What Management Said
Read the full Q1 2026 transcript ↗Please note that today's comments include forward-looking statements that include 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. In just a few months, we've achieved major milestones for our cloud computing strategy, marking a definitive turning point in the growth and evolution of our business. We have a large and rapidly expanding pipeline of prospects who are looking to Akamai for cloud solutions, including some with very large needs.
To satisfy this strong and growing demand for our Cloud Infrastructure Services, we expect to continue to build out both our physical infrastructure and our cloud sales and support teams. As Ed will talk about in a few minutes, we now anticipate significant acceleration of our overall revenue growth heading into 2027 and beyond. Turning to security, I'm pleased to report that Q1 was also strong for our security portfolio, where revenue grew 11% year-over-year as reported and 9% in constant currency. Our security growth was led by strong demand for our market-leading Web Application Firewall, API Security, and Guardicore Segmentation solutions.
Our WAF in particular is seeing growing interest from customers eager to deploy the latest defenses for vulnerabilities that could be exposed by the ever-strengthening frontier models and AI-powered attacks. For example, there are many legacy systems and billions of deployed devices that can't be patched. The WAFs need to be deployed across a vast distributed platform, and this need provides a unique advantage for Akamai when compared to the competition. In closing, we're thrilled by the way our growth strategy has taken hold and is generating transformative opportunities for our business.
What went well
- Signed the largest customer deal in Akamai history: a landmark seven-year, $1.8 billion commitment for Cloud Infrastructure Services (CIS) from a leading frontier model company, announced on the call.
- Cloud Infrastructure Services revenue reached $95 million, up 40% year-over-year as reported (39% in constant currency), the fastest-growing part of the business.
- Security revenue hit $590 million, up 11% year-over-year as reported (9% in constant currency), led by Web Application Firewall, API Security, and Guardicore Segmentation.
- Total revenue of $1.074 billion, up 6% year-over-year as reported (4% in constant currency), a strong start to the year.
- Unveiled the industry's first global-scale implementation of NVIDIA's AI Grid at GTC in March and began rolling out thousands of NVIDIA RTX PRO 6000 GPUs, with NVIDIA citing Akamai as a vital player in the AI infrastructure ecosystem.
- Management now expects total-company annual top-line revenue growth to reach double digits in 2027, driven by the $1.8B win, the $200M four-year CIS deal announced in February, and a rapidly accelerating pipeline.
- Large security renewals and expansions signed in Q1, including a $24 million bot-protection expansion with a leading U.S. retailer, an $80 million two-year expansion with a top video game company, and a $20M+ expansion with a Korean consumer electronics company.
- Won top analyst recognitions: 99% recommendation as Customer's Choice in Gartner Peer Insights for microsegmentation, and the only provider named Customer's Choice in Gartner Peer Insights for API Protection.
What went wrong
- Delivery and other cloud applications revenue fell to $389 million, down 7% year-over-year as reported (down 8% in constant currency), driven by the wraparound impact of the 2025 Edgio transaction.
- Non-GAAP EPS of $1.61 declined 5% year-over-year (both as reported and in constant currency), and non-GAAP net income of $239 million was pressured by CIS-related investment costs.
- Profitability weighed down by expanded colocation investments, higher depreciation, and increased headcount all tied to the strategic CIS build-out; operating margin held at 26% with no near-term expansion expected.
- Management is deliberately investing slightly ahead of revenue, driving CapEx sharply higher (to ~40%-42% of revenue for FY2026) and compressing free cash flow during the heavy investment years.
- Some large CIS deals may run at operating margins below 30%, diluting blended company margins as the mix shifts toward big committed-capacity contracts.
