Robust Q4 Performance and Security Milestone
Akamai Technologies (NASDAQ: AKAM) posted impressive Q4 2024 financial results, exceeding market expectations with revenue of $1.02 billion and non-GAAP EPS of $1.66. Security revenue surpassed the $2 billion annual mark for the first time, growing 16% year-over-year, while cloud computing revenue surged 25% to $630 million.
Security emerged as the dominant revenue driver, fueled by strong demand for Guardicore segmentation solutions, which achieved an annual recurring revenue (ARR) of $190 million, up 31% year-over-year. API security also saw explosive growth, reaching an ARR of $57 million from just $1 million in 2023, surpassing its $50 million target.
Cloud Computing Gains Momentum
Akamai’s cloud computing business continued its rapid expansion, with cloud infrastructure services ARR increasing 35% year-over-year to $259 million. The company exceeded its $100 million ARR target for enterprise customers, achieving $115 million, underscoring its growing presence in the cloud space.
CFO Ed McGowan noted that Q4 compute revenue grew 24% year-over-year, while security revenue rose 14%. Delivery revenue, however, declined 18% due to shifting traffic trends, though management highlighted stabilization signs.
Strong Outlook for 2025
Looking ahead, Akamai expects cloud infrastructure services ARR to grow 40%-45% in 2025, driven by continued enterprise adoption. Compute revenue is projected to expand by 15% in 2025, with a long-term CAGR target of 20% over the next three to five years.
Security ARR for Guardicore and API Security combined is anticipated to grow 30%-35% in 2025, while overall security revenue is expected to increase by approximately 10% in constant currency. The company has set full-year 2025 revenue guidance between $4 billion and $4.2 billion, with non-GAAP EPS ranging from $6.00 to $6.40.
Key Financial Highlights
- Q4 revenue: $1.02 billion (vs. $1.015 billion estimate)
- Non-GAAP EPS: $1.66 (vs. $1.52 estimate)
- Security revenue: $535 million, led by Zero Trust Enterprise and API security solutions contributing $205 million, up 51% year-over-year
- Compute revenue: $167 million, including cloud infrastructure services at $65 million
- Delivery revenue: $318 million, declining 18% year-over-year, though pricing trends are stabilizing
Analyst Reactions and Market Sentiment
Wall Street analysts showed a mix of optimism and caution, with a keen focus on the sustainability of compute growth and the stabilization of delivery revenues. CEO Tom Leighton and CFO Ed McGowan provided measured responses, reinforcing confidence in long-term security and cloud strategies while acknowledging near-term challenges in the delivery segment.
During the Q&A, UBS’s Roger Boyd inquired about the competitive landscape in Akamai’s $100 million cloud infrastructure deal, with Leighton emphasizing the company’s edge presence and pricing advantages. Bank of America’s Madeline Brooks sought clarification on a major five-year contract, which was confirmed as the same deal.
Strategic Growth and Market Positioning
Compared to previous quarters, Akamai demonstrated a stronger stance on long-term security and compute growth. Guardicore and API security solutions outperformed expectations, reinforcing Akamai’s position in the cybersecurity sector. Meanwhile, compute revenue growth remained solid, albeit slightly slower than the previous quarter, as older applications transitioned to ISV partners.
While delivery revenue remains a drag on overall performance, management highlighted improved pricing trends and stabilization signals. The company continues to invest in enterprise sales, strategic partnerships, and infrastructure expansion to accelerate growth in its high-margin security and cloud businesses.
Challenges and Risk Factors
Despite strong financial results, management flagged macroeconomic headwinds, foreign exchange volatility, and tariff risks as potential challenges. The delivery business remains under pressure, with weak traffic growth trends and competition affecting revenue. Analysts also raised concerns about potential disruptions from Akamai’s ongoing sales reorganization.
Q1 2025 Guidance and Key Takeaways
For Q1 2025, Akamai forecasts revenue between $1 billion and $1.02 billion, with non-GAAP EPS guidance set at $1.50 to $1.55. Compute and security are expected to drive overall performance, with delivery revenue showing early signs of stabilization.
Akamai strategic focus on high-growth areas, including cloud computing and cybersecurity, positions the company for continued expansion. Investors and analysts will closely watch how Akamai executes its ambitious 2025 roadmap in a dynamic market landscape.
