AKAMAI TECHNOLOGIES, INC. (AKAM): what the price requires
At today's price, AKAMAI TECHNOLOGIES, INC. (AKAM) is priced for +18.5% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/AKAM
Headline
| Field | Value |
|---|---|
| Ticker | AKAM |
| Company | AKAMAI TECHNOLOGIES, INC. |
| Current price | $124.97/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 9.6% |
| Operating margin today | 14.0% |
| Margin compression implied | -4.4pp |
| Implied growth | 18.5% |
| Multiple paid | 39x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~10.1pp.
Reconcile: at the x-ray's 9.3% required return this reads ~8.1 years; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.57σ |
| cohort percentile (of 210 peers) | 89 |
| sustained it ~5 years at this level | 39% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 4.03x | 4 | expensive |
| Earnings | 3.91x | 5 | expensive |
| Relative | 1.96x | 5 | expensive |
| Growth | 0.82x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.1%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $241.12 | 0.52x | yes | FCF base $1.1B, growth 6% (input: historical growth), terminal g 4.0%, WACC 7.1%, 5yr projection |
| DCF Exit Multiple | Growth | $152.52 | 0.82x | yes | Exit EV/EBITDA: 31.8x / 33.8x / 35.8x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $71.18 | 1.76x | yes | P/E 26.92x (blended: static sector reference 20x + trailing (TTM) 43x), scenarios: 22.6x / 26.9x / 31.2x (bear / base = reference held flat / bull), EV/EBITDA 19.93x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $31.36 | 3.99x | yes | BV/sh $32.72, ROE (TTM) 8.9%, ke 9.3% |
| Two-Stage Excess Return | Asset | $30.70 | 4.07x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $107.62 | 1.16x | yes | Rev $4.3B, growth 6% (input: historical growth; tapered), Terminal P/S: 3.7x / 4.4x / 5.1x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $63.91 | 1.96x | yes | EPS $2.96, growth 22% (input: historical EPS growth), PEG=2.00 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $22.40 | 5.58x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.68B × (1−13%) / WACC 7.1% → EPV (no growth) |
| Residual Income | Asset | $30.59 | 4.09x | yes | BV $32.72 + 5yr PV of (ROE (TTM) 8.9% − Kₑ 9.3%) × BV; BV grows 5.8%/yr |
| Graham Number | Asset | $46.68 | 2.68x | yes | √(22.5 × EPS $2.96 × BVPS $32.72) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $31.35 | 3.99x | yes | EBITDA $0.71B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $43.47 | 2.87x | yes | FCF $1088.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $9.16 | 13.64x | yes | SBC-adj FCF $0.61B (FCF $1.09B − SBC $0.48B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $95.51 | 1.31x | yes | EPS $2.96 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $4.55 | 27.47x | yes | BV $32.72 × (ROIC 1.0% / WACC 7.1%) (excluded from median) |
| P/Sales Sector | Relative | $42.66 | 2.93x | yes | Revenue $4.27B × sector P/S 1.5x |
| PEG Fair Value | Relative | $95.86 | 1.30x | yes | EPS $2.96 × (PEG 1.5 × growth 21.6% (input: historical EPS growth)) → PE 32.4x |
| Earnings Yield | Earnings | $32.00 | 3.91x | yes | EPS $2.96 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.2b |
| Net debt / NOPAT (after-tax) | 6.22x |
| Net debt / operating income (pre-tax) | 5.42x |
| Interest coverage | 18.8x |
| Share count CAGR (buyback) | -2.1% |
| Burning cash | no |
Bullet Takeaways
At $124.94 the stock trades near 39 times operating income, well above where the static methods land, near a blended $66. Only the forward-growth frame reaches the price, which makes this a bet on the transition working.
The mix shift is real: cloud infrastructure services surged 45 percent and Akamai signed the largest contract in its history, a $1.8 billion seven-year cloud deal with an AI-focused customer, while security revenue grew 11 percent.
The legacy content-delivery business keeps shrinking, down about 2 percent, and the 2026 guidance disappointed because the AI build-out is costly. The price assumes the new businesses outgrow the old one for years.
Bull Case
Start with how far the price sits above the methods, because that distance is the whole debate. At $124.94 (June 27, 2026) the stock trades near 39 times operating income, while the asset, earnings-power and peer-multiple frames all land far below, around a blended $66. Only the forward-growth method reaches the price. For a company in the middle of a business-model transition, that gap is the market saying the future mix is worth far more than the trailing financials, which are weighed down by a declining legacy line. The bet the price makes is that Akamai's newer security and cloud-compute businesses keep outgrowing the old content-delivery business for years, and the recent numbers give that bet a foundation.
The growth businesses are inflecting hard. Cloud infrastructure services surged 45 percent following the rollout of the Akamai Inference Cloud, and the company signed the largest contract in its history, a $1.8 billion, seven-year cloud infrastructure commitment with a leading AI-focused customer. Security revenue reached $592 million, up 11 percent, with API security growing more than 100 percent and crossing a $100 million run rate. These are not adjacent experiments; they are large, fast-growing lines that play to Akamai's core asset, a globally distributed edge network. Putting compute and inference at the edge, close to users, is a genuine architectural advantage as AI workloads move from centralized training toward distributed serving.
