Tom Leighton
Chief Executive Officer, Co-Founder, and Director at Akamai Technologies
Thanks, Mark. As you can see in today's press release, Akamai delivered solid performance in the 4th-quarter, with revenue coming in at $1.02 billion and non-GAAP earnings per share coming in well-above our guidance range at $1.66. I'm also pleased to report that we made excellent progress on our multi-year journey to transform Akamai from a CDN pioneer into the cybersecurity and cloud computing company that powers and protects business online. For the first time in Akamai's history, security delivered the majority of our annual revenue in 2024, surpassing the $2 billion threshold and growing at 16% year-over-year. Our cloud computing portfolio recorded $630 million in revenue last year, growing 25% over 2023. The portion of this revenue derived from our cloud infrastructure services was $230 million, up 32% over 2023. Our cloud infrastructure services primarily consist of the compute and storage solutions that we've developed based on Lenode. They also include our Edge workers product and ISV solutions running on our cloud platform. Combined, security and compute accounted for two-thirds of Akamai revenue in 2024, growing 18% year-over-year. And we exceeded all our year-end annualized revenue run-rate or ARR goals for the fastest-growing areas of the business, namely for our Guardicore platform, our API security solution and enterprise revenue for our cloud infrastructure services. These are three of the key areas that we anticipate will drive revenue acceleration for our overall business in 2026 and beyond. In the area of security, Akamai has expanded into new adjacent markets, growing beyond point solutions to provide a more holistic and comprehensive security offering. This has enabled us to expand our customer-base and to better serve enterprises with a broader portfolio for protecting infrastructure, applications, APIs and user interactions in both cloud and on-prem environments. Security growth in Q4 was driven by continued strong demand for our market-leading Guardicore segmentation solution. As more enterprises relied on Akamai to defend against malware and ransomware. The Guardicore platform ended the year with an ARR of $190 million, up 31% year-over-year and surpassing our goal of $180 million. In Q4, we signed our largest deployment to date for Guardicore with a leading IT services company in India. The solution covers 30,000 servers and nearly 300,000 endpoints. We also displaced a competitor segmentation offering that was falling short at major banks, but both Hong-Kong and in the US. More than 80% of our segmentation revenue in 2024 came through channel partners, including one of the world's leading SIs, Deloitte, which wraps its services and implementation expertise around our segmentation and API security products to create value for customers that Deloitte knows well. Together, in Q4, we won a $5.8 million contract with Petrobras in Brazil to reduce the risk of a breach and ransomware attacks. We also partnered with Deloitte to help defend two large European banks from API risks. In Q4, Akamai also signed a large contract for API Security with one of the biggest asset managers and brokerage firms in the US. Our API security solution ended 2024 with an ARR of $57 million, up from just $1 million at the end of 2023 and exceeding our goal of $50 million. Taken together, our API security solution and Guardicore platform ended 2024 with $247 million of ARR. As we look-ahead, we expect to generate continued strong growth for these products with a goal of increasing their combined ARR by 30% to 35% during the year. We also anticipate that over the next several years, the rapid growth and more meaningful amount of revenue from these new products will help offset the slower-growth of our more widely adopted and market-leading web app firewall and DDoS mitigation products. As a result, and as noted in our supplemental disclosure that Mark mentioned a few minutes ago, we believe that we can maintain a CAGR of about 10% in constant-currency for our security products over the next three to five years with typical M&A. This would bring us to more than $3 billion in security revenue by the end-of-the decade. While our security product-line is performing very well, our compute product-line is growing even faster and has a much larger addressable market. We've come a long way since we expanded into the cloud computing market in 2022 with the acquisition of. And we made a lot of progress last year achieving what we set-out to do in revenue growth, signing new enterprise customers, infrastructure deployment, product development, partner ecosystem expansion and migrating our own applications from hyperscalers to the Akamai cloud. We continued to sign compute customers at a rapid pace in Q4, including two financial software companies in the US, two of the largest retailers in the US, a cybersecurity provider in Europe, an enterprise software company in Asia, one of the largest banks in Southeast Asia and an intelligent transportation system provider in Latin-America. When we measure the progress of our cloud infrastructure services, we've been looking at the results through two lenses. Our primary lens is the uptake of these solutions by larger enterprise customers, such as those doing over $100,000 in ARR. The second lens is looking at the performance of these products across customers of all sizes. At year-end, approximately 300 enterprises were spending at least $100,000 in ARR for our cloud infrastructure services, up significantly from the year before. Collectively, these customers finished the year with an ARR of $115 million for our cloud infrastructure services, far exceeding our goal of $100 million. When you include all customers, the ARR for our cloud infrastructure services finished 2024 at $259 million, up 35% year-over-year. This is a substantial