Summary
Akamai closed fiscal 2022 with fourth-quarter revenue of $927.8 million, up 2.5% from the prior-year quarter. The full-year top line reached $3.62 billion, up 4.5% year over year. Security and compute now carry the growth. Those two categories represented 55% of total revenue in the fourth quarter and grew 18% year over year. For the full year they were 54% of revenue and grew 23%. Security revenue rose 10% in the quarter, compute revenue rose 61%, and delivery revenue, still the largest category, fell 12%. On a constant-currency basis, total revenue rose 6% in the quarter and 8% for the year, a reminder of how much the strong dollar weighed on reported results. The company credited seasonal traffic, its security portfolio, and its cloud computing push.
Profitability moved the other way. Fourth-quarter GAAP operating income was $167.5 million, down 14.6% from the prior-year quarter, and GAAP operating margin was 18.1%, down 3.6 percentage points. Full-year GAAP operating income was $676.3 million, down 13.6%, for an 18.7% operating margin, down 3.9 percentage points. GAAP net income was $128.8 million in the quarter, down 19.8%, and $523.7 million for the year, down 19.6%. GAAP diluted EPS was $0.82 in the quarter, down 15.5%, and $3.26 for the year, down 17.0%. The gap between revenue growth and profit growth comes from costs. Cost of revenue climbed on higher co-location fees, network build-out and supporting services, and depreciation. Research and development, sales and marketing, and general and administrative expenses all rose for the full year. Non-GAAP results were less weak. Fourth-quarter non-GAAP operating income was $258 million, down 9%, and the non-GAAP operating margin was 28%, down 3 percentage points. Non-GAAP net income was $216 million, down 11%, and non-GAAP EPS was $1.37, down 8%. Full-year non-GAAP EPS was $5.37, down 6%.
Cash generation held up but slipped. Fourth-quarter operating cash flow was $341.5 million, down 11.7%, and full-year operating cash flow was $1.27 billion, down 9.2%. The company ended the year with current deferred revenue of $105.1 million, up 21.5%, and remaining performance obligations of $3.50 billion, up 12.9%. That backlog growth supports future revenue, though it also reflects the mix shift toward larger security and compute contracts. Capital expenditures, reported as purchases of property and equipment, were $65.2 million in the quarter, up 2.2%, and $241.3 million for the year, down 26.7%.
Management's outlook for the full fiscal year 2023 calls for higher expenses across the board. The 10-K says cost of revenue, research and development, sales and marketing, and general and administrative expenses are all expected to increase in 2023. Traffic growth is expected to stay below historical levels, and Akamai expects elongated sales cycles to continue as customers and prospects work through an uncertain economy. The risk list is long. It includes competition and pricing pressure, foreign currency swings, inflation, rising interest rates, recession concerns, supply chain challenges, uncertain energy supplies, and geopolitical disruption from the war in Ukraine. Delivery revenue remains a drag, and the company is shifting workloads to its own cloud to cut third-party cloud expense. Management is also still assessing the impact of a prior tax misstatement on its internal control over financial reporting. The pattern for the year is clear. Security and compute carry growth, delivery shrinks, and investment plus currency pressure holds GAAP profit below the prior year.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $927.8M | $881.9M | +5.2% | $905.4M | +2.5% |
| Gross profit | $569.8M | $535.4M | +6.4% | $580.0M | -1.7% |
| Gross margin | 61.4% | 60.7% | +0.7 pp | 64.1% | -2.6 pp |
| Research & development | $105.4M | $94.0M | +12.1% | $93.2M | +13.1% |
| Sales & marketing | $129.1M | $123.9M | +4.2% | $125.2M | +3.1% |
| General & administrative | $150.3M | $139.4M | +7.8% | $147.7M | +1.7% |
| Total operating expenses | $760.3M | $721.5M | +5.4% | $709.3M | +7.2% |
| Operating income (loss) | $167.5M | $160.4M | +4.4% | $196.1M | -14.6% |
| Operating margin | 18.1% | 18.2% | -0.1 pp | 21.7% | -3.6 pp |
| Net income (loss) | $176.8M | $108.2M | +63.5% | $160.5M | +10.1% |
| Net margin | 19.1% | 12.3% | +6.8 pp | 17.7% | +1.3 pp |
| Diluted EPS | $1.10 | $0.68 | +$0.42 | $0.97 | +$0.13 |
Risks
MD&A states the company has experienced elongated sales cycles with customers and prospects due to the uncertain macroeconomic environment and expects elongated sales cycles to continue in 2023. Inflation, rising interest rates, supply chain challenges and the war in Ukraine are cited as factors, and the company expects traffic growth in 2023 to remain below historical levels.
Delivery solutions revenue decreased 10.9% in 2022 compared to 2021, driven by reduced traffic growth particularly among the largest customers and the pricing impact of some large renewals completed in the first half of the year. Total revenue grew 4.5% year over year in 2022 while GAAP operating income fell 13.6% and GAAP net income fell 19.6% over the same period.
The filing emphasizes intensely competitive markets and states the prices paid by some customers have declined in recent years due to competition and contract renewals, negatively impacting revenue growth rates. Competitors with greater financial and marketing resources and shorter sales cycles could force price reductions or loss of market share.
The company identified a material weakness in internal control over financial reporting as of December 31, 2022 related to income taxes, caused by inadequate control over the adoption and application of new accounting standards. This resulted in immaterial errors to net deferred tax assets and provision for income taxes for the interim periods ended March 31, June 30 and September 30, 2022, and remediation is ongoing.
The company is investing significant resources to integrate the Linode acquisition into its edge platform, including connecting locations into its private backbone and expanding facility capacity, and states success is not guaranteed. Compute solutions revenue grew 60.2% in 2022 compared to 2021, with $103.5 million attributable to Linode, but the company notes these costs may reduce previously achieved gross and operating margins.
The company cites significant competition for skilled employees in the regions where its primary offices are located, leading to increased cash and stock-based compensation costs and potential dilution. It is also retasking certain employees to develop and support compute solutions, and failure to retrain them could harm the compute business.
Laws limiting the delivery of certain content or imposing content liability, data transfer restrictions, sanctions and so-called fair share or internet content taxes could raise costs or reduce revenue. The filing notes restrictions adopted in India in 2020 prohibiting access to identified Chinese applications caused a reduction in revenue, and repeal or amendment of Section 230 could expose the company to greater legal liability.
The company is reliant on large media and other customers for a significant part of its revenue, and states that as the amount a customer spends increases, the risk they pursue a do-it-yourself or multi-vendor strategy likewise increases. Large customers shifting to internal solutions would reduce traffic on the network and contracted revenue commitments.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Non-GAAP operating margin
Summary, forecast, risks and KPIs are extracted from AKAMAI TECHNOLOGIES INC's SEC filings for Q4 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.