Akamai(AKAM) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenue reached $1,015 million, representing a 3% year-over-year increase and a 4% increase in constant currency [4][23] - Non-GAAP operating margin was reported at 30%, exceeding guidance [4] - Non-GAAP earnings per share (EPS) was $1.7, up 4% year-over-year and up 6% in constant currency, surpassing the high end of guidance [4][26] - Total Q1 CapEx was $226 million, accounting for 22% of revenue [26] Business Line Data and Key Metrics Changes - Security and compute combined accounted for 69% of total revenue, growing 10% year-over-year as reported and 11% in constant currency [5][24] - Security revenue was $531 million, growing 8% year-over-year as reported and 10% in constant currency [24] - Compute revenue grew to $165 million, a 14% year-over-year increase as reported and 15% in constant currency [23][24] - Delivery revenue was $319 million, down 9% year-over-year as reported and down 8% in constant currency [24] Market Data and Key Metrics Changes - International revenue was $486 million, up 2% year-over-year or 5% in constant currency, representing 48% of total revenue [24] - Foreign exchange fluctuations negatively impacted revenue by $5 million sequentially and $14 million year-over-year [24] Company Strategy and Development Direction - Akamai is transforming from a CDN pioneer into a cybersecurity and cloud computing company, focusing on security solutions like Guardicore and API security [5][6] - The company introduced new products such as the firewall for AI, aimed at protecting AI applications from emerging threats [10][11] - Akamai aims to enhance its edge computing capabilities with the introduction of a managed container service [17] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding potential recession impacts on bookings later in the year, although no current impacts were noted [20] - The company expects to lose a few million dollars in revenue in the latter half of 2025 due to federal cutbacks, but sees potential for increased revenue from solutions that generate savings for federal agencies [21] - Akamai remains committed to maintaining strong customer relationships and trust, which are core values for the company [22] Other Important Information - Akamai's capital allocation strategy includes share buybacks, with approximately $1.5 billion remaining on the current repurchase authorization [27] - The company completed the migration of Edgeio customers to its platform, expecting revenue contributions from Edgeio to remain between $85 million to $105 million for 2025 [28] Q&A Session Summary Question: What drove the upside in delivery revenue? - Management indicated that traffic growth was the primary driver, with strong performance across various sub-verticals [38][39] Question: How did security revenue perform in March? - Security revenue met internal expectations, with growth driven by strong API security and Guardicore performance [41][42] Question: What role can Akamai play with AgenTic AI and its AI firewall? - Akamai's AI firewall is designed to protect AI applications from various attacks, ensuring the integrity of AI agents and their data [47][50] Question: What differentiates Akamai's segmentation product in the market? - Akamai's scale, ease of use, and trustworthiness set it apart, allowing it to protect large enterprises effectively [56][60] Question: What are the expectations for security revenue growth? - Management expects security revenue growth of approximately 10% in constant currency for 2025, driven by strong demand for segmentation and API security solutions [34][90]