Akamai Technologies ((AKAM)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Akamai Technologies’ recent earnings call presented a mixed sentiment, highlighting strong growth in its security and cloud computing segments with record-breaking revenue achievements. However, the company faces challenges such as declining delivery revenue and the impact of its largest customer’s DIY strategy. These issues balance out the otherwise positive growth potential and strategic advancements noted during the call.
Record Revenue from Security Segment
Akamai celebrated a milestone in its security segment, with revenue surpassing the $2 billion mark for the first time in its history in 2024. This 16% year-over-year growth underscores the company’s successful expansion in this critical area.
Cloud Computing Growth
The cloud computing portfolio saw substantial growth, recording $630 million in revenue—a 25% increase over 2023. Notably, cloud infrastructure services grew by 32%, showcasing Akamai’s strengthening position in the cloud market.
Strong ARR Growth in Key Areas
Akamai’s focus on annualized recurring revenue (ARR) growth yielded impressive results. The Guardicore platform’s ARR reached $190 million, up 31% year-over-year, while the API security solution’s ARR grew from $1 million in 2023 to $57 million, far exceeding growth expectations.
Larger Enterprise Engagements
The company reported that approximately 300 enterprises invested at least $100,000 in ARR for cloud infrastructure services. This engagement contributed to a total ARR of $259 million, a 35% increase year-over-year.
Strategic Improvements and Partnerships
Akamai’s strategic positioning was bolstered by a $5.8 million contract with Petrobras and a partnership with Deloitte, highlighting its efforts to enhance market presence and capabilities.
Delivery Revenue Decline
Despite signs of stabilization, delivery revenue experienced an 18% decline year-over-year, totaling $318 million. This remains a concern for the company as it seeks to stabilize and eventually rejuvenate this segment.
Impact of Largest Customer’s DIY Strategy
Akamai’s growth is challenged by its largest customer’s shift towards a DIY strategy, which is expected to pose a revenue growth headwind of about 1% to 2% annually over the coming years.
Foreign Exchange Headwinds
Fluctuations in foreign exchange rates have adversely affected expectations for 2025, reducing revenue by approximately $18 million and impacting operating margins and EPS.
Forward-Looking Guidance
Looking ahead, Akamai maintains a robust outlook with strong growth prospects. For Q4 2024, the company reported revenues of $1.02 billion and non-GAAP EPS of $1.66, both surpassing expectations. Security is projected to remain a key growth driver, with revenue expected to exceed $3 billion by the decade’s end. Cloud infrastructure services are forecasted to grow by 40% to 45% in ARR during 2025, with overall cloud computing revenue growth of 15%. Despite ongoing challenges, Akamai is optimistic about achieving double-digit revenue growth by the decade’s end and non-GAAP EPS growth resuming in 2026.
In summary, Akamai Technologies’ recent earnings call reflects a balanced sentiment with significant accomplishments in security and cloud computing juxtaposed with challenges in delivery revenue and customer strategies. The company’s forward-looking guidance remains positive, emphasizing its potential for sustained growth and strategic advancements in the future.
