Tom Leighton
Co-Founder & Chief Executive Officer at Akamai Technologies
Thanks, Tom. And thank you all for joining us today. Our Q1 revenue was $904 million, up 7% year-over-year and up 9% in constant currency. This solid result was driven by the continued rapid growth of our Security and Compute businesses.
Q1 non-GAAP operating margin was 30%. Q1 non-GAAP EPS was a $1.39 per diluted share, up 1% year-over-year and up 4% in constant currency. As Ed will discuss later, EPS came in at the low end of our guidance range, primarily due to an adverse tax impact of $0.03.
Since our last call with you on February 15, we've seen the development of several major global events and financial headwinds. It's remarkable how quickly the world has changed with the war in Ukraine, the significant strengthening of the U.S. dollar, escalating inflation, increasing concerns about a recession and a moderation of internet traffic growth, as many countries remove mask mandates. Since these developments are all fairly recent, they had a relatively small impact on our Q1 results but it's prudent to assume that they'll impact our results more meaningfully for the rest of the year. For example, at current spot rates, the strengthening dollar will adversely impact full year 2022 revenue by about a $100 million. About $55 million of that impact has come since we issued guidance on February 15.
As we disclosed in our 8-K filing on March 7, about 1% of our revenue comes from Russian companies or is derived from delivering traffic into Russia. We have since terminated our business with several majority state-owned Russian companies and our traffic delivered into Russia and Ukraine on behalf of other global customers has declined dramatically since the war began. As a result, it's reasonable to assume that we will no longer generate most of the revenue that had been associated with Russian and Ukraine.
Lastly, data from some of our large customers in the media and commerce verticals suggest that they may be transitioning from an environment of above normal online consumption, fueled by COVID-related restrictions to an environment with more macroeconomic uncertainty which could moderate their traffic growth in the near term.
Discussions with many of our large carrier partners across the world have reinforced the view that traffic growth rates may be moderating across the internet as a whole. In particular, they've told us that they've recently seen a moderation in their year-over-year traffic growth and that the current levels of traffic on their network are less than what they'd expected. This is consistent with what we've recently seen. Traffic is still growing at a fast pace on the Akamai platform but at a more moderate pace than we've observed over the last few years. As a result of these largely external factors and to be conservative in our outlook, we feel it's prudent to lower our expectations for the full year. Ed will provide more detail shortly.
That said and this is important to emphasize, Akamai's business continues to be very strong and highly profitable. Traffic growth on our platform remains substantial. And the data we've received from customers and carrier partners indicates that our market share remains stable or is modestly increasing. In addition, our customer churn levels continue to be at record lows. Lost annual revenue from churned accounts in Q1 amounted to less than one half of 1% of total annual revenue. And churn due to competitors was much less than half of that already small amount. As a result, our market leading delivery business continues to generate substantial cash and to power our unique edge platform.
Our security business has reached an annual revenue run rate of over $1 billion and continues to grow over 20% annually in constant currency. And we believe that our Compute business is poised to achieve about $400 million in revenue this year with a growth rate of over 60%. And perhaps most important of all the combination of our security and compute businesses now represents the majority of our revenue. We expect these businesses to generate about $2 billion of revenue this year with a growth rate of about 27% in constant currency.
I'll now talk about each of our three major business lines, starting with Security which we believe will soon become our largest business line. Our security solutions generated revenue of $382 million in Q1, one up 23% year-over-year and up 26% in constant currency. This very strong growth was driven primarily by our flagship security products, Kona Site Defender and Bot Manager. And also by our new Guardicore micro-segmentation solution to stop ransomware.
In Q1, we finalized the largest deal in Guardicore's history, valued it more than $10 million over the next three years, expanding our longtime relationship with one of the largest banks in the world. The size and scope of the deal illustrates why we're so excited about our opportunity in micro segmentation. Financial services firms in particular are frequent targets of ransomware and malware and large banks with security risks, face financial penalties from regulators if they fail to address them.
So from a compliance perspective, adopting micro segmentation can reduce risk and prevent large fines in the process. By reducing spending on their legacy static firewalls, the bank that's adopting our micro segmentation solution will free up resources to implement stronger defenses as they move to a new zero trust security architecture. And by converting to our more flexible software-based solution, they can achieve greater agility to compete with fast moving FinTech services. This example demonstrates how Guardicore can help Akamai expand longtime relationships with customers to become a more valuable strategic partner in the future. Guardicore is also helping us win new accounts and verticals such as critical infrastructure. For example, one of the largest railroads in the world recently became a multimillion dollar Guardicore customer. On April 20, cybersecurity authorities in the U.S. and other major countries warned that the war in Ukraine raises the risk of cyber-attacks.
Their recommended defenses aligned well to Akamai security solutions from micro-segmentation, DDoS protection and web app firewall. Web application attacks experienced by customers grew by nearly 200% year-over-year in Q1. The largest increase we've seen in several years, web app attacks are a critical vulnerability for any company moving to the cloud, building microservices or integrating third parties via APIs which is why app and API protection is a critical priority for major enterprises.
