FULLTEXT DEL 1 AV 2
10-Q – 2025-11-07 – akam-20250930.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________
FORM 10-Q
______________________________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2025
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-27275
______________________________________________
Akamai Technologies, Inc .
(Exact name of registrant as specified in its charter)
Delaware 04-3432319
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)
145 Broadway
Cambridge , MA 02142
( 617 ) 444-3000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
______________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock - par value $0.01 per share
AKAM Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of shares outstanding of the registrant’s common stock as of November 3, 2025: 143,865,237
1
Table of Contents
AKAMAI TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
3
Condensed Consolidated Balance Sheets at September 30, 2025 and December 31, 2024
3
Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024
5
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024
6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024
7
Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2025 and 2024
9
Notes to Unaudited Condensed Consolidated Financial Statements
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 3. Quantitative and Qualitative Disclosures About Market Risk
42
Item 4. Controls and Procedures
43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
44
Item 1A. Risk Factors
45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
60
Item 5. Other Information
60
Item 6. Exhibits
61
SIGNATURES
62
2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) (unaudited) September 30,
2025 December 31,
2024
ASSETS
Current assets:
Cash and cash equivalents $ 927,933 $ 517,707
Marketable securities 190,807 1,078,876
Accounts receivable, net of reserves of $ 5,769 and $ 3,522 at September 30, 2025, and December 31, 2024, respectively
765,891 727,687
Prepaid expenses and other current assets 282,607 253,827
Total current assets 2,167,238 2,578,097
Marketable securities 694,000 275,592
Property and equipment, net 2,317,804 1,995,071
Operating lease right-of-use assets 1,021,166 1,006,738
Acquired intangible assets, net 647,480 727,585
Goodwill 3,170,123 3,151,077
Deferred income tax assets 619,367 483,249
Other assets 196,095 151,376
Total assets $ 10,833,273 $ 10,368,785
3
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, continued
(in thousands, except share data) (unaudited) September 30,
2025 December 31,
2024
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 189,967 $ 130,447
Accrued expenses 308,160 370,888
Deferred revenue 162,448 149,222
Convertible senior notes — 1,149,116
Operating lease liabilities 281,347 259,134
Other current liabilities 8,394 32,516
Total current liabilities 950,316 2,091,323
Deferred revenue 22,981 26,314
Deferred income tax liabilities 27,154 16,066
Convertible senior notes 4,103,106 2,396,695
Operating lease liabilities 846,619 829,660
Other liabilities 151,153 130,370
Total liabilities 6,101,329 5,490,428
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $ 0.01 par value; 5,000,000 shares authorized; 700,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued or outstanding
— —
Common stock, $ 0.01 par value; 700,000,000 shares authorized; 159,113,000 shares issued and 143,767,463 shares outstanding at September 30, 2025, and 155,647,988 shares issued and 150,025,096 outstanding at December 31, 2024
1,591 1,556
Additional paid-in capital 2,819,050 2,618,384
Accumulated other comprehensive loss ( 93,318 ) ( 155,993 )
Treasury stock, at cost, 15,345,537 shares at September 30, 2025, and 5,622,892 shares at December 31, 2024
( 1,335,236 ) ( 558,488 )
Retained earnings 3,339,857 2,972,898
Total stockholders’ equity 4,731,944 4,878,357
Total liabilities and stockholders’ equity $ 10,833,273 $ 10,368,785
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(in thousands, except per share data) (unaudited) 2025 2024 2025 2024
Revenue $ 1,054,630 $ 1,004,679 $ 3,113,263 $ 2,971,229
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below) 429,532 408,806 1,275,012 1,206,437
Research and development 124,720 120,347 374,107 350,631
Sales and marketing 144,867 138,551 425,237 412,160
General and administrative 161,719 159,957 480,249 466,241
Amortization of acquired intangible assets 27,783 24,368 83,141 66,467
Restructuring (benefit) charge
( 15 ) 82,013 3,449 83,942
Total costs and operating expenses 888,606 934,042 2,641,195 2,585,878
Income from operations 166,024 70,637 472,068 385,351
Interest and marketable securities income, net 18,893 23,065 52,552 77,534
Interest expense ( 7,915 ) ( 6,735 ) ( 22,866 ) ( 20,382 )
Other expense, net
( 3,837 ) ( 13,161 ) ( 3,268 ) ( 13,599 )
Income before provision for income taxes 173,165 73,806 498,486 428,904
Provision for income taxes ( 32,995 ) ( 15,899 ) ( 131,527 ) ( 63,891 )
Net income $ 140,170 $ 57,907 $ 366,959 $ 365,013
Net income per share:
Basic $ 0.98 $ 0.38 $ 2.52 $ 2.40
Diluted $ 0.97 $ 0.38 $ 2.50 $ 2.36
Shares used in per share calculations:
Basic 143,577 151,435 145,795 151,776
Diluted 144,811 153,240 147,041 154,765
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(in thousands) (unaudited) 2025 2024 2025 2024
Net income $ 140,170 $ 57,907 $ 366,959 $ 365,013
Other comprehensive (loss) gain:
Foreign currency translation adjustments ( 6,874 ) 28,475 61,613 ( 6,870 )
Change in unrealized gain on investments, net of income tax expense of $ 317 , $ 2,598 , $ 345 and $ 572 for the three and nine months ended September 30, 2025 and 2024, respectively
973 8,010 1,062 1,764
Other comprehensive (loss) gain
( 5,901 ) 36,485 62,675 ( 5,106 )
Comprehensive income $ 134,269 $ 94,392 $ 429,634 $ 359,907
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
(in thousands) (unaudited) 2025 2024
Cash flows from operating activities:
Net income $ 366,959 $ 365,013
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 526,106 480,461
Stock-based compensation 340,177 294,333
Provision for deferred income taxes 24,346 938
Amortization of debt issuance costs 5,176 4,933
(Gain) loss on investments ( 9,313 ) 66
Other non-cash reconciling items, net 5,341 45,691
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable ( 24,566 ) 28,092
Prepaid expenses and other current assets ( 18,101 ) ( 25,480 )
Accounts payable and accrued expenses ( 62,494 ) ( 79,191 )
Deferred revenue 3,757 13,978
Other current liabilities ( 24,562 ) 42,350
Other non-current assets and liabilities 19,355 4,199
Net cash provided by operating activities 1,152,181 1,175,383
Cash flows from investing activities:
Cash received (paid) for business acquisitions, net of cash acquired
790 ( 434,066 )
Cash paid for asset acquisitions ( 29,930 ) ( 4,862 )
Purchases of property and equipment ( 376,092 ) ( 297,548 )
Capitalization of internal-use software development costs ( 238,713 ) ( 224,860 )
Purchases of short- and long-term marketable securities ( 851,265 ) ( 201,641 )
Proceeds from sales of short- and long-term marketable securities 266,582 307,701
Proceeds from maturities and redemptions of short- and long-term marketable securities 1,059,642 296,623
Other, net ( 5,365 ) 4,160
Net cash used in investing activities ( 174,351 ) ( 554,493 )
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
For the Nine Months
Ended September 30,
(in thousands) (unaudited) 2025 2024
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility 250,000 —
Repayment of borrowings under revolving credit facility ( 250,000 ) —
Proceeds from the issuance of convertible senior notes, net of issuance costs 1,701,796 —
Proceeds from the issuance of warrants related to convertible senior notes 330,855 —
Purchase of note hedge related to convertible senior notes ( 605,820 ) —
Repayment of convertible senior notes ( 1,149,992 ) —
Proceeds related to the issuance of common stock under stock plans 48,897 47,708
Employee taxes paid related to net share settlement of stock awards ( 109,981 ) ( 157,115 )
Repurchases of common stock ( 799,963 ) ( 419,097 )
Other, net ( 2,126 ) ( 10,291 )
Net cash used in financing activities ( 586,334 ) ( 538,795 )
Effects of exchange rate changes on cash, cash equivalents and restricted cash 20,742 188
Net increase in cash, cash equivalents and restricted cash 412,238 82,283
Cash, cash equivalents and restricted cash at beginning of period 519,084 490,470
Cash, cash equivalents and restricted cash at end of period $ 931,322 $ 572,753
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds received of $ 15,539 and $ 5,499 for the nine months ended September 30, 2025 and 2024, respectively
$ 123,021 $ 111,430
Cash paid for interest expense 20,849 19,556
Cash paid for operating lease liabilities 234,337 213,459
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities 214,754 285,494
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses 109,042 35,660
