 revenue above $7.0B — but no 2027/2028 margin, EPS or FCF targets were given, and the $2.2B convertible priced 2026-11-09 plus $7.57B of converts at Sep 30, 2026 fund capex rather than buybacks (buybacks halted in Q3). At the 32.3x peer median P/E (4 peers in the comps table), the base is $86.94 (+3.9%); the downside is $56.02 (-33.1%) at 27.35x P/E plus the $0.06 exposure stress, and the upside is $102.13 (+22.0%). With 13.6% of float short (crowded short flagged), reward/risk is 0.66 and the base/upside do not clear +30%, so the call is pass with low conviction. I use post-deal TTM to Sep 30, 2026 throughout and do not average pre-2022 acquisition earnings ($872.1M paid for businesses to 2022-12-31).
Key numbers
- Share price: $83.71
- Market cap: $12.07B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $4.39B
- EV / EBITDA (TTM): 7.5x
- P/E (TTM): 31.1x
- FCF yield: 4.5%
- Price / book: 2.34x
- Earnings-quality flags (TTM): none flagged
- P/E, operating (tax-normalized) (TTM): 34.7x
- EV / FCF (TTM): 15.7x
- Revenue growth (latest fiscal year): +5.4%
- ROIC (TTM): 21.3%
- WACC: 9.7%
- Economic profit spread: +11.6 pts
The 15 boxes
- ✓ 1. Long-form business notes
Akamai sells security, cloud computing and delivery plus services/support to enterprises and government, mainly through direct and channel sales, on a global edge network. The FY2025 10-K shows a shift from FY2020's separate cloud/security, web/mobile performance, media delivery, edge compute and carrier categories to three core offerings, with more AI and cloud-computing emphasis and acquisitions in API security and serverless compute. Consolidated revenue was $4.21B at 2025-12-31 and $4.39B TTM to 2026-09-30, while operating income was $566.9M and $398.4M, respectively; customer concentration is low.
- ✓ 2. Competitive advantage
The sources show scale and network breadth as Akamai's stated edge, but the numbers say that edge is not converting into pricing power or rising returns. Revenue rose from $3.62B in FY2022 to $4.39B TTM to 2026-09-30, while operating income fell from $676.3M to $398.4M and capex climbed from $241.3M to $893.2M over the same comparison. Management itself reports continued delivery revenue declines on pricing pressure and DIY/multi-vendor sourcing, and says security and cloud computing face larger incumbents with more resources and priority access to servers, memory, colocation and power. Conclusion: a real network/scale asset, but a narrow and currently eroding advantage, not a durable one.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended 9/30/26) revenue rose 6% to $1.122B, with security $622M (+9%) and cloud infrastructure services $109M (+34%) offsetting delivery and other cloud applications $391M (-3%); nine-month revenue was $3.295B, +6%. The growth is being bought: cost of revenue rose to 45% of revenue from 41%, GAAP operating margin fell to 10% from 16%, and GAAP diluted EPS fell 21% to $0.77, while non-GAAP operating margin was 25%, down 6 points. Cash generation held up ($433M operating cash flow in Q3, $4.239B cash plus marketable securities) and no shares were repurchased in Q3 after $616M of buybacks in the first nine months. Guidance is fully numeric: Q4 2026 revenue $1.145-1.170B, FY2026 $4.440-4.465B, with 2027 CIS revenue of $1.1-1.3B and total 2027 growth of 17-22% at constant currency.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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