Summary
The quarter ended September 30, 2021 delivered revenue of $860.33 million, up 8.5% from $792.84 million a year earlier. GAAP operating income climbed 13.3% to $205.26 million, net income rose 12.8% to $178.92 million, and diluted EPS reached $1.08, up 13.7% from $0.95. Operating margin was 23.9%, up 1.0 percentage point from the prior-year quarter. Through nine months of FY2021, revenue of $2.56 billion was up 8.7%, operating income of $587.06 million was up 12.1%, net income of $491.11 million was up 10.7%, and diluted EPS of $2.96 was up 10.0%.
Security remains the growth engine. Security Technology Group revenue rose 26% year over year and 25% adjusted for foreign exchange, and the group now accounts for nearly 40% of overall revenue. Edge Technology Group revenue was flat year over year and down 1% adjusted for foreign exchange. On the geographic side, U.S. revenue rose 3%, while international revenue rose 16%, or 15% adjusted for foreign exchange. On a non-GAAP basis, income from operations was $277 million, up 10%, non-GAAP EPS was $1.45, up 11%, and Adjusted EBITDA was $396 million, up 13%, for a 46% margin that was up 2 percentage points. Non-GAAP operating margin was 32%, flat versus the prior-year quarter.
Cash generation was mixed depending on the measure. Operating cash flow in the quarter was $389.74 million, down 3.0% from $401.97 million a year earlier, while the nine-month figure of $1.02 billion was up 10.1%. Capital expenditures of $70.68 million fell 60.9% from $180.84 million in the quarter, and the nine-month total of $265.13 million was down 33.0%. A lighter network build plus higher net marketable securities activity set up the October purchase of Guardicore. Akamai spent $97 million during the quarter to repurchase 0.8 million shares at an average price of $114.40, and ended September with 162 million shares outstanding. The board authorized a new $1.8 billion repurchase program running from January 1, 2022 through December 31, 2024, on top of $321 million remaining under the prior authorization, which expires at the end of 2021.
Backlog and near-term billings moved in different directions. Deferred revenue, current portion, was $83.37 million, down 6.3% year over year, while remaining performance obligations were $2.80 billion, up 3.7%. Management ties the softer near-term picture to moderating traffic growth as pandemic restrictions eased, and expects traffic and associated revenue growth to keep moderating for the rest of 2021. Pricing is another drag. Contract renewals and large media consolidations have lowered the prices paid by some customers, and revenue from website and application performance solutions declined over the first nine months of 2021, particularly in the U.S. commerce vertical.
Guardicore closed in October 2021 for roughly $600.0 million net of cash acquired, adds about 270 employees, and is expected to dilute earnings per share at least through 2022. Research and development costs should increase for the remainder of 2021, and sales and marketing costs should rise slightly in the fourth quarter of 2021. Akamai also expects more losses from its GO-NET equity method investment in the fourth quarter of 2021 and beyond. Seasonal holiday activity typically lifts fourth-quarter revenue for some solutions, which offers a partial offset to the pricing pressure. Headcount ended the period at 8,411, with most employees still working remotely and a return to offices not required before May 1, 2022.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $860.3M | $852.8M | +0.9% | $792.8M | +8.5% |
| Gross profit | $543.5M | $532.8M | +2.0% | $509.4M | +6.7% |
| Gross margin | 63.2% | 62.5% | +0.7 pp | 64.3% | -1.1 pp |
| Research & development | $82.9M | $77.3M | +7.3% | $66.8M | +24.2% |
| Sales & marketing | $108.5M | $111.9M | -3.0% | $122.7M | -11.6% |
| General & administrative | $134.3M | $134.3M | -0.0% | $128.4M | +4.6% |
| Total operating expenses | $655.1M | $653.4M | +0.3% | $611.7M | +7.1% |
| Operating income (loss) | $205.3M | $199.4M | +2.9% | $181.2M | +13.3% |
| Operating margin | 23.9% | 23.4% | +0.5 pp | 22.9% | +1.0 pp |
| Net income (loss) | $178.9M | $156.5M | +14.3% | $158.6M | +12.8% |
| Net margin | 20.8% | 18.4% | +2.4 pp | 20.0% | +0.8 pp |
| Diluted EPS | $1.08 | $0.94 | +$0.14 | $0.95 | +$0.13 |
Risks
Akamai's risk factor states revenue growth may not continue and that network traffic growth began to stabilize in Q4 2020, so 2021 annual traffic growth is not expected to match 2020 levels. MD&A says traffic growth moderated in 2021 and expects year-over-year traffic and associated revenue growth to continue moderating for the remainder of 2021 as pandemic restrictions lessen.
The risk factor cites increasing pricing pressure due to competition and customer business conditions, with revenue declines in web performance solutions expected to continue. MD&A reports Edge Technology Group revenue decreased 0.2% in FY2021 Q3 and showed no percentage change for the nine-month period, as reductions in application performance solutions offset security growth; management expects website and application performance revenue challenges to continue for the remainder of 2021.
In October 2021, Akamai acquired Guardicore Ltd. for approximately $600.0 million, net of cash acquired. MD&A states the acquisition is expected to be dilutive to earnings per share at least through 2022, and risk factors warn acquisitions can cause integration difficulties, dilution, management distraction and assumption of unknown liabilities.
Risk factor warns that a shift from committed revenue contracts to a pay-as-you-go approach or from traditional overage billing to models without surcharges could make it easier for customers to reduce or stop business. MD&A notes new billing models, including a zero overage plan that eliminates surcharges for certain traffic.
Security Technology Group is the main growth driver, with revenue up 25.9% in FY2021 Q3 and 26.7% for the nine-month period. Risk factors say maintaining or accelerating security revenue growth requires increasing industry recognition and developing or acquiring new solutions in a rapidly changing threat environment.
Akamai relies on large media and other customers for a significant part of revenue, and the risk factor says some have adopted do-it-yourself internal solutions or multi-vendor policies. As spending with Akamai increases, the risk of customers shifting to DIY or multi-vendor alternatives likewise increases, which could reduce network traffic and contracted revenue commitments.
Privacy and content regulations are rapidly proliferating, including GDPR, CCPA, proposals to repeal or amend Section 230, and foreign content access restrictions. The risk factor specifically notes India's 2020 restrictions prohibiting access to identified Chinese applications, which caused a reduction in revenue to Akamai.
In October 2021, a global consortium of countries agreed to establish a new framework for international tax reform; if implemented, it may increase Akamai's tax liabilities and reduce profitability. Akamai is also contesting adverse Massachusetts tax audit findings, and the ultimate outcome may differ from recorded reserves.
Akamai depends on executive officers and key technology, sales, marketing and support personnel, and faces significant competition for talent. Nearly all employees have worked remotely since Q1 2020, and employees whose roles do not require in-person presence are not required to return before May 1, 2022, which could negatively impact morale, productivity, hiring and training.
Risk factor says failure to develop or acquire new solutions attractive to enterprises, especially security services that keep pace with constantly changing threats, could cause expenses to grow faster than revenue. MD&A reports research and development expenses increased 24.2% in FY2021 Q3 and 19.8% for the nine-month period, and expects R&D costs to increase in the remainder of 2021 due to innovation initiatives and Guardicore.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Non-GAAP operating margin
Adjusted EBITDA
Cash from operations
Non-GAAP Income from Operations
Summary, forecast, risks and KPIs are extracted from AKAMAI TECHNOLOGIES INC's SEC filings for Q3 FY2021 (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.