Summary
Fiscal 2026 opened with a split result for Akamai. Revenue of $1.07 billion rose 5.8% from the prior-year quarter, but GAAP operating income of $114.49 million fell 25.9%. The GAAP operating margin dropped to 10.7% from 15.2% in the same quarter last year. GAAP net income of $106.32 million was down 13.7%, and diluted earnings per share of $0.71 were down 13.4%. Growth is holding up. Profitability is not.
The mix explains most of the gap. Security rose 11% year over year, and Cloud Infrastructure Services rose 40%. Delivery and other cloud applications slipped 7%, hurt by downward pricing at contract renewals and by customers optimizing traffic. Geography added a second layer. U.S. business rose 3%, while international business rose 9%, or 5% at constant currency.
Then there is the AI headline. Akamai disclosed that a leading, U.S. based frontier model provider committed $1.8 billion over seven years for Cloud Infrastructure Services. The commitment validates the strategy and gives the compute business a marquee reference customer. It also concentrates a large slice of future business in a segment where capacity has to be built ahead of demand, and where management concedes that server and memory prices are rising because of hyperscaler competition.
Costs are the pressure point. Non-GAAP operating income of $282.8 million was down 8%, and the non-GAAP operating margin of 26% was down 4 percentage points from a year earlier. Non-GAAP net income of $239.26 million fell 7%, and non-GAAP earnings per diluted share of $1.61 were down 5%. Adjusted EBITDA of $426.67 million was down 3%, with a margin of 40% against 43% in the prior-year quarter. Co-location costs, network build-out and supporting services, payroll, and stock-based compensation all moved higher, driven by the build-out for cloud infrastructure services and by headcount growth. The company also introduced a retirement benefit that shortened the service period for retirement eligible employees, which raised stock-based compensation.
Cash and contracted backlog look better. Operating cash flow of $312.51 million was up 24.4% from the prior-year quarter, lifted by the timing of payroll funding and vendor payments and by lower income tax payments. Capital expenditures of $101.69 million were down 13.7%. Deferred revenue of $203.68 million rose 20.1%, and remaining performance obligations of $5.50 billion rose 27.9%. Akamai held $1.733 billion in cash, cash equivalents and marketable securities at March 31, 2026. It spent $206 million to repurchase 2 million shares at a weighted average price of $105.47, leaving 146 million shares outstanding and $974.6 million available under the current authorization.
Guidance points to steady top-line growth and a flat margin. For the second quarter of 2026, Akamai guides to a non-GAAP operating margin of 25% to 26% and non-GAAP earnings per diluted share of $1.45 to $1.65. For the full year 2026, the company guides to a non-GAAP operating margin of 26% and non-GAAP earnings per diluted share of $6.40 to $7.15, on a non-GAAP tax rate of 18.5%. Revenue guidance ranges were also provided for both periods. The guidance is non-GAAP only, and the company states it cannot reconcile it to the closest GAAP measures without unreasonable effort.
The risks are concrete. Delivery pricing continues to fall at renewal, and management expects the moderation in traffic growth to continue for the remainder of 2026. The $1.8 billion commitment depends on the customer meeting its purchase obligations and on Akamai deploying the needed infrastructure and procuring sufficient hardware and memory at expected costs. Competition for data center space keeps pushing co-location costs higher, and the company is signing longer leases with financial commitments that are expensed before those sites are fully used. Currency cuts both ways, with reported revenue growth of 6% against 4% at constant currency.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.07B | $1.09B | -1.9% | $1.02B | +5.8% |
| Gross profit | $602.3M | $642.4M | -6.2% | $596.2M | +1.0% |
| Gross margin | 56.1% | 58.7% | -2.6 pp | 58.7% | -2.6 pp |
| Research & development | $141.6M | $139.5M | +1.5% | $123.5M | +14.6% |
| Sales & marketing | $157.1M | $149.1M | +5.4% | $134.1M | +17.1% |
| General & administrative | $163.8M | $176.5M | -7.2% | $155.9M | +5.1% |
| Total operating expenses | $959.1M | $1.00B | -4.1% | $860.6M | +11.5% |
| Operating income (loss) | $114.5M | $94.9M | +20.7% | $154.6M | -25.9% |
| Operating margin | 10.7% | 8.7% | +2.0 pp | 15.2% | -4.6 pp |
| Net income (loss) | $106.3M | $85.1M | +25.0% | $123.2M | -13.7% |
| Net margin | 9.9% | 7.8% | +2.1 pp | 12.1% | -2.2 pp |
| Diluted EPS | $0.71 | $0.58 | +$0.13 | $0.82 | -$0.11 |
Risks
Global macroeconomic and geopolitical conditions, including inflation, elevated interest rates, tariffs, trade restrictions, export controls, and regional conflicts such as the U.S.-Israel military conflict with Iran, have adversely affected and may continue to adversely affect customer demand, traffic, and costs. MD&A states these conditions can cause customers to reduce spending or lengthen procurement and sales cycles.
