Frank Thomson Leighton
Co-Founder, Chief Executive Officer & Director at Akamai Technologies
Thanks, Mark. Akamai got off to a strong start for the year with our security and compute portfolios, and we continue to experience industry headwinds with our delivery product line.First quarter revenue grew to $987 million, up 8% year-over-year as reported and in constant currency. Non-GAAP operating margin was 30% and non-GAAP earnings per share was $1.64, up 17% year-over-year and up 18% in constant currency.
The fast-growing parts of our business, security and cloud computing grew to represent almost two-thirds of total revenue in Q1. And combined, they grew 22% over Q1 of 2023. The continued shift in Akamai's revenue mix towards security and compute is a clear indicator that our growth strategy is achieving the intended results. We continue to successfully leverage the market leadership and cash flow of our delivery product line to invest in our faster growing and more profitable security and cloud computing portfolios.
And we're excited about the opportunity we have ahead of us, especially with our planned acquisition of Noname Security, which we announced this week, I'll say more about Noname in a minute.
But first, looking at our security portfolio more broadly. Security revenue grew 21% year-over-year in Q1 to $491 million, driven in part by continued strong demand for our market-leading Guardicore segmentation solution. Customers who purchased segmentation from Akamai in Q1 included one of the top telcos in the US, a supermarket chain with more than 1,500 stores across Canada and a major business management software company in Latin America. Our Zero Trust Network Access solution is also seeing good traction. For example, the United States Army announced last month that it selected Akamai for Zero Trust security in Battlefield networks. After a competitive evaluation of more than 40 vendors, The Army will use Akamai for its tactical identity credential and access management to enhance defenses and high-risk operational environments and limit network access to authorized users, devices, applications and services.
In response to customer requests to bring our enterprise Zero Trust solutions together into a single platform, we've integrated Guardicore with our other enterprise security solutions to form our recently announced Akamai Guardicore platform. This new platform is the first of its kind to enable Zero Trust security through a fully integrated combination of micro segmentation, Zero Trust network access, multifactor authentication, DNS firewall and threat hunting, all designed to strengthen and simplify enterprise security with broad visibility and granular controls through a single console. We think it will appeal to customers looking to consolidate security vendors and integrate their security tools.
We also continue to see strong customer interest in our app and API security solutions. Customers who purchased Akamai API Security in Q1 included a major consumer financial services company, a US supermarket chain with more than 1,200 stores and a leading US manufacturer of electric vehicles. Last month, one of our largest customers, a well-known hyperscaler was hit with a massive denial of service attack, 24 million requests per minute. Using our rate controls and custom web app firewall rules, the customer successfully forded 99.999% of the attack traffic. That's 5 9s of protection. The customer was delighted telling us, that's an A+ by just about every calculation unlike some of our competitors who struggled to defend against far smaller DDoS attacks in recent months, Akamai is capable of protecting even the hyperscalers.
The scale of Akamai defenses and the depth of our expertise really matter for customers, who named Akamai a customer's choice for the fifth year in a row in the new Gartner Peer Insights Voice of the Customers report for cloud, web app and API protection. And soon, our suite of app and API security solutions will become even stronger with the planned acquisition of Noname Security. The use of APIs has exploded in nearly every industry driven by digital transformation, the widespread adoption of mobile phones and IoT devices and the increased sharing of data between third-party providers. The increasing use of APIs also opens up new threat factors for attackers and the need for API security.
For example, we saw API attacks on our platform more than double from January 2023 to January 2024. And IDC research now predicts that the API security market will grow at a CAGR of 34% to nearly $1 billion by 2027. That's one reason why we're so excited about our plan to acquire Noname, as we accelerate our momentum in this fast-growing segment. As one of the market-leading API security offerings, Noname delivers visibility into API business logic abuse, and contextual awareness between API requests and responses to ensure that anomalous traffic is detected, inspected and blocked when warranted.
We believe that the addition of Noname to our API security solution will offer Akamai customers enhanced attack analysis, more flexible deployment options and extensive vendor integrations. Ed will share some financial details about the acquisition shortly.Turning now to cloud computing. I'm pleased to say that 2024 is off to a great start with strong early momentum across multiple verticals. Customers are excited about our differentiated cloud platform, which offers superior performance through a more distributed footprint, cloud diversification and lower costs.
