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01/10 16:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects a positive sentiment with strong growth projections in compute and security revenues, a strategic partnership with NVIDIA, and a stable delivery business with pricing improvements. The Q&A session highlights opportunities in AI and API security, with strong demand and potential large deals in the pipeline. Despite the lack of share repurchases in Q3, the overall financial health and strategic positioning indicate a positive outlook for the stock price over the next two weeks.
Revenue Revenue grew to $1.055 billion, up 5% year-over-year as reported and up 4% in constant currency. The growth was driven by strong performance across the portfolio, including accelerating momentum for Cloud Infrastructure Services, strong demand for high-growth security products, and stabilization of delivery revenue.
Non-GAAP Operating Margins Non-GAAP operating margins improved to 31%. This improvement reflects strong execution and higher-than-expected revenue.
Non-GAAP Earnings Per Share (EPS) Non-GAAP EPS was $1.86, up 17% year-over-year as reported and in constant currency. The increase was driven by higher-than-expected revenue and strong execution.
Cloud Infrastructure Services (CIS) Revenue CIS revenue was $81 million, up 39% year-over-year as reported and in constant currency. This growth accelerated from the 30% growth rate in Q2, driven by new and expanded contracts with major global companies.
Compute Revenue Compute revenue, which includes CIS and other cloud applications, was $180 million, up 8% year-over-year as reported and 7% in constant currency. The growth was impacted by a $7 million one-time benefit in Q3 2024, which affected the year-over-year growth rate.
Security Revenue Security revenue was $568 million, up 10% year-over-year as reported and 9% in constant currency. High-growth security products, including API security and Zero Trust Enterprise Security, contributed $77 million, growing 35% year-over-year as reported and 34% in constant currency.
Delivery Revenue Delivery revenue was $306 million, down 4% year-over-year as reported and in constant currency. However, the decline was slightly better than expected, showing improved trends.
International Revenue International revenue was $525 million, up 9% year-over-year as reported and 8% in constant currency, representing 50% of total revenue.
Non-GAAP Net Income Non-GAAP net income was $269 million, up 17% year-over-year as reported and in constant currency. This was driven by strong revenue performance and execution.
Capital Expenditures (CapEx) CapEx was $224 million, representing 21% of revenue, as investments were made in the fast-growing CIS business.
Akamai Inference Cloud: Launched to support AI inference on the Internet, leveraging distributed compute capabilities and NVIDIA's Blackwell AI infrastructure. Initial customers include Monks and Harmonic, showcasing applications in sports broadcasting and video content.
Cloud Infrastructure Services (CIS): Revenue grew to $81 million, up 39% year-over-year. Expanded contracts with major global companies, including a $37 million renewal with a multinational gaming company in Japan.
Revenue Growth: Total revenue reached $1.055 billion, up 5% year-over-year. Non-GAAP operating margins improved to 31%, and non-GAAP EPS increased by 17% to $1.86.
Security Revenue: Revenue from high-growth security products grew 35% year-over-year, driven by API security and Zero Trust Enterprise Security solutions.
Strategic Shift to AI Inference: Positioned to lead in AI inference at the edge, transitioning from CDN pioneer to distributed cloud provider. Collaboration with NVIDIA highlights this shift.
Macroeconomic Trends: Potential adverse impacts from macroeconomic trends were mentioned as a risk factor that could affect revenue and earnings guidance.
Integration of Acquisitions: Challenges related to the integration of acquisitions were highlighted as a potential risk to achieving strategic objectives.
Geopolitical Developments: Geopolitical developments were identified as a risk factor that could materially impact the company's performance.
Delivery Revenue Decline: Delivery revenue declined by 4% year-over-year, which could pose a challenge to stabilizing this segment of the business.
Seasonal Revenue Variability: Seasonality in media and e-commerce traffic creates unpredictability in revenue, particularly in Q4.
Sales Commission Costs: Seasonal increases in sales commissions during Q4 could lead to higher operating expenses.
Foreign Exchange Fluctuations: Foreign exchange fluctuations were noted as a factor that could impact revenue positively or negatively.
Tax Legislation Changes: Changes in tax legislation, such as the One Big Beautiful Bill Act, could introduce complexities in tax planning and compliance.
Revenue Growth: For Q4 2025, revenue is projected to be in the range of $1.065 billion to $1.085 billion, representing a 4% to 6% increase as reported and 3% to 5% in constant currency over Q4 2024. Full-year 2025 revenue is expected to grow 4% to 5% in constant currency.
Cloud Infrastructure Services (CIS) Growth: CIS revenue grew 39% year-over-year in Q3 2025 and is expected to achieve annual recurring revenue (ARR) growth of 40% to 45% year-over-year in constant currency by year-end 2025.
High-Growth Security Solutions: Revenue from high-growth security products, including API security and Zero Trust Enterprise Security, increased 35% year-over-year in Q3 2025. The company expects the combined ARR for these solutions to grow 30% to 35% year-over-year in constant currency for 2025.
API Security Business: The API security business is expected to exit 2025 with a run rate of approximately $100 million on both an as-reported and constant currency basis.
Capital Expenditures (CapEx): Q4 2025 CapEx is projected to be $171 million to $181 million, approximately 16% of total projected revenue. Full-year 2025 CapEx is focused on supporting the fast-growing CIS business.
Non-GAAP EPS: Q4 2025 non-GAAP EPS is expected to range from $1.65 to $1.85. Full-year 2025 non-GAAP EPS is projected to be between $6.93 and $7.13.
Operating Margins: Q4 2025 non-GAAP operating margin is expected to be approximately 28% to 30%. Full-year 2025 non-GAAP operating margin is projected to be 29% to 30%.
AI Inference Cloud: The Akamai Inference Cloud, launched in Q3 2025, is positioned to support the growing demand for AI inference at the edge. The service is available in 17 global locations, with plans to expand as customer demand grows.
Share Repurchase: During the third quarter, we did not repurchase any shares. However, year-to-date, we spent $800 million to buy back approximately 10 million shares, marking the largest annual buyback in our history. 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 when market and business conditions warrant.
The earnings call reflects a positive sentiment with strong growth projections in compute and security revenues, a strategic partnership with NVIDIA, and a stable delivery business with pricing improvements. The Q&A session highlights opportunities in AI and API security, with strong demand and potential large deals in the pipeline. Despite the lack of share repurchases in Q3, the overall financial health and strategic positioning indicate a positive outlook for the stock price over the next two weeks.
Akamai's earnings call reveals strong growth prospects in security and compute revenues, with significant ARR growth expectations. The Q&A section highlights a positive competitive landscape shift, stable pricing, and increasing demand for API security. Despite some concerns about revenue recognition timing, the overall sentiment is bolstered by new product launches, strong customer interest, and strategic acquisitions like Edgio. The guidance for revenue and EPS also indicates a positive outlook, supporting a positive stock price movement prediction.
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