Akamai Technologies has been on fire lately. In the past six months alone, the company’s stock price has rocketed 51.4%, reaching $114.84 per share. This performance may have investors wondering how to approach the situation.

Is there a buying opportunity in Akamai Technologies, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think Akamai Technologies Will Underperform?

We’re glad investors have benefited from the price increase, but we don't have much confidence in Akamai Technologies. Here are three reasons you should be careful with AKAM and a stock we'd rather own.

1. Weak Billings Point to Soft Demand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Akamai Technologies’s billings came in at $1.08 billion in Q4, and over the last four quarters, its year-on-year growth averaged 4.6%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers.

2. Low Gross Margin Reveals Weak Structural Profitability

For software companies like Akamai Technologies, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Akamai Technologies’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 58.9% gross margin over the last year. That means Akamai Technologies paid its providers a lot of money ($41.05 for every $100 in revenue) to run its business.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Akamai Technologies has seen gross margins decline by 1.5 percentage points over the last 2 year, which is poor compared to software peers.

3. Long Payback Periods Delay Returns

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Akamai Technologies’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between Akamai Technologies’s products and its peers.

Final Judgment

We see the value of companies addressing major business pain points, but in the case of Akamai Technologies, we’re out. Following the recent surge, the stock trades at 3.6× forward price-to-sales (or $114.84 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d suggest looking at one of our all-time favorite software stocks.

High-Quality Stocks for All Market Conditions

ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.

Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.