Akamai Technologies, Inc. (AKAM) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong growth in Cloud Infrastructure Services and security solutions, positive financial guidance, and a successful AI Inference Cloud launch. The Q&A section reveals increased customer commitments and successful competition against hyperscalers. Although management was vague on some specifics, the overall sentiment is positive, particularly with the optimistic guidance and strategic investments in AI and security.
Key Financial Performance
Revenue $1.095 billion, up 7% year-over-year as reported and up 6% in constant currency. Growth driven by strong performance in Cloud Infrastructure Services and security solutions.
Non-GAAP Operating Margin 29%, no year-over-year change mentioned.
Non-GAAP Earnings Per Share (EPS) $1.84, up 11% year-over-year as reported and in constant currency. Increase attributed to higher-than-expected top-line revenue.
Cloud Infrastructure Services (CIS) Revenue $94 million, up 45% year-over-year as reported and up 44% in constant currency. Growth driven by ISV solutions, Infrastructure as a Service, storage customers, and AI-related tailwinds.
Security Revenue $592 million, up 11% year-over-year as reported and 9% in constant currency. Growth driven by API Security and Guardicore Segmentation solutions.
API Security Revenue Grew by more than 100% year-over-year, exiting the year with a revenue run rate exceeding $100 million. Growth driven by strong demand across multiple verticals.
Delivery Revenue $311 million, down 2% year-over-year as reported and down 3% in constant currency. Decline attributed to steadying trends in the delivery business.
Compute Revenue $191 million, up 14% year-over-year as reported and in constant currency. Growth driven by Cloud Infrastructure Services.
International Revenue $542 million, up 11% year-over-year as reported and 8% in constant currency. Growth driven by strong performance in international markets.
CapEx $154 million, representing 14% of revenue. No year-over-year change mentioned.
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Operating Highlights
Akamai Inference Cloud: Launched to support scaling AI inference on the Internet, incorporating NVIDIA Blackwell GPUs into Akamai's distributed cloud infrastructure. Signed a 4-year $200 million commitment with a major U.S. tech company for this service.
Cloud Infrastructure Services (CIS): Revenue grew 45% YoY to $94 million in Q4 2025, driven by ISV solutions, Infrastructure as a Service, and storage customers. Expanded contracts with global companies, including a 3-year deal with an Indian AI chatbot platform and a major U.S. tech company.
Security Solutions: Revenue grew 36% YoY for API security and Guardicore Segmentation solutions. Signed contracts with major institutions, including a 4-year $40 million deal with a North American financial institution and a 5-year $47 million deal with a global hardware company.
Operational Efficiency: Targeted workforce reduction to align with growth priorities, reinvesting savings into scaling go-to-market efforts and infrastructure. Took a $55 million restructuring charge in Q4 2025.
Strategic Shift to AI and Cloud: Investing $250 million in 2026 to scale AI Inference Cloud and $200 million due to increased hardware costs. Transitioning reporting structure to highlight Cloud Infrastructure Services as a standalone category.
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Risk or Challenges
Macroeconomic Trends: Potential adverse impacts from macroeconomic trends were mentioned, which could affect revenue and earnings guidance.
Integration of Acquisitions: Challenges related to the integration of acquisitions were highlighted as a potential risk factor.
Geopolitical Developments: Geopolitical developments were identified as a risk that could materially impact the company's results.
Inflationary Pressure in Hardware Market: Significant inflationary pressure in the computer hardware market, particularly in memory chips, is driving up server costs, necessitating an upward adjustment to CapEx forecast by approximately $200 million for 2026.
Supply Constraints: Supply constraints in the hardware market due to unprecedented industry investment in AI were noted as a challenge.
Seasonal Operating Expense Increases: Seasonal increases in operating expenses, including higher payroll costs and stock vesting, were mentioned as a challenge for Q1.
