Summary
Akamai's first quarter of fiscal 2024 showed a company still leaning on security and compute for growth while its delivery business shrank. GAAP revenue was $986.97 million, up 7.8% year over year. Security and compute revenue represented 64% of total revenue and combined grew 22% year over year. The mix shift matters because delivery revenue declined 11% and compute grew 25%, while security grew 21%. GAAP operating income was $166.73 million, up 31.7% year over year. GAAP operating margin was 16.9%, up 3.1 percentage points. GAAP net income was $175.42 million, up 80.6%. GAAP diluted EPS was $1.11, up 79%.
Non-GAAP results showed similar momentum. Non-GAAP income from operations was $292 million, up 11% year over year. Non-GAAP operating margin was 30%, up 1 percentage point. Non-GAAP net income was $255 million, up 17%. Non-GAAP net income per diluted share was $1.64, up 17%. Adjusted EBITDA was $417 million, up 11%. These adjustments exclude stock-based compensation, amortization of acquired intangibles, restructuring charges, acquisition-related costs and other items.
Cash generation improved. Operating cash flow was $351.88 million, up 50.7% year over year. Capital expenditures were $93.75 million, down 33.8% year over year. Deferred revenue, current portion, was $142.53 million, up 1.1%. Remaining performance obligations were $3.40 billion, up 3.0%. The company spent $125 million to repurchase 1.1 million shares at an average price of $109.79, and it had 152 million shares outstanding as of March 31, 2024. In May 2024 the board authorized a new $2.0 billion share repurchase program effective through June 30, 2027, alongside $412 million remaining under the prior authorization.
Guidance reflects a tougher near-term backdrop. For the second quarter of 2024, Akamai guides revenue of $967 million to $986 million and non-GAAP net income per diluted share of $1.51 to $1.56. For the full year 2024, the company guides revenue of $3.95 billion to $4.02 billion and non-GAAP net income per diluted share of $6.20 to $6.40. Full-year non-GAAP operating margin is guided to 28% to 29%, with security revenue growth of 15% to 17% and compute revenue growth of 21% to 23%. Capex as a percentage of revenue is guided to 18% to 19% for the second quarter and 16% for the full year. The guidance is non-GAAP and cannot be reconciled to GAAP without unreasonable effort. Management said the outlook reflects a strengthening U.S. dollar, a large social media customer optimizing costs, slowing traffic growth across the industry, and increased full-year expectations for security and compute.
Risks remain concentrated in delivery and execution. A large social media customer has taken steps to lower costs by optimizing its platform, which reduced traffic on Akamai's network and hurt delivery revenue. Pricing pressure from competition and contract renewals continues to weigh on delivery and security revenue growth. Macroeconomic and geopolitical uncertainty, inflation, interest rates and foreign exchange fluctuations add volatility. Foreign currency unfavorably affected revenue by $3.7 million in the first quarter compared with the prior-year period. The planned acquisition of Noname Security for approximately $450.0 million is expected to close in the second quarter of 2024, add about 200 employees, and be dilutive to earnings per share at least through 2024. Cost of revenue, research and development, sales and marketing, and general and administrative expenses all increased year over year, with co-location and depreciation costs rising as Akamai builds out its compute infrastructure.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $987.0M | $995.0M | -0.8% | $915.7M | +7.8% |
| Gross profit | $592.2M | $601.6M | -1.6% | $554.4M | +6.8% |
| Gross margin | 60.0% | 60.5% | -0.5 pp | 60.5% | -0.5 pp |
| Research & development | $116.9M | $109.2M | +7.1% | $91.9M | +27.3% |
| Sales & marketing | $134.6M | $135.3M | -0.5% | $129.1M | +4.2% |
| General & administrative | $152.4M | $155.6M | -2.0% | $146.1M | +4.3% |
| Total operating expenses | $820.2M | $810.2M | +1.2% | $789.1M | +4.0% |
| Operating income (loss) | $166.7M | $184.8M | -9.8% | $126.6M | +31.7% |
| Operating margin | 16.9% | 18.6% | -1.7 pp | 13.8% | +3.1 pp |
| Net income (loss) | $175.4M | $161.2M | +8.8% | $97.1M | +80.6% |
| Net margin | 17.8% | 16.2% | +1.6 pp | 10.6% | +7.2 pp |
| Diluted EPS | $1.11 | $1.04 | +$0.07 | $0.62 | +$0.49 |
Risks
Delivery solutions revenue decreased 10.8% in the three months ended March 31, 2024 versus the prior-year period, and Akamai expects delivery revenue declines to continue in the near future. MD&A attributes the decline to customer economic headwinds, contract pricing, and a large social media customer optimizing its platform, which reduced traffic on Akamai's network.
Akamai is investing significant resources in compute infrastructure and Akamai Connected Cloud; co-location fees rose 27.7% and depreciation of network equipment rose 25.9% in the three months ended March 31, 2024 versus the prior-year period. The company expects cost of revenue to increase in 2024, and success depends on sourcing co-location space, managing server supply chain, and competing with larger cloud providers.
Competition is intense, especially in compute where a small number of very large competitors lead, and pricing pressure has reduced prices paid by some delivery and security customers. MD&A notes delivery revenue declined 10.8% and that contract renewals and competition negatively impact revenue growth rates.
Global macroeconomic and geopolitical conditions, including inflation, elevated interest rates, energy costs, and geopolitical tensions, continue to impact business and revenue growth. MD&A states these conditions may adversely affect results, and foreign currency changes unfavorably impacted revenue by $3.7 million in the three months ended March 31, 2024.
Approximately 5% of global employees are in Tel Aviv, Israel, and some have been mobilized as Israeli military reserves due to the Israel-Hamas War. This could impair operations and initiatives, including security offerings and migration of internal applications to Akamai Connected Cloud.
Akamai relies on large customers for a significant part of revenue, and if multiple large customers shift to do-it-yourself or multi-vendor solutions, traffic and contracted revenue commitments would decrease. A large social media customer already reduced traffic and negatively impacted delivery revenue in the first quarter of 2024.
In April 2024, U.S. legislation may prohibit access to a Chinese application beginning as soon as the first quarter of 2025; traffic from this application in 2023 was less than 1.5% of revenue, but restrictions would negatively impact revenue. Other content, AI, and cloud regulations could increase costs or limit services.
The OECD Pillar Two 15% global minimum corporate income tax became effective for Akamai on January 1, 2024 and increased its effective income tax rate. The company expects its effective income tax rate to increase in 2024, though the first quarter increase did not materially impact overall results.
Akamai announced in May 2024 an intention to acquire Noname Security for approximately $450.0 million, expected to be dilutive to earnings per share at least through 2024. Integration of acquisitions, including Linode, poses risks such as cybersecurity vulnerabilities, diversion of management, and failure to realize synergies.
Competition for skilled employees in security and cloud computing increases cash and stock-based compensation costs and can dilute stockholders. Stock-based compensation increased to $93.3 million in the three months ended March 31, 2024 from $61.9 million in the prior-year period.
Akamai regularly faces cyberattacks, and the use of artificial intelligence by bad actors has heightened the sophistication and effectiveness of attacks. The Linode compute acquisition adds risk of abuse of compute products, and the integration period increases cybersecurity risk.
Akamai had $3,565.0 million of convertible senior notes outstanding as of March 31, 2024, and interest expense increased 154.3% in the three months ended March 31, 2024 versus the prior-year period. Failure to meet debt obligations or obtain financing could harm the business.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Non-GAAP operating margin
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from AKAMAI TECHNOLOGIES INC's SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.