What Management Said
Read the full Q2 2025 transcript ↗Please note that today's comments include forward-looking statements, including those regarding revenue and earnings guidance. The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments, and other risk factors identified in our filings with the SEC. I'm pleased to report that Akamai had an excellent second quarter, with results coming in above our guidance for revenue, margin, and earnings per share. Revenue grew to $1.043 billion, up 7% year-over-year as reported, and up 6% in constant currency.
Non-GAAP operating margin was 30%, and non-GAAP earnings per share came in at $1.73, up 9% year-over-year as reported and in constant currency, and $0.15 above the high end of our guidance range. I'm especially excited about the growth and opportunity we're seeing for our Cloud Infrastructure Services portfolio. CIS revenue in Q2 was $71 million and grew at 30% year-over-year as reported, and 29% in constant currency. We're projecting even faster growth throughout the remainder of the year as we start recognizing revenue from some large deals signed earlier this year.
It's the high-growth portion of our cloud computing product line, and it's where we're focusing our investments. Already, customers have deployed AI-powered applications on Akamai Cloud for tasks such as image classification, image optimization, speech-to-text and speech-to-image, chatbots, inference engines, virtual fitting rooms, to name a few. AI Gateway acts as a smart traffic controller that sits between users and the AI services deployed by our customers. According to news reports, one attack in April on a British retailer impacted operations for at least three months, costing the company an estimated $400 million in lost revenue.
What went well
- Total revenue grew to $1.043 billion, up 7% year-over-year as reported and 6% in constant currency, coming in above the guidance range.
- Non-GAAP EPS reached $1.73, up 9% year-over-year and $0.15 above the high end of guidance, on non-GAAP net income of $251 million.
- Cloud Infrastructure Services (CIS) revenue was $71 million, up 30% as reported (29% cc), with management projecting faster growth ahead as large signed deals begin recognizing revenue.
- Compute revenue rose to $171 million, up 13% year-over-year, driven by CIS strength.
- Security revenue reached $552 million, up 11% as reported (10% cc), led by strong Guardicore Segmentation and API Security demand.
- Combined API Security and Zero Trust enterprise security revenue was $67 million, up 48% as reported (up ~32% excluding ~$8 million of inorganic Noname Security revenue).
- Delivery revenue of $320 million was down only 3% (4% cc), well above expectations, marking continued stabilization with improved pricing and traffic trends.
- Signed multiple large CIS commitments in Q2 including a $28 million travel deal, an $18 million South Korea internet platform deal, a $19 million Japan deal, a $16 million AI-leader renewal, and a $10 million media deal.
What went wrong
- Delivery revenue still declined 3% as reported (4% cc), remaining a structural headwind even as it stabilizes.
- Full-year compute growth could come in a little below the ~15% constant-currency goal due to timing of revenue recognition on large CIS deals.
- Overall security growth is held to ~10% because a large chunk of the ~$2.2 billion security base (WAF, Prolexic DDoS, bot management) grows at a slower rate.
- Operating margin in the second half of 2025 is expected to be lower than the first half due to go-to-market sales and specialist hiring investments.
- Other cloud applications (OCA) revenue of $100 million grew only 4% and will see a one-time YoY dip in Q3 against last year's $7 million deferred-revenue benefit.
- Q2 gross margin was flattered by an unusual ~$5 million one-time bandwidth/colocation credit benefit that will not recur, and QCP partner resales plus new colocation costs will pressure gross margin going forward.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Q3 2025 | $1.035B-$1.050B (up 3%-4% reported, 2%-4% cc) |
| Cash gross margin | Q3 2025 | ~72%-73% |
| Non-GAAP operating expenses | Q3 2025 | $327M-$332M |
| EBITDA margin | Q3 2025 | ~41% |
| Non-GAAP operating margin | Q3 2025 | ~28% |
| Non-GAAP EPS | Q3 2025 | $1.62-$1.66 |
| Non-GAAP tax rate | Q3 2025 | ~19% ($54M-$55M taxes) |
| Fully diluted share count | Q3 2025 | ~145 million shares |
| CapEx | Q3 2025 | $227M-$237M (~22% of revenue) |
| Non-GAAP depreciation | Q3 2025 | $139M-$141M |
| Revenue | FY2025 | $4.135B-$4.205B (up 4%-5% reported, 3%-5% cc) |
| CIS ARR growth (cc, at year-end) | FY2025 | 40%-45% |
| Security revenue growth (cc) | FY2025 | ~10% |
| Zero Trust + API Security combined ARR growth (cc) | FY2025 | 30%-35% |
| Compute revenue growth (cc) | FY2025 | could be a little less than ~15% |
| QCP partner-resale impact on gross margin | FY2025 | ~70 bps drag |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +7% reported (+6% cc) | Delivery stabilization plus security and compute growth; $1.043B, above guidance. |
| Security revenue | +11% reported (+10% cc) | $552M; led by Guardicore Segmentation and API Security demand. |
| API Security + Zero Trust (combined) | +48% reported (+49% cc; ~32% organic) | $67M; ~$8M inorganic from Noname Security acquisition. |
| Compute revenue | +13% reported and cc | $171M; driven by Cloud Infrastructure Services strength. |
| Cloud Infrastructure Services (CIS) | +30% reported (+29% cc) | $71M; Linode-based compute/storage, EdgeWorkers and ISV offerings; near ~$300M ARR. |
| Other cloud applications (OCA) | +4% reported (+3% cc) | $100M; mature products (Image & Video Manager, Cloudlets, LegacyNet Storage) roughly flat. |
| Delivery revenue | -3% reported (-4% cc) | $320M; well above expectations on better pricing and traffic (video, software download). |
| International revenue | +10% (+8% cc) | $516M; 49% of total revenue; FX +$8M YoY. |
