Akamai Technologies, Inc AKAM Q3 2025 Earnings Call

Thanks, Mark. I'm pleased to report that Akamai had a strong third quarter with results coming in above expectations for revenue, margin, and earnings per share. Revenue grew to 1.055 billion, up 5% year-over-year as reported and up 4% in constant currency. Non-GAAP operating margins improved to 31%, and non-GAAP earnings per share was $1.86, up 17% year-over-year as reported and in constant currency. Our business performed well across the spectrum of our portfolio with accelerating momentum for our cloud infrastructure services, continued strong demand for our high growth security products, and continued stabilization of our delivery revenue. We're especially pleased with the greater recognition of the strength of our distributed platform and differentiated strategy among customers and industry analysts. For investors who may be less familiar with how we have transformed Akamai's business model from the CDN pioneer to a leader in cloud security and distributed cloud computing, I encourage you to read the new report on Akamai from IDC titled 'Akamai Navigating the Cloud Frontier: A Transformation from CDN to Distributed Cloud Provider.' It offers an objective third-party perspective of how Akamai has evolved our strategy and our key differentiators in security and distributed cloud computing for AI inferencing at the edge. You can find the report on our website. As a great proof point for the advantages offered by Akamai's uniquely distributed compute capabilities, the top three cloud providers in the US are all now using Akamai cloud infrastructure services. And in Q3, one of them signed an expanded multi-year renewal that solidifies Akamai's position to be their premier distributed cloud computing provider. This customer has a dominant position at the core of the internet and uses our widely distributed managed container service to get their business logic closer to end users for superior performance. Our revenue for cloud infrastructure services in Q3 was $81 million, up 39% year-over-year as reported and in constant currency. That's an acceleration from the 30% growth rate we had in Q2. We signed many new and expanded contracts for our cloud infrastructure services in Q3, including with a major global appliance and consumer electronics manufacturer in South Korea, a multinational financial services company in Singapore, a leading US developer of analytic software, a US-based supply chain planning software vendor, a European cyber security provider, a major US airline, a leading American video game company, a leading media and entertainment company in India, and one of the largest media companies in the world. Also, a multinational gaming company in Japan contracted for our cloud infrastructure services as part of a larger $37 million two-year renewal for an array of Akamai products and services. Last week, I was with our team at the AI industry conference, NVIDIA GTC, where Akamai took a major step toward the future with the launch of Akamai Inference Cloud, our platform to support the growing demand to scale AI inference on the internet. With the rise of AI, the internet is undergoing a fundamental shift in architecture. The internet we're building today is driven by AI where human intelligence is supported and augmented by intelligence systems powered by AI inference. Akamai is positioned to power inference the way we power the web by bringing inference physically close to users. This will enable faster performance and global scale to support intelligent applications worldwide. When the web was first taking hold, the need for performance and scale is what catalyzed Akamai's founding. Akamai helped to end what was known as the worldwide wait, enabling the internet to scale to provide real-time services to billions of people around the world. Subsequently, we introduced web security as a cloud service, enabling the web to be used safely for myriad critical applications such as banking and commerce. We see the same need for performance, scale, and security playing out again with AI inference today. By combining highly scaled GPU and compute capacity with Akamai's unparalleled global reach and security at the edge, Akamai Inference Cloud enables intelligence to run instantly, securely, and exactly where it's needed, right next to the user, agent, or device. This is how Akamai can power the new generation of AI applications—conversational, personalized, and agentic—all designed to scale in real time to meet unprecedented demand. As we look at AI investment cycles, we see the market at a transition point. Until now, the AI story has largely focused on training, the initial creation of AI models from massive amounts of underlying data to train foundation models. AI pioneers have relied on hyperscale clouds and their centralized data centers with their enormous concentrations of compute power and capital. We believe that AI inference, or the execution of queries against a trained model, is the new frontier—one that requires purpose-built infrastructure to enable distributed, low-latency, globally scalable inference at the edge with response times measured in a few tens of milliseconds. As AI systems are adopted at scale, we expect the growth of inference will drive enormous demand to this new intelligent layer of the internet. And we're