AKAMAI TECHNOLOGIES INC Q3 FY2024 earnings call

Security - Achieved security annual revenue run rate exceeding $2 billion. Strong customer interest with significant contracts like $70M deal with a large financial institution, $6M upgrade for a chemical producer, etc. Leveraging generative AI to enhance security solutions. Thwarted large DDoS attacks and saw strong interest in Prolexic service. ### Compute - Q3 compute revenue grew 28% YOY to $167M. Strong new customer additions for enterprise compute solutions. On track for enterprise compute solutions to have over $100M annualized run rate by year end. Notable wins in various regions including US retailers, European travel platforms, Latin American banks, etc. ### Delivery - Impacted by macroeconomic headwinds, but positioned to capitalize on recovery. Disciplined profitability, cross-selling opportunities, and reinvesting cash flow from delivery into growth areas.

Compute: Q3 compute revenue was $167 million, up 28% year-over-year in constant currency. Annualized revenue run rate for enterprise compute solutions is on track to exceed $100 million by year end. Security: Q3 security revenue was $519 million, a 14% year-over-year increase in constant currency. Security annual revenue run rate exceeded $2 billion. Compute and security combined account for more than two thirds of total revenue. Delivery: Q3 delivery revenue was $319 million, a 16% year-over-year decline in constant currency, impacted by macroeconomic headwinds in video streaming and gaming.

Q4 - Projected revenue range $995M to $1.020B (flat to up 3% YOY). Cash gross margins expected 72%-73%. Q4 non-GAAP operating expenses $321M-$327M, EBITDA margin 40%-41%, non-GAAP operating margin 27%-28%, non-GAAP EPS $1.49-$1.56. ### Full-year 2024 - Expected revenue $3.966B-$3.991B (up 4-5% YOY). Security growth 15-17% CC. Compute revenue growth increased to higher end of prior guidance, ~25% CC. Non-GAAP operating margin ~29%, non-GAAP EPS $6.31-$6.38.

• Macroeconomic trends impacting revenue. - Integration of acquisitions. - Geopolitical developments affecting business. - Competition and pricing pressures in delivery segment.

Q: Maybe, Tom, in your prepared remarks, you talked a little bit about some of the traction that you're having on the AI side, including with AI companies. Can you help us understand philosophically, how you're thinking about the role that GenAI could play in security on both sides of the equation...

A: GenAI is already in the hands and being widely used by nefarious actors, and that's one reason why we're seeing a lot more attacks and penetrations. On our side of the house, we've been using AI and ML really forever in our security products. We use it for anomaly detection, bot detection. We're using it in - already in two of our products, security products with GenAI as an interface.

Q: Since you acquired the Lumen CDN last year, you're a little over a year ago, did you get any network elements with that? And is there any aspect of their new networks that they're building to support their AI partners that they're having conversations with you about...

A: So with the Lumen acquisition, there was no acquisition of any assets aside from the customer contracts. So there was no network acquisitions. And as far as any partnership discussions we have with Lumen, we're not prepared to talk about anything but there's nothing specific to what you mentioned there.