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Disappointing guidance sends Cloudflare and Akamai stocks lower
- Cloudflare and Akamai stocks fell after providing low guidance following third-quarter results. Cloudflare stock was down just over 6% after its sales forecast for the current quarter came up short of analyst expectations, while Akamai shares fell more than 7% after it cut its guidance for fiscal 2024 revenue. Cloudflare's revenue grew by 38%, to $430m. It reported a net loss of $15.3m, improving on the $23.5m loss of the same period last year. Akamai's Q3 revenue was just over $1bn, up just 4% year on year.
- Cloudflare anticipates sales of between $451m and $452m for the current quarter, trailing the Street's forecast of $455m. The company reiterated its annual sales forecast, saying it sees full-year revenue of $1.66bn at the midpoint, matching the Street's consensus estimate.
- Akamai reported a net profit of just $57.9m for the quarter, down from a $131.7m profit in the year-ago quarter. Revenue fell 16% from a year earlier, to $319m. Its security segment grew 14% to $519m, while its cloud computing business added $167m, growing 28%.
- Cloudflare is facing headwinds with customers scaling back their technology budgets in light of economic uncertainty, while experiencing growing competition from cybersecurity firms such as Palo Alto Networks and CrowdStrike Holdings. Akamai says its content delivery business has been challenged by macroeconomic and geopolitical headwinds.
- Both Akamai and Cloudflare are best known for their content delivery networks, though analysts suggest the segment is under-growing pressure.
- Akamai said it faces headwinds in terms of content delivery across the entire segment due to increased geopolitical tensions and other issues experienced in various countries that have affected the availability of customer content.
- Cloudflare responded by diversifying its product base. This year it has continued to innovate around core offerings such as its Web Application Firewall and Cloudflare Workers.
- For the current quarter, Cloudflare anticipates earnings of 18 cents per share at the midpoint of its guidance, ahead of the Street's target of 17 cents. Akamai anticipates Q4 earnings of between $1.49 per share and $1.56 per share on revenue of between $995 million and $1.02 billion.
- Akamai said it's now expecting fiscal 2024 earnings of between $6.31 and $6.38 per share, down from its prior range of $6.34 to $6.47, and below Street consensus.
- Cloudflare co-founder and Chief Executive Matthew Prince said the company added a record 219 large customers and achieved a new milestone — 35% of the Fortune 500 are now paying Cloudflare customers.
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