not the only ones who see it coming. Fortune Business Insights noted in a report on the rising global AI inference market that due to rising demand for real-time, low-latency AI processing near data sources, edge inference leads the market and is projected to grow at the highest rate of all AI inference models. And as Nvidia's founder and CEO Jensen Huang said when we launched Akamai Inference Cloud at GTC, 'Inference has become the most compute-intensive phase of AI, demanding real-time reasoning at planetary scale. Together, Nvidia and Akamai are moving inference closer to users everywhere, delivering faster, more scalable generative AI, and unlocking the next generation of intelligent applications.' Akamai Inference Cloud brings together Akamai's globally distributed architecture and expertise with Nvidia's Blackwell AI infrastructure to provide the computing needed to unlock AI's true potential. The service is available today with 17 locations around the world, and we're building out more points of presence as customer demand grows. One of our initial customers, Monks, the European digital-first marketing technology services and consulting company, said, 'With Akamai Inference Cloud, we will accelerate the delivery of key capabilities, including identifying players and plays and delivering tactical insights to coaches while the game is still happening. That's only possible by distributing advanced GPUs to the edge, and we believe it will transform how we approach sports broadcasting and immersive fan experiences.' Another customer, Harmonic, whose technology helps to distribute video content for television and the internet, said, 'Akamai Inference Cloud will allow us to run larger parameter, more capable models locally, expanding the number of functions we can deliver cost-effectively within the same compute instance to deliver fast response times, sophisticated personalization, and more enriching video content.' At Akamai, we believe the technology ecosystem that enables the AI revolution will require multiple providers of AI infrastructure—the hyperscalers, Nvidia, and also Akamai with our unique distributed capabilities and our unparalleled expertise at the edge. We are very excited about what lies ahead. The edge, of course, is also where Akamai deploys our security solutions. And as customers speak with us about their plans for AI inferencing, they tell us they see valuable synergy between Akamai security and delivery product lines and our cloud computing capabilities, and how they trust Akamai to help make the internet faster, more reliable, and secure for their businesses. Akamai security growth in Q3 continued to be driven by strong demand for our market-leading segmentation solution and by rapidly growing customer adoption of our API security solution. Combined, these high-growth security products grew revenue 35% year-over-year as reported and 34% in constant currency. Our segmentation wins in Q3 included a $3 million expansion contract to give one of North America's largest healthcare technology companies the visibility and control they didn't have before, a $1 million contract with a European insurance group that is also a net new Akamai customer, a multi-year contract with a large insurance company in Korea, and an expansion contract with a large bank in Mexico to extend their initial deployment across their operations in Latin America. In Q3, we also continue to see growing interest in our market-leading API security solution as organizations shift towards an API-first strategy and expand their use of AI applications that rely on APIs in a fundamental way. They adopt tools that enable them to discover and monitor deployed APIs, manage risk, comply with stricter data protection regulations (especially in Europe), and respond to public reports of API-related breaches that have raised awareness and increased the stakes for financial and reputational loss. Akamai API security wins in Q3 included a $7 million contract for API security with one of Europe's most important banks as part of a $31 million multi-year commitment for security and compute, adoption of API security as part of a $20 million expansion contract with one of the world's largest airlines, an expansion of API security as part of a $42 million contract across the breadth of our portfolio with one of the world's largest software companies, a $2.6 million contract with one of the largest life insurance groups in Asia, the displacement of a competitor at a fintech payments provider in Brazil, and we also signed seven-figure contracts for API security with two of the 10 largest financial institutions in the US and one of the largest banks in Canada. We're also pleased to note that for the sixth straight year, Akamai has been named Customer's Choice in Gartner's latest Voice of the Customer report for cloud web application and API protection. Akamai was also recognized as Customer Choice in Gartner's Voice of the Customer report on online fraud detection. Before I turn the call over to Ed, I'd like to express my gratitude to our employees for their great work in Q3 and for making Akamai a great place to work. In recognition of your efforts, Glassdoor named Akamai as one of their top 50 best companies of 2025. Now, I'll turn the call over to Ed to say more on our Q3 results and our outlook for Q4 and the year.

