Akamai Technologies, Inc.AKAMNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Terminal value represents 89% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $376.27 per share(market-calibrated)

+285.4%

Upside to Fair Value

Current

$97.64

Pure Model

$451.77

Fair Value

$376.27

Bull Case

$546.66

Bear Case

$311.75

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $451.77.

What's Driving This Ratingfor AKAM

↓

CapEx normalizing toward maintenance

Historical CapEx is 15.39% of revenue (heavy investment phase). Model fades this to 6.00% by Year 10, freeing up ~$869M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 17.93% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.1B (22.68% margin).

→

Moderate revenue growth

Analyst consensus projects 6.34% revenue growth, fading to 3.75% by Year 10. Revenue reaches $9.3B (vs $4.2B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 66.56% indicates efficient cash generation. FCF reaches $2.3B by Year 10 (24.81% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.72

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.75%

Cost of Debt

Pre-tax Cost of Debt0.46%

Tax Rate24.96%

After-tax Cost of Debt0.35%

Equity Weight (E/V)67.27%

Debt Weight (D/V)32.73%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (67.27% × 7.75%) + (32.73% × 0.35%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$4.5B	$5.2B	$6.4B	$7.8B	$9.3B
EBIT	$802M	$930M	$1.1B	$1.6B	$2.1B
Tax	$200M	$232M	$285M	$400M	$524M
NOPAT	$602M	$698M	$857M	$1.2B	$1.6B
+ Depreciation	$653M	$757M	$930M	$1.1B	$1.4B
- Capex	$689M	$690M	$715M	$714M	$555M
- Δ NWC	$59M	$87M	$172M	$155M	$74M
Free Cash Flow	$507M	$678M	$901M	$1.5B	$2.3B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$481M	$577M	$689M	$1.0B	$1.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.3B

Terminal Growth Rate3.75%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$119.1B

PV of Terminal Value$69.7B

Exit Multiple Method

Year 10 EBITDA$3.4B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$96.6B

PV of Terminal Value$56.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.5B

PV of Terminal Value$69.7B

Enterprise Value$78.3B

(-) Net Debt$6.0B

Equity Value$72.3B

Shares Outstanding145M

Price per Share$497.11

Exit Multiple Method

PV of Projected FCFs$8.5B

PV of Terminal Value$56.5B

Enterprise Value$65.1B

(-) Net Debt$6.0B

Equity Value$59.1B

Shares Outstanding145M

Price per Share$406.44

Pure Model Fair Value

$451.77

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
3.50%	$484.20	$461.93	$440.72	$420.53	$401.29
4.50%	$484.20	$461.93	$440.72	$420.53	$401.29
5.50%	$384.71	$424.11	$440.72	$420.53	$401.29
6.50%	$306.29	$324.66	$349.72	$385.91	$401.29
7.50%	$254.92	$265.12	$278.04	$294.93	$317.96

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$311.75

219.3% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 0.90

Base Case

$451.77

362.7% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 0.72

Bull Case

$546.66

459.9% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.61

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth6.34%

Year 3 Revenue Growth8.17%

Year 5 Revenue Growth13.83%

Year 7 Revenue Growth9.80%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin17.93%

Terminal EBIT Margin25.00%

Tax Rate24.96%

Historical Capex / Rev15.39%

Terminal Capex / Rev6.00%

NWC / Revenue22.22%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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