Summary
Akamai's second quarter of fiscal 2022 ended June 30 with revenue of $903.3 million, up 5.9% from the prior-year quarter. First-half revenue was $1.81 billion, up 6.6%. On a constant-currency basis, total revenue rose 9% in the quarter. The product mix kept shifting toward security and compute. Security revenue grew 17% year over year and 21% adjusted for foreign exchange. Compute revenue grew 74% and 78% adjusted. Delivery revenue fell 11% and 8% adjusted. Security and compute together represented 54% of total revenue and grew 26% year over year, or 30% adjusted for foreign exchange. U.S. revenue grew 6%, while international revenue grew 6% and 13% adjusted.
Profitability came under pressure. GAAP operating income was $175.0 million, down 12.2% from the prior-year quarter. GAAP operating margin was 19.4%, down 4.0 percentage points. GAAP net income was $119.5 million, down 23.6%. GAAP diluted EPS was $0.74, down 21.3%. Non-GAAP income from operations was $262 million, down 3%. Non-GAAP operating margin was 29%, down 3 percentage points. Non-GAAP net income was $216 million, down 7%. Non-GAAP EPS was $1.35, down 5% and flat adjusted for foreign exchange. Adjusted EBITDA was $388 million, up 1% from the prior-year quarter. Operating cash flow was $341.4 million, down 9.7%. Capital expenditures were $74.2 million, down 30.8%.
Backlog and billings indicators improved. Current deferred revenue was $111.8 million, up 17.4% from the prior-year quarter. Remaining performance obligations were $3.30 billion, up 17.9%. Akamai spent $165 million in the second quarter to repurchase 1.6 million shares at an average price of $100.80, and it had 159 million shares outstanding as of June 30, 2022. During the first six months, repurchases totaled 2.6 million shares for $267.6 million at a weighted average price of $104.58. The board authorized a new $1.8 billion repurchase program through December 2024, with $1.5 billion remaining available as of June 30, 2022.
Strategic efforts center on security and compute. Akamai completed the Linode acquisition in March 2022 and the Guardicore acquisition in October 2021. Guardicore is expected to be dilutive to EPS at least through 2022. Headcount was 9,270 at June 30, 2022, compared with 8,275 at June 30, 2021. In May 2022, the company launched FlexBase, and more than 90% of the workforce is designated as flexible. Management plans to keep investing in security and compute while managing delivery, where pricing pressure and slower traffic growth remain issues.
Risks and outlook are tied to the macro backdrop. Foreign currency changes reduced revenue by $29.4 million in the quarter and $47.1 million in the first half, according to the 10-Q. Management expects the stronger U.S. dollar to keep pressuring revenue for the remainder of 2022. The war in Ukraine has cut traffic from Russia, Belarus and Ukraine, which accounted for about 1% of 2021 revenue, and management expects that decline to continue in 2022. The 10-Q also cites escalating inflation, growing recessionary concerns, rising interest rates, competition and pricing pressure, cyber risks, and supply chain constraints. For the remainder of fiscal 2022, not just the next quarter, management expects cost of revenues, research and development, and sales and marketing expenses to increase, while capital expenditures should remain below recent peak levels.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $903.3M | $903.6M | -0.0% | $852.8M | +5.9% |
| Gross profit | $556.7M | $570.9M | -2.5% | $532.8M | +4.5% |
| Gross margin | 61.6% | 63.2% | -1.5 pp | 62.5% | -0.8 pp |
| Research & development | $92.1M | $99.9M | -7.9% | $77.3M | +19.2% |
| Sales & marketing | $126.7M | $122.7M | +3.2% | $111.9M | +13.2% |
| General & administrative | $141.2M | $153.3M | -7.9% | $134.3M | +5.2% |
| Total operating expenses | $728.3M | $730.3M | -0.3% | $653.4M | +11.5% |
| Operating income (loss) | $175.0M | $173.3M | +1.0% | $199.4M | -12.2% |
| Operating margin | 19.4% | 19.2% | +0.2 pp | 23.4% | -4.0 pp |
| Net income (loss) | $119.5M | $119.2M | +0.3% | $156.5M | -23.6% |
| Net margin | 13.2% | 13.2% | +0.0 pp | 18.4% | -5.1 pp |
| Diluted EPS | $0.74 | $0.73 | +$0.01 | $0.94 | -$0.20 |
Risks
Akamai faces slowing revenue growth and delivery solutions weakness. Total revenue for the current quarter was up 5.9%, but delivery solutions revenue declined 10.7% in the current quarter and 8.5% year to date, and management expects traffic growth to moderate for the remainder of 2022.
The strengthening U.S. dollar negatively impacted revenue by $29.4 million in the current quarter and $47.1 million year to date, and management expects continued negative impact for the remainder of 2022. Inflation, rising interest rates, recession concerns, and supply constraints also pressure costs and customer spending.
Operating profitability weakened as GAAP operating income fell 12.2% in the current quarter and net income fell 23.6%, while operating margin declined 4.0 percentage points versus the prior-year quarter. Cost of revenue rose 8.3% and research and development expense rose 19.2% in the current quarter.
Akamai competes with larger technology and telecommunications companies and smaller nimble rivals, with pricing pressure already causing declines in prices paid by some customers. Multi-vendor policies, DIY internal solutions, and lower-priced alternatives could reduce traffic, contracted revenue commitments, and market share.
The filing highlights the Log4Shell vulnerability in Apache Log4j 2 and nation-state attacks during heightened geopolitical tensions such as the war in Ukraine. With Linode, Akamai is adapting procedures for abuse of compute products, and a significant cybersecurity event could cause customer loss and reputational damage.
Approximately 1% of 2021 revenue came from traffic into Russia, Belarus, and Ukraine, and Akamai experienced a decline in revenue in the first half of 2022 related to the war in Ukraine. The company expects to continue experiencing a decline in 2022 compared with 2021.
Global supply chain constraints continue to increase lead times for equipment components, adding risk to network expansion and the global compute buildout tied to Linode. Failure to obtain adequate server equipment could harm service quality and lead to customer and revenue loss.
Akamai completed the $898.8 million Linode acquisition in March 2022 and the $610.4 million Guardicore acquisition in October 2021, and Guardicore is expected to be dilutive to earnings per share at least through 2022. Integration of technologies, operations, and personnel could disrupt the business and divert management attention.
Akamai faces competition for skilled employees in its primary office regions, leading to increased cash and stock-based compensation costs and dilution. The FlexBase remote-work program and continued hybrid arrangements create risks around morale, productivity, training, and cybersecurity for remote workers.
Evolving privacy regulations such as GDPR and CCPA, international data transfer restrictions, Section 230 proposals, and content-blocking rules could increase compliance costs or reduce revenue. Restrictions adopted in India in 2020 already caused a reduction in revenue to Akamai.
Akamai may face greater-than-anticipated tax liabilities from audits, including the Massachusetts tax appeal in which Cambridge upheld its appeal, and from international tax reform. Adverse outcomes could require financial charges if reserves are inadequate.
Akamai had $1,150.0 million of convertible senior notes outstanding due in 2025 and $1,150.0 million due in 2027, plus $75.0 million outstanding under its credit facility as of June 30, 2022. Failure to repay or refinance these obligations could cause a default and limit financing flexibility.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Non-GAAP operating margin
Adjusted EBITDA
Cash from operations
Non-GAAP Income from Operations
Cash from operations margin
Summary, forecast, risks and KPIs are extracted from AKAMAI TECHNOLOGIES INC's SEC filings for Q2 FY2022 (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.