Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Akamai Technologies Inc (AKAM, Financial) reported strong growth in its security portfolio, with revenue reaching $499 million in Q2, up 15% year-over-year.
- The company's compute revenue grew to $151 million, marking a 23% increase year-over-year, indicating strong early momentum in its cloud offerings.
- Akamai Technologies Inc (AKAM) achieved a non-GAAP operating margin of 29%, maintaining robust profitability.
- The company successfully integrated Noname Security, enhancing its API security solutions and expanding its market presence.
- Akamai Technologies Inc (AKAM) is experiencing strong customer interest in its new Akamai Guardicore platform, which offers a comprehensive zero trust security solution.
Negative Points
- Delivery revenue declined by 13% year-over-year, reflecting ongoing challenges in this segment due to macroeconomic and geopolitical headwinds.
- The company faces a challenging macroeconomic environment and geopolitical tensions, which could impact future business performance.
- Akamai Technologies Inc (AKAM) anticipates a modest uptick in traffic in Q3, but expects a more muted seasonal impact in Q4 compared to previous years.
- The integration of Noname Security is expected to be dilutive to non-GAAP EPS by approximately $0.04 to $0.05 for the full year 2024.
- Foreign exchange fluctuations had a negative impact on revenue, with a $10 million year-over-year impact.
Q & A Highlights
Q: Can you discuss the trajectory and future potential of Akamai Connect to Cloud, especially given the $100 million revenue milestone?
A: Thomson Leighton, CEO, expressed optimism about the rapid early adoption of Akamai Connect to Cloud, which started selling in earnest this year. They aim to reach $100 million ARR by the end of the year and anticipate strong growth driven by enterprise customers, tapping into a large market opportunity.
Q: Are the current headwinds in the delivery business cyclical or structural in nature?
A: Thomson Leighton, CEO, believes the current headwinds are not long-term. While traffic growth may be slower than during COVID times, delivery remains a profitable business. The company intends to maintain market leadership and leverage synergies with its security and compute businesses.
Q: How does the integration of Noname Security impact Akamai's guidance and business strategy?
A: Edward McGowan, CFO, stated that Noname Security is expected to add $18 million to $20 million in revenue for 2024. The acquisition enhances Akamai's API security offerings and is expected to be dilutive to non-GAAP EPS by $0.04 to $0.05 for the full year 2024.
Q: Can you elaborate on the Akamai Guardicore zero trust platform and its market positioning?
A: Thomson Leighton, CEO, highlighted that segmentation is essential for zero trust environments. The Guardicore platform combines micro-segmentation with other security features, offering a single agent and control panel. It is channel-friendly, allowing partners to add value and generate revenue.
Q: What are the growth prospects for Akamai's compute business compared to delivery, and how does it impact overall revenue?
A: Thomson Leighton, CEO, emphasized that compute offers a much larger opportunity than delivery. While delivery remains a strong cash generator, compute is expected to drive significant revenue growth independently, with potential to become a much larger business over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