Yeah, first inning of a very exciting game. There's just so many customers that want to adopt AI applications and do inference for applications that need to be fast for real users. An example would be a commerce company that wants to present the right products, personalized images to the user, and then if the user is interested in something, they really want to show not only the product but the user wearing the product, and not just in a picture but in a video. And in the video, they want to show the user in a context, an environment that makes sense for the user. We've got customers with AI-powered toys, customers that want to do robotics and need really fast control and response, so they need to do the inference close to the end user at the edge. Media workflow—people are going to see different versions of games, different versions of movies. It'll all be personalized. And this needs something like the Nvidia Blackwell 6000, which is very powerful but also well suited to run at our edge. That's why the partnership with Nvidia makes so much sense. So we're in the first inning. We're just launching the service in the last couple of weeks, but we're seeing a very strong amount of interest among our customer base. This is exactly what they want.

Thanks.

Yeah, we've made a lot of progress in the go-to-market transformation, and that will be continuing through the early part of next year. I would say by the time we get into Q2, a lot of the transformation will be done. There will be continued hiring from now through at least the first half of next year to have increased sales capacity for hunting both in security and obviously also in compute. So that's an ongoing effort, but the transformation part will be largely done by the beginning of next year.

Yeah, Akamai has a unique platform. Nobody is like us. We have over 4,000 points of presence. We're in already in 700 plus cities, and that's unique. We already support our edge worker solution or function as a service in every location. In fact, one of the hyperscalers is using us for ad logic to get their ad logic a lot closer to users. Another hyperscaler is using us for API orchestration—again, needs to be fast and close to users. We've talked about our managed container service. A third hyperscaler is using our managed container service for their media workflow, and again, because it's closer to users. So it's not a capacity constraint issue. It's not that the hyperscalers have run out of capacity. Certainly, that's not the case. It's because our platform is different and we can make their logic, their compute logic run faster for users because it's closer. And obviously, we compete with their cloud businesses to win that business because it's our better performance. And the good news is we don't have to go deploy 4,000 new regions or start new deployments in 700 cities because we already have this distributed platform. We're augmenting several of the regions that we've talked about with the new Blackwell 6000s, and that's pretty exciting, and we will continue to do that as we scale that business.

Absolutely, and we're already doing that. For example, with API security and detecting the APIs, detecting the new AI agents and apps that the shadow AI enterprises have running and don't know. And then, of course, to protect that with our new AI firewall service. This is one of the reasons that we're so excited about our API security business—not just to protect the legacy APIs, but the new agentic web and to protect and identify all those new inferencing applications.

Yeah, those would be in our other cloud compute applications segment, and that's not really the focus of the business. There's still some more that'll happen there, but more or less that was flat quarter over quarter. It's not where we're investing and not where we'll see the growth. I think you want to focus on CIS, the cloud infrastructure services. That's where all the excitement is and where all the future potential growth is. In fact, going forward, we may even just separate the two and report on CIS because OCA is pretty small and pretty stable. The big driver of our future growth is cloud infrastructure services, and that's where we have our products like edge workers for function as a service, 4,000 pops, managed container service that was being used by a hyperscaler for their media workflow, and AI inference cloud with huge potential growth. So probably that's what you want to be thinking about when you think about Akamai compute. Yes. So that's what we're looking at as well.

Yeah, absolutely, and that's a great question because as you're putting these applications and models out there, they've got to be secured. In fact, they have even greater vulnerabilities than a normal application or API would have. So you're going to need API security. You're going to need like an AI firewall. And those are things that we have market-leading solutions for. So we can build that around your inference engines and your models that are on Akamai's cloud.