Akamai launched AIC and is investing heavily in AI inference and cloud infrastructure, but now competes with established and emerging AI infrastructure providers; these competitors may bundle offerings, have priority access to servers and power, and market AI solutions more successfully. The filing says AI initiatives may not be successful and may introduce operational, security, and regulatory risks.
Market dynamics driven by hyperscalers are causing significant increases in co-location, server, and memory costs, and longer term co-location leases can incur costs before locations are fully utilized. Current quarter cost of revenue rose 12% and GAAP operating margin decreased to 10.7% from 15.2% in the prior-year quarter, with further cost increases expected in 2026.
Delivery and other cloud applications revenue decreased 7% in the current quarter versus the prior-year quarter due to downward pricing at contract renewals and customer cost optimization, including a large social media customer using DIY components that reduced network traffic. MD&A expects moderation of traffic growth to continue for the remainder of 2026.
The filing expands on evolving cybersecurity threats enhanced by AI, including increasingly capable models and coding agents that can autonomously discover and exploit software vulnerabilities and compress patch response time. Nation-state and hacktivist attacks may intensify during geopolitical tensions, and cloud product abuse or vulnerabilities such as AMD Inception could require costly mitigation.
The filing specifically warns that commercial data centers and cloud infrastructure in the Middle East may be physically targeted, citing Iranian strikes on Persian Gulf data center facilities in early 2026. Akamai relies on third-party co-location providers and network infrastructure in conflict-affected regions, so attacks could disrupt services and cause significant remediation costs.
Evolving privacy, data localization, digital sovereignty, and AI governance rules, including the EU AI Act and U.S. state AI laws, may require in-country hosting, local partners, segregated infrastructure, or limit features. These developments could decrease Akamai's addressable market, increase costs and complexity, and lengthen sales cycles.
PAFACA and the related Chinese-owned application divestiture completed in January 2026 still carry risks of future governmental review or litigation, fines, indemnification claims, and reputational harm. The filing says there is no assurance Akamai will not be exposed to liability for continuing to provide services to this customer.
Akamai had $4,140.0 million of convertible senior notes outstanding as of March 31, 2026, and interest expense increased 22% in the current quarter versus the prior-year quarter. The ability to repay or refinance notes depends on market conditions and future performance, and a cash shortfall at conversion or repurchase could cause default.
Competition for skilled employees, especially in security and cloud infrastructure, increases cash and stock-based compensation costs and may dilute stockholders. Approximately six percent of global employees are in Israel and have been impacted by military conflicts, including being required to report for military duty.
Akamai has implemented restructurings in 2023, 2024, and 2025 and introduced sales organization and compensation changes in 2025. These actions may disrupt operations, reduce productivity through employee distraction, and cause unanticipated turnover.
The filing says the market price of Akamai common stock has been and may continue to be volatile, driven by quarterly results, guidance changes, customer announcements, AI market speculation, and macro factors. Failure to meet guidance could cause a significant stock price decline.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Non-GAAP operating margin
Adjusted EBITDA
Cash from operations
Summary, forecast, risks and KPIs are extracted from AKAMAI TECHNOLOGIES INC's SEC filings for Q1 FY2026 (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 2, 2026.