Capitalization of stock-based compensation 96,278 81,636
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents $ 927,933 $ 569,749
Restricted cash 3,389 3,004
Cash, cash equivalents and restricted cash $ 931,322 $ 572,753
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended September 30, 2025
(in thousands, except share data) (unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Stockholders' Equity
Shares Amount
Balance at July 1, 2025 143,199,911 $ 1,586 $ 2,696,975 $ ( 87,417 ) $ ( 1,343,323 ) $ 3,199,687 $ 4,467,508
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes 479,360 5 ( 12,477 ) ( 12,472 )
Stock-based compensation 134,552 134,552
Repurchases of common stock 436 436
Re-issuance of treasury stock for 401(k) employer match
88,192 7,651 7,651
Net income 140,170 140,170
Foreign currency translation adjustment ( 6,874 ) ( 6,874 )
Change in unrealized gain on investments, net of tax 973 973
Balance at September 30, 2025 143,767,463 $ 1,591 $ 2,819,050 $ ( 93,318 ) $ ( 1,335,236 ) $ 3,339,857 $ 4,731,944
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued
Three Months Ended September 30, 2024
(in thousands, except share data) (unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Stockholders' Equity
Shares Amount
Balance at July 1, 2024 151,913,207 $ 1,544 $ 2,368,225 $ ( 136,921 ) $ ( 253,258 ) $ 2,775,086 $ 4,754,676
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes 415,997 4 ( 15,656 ) ( 15,652 )
Stock-based compensation 126,983 126,983
Repurchases of common stock ( 1,704,660 ) ( 166,261 ) ( 166,261 )
Net income 57,907 57,907
Foreign currency translation adjustment 28,475 28,475
Change in unrealized gain on investments, net of tax
8,010 8,010
Balance at September 30, 2024
150,624,544 $ 1,548 $ 2,479,552 $ ( 100,436 ) $ ( 419,519 ) $ 2,832,993 $ 4,794,138
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued
Nine Months Ended September 30, 2025
(in thousands, except share data) (unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Stockholders' Equity
Shares Amount
Balance at January 1, 2025 150,025,096 $ 1,556 $ 2,618,384 $ ( 155,993 ) $ ( 558,488 ) $ 2,972,898 $ 4,878,357
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes 3,006,804 31 ( 110,990 ) ( 110,959 )
Issuance of common stock under employee stock purchase plan 458,208 4 29,568 29,572
Stock-based compensation 407,544 407,544
Issuance of warrants related to convertible senior notes 330,855 330,855
Purchase of note hedge related to convertible senior notes, net of deferred taxes of $ 149,509
( 456,311 ) ( 456,311 )
Repurchases of common stock ( 10,028,703 ) ( 804,899 ) ( 804,899 )
Re-issuance of treasury stock for 401(k) employer match
306,058 28,151 28,151
Net income 366,959 366,959
Foreign currency translation adjustment 61,613 61,613
Change in unrealized gain on investments, net of tax 1,062 1,062
Balance at September 30, 2025 143,767,463 $ 1,591 $ 2,819,050 $ ( 93,318 ) $ ( 1,335,236 ) $ 3,339,857 $ 4,731,944
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AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued
Nine Months Ended September 30, 2024
(in thousands, except share data) (unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Stockholders' Equity
Shares Amount
Balance at January 1, 2024 151,232,908 $ 1,512 $ 2,222,993 $ ( 95,330 ) $ — $ 2,467,980 $ 4,597,155
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes 3,224,444 32 ( 157,742 ) ( 157,710 )
Issuance of common stock under employee stock purchase plan 369,920 4 28,365 28,369
Stock-based compensation 385,936 385,936
Repurchases of common stock ( 4,202,728 ) ( 419,519 ) ( 419,519 )
Net income 365,013 365,013
Foreign currency translation adjustment ( 6,870 ) ( 6,870 )
Change in unrealized gain on investments, net of tax
1,764 1,764
Balance at September 30, 2024
150,624,544 $ 1,548 $ 2,479,552 $ ( 100,436 ) $ ( 419,519 ) $ 2,832,993 $ 4,794,138
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Basis of Presentation
Akamai Technologies, Inc. (the “Company”) develops and provides solutions for global enterprises to build, secure and accelerate their applications and digital experiences. Its massively distributed global network is comprised of core and distributed compute sites, more than 4,300 edge points-of-presence in approximately 130 countries and over 700 cities. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. The Company is currently organized and operates as one operating and reportable segment.
The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation in the accompanying interim condensed consolidated financial statements.
Certain information and footnote disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes have been condensed in, or omitted from, these interim financial statements. Accordingly, the unaudited interim condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 24, 2025. The December 31, 2024 condensed consolidated balance sheet included herein is derived from the Company's audited consolidated financial statements.
The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited interim condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of the results of all interim periods reported herein.
Recent Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board ("FASB") issued guidance which modernizes the accounting for internal-use software by removing all references to software development stages given the evolution of software development. The targeted improvements aim to increase the operability of the recognition guidance for internal-use software. The guidance also seeks to clarify the disclosure requirements for internal-use software. This guidance will be effective for the Company on January 1, 2028, and is to be applied prospectively, modified prospectively or retrospectively. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.
In July 2025, the FASB issued guidance which provides targeted improvements and clarifications related to the recognition and measurement of expected credit losses, particularly for off-balance-sheet credit exposures and certain practical expedients. This guidance will be effective for the Company on January 1, 2026, and is to be applied prospectively. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.
In November 2024, the FASB issued guidance which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This guidance will be effective for the Company on January 1, 2026, and is to be applied prospectively with the option to adopt retrospectively. The Company has historically not had induced conversions of its convertible senior notes and does not anticipate this guidance to have an impact on its consolidated financial statements or its disclosures upon adoption.
In November 2024, the FASB issued guidance to enhance income statement disclosures through additional disclosures of specified information about certain costs and expenses. This guidance will be effective for the Company's annual period ending December 31, 2027 and interim periods beginning on January 1, 2028, and is to be applied prospectively with the option to adopt retrospectively. The Company is evaluating the impact the update will have on its disclosures.
In December 2023, the FASB issued guidance to improve income tax disclosures, primarily through enhanced disclosures for the rate reconciliation and income taxes paid, in addition to the modification or elimination of other disclosures. This guidance will be effective for the Company's annual period ending December 31, 2025 and is to be applied prospectively with
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the option to adopt retrospectively. The Company has completed a preliminary assessment of the guidance and does not anticipate an impact on its consolidated financial statements other than for the additional required disclosures.
2. Fair Value Measurements
Available-for-sale marketable securities held as of September 30, 2025 and December 31, 2024 were as follows (in thousands):
Gross Unrealized Classification on Balance Sheet
Amortized Cost Gains Losses
Aggregate
Fair Value Short-Term
Marketable
Securities Long-Term
Marketable
Securities
As of September 30, 2025
Time deposits
$ 31,942 $ — $ — $ 31,942 $ 31,942 $ —
Corporate bonds 809,464 3,224 ( 224 ) 812,464 144,833 667,631
$ 841,406 $ 3,224 $ ( 224 ) $ 844,406 $ 176,775 $ 667,631
As of December 31, 2024
Time deposits $ 11,330 $ — $ — $ 11,330 $ 11,330 $ —
Corporate bonds 1,003,915 1,369 ( 307 ) 1,004,977 808,800 196,177
U.S. government agency obligations 303,816 567 ( 36 ) 304,347 249,318 55,029
$ 1,319,061 $ 1,936 $ ( 343 ) $ 1,320,654 $ 1,069,448 $ 251,206
The Company holds money market funds and mutual funds, which are classified as equity securities. These securities are not included in the available-for-sale securities table above, but are included in marketable securities in the interim condensed consolidated balance sheets.