| Non-GAAP operating margin | 30% | Above guidance; aided by lower bandwidth costs and a ~$5M one-time credit benefit. |
| Non-GAAP EPS | +9% reported and cc | $1.73; higher revenue, lower bandwidth costs, higher interest income and lower share count. |
| Non-GAAP net income | n/a | $251 million for the quarter. |
| CapEx | n/a | $214M, 21% of revenue. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Cloud Infrastructure Services (CIS) acceleration | Early-stage Linode-based cloud build-out | $71M at +30%; several large multi-year committed deals signed, driving projected 40%-45% year-end ARR growth and acceleration into 2026. | — |
| AI at the edge / inference | Emerging opportunity | New AI Gateway and Firewall for AI launched; 4,300+ PoPs positioned for low-latency GenAI inference, personalization and agents; dozens of PoCs underway. | — |
| Microsegmentation / Zero Trust security | Guardicore establishing leadership | Named customer favorite in Forrester Wave Zero Trust Platforms; strong demand off ransomware risk; ~30%-35% ARR growth. | — |
| API Security | Growing add-on | Recognized leader by KuppingerCole; extremely strong pipeline as natural WAF upsell; large greenfield opportunity across enterprises' thousands of exposed APIs. | — |
| Delivery stabilization | Persistent structural decline | Two sequential growth quarters; four major pre-pandemic CDN competitors gone, healthier pricing and traffic; targeting mid-single-digit declines trending toward stable. | — |
| Go-to-market transformation | Standard sales motion | Adding hunter reps, product specialists and channel partners; near-term margin drag but core to capturing security/compute growth. | — |
| Capital return and balance sheet | Ongoing buybacks | $300M / 3.9M shares repurchased in Q2 ($800M YTD); refinanced $1.15B converts with $1.725B 0.25% notes due 2033; ~$1.2B authorization remaining; ~$1.6B cash. | — |
| Edgeo acquisition integration | Newly acquired CDN assets | Traffic migrated by mid-January; tracking to (or above) the $85M-$105M range with new-logo upsell playing out as planned. | — |
Q&A Summary
How did compute perform in H1 versus expectations, and why might 2025 finish below the ~15% goal?
CIS is meeting/exceeding expectations with many large customers signed; full-year compute could land slightly below 15% purely on timing of when that revenue starts recognizing, but ARR is on a clear 40%-45% acceleration path off a ~$300M base.
Is the delivery improvement sustainable, and is it helped by CDN competitors exiting?
Yes; four of the biggest pre-pandemic competitors are gone and Akamai took the contracts it wanted, plus better traffic and a less irrational pricing environment. Near term expects mid-single-digit declines, long term aims for stable/steady.
What is the structure of the large CIS contracts giving confidence in the second-half ramp?
Three or four very large contracts, all with minimum commitments and a revenue ramp through the year; high confidence, with revenue timing dependent on how quickly customers migrate applications.
Does the 40%-45% ARR target assume only minimum commitments?
No; ARR is defined simply as Q4 revenue x4, reflecting actual revenue generated from those contracts in Q4, not just the minimum commitment.
How much of the guidance raise is from adding TikTok, and what's happening in non-Linode compute (OCA)?
TikTok is ~$40M-$50M annually, roughly half in the back-half guide, but the raise is broad-based strength. OCA has puts and takes: some business being transferred to compute partners for large commitments, and LegacyNet Storage (~$50M) is end-of-life, migrating toward CIS.
Can you quantify the OCA revenue being transferred to partners?
Not disclosed; it is not overly significant, a smaller percentage of the roughly $100M OCA total.
How much visibility/control does Akamai have over when customers move applications onto CIS?
It varies; some deals required Akamai to build capacity (on schedule), but most timing is in the customer's court (POC windows, change moratoriums). High confidence in total contract size and upside; only the exact recognition month is uncertain.
What does the CIS pipeline look like into the second half?
Growing and healthy across verticals and geographies, with larger deal sizes than typical security/delivery, plus new-logo and existing-customer growth. API Security pipeline in particular is extremely strong as a natural WAF upsell.
What drives API and microsegmentation demand, and why isn't overall security growth stronger?
Large greenfield: enterprises have thousands of exposed APIs and need visibility, and ransomware makes microsegmentation the last line of defense (30%-35% ARR growth). But a big share of the ~$2.2B security base (WAF, Prolexic, bot) grows slower, holding the total to ~10%.
What is the AI security opportunity and how do you compare to competitors?
Firewall for AI is early but differentiated, protecting user-facing AI apps against prompt injection and misuse; dozens of PoCs underway with strong feedback, alongside API Security and WAF benefiting from new AI applications.
How much did Edgeo contribute and how is it tracking versus the $85M-$105M range?
Hard to isolate given customer overlap, but tracking as hoped or a little better, likely toward the higher end, with new-logo upsell emerging and the acquisition thesis playing out.
What is driving two consecutive sequential delivery growth quarters, and is it one-time?
Not Edgeo (traffic migrated by mid-January); it's stronger-than-expected traffic growth (video and software download) plus moderating pricing declines and less competition, i.e., a healthier market.
What would compute growth have been adjusting for legacy revenue transferred to partners?
Minimal difference; the transferred revenue is down only slightly in aggregate, so the impact is very small.
More on Akamai Technologies Inc
Reported 2025-08-07 · figures from the Akamai Technologies Inc Q2 2025 earnings call.
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