Executive Summary / Key Takeaways

• Akamai Technologies is undergoing a profound transformation, evolving from a Content Delivery Network (CDN) pioneer into a formidable leader in cybersecurity and distributed cloud computing, with Security now contributing the majority of its annual revenue.
• The company delivered a strong Q3 2025, with revenue of $1.055 billion and non-GAAP EPS of $1.86, driven by accelerating growth in its Cloud Infrastructure Services (CIS) and robust demand for high-growth security products like API Security and Guardicore segmentation.
• Akamai's strategic pivot to AI Inference at the edge, exemplified by the launch of Akamai Inference Cloud powered by NVIDIA (NVDA), leverages its unparalleled global network to offer superior performance, lower latency, and significant cost advantages over traditional hyperscalers for AI workloads.
• Despite macroeconomic headwinds and a strategic shift in its largest customer's delivery traffic, Akamai projects continued revenue acceleration and margin expansion into 2026, targeting double-digit top-line growth and 30%+ operating margins by the end of the decade.
• Key risks include ongoing macroeconomic and geopolitical uncertainties, intense competition from hyperscalers and specialized security vendors, and the execution challenges inherent in a multi-year go-to-market transformation.

Akamai's Strategic Evolution: From "World Wide Wait" to AI at the Edge

Akamai Technologies, founded in 1998, initially set out to conquer the "World Wide Wait," a mission to enhance internet performance and scalability that fundamentally shaped the early digital landscape. This foundational expertise in distributed network architecture has since propelled Akamai through a significant multi-year transformation, repositioning the company as a leader in cybersecurity and distributed cloud computing. Today, Akamai's core business revolves around providing solutions for global enterprises to build, secure, and accelerate their applications and digital experiences through its massively distributed global network, comprising over 4,300 edge points-of-presence in approximately 130 countries and over 700 cities.

This strategic evolution is not merely a shift in focus but a fundamental re-architecture of its offerings, directly addressing the escalating demands of modern digital business and the emerging era of artificial intelligence. The company's unique platform, unlike those of traditional hyperscalers, is designed to bring compute instances and security closer to end-users, offering distinct advantages in performance, latency, and cost-efficiency. This differentiation is crucial in an intensely competitive market where rivals range from agile startups to large technology and telecommunications giants like Cloudflare , Fastly , Amazon (via AWS), and Microsoft (via Azure). Akamai's ability to bundle delivery, security, and compute on a single, highly optimized platform creates a synergistic offering that enhances customer value and strengthens its competitive moat.

Technological Edge: Powering Performance and Protection

Akamai's competitive advantage is deeply rooted in its differentiated technology, particularly its globally distributed network and innovative product suite. The company's core technology enables it to deliver superior performance and security by processing data and applications at the network's edge, minimizing the distance to the end-user. This architecture is critical for real-time applications and is a direct response to the industry-wide trend of increasing demand for low-latency processing.

A cornerstone of Akamai's technological differentiation is its Managed Container Service (MCS), which, as announced in Q1 2025, will support customer containers in over 4,000 points of presence across more than 700 cities globally. This capability is unique in the market, allowing customers to deploy compute workloads significantly closer to users than any other cloud provider. Furthermore, Akamai became the first and only provider to offer Video Processing Units (VPUs) in the cloud with its new accelerated compute instances solution. This VPU architecture offers up to 20x greater throughput than traditional CPU solutions, resulting in greatly improved performance and substantial savings for media companies. The company has also significantly upgraded its object storage solution, achieving a 5x increase in scalability and a 10x increase in performance, making it comparable to hyperscalers but with notably lower egress fees due to the inherent efficiencies of its edge platform.

These technological advancements are particularly pertinent to the burgeoning field of AI. Akamai's AI Gateway solution acts as a smart traffic controller, handling many AI requests closer to the user at the edge, making interactions faster, more energy-efficient, and cost-effective. The recently launched Akamai Inference Cloud (AIC), powered by NVIDIA's Blackwell AI infrastructure, is a direct manifestation of this strategy. Available in 17 locations globally and expanding, AIC combines highly scaled GPU and compute capacity with Akamai's global reach to enable intelligence to run instantly, securely, and exactly where needed. Early customer feedback highlights AIC's ability to deliver "30% faster response times" and "2.5x faster response times with 3x higher throughput and significant cost savings" compared to hyperscalers for AI applications. This positions Akamai as a major player in the AI inferencing market, which Fortune Business Insights projects to be the highest CAGR segment of all AI inference models due to demand for real-time, low-latency processing near data sources.

