Core Viewpoint - The article emphasizes the importance of focusing on Akamai Technologies' long-term potential rather than just its delivery segment performance, suggesting a hold rating for the stock [1] Group 1: Investment Criteria - An ideal investment should operate in a sector expected to experience structural organic growth exceeding GDP growth over the next 5-10 years [1] - Profits should stem from sustainable competitive advantages that lead to attractive unit economics [1] - The company should be managed by competent, ethical, and long-term thinkers, and should be fairly valued [1]

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Akamai Technologies, following disappointing financial guidance that led to a significant drop in stock price [1][2][3]. Financial Performance - On February 20, 2025, Akamai reported better-than-expected revenue and earnings per share (EPS) for Q4 and full year 2024, but provided guidance for the current quarter and full year that fell short of consensus estimates [2]. - Following the announcement, Akamai's stock price fell by $21.30 per share, or 21.73%, closing at $76.73 per share on February 21, 2025 [3]. Legal Investigation - Pomerantz LLP is representing investors in investigating claims against Akamai and its officers/directors regarding possible securities fraud [1]. - The firm has a long history in corporate and securities class litigation, having recovered numerous multimillion-dollar damages for victims of securities fraud [4].

Core Insights - Akamai Technologies has launched a Managed Container Service aimed at enhancing user experience by running workloads closer to users and data sources [1][2] - The service is operational across over 700 cities and more than 4,300 points of presence, significantly advancing Akamai's cloud computing strategy [1][2] - The Managed Container Service is currently being tested with customer applications in over 100 cities [1] Company Overview - Akamai is recognized as a leading cybersecurity and cloud computing company that provides robust online business protection and performance [3] - The company offers a full-stack cloud computing infrastructure, including GPUs, VPUs, object storage, and managed database services, which are essential for handling data-intensive workloads [2][3] - Akamai's solutions are designed to ensure predictable costs and performance as applications scale, making it a key player in enterprise multicloud environments [2] Industry Context - The Managed Container Service addresses the modern demand for high performance, low latency, and scalability in applications [3] - Akamai's commitment to providing responsive infrastructure is crucial for delivering a consistent user experience across its globally distributed cloud and edge locations [3]

Revenue Performance - Total revenue for 2024 was $3,991,168, representing a 4.7% increase compared to 2023, driven primarily by growth in security and compute solutions[171]. - Security solutions revenue increased to $2,042,661 in 2024, a 15.7% rise from 2023, attributed to growth in segmentation and web application solutions[171][172]. - Compute solutions revenue grew by 25.0% in 2024, reaching $630,376, supported by sales of cloud optimization solutions and the acquisition of Linode[171][174]. - Delivery solutions revenue decreased by 14.5% in 2024 to $1,318,131, impacted by economic and geopolitical headwinds affecting customer traffic growth[171][173]. - U.S. revenue for 2024 was $2,075,533, representing 52.0% of total revenue, with a 5.4% increase from $1,968,779 in 2023[175]. - International revenue for 2024 was $1,915,635, accounting for 48.0% of total revenue, with a 3.9% increase from $1,843,141 in 2023[175]. Profitability and Income - Net income for 2024 was 12.7% of revenue, down from 14.2% in 2023, indicating a decline in profitability[170]. - Net income for 2024 was $504,918, down from $547,629 in 2023, but up from $523,672 in 2022[213]. - The company reported a net income margin of 12.7% in 2024, down from 14.4% in 2023 and 14.5% in 2022, indicating pressure on profitability[219]. - The diluted net income per share for 2024 was $3.27, down from $3.52 in 2023, indicating a decrease of approximately 7.1%[290]. - Comprehensive income for 2024 was $444,255, down 25.0% from $592,631 in 2023[292]. Expenses and Costs - Cost of revenue increased