Akamai(AKAM) - 2024 Q4 - Earnings Call Transcript

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]