Summary
Akamai's fiscal 2022 third quarter revenue came in at $881.9 million, up 2.5% from the prior-year quarter, and revenue for the nine months ended September 30, 2022 reached $2.69 billion, up 5.2%. Currency was the dominant story in the sales line. Adjusting for foreign exchange, revenue grew 7% in the quarter, and the company said rate moves cut $38.9 million from reported revenue. U.S. revenue rose 3% and international revenue rose 2%, or 12% in constant currency.
Security and compute did the heavy lifting. Security revenue rose 13% year over year, or 19% in constant currency, and compute revenue rose 72%, or 77% in constant currency, helped by the Linode acquisition completed in March 2022 for $898.5 million. Delivery revenue fell 15%, or 11% in constant currency, as traffic growth decelerated among the largest customers and as large renewals completed in the first half of the year lapped. Together, security and compute produced 55% of total revenue and grew 23%, or 28% in constant currency. The revenue mix keeps shifting away from the legacy delivery business toward products that carry different cost and margin profiles.
Profitability stepped down. GAAP operating income fell 21.8% to $160.4 million, and operating margin narrowed to 18.2% from 23.9%. GAAP net income dropped 39.6% to $108.2 million, and diluted EPS fell to $0.68 from $1.08. Non-GAAP results followed a similar path: income from operations of $242.6 million was down 12%, non-GAAP operating margin was 27.5%, non-GAAP EPS of $1.26 was down 13%, and Adjusted EBITDA of $368 million was down 7%. Cost of revenue grew on network build-out and supporting services, including third-party cloud applications, co-location, and depreciation of network equipment. Research and development rose on lower capitalized salaries and more third-party cloud use, and sales and marketing rose as marketing programs, customer events, and travel returned. The tax line also moved against the company because of an intercompany sale of intellectual property and a smaller excess tax benefit on stock compensation.
Cash generation held up better than earnings. Operating cash flow was $369.3 million in the quarter, down 5.2% and equal to 42% of revenue. Through nine months it was $933.2 million, down 8.3%, with the drop attributed to the timing of income tax payments. Capital expenditures on property and equipment fell 28.1% to $50.8 million as spending on delivery capacity came down. Deferred revenue, current portion, rose 31.7% to $109.8 million, and remaining performance obligations rose 14.3% to $3.2 billion. Cash, cash equivalents and marketable securities totaled $1.4 billion on September 30, 2022. The company spent $163 million repurchasing 1.8 million shares at an average price of $90.93 and reported 158 million shares outstanding. A $1.8 billion repurchase authorization runs through December 2024, with $1.4 billion remaining.
Management expects the macro environment to keep squeezing results for the remainder of the fiscal year. The strengthening U.S. dollar should continue to hurt revenue and profitability, and cost of revenue, research and development, sales and marketing, and general and administrative expenses are each expected to increase versus 2021 over the rest of 2022. Capital expenditures are not expected to reach prior-year levels this year, and amortization of acquired intangible assets is projected at roughly $17.4 million for the remainder of 2022. Traffic should keep growing, but at a more moderate pace than in prior years. Elongated sales cycles, inflation, recession concerns, rising interest rates, competitive pricing pressure on renewals, and the war in Ukraine remain the main risks; about 1% of 2021 revenue came from traffic served into Russia, Belarus and Ukraine. Hiring is being limited to critical areas. Guardicore, bought in October 2021 for $610.7 million, is also expected to dilute earnings per share at least through 2022.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $881.9M | $903.3M | -2.4% | $860.3M | +2.5% |
| Gross profit | $535.4M | $556.7M | -3.8% | $543.5M | -1.5% |
| Gross margin | 60.7% | 61.6% | -0.9 pp | 63.2% | -2.5 pp |
| Research & development | $94.0M | $92.1M | +2.1% | $82.9M | +13.4% |
| Sales & marketing | $123.9M | $126.7M | -2.2% | $108.5M | +14.2% |
| General & administrative | $139.4M | $141.2M | -1.3% | $134.3M | +3.8% |
| Total operating expenses | $721.5M | $728.3M | -0.9% | $655.1M | +10.1% |
| Operating income (loss) | $160.4M | $175.0M | -8.3% | $205.3M | -21.8% |
| Operating margin | 18.2% | 19.4% | -1.2 pp | 23.9% | -5.7 pp |
| Net income (loss) | $108.2M | $119.5M | -9.5% | $178.9M | -39.6% |
| Net margin | 12.3% | 13.2% | -1.0 pp | 20.8% | -8.5 pp |
| Diluted EPS | $0.68 | $0.74 | -$0.06 | $1.08 | -$0.40 |
Risks
Revenue growth may not continue and delivery solutions are declining. Total revenue rose 2.5% to $881.9 million in FY2022 Q3, but MD&A reports delivery revenue decreased 14.9% and expects slower traffic growth for the remainder of 2022; GAAP operating income fell 21.8% and net income fell 39.6% in the quarter.
Inflation, rising interest rates, recession concerns and supply constraints could pressure customer spending and costs. MD&A states the company is managing through an uncertain period with escalating inflation, growing recessionary concerns and rising interest rates, and it expects these conditions to continue to affect results.
Elongated sales cycles with customers and prospects may delay revenue conversion. MD&A says the uncertain macroeconomic environment has lengthened sales cycles and that the company expects to continue to experience elongated sales cycles for the remainder of 2022.
Intense competition and pricing pressure, including delivery solution commoditization and DIY or multi-vendor strategies, could reduce revenue and market share. MD&A notes prices paid by some customers have declined due to competition and contract renewals, and delivery revenue decreased 14.9% in the quarter.
Rising costs, including energy and third-party cloud supporting services, are pressuring profitability. FY2022 Q3 cost of revenue increased 9.3% and operating margin fell 5.7 pp to 18.2%; MD&A expects cost of revenue to increase for the remainder of 2022.
The strengthening U.S. dollar is expected to continue to negatively impact revenue and profitability. MD&A reports foreign currency exchange rates unfavorably impacted revenue by $38.9 million in the quarter and $86.0 million year to date, with expense benefits only partially offsetting the revenue hit.
The Linode acquisition and compute expansion carry integration, competitive and supply chain execution risks. Success depends on creating enterprise-competitive compute products, sourcing additional co-location facilities and managing an uncertain supply chain for server hardware; compute revenue rose 71.6% in the quarter, increasing the importance of this effort.
Competition for skilled employees is increasing compensation costs and could impair execution. Risk factors cite difficulty hiring and retaining highly skilled employees, and MD&A says the company is limiting hiring to critical areas and closing open positions while re-tasking employees to compute.
Service incidents, vulnerabilities and compute abuse could lead to customer loss, credits and reputational harm. The filing references summer 2021 service incidents that interrupted some customer websites, the Log4Shell vulnerability, and risks from abuse of compute products after the Linode acquisition.
Evolving privacy and content regulations could increase compliance costs and reduce revenue. Risk factors cite GDPR, CCPA, proposals to amend Section 230 and India restrictions adopted in 2020 that caused a reduction in revenue to us.
Higher tax liabilities could reduce profitability. FY2022 Q3 provision for income taxes increased 266.4% and the effective income tax rate was 31.6% versus 7.0% in the prior-year quarter, driven by an intercompany sale of intellectual property and global intangible low taxed income.
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 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.