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Revenues from Akamai’s Internet Platform Customers Remain Soft

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Declining trend of Internet Platform Customers revenues

Leading cloud delivery platform Akamai Technologies (AKAM) has seen a decline in its Internet Platform Customers segment’s revenues. Its 4Q17 revenues fell 14.7% YoY (year-over-year) to nearly $50.0 million. 

In fiscal 2017, this segment’s revenues came in at ~$203.0 million for a 19.0% YoY decrease. Revenues from Non-Internet Platform Customers in 4Q17 and 2017 increased 10.0% YoY.

In the graph above, we can see the declining revenue trend of Akamai’s Internet Platform Customers in the last five quarters. During the period, it declined at a CAGR[1. compound annual growth rate] of 3.9%.

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Cause of decline and tailwinds

This decline in revenues was mainly responsible for the change in business tactics by the top six tech companies—Amazon (AMZN), Netflix (NFLX), Facebook (FB), Microsoft (MSFT), Google, and Apple. In order to cut costs, these tech giants started building their own internal infrastructure to transfer huge amounts of media content instead of depending on other cloud delivery content service providers.

Akamai believes that the declining revenue trend could persist going forward. In fiscal 2017, these six large enterprises contributed ~8.0% of the total revenues compared with 11.0% in fiscal 2016.

However, increased market share outside the US, coupled with new product launches, has mitigated softness in its Internet Platform Customers segment’s revenues. The acquisition of SOASTA may offset the loss of revenues from these top clients.

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