Akamai Technologies - $AKAM - Earnings Analysis: Strong growth in security revenue, driven by Guardicore platform and API security solutions.

Business Model

Akamai generates revenue through three primary solution categories: Security, Delivery, and Compute. Security revenue is derived from solutions safeguarding enterprise data and applications. Delivery revenue comes from content delivery network services. Compute revenue is generated from cloud computing solutions.

Revenue Sources

• Security solutions, including Infrastructure Security, Application Security, Zero Trust Enterprise Security, and API Security.
• Delivery solutions, including Media Delivery, Website Acceleration, and Live Streaming.
• Compute solutions, including Cloud Infrastructure Services and Other Cloud Applications.

Income Statement Analysis

• Revenue increased by 1.52% from Q3 2024 to Q4 2024.
• Income from Operations increased significantly by 109.61% from Q3 2024 to Q4 2024.
• Net Income increased significantly by 141.60% from Q3 2024 to Q4 2024.

Balance Sheet Analysis

• Total Assets increased by 4.73% from December 31, 2023, to December 31, 2024, indicating overall growth in the company's resources.
• Total Stockholders’ Equity increased by 6.12% from December 31, 2023, to December 31, 2024, reflecting increased ownership value for shareholders.
• Total Liabilities increased by 3.54% from December 31, 2023, to December 31, 2024.

Cash Flow Analysis

• Net Cash Provided by Operating Activities decreased by 12.42% from Q3 2024 to Q4 2024.
• Net Cash Used in Investing Activities increased significantly by 110.09% from Q3 2024 to Q4 2024.
• Net Cash (Used in) Provided by Financing Activities decreased by 13.29% from Q3 2024 to Q4 2024.
• Net Decrease Increase in Cash, Cash Equivalents and Restricted Cash decreased significantly by 143.44% from Q3 2024 to Q4 2024.

Capital Allocation

Akamai's capital allocation strategy includes share repurchases to offset dilution from employee equity programs, opportunistic M&A, and investments in innovation. In Q4 2024, $138 million was spent to repurchase 1.4 million shares. The company has $2 billion remaining on its repurchase authorization.

Management Commentary

Akamai delivered solid performance in the fourth quarter with revenue coming in at $1,020,000,000 and non GAAP earnings per share coming in well above our guidance range at $1.66

For the first time in Akamai's history, security delivered the majority of our annual revenue in 2024, surpassing the $2,000,000,000 threshold and growing at 16% year over year.

We expect that the revenue from this customer (largest customer) will produce a headwind of about 1% to 2% per year on our overall revenue growth rate for the next couple of years before stabilizing at a level similar to some of our hyperscaler customers, which would be about 2% to 3% of our total revenue.

Overall Sentiment: Positive, driven by strong performance in security and compute, but tempered by challenges in the delivery business and the impact of a large customer's DIY strategy.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.