Summary
Akamai's fiscal 2024 second quarter, ended June 30, 2024, showed a company still tilting toward security and compute. Total revenue was $979.6 million, up 4.7% from the prior-year quarter and up 6% adjusted for foreign exchange. Security revenue grew 15% year over year, or 16% at constant currency. Compute revenue grew 23%, or 24% at constant currency. Together those two lines represented 66% of total revenue and grew 17% combined. Delivery went the other way, down 13% year over year and down 12% adjusted. Management tied the delivery decline to customer economic and geopolitical headwinds, renewal pricing pressure, and a large social media customer's push into cost optimization and do-it-yourself solutions.
GAAP profitability was mixed. Operating income was $147.99 million, down 1.2% from the prior-year quarter, and operating margin was 15.1%, down 0.9 percentage points. Net income rose 2.2% to $131.69 million and diluted EPS rose 2.4% to $0.86. The year-to-date picture was better. Revenue for the six months ended June 30, 2024 was $1.97 billion, up 6.2%. Net income for the year to date was $307.11 million, up 35.9%, and diluted EPS was $1.97, up 34.9%. Operating margin for the year to date was 16.0%, up 1.1 percentage points. Non-GAAP results were steadier. Non-GAAP income from operations was $281.5 million, up 3%, and non-GAAP net income was $243 million, up 6%. Non-GAAP diluted EPS was $1.58, up 6%, and non-GAAP operating margin was 29%, flat with the prior-year quarter. Adjusted EBITDA was $409 million, up 5%.
Cash generation stood out. Operating cash flow was $430.96 million in the quarter, up 17.6%, and $782.84 million for the year to date, up 30.5%. Capital expenditures were $90.99 million in the quarter, down 19.0%, and $184.74 million for the year to date, down 27.3%. Deferred revenue, current portion, was $139.93 million, up 1.0% from the prior-year quarter. Remaining performance obligations were $3.40 billion, up 3.0%. The company spent $128 million to repurchase 1.4 million shares at an average price of $94.29 per share and reported 152 million shares of common stock outstanding as of June 30, 2024.
Guidance keeps the emphasis on steady growth and investment. For the third quarter, management guided revenue to $988 million to $1,008 million, with security revenue growth of 15% to 17% and compute revenue growth of 23% to 25%. For the full year 2024, revenue guidance is $3,970 million to $4,010 million. Non-GAAP operating margin is guided at 29% for both the third quarter and the full year. Non-GAAP diluted EPS is guided to $1.56 to $1.62 for the third quarter and $6.34 to $6.47 for the full year. Capex is guided at 17% of revenue for the third quarter and 16% for the full year. The Noname Security acquisition, closed in June 2024 for $452.3 million, is expected to add about $20.0 million of revenue in 2024 and to dilute earnings per share through 2024.
Risks cluster around delivery and cost. Delivery revenue is shrinking at a double-digit rate, and management warned that more customers could follow the do-it-yourself path. Renewal pricing pressure and competition could keep weighing on growth. The compute build-out is lifting co-location costs and depreciation of network equipment, and amortization of acquired intangible assets is set to rise. Foreign exchange rate changes unfavorably impacted revenue in both the quarter and the first half. The company also pointed to macroeconomic and geopolitical uncertainty, inflation, interest rates, supply chain and energy costs, and execution risk on acquisitions and cloud migrations. The quarter showed Akamai can grow security and compute, generate strong operating cash, and return capital, but GAAP operating income and margin slipped as delivery declined and investment spending continued.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $979.6M | $987.0M | -0.7% | $935.7M | +4.7% |
| Gross profit | $576.7M | $592.2M | -2.6% | $562.4M | +2.5% |
| Gross margin | 58.9% | 60.0% | -1.1 pp | 60.1% | -1.2 pp |
| Research & development | $113.4M | $116.9M | -3.1% | $99.0M | +14.4% |
| Sales & marketing | $139.0M | $134.6M | +3.3% | $136.6M | +1.8% |
| General & administrative | $153.9M | $152.4M | +0.9% | $151.8M | +1.3% |
| Total operating expenses | $831.6M | $820.2M | +1.4% | $785.9M | +5.8% |
| Operating income (loss) | $148.0M | $166.7M | -11.2% | $149.8M | -1.2% |
| Operating margin | 15.1% | 16.9% | -1.8 pp | 16.0% | -0.9 pp |
| Net income (loss) | $131.7M | $175.4M | -24.9% | $128.8M | +2.2% |
| Net margin | 13.4% | 17.8% | -4.3 pp | 13.8% | -0.3 pp |
| Diluted EPS | $0.86 | $1.11 | -$0.25 | $0.84 | +$0.02 |
Risks
Akamai says overall revenue growth may not continue and could decline, with delivery solutions revenue already negatively impacted by pricing pressure and a large social media customer's cost optimization and DIY efforts in the first half of 2024. Management expects delivery revenue declines to continue in the near future, which could hurt profitability and stock price.