improvement from when we acquired Lenode in 2022, when the ARR from these services was approximately $127 million and was growing in the mid-teens. In addition to enabling customer growth, our work to make Lenode be enterprise-grade has allowed us to move some of our most important products from hyperscalers to Cloud. This has resulted in improved performance and savings of well over $100 million per year. Many of our customers have also significantly expanded their use of our cloud infrastructure services over the last year, some by a factor of 4x or more. By year end, 15 customers were spending over $1 million in ARR for our cloud infrastructure services, more than triple the number from 2023. And today, we announced our first customer to sign a contract committing to spend more than $100 million for our cloud infrastructure services over the next several years. We believe this is a remarkable validation of our new cloud capabilities, signaling that an extremely sophisticated buyer of cloud services is confident in our ability to execute and provide a level of service and performance comparable to or better than the hyperscalers. The recent improvements that we've made to our cloud platform will enable us to do even more for enterprise customers in 2025. For example, in the last year, we expanded Akamai's core data center footprint to 41 locations in 36 cities around the world. Next week, we plan to announce that we've enabled our new managed container service in our 4,300 plus points of presence in more than 700 cities around the world. We're currently testing this service with customer workloads in over 100 cities. We significantly upgraded our object storage solution with a 5x increase in scalability and a 10x increase in performance, making it comparable to the hyperscalers, but with much lower egress fees due to the efficiencies of our unique Edge platform. We added GPUs for a variety of AI and media use cases. One customer ran a proof-of-concept between Akamai and a hyperscaler and then chose Akamai for text-to-image AI inferencing workloads. Another customer uses our cloud for AI-powered speech recognition for its in-vehicle voice assistant. And an OTT provider switched from a hyperscaler to Akamai to provide a more cost-effective platform for its ad-supported streaming TV service. We enhanced the scale and security of our Lenode Kubernetes engine product. Traditional cloud providers run Kubernetes platforms from a relatively small number of core data centers. Akamai's differentiated approach will combine the computing power of our cloud platform with the proximity and efficiency of our edge to put workloads closer to users than any other cloud provider. Building on technology that we acquired from RedCubes last year, we released the Akamai app platform to enable developers to build and deploy highly distributed applications in just a few clicks. And we added nine compute ISV partners last year, bringing our total to 23. Our ISV partners accounted for $36 million of cloud Infrastructure services ARR at year-end. We're very excited about our opportunity for continued strong growth as we bring the power of compute to the edge with our broadly deployed network getting compute instances closer to-end users with an open platform that ensures flexibility and portability, orchestrated resource deployment to ensure efficient scaling and operations and predictable pricing with an unmatched ability to minimize egress costs. I think our rapid progress in cloud computing has summed up well in an evaluation of public-cloud platforms released last month-by IDC. Their worldwide public-cloud for IAS identified Akamai as a major player relative to industry peers, saying, Akamai has accelerated its journey into the public-cloud IAS space, transforming from a pure-play CDN provider into a formidable public-cloud competitor. In addition, Gartner positioned Akamai as an emerging leader for Gen AI specialized infrastructure in their recent innovation guide for generative AI technologies. As we noted in the supplemental materials Mark mentioned, we're supporting a growing number of AI use cases with a special focus on inferencing. While it's still early days, we're excited about the long-term revenue opportunity and we believe that the unique properties of cloud position us to be a major player in AI inferencing in the years to come. As we look-forward to the rest of 2025, our goal is to grow our total cloud infrastructure services ARR by 40% to 45% in constant-currency. We believe that the accelerating growth of our cloud infrastructure services revenue will be driven primarily by enterprise customers. Given the great success that we're having with our cloud infrastructure services, we plan to focus more of our compute investments in this area. In particular, we're in the process of migrating some of our older cloud applications for tasks such as visitor prioritization, image and video management and live-streaming workflow to ISV partners who specialize in these areas and who plan to move some or all of their workloads to Cloud. In addition to converting former competitors into important ISV partners for our cloud, we believe this transition will enable us to focus more of our internal resources on further development and expansion of our cloud infrastructure services. The transition also means that we expect that the revenue from some of our cloud applications will decline in 2025. And as Ed will discuss shortly, that we're projecting about 15% growth for our cloud computing solutions as a whole in 2025. As our cloud infrastructure services revenue continues to rapidly increase, we believe that we can reaccelerate the overall cloud computing revenue growth rate to achieve a CAGR of at least 20% over the next three to five years in constant-currency. This would make cloud computing our third $1 billion product-line by 2027. I'll next talk about content