Akamai is a leader in Gartner's Magic Quadrant for Web App and API Protection. And in Q1, Akamai's web app and API protection on Gartner Peer Insights Customers Choice Distinction for the third year in a row, also in Q1, Forrester named Akamai a leader in it's New Wave for Micro-segmentation. As we discussed during our last call with investors in February, we will be reporting on our delivery and compute product lines separately, going forward.
In Q1, our delivery products generated revenue of $444 million, down 6% year-over-year and down 4% in constant currency. Revenue for our compute product group was $78 million in Q1, up 32% year-over-year and up 35% in constant currency. As I mentioned earlier, traffic on our platform has been growing at a substantial rate. In fact, just last week, we set another record when we delivered over 250 terabits per second of peak traffic, more than 20% higher than our previous peak reached in February.
The Akamai Edge platform continues to be the top choice for large media companies worldwide due to it's unique scale and performance. In a recent review of CDN vendors worldwide, IDC said Akamai's balanced and comprehensive portfolio spanning media and web delivery, emerging edge applications, extensive security capabilities and programmable edge addresses the needs of all enterprise segments and the developer community. The report also noted how Akamai's appetite for innovation is showcased by the fact that it continues to expand it's services and capabilities beyond CDN to address new areas.
Akamai is the market leader in delivery by far and the income generated by our delivery business helps to fund our investments in the fast growing areas of security and compute, including our game changing acquisitions of Guardicore and Linode. Our compute product group includes Akamai's capabilities in compute, storage, cloud optimization, developer tools, edge applications and now Linode which joined Akamai on March 21.
We are encouraged by how customers and industry analysts have responded to our acquisition of Linode. In fact, several of used the word transformational to sum up the potential impact of our combination of the marketplace, the CEO and Co-Founder of Macrometa, Linode partner that enables web and cloud developers to run and scale data heavy real-time cloud applications has called Akamai's acquisition of Linode, a watershed moment for the cloud because it fundamentally reconfigures the landscape in many ways. Those are his words and he says that Akamai provides that layer of reach and distribution in a way that cloud providers are very challenged to be able to do. I'm excited about that he said. Of course, we're excited too.
Linode was an early pioneer in creating the market for alternative clouds, offering developers a platform to build new applications in ways that are simple to use and affordable. With high performance, a competitive, transparent and predictable price points and backed by strong customer support after the sale. Today, nearly three quarters of enterprises are pursuing multi-cloud strategies which means that new workloads will be cloud agnostic and portable, free to move and choose the best place to be. In fact, IDC just issued a report on workload deployment optimization that urges buyers to consider suppliers of Infrastructure-as-a-Service beyond the hyperscalers. Our acquisition of Linode was the first alternative IDC highlighted as an example that can offer better cost and performance while retaining the level of redundancy and coverage demanded by enterprises.
In the coming years, we expect that customers will have a growing need for a continuum of compute from the cloud to the edge, to be closer where billions of end users are and where tens of billions of connected devices will be, especially as 5G and IoT take hold and grow. Building the bridge that enables developers to move from the cloud to the edge and have one place to build, run and secure apps is a key reason why we're expanding our offering with Linode.
At our Analyst Day, coming up on May 18, we'll talk more about the potential for substantial future growth in this new and exciting part of Akamai's portfolio. As we become the cloud company that powers and protects life online. The soundness of our overall strategy was validated in visits I had with dozens of Akamai customers across EMEA and APJ last month. Common concerns expressed by customers and prospects included the war in Ukraine, the heightened level of cyber-attacks, as well as risk to trade and supply chains, energy costs and currency evaluations. Customers express very strong interest in our security strategy and Guardicore, in particular.
As you can imagine, their boards are asking them how they can prevent a crippling ransomware attack. And Guardicore is the perfect solution. They know that malware always finds a way in, the key is identifying it and stopping it spread before it can cause serious damage. And that's exactly what Guardicore is designed to do. Most of the customers I met with, were also interested in exploring our cloud compute offering as a more affordable and easier way to build, run and secure their new applications. The tight labor market, employee attrition and the desire of employees to work remotely were also top of mind for customers in every location.
Several companies that I met with are reducing their real estate footprint. And one of them told me they could only do this because they secured their remote work environments with Akamai's enterprise application access. Here at Akamai, we face the same macro trends as our customers but in spite of the headwinds, we feel good about the growing demand from customers for our security and compute solutions, the expertise of our team in the addition of capabilities and talent from Guardicore and Linode. And how all of this gives Akamai not one but two, rapidly growing and highly synergistic businesses, further diversifying our revenue, we've also performed well on the retention of our talent, employees appreciate our flexible workplace policy and culture of teamwork.
Akamai scores very high on third-party rankings of the Best Places to Work. I'm proud of the way that our employees have managed. And I want to thank our extended team around the world for doing such a great job for our customers. They are truly making life better for billions of people, billions of times a day.
Now over to Ed for more on Q1 and our outlook for Q2 and the rest of the year. Ed?
