NET vs Akamai?

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As you know, it is hard to search these boards. At least I find it is.

Enjoyed the recent commentary around Cloudflare’s CEO Prince and what he has been stating.
Appreciated Saul’s views on it and TMF Galagan’s transcript snippets.

I have long liked NET, but not their valuation, but that is starting to change at this point.
Fastly has been beaten to a pulp on this board and elsewhere, but I don’t recall seeing too much of Akamai, in terms of competition for Cloudflare. Clocking in north of $3b+ of revenue, they aren’t small. Growth hasn’t been explosive for them, of course.

Are there any good primers or links to understanding how best to think about Cloudflare vs Akamai, and why Akamai may or may not be real competition, etc…?

thanks in advance,
Dreamer

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A fascinating question Dreamer. I’ve long ignored Akamai as a legacy-being-eaten company, but your question prompted me to look at them again.


| Ticker   |   Close | Revenue   | Revenue TTM   |   Rev. TTM 𝝳 (yoy) | EV      |   EV/S |   Gross Margin | GM$ ttm   |   EV/GM$ |   GM$ 𝝳 (yoy) % | rnd    |   rps | FCF     | Cash    | Short-term investments   | Debt   | Deferred rev   | EBIT margin   | Stock based comp   | Diluted shares   |   shareswadil_growth |
|:---------|--------:|:----------|:--------------|-------------------:|:--------|-------:|---------------:|:----------|---------:|----------------:|:-------|------:|:--------|:--------|:-------------------------|:-------|:---------------|:--------------|:-------------------|:-----------------|---------------------:|
| AKAM     |   87.46 | 903.65m   | 3.522b        |               0.07 | 16.890b |   4.80 |           0.63 | 2.228b    |     7.58 |            0.06 | 99.94m | 21.52 | 91.09m  | 377.81m | 129.06m                  | 3.244b | 169.82m        | 33.0%         | 56.23m             | 163.64m          |                -0.01 |
| NET      |   39.70 | 212.17m   | 730.54m       |               0.53 | 14.280b |  19.55 |           0.78 | 568.22m   |    25.13 |            0.55 | 67.05m |  2.26 | -64.40m | 160.43m | 1.573b                   | 1.575b | 137.23m        | -5.1%         | 33.97m             | 323.33m          |                 0.06 |

Here’s the smackdown from my code… And it pretty much looks as you’d expect for a “old timer” vs “up-and-comer” comparison.

Lots of revenue growing slow, vs not much revenue growing fast. Assuming stable TTM growth rates, NET will overtake AKAM in about 4 years.

Lots of debt for both, but NET has that debt sitting in investments, whereas AKAM theoretically have it in assets. The asset profile for both is similarly old-timer vs up-and-comer…


     | Property, plant, equip | Goodwill  |
NET  | 340.5m                 | 28.5m     |
AKAM | 2,399.7m               | 2,745.9m  |

I’m not clear on AKAMs acquisitions (https://tracxn.com/d/acquisitions/acquisitionsbyAkamai) has about $2.3B in transactions, but the low growth rate suggests those a gap-plugging acquisitions to me.

So the question (in this market) is: what is the value of growth vs what is the value of free-cash-flow and actual net profit?

So not super interesting maybe. I’m thinking maybe the CRWD vs PANW comparison is more interesting maybe?

Here’s their smackdown, with SentinelOne included.


### Smackdown

| Ticker   |   Close | Revenue   | Revenue TTM   |   Rev. TTM 𝝳 (yoy) | EV      |   EV/S |   Gross Margin | GM$ ttm   |   EV/GM$ |   GM$ 𝝳 (yoy) % | rnd     |   rps | FCF     | Cash    | Short-term investments   | Debt    | Deferred rev   | EBIT margin   | Stock based comp   | Diluted shares   |   shareswadil_growth |
|:---------|--------:|:----------|:--------------|-------------------:|:--------|-------:|---------------:|:----------|---------:|----------------:|:--------|------:|:--------|:--------|:-------------------------|:--------|:---------------|:--------------|:-------------------|:-----------------|---------------------:|
| CRWD     |  157.21 | 487.83m   | 1.637b        |               0.64 | 34.898b |  21.32 |           0.74 | 1.205b    |    28.96 |            0.63 | 123.40m |  7.08 | 157.53m | 2.153b  | 0.00                     | 772.05m | 1.693b         | 0.2%          | 102.49m            | 231.18m          |                 0.03 |
| PANW     |  466.31 | 1.387b    | 5.170b        |               0.30 | 47.456b |   9.18 |           0.68 | 3.585b    |    13.24 |            0.29 | 355.40m | 52.28 | 351.20m | 2.420b  | 1.455b                   | 3.951b  | 5.859b         | 2.7%          | 247.30m            | 98.90m           |                 0.02 |
| S        |   21.74 | 78.25m    | 245.66m       |               1.18 | 5.172b  |  21.05 |           0.65 | 155.15m   |    33.34 |            1.48 | 45.88m  |  0.91 | -54.73m | 766.10m | 851.42m                  | 30.12m  | 275.64m        | -110.8%       | 31.63m             | 269.59m          |                 4.90 |

One of the interesting questions with all of these companies is: What value is a R&D dollar? ie, what sort of advantage does PANW get by spending 2.5x CRWD, who spend 2.5x SentinelOne?

cheers
Greg

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