The foundation underneath supports the reinvestment. Total revenue grew to roughly $4 billion (FY2025 10-K, accession 0001086222-26-000022), the business throws off substantial cash, and interest coverage near 16 times means the $3.2 billion of net debt is comfortably serviced. Akamai is using that cash flow to fund the AI and cloud build-out, which is exactly why the trailing margin looks compressed: the company is investing ahead of the revenue. If the security and compute lines keep compounding at their current rates, they will eventually dwarf the shrinking delivery business, and the durable growth the price assumes becomes the reported reality, something the static frames structurally cannot anticipate.
Bear Case
The disruption risk is not hypothetical for Akamai; it has already eaten the original business. Content delivery, the franchise the company was built on, fell another 2 percent and has been declining for years, commoditized by hyperscale cloud providers and bandwidth deflation. The bear thesis is that the same competitive force now threatens the newer lines. Akamai competes in cloud and security against far larger players, and its own filing lists the battle on "expertise, security, ease-of-use, breadth of services offered, price and financial strength," warning that "any type of increased competition could result in price and revenue reductions, loss of custom" (FY2025 10-K, accession 0001086222-26-000022). In cloud compute specifically, the competitors are the hyperscalers with vastly deeper capital, so Akamai is entering its growth markets against incumbents that can outspend it.
The AI pivot is expensive and is already pressuring the model. When the company issued conservative 2026 guidance, the stock fell more than 9 percent, because the aggressive and costly push into AI infrastructure weighs on near-term profitability. Full-year guidance put non-GAAP earnings per share at $6.20 to $7.20, below the $7.34 consensus, with a non-GAAP operating margin of only 26 to 28 percent, signaling margin compression as the build-out runs ahead of returns. The $1.8 billion cloud contract is large, but concentrating a chunk of the growth story in one customer adds dependency, and building data-center and inference capacity is a capital-heavy game that is unlike Akamai's historically asset-light delivery model.
The valuation leaves no room for the transition to stall. At nearly 39 times operating income, the multiple sits at the very top of the peer distribution, well beyond the upper quartile, and the price embeds about 19 percent annual operating growth for five years. Only about 39 percent of comparable fast-growers sustained that pace, and Akamai must do it while the legacy line shrinks and margins absorb the AI investment. If security growth slows, if the cloud business cannot scale profitably against the hyperscalers, or if the AI capex does not convert to durable high-margin revenue, the price re-rates toward the static methods, which see a far lower value.
Valuation
The price decomposes as a durability premium on a business in transition. The asset, earnings-power and peer-multiple frames all read the stock as richly valued, and only the forward-growth DCF reaches the $124.94 price, against a blended central value near $66. The static methods sit far below because they price the trailing financials, which are depressed by a shrinking legacy delivery business and by the heavy AI and cloud investment compressing current margins.
The gap to the price is a bet on the mix shift. Inverting the current price, the market is paying about 39 times operating income, which implies operating growth of roughly 19 percent per year for five years. The near-term pace is within what Akamai has recently delivered, given cloud infrastructure up 45 percent and security up 11 percent, so the rate is credible for the growth segments. The stretch is twofold: the multiple sits at the very top of the peer distribution, well beyond the upper quartile, and the company must sustain blended growth while the legacy content-delivery line keeps falling and margins absorb the AI build-out. The 2026 guidance, with non-GAAP earnings per share of $6.20 to $7.20 and an operating margin of 26 to 28 percent, shows that profitability growth is lagging revenue as the investment runs ahead. The investment case is therefore whether security and cloud compute can outgrow the declining delivery business durably and profitably, against hyperscale competition. If they do, the transition justifies the premium; if the new lines disappoint or the AI capex does not earn its return, a top-of-distribution multiple has a long way to fall.
Catalysts
Cloud and security growth are the central catalysts. Cloud infrastructure services grew 45 percent on the Akamai Inference Cloud rollout, and the $1.8 billion seven-year cloud contract with an AI-focused customer is the marquee win; security revenue grew 11 percent with API security up more than 100 percent. The quarterly growth rates of these two lines, and the ramp of the large cloud contract, are the key signals that the transition the price pays for is on track.
Margin and guidance are the swing catalysts. The stock fell more than 9 percent when 2026 guidance came in conservative because of the costly AI pivot, so the non-GAAP operating margin, guided to 26 to 28 percent, and any revision to the $6.20 to $7.20 earnings-per-share range are the items that move the stock. Watch whether the AI and cloud investment starts converting to profitable revenue or continues to pressure margins.
The legacy delivery decline and competition are the factors to monitor. Traditional content delivery fell about 2 percent and its trajectory determines how much drag the growth segments must overcome. Competition from hyperscale cloud providers in both compute and security is the structural risk, since increased competition can force price and revenue reductions. Quarterly results remain the main proof point on whether the new businesses are outgrowing the old one fast enough to justify the multiple.
Peer Cohorts (Per Segment, With Filing Citations)
Akamai (consolidated) (reported)
- FSLY (FASTLY, INC.)
- (no filing in the citation store)
- NET (Cloudflare Inc)
- (no filing in the citation store)
- FTNT (Fortinet Inc)
- (no filing in the citation store)
- PANW (Palo Alto Networks Inc)
- (no filing in the citation store)
- GEN (Gen Digital Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.