delivery, which continues to be an important generator of profit that we use to develop new products to fuel our future growth. Our unique edge platform with over 4,300 points of presence in over 700 cities continues to be a major differentiator in terms of lowering our cost, enabling massive scale and providing superior performance. And this is true not only for delivery, but also for security and compute. In security, we use the platform to provide a massive shield against all sorts of attacks without impacting performance or raising costs. And in Compute, we use the platform to provide function as a service with our Edge workers product. And as we'll announce next week, we'll also use this same platform to run our new managed container service in thousands of POPs across hundreds of cities. This capability is unique in the market and it will enable our customers to get their compute workloads much closer to users. Akamai achieved substantial cost synergies by using the same physical server to support our delivery, security and now compute services in over 4,300 POPs and 700 cities. It's a unique capability and a key reason why Akamai has been so profitable while many of our competitors have struggled. Our installed-base of delivery customers also continues to be a key contributor to our growth in security and cloud computing as we harvest the competitive and performance advantages of offering delivery, security and compute as a bundle on the same platform. That synergy works especially well for our security and compute customers that want delivery as a feature and see it as critical to their relationship with us over other vendors. In Q4, we signed many deals that included security and compute solutions alongside our best-in-class delivery. And we won back delivery business for competitors at one of the leading tech players in AI and at a leading player in streaming media. And in December, we acquired select customer contracts from Egio to offer their customers our market-leading delivery services and the opportunity to take advantage of Akamai's full range of security and cloud solutions. I'm pleased to report that we're beginning to see signs of improvement in the delivery marketplace with more customers willing to sign multi-year contracts with predictable pricing, a more stable pricing environment generally and early signs of stabilizing traffic growth. As a result, and as Ed will discuss in a few minutes, we now expect to see the year-over-year decline in delivery revenue shrink to about 10% this year. If the favorable trends hold, we should see the decline in delivery revenue continue to lessen in 2026 and beyond. As we noted in our call last May, our largest customer is navigating political challenges and is pursuing a DIY strategy. As a result, we expect that the revenue from this customer will produce a headwind of about 1% to 2% per year-on our overall revenue growth rate for the next couple of years before stabilizing at a level similar to some of our hyperscaler customers, which would be about 2% to 3% of our total revenue. That said, I'm pleased to report that we entered into a five-year committed relationship with this customer in Q4 that includes a substantial minimum annual spend, which provides greater predictability and which reduces our exposure to their political situation in the US while we're pleased with the progress that we made last year-on our multi-year transformation journey, we still have work to do to reach more new customers and to cross-sell our new capabilities in security and cloud computing to our installed-base. To drive greater top-line growth over the next three to five years, we're transforming our go-to-market strategy to align more resources with the higher-growth segments of our business and to accelerate the pace at which we add new customers. In particular, we've already begun to raise the ratio of hunters to farmers in sales and to increase the number of specialized sellers and pre-sales resources that support sales of our Guardicore platform, API security and cloud infrastructure services. We're also investing more in partner enablement as the channel has become a major source of revenue growth for us. Based on advice from one of the world's top consulting firms, we're also embarking on a major project to optimize our sales operating model, account coverage framework, compensation structure, pricing strategy and the way that we leverage our channel partner ecosystem. As we disclosed in the supplemental forecast posted on Akamai's Investor Relations website. We believe that the combination of double-digit security growth, very fast-growth in cloud computing, a stabilizing delivery business and a constantly improving product mix should enable us to accelerate revenue growth in the years ahead and to achieve double-digit revenue growth by the end-of-the decade, if not sooner. In fact, if you remove the impact of foreign-exchange headwinds and the large customer I mentioned earlier, you can see that the acceleration is already underway. Excluding these two factors, revenue growth accelerated in 2024 over 2023. And as Ed will describe shortly, we anticipate further acceleration in 2025. We believe that improving our top-line growth and product mix combined with our continued efforts to improve efficiency will help to improve operating margins, so that we can meet and then exceed our goal of 30% over the next several years. We also believe that we can resume growing our non-GAAP EPS in 2026. While we still have much to do, we're very optimistic about the future. Our cloud computing strategy is taking hold as we envisioned. Our expanded security portfolio is enabling us to deepen and expand our relationships with customers and partners, and we continue to invest in Akamai's future growth, while also maintaining strong profitability. Now I'll turn the call over to Ed for more on our results and our outlook. Ed?