Decline in Delivery Revenue: Delivery revenue is expected to decline in mid-single digits year-over-year, posing a challenge to overall revenue growth.
Increased Colocation and Depreciation Expenses: Increased colocation and depreciation expenses associated with the buildup of the Cloud Infrastructure Services business are expected to impact operating margins.
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Guidance & Outlook
Revenue Projections for Q1 2026: Revenue is projected to be in the range of $1.06 billion to $1.085 billion, representing a 4% to 7% increase as reported or 2% to 5% in constant currency compared to Q1 2025.
Revenue Projections for Full Year 2026: Revenue is expected to be in the range of $4.4 billion to $4.55 billion, reflecting a 5% to 8% increase as reported and 4% to 7% in constant currency.
Cloud Infrastructure Services (CIS) Growth: CIS revenue growth is projected to accelerate to 45% to 50% year-over-year in 2026, with momentum building in the second half of the year driven by the scaling of the AI Inference Cloud business.
Security Revenue Growth: Security revenue is expected to grow in the high single digits on a constant currency basis in 2026.
Delivery and Other Cloud Applications Revenue: Revenue from delivery and other cloud applications is expected to decline in the mid-single digits year-over-year in 2026.
Capital Expenditures (CapEx) for 2026: CapEx is projected to be approximately 23% to 26% of total revenue, driven by investments in AI Inference Cloud and increased hardware costs due to inflation in the computer hardware market.
Non-GAAP Operating Margin for 2026: Non-GAAP operating margin is estimated to be approximately 26% to 28%, reflecting increased colocation and depreciation expenses associated with the CIS business.
Non-GAAP Earnings Per Share (EPS) for 2026: Non-GAAP EPS is expected to be in the range of $6.20 to $7.20 for the full year 2026.
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Shareholder Return Plan
Share Buyback Program: During the fourth quarter, we did not repurchase any shares. For the full year 2025, we spent $800 million to buy back approximately 10 million shares, marking the largest annual buyback in our history. As it relates to the use of capital, our intentions remain the same, to continue buying back shares over time, to offset dilution from employee equity programs and to be opportunistic in both M&A and share repurchases.
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Key Q&A
Q:Does the $1 of CapEx equal $1 of revenue still hold true?
A:The $1 CapEx for $1 of revenue does not hold true for this particular buying CapEx due to inflation in memory chips, but it is not far off. For larger deals with longer commitments, volume discounts are offered. A rental service for GPU by the hour will be launched later this quarter, priced at $250 million, which may yield a slightly better return.
Q:Can you provide details on the Akamai Inference Cloud opportunity and its pipeline?
A:The Inference Cloud offering announced in the fall, with GPUs deployed in 20 cities, is already sold out from beta customers. The pipeline is strong, with interest in inference applications, post-model training, transcoding, real-time translation, generative media, vision processing, customer support bots, gaming applications, commerce applications, robotics, autonomous vehicles, and local LLMs. The company is ramping up investment in this area.
Q:Was the major U.S. tech customer a new logo or an existing customer?
A:The major U.S. tech customer was an existing customer, previously using Akamai for CDN and security. Discussions had been ongoing for several months, and the customer has dramatically increased their spend.
Q:How is Akamai addressing the heightened price components in the market?
A:Akamai is not significantly changing its sourcing of servers or hardware but is looking to reduce the impact of memory chip cost increases by sourcing differently. The company continues to use third-party colocation providers and has normalized CapEx at the lower end of its typical range, despite the $200 million price increases and the $250 million AI Inference Cloud purchase.
Q:Is the CIS business growth additive to existing customer bills?
A:Yes, the CIS business growth is additive to existing customer bills. It is not replacing delivery or security spending. The pipeline includes both new and existing customers, with total new customer count increasing over the last 1.5 years.
Q:What are the assumptions for major events in the 2026 guide?
A:Major events like the Olympics and World Cup are expected to contribute a few million dollars each, but they are not overly material to the year. Gaming releases and console refresh cycles could have a larger impact, depending on their popularity and scale.
