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AKAMAI TECHNOLOGIES INC (AKAM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered modest top-line growth and a clean beat on non-GAAP EPS: Revenue was $1.015B (+3% YoY) and non-GAAP EPS was $1.70; both exceeded consensus while GAAP EPS was $0.82 reflecting higher tax and non-cash items . Versus Q4 2024, revenue was essentially flat and margins improved on a non-GAAP basis .
  • Mix continued to shift to higher-value businesses: Security ($531M, +8% YoY) and Cloud ($165M, +14% YoY) together were 69% of revenue; Delivery remained pressured ($319M, -9% YoY) but was stronger than internal expectations .
  • Guidance: Q2 revenue $1.012–$1.032B, non-GAAP margin ~28%, EPS $1.52–$1.58; FY 2025 revenue $4.05–$4.20B, non-GAAP margin ~28%, EPS $6.10–$6.40. FY ranges nudged up at the low end vs February, and share count assumptions reduced (150M from 152M) .
  • Strategic catalysts: Completed Edgio migrations/TSA exit; sales force rebalancing to “hunters” and channel; new Firewall for AI product; and compute ARR expected to grow 40–45%, positioning for multi-year mix and margin improvement .

What Went Well and What Went Wrong

  • What Went Well

    • Security momentum: “continued strong demand for our market-leading Guardicore segmentation solution” with multiple competitive takeaways and expansions across financials, government, and industrial customers .
    • Delivery better than expected: upside was “really traffic… pretty strong across video, gaming, software downloads, commerce,” while remaining cautious about a bottom .
    • New AI security product: Firewall for AI debuted to strong interest and industry recognition; management emphasized multilayered protection for LLMs and agentic AI use cases .

  • What Went Wrong

    • GAAP profitability compressed: GAAP operating margin fell to 15% (from 17% YoY) and GAAP EPS dropped to $0.82 on higher tax expense and non-cash adjustments .
    • Delivery still declining YoY: Delivery revenue -9% YoY; pricing remains volume-driven and unit economics face pressure, even as price declines moderate .
    • FX and interest headwinds: FX was a sequential/YoY drag on revenue and margins; net interest income expected to fall ~$5M per month starting May due to lower cash balances and rate path .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Billions)$0.987 $1.020 $1.015
GAAP Diluted EPS ($)$1.11 $0.91 $0.82
Non-GAAP Diluted EPS ($)$1.64 $1.66 $1.70
GAAP Operating Margin (%)17% 15% 15%
Non-GAAP Operating Margin (%)30% 29% 30%
Adjusted EBITDA ($USD Millions)$417 $429 $441
Adjusted EBITDA Margin (%)42% 42% 43%

Actual vs S&P Global consensus

MetricQ1 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD Millions)*$989.2*$1,015.3*$1,011.1*
Revenue Actual ($USD Millions)$986.97 $1,019.94 $1,015.14
Primary EPS Consensus Mean ($)*$1.609*$1.523*$1.566*
Non-GAAP Diluted EPS Actual ($)$1.64 $1.66 $1.70
Beat/MissRev: Miss; EPS: BeatRev: Beat; EPS: BeatRev: Beat; EPS: Beat

Values retrieved from S&P Global.

Segment breakdown (solutions)

MetricQ1 2024Q4 2024Q1 2025
Security Revenue ($USD Millions)$490.68 $534.60 $530.70
Security YoY Growth (%)21% 14% 8% (10% cc)
Delivery Revenue ($USD Millions)$351.76 $317.84 $318.99
Delivery YoY Growth (%)-11% -18% -9% (-8% cc)
Cloud Computing Revenue ($USD Millions)$144.53 $167.50 $165.46
Cloud YoY Growth (%)25% 24% 14% (15% cc)
Security+Cloud Mix (%)65% 69% 69%

Geography

MetricQ1 2024Q4 2024Q1 2025
U.S. Revenue ($USD Millions)$512.35 $529.88 $528.74
International Revenue ($USD Millions)$474.62 $490.06 $486.40
U.S. YoY (%)8% 3% 3%
International YoY (%)7% 2% 2% (5% cc)

Key KPIs and cash/capex

KPIQ1 2024Q4 2024Q1 2025
Cash from Operations ($USD Millions)$351.88 $343.79 $251.20
Capex (Accrual) ($USD Millions)$152.13 $192.67 $225.90
Capex as % of Revenue15% 19% 22%
Cash, Cash Equivalents & Marketable Securities ($USD Billions)——$1.344
Share Repurchases——$500M; 6.2M shares @ $81.19 avg; 146M shares o/s
Non-GAAP Tax Rate (%)19% 19% 19%
Headcount (EOP)10,533 10,748 10,811

Note: The Q1 2025 transcript contains a typographical discrepancy stating non-GAAP EPS “$1.07”; the 8-K and CFO remarks confirm $1.70 (we attribute the $1.07 to transcription error) .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 20, 2025)Current Guidance (May 8, 2025)Change
Revenue ($USD Billions)Q2 2025—$1.012–$1.032 New
Non-GAAP Operating Margin (%)Q2 2025—~28% New
Non-GAAP EPS ($)Q2 2025—$1.52–$1.58 New
Non-GAAP Tax Rate (%)Q2 2025—19–20% New
Diluted Shares (M)Q2 2025—148 New
Capex % of RevenueQ2 2025—22–23% New
Revenue ($USD Billions)FY 2025$4.00–$4.20 $4.05–$4.20 Raised low end
Non-GAAP Operating Margin (%)FY 2025~28% ~28% Maintained
Non-GAAP EPS ($)FY 2025$6.00–$6.40 $6.10–$6.40 Raised low end
Non-GAAP Tax Rate (%)FY 2025~19.5% 19–20% Widened range
Diluted Shares (M)FY 2025~152 ~150 Lowered
Capex % of RevenueFY 2025~19% 19–20% Widened range

