UPDATE 3-Akamai profit and cost outlook weigh on shares

* Sees Q3 EPS excl items $0.32-0.34, Wall St view $0.34

* Raises capex forecast, reports higher costs

* Q2 revenue, EPS growth meet market expectations

* Shares fall 5 pct (New headline, adds analyst’s comments and details on capex)

By Ritsuko Ando

NEW YORK, July 28 (Reuters) - Akamai Technologies Inc's AKAM.O business outlook disappointed investors who expected greater profit from the growing popularity of online entertainment, sending the shares down 5 percent after-hours on Wednesday.

Higher costs also worried some analysts, although the company said the investment was crucial to support growing demand for online entertainment like high-definition movie downloads and real-time streaming of sports events.

Akamai, which helps media companies deliver online entertainment by navigating less-congested routes over the Web, said it expects earnings in the current quarter, excluding items, to be about 32 cents to 34 cents.

Analysts on average expected profit excluding items of 34 cents, according to Thomson Reuters I/B/E/S.

The company also raised its capital spending forecast for the full year to 17 percent of revenue from a previous range of 13 to 16 percent, after reporting higher costs in the second quarter.

Shares in Akamai fell to $41.85 after-hours, compared with their close on the Nasdaq at $44.03. They had risen more than 30 percent over the last three months on expectations that the popularity of online media, including high-definition video downloads, would boost its sales and profits.

Some analysts said the sell-off was overdone considering second-quarter results were solid, albeit in line with expectations.

“They were a little higher than expected on expenses and capex. But we’re also getting into this situation where dreams are always better than reality. We’ve seen this with other companies that have reported this quarter, where no matter how good the numbers, people are selling on the news,” said Donna Jaegers, analyst at D.A. Davidson & Co.

“I would expect the shares to bounce back tomorrow,” she said. “I thought the second-quarter numbers were very, very strong.”

Second-quarter net profit rose to $38 million from $36 million a year earlier. Earnings excluding special items was 34 cents a share, matching expectations.

Quarterly revenue rose 20 percent from a year earlier to $245 million, it said. That was also roughly in line with the average analyst forecast of $243 million. Akamai said it expects to hit its $1 billion revenue target this year.

The World Cup helped sales, the company said, with over 24 television broadcasters around the world using its technology to deliver the games over the Internet, many of them using high-definition video.

But it also said the games weren’t the only sales driver, as an increasing number of media and entertainment companies were seeking its help to build more sophisticated online businesses.

It also said pricing had stabilized, soothing concerns that increasing competition from rivals like Limelight Networks Inc LLNW.O and Level 3 Communications Inc LVLT.O could hurt its profitability. (Reporting by Ritsuko Ando, editing by Matthew Lewis, Leslie Gevirtz, Gary Hill)