to 40.6% of total revenue in 2024, up from 39.6% in 2023, reflecting rising bandwidth and co-location costs[170]. - Research and development expenses for 2024 totaled $470,876, a 16.0% increase from $406,048 in 2023, accounting for 11.8% of total revenue[181]. - Sales and marketing expenses for 2024 were $556,781, a 4.4% increase from $533,226 in 2023, maintaining 14.0% of total revenue[186]. - General and administrative expenses for 2024 increased to $621,785,000, a 3.5% rise from $600,851,000 in 2023[190]. - Stock-based compensation in research and development increased by 22.8% to $152,114 in 2024 from $123,896 in 2023[181]. - Stock-based compensation rose by 8.7% to $102,494,000 in 2024, compared to $94,316,000 in 2023[190]. - Restructuring charges for 2024 were $95,441,000, a 68.5% increase from $56,643,000 in 2023[194]. Acquisitions and Investments - The company acquired Noname Security in June 2024 to enhance its API Security offerings, integrating approximately 200 employees[166]. - The acquisition of customer contracts from Edgio in December 2024 aims to strengthen delivery services and transition customers to the company's platform[166]. - Cash paid for business acquisitions in 2024 was $434,066, significantly higher than $106,171 in 2023[294]. - The acquisition of Noname Gate Ltd. was completed for $452.3 million in cash, with $132.3 million recorded as completed technologies[283]. Cash Flow and Liquidity - Net cash provided by operating activities for 2024 was $1,519.2 million, an increase from $1,348.4 million in 2023, attributed to increased customer collections and a shift to stock-based compensation[226]. - Cash used in investing activities decreased to $798.7 million in 2024 from $1,848.2 million in 2023, primarily due to increased cash proceeds from marketable securities and reduced property and equipment purchases[228]. - The company reported cash, cash equivalents, and marketable securities totaling $1.9 billion as of December 31, 2024[222]. - The company expects its current cash and marketable securities, along with forecasted cash flows, to meet foreseeable cash needs for at least the next 12 months[239]. Market and Economic Factors - Changes in foreign currency exchange rates negatively impacted revenue by $22.5 million in 2024 compared to 2023[175]. - Fluctuations in foreign currency exchange rates are expected to continue impacting the company's financial results, particularly when local currencies weaken against the U.S. dollar[220]. - The company experienced a foreign currency translation adjustment loss of $59,064 in 2024, contrasting with a gain of $18,439 in 2023[292]. Financial Position - Total assets increased to $10.369 billion in 2024 from $9.900 billion in 2023, marking a growth of approximately 4.7%[289]. - The company's total liabilities were $5.490 billion as of December 31, 2024, compared to $5.303 billion in 2023, representing an increase of about 3.5%[289]. - As of December 31, 2024, total stockholders' equity increased to $4,878.357 million from $4,360.187 million at the end of 2022, reflecting a growth of approximately 11.9%[299]. Tax and Regulatory Matters - Provision for income taxes decreased by 22.8% to $82,095,000 in 2024 from $106,373,000 in 2023[200]. - Effective income tax rate for 2024 was 14.0%, down from 16.3% in 2023[202]. - The company has recorded certain tax reserves to address potential exposures involving its income tax positions, which are based on past experiences and judgments[352]. - The company is evaluating the impact of new FASB guidance issued in December 2023 to improve income tax disclosures, effective for the annual period ending December 31, 2025[358]. Operational Insights - The company maintains effective internal control over financial reporting, although inherent limitations exist that may not prevent or detect misstatements[276]. - The company recognizes revenue primarily from long-term contracts, with most services being recognized over time due to consistent monthly usage commitments[280]. - The company assesses collectability of accounts receivable based on historical loss rates and ongoing credit evaluations, with specific reserves created for customers deemed unable to pay[249]. - The company has no customer with an accounts receivable balance of 10% or more, indicating limited concentration of credit risk[269].

