Softness in Media segment’s revenues
Akamai Technologies (AKAM) witnessed a decline in its Media division’s revenues in 4Q17, mainly due to the decrease in rates by the largest clients at the time of renewal of service. In the reported period, its segmental revenues fell 2.7% YoY (year-over-year) to $284.0 million.
In fiscal 2017, the company’s Media business generated revenues of $1.1 billion, which declined 2.0% YoY. However, on a constant currency basis, its revenues for 4Q17 and 2017 decreased 4.0% and 1.0%, respectively.
In the graph above, we can see the revenue trend of the Media segment in the last five quarters for Akamai. During the period, it grew at a CAGR[1. compound annual growth rate] of 0.2%. However, it’s showing a declining trend for most quarters.
Growth in traffic holds the key
Despite a decline in its Media business, Akamai’s annualized growth in traffic easily outpaced the industry averages in 4Q17. This growth was mainly driven by its Internet Platform Customers segment, including Google (GOOGL), Facebook (FB), and Microsoft (MSFT). Moreover, the OTT (over-the-top) traffic in the reported quarter increased 50.0% YoY.
Growing demand for online movies from Netflix (NFLX) and Hulu expands Akamai’s traffic requirements. The company is also optimistic about its Media division’s customer growth in 2018, fueled by the strategy implemented by its management in mid-2017. Akamai’s Media segment’s management team targets the top 250 media customers, which is responsible for most of its traffic and revenues.