Why Akamai Technologies, Inc. Fell Hard on Wednesday

Source: Akamai.

What: Shares of Akamai Technologies fell as much as 20% on Wednesday, following the release of solid third-quarter results with a side of disappointing guidance.

So what: The content delivery network (CDN) operator saw revenues rise 11% year over year to $551 million. On a constant-currency basis, sales increased by 15%. On the bottom line, adjusted earnings stayed flat at $0.62 per diluted share.

Analysts had expected earnings of $0.58 per share on sales of $550 million, so Akamai beat both of these oft-cited expectations.

Indeed, Akamai shares rose as much as 3% on this initial report. But Tuesday's after-market chart turned south with a vengeance during the earnings call, where management set up disappointing guidance targets for the fourth quarter.

Now what: In the fourth quarter, Akamai now expects to record revenues in the $567 million range. Adjusted earnings are seen landing near $0.62 per diluted share.

Your average Wall Street analyst currently expects fourth-quarter earnings of $0.65 per share on $597 million in top-line sales.

Akamai CEO Frank Thomson did his best to pad the guidance blow, explaining how the fourth quarter dips into the "external macroeconomic environment" to a unique degree. But that's not all:

One might expect this horrific market environment to weigh on all major content delivery companies, but that isn't the case.

Level 3 Communications , which does a fair bit of CDN business besides its core networking operations, reported results on Wednesday morning. That report lifted Level 3 shares as much as 9% higher on Wednesday. Limelight Networks , which is the most direct rival in Akamai's focus markets, had no news of its own but rose 3% on the combination of Level 3 and Akamai news.

In short, Akamai's soft guidance makes it look like an underperformer in an otherwise healthy CDN sector.

The article Why Akamai Technologies, Inc. Fell Hard on Wednesday originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.