- Current GPU pipeline already exceeds existing and projected inventory; additional GPU orders may be needed but could slip into next year given chip delivery lead times, and are not yet factored into guidance.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Total revenue | Q2 2026 | $1.075B-$1.1B, up 3%-5% YoY (as reported and constant currency) |
| Cash gross margin | Q2 2026 | approximately 70%-71% |
| Non-GAAP operating expenses | Q2 2026 | $346M-$357M |
| EBITDA margin | Q2 2026 | approximately 38%-39% |
| Non-GAAP depreciation expense | Q2 2026 | $144M-$146M |
| Non-GAAP operating margin | Q2 2026 | approximately 25%-26% |
| Non-GAAP EPS | Q2 2026 | $1.45-$1.65 (assumes ~18.5% tax rate, ~146M diluted shares) |
| CapEx | Q2 2026 | $433M-$453M, approximately 40%-41% of revenue |
| Total revenue | FY 2026 | $4.445B-$4.55B, up 6%-8% as reported (5%-8% constant currency) |
| CIS revenue growth | FY 2026 | raised to at least 50% YoY growth in constant currency |
| Security revenue growth | FY 2026 | high single digits YoY in constant currency |
| Delivery revenue growth | FY 2026 | decline in the mid single digits YoY in constant currency |
| Non-GAAP operating margin | FY 2026 | approximately 26% at today's FX rates |
| CapEx | FY 2026 | approximately 40%-42% of total revenue (includes $700M for the $1.8B contract) |
| Non-GAAP EPS | FY 2026 | $6.40-$7.15 (assumes ~18.5% tax rate, ~147M diluted shares) |
| Revenue from $1.8B win | Q4 2026 | expected to ramp starting Q4, approximately $20M-$25M in Q4 |
| Total-company top-line revenue growth | FY 2027 | expected to reach double digits |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +6% as reported (+4% constant currency) | $1.074 billion; strong CIS and security growth partly offset by delivery decline; FX added $19M YoY. |
| Cloud Infrastructure Services (CIS) revenue | +40% as reported (+39% constant currency) | $95 million; robust start driven by CIS wins across industries, geographies, and use cases with a rapidly building AI-specific pipeline. |
| Security revenue | +11% as reported (+9% constant currency) | $590 million; led by API Security, Guardicore Segmentation, and largest product Web Application Firewall amid AI-driven threat urgency. |
| Delivery and other cloud applications revenue | -7% as reported (-8% constant currency) | $389 million; in line with expectations, driven by the wraparound impact of the 2025 Edgio transaction; rate of decline expected to moderate. |
| International revenue | +9% as reported (+5% constant currency) | $530 million, 49% of total revenue; FX contributed a positive $19M year-over-year. |
| Non-GAAP net income | -5% (as reported and constant currency) | $239 million; reduced by expanded colocation investments, higher depreciation, and increased headcount tied to CIS strategic investment. |
| Non-GAAP EPS (diluted) | -5% (as reported and constant currency) | $1.61 per diluted share; same CIS investment cost drivers as net income. |
| Non-GAAP operating margin | 26% (in line with expectations) | Held steady as investment ramps to capture growth; expected to remain in this range for the rest of 2026. |
| Capital expenditures | $206M, 19% of revenue | Slightly below guidance due to timing (some spend shifted to Q2) and favorable, lower-than-expected component pricing. |
| Share repurchases | ~$206M, ~2M shares | Bought back roughly 2 million shares; ~$975M remaining on repurchase authorization; strategy to offset equity dilution and be opportunistic. |
| Cash, equivalents and marketable securities | ~$1.7 billion | As of March 31; plus a $1 billion line of credit available, funding build-outs from internal capital so far. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| AI as the growth turning point for the cloud strategy | Building a distributed compute/inference platform desired by large enterprises | Definitive turning point: landmark $1.8B win plus $200M CIS deal validate the strategy; double-digit total-company growth expected in 2027 and beyond. | — |
| NVIDIA partnership and distributed AI inference at the edge | Traditional distributed platform for delivery and security | First global-scale NVIDIA AI Grid implementation; thousands of RTX PRO 6000 GPUs rolling out to push AI inference to the edge within milliseconds of end users. | — |
| Security demand amplified by AI threats | Steady security growth from WAF, API Security, Guardicore | Unprecedented urgency as AI enables larger attacks (millions of requests/sec from millions of IPs); WAF in surging demand; CISOs scrambling to protect apps, agents, and APIs. | — |