Q:How are the larger CIS deals progressing, and what are the typical ramps for compute deals?
A:Some larger CIS deals ramped up at the end of last year, and the $200 million deal signed this quarter will start ramping in Q4. Ramps depend on the size of the transaction and specific geographic needs. Larger deals usually take longer to ramp, but some customers can get up and running quickly.
Q:What is the trajectory of the delivery business and its pricing dynamics?
A:The delivery business is expected to grow at a mid-single-digit rate this year, with trends comparable to the latter half of last year. The pricing environment remains competitive, with some cost increases leading to potential price raises.
Q:What is the structure and expected utilization of the rental service for GPUs?
A:The rental service for GPUs will have two models: traditional (buying access by the VM hour or token) and a new model (selling clusters of GPUs for multiyear contracts). Early pipeline demand is skewed towards customers wanting guaranteed capacity.
Q:What are the revenue commitments from customers, and how do they compare to before?
A:Revenue commitments are increasing, with longer commitments for all services. The delivery business commitments remain roughly the same, but security and compute commitments are growing faster.
Q:What is the impact of AI on Akamai's security and delivery businesses?
A:AI is increasing the attack landscape, creating more need for Akamai's security services like API security and bot management. In delivery, AI-induced scraper bots are increasing traffic, but Akamai's bot management solutions help customers handle them effectively.
Q:What are the main reasons customers choose Akamai for compute workloads at the edge?
A:Customers choose Akamai for better performance, scalability, and cost. Akamai's distributed platform allows for closer proximity to users and better handling of bandwidth-intensive applications.
Q:What is the outlook for Guardicore and API Security growth in 2026?
A:Guardicore and API Security are expected to drive the majority of security growth in 2026, with low penetration rates indicating significant runway for growth. Both are seeing adoption across various verticals.
Q:What is the competitive dynamic against hyperscalers?
A:Akamai competes successfully against hyperscalers in delivery, security, and compute. Hyperscalers are also Akamai customers for delivery and security. Akamai's distributed nature provides better performance and scalability for compute workloads.
Q:What is the impact of AI on Akamai's cloud segment?
A:AI is driving demand for Akamai's Inference Cloud, with applications requiring low latency and high bandwidth. Akamai's distributed platform is well-suited for these needs, leading to increased investment in GPU capacity.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the identity of the major U.S. tech customer and the exact revenue impact of certain events like gaming releases and console refresh cycles. Additionally, they did not provide precise utilization rates for the new GPU rental service or detailed breakdowns of the competitive dynamics against hyperscalers.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI chatbot
AI ecosystem
AI market
AI marketplace
AI tailwind
AI use
AI way
API Security
Along offering
America Companies
America Scandinavia
America Trusted
America commitment
America company
America institution
Asia Pacific
Asia airline
BPFDoor security
CDN result
CIS ISV
Center
Cloud Infrastructure
East
Forbes
Guardicore Segmentation
Inference Cloud
Infrastructure Services
South
demand AI
experience
future
hyperscaler
latency
list America
security product
support
trust
AKAM Transcript
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The earnings call presents mixed signals. While Q1 2026 revenue increased by 5%, operating margins and net income declined due to higher expenses. The guidance suggests cautious optimism, but risks from macroeconomic trends and acquisition integration are concerning. The lack of clear management responses in the Q&A adds uncertainty. Despite improved free cash flow, the negative aspects balance out the positives, resulting in a neutral sentiment.
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Akamai Technologies, Inc. (AKAM) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call highlights strong growth in Cloud Infrastructure Services and security solutions, positive financial guidance, and a successful AI Inference Cloud launch. The Q&A section reveals increased customer commitments and successful competition against hyperscalers. Although management was vague on some specifics, the overall sentiment is positive, particularly with the optimistic guidance and strategic investments in AI and security.
AKAM Report
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