HSBC downgraded Akamai Technologies to Hold from Buy and lowered its target price to $123 from $171, citing weaker cloud infrastructure margins and slower long-term growth expectations. The new target represents approximately 3.8% upside from Akamai’s share price of $118.55 as of August 6.
Akamai Earnings Show Revenue Growth but Margin Pressure
Akamai reported second-quarter revenue of $1.10 billion, representing a 5.4% year-over-year increase and roughly matching analyst expectations. However, the company generated $271 million in non-GAAP operating profit, which was 7.1% below HSBC’s estimate.
The company’s non-GAAP operating margin declined to 24.6% from 29.6% a year earlier, while non-GAAP earnings per share decreased 8.1% to $1.59.
AI Demand Supports Cloud Growth Outlook
Akamai expects strong demand for its cloud infrastructure services, particularly from artificial intelligence-related workloads. HSBC projects the segment’s revenue will grow at a 56.8% compound annual growth rate from 2025 through 2028.
The growth outlook is supported by more than $2.8 billion in orders secured year to date and Akamai’s globally distributed network infrastructure. However, HSBC noted that the company is generating lower margins from this business than previously expected.
Lower Growth Forecasts and Higher Spending Pressure
HSBC reduced its 2026 non-GAAP operating profit estimate to $1.144 billion from $1.169 billion. The bank also lowered its 2027 and 2028 non-GAAP earnings-per-share forecasts by 3% to 8%.
The firm now expects Akamai’s earnings per share to grow at an 8.5% compound annual rate from 2026 through 2028, below its previous forecast of 10% to 15% growth for the broader technology sector.
HSBC also expects Akamai to maintain elevated capital spending, with capital expenditures projected to average 36% of revenue between 2026 and 2028.
Valuation Multiple Reduced
Due to higher capital spending requirements and weaker cloud infrastructure margins, HSBC lowered Akamai’s valuation multiple to 17 times estimated near-term non-GAAP earnings, down from 25 times.
The bank said the reduced valuation reflects concerns about profitability pressures, increased investment requirements, and a slower growth trajectory compared with the broader technology sector.
