After Akamai’s FY adjusted EPS was lowered and its revenue outlook was lowered, shares of Akamai fell more than 13% Wednesday in premarket trades

AKAM Q1 adjusted EPS was $1.39. This compares to $1.38 for the previous year and misses the consensus estimate of $1.42. Revenue was $903.6 Million, which is 7.2% higher YoY than the analysts consensus estimate of $904.4 millions.

Akami anticipates Q2 adjusted earnings to be in the $1.28-$1.33 range, which is well below analyst expectations of $1.45. Analysts had expected Q2 revenue to range from $890million to $905m, but Akami anticipates that it will be between $905 million and $905 million. A margin of 43% is expected for Q2 EBITDA.

Akamai is now expecting 2022 adjustedEPS between $5.32 and $5.44 for the whole year. This compares to the 5.82 to 5.97 forecast, which analysts had expected to reach $5.92. The range for 2022 revenue will be between $3.62 billion and $3.67 billion. This is down from the $3.673 billion-$3.728 billion consensus estimate.

“Despite a challenging global environment and the headwinds associated with the strengthening U.S. dollar, Akamai delivered results in line with our Q1 guidance,” said Akamai CEO, Dr. Tom Leighton.

Morgan Stanley analyst Keith Weiss reduced the price target from $130.00 for the EW-rated shares to $118.00.

“Multiple cyclical factors are putting significant pressure on earnings power, including: 1) waning traffic volumes as mask mandates ease and consumers reduce their time spent gaming and watch OTT video, 2) pricing impacts from the renewal of several large customers in Q1 (with more to come in Q2), 3) exiting their Russian business which represented ~1% of overall revenues, 4) mounting FX headwinds, rising from the $45 million revenue impact estimates on the Q4 call to $100 million given current FX rates, and 5) a higher pro-forma tax rate driven by a higher international mix and unfavorable tax code changes. While segments like Security have the potential to be counter-cyclical, especially given the heightened threat environment, that has not yet proven an effective offset,” Weiss said in a note.

Raymond James analyst Frank Louthan has also reduced estimates ($115.00 from $118.00), to reflect slower traffic growth.

“While the net impact off this is disappointing, we believe the damage will be in the name early and the shares can recover over the next 12 months, particularly if FX changes, Linode contribution improves, and continued growth in compute and security make CDN traffic a smaller impact to the business. As such, we remain at Outperform,” Louthan told clients in a memo.

By Senad Karaahmetovic