Financial Performance: A Story of Strategic Repositioning

Akamai's financial performance in Q3 2025 underscores the success of its strategic repositioning. The company reported total revenue of $1.055 billion, marking a 5% increase year-over-year as reported and 4% in constant currency. Non-GAAP operating margins improved to 31%, and non-GAAP earnings per diluted share reached $1.86, up an impressive 17% year-over-year. For the nine months ended September 30, 2025, total revenue stood at $3.11 billion, a 5% increase over the prior year.

Security Segment: This segment continues to be a primary growth engine. In Q3 2025, Security revenue grew to $568 million, up 10% year-over-year (9% in constant currency). For the first time in 2024, Security contributed the majority of Akamai's annual revenue, surpassing $2 billion with a 16% year-over-year growth. The high-growth security products, including API Security and Zero Trust Enterprise Security, demonstrated significant momentum, with revenue increasing 35% year-over-year (34% in constant currency) to $77 million in Q3 2025. Akamai expects API security to exit 2025 with an approximate $100 million run rate, and the combined ARR for high-growth security solutions is projected to increase by 30% to 35% in 2025. This segment boasts a high gross margin profile, typically in the high 80s, reflecting the value and stickiness of its offerings.

Cloud Computing Segment: This segment is experiencing accelerating momentum, particularly its Cloud Infrastructure Services (CIS). Total compute revenue in Q3 2025 was $180 million, up 8% year-over-year (7% in constant currency). More specifically, CIS revenue accelerated to $81 million, growing 39% year-over-year (also 39% in constant currency) in Q3 2025. This acceleration is a key indicator of the company's successful entry into the distributed cloud market. Akamai projects CIS Annual Recurring Revenue (ARR) to grow in the range of 40% to 45% in constant currency by year-end 2025. The gross margin profile for cloud computing is in the low 70s, which is expected to improve as the business scales.

Delivery Segment: While still facing headwinds, the Delivery segment has shown signs of stabilization. Revenue in Q3 2025 was $306 million, down 4% year-over-year (also 4% in constant currency). This marks an improvement in trends compared to previous periods, driven by improved overall traffic growth and a more stable pricing environment due to a reduced competitive landscape. Delivery remains a significant generator of profit, funding new product development and leveraging Akamai's extensive network.

Cost and Profitability: The increase in cost of revenue in Q3 2025 was primarily due to investments in the compute platform, including co-location fees and depreciation of network equipment, as well as partner program costs for cloud computing solutions and stock-based compensation. These increases were partially offset by lower bandwidth fees due to improved contract pricing and operational efficiencies. Non-GAAP operating expenses are projected to be between $322 million and $331 million for Q4 2025, reflecting seasonal increases in sales commissions and ongoing investments in go-to-market initiatives.

Liquidity and Capital Allocation

As of September 30, 2025, Akamai maintained a strong liquidity position with approximately $1.80 billion in cash, cash equivalents, and marketable securities. The company's robust balance sheet and access to revolving credit facilities provide financial flexibility for strategic investments. In May 2025, Akamai issued $1.725 billion in convertible senior notes due 2033, intending to use a portion of the proceeds to repay $1.15 billion in outstanding convertible senior notes due 2027. This proactive debt management ensures a healthy capital structure.

Akamai's capital allocation strategy prioritizes offsetting dilution from employee equity programs through share repurchases and opportunistic M&A. Year-to-date in 2025, the company repurchased 10 million shares for $800 million, marking its largest annual buyback in history. This demonstrates a commitment to returning capital to shareholders while preserving resources for strategic growth opportunities.

Competitive Landscape and Strategic Positioning

Akamai operates in intensely competitive and rapidly changing markets. In cloud computing, it faces formidable competition from hyperscalers like Amazon (AMZN) (AWS) and Microsoft (MSFT) (Azure), who dominate the broader cloud infrastructure market. However, Akamai differentiates itself by focusing on the edge, offering a uniquely distributed platform that delivers superior performance and cost-effectiveness for specific workloads, particularly AI inferencing. Customers, including the top three cloud providers in the U.S., are increasingly leveraging Akamai's Cloud Infrastructure Services not due to hyperscaler capacity constraints, but for Akamai's ability to bring business logic closer to end-users, resulting in faster execution and lower egress fees. This is a critical "so what" for investors: Akamai is not trying to be a general-purpose cloud provider but a specialized, high-performance edge cloud.

In cybersecurity, Akamai competes with a diverse set of players, from specialized vendors like Cloudflare (NET) and Fastly (FSLY) to larger integrated security providers. Akamai's strength lies in its comprehensive, market-leading solutions such as Guardicore segmentation and API security, which are critical defenses against modern threats like ransomware and API-based attacks. The company's "five 9s of reliability" is a key differentiator, especially for high-stakes environments like financial services, where downtime is catastrophic. Akamai's ability to integrate its security offerings with its delivery and compute platforms provides a holistic defense that many competitors cannot match. While not always the lowest-cost provider, Akamai's focus on robust, integrated protection for critical infrastructure resonates with enterprises.

