Akamai Technologies AKAM is set to report second-quarter 2020 results on Jul 28.

For the second quarter, Akamai expects revenues between $752 million and $778 million. The Zacks Consensus Estimate for quarterly revenues is pegged at $768.4 million, which indicates a rise of 9% from the year-ago quarter’s reported figure.

Non-GAAP earnings are expected in the range of $1.18-$1.24 per share. The consensus mark for earnings was unchanged at $1.22 over the past 30 days, which reflects year-over-year growth of 14%.

Notably, the company has a trailing four-quarter positive earnings surprise of 7.01%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors Likely to Have Impacted Q2

Akamai’s second-quarter 2020 performance is expected to have benefited from strong demand for its robust security solutions that include services for DDoS prevention, application-layer firewall and bot management. Moreover, ongoing momentum for the company’s new Zero Trust enterprise security solutions is likely to have contributed to second-quarter revenues.

Demand is being driven by the increase in cyber-attacks as hackers are taking advantage of the ongoing coronavirus pandemic to ramp up attacks on enterprises across all industries.

Further, the addition of enhancements like Secure Web Gateway to Akamai’s Enterprise Threat Protector 3.0 offering is likely to have led to its robust adoption, which in turn is anticipated to have driven Cloud Security Solutions revenues in the to-be-reported quarter.

The Zacks Consensus Estimate for Cloud Security Solutions second-quarter revenues is currently pegged at $247 million, which suggests a rise of 20.5% on a year-over-year basis.

Akamai’s Media and Carrier division revenues is expected to have benefited from strong traffic on the company’s platform, stemming from surge in demand for OTT video services as well as software and gaming downloads during the quarter under review.

The Zacks Consensus Estimate for Media and Carrier Division’s second-quarter revenues is currently pegged at $350 million, which indicates a growth of 7.1% on a year-over-year basis.

Shelter-in-place measures due to the ongoing pandemic are likely to have driven Internet traffic during the to-be reported quarter. As people are staying at home, there is significant growth in the usage of social media, news and other information websites. This is driving bandwidth requirements, which is expected to have accelerated demand for the company’s solutions and boosted revenues.

Growing clout of the company’s products instill confidence in the stock. Notably, shares of the company have returned 31.8% in the year-to-date period compared with the industry’s rally of 18.6%.

Akamai’s Web Division revenues are expected to have been negatively impacted by weakness in the hospitality, travel and retail end markets, as these verticals have been hit the hardest by the coronavirus outbreak. Nevertheless, the Zacks Consensus Estimate for Web Division revenues for the second quarter is currently pegged at $416 million that indicates growth of 9.5% on a year-over-year basis.

However, increasing investments in product innovation amid stiff competition in OTT video services and cyber security end-markets is likely to have exerted pressure on margins in the to-be-reported quarter.

Also, coronavirus crisis-induced slowdown has led to a decline in spending across small and medium businesses, which in turn is likely to have limited top-line growth.

Key Development in Q2

Akamai enhanced its Cloud Security Solutions portfolio with the roll out of a new threat detection solution — Page Integrity Manager — to prevent data breaches and credit card skimming amid the growing cyber security attacks.

Favorable ESP

Our proven model predicts an earnings beat for Akamai this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Akamai has an Earnings ESP of +0.89% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some other stocks you may consider as our proven model shows that these also have the right mix of elements to beat estimates this time:
    
Synaptics Incorporated SYNA has an Earnings ESP of +10.60% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Microchip Technology Incorporated MCHP has an Earnings ESP of +3.09% and a Zacks Rank of 1.

Anaplan, Inc. PLAN has an Earnings ESP of +1.64% and a Zacks Rank of 1.

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