Akamai Technologies’ Earnings Call: Solid Growth Amid Challenges

Akamai Technologies ((AKAM)) has held its Q1 earnings call. Read on for the main highlights of the call.

Akamai Technologies’ recent earnings call revealed a generally positive sentiment, driven by strong growth in its security and compute segments. The company celebrated notable customer acquisitions and industry recognition, although it faced challenges such as declining delivery revenue and concerns over macroeconomic and geopolitical impacts. Despite these hurdles, Akamai’s performance was solid, signaling a promising trajectory with some areas needing attention.

Strong Start to Fiscal Year 2025

Akamai kicked off fiscal year 2025 with a robust performance, reporting first-quarter revenue of $1.015 billion, marking a 3% increase year-over-year and 4% in constant currency. The company’s non-GAAP EPS reached $1.07, up 4% year-over-year and 6% in constant currency, surpassing the high end of guidance. This strong start underscores Akamai’s solid financial footing as it navigates the new fiscal year.

Security and Compute Growth

The security and compute segments were standout performers, accounting for 69% of Akamai’s total revenue in Q1. These segments grew by 10% year-over-year as reported and 11% in constant currency. The demand for security solutions, including Guardicore and API security, was particularly strong, highlighting Akamai’s competitive edge in these critical areas.

Successful Customer Acquisitions and Partnerships

Akamai’s strategic focus on customer acquisition paid off with several large contracts secured for its Guardicore solution, including deals with major financial institutions and government agencies. Additionally, the company signed significant contracts for API security with prominent firms across various sectors, reinforcing its market position.

Recognition and Awards

Akamai’s industry leadership was further validated by its recognition as a leader in the Forrester Wave Web Application Firewall report and winning a global Infosec Award for its API security solution at the RSA Security Conference. These accolades underscore Akamai’s innovative capabilities and market leadership.

Cloud Computing Momentum

The cloud computing segment showed impressive momentum, with revenue growing by 14% year-over-year. Akamai signed significant deals, including with a global live streaming service and a major cybersecurity provider. The company was also recognized as an emerging leader for GenAI specialized infrastructure by Gartner, highlighting its strategic advancements in cloud technology.

Delivery Revenue Decline

Despite overall growth, Akamai faced a 9% year-over-year decline in delivery revenue, totaling $319 million. While this was better than expected, the company remains cautious about predicting a rebound in delivery performance, indicating a need for strategic adjustments in this area.

Macroeconomic and Geopolitical Concerns

Akamai acknowledged concerns from some customers about potential recession impacts and reliance on American companies for critical infrastructure. Although these concerns have not yet impacted business, they represent potential challenges that Akamai is monitoring closely.

US Public Sector Revenue Concerns

Revenue from the US public sector accounts for less than 5% of Akamai’s total revenue. However, potential revenue loss of a few million dollars in the second half of 2025 due to federal budget cutbacks could pose a minor challenge.

Interest Income Decline Expected

Akamai anticipates a decline in interest income due to lower cash balances and expected lower investment yields as interest rates are projected to decrease. This financial adjustment reflects the broader economic environment’s influence on the company’s financial strategy.

Forward-Looking Guidance

Looking ahead, Akamai provided optimistic guidance for the upcoming periods. The company anticipates Q2 revenue between $1.012 billion and $1.032 billion, maintaining a full-year 2025 revenue guidance between $4.050 billion and $4.2 billion. Security revenue is expected to grow by about 10% in constant currency for 2025, with compute revenue projected to increase by approximately 15%. Akamai is also taking steps to mitigate risks from global economic and political challenges, positioning itself for sustained growth.

In summary, Akamai Technologies’ earnings call painted a picture of a company on a solid growth path, driven by its security and compute segments. While challenges such as declining delivery revenue and macroeconomic concerns persist, Akamai’s strategic initiatives and industry recognition position it well for future success. Investors and market watchers will be keen to see how the company navigates these challenges and capitalizes on its growth opportunities.