Equinix, Akamai Each Post Powerful Q4, But Falter Anyway

February 9th, 2011 by · Leave a Comment

Two next generation pillars of the internet world, Equinix (NASDAQ:EQIX, news, filings) and Akamai (NASDAQ:AKAM, news, filings) are taking a beating after hours following their Q4/10 reports.  In each case, their Q4 numbers were ahead of expectations but their forward guidance was, shall we say, not well received.  Of course, it doesn’t help that Cisco’s miss has cast a shadow over the whole market – it would have taken a lot to overcome that.  First let’s take a look at Equinix’s numbers in a quick table:

$ in millions Q4/09 Q1/10 Q2/10 Q3/10 Q4/10





– Recurring 231.5 237.2 282.1 314.7 326.3
– Non-recurring 11.1 11.4 14.0 15.6 18.9
Revenues 242.6 248.6 296.1 330.3 345.2 354-356 >1,500
COS 127.1 133.1 162.6 185.5 193.6
SG&A 60.9 62.6 83.1 89.8 96.3
Adjusted EBITDA 111.7 117.3 132.2 146.5 148.9 151-153 >675
Earnings Per Share 0.44 0.35 (0.05) 0.24 0.29

Ongoing Capex 20.7 14.5 26.9 40.7 32.4
Expansion Capex 81.0 128.9 121.8 103.2 111.0

Both revenues and EPS were stronger than anticipated, as the colocation giant rebounded from a disappointing Q3 that sent its stock into a tailspin back in October.  And it’s actual projected numbers for Q1/11 and FY/11 were largely in line with most projections I found.  But Equinix so often beats those numbers that just meeting them wasn’t enough to counteract the Cisco disappointment’s shift.  Instead analysts seem to be picking apart the details looking for stuff to be depressed about.  To me, things seemed relatively ok thus far.

Now on to Akamai’s numbers:

$ in millions Q4/09 Q1/10 Q2/10





Revenue 238.3 240.0 245.3 253.6 284.7 265-275
COS 67.6 67.4 71.8 77.8 86.2
SG&A+R&D 104.4 102.4 112.5 112.6 121.8
Gross Margin


71.9% 70.7% 69.3% 69.7%
Adj.  EPS 0.34 0.35 0.34 0.34 0.40 $0.35-0.37

Once again, revenues and earnings per share were slightly ahead of expectations, which were already high as Akamai finished what was a powerful year for them with a seasonally strong Q4.  However, the street had been looking for projected Q1 revenues flat with Q4 despite that seasonality, and it didn’t get that.  Perhaps a bit of that is the Netflix traffic they lost to Level 3 starting with the new year though they continue to have Netflix as a streaming customer.  Honestly though, it all looks reasonable at first glance.  The CDN marketplace is quite dynamic and revenue trends are harder to predict than the colocation segment, but Akamai had such a good 2010 it will be a tough act to follow.

Overall though, I think the pessimism’s main source lies with the aftermath of Cisco’s miss.  Everyone is worried about a bit of a slowdown, and failing to contradict that worry clearly enough this week will mean short term volatility for anyone.

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