Summary
Akamai crossed the billion-dollar mark in quarterly revenue for the first time in the third quarter of fiscal 2024. Revenue reached $1.00 billion, up 4.1% from the prior-year quarter and up 4.3% at constant currency. Security and compute solutions together accounted for 68% of total revenue and grew 17% on a year-over-year basis. Security revenue rose 14% and compute revenue rose 28%, while delivery revenue fell 16%. U.S. revenue grew 5% and international revenue grew 3%.
The profit picture split sharply between GAAP and non-GAAP. GAAP operating income fell to $70.6 million, down 59.9% from the prior-year quarter. The GAAP operating margin of 7.0% was down 11.2 percentage points from a year earlier. GAAP net income was $57.9 million, down 63.9%, and GAAP diluted earnings per share were $0.38, down 63.5%. A restructuring charge of $82 million tied to a workforce reduction and impairments of assets from recent acquisitions drove much of that decline. Non-GAAP results, which strip out that charge along with stock-based compensation and amortization of acquired intangibles, held up better. Non-GAAP income from operations was $296 million, flat year over year, with a non-GAAP operating margin of 29%, down 2 percentage points. Non-GAAP net income was $244 million, down 3%, and non-GAAP earnings per diluted share were $1.59, down 2%. Adjusted EBITDA rose 2% to $426 million.
Cash generation was the bright spot. Operating cash flow was $392.5 million for the quarter, up 9.2% and equal to 39% of revenue, and operating cash flow for the first nine months of fiscal 2024 was $1.18 billion, up 22.5%. Capital expenditures, reported as purchases of property and equipment, were $112.8 million for the quarter, down 15.5%. Capex measured on the accrual basis the company uses for its non-GAAP disclosures was 16% of revenue. Cash, cash equivalents and marketable securities totaled $1.979 billion at September 30, 2024. Deferred revenue, current portion only, was $138.9 million, up 11.7%, and remaining performance obligations were $3.50 billion, up 9.4%. The company spent $166 million to repurchase 1.7 million shares at an average price of $97.29, leaving 151 million shares of common stock outstanding at quarter end.
Guidance points to a softer fourth quarter. For the three months ending December 31, 2024, Akamai guided a non-GAAP operating margin of 27% to 28% and non-GAAP net income per diluted share of $1.49 to $1.56. For the full year 2024, the company guided a non-GAAP operating margin of 29%, non-GAAP net income per diluted share of $6.31 to $6.38, a non-GAAP tax rate of 19%, and capex at 17% of revenue. Fourth-quarter capex is guided at 18% to 19% of revenue. That guidance is on a non-GAAP basis and cannot be reconciled to the closest GAAP measures without unreasonable effort.
Delivery remains the main risk. A large social media customer has cut costs and leaned on do-it-yourself solutions, which reduced traffic on the network, and renewals keep coming at lower prices. Traffic growth in media and gaming has moderated. Foreign currency moves trimmed revenue by $2.7 million in the quarter. On the cost side, co-location fees and depreciation of network equipment keep climbing as the company builds out compute infrastructure, though migrating third-party cloud services onto its own platform is lowering some costs. Akamai closed the Noname Security acquisition in June 2024 for $452.3 million and expects it to be dilutive to earnings per share through 2024. Headcount ended the quarter at 10,947 employees. The company also faces repayment of $1,150.0 million of convertible senior notes due in May 2025, which it plans to fund with proceeds from its 2029 notes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.00B | $979.6M | +2.6% | $965.5M | +4.1% |
| Gross profit | $595.9M | $576.7M | +3.3% | $582.4M | +2.3% |
| Gross margin | 59.3% | 58.9% | +0.4 pp | 60.3% | -1.0 pp |
| Research & development | $120.3M | $113.4M | +6.2% | $105.9M | +13.6% |
| Sales & marketing | $138.6M | $139.0M | -0.4% | $132.3M | +4.7% |
| General & administrative | $160.0M | $153.9M | +4.0% | $147.3M | +8.6% |
| Total operating expenses | $934.0M | $831.6M | +12.3% | $789.4M | +18.3% |
| Operating income (loss) | $70.6M | $148.0M | -52.3% | $176.1M | -59.9% |
| Operating margin | 7.0% | 15.1% | -8.1 pp | 18.2% | -11.2 pp |
| Net income (loss) | $57.9M | $131.7M | -56.0% | $160.5M | -63.9% |
| Net margin | 5.8% | 13.4% | -7.7 pp | 16.6% | -10.9 pp |
| Diluted EPS | $0.38 | $0.86 | -$0.48 | $1.04 | -$0.66 |
Risks
Delivery solutions revenue decreased 15.9% for the quarter and 13.3% year to date, driven by customer economic and geopolitical headwinds, moderation of traffic growth, and continued downward pricing of renewals. The company expects delivery revenue declines to continue in the near future.
