Akamai Technologies (AKAM) BofA Securities 2024 Global Technology Conference summary

Q1 performance and business segment trends

• Strong growth in compute and security segments, with compute enterprise ARR at $50M and 300% growth; delivery segment faces challenges due to slower internet traffic and industry headwinds.

• Delivery business outlook was revised downward due to persistent traffic slowdown, with Q4 expected to be seasonally stronger and summer slower.

• CDN remains a cash generator with 20%+ operating margins, supporting investments in security and compute; not expected to be a growth driver but provides strategic value and customer relationships.

• Large customer risk from a U.S. social media ban is under 1.5% of revenue and would impact 2025, not 2024.

• Market commoditization in CDN may stabilize as competitors exit, but flat to slightly declining performance is anticipated.

Security business performance and strategy

• Security is a $2B run-rate business, growing 21% last quarter and guided for ~15% growth this year; main revenue from web application protection and bot management.

• Micro-segmentation and API security are key growth drivers, with micro-segmentation at $100M run rate and 60% growth.

• Acquisition of Noname strengthens API security, combining with a prior acquisition to offer a leading solution in a market expected to reach $1B in a few years.

• Security business is highly profitable, leveraging CDN footprint and sales force, with 30%+ operating margins and strong free cash flow.

• Continued innovation and bundling expand TAM, with organic growth as the main driver and acquisitions adding 2-4% to growth.

Compute business evolution and outlook

• Compute segment includes legacy edge compute and next-gen distributed compute, with the latter enabling full-stack applications at lower cost and latency than hyperscalers.

• Internal migration from hyperscalers to own platform saved over $100M, with improved performance and cost efficiency.

• Enterprise compute ARR is $50M, growing at 300%, with potential to become the largest revenue source over time.

• Customer demand is broad across verticals, with distributed use cases and cost savings as key drivers; Asia Pacific is the fastest-growing region.

• CapEx build-out is a good, though imperfect, indicator of demand; company has capacity to support significant future growth.