The delivery market has seen a significant shift, with several major competitors exiting the space pre-pandemic. This reduced competition has contributed to a more stable pricing environment for Akamai, which, combined with improving traffic trends, is helping to moderate revenue declines. Akamai's long-standing relationships with major media and entertainment companies, coupled with its new VPU offerings, further solidify its position. The company also strategically acquires customer contracts, such as those from Edgio (EGIO) in December 2024, to expand its delivery base and cross-sell its broader portfolio.

Akamai's go-to-market strategy is undergoing a multi-year transformation to align resources with higher-growth segments. This involves increasing the ratio of "hunters" to "farmers" in sales, adding specialized sellers for security and compute products, and investing more in partner enablement. This strategic overhaul is designed to maximize new customer acquisition and cross-selling opportunities, ensuring the sales force is equipped to capitalize on the company's evolving product portfolio.

Outlook and Guidance

Akamai's management has provided a confident outlook for continued growth and profitability. For Q4 2025, the company projects revenue in the range of $1.065 billion to $1.085 billion, representing a 4% to 6% year-over-year increase as reported. Full-year 2025 revenue is expected to grow 4% to 5% in constant currency. Non-GAAP EPS for Q4 2025 is guided between $1.65 and $1.85, with the full-year non-GAAP EPS projected at $6.93 to $7.13.

The company anticipates its Cloud Infrastructure Services (CIS) ARR to grow robustly in the range of 40% to 45% in constant currency by year-end 2025. Total compute revenue growth for 2025 is expected to be slightly under 15% in constant currency, primarily due to the timing of larger contracts ramping up later in the year and the strategic migration of some older cloud applications to ISV partners. This strategic shift, while causing a near-term flattening in the "other cloud applications" segment, is designed to focus internal resources on the faster-growing CIS offerings, ultimately re-accelerating overall cloud computing revenue growth to a CAGR of at least 20% over the next three to five years, aiming for it to become a third $1 billion product line by 2027.

Security revenue is projected to grow approximately 10% in constant currency for the full year 2025, with the combined ARR of high-growth security solutions (API Security and Zero Trust Enterprise Security) expected to increase by 30% to 35%. Delivery revenue declines are expected to moderate to about 10% in 2025, with further stabilization anticipated in subsequent years.

Non-GAAP operating margins are projected at approximately 29% to 30% for full-year 2025, with a long-term goal of reaching 30%+ by the end of the decade. Capital expenditures for 2025 are expected to be around 20% of total revenue, reflecting significant investments in CIS, including geo-specific builds for large customer contracts and proactive CapEx to mitigate potential tariff risks. Management also anticipates revenue acceleration and margin expansion in 2026 compared to 2025 levels, driven by the improving product mix and operating leverage.

Risks and Challenges

Despite the positive outlook, Akamai faces several pertinent risks. Global macroeconomic and geopolitical conditions continue to introduce uncertainty, potentially impacting customer spending and increasing operational costs. The ongoing Israel-Hamas war, for instance, could affect Akamai's workforce in Israel, where approximately six percent of its global employees are located. The company's largest customer (TikTok) is pursuing a DIY strategy for content delivery, which is expected to create a 1% to 2% headwind on Akamai's overall revenue growth rate for the next couple of years, although a new five-year committed relationship mitigates the risk of a potential U.S. ban.

Intense competition in both security and cloud computing markets could lead to pricing pressure and market share erosion. The multi-year go-to-market transformation, while strategic, carries execution risk and potential for disruption. Additionally, the rapid evolution of AI technologies presents both opportunities and challenges, requiring continuous innovation to stay ahead of new threats and competitive offerings.

Conclusion

Akamai Technologies stands at a pivotal juncture, successfully transforming its business model to capitalize on the burgeoning markets of cybersecurity and distributed cloud computing. The company's unique global edge network and innovative technological differentiators, particularly in AI inferencing and specialized compute services, provide a compelling competitive advantage against both traditional CDN rivals and hyperscalers. Strong financial performance in Q3 2025, driven by accelerating growth in its Cloud Infrastructure Services and high-growth security products, validates this strategic pivot.

While macroeconomic uncertainties and the evolving dynamics with its largest customer present near-term headwinds, Akamai's clear strategic roadmap, robust capital allocation, and commitment to technological leadership position it for sustained long-term growth. The ambitious targets for double-digit revenue growth and expanding operating margins by the end of the decade are underpinned by a disciplined focus on high-margin segments and a re-aligned go-to-market strategy. For discerning investors, Akamai represents an opportunity to invest in a company that is not just adapting to the digital frontier but actively shaping its future, particularly in the critical domains of AI and enterprise security at the edge.