What Happened?

Shares of cloud technology company Akamai Technologies (NASDAQ: AKAM) jumped 5.6% in the afternoon session after Morgan Stanley upgraded the company's stock from 'Underweight' to 'Overweight' and raised its price target to $115 from $83. 

The bank's analysts noted expectations for overall growth to improve. This was based on a few key factors: the decline in its content delivery business was expected to slow down, its security business was projected to maintain steady growth, and its compute division was forecasted to speed up. The firm pointed to industry consolidation supporting pricing and live sports driving demand for the content delivery segment. Meanwhile, analysts anticipated that the compute business would see growth accelerate into the high teens.

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What Is The Market Telling Us

Akamai Technologies’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 11 months ago when the stock dropped 20.3% on the news that the company reported weak fourth-quarter 2024 results, with next year's revenue guidance signaling a sharp deceleration in demand and falling short of Wall Street's estimates. 

Revenue grew just 3% year on year with security and compute solutions delivering double-digit growth, but these gains were overshadowed by an 18% drop in delivery revenue, the segment that historically generated a substantial portion of Akamai's business. Despite this, it wasn't all bad as adjusted operating profits and earnings beat expectations, and next-quarter EBITDA guidance also came in ahead of forecasts. It seems AKAM is shifting focus to profit growth as top-line expansion slows. Notably, the full-year outlook isn't great, implying 2.7% revenue growth at the midpoint, down from 4.8% in 2024. Overall, this was a weaker quarter, as revenue struggles overshadowed strong profit growth.

Akamai Technologies is up 9.1% since the beginning of the year, but at $92.82 per share, it is still trading 9.1% below its 52-week high of $102.10 from February 2025. Investors who bought $1,000 worth of Akamai Technologies’s shares 5 years ago would now be looking at an investment worth $912.83.

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