Shares of Akamai Technologies (NASDAQ:AKAM) rose about 4% in premarket trading after Morgan Stanley upgraded the stock twice, moving it to Overweight from Underweight, citing improving growth dynamics and an undemanding valuation.
The bank said Akamai appears to be approaching an inflection point following several years of subdued growth, arguing that the current share price does not fully reflect the company’s improving fundamentals.
Akamai’s revenue growth has hovered around 4% to 5% since the pandemic, as declines in its legacy content delivery network business offset expansion in other areas. That dynamic previously supported Morgan Stanley’s Underweight view, given expectations for elevated investment with limited near-term returns. The firm now believes conditions are shifting more favorably.
Morgan Stanley expects overall growth to accelerate as pressure in content delivery eases, security revenues continue to expand steadily, and the compute segment gains momentum. Content delivery, which represents roughly 30% of total revenue, is seen stabilizing after years of double-digit declines, helped by industry consolidation, improved traffic trends and increased demand tied to live sports.
The security business, accounting for around 53% to 54% of revenue, is expected to maintain high single-digit growth through 2027. According to the bank, faster-growing offerings such as API security and microsegmentation should help offset slower expansion in more mature products like web application firewalls, bot protection and DDoS mitigation.
The strongest acceleration is forecast in compute, which contributes about 16% to 17% of revenue. Morgan Stanley expects growth in this segment to move into the high teens, driven by continued expansion of more than 40% in cloud infrastructure services. Improving performance at Linode, Akamai’s public cloud platform, along with an initial contribution from Akamai Inference Cloud beginning in 2026, were highlighted as key catalysts.
The bank said a reacceleration in growth could justify a re-rating of the stock. At present, Akamai trades at roughly 11 times Morgan Stanley’s 2027 earnings estimate of $8.20, which the firm views as failing to capture the potential for faster revenue and earnings growth.
Morgan Stanley raised its price target to $115 from $83, implying around 30% upside, and noted that its base-case scenario assumes a 7% compound annual revenue growth rate through 2027.