Akamai Technologies, Inc. is a leading provider of cloud computing, security, and content delivery solutions that power and protect life online. The company has a long history of innovation, dating back to its founding in 1998 by two engineers from MIT. Akamai's massively distributed edge and cloud platform, known as Akamai Connected Cloud, comprises more than 4,100 edge points-of-presence in approximately 130 countries and nearly 750 cities, making it one of the world's largest and most reliable networks.

Business Overview

Akamai's business is organized into three key solution categories: security, delivery, and compute. The security solutions are designed to protect businesses online by keeping infrastructure, websites, applications, and users safe. The delivery solutions enable businesses to deliver content, applications, and software over the internet, while the compute solutions provide cloud computing capabilities to power a wide range of workloads.

Financials

In the fiscal year 2023, Akamai generated annual revenue of $3.81 billion and net income of $547.6 million. The company's annual operating cash flow was $1.35 billion, and its annual free cash flow was $497.4 million. These strong financial results demonstrate Akamai's ability to consistently generate substantial cash flow, which the company reinvests to drive innovation and growth.

During the first quarter of 2024, Akamai reported revenue of $987 million, up 7.8% year-over-year. The company's two fastest-growing offerings, security and compute, grew 22% year-over-year on a combined basis and now represent 64% of total revenue. Security revenue grew 21% year-over-year to $491 million, driven by strong demand for the company's Guardicore Segmentation Solution and Zero Trust Network Access offerings. Compute revenue was $145 million, up 25% year-over-year, as Akamai continued to see strong early traction with enterprise customers.

Risks and Challenges

However, Akamai's delivery revenue, which represents a little over one-third of the company's overall revenue, declined 11% year-over-year to $352 million. This decline was primarily due to slowing traffic growth across the industry and a large social media customer that is optimizing its business to reduce costs. As a result, Akamai has revised its full-year 2024 guidance, now expecting revenue of $3.95 billion to $4.02 billion, up 4% to 5% year-over-year, and non-GAAP earnings per share of $6.20 to $6.40.

Outlook

Despite the challenges in the delivery business, Akamai remains well-positioned for long-term growth. The company's security and compute solutions continue to gain traction, and Akamai is making strategic investments to further strengthen its offerings. In May 2024, Akamai announced its intention to acquire Noname Security, a leading provider of API security solutions, for approximately $450 million. This acquisition is expected to enhance Akamai's existing API Security solution and accelerate its ability to meet growing customer demand in this fast-growing market.

Liquidity

Akamai's financial position remains strong, with $2.3 billion in cash, cash equivalents, and marketable securities as of March 31, 2024. The company has also maintained a disciplined approach to capital allocation, using its substantial cash flow to fund strategic investments, make selective acquisitions, and return capital to shareholders through a $2 billion share repurchase program.

Conclusion

Looking ahead, Akamai is well-positioned to capitalize on the growing demand for cloud computing, security, and content delivery solutions. The company's innovative product portfolio, global network infrastructure, and strong financial position provide a solid foundation for continued growth and success.

Overall, Akamai's Q1 2024 results demonstrate the company's ability to navigate industry challenges while investing in its faster-growing and more profitable security and compute solutions. With the planned acquisition of Noname Security and the company's strong financial profile, Akamai appears poised to continue powering and protecting life online for years to come.