Examples of major enterprises using our cloud computing platform now include one of the world's largest e-commerce platforms, several global auto manufacturers, several large direct-to-consumer and OTT providers, several global SaaS providers, numerous travel and hospitality companies, including one of the world's largest cruise lines and a large airline in Asia, one of the largest credit unions in the US, a multinational financial services company, an iconic global corporation that manufactures and sells consumer electronics, computer software and online services, a European cybersecurity company and a leading ad tech company.
Just this week, we signed up one of the world's best-known media companies to a two-year deal worth several million dollars per year for compute. Yet another great example of major enterprises using our new cloud computing platform is Sony Group. Sony is excited about Akamai's investment into edge compute and has multiple latency-sensitive compute workloads that are running on Akamai. Current use cases include Playstation.com, leveraging edge compute to improve search engine optimization and PlayStation Direct, leveraging edge compute to ensure a fair experience for customers purchasing PlayStation hardware. We're also seeing strong early traction with our Independent Software Vendor or ISV partners. They offer solutions that run on our compute platform in which our go-to-market teams co-sell to help customers solve big challenges with a better together solution.
For example, a media workflow provider, which powers OTT video, now offers its live encoder solution on Akamai Connected Cloud. The solution is designed to increase efficiency for large-scale streaming while also lowering egress fees by as much as 90% according to their calculations. Joint customers of the offering include OneFootball, one of the world's biggest digital soccer platforms, backed by clubs such as Real Madrid, Manchester City and Bayern Munich. In partnership with an observability solution provider, we won cloud computing deals in Q1 with one of the world's leading gaming companies, a leading luxury goods brand in Europe and one of India's largest conglomerates. Their solution powers observability using Akamai cloud computing and enables real-time data ingestion at scale, lightning fast query performance and extensive data retention at a fraction of the cost of other platforms.
Another ISV partner that is providing distributed database services enabled a well-known online travel marketplace to go live in Q1 with a geo location implementation that uses Akamai's edge computing to execute code at the edge for optimal performance. The travel site invoked more than 68 billion edge compute instances in March alone. By the end of Q1, we had over 200 customers spending $36,000 or more in annual recurring revenue for our new compute services with about half spending $100,000 or more and six spending over $1 million per year, all just for compute. All of these customer counts are triple what we had in Q1 of last year. Collectively, these customers are spending over $50 million annually coming out of Q1 for our new cloud computing solutions, which is up more than four time year-over-year.
Beginning this quarter, our global enterprise cloud sales team is now led by Dan Lawrence, who joined us from AWS, where he ran data and analytics for its private equity segment. Before that, Dan ran the Americas Analytics business for five customer segments, including gaming and high-tech SaaS. Dan joined Akamai for the potential he sees to combine Akamai's trusted brand and edge computing platform with a large market opportunity in distributed cloud.
I'll now say a few words about content delivery, which represents a little over one-third of our overall revenue. Akamai remains the market leader in delivery by a wide margin, providing the scale and performance required by the world's top brands, as we help them deliver reliable, secure and near flawless digital experiences. That said, our delivery revenue was less than expected in Q1 due to slowing traffic growth across the industry and a large social media customer that is now optimizing their business to reduce costs. As a result, and as Ed will discuss shortly, we now expect our delivery revenue to decline at a higher rate this year.
As we've noted before, delivery continues to generate profits that we use to fuel our future growth. It also helps our security and cloud computing portfolios, as we harvest the competitive and cost advantages of offering delivery, security and compute on the same platform. Of course, we're not happy to see the declining revenue in our delivery portfolio. And while it remains difficult to predict exactly when that business will begin to stabilize, we believe that Akamai CDN remains a critical enabler of doing business on the Internet.
This has been the case for the past 25 years, and we remain convinced that businesses will continue to need Akamai's superior scale, reliability and security in the future as they migrate more workloads to the cloud, seek to cure their internal and external applications and look to unlock the promise of AI, often while also leveraging Akamai's security and compute capabilities. Moreover, given the exciting growth we're seeing in our security and compute portfolios, we believe it is only a matter of time before these businesses drive accelerating revenue growth for Akamai as a whole. In summary, we're pleased by the strong performance of our security and compute portfolios to start the year, and we're very excited about our potential for future growth and profitability, as we add no name to our security portfolio and as our fast-growing compute portfolio contributes a larger share of revenue.
Now I'll turn the call over to Ed for more on our Q1 results and our outlook for Q2 and the full year. Ed?