Unrealized gains and unrealized losses on investments classified as available-for-sale are included within accumulated other comprehensive loss in the interim condensed consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest and marketable securities income, net in the interim condensed consolidated statements of income. As of September 30, 2025, the Company did not hold any available-for-sale marketable securities in a continuous unrealized loss position for more than 12 months.
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Fair Value Measurements
The fair value measurements within the fair value hierarchy of the Company’s financial assets as of September 30, 2025 and December 31, 2024 were as follows (in thousands):
Total Fair Value Fair Value Measurements at
Reporting Date Using
Level 1 Level 2
As of September 30, 2025
Cash Equivalents and Marketable Securities:
Money market funds $ 369,033 $ 369,033 $ —
Time deposits 89,755 — 89,755
Corporate bonds 812,464 — 812,464
Mutual funds 29,522 29,522 —
$ 1,300,774 $ 398,555 $ 902,219
As of December 31, 2024
Cash Equivalents and Marketable Securities:
Money market funds $ 163,722 $ 163,722 $ —
Time deposits 64,202 — 64,202
Corporate bonds 1,004,977 — 1,004,977
U.S. government agency obligations 304,347 — 304,347
Mutual funds 26,580 26,580 —
$ 1,563,828 $ 190,302 $ 1,373,526
As of September 30, 2025 and December 31, 2024, the fair value of the Company's financial assets were determined utilizing a Level 1 or Level 2 valuation. Level 1 valuations are based upon the market prices for such investments that are readily available in active markets and Level 2 valuations are based upon the available quoted prices for similar assets in active markets (or identical assets in an inactive market). The Company did not have any transfers of assets or liabilities between Level 1 or Level 2 of the fair value measurement hierarchy during the nine months ended September 30, 2025.
When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about the assumptions market participants would use to estimate the fair value of a financial instrument.
Contractual maturities of the Company’s available-for-sale marketable securities held as of September 30, 2025 and December 31, 2024 were as follows (in thousands):
September 30,
2025 December 31,
2024
Due in 1 year or less $ 176,775 $ 1,069,448
Due after 1 year through 5 years 667,631 251,206
$ 844,406 $ 1,320,654
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3. Accounts Receivable
Net accounts receivable consisted of the following as of September 30, 2025 and December 31, 2024 (in thousands):
September 30,
2025 December 31,
2024
Trade accounts receivable $ 546,945 $ 508,928
Unbilled accounts receivable 224,715 222,281
Gross accounts receivable 771,660 731,209
Allowances for current expected credit losses and other reserves ( 5,769 ) ( 3,522 )
Accounts receivable, net $ 765,891 $ 727,687
A summary of activity in the accounts receivable allowance for current expected credit losses and other reserves for the nine months ended September 30, 2025 and 2024 was as follows (in thousands):
September 30,
2025 September 30,
2024
Beginning balance $ 3,522 $ 3,469
Charges to income from operations 10,323 4,832
Collections from customers previously reserved and other ( 8,076 ) ( 4,481 )
Ending balance $ 5,769 $ 3,820
Charges to income from operations primarily represents charges to provision for doubtful accounts for increases in the allowance for current expected credit losses.
4. Incremental Costs to Obtain a Contract with a Customer
Deferred costs associated with obtaining customer contracts, specifically commission and incentive payments, as of September 30, 2025 and December 31, 2024 were as follows (in thousands):
September 30,
2025 December 31,
2024
Deferred costs included in prepaid expenses and other current assets $ 62,097 $ 72,391
Deferred costs included in other assets 81,116 58,996
Total deferred costs $ 143,213 $ 131,387
Information related to incremental costs to obtain a contract with a customer for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Amortization expense related to deferred costs
$ 16,934 $ 17,179 $ 46,098 $ 46,916
Incremental costs capitalized
20,764 27,962 52,848 70,668
Amortization expense related to deferred costs is primarily included in sales and marketing expense in the interim condensed consolidated statements of income.
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5. Acquired Intangible Assets and Goodwill
Acquired intangible assets that are subject to amortization consisted of the following as of September 30, 2025 and December 31, 2024 (in thousands):
September 30, 2025 December 31, 2024
Gross
Carrying
Amount Accumulated Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Completed technologies $ 465,699 $ ( 252,850 ) $ 212,849 $ 463,766 $ ( 223,480 ) $ 240,286
Customer-related intangible assets 764,439 ( 368,459 ) 395,980 758,817 ( 313,991 ) 444,826
Trademarks and trade names 15,350 ( 11,790 ) 3,560 15,318 ( 10,579 ) 4,739
Acquired license rights 44,811 ( 9,720 ) 35,091 44,810 ( 7,076 ) 37,734
Total $ 1,290,299 $ ( 642,819 ) $ 647,480 $ 1,282,711 $ ( 555,126 ) $ 727,585
Based on the Company’s acquired intangible assets as of September 30, 2025, aggregate expense related to amortization of acquired intangible assets is expected to be $ 27.9 million for the remainder of 2025, and $ 104.0 million, $ 89.2 million, $ 81.8 million and $ 75.9 million for 2026, 2027, 2028 and 2029, respectively.
The changes in the carrying amount of goodwill for the nine months ended September 30, 2025 were as follows (in thousands):
Balance as of January 1, 2025 $ 3,151,077
Measurement period adjustments related to an acquisition completed in prior year
( 996 )
Foreign currency translation 20,042
Balance as of September 30, 2025 $ 3,170,123
The Company tests goodwill for impairment at least annually. Through the date the interim condensed consolidated financial statements were issued, no triggering events have occurred that would indicate that a potential impairment exists.
6. Debt
Convertible Senior Notes
In May 2025, the Company issued $ 1,725.0 million in principal amount of convertible senior notes due 2033 and entered into related convertible note hedge and warrant transactions. The Company intends to use a portion of the net proceeds to repay at maturity its $ 1,150.0 million outstanding aggregate principal amount of convertible senior notes due in 2027.
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Including the May 2025 issuance of $ 1,725.0 million in principal amount of convertible senior notes, the Company has three convertible senior notes ("2033 Notes", "2029 Notes" and "2027 Notes") outstanding with a par value totaling $ 4,140.0 million (collectively, the "Notes") that are senior unsecured obligations of the Company and bear interest payable semi-annually in arrears. The following table summarizes further details of the Notes:
Notes
Issuance Date
Maturity Date Principal Amount (in thousands)
Coupon Interest Rate Effective Interest Rate
2033 Notes May 19, 2025 May 15, 2033 (1)
$ 1,725,000 0.250 % 0.484 %
2029 Notes August 18, 2023 February 15, 2029 $ 1,265,000 1.125 % 1.388 %
2027 Notes August 16, 2019 September 1, 2027 $ 1,150,000 0.375 % 0.539 %
(1) Holders of the 2033 Notes have the right to require the Company to repurchase for cash all or a portion of their 2033 Notes on May 15, 2031 if the last reported sale price of the Company’s common stock on the trading day immediately preceding the business day immediately preceding May 15, 2031 is less than the conversion price per share. The repurchase price will be equal to 100% of the principal amount of the 2033 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the optional repurchase date.
Additionally, on May 1, 2025, the Company repaid $ 1,150.0 million in par value of convertible senior notes that matured (“2025 Notes”). The 2025 Notes were senior unsecured obligations of the Company and bore interest at 0.125 %.
Conversion Rights of the Notes
At their option, holders may exercise the conversion right of the respective Notes at the following specified times and rates to receive the principal amount in cash and receive any amount in excess of the principal amount in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election.
Prior to the close of business on the business day immediately preceding the conversion date, as noted in the table below, under the following circumstances a holder may exercise their conversion right:
• during any calendar quarter commencing after the calendar quarter ended September 30, 2025 for the 2033 Notes, December 31, 2023 for the 2029 Notes and December 31, 2019 for the 2027 Notes (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;
• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the respective Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or
• upon the occurrence of specified corporate events.
On or after the respective conversion date, as noted in the table below, holders may convert all or any portion of their respective Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.