| Delivery business role | Legacy CDN, harvested for cash | Still a cash generator plowed into cloud growth; declining on Edgio wraparound but synergistic; potential future upside from agent-generated video traffic. | — |
| Dedicated-capacity vs. on-demand GPU model | General cloud/compute offering | Supports both; customers increasingly prefer dedicated committed capacity for better pricing and to lock in scarce GPU supply; $1.8B deal is committed capacity billed ratably like a subscription. | — |
| Investing ahead of revenue / CapEx surge | Disciplined CapEx around 19%-20% of revenue | CapEx jumping to ~40%-42% of FY2026 revenue including $700M for the $1.8B win; ~$800M-$825M total over 12 months; possible additional GPU orders not yet in guidance. | — |
| Power and colocation capacity | Concern about scaling infrastructure | Not concerned about access to power or colo; strong data-center relationships, excellent credit, takes large colo chunks and helps partners build out; CDN/security use little power vs. GPUs. | — |
| Capital allocation and funding | Buybacks to offset dilution, opportunistic M&A | Funding build-outs from internal cash ($1.7B on hand, $1B credit line); open to capital markets if large deals require, but nothing announced yet. | — |
Q&A Summary
On the landmark $1.8B deal, who was the competitive set (hyperscalers or neo clouds), and what use cases/workloads?
Tom Leighton declined to detail the specific deal but said CIS primarily competes with hyperscalers and neo clouds. Customers choose Akamai for proven ability to manage and scale complex distributed systems, secure data center space globally, and interconnect with the largest delivery network and leading security. Every deal is competitive, but unique capabilities across 4,300 locations in 700 cities and 130 countries drive a strong pipeline and large wins.
What are you seeing in security demand around conversion rates, sales cycles, and urgency against an AI-fueled attack landscape?
Leighton said he's never seen CISOs more agitated or urgent. Meetings with the world's biggest CISOs and CEOs reveal deep concern about attackers gaining advanced AI/frontier models, uncovering many more vulnerabilities and zero-days. Many are scrambling to ensure their apps, agents, and APIs are protected by Akamai; most major banks rely on Akamai and face a big wave of new attacks.
Is the mega-deal a highly distributed use case or served from sub-10 data centers?
Leighton wouldn't discuss the specific deal but stressed Akamai's unparalleled distributed architecture is the key value proposition — placing agents, applications, and business logic close to users and data for low latency and scalability, especially for video processing/generation that needs scale.
Why might CapEx have to increase mid-year, and what does that mean?
Ed McGowan explained the GPU pipeline is very strong and exceeds current inventory. Akamai wants to fulfill that pipeline, but chips take time to arrive and an order could slip into next year. He'll wait another quarter; if positioned to place an order and receive it by year-end, they will and will inform investors. He framed it as a bullish comment, not wanting to surprise investors with a possible additional order (a couple hundred million).
On CapEx for the mega-deal over seven years, is the supply locked in given rising memory costs, or are you exposed to future price increases?
McGowan said they worked closely with both sides and secured the supply chain, expecting to receive all goods needed to deliver the seven-year service within the next 12 months, with the majority of CapEx this year. Contracts include mechanisms to handle price increases six months out. Revenue is a set amount of committed capacity with no usage component, recognized like a subscription once ramped.
Given the OpenAI Sora video shutdown in March, any effect on delivery or compute forecasts?
Leighton said no impact at all. Akamai partners with OpenAI on security vulnerabilities but OpenAI is not and has never been a customer.
How does the big deal affect on-demand GPU capacity, and how do you balance committed vs. incremental demand?
Leighton said Akamai supports both on-demand (per token or per VM hour) and large tranche deals. It's not really a trade-off at this point; as more GPUs are needed, they may purchase more.
Why take a dedicated-capacity approach when spot/rental GPU rates are more attractive?
