Arti Vula

Arti Vula asked about the newer verticals driving compute deals, whether they originate from direct sales or channel partners, and inquired about any changes in competitive dynamics against hyperscalers and the impact of AI on security and delivery revenue.

Answer

CFO Ed McGowan identified newer verticals like life sciences, manufacturing, healthcare, and industrials, noting that deals come from both partners (e.g., NVIDIA referrals) and direct sales. CEO Tom Leighton stated no fundamental change in competitive dynamics with hyperscalers, emphasizing Akamai's successful competition and the use of Akamai's compute by all three major hyperscalers for performance. He also explained that AI helps attackers, increasing the need for Akamai's security services, and for delivery, it drives scraper bots, increasing the need for bot management.

Arti Vula asked about the newer verticals from which deals are coming in the compute pipeline and whether these are primarily from direct sales or channel partners. She also inquired about competitive dynamics against hyperscalers, specifically if Akamai is seeing an improving trend in winning deals against them in CIS and security.

Answer

Ed McGowan (CFO) identified newer verticals as life sciences, manufacturing, healthcare, and industrials, noting that demand comes from both direct sales and partners like NVIDIA. Tom Leighton (CEO) stated that competitive dynamics against hyperscalers in delivery and security haven't fundamentally changed, as Akamai has successfully competed for over a decade, with two of the three hyperscalers being large Akamai customers. He added that all three hyperscalers now use Akamai for compute, not for cost but for better performance due to Akamai's distributed nature. Ed McGowan (CFO) clarified that wins aren't solely from taking business from hyperscalers; new workloads, especially in AI inference, present opportunities where low latency and proximity are critical, making it a growing market with plenty of room for Akamai.

Asked about the reasons for success in complex categories and whether momentum is new or a continuation. Also inquired if customers are discussing tariffs more, and if existing inventory levels are providing a short-term buffer.

Answer

Travis Hess explained their success in complex niches is a continuation, driven by the platform's flexibility, and they are now more deliberately focusing on these areas. Daniel Lentz said they hear about tariffs from customers with supply chain challenges and remains cautious, stating the full effects won't be known until companies work through existing inventories, which could be providing a short-term buffer.

Inquired about the integration of new leadership and the potential for business disruption, and asked about the key drivers and assumptions behind the expected acceleration in ARR growth.

Answer

The new leadership team has settled in well without disruption, with external changes to become visible in mid-March. ARR growth acceleration is expected to be driven by the doubling of sales capacity, a new focus on net revenue retention, and various product initiatives like Catalyst and self-serve Feedonomics.

Arti Vula, on for Mark Murphy, asked whether market uncertainty would deter investment in new technologies like AI or spur it as a means for efficiency, and if these pressures were felt differently across geographies.

Answer

CEO Daniel Dines asserted that the uncertainty affects all investments but that customer interest in Agentic AI remains strong due to its potential. COO & CFO Ashim Gupta added that while CFOs are tightening budgets, activity around Agentic proofs-of-concept is high. Gupta noted the macroeconomic pressure is global, though perhaps more pronounced in Canada.

Arti Vula, on for Mark Murphy, inquired about any macro demand factors beyond the post-election ad spend lull and asked about the lead products in recent wins like Home Depot and Dollar General.

Answer

An executive confirmed the post-election ad spend environment worsened in November and December but sees a more stable outlook for 2025. CEO Mark Zagorski described the large wins as classic 'land and expand' deals, often starting with measurement and upselling to activation solutions. He highlighted Scibids (Sybase) as an increasingly important hook due to its clear ROI, which enhances customer stickiness.

Arti Vula, on for Mark Murphy, asked for more color on the uncertainty surrounding the post-election rebound in traditional ad spending and why that effect might persist.

Answer

CFO Nicola Allais explained that the uncertainty is not about if brand dollars will return, but about the speed at which they will flow back into the ad ecosystem during a busy Q4. CEO Mark Zagorski added that the unprecedented level of digital political ad spend crowded out many brands, and it remains to be seen how quickly they will decide it is 'safe to get back in the water' and resume their campaigns.

Arti Vula of JPMorgan Chase & Co. inquired about the potential impact of AI technologies like DeepSeek on Semrush's product roadmap and costs, and also asked for an update on the macroeconomic environment and its effect on different customer segments.

Answer

CEO Oleg Shchegolev addressed the AI question, stating that the democratization of AI technology is an expected and positive trend that makes freemium models more viable. CFO Brian Mulroy commented on the macro environment, noting no significant changes and confirming continued strength in business and agency cohorts alongside persistent softness at the lower end of the market.

Arti Vula, on for Mark Murphy at JPMorgan Chase & Co., asked for specifics on which customer segments and international regions are being prioritized for the IAM rollout. She also requested help in sizing the headcount contribution from the Lexion acquisition and understanding where new hiring is being focused.

Answer

CEO Allan Thygesen outlined the IAM rollout plan, stating it will expand from the commercial segment to include a self-service option for small businesses and departmental rollouts for large enterprises by year-end. Geographically, it will expand to the U.K., Germany, and France. CFO Blake Grayson noted that the Lexion acquisition was a 'fair chunk' of the quarterly headcount increase, with the remainder focused on growth initiatives in R&D and PLG. He stressed a mindful approach to hiring, balancing cost and location.

Asked if there were any divergences in demand patterns by geography or end market, and inquired about the go-forward plan for increasing sales force coverage in the top 50 metros.

Answer

Management reported that demand has been very consistent across all sizes, markets, and industries with no significant changes. They will continue to increase sales coverage in the top 50 metros during FY '25, but not dramatically, as they balance new hiring with leveraging the productivity of the existing sales force.