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(Reuters) – Akamai Technologies Inc’s (AKAM.O) forecast for third quarter revenue largely missed Wall Street expectations on Tuesday, even as its second quarter profit topped estimates on strength in its cloud security business.
Shares of the company, which were initially up after results, fell 3.5 percent to $ 72.60 in after-hours trading.
It forecast current-quarter revenue of $ 656 million to $ 668 million, while analysts on average were expecting $ 668 million, according to Thomson Reuters I/B/E/S.
Akamai provides services to companies to speed up their web pages, but has been under pressure as larger customers such as Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O) develop their own in-house know-how to handle web traffic.
The company has been responding by shifting its focus to cloud security.
Revenue from Akamai’s web business rose nearly 11 percent to $ 351 million in the second quarter. However, this growth was the slowest in at least six quarters.
“(Revenue) is a little lower than what we’d like to see from the web division,” Chief Executive Officer Tom Leighton said on an earnings call with analysts.
On the same call, Chief Financial Officer James Benson said the company was nonetheless “optimistic” about web division growth.
Revenue from the company’s cloud security business – which provides data centers with safe ways to operate and deliver content – rose 33 percent to $ 155 million in the quarter.
The company’s overall revenue rose 9 percent to $ 663 million, narrowly beating the average analyst estimate of $ 662 million.
Net income fell to $ 43 million, or 25 cents per share, in the quarter ended June 30, from $ 57 million, or 33 cents per share, a year earlier, as expenses rose 16 percent.
Excluding items, the company earned 83 cents per share, beating the average analyst estimate of 80 cents.
Akamai said in quarter three it expects to report adjusted earnings of 80 cents to 86 cents per share. Analysts were expecting earnings of 80 cents.
Reporting by Pushkala Aripaka in Bengaluru; Editing by Arun Koyyur and Rosalba O’Brien
SHANGHAI/BEIJING (Reuters) – Chinese internet search firm Baidu Inc posted a forecast-beating quarterly revenue increase and unveiled a U.S. listing plan for its Netflix-like video platform iQiyi as it looks to rev up new drivers for growth.
Baidu posted on Tuesday fourth quarter revenue of 23.6 billion yuan ($ 3.72 billion), up 29 percent against the same period a year ago and topping analysts’ forecasts of 23.05 billion yuan and the company’s own guidance.
The strong results are a major fillip for Baidu as it looks to ramp up spending on riskier gambles in autonomous driving and fend off cashed-up rivals such as Tencent Holdings Ltd and Alibaba Group Holding Ltd in online video content.
A U.S. listing would bring extra financial muscle for its popular iQiyi platform as it ramps up spending. Baidu said the size of any IPO was not yet set, but that it would likely remain iQiyi’s controlling shareholder. iQiyi could be worth $ 8 billion or more, according to Reuters Breakingviews.
“An IPO will bolster iQiyi’s position in the market and give it more cash to buy content or make content on their own,” said Ni Shuang, Beijing-based Pacific Securities analyst, adding it would help Baidu keep pace with rivals in the space.
The strong quarterly showing – driven by the core search and news feed businesses – is also key to generating cash flow “to fund our new AI businesses”, Baidu chief executive Robin Li told a post-earnings conference call.
The company’s shares rose nearly 5 percent in extended trading after the results, overturning a nearly 4 percent fall since the start of the year.
Herman Yu, the firm’s chief financial officer, said content costs rose 70 percent last year to 13.4 bln yuan as iQiyi acquired content. These costs would rise at a similar pace this year.
The firm will also raise R&D spending in areas like its Apollo open-source software platform for autonomous driving, which executives said would eventually become a “very material and significant revenue source for the company”.
“Having said that, a key caveat is that this market will take time to build,” chief operating officer Qi Lu told the conference call.
Strong results in its more traditional businesses were central to Baidu’s success, with revenue from its core online marketing – including its search platform and news feed – jumping 26.3 percent to 20.4 billion yuan.
The results will help soothe Baidu investors as the company looks to turn around its fortunes after a series of missteps sparked steep losses in 2016 and hit its advertising revenue from internet searches.
Baidu, part of China’s trinity of tech giants along with Alibaba and Tencent, posted net income of 4.16 billion yuan in the quarter ended Dec. 31, up from 4.13 billion yuan a year earlier.
Excluding one-time items, the company earned 14.9 yuan per ADS, above forecasts.
Baidu pegged its guidance for first-quarter revenue growth, between 19.86 billion yuan and 20.97 billion yuan, a 25-32 percent increase against the same period of 2017. That compared with analysts’ average estimate of 21.18 billion yuan.
Reporting by Adam Jourdan in SHANGHAI, Pei Li in BEIJING and Arjun Panchadar in BENGALURU; Editing by Eric Meijer and Muralikumar Anantharaman
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