Akamai Technologies, Inc.

NASDAQ Global Select
Back to all articles
Bullish +75

Akamai stock soars: here's why BofA is betting on the stock

AI-generated analysis

📈 Akamai stock surged over 7% to around $160 following a Buy rating upgrade from Bank of America analyst Tal Liani.

💼 BofA upgraded the cloud computing company from Neutral to Buy and raised its price target to $175 from $130.

🤖 The upgrade is driven by a $1.8 billion, 7-year AI infrastructure commitment from Anthropic that validates Akamai's shift from legacy delivery to AI/edge inference.

💰 This major deal is expected to contribute $20–$25 million per quarter starting in Q4, supporting the company's transformation into an AI platform.

📊 Cloud Infrastructure Services are growing at approximately 40% year-over-year, indicating an inflection point for the business.

⚠️ Traditional legacy delivery revenue faces pressure with a reported 7% decline from last year.

📈 Analysts expect overall revenue growth to accelerate to 11.4% in 2027 and EPS to rise to $9.03 by 2028.

💸 Expansion of AI infrastructure capacity will require significant capital expenditures, estimated up to $825 million in the next 12 months.

📉 Free cash flow is projected to decline nearly 48% in 2026 due to these heavy investments before recovering later.

⚖️ The stock is currently up roughly 81% for the year but remains well below its all-time high of $327.62 from December 1999.

🔍 A major risk cited by BofA is that the AI deal may not scale into follow-on enterprise contracts, leaving Akamai with higher capex and weak cash flow.

📉 Options strategists suggest buying a near-dated call spread to capture upside while managing volatility around the news headlines.

⚠️ A sharp selloff could occur if management guidance or customer confirmation regarding the deal disappoints investors.

💹 The stock has already rallied 54% in May as Wall Street sentiment improves following stronger-than-expected first-quarter earnings.

📉 Even with strong ratings, a key risk is that the narrative might be overpriced immediately after the initial upgrade and deal announcements.

🏢 Akamai aims to compete in hybrid edge-and-core computing markets alongside larger cloud providers according to Bank of America.

💼 Morgan Stanley maintains an Overweight rating on the stock, highlighting its potential in AI growth narratives.

Bullish Signals
  • Bank of America upgraded Akamai to Buy from Neutral and raised its price target to $175 from $130, reflecting strong analyst confidence in the company's transformation.
  • Akamai shares surged more than 7% during the session to around $160, becoming one of the top performers in the S&P 500 with gains pushed to close near their highest level since March 2000.
  • The stock has already surged 54% in May and is up roughly 81% for the year, demonstrating significant market momentum and investor enthusiasm.
  • Akamai's Cloud Infrastructure Services segment is experiencing robust growth of approximately 40% year-over-year, validating the shift from legacy delivery to AI/edge inference infrastructure.
  • A major $1.8 billion, 7-year deal with a leading frontier model provider (likely Anthropic) is expected to start contributing $20–$25 million in quarterly revenue beginning in Q4.
  • Bank of America forecasts that overall revenue growth will accelerate to 11.4% in 2027 and EPS will rise to $9.03 by 2028, indicating a bright long-term outlook.
  • Wall Street sentiment has improved notably following the infrastructure deal and stronger-than-expected first-quarter earnings reported last week.
  • The company is now seen as a credible competitor in hybrid edge-and-core computing markets alongside larger cloud providers, diversifying its revenue streams.
  • Morgan Stanley maintains an Overweight rating, while FactSet data shows a consensus average price target of $155.46 among analysts covering the stock.
  • Even with required infrastructure investment of up to $825 million over the next 12 months, free cash flow is projected to recover in subsequent years after a temporary dip in 2026.
Risk Factors
  • The stock has surged 81% for the year but remains significantly below its all-time high of $327.62 from December 1999, indicating substantial downside risk if sentiment reverses.
  • Capital expenditures are projected to rise by as much as $825 million over the next 12 months, which will cause free cash flow to decline nearly 48% in 2026 before recovering.
  • The traditional delivery business segment continues to face pressure with revenue declining 7% year over year, relying on AI growth to offset this decline.
  • A sharp selloff could occur if management guidance or customer confirmation regarding the $1.8B deal disappoints, leading to a re-rating of the stock down.
  • The AI infrastructure deal may not scale into follow-on enterprise contracts, leaving the company stuck with high capex and potentially weak free cash flow for an extended period.
Full Analysis
Shares of Akamai Technologies (AKAM) surged over 7% in recent trading sessions after Bank of America upgraded the stock from Neutral to Buy and raised its price target to $175 from $130. Analyst Tal Liani at BofA highlighted a major inflection point for the company, noting that its business model is shifting from a legacy content delivery network to a credible artificial intelligence infrastructure platform. This transformation is driven by a significant new partnership where a leading frontier model provider, widely reported as Anthropic but not officially confirmed by either party, has committed $1.8 billion to Akamai’s cloud infrastructure services over a seven-year period. BofA analysts estimate that this agreement will begin contributing between $20 million and $25 million in quarterly revenue starting in the fourth quarter of the current year. The deal serves as validation for Akamai's pivot toward distributed AI and edge inference workloads, areas where the company is growing rapidly; specifically, the Cloud Infrastructure Services segment is currently expanding at approximately 40% year-over-year. Consequently, the brokerage expects overall revenue growth to accelerate from an estimated 8.2% in 2026 to 11.4% in 2027, with earnings per share rising to $9.03 by 2028. Despite the bullish outlook and strong momentum that has pushed Akamai shares up roughly 81% for the year and close to their highest closing levels since March 2000, Wall Street analysts point out significant near-term risks. The transition requires substantial capital investment, with BofA estimating capital expenditures could reach $825 million over the next 12 months. This heavy spending is projected to cause free cash flow to decline by nearly 48% in 2026 before recovering in subsequent years. Additionally, traditional delivery business revenue continues to face pressure, having declined 7% from a year earlier, creating dependency on the success of these new AI workloads to offset legacy segment weaknesses. The upgrade has also sparked trading interest in options, with some strategists suggesting a near-dated call spread could capitalize on the momentum while managing volatility. The market is currently pricing in immediate gains following the news, and sentiment remains high if management can confirm additional AI workload wins or deliver against the strong guidance. However, investors remain cautious about a potential selloff should future customer confirmations disappoint or if the capital-intensive transition does not yield the expected long-term revenue acceleration.