If the Company undergoes a fundamental change at any time prior to the maturity date, holders of the Notes will have the right, at their option, to require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.
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The conversion rights for the outstanding Notes as of September 30, 2025 are as follows:
Notes Conversion Date Conversion Rate (1)
Conversion Price per Share (1)
2033 Notes January 15, 2033 10.7513 $ 93.01
2029 Notes October 15, 2028 7.9170 $ 126.31
2027 Notes May 1, 2027 8.6073 $ 116.18
(1) The conversion rate for the Notes is established as a number of shares of the Company's commons stock per $1,000 principal amount of the Notes, that is equivalent to the conversion price per share, subject to adjustments in certain events. Upon the occurrence of certain corporate events the Company will increase the conversion rate for a holder that elects to convert its Notes.
Components and Fair Value of the Notes
The Notes consisted of the following components as of September 30, 2025 and December 31, 2024 (in thousands):
2033 Notes 2029 Notes 2027 Notes
2025 Notes Total
As of September 30, 2025
Principal $ 1,725,000 $ 1,265,000 $ 1,150,000 $ — $ 4,140,000
Less: issuance costs, net of amortization ( 22,371 ) ( 10,983 ) ( 3,540 ) — ( 36,894 )
Net carrying amount $ 1,702,629 $ 1,254,017 $ 1,146,460 $ — $ 4,103,106
Estimated fair value (1)
$ 1,724,293 $ 1,187,215 $ 1,103,494 $ — $ 4,015,002
As of December 31, 2024
Principal $ — $ 1,265,000 $ 1,150,000 $ 1,150,000 $ 3,565,000
Less: issuance costs, net of amortization — ( 13,354 ) ( 4,951 ) ( 884 ) ( 19,189 )
Net carrying amount $ — $ 1,251,646 $ 1,145,049 $ 1,149,116 $ 3,545,811
Estimated fair value (1)
$ — $ 1,239,068 $ 1,155,865 $ 1,219,345 $ 3,614,278
(1) The fair values were determined based on the quoted prices of the Notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 within the fair value hierarchy.
Note Hedges and Warrants
To minimize the impact of potential dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock concurrently with each respective note issuance month. The note hedge transactions cover an approximate number of shares of the Company’s common stock at a strike price that corresponds to the conversion prices for the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The note hedge transactions expire upon the respective maturity dates of the Notes. The Company determined that the note hedges meet the definition of a derivative and are classified in stockholders’ equity, as the note hedges are indexed to the Company's common stock, and the Company, at its election, may receive cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The Company recorded the purchase of the hedges as a decrease to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the note hedges in its interim condensed consolidated financial statements.
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Separately, the Company also entered into warrant transactions concurrently with each of the note issuances, whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, shares of the Company’s common stock at a predetermined strike price per share. The convertible note hedge and warrant transactions will generally have the effect of increasing the conversion price of each of the Notes to the respective strike price related to the warrant transactions. The Company determined that the warrants meet the definition of a derivative and are classified in stockholders’ equity, as the warrants are indexed to the Company's common stock, and the Company, at its election, may pay or deliver to holders cash or shares of the Company's common stock. The Company recorded the proceeds from the issuance of the warrants as an increase to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the warrants in its interim condensed consolidated financial statements. The following table summarizes the main terms impacting the note hedges and warrants (in thousands, except per share data):
2033 Notes 2029 Notes 2027 Notes
Note hedge transaction costs $ 605,820 $ 236,555 $ 312,225
Shares covered by note hedge transactions 18,546 10,015 9,898
Shares related to warrant transactions 18,546 10,015 9,898
Strike price per share related to warrant transactions $ 155.02 $ 180.44 $ 178.74
Aggregate proceeds from sale of warrants $ 330,855 $ 90,195 $ 185,150
With the issuance of the 2025 Notes, the Company previously entered into related hedge and warrant transactions. The hedges have expired. The warrants for 12.1 million shares of the Company’s common stock at a strike price of approximately $ 149.18 per share that resulted in aggregate proceeds of $ 119.9 million will expire during the fourth quarter of 2025. There were 3.6 million shares related to these warrant transactions outstanding as of September 30, 2025.
Revolving Credit Facilities
In January 2025, the Company entered into a $ 150.0 million uncommitted revolving credit agreement ("2025 Credit Agreement"). Any outstanding borrowings are secured by collateral, consisting primarily of available-for-sale marketable securities. Borrowings under the 2025 Credit Agreement may be used to finance working capital needs and for general corporate purposes. The 2025 Credit Agreement does not expire but is cancellable at any time and any borrowings can be due on demand. Borrowings under the 2025 Credit Agreement will bear a specified interest rate, based on the Secured Overnight Financing Rate, and interest period at the time of the confirmed borrowing. There were no outstanding borrowings under the 2025 Credit Agreement as of September 30, 2025.
In November 2022, the Company entered into a $ 500.0 million revolving credit agreement (“2022 Credit Agreement”). The 2022 Credit Agreement was amended in May 2025 to increase the aggregate revolving commitments under the 2022 Credit Agreement from $ 500.0 million to $ 1.0 billion and to extend the expiration one year. Borrowings under the 2022 Credit Agreement may be used to finance working capital needs and for general corporate purposes. The 2022 Credit Agreement expires on November 22, 2028, and any amounts outstanding thereunder will become due and payable, subject to up to a one-year extension at the Company's request and with the consent of the lenders party thereto.
Borrowings under the 2022 Credit Agreement bear interest, at the Company's option, at a term benchmark rate plus a spread of 0.75 % to 1.125 %, a reference rate plus a spread of 0.75 % to 1.125 %, or a base rate plus a spread of 0.00 % to 0.125 %, in each case with such spread being determined based on the Company's consolidated leverage ratio specified in the 2022 Credit Agreement. Regardless of what amounts, if any, are outstanding under the 2022 Credit Agreement, the Company is also obligated to pay an ongoing commitment fee on undrawn amounts at a rate of 0.07 % to 0.125 %, with such rate being based on the Company's consolidated leverage ratio specified in the 2022 Credit Agreement.
The 2022 Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. As of September 30, 2025, the Company was in compliance with all covenants. The negative covenants include restrictions on subsidiary indebtedness, liens and fundamental changes. These covenants are subject to a number of important exceptions and qualifications. The principal financial covenant requires a maximum consolidated leverage ratio. There were no outstanding borrowings under the 2022 Credit Agreement as of September 30, 2025.
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Interest Expense
The Notes bear interest at fixed rates that are payable semi-annually in arrears on their respective interest payment dates each year. Interest expense, together with ongoing commitment fees under the terms of the Company's credit agreements, included in the interim condensed consolidated statements of income for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Amortization of debt issuance costs $ 2,357 $ 1,952 $ 6,338 $ 5,847
Coupon interest payable on 2033 Notes 1,078 — 1,569 —
Coupon interest payable on 2029 Notes 3,558 3,558 10,674 10,674
Coupon interest payable on 2027 Notes 1,078 1,078 3,234 3,234
Coupon interest payable on 2025 Notes — 359 483 1,077
Interest payable and commitment fees under the credit agreements 275 149 1,730 464
Capitalization of interest expense ( 431 ) ( 361 ) ( 1,162 ) ( 914 )
Total interest expense $ 7,915 $ 6,735 $ 22,866 $ 20,382
7. Restructuring
During the third quarter of 2024, management committed to an action to restructure certain parts of the Company with the primary intent of redeploying resources to support the Company's strategic investments ("Q3 2024 Action"). As a result, certain headcount reductions were necessary. Additionally, the Company planned for the end of life of certain solutions which resulted in impairments to capitalized internal-use software, as well as completed technologies and customer-related acquired intangible assets. The Company does not expect to incur any material additional charges related to this action.
The Company also recognizes restructuring charges related to completed acquisitions for severance and related expenses paid to redundant employees, fees pai d to terminate redundant contracts and impairments of redundant long-lived assets, primarily duplicative facility-related assets, acquired intangible assets and capitalized internal-use software. The Company does not expect to incur material additional charges related to past acquisitions.