Market Overview - Major U.S. equities indexes fell, with the S&P 500 down by 1.7%, the Dow Jones Industrial Average also declining by 1.7%, and the Nasdaq falling by 2.2% [1][9] - The decline followed underwhelming economic data and earnings forecasts, marking a retreat from record-high levels [1] Economic Data Impact - Existing home sales fell more than expected, contributing to inflation concerns that weighed on consumer sentiment [2] Company-Specific Movements - Akamai Technologies (AKAM) shares plunged by 21.7% after its 2025 revenue outlook fell short despite meeting quarterly results expectations [3] - Old Dominion Freight Line (ODFL) shares fell by 8.5% due to concerns that Amazon's expansion in freight shipping could reduce demand for its services [4] - Nuclear energy providers experienced stock declines, with GE Vernova (GEV) down by 8.8%, Constellation Energy (CEG) down by 8.1%, and Vistara (VST) down by 7.8% following regulatory delays [5] - UnitedHealth Group (UNH) shares fell by 7.2% amid investigations by the Department of Justice regarding potential overdiagnosing for Medicare Advantage payouts [6] - Moderna (MRNA) shares rose by 5.3% after reports of a new coronavirus discovered in bats in China, reversing previous declines [7][9] - Consumer staples stocks, including Hershey (HSY) up by 4.1% and Conagra Brands (CAG) among others, saw gains as traders sought safe investments amid market volatility [8]

Core Insights - Akamai Technologies, Inc. (AKAM) reported strong fourth-quarter 2024 results, with both revenue and net income exceeding Zacks Consensus Estimates, driven by robust demand across various end markets [1][4]. Financial Performance - GAAP net income for the fourth quarter was $140 million or $0.91 per share, down from $161 million or $1.03 in the same quarter last year, primarily due to increased operating expenses [2]. - Non-GAAP net income was $253.9 million or $1.66 per share, a slight decrease from $262.6 million or $1.69 a year ago, but still beating the Zacks Consensus Estimate by $0.14 [2]. - For the full year 2024, GAAP net income was $504.9 million or $3.27 per share, compared to $547.6 million or $3.52 in 2023. Non-GAAP net income increased to $995.6 million or $6.48 per share from $960 million or $6.20 in 2023 [3]. Revenue Breakdown - Akamai generated $1 billion in revenues for the fourth quarter, up from $995 million in the previous year, with a $5 million beat over the Zacks Consensus Estimate [4]. - Revenue from the Security Technology Group was $534.6 million, reflecting a 14% year-over-year growth, driven by strong demand for Guardicore segmentation solutions and API security solutions [5]. - The Delivery segment's revenue decreased to $317.8 million from $389 million year-over-year, facing challenges from macroeconomic headwinds [5]. - The Compute segment saw revenues rise to $167.5 million from $135 million in the prior year, supported by strong enterprise customer traction [6]. Operating Expenses and Cash Flow - Total operating expenses increased to $871.9 million from $810.2 million year-over-year, with non-GAAP operating income declining to $298.1 million from $302.7 million [7]. - Akamai generated $343.8 million in cash from operating activities in the fourth quarter, down from $389.2 million in the prior year, but for the full year 2024, cash from operations increased to $1.51 billion from $1.34 billion in 2023 [8]. Liquidity Position - As of December 31, 2024, Akamai had $517.7 million in cash and cash equivalents, with operating lease liabilities of $829.7 million, compared to $489.5 million and $774.8 million, respectively, in the previous year [9]. Future Outlook - For Q1 2025, Akamai estimates revenues between $1 billion and $1.02 billion, with non-GAAP earnings expected in the range of $1.54 to $1.59 per share [10]. - For the full year 2025, management anticipates revenues between $4 billion and $4.2 billion, with non-GAAP earnings projected to be between $6 and $6.4 per share [11].