Leighton said Akamai does both. Big long-term commit deals are attractive (guaranteed commit, though lower pricing); on-demand carries higher pricing but more expense. McGowan added customers are driving the dedicated model — they want dedicated GPU capacity given marketplace scarcity, accepting slightly better pricing to lock in capacity; it's market-driven.
What are the sources of funding for these larger CapEx build-outs — internal or external capital?
McGowan said no issues financing build-outs from internal capital so far; Akamai is very profitable and cash-generative (though cash flow dips in heavy investment years, with phenomenal free cash flow afterward). They have $1.7B cash and a $1B credit line, excellent credit, and could raise capital if large deals require, but nothing has been announced.
What suddenly changed to bring these large CIS deals to your doorstep, and does it change how you think about other segments?
Leighton said this has been the strategy all along — deploying a distributed inference/compute platform desired by large enterprises, who spend 10x or more on compute than on traditional delivery and security. The platform has reached the point where it can deliver, and he expects more of this going forward.
Is the $1.8B contract a public cloud opportunity or specifically Akamai Inference Cloud, and how is RPO booked / is it take-or-pay?
Leighton couldn't detail the specific deal but noted Inference Cloud and cloud deals span GPUs and CPUs, matching the right hardware and location per application. McGowan said it is dedicated-capacity (not pay-by-hour); revenue is recognized ratably once capacity is set up — some this year, partial next year. RPO will build, with some next quarter and the full amount in RPO once fully delivered, with nuance in the first 12 months.
Has the thesis on delivery secular growth changed given the rise of agents, or is it still harvested for profitability?
Leighton said the biggest growth driver from agent proliferation is the compute/cloud platform, then security (agents create a new vulnerability surface needing WAF, API Security, and special AI security — a tailwind for the Security Technology Group). Agent-generated traffic won't swing delivery bits much unless it involves video generation (e.g., showing a shopper in a sweater), which is early-stage. Delivery remains synergistic and a big cash generator funding cloud growth.
Is the full $1.8B all revenue, any offset to CapEx, and how many locations is Inference Cloud built to?
McGowan said it's all revenue with no CapEx offset. Leighton said Inference Cloud covers all 4,300 locations with Functions as a Service serverless everywhere; managed container service runs in well over 100 cities (could scale to all 700); full IaaS in several dozen cities, a couple dozen equipped with the new 6000 GPUs. Orchestration routes each workload to the most efficient resource closest to the user — the NVIDIA AI Grid vision, like an electrical grid for AI.
Do you need more GPUs for the new deal or the broader pipeline, and what's the cost framework?
McGowan clarified all CapEx to satisfy the $1.8B deal is in guidance; the additional GPU purchase comment relates to the broader pipeline and execution speed. Demand is very strong with customers wanting from a couple hundred to 1,000+ GPUs. The last such order was around $250 million in CapEx; he wouldn't size the potential new one but hopes it's a big number reflecting strong demand.
How should we think about gross margin and operating margin impacts of these large deals into 2028?
McGowan said for large committed deals the biggest cost is depreciation over time; cash gross margin costs (colocation, some bandwidth/networking, some people) are much lower and scale well, so cash gross margin and EBITDA margin should expand a bit. Some large deals may run sub-30% operating margin while rented GPU-as-a-service is higher; OpEx scales across larger customers. They'll prioritize capitalizing on growth over margin expansion for the next year or two, with free cash flow margins improving naturally over time.
On power/megawatts, how much is for non-compute and what's the plan through 2027?
McGowan said the analyst's math on power required for the deal was incorrect and significantly lower. CDN and security use little power (kilowatts, maybe a megawatt or two for big CDN deployments); compute is far greater, especially thousands of GPUs per location. Typical larger deployments (40 core compute locations) run 5-10 MW expandable to 20-30 MW. He's not concerned about access to power or colo given strong data-center relationships and excellent credit, and noted increasingly power-efficient hardware; power dynamics differ by product and are factored into every deal.
More on Akamai Technologies Inc
Reported 2026-05-07 · figures from the Akamai Technologies Inc Q1 2026 earnings call.
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