The Company's restructuring (benefit) charges during the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Q3 2024 action $ ( 35 ) $ 54,259 $ 397 $ 54,259
Acquisitions related and other 20 27,754 3,052 29,683
Total restructuring (benefit) charge
$ ( 15 ) $ 82,013 $ 3,449 $ 83,942
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The liability for restructuring charges for employee severance and related expenses is substantially included in other current liabilities on the consolidated balance sheets. The changes in the liability for all restructuring actions for the nine months ended September 30, 2025 were as follows (in thousands):
Q3 2024 Action
Acquisitions Related and Other Total
Balance as of January 1, 2025 $ 24,606 $ 1,745 $ 26,351
Costs incurred 397 1,667 2,064
Cash disbursements ( 25,267 ) ( 2,106 ) ( 27,373 )
Translation adjustments and other 310 49 359
Balance as of September 30, 2025 $ 46 $ 1,355 $ 1,401
8. Stockholders’ Equity
Share Repurchase Program
In May 2024, the board of directors authorized a $ 2.0 billion share repurchase program, effective May 2024 through June 2027, of which $ 1,180.5 million remains available for repurchase as of September 30, 2025. The Company's goals for the share repurchase program are to offset the dilution created by its employee equity compensation programs over time and provide the flexibility to return capital to shareholders as business and market conditions warrant, while still preserving its ability to pursue other strategic opportunities.
During the three months ended September 30, 2025, the Company did not repurchase shares of its common stock. During the nine months ended September 30, 2025, the Company repurchased 10.0 million shares of its common stock for $ 800.0 million.
Stock-Based Compensation
Components of total stock-based compensation included in the Company’s interim condensed consolidated statements of income for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Cost of revenue $ 19,738 $ 16,566 $ 57,980 $ 45,048
Research and development 42,415 39,275 124,486 114,271
Sales and marketing 22,413 21,076 67,116 58,863
General and administrative 30,857 25,690 90,595 76,151
Total stock-based compensation 115,423 102,607 340,177 294,333
Provision for income taxes ( 21,952 ) ( 14,322 ) ( 57,214 ) ( 76,403 )
Total stock-based compensation, net of income taxes $ 93,471 $ 88,285 $ 282,963 $ 217,930
During 2025, the Company's matching program related to the savings plan for its U.S. employees that is designed to be qualified under Section 401(k) of the Internal Revenue Code was redesigned to be settled in shares of the Company's common stock instead of cash and the percentage match was increased.
In addition to the amounts of stock-based compensation reported in the table above, the Company’s interim condensed consolidated statements of income also include stock-based compensation reflected as a component of amortization primarily consisting of capitalized internal-use software; the additional stock-based compensation was $ 12.6 million and $ 37.0 million for the three and nine months ended September 30, 2025, respectively, before taxes, and $ 11.0 million and $ 31.3 million for the three and nine months ended September 30, 2024, respectively, before taxes.
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9. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss, net of tax, which is reported as a component of stockholders' equity, for the nine months ended September 30, 2025 were as follows (in thousands):
Foreign Currency Translation Net Unrealized Gains on Investments Total
Balance as of January 1, 2025 $ ( 157,099 ) $ 1,106 $ ( 155,993 )
Other comprehensive gain 61,613 1,062 62,675
Balance as of September 30, 2025 $ ( 95,486 ) $ 2,168 $ ( 93,318 )
Amounts reclassified from accumulated other comprehensive loss to net income were insignificant for the nine months ended September 30, 2025.
10. Revenue from Contracts with Customers
The Company sells its services through a sales force located both domestically and internationally. Revenue derived from operations outside of the U.S. is determined based on the country in which the sale originated. Other than the U.S., no single country accounted for 10% or more of the Company’s total revenue for any reported period. Revenue by geography included in the Company’s interim condensed consolidated statements of income for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
U.S. $ 529,978 $ 524,611 $ 1,586,324 $ 1,545,654
International 524,652 480,068 1,526,939 1,425,575
Total revenue $ 1,054,630 $ 1,004,679 $ 3,113,263 $ 2,971,229
The Company reports its revenue in three solution categories: security, delivery and cloud computing. Security includes solutions that are designed to protect business online by keeping infrastructure, websites, applications, APIs, networks and users safe. Delivery includes solutions that are designed to enable business online, including media delivery and web and mobile performance. Cloud computing includes compute, storage, networking, database and container management services. Revenue by solution category included in the Company’s interim condensed consolidated statements of income for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Security $ 568,437 $ 518,670 $ 1,651,046 $ 1,508,059
Delivery 306,495 319,132 945,608 1,000,289
Cloud computing 179,698 166,877 516,609 462,881
Total revenue $ 1,054,630 $ 1,004,679 $ 3,113,263 $ 2,971,229
Most security, delivery and cloud computing services represent obligations that are satisfied over time as the customer simultaneously receives and consumes the services provided by the Company. Accordingly, the majority of the Company's revenue is recognized over time, generally ratably over the term of the arrangement due to consistent monthly usage commitments that expire each period. Any usage over a given commitment is recognized in the period in which the units are served. A small percentage of the Company's contracts are satisfied at a point in time, such as one-time professional services contracts, integration services and most license sales where the primary obligation is delivery of the license at the start of the term. In these cases, revenue is recognized at a point in time of delivery or satisfaction of the performance obligation.
During the nine months ended September 30, 2025 and 2024, the Company recognized $ 136.7 million and $ 99.3 million of
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revenue that was included in deferred revenue as of December 31, 2024 and 2023, respectively.
As of September 30, 2025, the aggregate amount of remaining performance obligations from contracts with customers was $ 4.8 billion. The Company expects to recognize approximately 55 % of its remaining performance obligations as revenue over the next 12 months and approximately 40 % over the next two to three years , with the remaining thereafter. Remaining performance obligations represent the amount of the transaction price under contracts with customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the reporting date. This consists of future committed revenue for monthly, quarterly or annual periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced in prior periods for which the related performance obligations have not been satisfied. It excludes estimates of variable consideration, such as usage-based contracts with no committed contract, as well as anticipated renewed contracts. Revenue recognized during the nine months ended September 30, 2025 and 2024, related to performance obligations satisfied in previous periods was not material.
11. Income Taxes
The Company's effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods. Potential discrete adjustments include tax charges or benefits related to stock-based compensation, changes in tax legislation, settlements of tax audits or assessments, uncertain tax positions and acquisitions, among other items.
The Company’s effective income tax rate was 26.4 % and 14.9 % for the nine months ended September 30, 2025 and 2024, respectively. The higher effective tax rate for the nine months ended September 30, 2025 was primarily due to a shortfall in the tax benefit related to stock-based compensation, an increase in certain tax reserves and a decrease in the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by a decrease in global intangible low-taxed income.
For the nine months ended September 30, 2025, the effective income tax rate was higher than the federal statutory tax rate due to non-deductible stock-based compensation, an increase in certain tax reserves and a shortfall in the tax benefit related to stock-based compensation. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits.
For the nine months ended September 30, 2024, the effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the 15% global minimum corporate income tax.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA is not expected to have a material impact on the Company's consolidated financial statements for the annual period ending December 31, 2025. The Company is currently evaluating the potential impact on future periods.
12. Net Income per Share
Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common stock. Potential common stock consists of shares issuable pursuant to stock awards, convertible senior notes and warrants issued by the Company. The dilutive effect of outstanding stock awards is reflected in diluted earnings per share by application of the treasury stock method and the dilutive effect of the convertible securities is reflected in diluted earnings per share by application of the if-converted method.
