We believe that Akamai's (AKAM) CDN and cloud security businesses should continue to benefit from the increase in network traffic, driven by the shelter-in-place and increasing preference for in-home activities even upon lifting of restrictions. The company withdrew the full-year guidance nonetheless, err on the side of being conservative, considering the pandemic impact on its commerce and retail customers, which make up ~16% of the business. However, we think that Akamai is in a strong position to more than offset the negative impact. Following a strong Q1, we expect that offline-to-online budget shifts in some retail and commerce customers as well as multi-product adoption in the cloud security business to drive growth and expand margins in Q2 and beyond.

Catalyst

As the shelter-in-place, as well as the new normal behaviors, persists, we think that Akamai can drive growth and expand margins in two ways. First, OTT streaming and gaming activities will continue driving the adoptions for CDN and cloud security offerings at a lowered marketing spend. Furthermore, with that in mind, the multi-product adoption uptrend within the cloud security should also continue subsequently, driving larger deal sizes at lower customer acquisition costs.

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