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]

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] - Non-GAAP earnings per share (EPS) was $1.66, exceeding guidance and down 2% year-over-year [50] - Security revenue reached $535 million, growing 14% year-over-year, while compute revenue grew to $167 million, a 24% year-over-year increase [46][48] 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] - Cloud computing revenue was $630 million, growing 25% over 2023, with cloud infrastructure services contributing $230 million, up 32% [10] - 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 anticipates a decline in delivery revenue to shrink to about 10% year-over-year in 2025, with signs of improvement in the delivery marketplace [36] Company Strategy and Development Direction - Akamai is transforming from a CDN pioneer 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 focus more on compute investments, expecting cloud infrastructure services ARR to grow by 40% to 45% in 2025 [29] 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] - The company expects to see revenue growth acceleration in 2025, driven by improvements in product mix and operational efficiency [40] - Management acknowledged challenges from foreign exchange fluctuations and the impact of a major customer pursuing a DIY strategy [37][59] 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 to generate approximately $85 million to $105 million in revenue from the Edgio transaction in 2025 [53] Q&A Session Summary Question: Can you expand on the large cloud deal and the competitive environment? - Management indicated that the customer is increasing usage of Akamai's cloud infrastructure services and that a data center is being built in Scandinavia to meet specific needs [81][82] Question: Is the $100 million compute deal the same as the five-year deal with the largest delivery customer? - Management confirmed that they are the same customer [86] Question: Can you elaborate on the $60 million headwind from the largest customer? - The headwind is primarily due to the customer's DIY build-out, which will reduce reliance on Akamai's services [92] Question: What is the outlook for retaining Edgio contracts? - Management expressed confidence in retaining the Edgio customer base, with no significant churn anticipated [120] Question: What steps are being taken to minimize disruption from changes in the go-to-market strategy? - Management is in the early stages of a two-year process to transform the sales force and improve account segmentation and 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]

Core Insights - Akamai Technologies has entered into a multi-year strategic usage agreement with a major technology company, involving an investment of over $100 million in Akamai's cloud computing capabilities [1][2]. Group 1: Agreement Details - The agreement allows the customer to utilize Akamai's full portfolio to enhance and secure its infrastructure services [2]. - Akamai will implement managed Kubernetes clusters in secure virtual private cloud environments, balancing user traffic and integrating application and network security to optimize performance and cost [3]. Group 2: Company Overview - Akamai is recognized as a leader in cybersecurity and cloud computing, providing robust security solutions and superior threat intelligence to protect enterprise data globally [4]. - The company’s cloud computing solutions are designed for performance and affordability, making it a trusted partner for global enterprises seeking reliability and scalability [4].

Core Viewpoint - Akamai Technologies, Inc. is expected to report fourth-quarter 2024 results on February 20, with anticipated year-over-year revenue growth driven by strong demand across various sectors and an increase in security solutions demand [1][2]. Group 1: Company Developments - Akamai upgraded its Akamai Guardicore Segmentation and Enterprise Application Access solution to enhance performance, security, and scalability in cloud environments, providing real-time visualization of cloud workloads [3]. - The integration of Avesha Technologies into Akamai's Qualified Compute Partner Program aims to improve content delivery through advanced Kubernetes solutions, expected to positively impact Akamai's revenue [4]. - A strategic partnership with Smartbig USA Inc. will utilize Akamai's cloud computing platform to support global gaming infrastructure, enhancing Akamai's international presence and performance [5]. - Akamai acquired select assets from the bankrupt Edgio Inc., including customer contracts and patent rights, which is projected to be accretive and expand its customer base [6]. Group 2: Financial Expectations - Revenue estimates for the security segment are projected at $537.7 million, reflecting a 14.2% year-over-year increase, while the compute vertical is expected to generate $168.7 million, indicating a 24.9% growth [7]. - The overall revenue consensus estimate for the fourth quarter of 2024 is $1.01 billion, up from $995 million year-over-year, with adjusted earnings per share expected to decline to $1.52 from $1.69 [8]. Group 3: Earnings Predictions - The current earnings ESP for Akamai is 0.00%, indicating no expected earnings beat, despite a Zacks Rank of 2 (Buy) [9][10][11].

Core Viewpoint - Akamai Technologies (AKAM) is expected to report a quarterly earnings per share (EPS) of $1.52, reflecting a year-over-year decline of 10.1%, while revenues are anticipated to reach $1.01 billion, showing a 2% increase compared to the previous year [1] Earnings Estimates - There has been no revision in the consensus EPS estimate for the quarter over the last 30 days, indicating that analysts have not changed their initial forecasts during this period [2] - Revisions to earnings projections are crucial for predicting investor behavior and are strongly linked to short-term stock price performance [3] Revenue Breakdown - Analysts estimate 'Revenue- Security' to be $533.06 million, representing a year-over-year increase of 13.2% [5] - The 'Revenue- Compute' is projected to be $167.63 million, indicating a 24.2% increase from the prior-year quarter [5] - The consensus estimate for 'Revenue- Delivery' is $311.62 million, reflecting a year-over-year decline of 19.9% [5] - 'Revenue- International' is expected to be $494.99 million, showing a 3.4% increase from the year-ago quarter [6] - 'Revenues- United States' are projected to reach $527.22 million, indicating a 2.1% increase from the previous year [6] Stock Performance - Over the past month, Akamai Technologies shares have returned 10.1%, outperforming the Zacks S&P 500 composite's 4.9% change, and the company holds a Zacks Rank 2 (Buy), suggesting it is likely to outperform the overall market in the near future [7]

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