Akamai Technologies' (AKAM) current valuation is yet to fully reflect the cloud services provider's growth potential in the artificial intelligence inferencing space, Oppenheimer said Tuesday in a client note.
The cloud infrastructure services segment could generate more than $4.1 billion in revenue by 2035 under Oppenheimer's multi-stage discounted cash flow model.
Akamai reached a $1.8 billion, seven-year cloud computing agreement with "a leading frontier model company," Chief Executive Tom Leighton said during the company's most recent earnings call, according to a FactSet transcript.
Bloomberg News reported in May that the $1.8 billion deal was signed with AI startup Anthropic.
Leighton, who didn't specify Anthropic, described it as the "largest customer deal in Akamai history." It comes on the heels of a $200 million CIS deal with "a major US technology company" in February, Leighton told analysts in May.
"We are incrementally positive on Akamai given its strong expansion opportunity with cloud/AI inferencing," Oppenheimer analysts Param Singh and Jake Heimowitz said in the report. "While the Street leans on the positive side, we think its view is too conservative and undervalues the growth opportunity more than warranted."
Oppenheimer said its bullish outlook on Akamai is driven by factors including a potential expansion of the total addressable market for cloud and AI inferencing.
To support its growth, Akamai is expected to boost capacity to between 80 megawatts and 100 MW by the end of 2028, compared with an estimated capacity of 17 MW at 2025-end, according to the brokerage.
Akamai's shares were up 4.5% intraday Tuesday. The stock has advanced 36% so far this year.
Oppenheimer reiterated its outperform rating on the stock and a price target of $180, which implies a more than 50% upside potential from current levels.
"As the growth opportunity is better understood, the stock should rally higher," Singh and Heimowitz said.
Price: $117.40, Change: $+3.60, Percent Change: +3.16%