Yeah, interesting question. Today, the vast majority of the traffic would be video—either on demand or live—and software downloads. Now, as you think about the future, you're right. Sites like commerce sites that might not have had any video or much video in the past are already thinking about how to make the entire experience immersive with video, so that as you go to a page, it starts with a video of you wearing something they think you'll like to buy. That does increase the traffic. Also, even the traditional video, live sports, as we talked about, we already have a customer where the feed that I see when I'm watching the game is going to be different than the feed you see. Things will be customized to the person. So AI is going to be used even to watch traditional video to give a better, more personalized experience. And who knows if you ever get people wearing devices that give you augmented reality—that drives a lot of new traffic. So I do think that there is a reasonable prospect that as AI becomes more prevalent, it will impact the traditional delivery business in a way that will be favorable to Akamai.

It's a combination. But the outages you raised is a really important point, and people don't think about it very much. This is important whether you're buying compute or delivery or even security—in fact, maybe even more important in security. Our goal at Akamai is to have five nines of reliability, and that means that over two years, the site or the app is down less than 10 minutes collectively from all causes including attacks. And we're achieving that today. We know that some of the world's major banks, the regulators want to see five nines, and we put a tremendous amount of investment into our platform to make sure that when we update metadata or software or a customer updates their metadata, it doesn't have some unintended consequence that blows up the platform. And we see what happens with our competitors who don't make that investment. For example, in security companies that we compete with, some of them are down for an hour every quarter, and that's just a disaster for a bank. They can't survive like that in today's world. So reliability is critical, and that's an area that really is a strength for Akamai. So I think that's super important, and that's a great call out.

Yeah, so there's a lot of room for growth with segmentation and API security. And also, as we talked about earlier with API security, you get a whole new market around the AI inference engines and models and agents that are going to need special security. Obviously it's early days on our specific protection for AI firewall, but very strong interest in the customer base—hundreds of prospects, lots of proofs of concept, and starting to get the first customers now adopting the solution. I think that'll be a pretty quickly evolving landscape in terms of protecting the models, the inference engines, and the agents.

I think the really important thing is it's providing very strong compute capabilities to support AI close to the users, the data, the devices, the robots, and the agents. That's what's unique about the offer. So you're combining Akamai's distributed platform, which is the most distributed by far in the world, with leading GPU capability. The new 6000s are very powerful. You can support models with hundreds of billions of variables. They can do very cool things that weren't possible before, literally like showing a user who comes to the site in a video. Very cool stuff. And that's unique with Akamai. We do have a good relationship with Nvidia, and we are working together in terms of commercializing the capability with customers and the ecosystem.

Oh, it's much deeper. Now we're deploying the Blackwell 6000s, and that's a huge leap from where we were with the 4000s in terms of capabilities. And we're deploying them much more broadly, and it's a much stronger partnership and relationship. So it's a world of difference, and that enables the inference cloud and all the applications that we talked about.

Good. We signed the third one, we just signed the third one, and the first one signed a much larger contract. So one got a lot bigger, and one is new, and so now we have all three.

No, as Ed talked about earlier, no change in our thinking or strategy. In fact, we bought back more shares or spent more on shares this year than ever before. So we didn't buy back shares in Q3, but we bought back a ton this year.

Yeah, I think pretty much everything is going to be powered by AI. I think how the web works is going to change. Everything is going to be model based. How you interact with it will be different. There'll be applications people haven't even dreamed about yet. And a lot of these, especially when there's a bot that's doing something important like a car or a human interacting in some way, you're going to want the thing to be in real time. By that, I mean within a small number of tens of milliseconds. For that, you need to be close. You're not going to want to go far away to a big data center with a giant model that's doing a zillion things and has a lot of capacity and infrastructure that really isn't relevant to your task. So I do think you're going to see the proliferation of small to medium-sized models that are operating close to the user with specific tasks in mind. I think that's why you're starting to hear the industry leaders talk about inference as being the next big thing and ultimately larger than the giant models in the training and the core of the internet. And that's where the future of the internet and the web goes.