Financial Data and Key Metrics Changes - Akamai reported total revenue of $1.02 billion for Q4 2024, representing a 3% year-over-year increase [45][46] - Non-GAAP earnings per share (EPS) was $1.66, exceeding guidance and down 2% year-over-year [50][64] - Security revenue reached $535 million, growing 14% year-over-year, while compute revenue grew to $167 million, a 24% year-over-year increase [48][46] Business Line Data and Key Metrics Changes - Security became the majority revenue contributor for the first time, surpassing $2 billion in annual revenue and growing 16% year-over-year [10][12] - Cloud computing revenue was $630 million, growing 25% over 2023, with cloud infrastructure services contributing $230 million, up 32% [10][11] - Combined revenue from security and compute accounted for 69% of total revenue in Q4 [48] Market Data and Key Metrics Changes - International revenue was $490 million, up 2% year-over-year, representing 48% of total revenue [49] - The company signed significant contracts, including a $5.8 million deal with Petrobras in Brazil and a large contract for API security with a major U.S. asset manager [15][14] Company Strategy and Development Direction - Akamai is transforming from a CDN provider to a cybersecurity and cloud computing company, focusing on expanding its security offerings and cloud infrastructure services [9][12] - The company aims to achieve a compounded annual growth rate (CAGR) of about 10% for security products over the next three to five years, targeting over $3 billion in security revenue by the end of the decade [16][17] - Akamai plans to grow total cloud infrastructure services ARR by 40% to 45% in constant currency for 2025 [29][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing strong demand for security solutions and cloud infrastructure services [41][76] - The company anticipates a stabilization in delivery revenue decline, projecting a reduction to about 10% year-over-year in 2025 [36][76] - Management highlighted the importance of optimizing the sales operating model to drive growth in higher segments [38][39] Other Important Information - Akamai's capital expenditures (CapEx) for Q4 were $193 million, representing 19% of revenue, with plans to continue share buybacks [51][52] - The company expects foreign exchange fluctuations to negatively impact revenue by approximately $38 million in 2025 [70][72] Q&A Session Summary Question: Can you expand on the large cloud deal and the competitive environment? - Management confirmed that the customer is increasing their usage of Akamai's cloud infrastructure services and highlighted a special build-out for them in Scandinavia [81][82] Question: Is the $100 million compute deal the same as the five-year deal with the largest delivery customer? - Management clarified that they are indeed the same customer [86] Question: Can you elaborate on the $60 million headwind from the largest customer? - Management indicated that the headwind is primarily due to the customer's DIY strategy and political challenges, but the five-year agreement mitigates exposure [92][93] Question: What is the outlook for retaining Edgio contracts? - Management expressed confidence in retaining Edgio contracts, noting that they were selective in the customers taken over and do not anticipate significant churn [118] Question: What steps are being taken to minimize disruption from changes in the go-to-market strategy? - Management acknowledged that the transformation is a two-year process and is focused on increasing the number of specialized sales teams and optimizing pricing strategies [105][106]

Core Insights - Akamai Technologies reported $1.02 billion in revenue for Q4 2024, a year-over-year increase of 2.5% [1] - The EPS for the same period was $1.66, slightly down from $1.69 a year ago, with a surprise of +9.21% compared to the consensus estimate of $1.52 [1] - The revenue exceeded the Zacks Consensus Estimate of $1.01 billion, resulting in a surprise of +0.49% [1] Revenue Breakdown - International revenue was $490.06 million, slightly below the estimated $494.99 million, reflecting a year-over-year increase of +2.4% [4] - U.S. revenue reached $529.88 million, surpassing the estimated $527.22 million, with a year-over-year increase of +2.6% [4] - Security revenue was reported at $534.60 million, exceeding the average estimate of $533.06 million, marking a significant year-over-year increase of +13.5% [4] - Compute revenue was $167.50 million, close to the estimated $167.63 million, showing a year-over-year increase of +24.1% [4] - Delivery revenue was $317.84 million, above the estimated $311.62 million, but represented a year-over-year decline of -18.3% [4] Stock Performance - Akamai Technologies' shares returned +5.4% over the past month, outperforming the Zacks S&P 500 composite's +2.