Summary
Akamai closed fiscal 2023 with fourth quarter revenue of $995.0 million, up 7.2% from the prior-year quarter. Full-year revenue was $3.812 billion, up 5.4%. The mix keeps tilting toward newer products. Security and compute accounted for 61% of fourth quarter revenue and grew 18% year over year. For the full year that group was 60% of revenue and grew 17%, with security revenue up 14% and compute revenue up 24%. Delivery revenue fell 6% in the quarter and 8% for the year. Management described the quarter as a strong close to the year and said 2024 plans center on keeping delivery profitable, widening the security portfolio, and extending the cloud computing platform to the edge.
Profitability improved in the quarter but slipped for the year. GAAP operating income was $184.8 million in the fourth quarter, up 10.3%, and the GAAP operating margin was 18.6%, up 0.5 percentage points from the prior-year quarter. Full-year GAAP operating income was $637.3 million, down 5.8%, and the full-year GAAP operating margin was 16.7%, down 2.0 percentage points. GAAP net income was $161.2 million for the quarter, up 25.2%, and $547.6 million for the year, up 4.6%. Full-year GAAP diluted EPS was $3.52, up 8%.
The spread between GAAP and non-GAAP results stays wide. Non-GAAP operating margin was 30% in the fourth quarter, up 2 percentage points, and non-GAAP net income per diluted share was $1.69, up 23%. Adjusted EBITDA was $426 million for the quarter, up 12%, and $1.608 billion for the year, up 5%. Stock-based compensation and amortization of acquired intangibles account for much of the gap between the two sets of numbers. The company also shifted part of one non-executive incentive program from cash to stock in 2023, which lifted that expense.
Cash generation looked steady. Fourth quarter operating cash flow was $389.2 million, up 14.0%, and the full-year total was $1.348 billion, up 5.8%. Capital expenditures were $70.4 million in the quarter, up 7.9%, while the full-year figure of $457.9 million rose 89.8%. That step-up reflects the build-out of compute capacity, and the company says co-location costs will keep rising in 2024 as it signs longer leases with financial commitments. Current deferred revenue was $107.5 million, up 2.3%. Remaining performance obligations were $3.4 billion, down 2.9%, a line worth watching because it sits behind future delivery and security bookings.
The balance sheet carried $2.3 billion in cash, cash equivalents and marketable securities as of December 31, 2023. Akamai spent $55 million in the fourth quarter to repurchase 0.5 million shares at an average price of $110.75. For the full year, buybacks totaled $654 million, or 7.8 million shares at an average price of $83.83. Shares outstanding were 151 million at year end.
Guidance for the first quarter of 2024 is revenue of $980 million to $1,000 million, a non-GAAP operating margin of 29% to 30%, non-GAAP net income per diluted share of $1.59 to $1.64, and capex at 15% of revenue. For the full year 2024, the company guides to revenue growth of 6% to 8%, security revenue growth of 14% to 16%, compute revenue growth of 20%, a non-GAAP operating margin of 30%, non-GAAP net income per diluted share growth of 7% to 11%, and capex again at 15% of revenue. The full-year targets are set at constant currency, which matters given the currency drag on reported revenue.
Risks are mostly macro and competitive. Management lists economic uncertainty, inflation, elevated interest rates, foreign currency swings, and geopolitical tension such as the war in Ukraine. Pricing pressure on delivery and security renewals persists, and traffic growth on the network has been modest. The compute build-out soaks up capital before new capacity is fully used, and the company warned that co-location costs will rise. Cyber incidents, supply chain problems, and the need to retain key personnel are also flagged. A higher effective tax rate is expected as the global minimum tax takes hold, though management does not expect a material hit.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $995.0M | $965.5M | +3.1% | $927.8M | +7.2% |
| Gross profit | $601.6M | $582.4M | +3.3% | $569.8M | +5.6% |
| Gross margin | 60.5% | 60.3% | +0.1 pp | 61.4% | -1.0 pp |
| Research & development | $109.2M | $105.9M | +3.1% | $105.4M | +3.6% |
| Sales & marketing | $135.3M | $132.3M | +2.2% | $129.1M | +4.8% |
| General & administrative | $155.6M | $147.3M | +5.6% | $150.3M | +3.5% |
| Total operating expenses | $810.2M | $789.4M | +2.6% | $760.3M | +6.6% |
| Operating income (loss) | $184.8M | $176.1M | +4.9% | $167.5M | +10.3% |
| Operating margin | 18.6% | 18.2% | +0.3 pp | 18.1% | +0.5 pp |
| Net income (loss) | $161.2M | $160.5M | +0.4% | $176.8M | -8.9% |
| Net margin | 16.2% | 16.6% | -0.4 pp | 19.1% | -2.9 pp |
| Diluted EPS | $1.04 | $1.04 | ±$0.00 | $1.10 | -$0.06 |
Risks
The Israel-Hamas War affects Akamai's workforce: approximately 5% of global employees are located in Tel Aviv, Israel, and some employees have been mobilized as Israeli military reserves, which could impair operations and ongoing initiatives. The filing also cites prior revenue declines from the war in Ukraine and rising energy costs, particularly in Europe.
Delivery solutions revenue decreased 7.6% in 2023 compared to 2022, and Akamai expects delivery revenue declines to continue in the near future due to pricing pressure and moderated traffic growth. Total revenue grew 5.4% year to date, but slowing growth could negatively impact profitability and the stock price.
Akamai faces intense competition in compute from a small number of very large established leaders, and its compute build-out requires significant resources. Capital expenditures rose 89.8% year to date, co-location fees rose 29.7% in 2023 versus 2022, and GAAP operating margin declined 2.0 percentage points year to date, with costs potentially reducing gross and operating margins if the compute strategy does not generate sufficient revenue.
The OECD 15% global minimum corporate tax is expected to increase Akamai's liability for corporate taxes and its effective income tax rate beginning in 2024. MD&A states it is monitoring these developments and evaluating the impact while the rules continue to be defined.
The compute build-out depends on procuring co-location space and server hardware, and supply chain disruptions have occurred in the past and could prevent purchasing needed equipment at attractive prices or at all. MD&A expects co-location costs to increase in 2024 due to continued investment in compute solutions.
Akamai relies on larger customers to direct traffic for a significant part of revenue, and multiple large customers shifting to DIY or multi-vendor strategies would reduce traffic and contracted revenue commitments. Delivery revenue already declined 7.6% in 2023 versus 2022 partly due to moderated traffic growth as largest customers experienced lower traffic growth.
Akamai reports that bad actors are using artificial intelligence to heighten the sophistication of attacks, and nation-state or hacktivist attacks may intensify during geopolitical tensions such as the Ukraine and Israel-Hamas wars. The Linode compute platform also creates risks from customer abuse and potential reputational damage if mitigation fails.
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 Q4 FY2023 (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.