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The components used in the computation of basic and diluted net income per share for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands, except per share data):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Numerator:
Net income $ 140,170 $ 57,907 $ 366,959 $ 365,013
Denominator:
Shares used for basic net income per share 143,577 151,435 145,795 151,776
Effect of dilutive securities:
Stock awards 1,234 1,511 1,246 2,120
Convertible senior notes — 294 — 869
Warrants related to issuance of convertible senior notes — — — —
Shares used for diluted net income per share 144,811 153,240 147,041 154,765
Basic net income per share $ 0.98 $ 0.38 $ 2.52 $ 2.40
Diluted net income per share $ 0.97 $ 0.38 $ 2.50 $ 2.36
For the three and nine months ended September 30, 2025 and 2024, certain potential outstanding shares from service-based stock awards and warrants were excluded from the computation of diluted net income per share because the effect of including these items was anti-dilutive. Additionally, certain market- and performance-based stock awards were excluded from the computation of diluted net income per share because the underlying market and performance conditions for such stock awards had not been met as of these dates. The number of potentially outstanding shares excluded from the computation of diluted net income per share for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Service-based stock awards 2,396 974 4,176 2,802
Market- and performance-based stock awards 1,583 1,311 1,583 1,318
Warrants related to issuance of convertible senior notes 42,087 32,006 41,548 32,006
Total shares excluded from computation 46,066 34,291 47,307 36,126
13. Segment Information
The Company’s chief operating decision-maker ("CODM") is the chief executive officer and the executive management team. As of September 30, 2025, the Company is currently organized and operates as one operating and reportable segment. The Company is not organized by market and is managed and operated as one business. A single management team that reports to the chief executive officer comprehensively manages the entire business. The Company does not operate any material separate lines of business or separate business entities with respect to its services. Accordingly, the Company does not accumulate discrete financial information with respect to separate entities. The CODM assesses performance and makes decisions on optimizing the allocation of resources across functions and strategic investments using consolidated net income. Segment assets represent total assets as reported on the interim condensed consolidated balance sheets.
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Information regarding the Company's one operating segment for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30, 2025
2025 2024 2025 2024
Revenue $ 1,054,630 $ 1,004,679 $ 3,113,263 $ 2,971,229
Less:
Co-location fees 86,763 79,074 257,713 227,070
Bandwidth fees 46,693 55,653 140,163 178,084
Network build-out and supporting services 59,524 48,236 171,821 140,573
Payroll and related costs 389,943 377,487 1,161,888 1,130,451
Capitalized salaries and related costs ( 86,014 ) ( 75,897 ) ( 246,968 ) ( 229,821 )
Facilities-related costs 21,680 22,368 64,823 64,864
Software and related services 21,497 18,863 63,018 54,386
Other segment items (1)
56,472 52,873 157,619 154,148
Depreciation and amortization 176,623 165,729 526,106 480,461
Stock-based compensation 115,423 102,607 340,177 294,333
Restructuring (benefit) charge
( 15 ) 82,013 3,449 83,942
Acquisition-related costs 17 5,036 1,386 7,387
Interest and marketable securities income, net ( 18,893 ) ( 23,065 ) ( 52,552 ) ( 77,534 )
Interest expense 7,915 6,735 22,866 20,382
Other expense (income), net 3,837 13,161 3,268 13,599
Provision for income taxes
32,995 15,899 131,527 63,891
Net income $ 140,170 $ 57,907 $ 366,959 $ 365,013
(1) Other segment items includes marketing programs and related costs, third-party professional service fees, non-income related tax expense and other expenses.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report on Form 10-Q, particularly Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth below, and notes to our unaudited interim condensed consolidated financial statements included herein contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as “believes,” “could,” “expects,” “anticipates,” “intends,” “plans,” “seeks,” “projects,” “estimates,” “should,” “would,” “forecasts,” “if,” “continues,” “goal,” “likely,” “may,” “will,” variations of such words or similar expressions are intended to identify a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Actual results may differ materially from the forward-looking statements we make as a result of various factors, including, but not limited to: potential slowing revenue growth, global economic and geopolitical conditions, including changes in customer spending and inflation, international tensions, changes in governmental policies including trade-related policies, volatility in capital markets, our ability to acquire or develop new products or solutions, our ability to compete effectively, including our ability to continue to grow our cloud computing services and solutions, security risks stemming from ineffective information technology systems or cybersecurity breaches, risks of maintaining global operations, regulatory developments, including changes in regulatory policy or resources, intellectual property claims or disputes, investment related risks and maintaining an effective system of internal controls. See “Risk Factors” elsewhere in this quarterly report on Form 10-Q and in our other reports with the Securities and Exchange Commission for a discussion of certain risks associated with our business. We disclaim any obligation to update forward-looking statements as a result of new information, future events or otherwise, including the potential impact of any mergers, acquisitions, divestitures or other events that may be announced after the date hereof.
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Our management’s discussion and analysis of our financial condition and results of operations is based upon our unaudited interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q, which we have prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), for interim periods and with Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The preparation of these unaudited interim condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related items, including, but not limited to, revenue recognition, accounts receivable and related reserves, valuation and impairment of marketable securities, goodwill and acquired intangible assets, capitalized internal-use software development costs, impairment and useful lives of long-lived assets, income taxes and stock-based compensation. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time they are made. Actual results may differ from our estimates. See the section entitled “Application of Critical Accounting Policies and Estimates” in our annual report on Form 10-K for the year ended December 31, 2024 for further discussion of our critical accounting policies and estimates.
Overview
We develop and provide solutions for global enterprises to build, secure and accelerate their applications and digital experiences through our massively distributed global network, which underpins our security, delivery and cloud computing solutions, and is central to our financial success. The key factors that influence our financial success are our ability to build on recurring revenue commitments across our security, delivery and compute product portfolios, increase traffic on our network, continue to develop, scale and successfully bring to market our compute platform and compute-to-edge solutions that meet the needs of professional users and enterprises, including with respect to reliability, effectively manage the prices we charge for our solutions, continuously develop new and existing products and appropriately manage our capital spending and other operational expenses. The purpose of this discussion and analysis section is to provide material information relevant to an assessment of our financial condition and results of operations from management’s perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are likely to impact our future performance.
Revenue
We primarily derive revenue from the sale of services to customers pursuant to contracts having terms of one year or longer, which allows us to have a consistent and predictable base level of revenue. Services included in our contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. In addition to a base level of revenue, we are also dependent on our ability to increase our product offerings and to cross-sell additional services to our new and existing customers, particularly for our security and cloud computing solutions portfolios. Our revenue is also impacted by customer renewals and the pricing for such renewals, the rate of adoption and timing of customer offerings, variability of one-time events, usage of cloud computing services and the amount of traffic we serve on our network. Geopolitical, economic and other developments that impact our customers' businesses can also impact our ability to attract new customers or continue to cross-sell additional services to existing customers and traffic levels for customers with variable usage. Over the longer term, our ability to continually develop and expand our product portfolio, to successfully bring those products to market and to effectively manage the prices we charge for our solutions are key factors impacting our revenue growth.
We have observed the following trends related to our revenue in recent years:
• Increased sales of our security solutions, led by application security solutions and Guardicore segmentation solutions, and increased sales of our cloud computing solutions, attributable to enhanced services on our compute platform and growth in our cloud infrastructure services, have made a significant contribution to revenue growth. Our security and cloud computing solutions continue to contribute to a large portion of revenue. We plan to continue to invest in these areas with a focus on higher growth security products and cloud infrastructure services to further advance our product portfolios and sales capabilities.
• Traffic growth on our network has improved, but remains moderated as compared to prior years. We, and the industry more broadly, are seeing growth at a slower pace than we have experienced in the past. In particular, customers in verticals such as media and gaming have optimized their traffic to manage through underlying business challenges at a time of global macroeconomic and geopolitical headwinds. Some of our customers' businesses have been impacted by these headwinds, and as a result, they may continue to reduce their spending or optimize their traffic, which would reduce traffic on our network and revenue. However, we are seeing incremental traffic from contracts acquired as part of our recent asset acquisitions. We expect these traffic growth trends to continue for the remainder of 2025.
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• The prices paid by some of our delivery and security customers have declined in recent years at contract renewal due to competition, which negatively impacts our revenue growth rates. We have been able to mitigate some of the negative impacts to our revenue growth rates by upselling incremental solutions to our existing customers. We continue to take steps upon contract renewals to sign customers to multi-year contracts and to optimize how we charge certain high-volume traffic customers to maintain alignment between customer traffic volumes and unit pricing.