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Group 1: Earnings Performance - Akamai Technologies reported quarterly earnings of $1.66 per share, exceeding the Zacks Consensus Estimate of $1.52 per share, but down from $1.69 per share a year ago, representing an earnings surprise of 9.21% [1] - The company posted revenues of $1.02 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.49% and up from $995.02 million year-over-year [2] Group 2: Stock Performance and Outlook - Akamai Technologies shares have increased approximately 4.8% since the beginning of the year, compared to the S&P 500's gain of 4.5% [3] - The current consensus EPS estimate for the upcoming quarter is $1.67 on revenues of $1.05 billion, and for the current fiscal year, it is $6.76 on revenues of $4.28 billion [7] Group 3: Industry Context - The Internet - Services industry, to which Akamai belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable outlook for stocks within this sector [8]

Revenue Performance - Fourth quarter revenue was $1.020 billion, a 3% increase year-over-year from $995 million in Q4 2023[4] - Full-year revenue for 2024 was $3.991 billion, up 5% from $3.812 billion in 2023[4] - Total revenue for Q4 2024 reached $1,019,939, a 3% increase year-over-year, with total revenue for the year at $3,991,168, up 5% from 2023[28] - U.S. revenue for Q4 2024 was $530 million, up 3% year-over-year[17] - U.S. revenue for Q4 2024 was $529,879, a 3% increase year-over-year, while international revenue was $490,060, growing by 2%[29] Profitability Metrics - GAAP net income per diluted share for Q4 2024 was $0.91, a 12% decrease from $1.03 in Q4 2023[14] - Non-GAAP net income per diluted share for 2024 was $6.48, a 5% increase from $6.20 in 2023[14] - Net income for Q4 2024 was $139,905,000, compared to $57,907,000 in Q3 2024 and $161,165,000 in Q4 2023, reflecting a significant quarter-over-quarter increase[24] - Non-GAAP net income per diluted share for Q4 2024 was $1.66, up from $1.59 in Q3 2024 and $1.69 in Q4 2023[34] - Total net income for the year ended December 31, 2024, was $504.9 million, down from $547.6 million in 2023[36] Operating Expenses and Cash Flow - Cash from operations for Q4 2024 was $344 million, representing 34% of revenue[15] - Operating cash flow for Q4 2024 was $343,788,000, up from $392,542,000 in Q3 2024 and $389,193,000 in Q4 2023[25] - Total costs and operating expenses for Q4 2024 were $871,879,000, a decrease from $934,042,000 in Q3 2024 and an increase from $810,231,000 in Q4 2023[24] - Research and development expenses for Q4 2024 were $120,245,000, compared to $120,347,000 in Q3 2024 and $109,202,000 in Q4 2023, indicating a year-over-year increase of 10.4%[24] Shareholder Returns - The company repurchased 1.4 million shares for $138 million at an average price of $97.43 per share in Q4 2024[16] - The company repurchased $138,371,000 of common stock in Q4 2024, compared to $165,839,000 in Q3 2024[26] Guidance and Future Expectations - The company provided guidance for Q1 2025 revenue between $1.000 billion and $1.020 billion[19] - Non-GAAP operating margin for 2025 is expected to be 28%[19] - Forward-looking statements indicate expectations for future financial performance, with potential risks including competition, economic uncertainty, and geopolitical conditions[53] Non-GAAP Financial Measures - The company emphasizes the use of non-GAAP financial measures to provide a clearer view of its ongoing business performance[37] - Adjusted EBITDA for Q4 2024 was $429.4 million, with an adjusted EBITDA margin of 42%, consistent with Q3 2024[36] - Adjusted EBITDA excludes various items such as interest, taxes, depreciation, and legal settlements, providing a clearer view of operational performance[47] Capital Expenditures - Capital expenditures for Q4 2024 amounted to $192,668, representing 19% of total revenue, with annual capital expenditures at $675,901[30] - Total cash used in investing activities for the year ended December 31, 2024, was $798,679,000, compared to $1,848,238,000 for the year ended December 31, 2023[26] Employee Metrics - The number of employees at the end of Q4 2024 was 10,748, an increase from 10,281 in the previous year[30] Currency Impact - Foreign currency exchange rates significantly impact revenue and earnings from international operations, with management expecting continued effects[51] - The impact of foreign currency exchange rates is calculated by translating current period results using prior period average rates, enhancing financial performance understanding[52]