Akamai Technologies (AKAM): Evaluating Valuation Following Launch of New Managed API Performance Service

If you are tracking Akamai Technologies (AKAM) right now, you probably noticed the recent buzz around its latest product launch. On September 24, Akamai rolled out its Managed Service for API Performance, doubling down on the crucial need for seamless and compliant API operations among today’s digital-first businesses. This move is not just another incremental tweak; it signals that Akamai is aiming to differentiate itself by offering deep, around-the-clock managed services, which could matter a lot to enterprises feeling the pressure of regulatory requirements and digital complexity.

This announcement comes at a time when Akamai’s share price has been underwhelming, with a drop of 25% over the last year and a year-to-date slide of 20%. The last month alone saw another 3% pullback, though a slight bump in the most recent trading session hints at renewed investor interest. In the bigger picture, Akamai has made several strategic partnerships and product moves lately, such as new alliances to monetize bot traffic and expanded Zero Trust solutions, but market momentum has yet to decisively shift upward. The recent API service launch may be an early catalyst for changing this narrative.

After the challenging year for AKAM’s valuation, is the introduction of this managed service a genuine buying opportunity for long-term investors, or is the market already accounting for future growth? Let’s dig into the numbers.

Most Popular Narrative: 20.1% Undervalued

According to the most widely followed analyst narrative, Akamai Technologies is currently undervalued by about 20% versus its calculated fair value, based on forward-looking projections. The prevailing narrative suggests the company’s growth potential in cloud, AI, and cybersecurity could unlock meaningful shareholder returns even as legacy content delivery revenues face pressure.

Rampant growth in data consumption, driven by AI-powered applications, video, and real-time use cases, is creating strong demand for Akamai's cloud infrastructure and edge compute offerings. This is illustrated by accelerating CIS (Cloud Infrastructure Services) ARR (annual recurring revenue), with 40 to 45% growth targeted for year-end 2025, pointing to robust forward revenue acceleration as large signed deals start to contribute.

Want to know the secret behind this big discount? The narrative is built on bold financial bets, with surprisingly upbeat expectations for the company’s growth and margins just a few years out. There’s a twist, however, as some of these projections are hotly debated among analysts. Curious which assumptions drive this valuation upgrade? Keep reading for the inside story on the numbers behind the target price.

Result: Fair Value of $95.20 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent declines in Akamai's core delivery revenues and greater-than-expected margin pressures from new investments could still challenge the bullish outlook.

Find out about the key risks to this Akamai Technologies narrative.

Another View: Our DCF Model Perspective

While analyst targets suggest Akamai is undervalued, an alternative look using our DCF model leads to a similar conclusion. This method takes a completely different approach, focusing on cash flows and intrinsic worth. Could this perspective uncover risks or potential upside that the consensus overlooks?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Akamai Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Akamai Technologies Narrative

If you see things differently or want to dive deeper into the numbers yourself, you can shape your own valuation story for Akamai in just a few minutes. Do it your way.

A great starting point for your Akamai Technologies research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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