Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Akamai Technologies Inc (AKAM, Financial) reported a solid start to the year with first-quarter revenue of $1.015 billion, up 3% year over year and 4% in constant currency.
• The company's non-GAAP operating margin exceeded guidance at 30%, and non-GAAP earnings per share were well above the high end of guidance at $1.07, up 4% year over year.
• Security and compute segments accounted for 69% of total revenue, growing 10% year over year, highlighting Akamai's transformation into a cybersecurity and cloud computing company.
• Akamai's Guardicore segmentation solution saw strong demand, with significant competitive takeaways and contract expansions in various sectors.
• The company introduced new products, such as the firewall for AI, generating strong customer interest and receiving accolades at industry events.

Negative Points

• Delivery revenue declined by 9% year over year, although it showed better-than-expected results for the quarter.
• Akamai anticipates heightened economic volatility, which could impact revenue growth and margins.
• There are concerns among some international customers about relying on U.S.-based services, which could affect future business.
• The company expects increased operating expenses in the second quarter due to various factors, including marketing expenditures and employee merit cycles.
• Akamai's compute segment growth slowed to 15% year over year, partly due to the exit of legacy revenue streams.

Q & A Highlights

Q: Can you discuss what drove the upside in the delivery segment this quarter and whether it can be sustained? A: Edward McGowan, CFO, explained that the upside was primarily traffic-driven, with strong growth across video, gaming, software downloads, and commerce. While the environment has improved, they are cautious about calling a bottom as trends are still stabilizing.

Q: How would you characterize your performance in the security segment, and what enables the expected acceleration in growth? A: McGowan noted that security performance was in line with expectations, achieving 10% growth in constant currency. The growth is driven by strong demand for API security and Guardicore solutions, which are expected to continue driving growth.

Q: Can you provide more detail on the role of Akamai's AI firewall and its potential benefits as AI utilization expands? A: CEO Tom Leighton highlighted that the AI firewall protects AI applications from various attacks, such as data leaks and misinformation. As enterprises increasingly adopt AI, Akamai's solutions help secure these applications, offering significant potential as AI usage grows.

Q: What sets Akamai apart in the segmentation market, allowing it to take share? A: Leighton emphasized Akamai's scale, ease of use, and trust as key differentiators. Their solutions are designed for large enterprises with extensive applications and devices, and their AI-enabled interface simplifies integration and management.

Q: How are recent sales changes progressing, and what improvements do you expect? A: Leighton stated that they are about one-third of the way through their sales transformation, focusing on hunting new customers and hiring specialists. They are seeing progress in longer-term contracts and expect continued growth in market presence.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.