• Revenue from our international operations continues to grow, particularly from new customer acquisition and cross-selling of incremental solutions. Because we publicly report in U.S. dollars, our reported revenue results are negatively impacted when the U.S. dollar strengthens and benefit when the U.S. dollar weakens.
• We have experienced variations in certain types of revenue from quarter-to-quarter. These quarterly variations in revenue are attributable to, among other things, the timing of large customer contract renewals; the frequency and timing of purchases of custom solutions or licensed software; the nature and timing of software and gaming releases by our customers; holiday season activity; and whether there are large live sporting or other events or situations that impact the amount of media traffic on our network.
Expenses
Our level of profitability is impacted by our expenses, including direct costs to support our revenue such as bandwidth and co-location costs, which includes energy to power our network. We have observed the following trends related to our profitability in recent years:
• Co-location costs are a significant portion of our cost of revenue. As we continue to build out our new compute locations to provide us with the ability to scale our platform, we have entered into, and expect to continue to enter into, longer term leases that include certain financial commitments in order to achieve more favorable unit economics. The costs of the financial commitments are expensed ratably over the lease term, and, as a result, in some cases, we are incurring costs in advance of these compute locations being fully utilized. We continue to improve our internal-use software and remain disciplined in managing our hardware deployments, which enables us to use servers more efficiently. We will need to continue to effectively manage our co-location costs to maintain or improve current levels of profitability.
• Network bandwidth costs are also a significant portion of our cost of revenue. We have been able to manage these costs through investment in internal-use software development to improve the performance and efficiency of our network and, more recently, improved pricing on contract renewals with our bandwidth providers. We will need to continue to focus on effectively managing our bandwidth costs to maintain or improve current levels of profitability.
• Network build-out and supporting service costs represent another significant portion of our cost of revenue. These costs include maintenance and supporting services, as well as partner program costs, incurred as we continue to build out our compute platform and maintain our global network, and costs of third-party cloud providers used for some of our operations. We have seen some of these costs increase in recent years as a result of our network expansion, and particularly the build out of our compute platform. While we have previously experienced increased costs from third-party cloud providers, we have been able to reduce those costs by migrating to our own compute solutions and working to optimize any remaining spend with these third-party cloud providers. We will need to continue to effectively manage our network build-out and supporting service costs and continue to migrate third-party cloud services to our compute platform in an effort to manage costs.
• Our employees are core to the operations of our business, and payroll and related costs, including stock-based compensation, is our largest expense. It is important to the success of our operations that we offer competitive compensation packages. However, we are focused on remaining disciplined in allocating our resources to support our faster growing security and cloud computing solutions, including maintaining operational efficiencies to mitigate the rising cost of talent. Over the past few years, we redesigned one of our non-executive short-term incentive compensation programs by shifting certain employees from a cash-based to stock-based program and introduced a non-executive incentive program tied to key initiatives. These programs are designed to better align employee incentives with the interests of our stockholders, which has increased our stock-based compensation.
• Depreciation expense related to our network equipment also contributes to our overall expense levels. In recent years, we have invested in our network, particularly as part of building out our compute infrastructure, which increased our
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capital expenditures and resulting depreciation expense. We are also experiencing an increase in certain server component costs that support the continued build out of our compute platform. We plan to continue to make investments in capital expenditures and focus investments on our faster growing cloud computing solutions, including support for a new enterprise cloud computing customer and our new Akamai Inference Cloud ("AIC").
• Growth in our international operations incrementally increases our exposure to foreign currency fluctuations. Because we publicly report in U.S. dollars, our expenses are positively impacted when the U.S. dollar strengthens and are negatively impacted when the U.S. dollar weakens.
Macroeconomic Conditions
Global macroeconomic and geopolitical conditions continue to impact our customers, as well as our business and revenue growth rates. We, along with our customers, continue to manage through an uncertain period of fluctuating inflation, regulatory policies and resources that may negatively impact business, economic and political uncertainty, decreased consumer confidence and pressure on prices during contract renewals, uncertain energy supplies, heightened geopolitical tensions and conflict, potential for supply chain disruptions, changes in legislation and regulations, including U.S. and international tax laws, volatility and increasing tensions related to changing trade policies, including announced or expected tariffs, fluctuations in foreign exchange rates and elevated interest rates. To the extent these macroeconomic conditions continue, the impact may adversely affect our business, operations and financial results.
Results of Operations
The following sets forth, as a percentage of revenue, interim condensed consolidated statements of income data for the periods indicated:
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Revenue 100 % 100 % 100 % 100 %
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below) 41 41 41 41
Research and development 12 12 12 12
Sales and marketing 14 14 14 14
General and administrative 15 16 15 16
Amortization of acquired intangible assets 3 2 3 2
Restructuring (benefit) charge
— 8 — 3
Total costs and operating expenses (1)
84 93 85 87
Income from operations (1)
16 7 15 13
Interest and marketable securities income, net 2 2 2 3
Interest expense (1) (1) (1) (1)
Other expense, net
— (1) — —
Income before provision for income taxes (1)
16 7 16 14
Provision for income taxes (3) (2) (4) (2)
Net income (1)
13 % 6 % 12 % 12 %
(1) Amounts may not foot due to rounding.
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Revenue
Revenue by solution category during the periods presented was as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 % Change % Change at Constant Currency 2025 2024 % Change % Change at Constant Currency
Security $ 568,437 $ 518,670 10 % 9 % $ 1,651,046 $ 1,508,059 9 % 9 %
Delivery 306,495 319,132 (4) (4) 945,608 1,000,289 (5) (5)
Cloud computing 179,698 166,877 8 7 516,609 462,881 12 12
Total revenue $ 1,054,630 $ 1,004,679 5 % 4 % $ 3,113,263 $ 2,971,229 5 % 5 %
During the three and nine months ended September 30, 2025, the increase in our revenue, as compared to the same periods in 2024, was primarily the result of continued growth in sales of our security and cloud computing solutions, partially offset by a decline in revenue from our delivery solutions due to downward pricing of contract renewals.
The increase in security solutions revenue for the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was due to growth in sales of key products in our security solutions portfolio, including our API security, web application and Guardicore segmentation solutions.
The decrease in delivery solutions revenue for the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was due to downward pricing of contract renewals which we believe is moderating compared to recent periods. Additionally, we believe macroeconomic headwinds are causing some customers to increase their focus on cost optimization, which reduced traffic on our network and delivery revenue. These decreases were partially offset by incremental revenue from contracts acquired as part of our recent asset acquisitions, such as Edgio, Inc.
The increase in cloud computing solutions revenue for the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was due to growth in cloud infrastructure services, which includes our compute and storage solutions based on Linode, as well as our EdgeWorkers product and the partner solutions running on our cloud platform.
Revenue derived in the U.S. and internationally during the periods presented was as follows (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 % Change % Change at Constant Currency
2025 2024 % Change % Change at Constant Currency
U.S. $ 529,978 $ 524,611 1 % 1 % $ 1,586,324 $ 1,545,654 3 % 3 %
As a percentage of revenue 50 % 52 % 51 % 52 %
International 524,652 480,068 9 8 1,526,939 1,425,575 7 7
As a percentage of revenue 50 % 48 % 49 % 48 %
Total revenue $ 1,054,630 $ 1,004,679 5 % 4 % $ 3,113,263 $ 2,971,229 5 % 5 %
For the three and nine months ended September 30, 2025 and 2024, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates favorably impacted our revenue by $7.9 million and $2.0 million during the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024.