Earnings Call Themes & Trends

TopicQ3 2024 (Prev -2)Q4 2024 (Prev -1)Q1 2025 (Current)Trend
AI/technology initiativesEarly AI use cases across security/compute; ML in WAF/DDoS, ISV ecosystem expanding Cloud inference use cases; Managed Container Service at thousands of POPs; GPUs; edge advantages Firewall for AI launched; strong interest; AI agent protection; awards; continued AI inference positioning Accelerating product innovation
Compute strategy & ARRCompute revenue +28% YoY; enterprise ARR on track to >$100M Cloud infrastructure services ARR $259M; goal +40–45% in 2025; large $100M multi-year deal Compute revenue +14% YoY; CIS ARR growth reiterated; legacy compute migrating to ISVs Mix shift to CIS; medium-term reacceleration
Delivery-16% YoY; weak traffic; cautious outlook; industry consolidation helping pricing -18% YoY; expect moderation in 2025; 5-year commitment with largest customer -9% YoY; better than expected on traffic; cautious to call bottom Stabilizing gradually
Sales/go-to-marketAnnounced shift to hunters, specialists, partner ecosystem Consulting-led sales model optimization; partner enablement “About 1/3 of the way there”; more hunters; incentives for multiyear deals; 80–90% of new logos via channel Execution in-flight
Tariffs/macro/FXCapex-heavy year; macro headwinds to delivery traffic FX volatility impacting 2025 outlook; tariff risk mitigation via front-loaded capex Tariff impact ~$10M capex amortized over 6 years; interest income to decline; FX tailwind to Q2 revenue vs Q1 Mixed macro; managed proactively
Regulatory/legal (TikTok)—Largest customer DIY headwind; U.S. ban risk ring-fenced via minimums Guidance frames scenarios around potential U.S. ban; mix assumptions embedded Risk acknowledged, mitigated
Security portfolio mixBroad-based growth; DDoS episodic Security +16% YoY in 2024; WAF/Prolexic maturing; 10% CAGR target LT Security +8% YoY; API Security & Guardicore strongest; WAF moderating Transition to newer products

Management Commentary

  • CEO on mix transformation: “Security and compute combined to account for 69% of our total revenue in Q1, growing 10% year-over-year... underscoring Akamai’s ongoing transformation” .
  • On delivery upside: “It was all about traffic growth… strong video, gaming, software downloads and commerce… just a better improved environment” .
  • On Firewall for AI: Designed to “protect AI agents… from sensitive data leaks, remote code execution, model back doors… and AI-driven denial of service attacks” with early customer validation .
  • On sales motion: “We’re about 1/3 of the way there… shifting from farmers toward hunting… hiring specialists… incent longer-term contracts” .

Q&A Highlights

  • Delivery trends: Traffic drove Q1 upside; pricing modestly more rational post competitor bankruptcy, but unit pricing remains volume-linked—caution before calling bottom .
  • Security growth drivers: API Security and Guardicore driving bookings; WAF growth moderating with high penetration; Prolexic growth normal without large episodic attacks .
  • Channel leverage: 80–90% of new logos coming via channel partners (Presidio, WWT, Optiv, Deloitte, etc.); broader portfolio cross-sell via channel .
  • Capex/interest: Capex front-loaded (22–23% of Q2 revenue); net interest income expected to decline ~$5M/month starting May due to debt actions and rates .
  • Edgio migration: TSA costs ended and customer migration complete; expect upsell into acquired base over 6–9 months .

Estimates Context

  • AKAM beat consensus on revenue and EPS in Q1 2025: Revenue $1,015.1M vs $1,011.1M*; non-GAAP EPS $1.70 vs $1.566*—a clean beat driven by better revenue, lower bandwidth, lower payroll taxes (stock-related), and medical claims .
  • Prior periods: Q4 2024 beat on both; Q1 2024 missed slightly on revenue but beat on EPS—underscoring more dependable cost/earnings control vs top-line variability .
  • Implications: FY 2025 EPS low end raised by $0.10 and share count reduced; models likely to nudge FY EPS and margin assumptions up modestly; delivery trajectory still the key debate given normalization pace .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix pivot intact: Security+Cloud now 69% of revenue; continued ARR growth in cloud infrastructure and API/segmentation should underpin multi-year margin resilience despite delivery drag .
  • Near-term setup: Q2 guide implies steady topline with non-GAAP margin ~28%; capex remains elevated near-term (front-loaded) but expected to normalize in 2H .
  • Delivery stabilization is the swing factor: Traffic is improving across sub-verticals; price declines moderating—monitor renewal cadence and traffic volumes for inflection .
  • EPS quality: Non-GAAP EPS outperformance came from revenue and controllable cost levers; FY EPS range raised low end—supportive for estimate revisions and sentiment .
  • AI catalyst: Firewall for AI expands TAM and strengthens security leadership as enterprises adopt LLMs/agents; early recognition and customer interest could accelerate security growth .
  • Capital actions: $500M buyback in Q1 and lower share count assumptions; subsequent upsized $1.5B convert due 2033 reinforces liquidity and refinancing flexibility .
  • Watch FX/interest: FX can swing revenue/margins; interest income declines through 2025—factor into non-operating line modeling .