A large social media customer has taken steps to lower costs and reduce reliance on U.S. providers by optimizing its platform, including using a do-it-yourself component, which reduced traffic on the network and negatively impacted revenue in the first nine months of 2024. If additional large customers shift to DIY, traffic and contracted revenue commitments could decrease more significantly.
The compute business faces intense competition from a small number of very large competitors that have established themselves as leaders, and success depends on building compute infrastructure, attracting enterprise customers, and developing price-competitive solutions. Compute revenue increased 28.0% for the quarter and 25.4% year to date, but the company is investing significant resources with uncertain prospects.
Operating income decreased 59.9% for the quarter and 14.8% year to date, and operating margin decreased 11.2 percentage points for the quarter and 3.1 percentage points year to date. Cost of revenue increased 6.7% for the quarter and 7.9% year to date, driven by higher co-location fees and depreciation of network equipment for the compute build out.
A restructuring charge of $82.0 million, or 8.2% of revenue, was recorded for the quarter, and $83.9 million, or 2.8% of revenue, year to date, related to headcount reductions and impairments of acquired intangible assets and capitalized internal-use software. Restructuring activities may disrupt operations and result in significant expense or unanticipated employee turnover.
Global macroeconomic and geopolitical conditions continue to impact customers and revenue growth rates, including fluctuating inflation, economic and political uncertainty, uncertain energy supplies, supply chain disruptions, changes in international tax laws, foreign exchange fluctuations, and elevated interest rates. These conditions can cause customers to take cost-savings measures, including optimization and DIY initiatives.
Approximately six percent of global employees are located in Tel Aviv, Israel, and some employees have been mobilized as members of the Israeli military reserves. The ongoing war could harm employees or impair their ability to work for extended periods, and a widening conflict could lead to broader geopolitical destabilization and macroeconomic impacts.
In April 2024, the U.S. government passed legislation that may prohibit access to a Chinese application beginning as soon as the first quarter of 2025. Traffic in the U.S. from this application in 2023 constituted less than 1.5% of revenue, but if restrictions become effective, revenue would be negatively impacted.
The OECD Pillar Two 15% global minimum corporate tax rate became effective for the company beginning January 1, 2024, and increased the effective income tax rate. The company expects its effective income tax rate to increase in 2024, and tax audits or adverse outcomes could require additional financial charges.
As of September 30, 2024, the company had $3,565.0 million of convertible senior notes outstanding, including $1,150.0 million due in May 2025. Repayment of the 2025 notes depends on market conditions and future performance, and the company intends to use a portion of the net proceeds from the $1,265.0 million notes due in 2029.
The compute build out requires significant additional co-location space and server hardware, and the company is experiencing an increase in certain server component costs. Co-location fees increased 24.6% for the quarter and 22.4% year to date, and failure to secure adequate capacity or equipment could lead to service disruptions and lost revenue.
The June 2024 acquisition of Noname Security for $452.3 million is expected to add approximately $20.0 million of revenue for 2024 and will be dilutive to earnings per share through 2024. Integration risks include difficulty integrating technologies and personnel, diversion of management attention, and failure to realize expected benefits.
Competition for skilled employees in security and cloud computing results in increased cash and stock-based compensation costs and potential dilution. The company is retasking certain employees to work on compute solutions, and geopolitical events such as the Israel-Hamas War may impact retention and workforce availability.
The use of artificial intelligence by bad actors has heightened the sophistication and effectiveness of attacks, and the integration of the Linode compute platform into Akamai Connected Cloud has ongoing vulnerabilities that, if exploited, could negatively impact the platform and customers. Compute product abuse or a significant cybersecurity event could result in loss of customers and reputational damage.
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 Q3 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.