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Akamai Technologies, Inc. (AKAM) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Akamai Technologies, Inc. (AKAM)

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Intrinsic Value (DCF)

Current$91.53
→
Intrinsic$83.99
-8%
$48.95$83.99$150.60
Market implies 13% growth for 5 years
AKAM appears fairly valued — current price aligns with our DCF estimate.
At $92, the market prices in 13% annual cash flow growth — a moderate expectation aligned with historical trends (11%).
Range: Bear $49 → Bull $151. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →7%9%11%13%
8%$105$117$130$143
10%$67$75$84$93
12%$46$52$59$65
14%$32$37$42$48

Bull Case

  • Bull case ($151) offers 65% upside at 13% growth, 9% discount
  • Conservative 11% growth assumption is achievable based on track record

Bear Case

  • Bear case ($49) implies 47% downside at 9% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$925.13M
Year 2$1.03B
Year 3$1.14B
Year 4$1.26B
Year 5$1.40B
Terminal$20.62B

📐 Model Inputs

Growth Rate10.9%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$833.90MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is AKAM stock undervalued or overvalued?
🟡 FAIRLY VALUED

AKAM trades at $91.53, within 10% of our $83.99 intrinsic value estimate. At 10.0% WACC and 10.9% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $51.45 (bear) to $128.68 (bull).

What is AKAM's intrinsic value?

Using a 5-year DCF model: Base FCF of $834M, projected at 10.9% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $4.12B net debt and dividing by 0.15B shares: Bear $51.45 | Base $83.99 | Bull $128.68. Current price $91.53 implies -5% to base case.

How is AKAM's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 10.9% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($17.08B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 20.5x.