Akamai Vs Cloudflare Stock: Which Is Best?

Akamai Vs Cloudflare Stock: Cybersecurity has never been more critical than it is today, and the need for businesses to invest in protecting digital assets will continue to grow.

In 2020, companies across the country and around the world moved their workforce home with almost no notice. That meant rapid expansion of virtual infrastructure with little or no preparation. As a result, many companies were left vulnerable to cyberattacks, which are growing more and more sophisticated every year. 

By some estimates, the collective costs associated with cybercrime will reach $6 trillion per year by 2021. That’s despite the fact that businesses are spending more on prevention.

Industry experts predict that by 2022, that spending will total $133.7 billion or more, as IT experts fight against hacking, malware, phishing, social engineering, and distributed denial of service (DDoS). 

Companies on the cutting edge of cybersecurity, as well as those that supply safe, reliable cloud and networking infrastructure, are in an excellent position to grow and expand in this increasingly essential space. However, choosing the stock that is most likely to succeed presents a thorny question for investors. 

After all, there are multiple players in this market, and each has a slightly different approach and a slightly different value proposition. 

In a matchup between major players, there are more questions than answers. For example, new investors want to know, Akamai vs Cloudflare stock – which is best?

Is Akamai Stock A Buy?

Internet users expect fast, secure delivery of web content on demand, and companies are committed to delivering this experience. However, the process that appears completely effortless on the user side requires flawless completion of a complex series of tasks behind the scenes.

Akamai makes the internet magic happen for a long list of prestigious clients worldwide. Examples include Apple (AAPL), Airbnb, Adobe (ADBE), Hulu, NASA, and Sony PlayStation. 

Specifically, Akamai offers a distributed cloud computing platform, as well as a seamless content delivery network (CDN). It is also a leader in cybersecurity with a strong focus on preventing attacks and protecting its clients from cybercrime. 

Akamai’s third quarter 2020 results exceeded analysts’ expectations, with revenue coming in at $793 million – a year-over-year increase of 12 percent.

Earnings per share totaled $0.95, and the guidance provided by management for fourth quarter and year-end looks quite positive. Oddly, Akamai share price lost nearly 14 percent in October in spite of these results, and no one seems quite sure why. Perhaps it is because other industry leaders did poorly, causing investors to consider Akamai shares suspect. 

If Akamai can deliver on its projections for the fourth quarter and beyond, today’s lower-priced shares could be an opportunity for value investors.

Cloudflare Hosts 25 Million Websites 

Like Akamai, Cloudflare offers content delivery network services to clients, along with cybersecurity and distributed domain name server services.

Though the company is just ten years old, it already hosts 25 million websites. This illustrates its strategy of pursuing clients that fall into the small and medium-sized category, rather than the massive industry leaders that Akamai has on its roster.

Cloudflare specializes in preventing and mitigating distributed denial of service (DDoS) attacks. These are particularly troubling, because they make it impossible for users to access client sites.

Cloudflare’s management has remarked that the company’s DDoS technology is some of the best in the business, and they state that the company prevents roughly 72 billion of these types of threats on a daily basis. 

The most recent quarter was an excellent one for Cloudflare by nearly every measure. The company benefited from the dramatic increase in demand for services due to the rise of virtual work. For the third quarter, Cloudflare reported revenue of $114.2 million, which is a year-over-year increase of 54 percent. 

Cloudflare is still operating at a loss, but the amount of those losses decreased sharply. For the third quarter, the company reported an adjusted net loss of $5.7 million, which is a substantial improvement over the $18.5 million loss during the same period in 2019. 

Given these figures, Cloudflare is right for investors who want to add a rapidly growing technology stock to their portfolios. It is a bit pricey, which appears due to high expectations for Cloudflare’s future performance. 

Akamai Growth Rate Has Slowed

The need for content delivery network services and cybersecurity tools is likely to grow, even when some workers return to the office. That means generally speaking, demand for Akamai’s technology should grow as well.

However, Akamai isn’t growing at the same rapid rate as certain competitors, which has investors concerned.

The biggest risk of buying Akamai stock boils down to its ability to retain and grow market share rather than lose existing market share to younger, more agile peers.

Cloudflare Momentum Remains Strong

Cloudflare’s unique strategy of going after smaller clients with affordable services rather than multi-million-dollar contracts appears to be working, and the company is growing at a rapid rate. There is no sign that momentum will slow, which could mean profitability is just around the corner.

However, the dangers of investing in Cloudflare and similar companies that must expand to turn a profit is that there is always a possibility that growth will slow unexpectedly.

This can happen for any number of reasons, leaving investors with little or no return on the shares they purchased.

Cloudflare Vs Akamai Stock: The Bottom Line

The question of Cloudflare vs Akamai stock doesn’t have a clear answer, because the two companies are in very different places. That means they appeal to distinct subsets of investors, and the best choice depends on individual style. 

Cloudflare is right for investors who are focused on growth – particularly those that are willing to pay a premium for shares that have a high likelihood of increasing in value over the next 12 months.

Akamai stock is, on the other hand, better suited to investors who want a more established company – one that can, perhaps, be purchased at something of a discount.

The bottom line is that your risk tolerance and financial goals are important factors in answering the question Akamai vs Cloudflare stock: which is best? 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.