A large social media customer has taken steps to lower costs and reduce reliance on U.S. providers, including a DIY component, reducing traffic on Akamai's network and negatively impacting delivery revenue in the first half of 2024. If additional large customers shift to DIY or multi-vendor models, contracted revenue commitments could decrease more significantly.
Akamai competes in intensely competitive markets, particularly compute, where a small number of very large competitors are established leaders and can offer lower prices, broader bundles, or greater resources. Increased competition could result in price and revenue reductions, loss of customers, or loss of market share.
Akamai is devoting significant resources to its own cloud computing offering and compute infrastructure; co-location costs and depreciation of network equipment increased cost of revenue in Q2 and the first half of 2024 as it builds out compute. The filing says these costs may reduce gross and operating margins, and success depends on attracting enterprise customers and managing an uncertain server supply chain.
Global macroeconomic and geopolitical conditions, including inflation, interest rates, tax changes, economic uncertainty, supply chain disruptions, and rising energy costs, continue to pressure Akamai and its customers. The filing notes approximately 1% of 2021 revenue was from traffic into Russia, Belarus, and Ukraine and that the war in Ukraine caused 2022 and 2023 revenue declines.
About five percent of Akamai's global employees are in Tel Aviv, Israel, and some have been mobilized for Israeli military reserves; the Israel-Hamas War could impair operations and initiatives, including security offerings and migration of internal applications to Akamai Connected Cloud. A wider Middle East conflict could cause broader geopolitical destabilization and macroeconomic impacts.
In June 2024, Akamai acquired Noname Security for $452.3 million; the deal is expected to add about $20.0 million of 2024 revenue and be dilutive to EPS through 2024. Integration risks include diverting management attention, failing to retain key talent, cybersecurity vulnerabilities during integration, and failing to realize expected benefits.
The OECD Pillar Two 15% global minimum corporate tax became effective for Akamai on January 1, 2024 and increased its effective income tax rate; management expects the effective tax rate to increase in 2024 due to changes in international tax laws. The company also faces tax audit and reserve risks across jurisdictions.
Akamai faces significant competition for talented employees, especially in security and cloud computing, and compensation costs are rising; payroll and stock-based compensation are its largest expense. Stock price volatility and geopolitical events, including the Israel-Hamas War, may adversely affect hiring and retention.
U.S. and international regulations on content liability, data transfer, AI, and cloud services could increase costs or reduce revenue. The April 2024 U.S. legislation that may prohibit access to a Chinese application beginning as soon as Q1 2025 could negatively impact revenue; traffic from that application was less than 1.5% of 2023 revenue.
Akamai had $3,565.0 million of convertible senior notes outstanding as of June 30, 2024, including $1,150.0 million due May 2025 that it intends to repay using proceeds from notes due 2029. Failure to repay, refinance, or repurchase notes could cause default and harm the business.
Akamai regularly faces cyberattacks, and the filing says use of AI by bad actors has heightened the sophistication and effectiveness of attacks. Nation-state and hacktivist attacks may intensify during geopolitical tensions, and vulnerabilities in acquired systems or compute products could lead to customer loss and reputational damage.
A significant portion of revenue is usage-based beyond customer commitments and can be difficult to forecast; Akamai may move to more pay-as-you-go contracting, making it easier for customers to reduce or leave. Because much of the cost structure is fixed in the short term, revenue shortfalls could disproportionately hurt profitability.
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 Q2 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 2, 2026.