HSBC downgrades Akamai to hold, cuts target price to $123

Investing.com -- HSBC downgraded Akamai Technologies to Hold from Buy and cut its target price to $123 from $171, citing weaker cloud infrastructure margins and slower long-term growth. The new target implies 3.8% upside from the $118.55 share price as of Aug. 6.

Akamai reported second-quarter revenue of $1.10 billion, up 5.4% from a year earlier and broadly in line with estimates. The company generated $271 million in non-GAAP operating profit, 7.1% below HSBC’s estimate, while its non-GAAP operating margin fell to 24.6% from 29.6% a year earlier. Non-GAAP EPS declined 8.1% to $1.59.

Akamai Technologies expects strong demand for its cloud infrastructure services, particularly from AI-related workloads. HSBC expects the segment’s revenue to grow at a 56.8% compound annual rate from 2025 through 2028, supported by more than $2.8 billion in orders secured year to date and Akamai’s geographically distributed network. However, the bank said Akamai generates lower margins from the business than it previously expected.

HSBC cut its 2026 non-GAAP operating profit estimate to $1.144 billion from $1.169 billion and lowered its 2027-28 non-GAAP EPS forecasts by 3% to 8%. The bank expects Akamai’s EPS to grow at an 8.5% compound annual rate from 2026 through 2028, below its 10%-15% growth forecast for the broader sector.

HSBC also expects Akamai to maintain elevated capital spending, with capex averaging 36% of revenue from 2026 through 2028. The bank therefore reduced its valuation multiple to 17 times estimated near-term non-GAAP EPS from 25 times and said the lower multiple reflects pressure from high capex and weaker cloud infrastructure margins.

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