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Cost of Revenue
Cost of revenue consisted of the following for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 % Change 2025 2024 % Change
Co-location fees $ 86,763 $ 79,074 10 % $ 257,713 $ 227,070 13 %
Bandwidth fees 46,693 55,653 (16) 140,163 178,084 (21)
Network build-out and supporting services 59,524 48,236 23 171,821 140,573 22
Payroll and related costs 84,855 84,417 1 254,223 251,054 1
Stock-based compensation, including amortization of prior capitalized amounts 31,368 26,811 17 92,237 74,196 24
Depreciation of network equipment 82,245 72,546 13 242,394 207,157 17
Amortization of internal-use software 38,084 42,069 (9) 116,461 128,303 (9)
Total cost of revenue $ 429,532 $ 408,806 5 % $ 1,275,012 $ 1,206,437 6 %
As a percentage of revenue 41 % 41 % 41 % 41 %
The increase in cost of revenue for the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was primarily due to:
• co-location fees and depreciation of network equipment as a result of investment in our network, particularly as we build out our compute platform to support future growth and scalability;
• network build-out and supporting services, particularly due to our partner program costs related to our cloud computing solutions; and
• stock-based compensation due to the shift in some of our compensation programs from cash-based to stock-based for certain employees, including our employer 401(k) match program effective in 2025, and the increased expected achievement of our performance-based compensation plans.
These increases were partially offset by lower bandwidth fees as a result of improved pricing on contract renewals with our bandwidth providers and operational efficiencies on our network.
During the remainder of 2025, we expect our cost of revenue to increase as compared to 2024, in particular our co-location fees and depreciation of network equipment, due to investments in our network to support the continued growth of our cloud computing solutions. Additionally, we expect network build-out and supporting services to increase due to our partner programs to support the growth of our cloud computing solutions.
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Research and Development Expenses
Research and development expenses consisted of the following for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 % Change 2025 2024 % Change
Payroll and related costs $ 150,712 $ 140,658 7 % $ 448,257 $ 423,772 6 %
Stock-based compensation 42,415 39,275 8 124,486 114,271 9
Capitalized salaries and related costs (75,882) (67,385) 13 (219,920) (208,403) 6
Other expenses 7,475 7,799 (4) 21,284 20,991 1
Total research and development $ 124,720 $ 120,347 4 % $ 374,107 $ 350,631 7 %
As a percentage of revenue 12 % 12 % 12 % 12 %
The increase in research and development expenses during the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth from our strategic initiatives, and the increased expected achievement of our performance-based compensation plans. Additionally, stock-based compensation increased due to a shift in our employer 401(k) match program from cash-based to stock-based, effective in 2025, which partially offset the increase in payroll and related costs.
Research and development costs are expensed as incurred, other than certain internal-use software development costs eligible for capitalization. Capitalized development costs consist of payroll and related costs for personnel and external consulting expenses involved in the development of internal-use software used to deliver our services and operate our network. During the three months ended September 30, 2025 and 2024, we capitalized $29.4 million and $25.7 million, respectively, of stock-based compensation. During the nine months ended September 30, 2025 and 2024, we capitalized $87.8 million and $76.0 million, respectively, of stock-based compensation. These capitalized internal-use software development costs are amortized to cost of revenue over their estimated useful lives, ranging from two to ten years based on the software developed and its expected useful life.
During the remainder of 2025, we expect our research and development costs to increase as compared to 2024, in particular payroll and related costs, including stock-based compensation, in support of our faster growing security and cloud computing solutions.
Sales and Marketing Expenses
Sales and marketing expenses consisted of the following for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 % Change 2025 2024 % Change
Payroll and related costs $ 96,529 $ 97,146 (1) % $ 285,168 $ 290,518 (2) %
Stock-based compensation 22,413 21,076 6 67,116 58,863 14
Marketing programs and related costs 16,735 14,077 19 44,504 40,808 9
Other expenses 9,190 6,252 47 28,449 21,971 29
Total sales and marketing $ 144,867 $ 138,551 5 % $ 425,237 $ 412,160 3 %
As a percentage of revenue 14 % 14 % 14 % 14 %
The increase in sales and marketing expenses during the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was primarily due to:
• stock-based compensation as a result of the increased expected achievement of our performance-based compensation plans and a shift in our employer 401(k) match program from cash-based to stock-based, effective in 2025;
• marketing programs and related costs from the timing of events and increased campaigns; and
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• other expenses as a result of professional service fees associated with our go-to-market transformation initiative.
During the remainder of 2025, we do not expect significant increases in sales and marketing expenses as compared to 2024, however as part of our go-to-market transformation initiative we plan to reinvest in headcount and resources to support our faster growing security and cloud computing solutions.
General and Administrative Expenses
General and administrative expenses consisted of the following for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 % Change 2025 2024 % Change
Payroll and related costs $ 57,739 $ 56,224 3 % $ 172,708 $ 169,737 2 %
Stock-based compensation 30,857 25,690 20 90,595 76,151 19
Depreciation and amortization 16,880 16,559 2 49,853 49,622 —
Facilities-related costs 21,680 22,368 (3) 64,823 64,864 —
Provision for doubtful accounts 1,190 1,410 (16) 2,896 3,491 (17)
Acquisition-related costs 17 5,036 (100) 1,386 7,387 (81)
Software and related service costs 17,618 14,617 21 52,017 43,218 20
Other expenses 15,738 18,053 (13) 45,971 51,771 (11)
Total general and administrative $ 161,719 $ 159,957 1 % $ 480,249 $ 466,241 3 %
As a percentage of revenue 15 % 16 % 15 % 16 %
The increase in general and administrative expenses during the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was primarily due to higher stock-based compensation as a result of the increased expected achievement of our performance-based compensation plans, an increase in the number of participants in the equity compensation program, as well as a shift in our employer 401(k) match program from cash-based to stock-based effective in 2025, which increased stock-based compensation and partially offset the increase in payroll and related costs. Additionally, software and related service costs increased as we transition to and expand usage of cloud-based applications to support our operations. These increases were partially offset by acquisition-related costs from our acquisition of Noname Gate Ltd. ("Noname Security") in 2024 that did not recur in 2025.
During the remainder of 2025, we do not expect significant increases in general and administrative expenses as compared to 2024 as we plan to continue to carefully manage costs in an effort to support the operations of the business.
Amortization of Acquired Intangible Assets
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(in thousands) 2025 2024 % Change 2025 2024 % Change
Amortization of acquired intangible assets $ 27,783 $ 24,368 14 % $ 83,141 $ 66,467 25 %
As a percentage of revenue 3 % 2 % 3 % 2 %
The increase in amortization of acquired intangible assets for the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was the result of amortization of acquired intangible assets related to our acquisitions in 2024. Based on acquired intangible assets at September 30, 2025, we expect amortization of acquired intangible assets to be approximately $27.9 million for the remainder of 2025, and $104.0 million, $89.2 million, $81.8 million and $75.9 million for 2026, 2027, 2028 and 2029, respectively.
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Restructuring Charge
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(in thousands) 2025 2024 % Change 2025 2024 % Change
Restructuring (benefit) charge
$ (15) $ 82,013 (100) % $ 3,449 $ 83,942 (96) %
As a percentage of revenue — % 8 % — % 3 %
The restructuring (benefit) charge for the three and nine months ended September 30, 2025 was primarily driven by management's commitment to redeploy headcount and resources to support our faster growing security and cloud computing solutions. The charges recognized during these periods include severance and related expenses for certain headcount reductions and impairments to capitalized internal-use software. We do not expect to incur material additional charges related to this action.
The restructuring charge for the three and nine months ended September 30, 2024 was driven by management's commitment to an action initiated during the third quarter of 2024 with the primary intent to redeploy resources to support our strategic investments and as a result of our completed acquisitions. The restructuring charge included severance and related expenses for certain headcount reductions, as well as impairments of acquired intangible assets and capitalized internal-use software. We do not expect to incur material additional charges related to these actions.
Non-Operating Income
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(in thousands) 2025 2024 % Change 2025 2024 % Change
Interest and marketable securities income, net $ 18,893 $ 23,065 (18) % $ 52,552 $ 77,534 (32) %
As a percentage of revenue 2 % 2 % 2 % 3 %
Interest expense $ (7,915) $ (6,735) 18 % $ (22,866) $ (20,382) 12 %
As a percentage of revenue (1) % (1) % (1) % (1) %
Other expense, net
$ (3,837) $ (13,161) (71) % $ (3,268) $ (13,599) (76) %
As a percentage of revenue — % (1) % — % — %
Interest and marketable securities income, net consists of interest earned on invested cash and marketable securities balances and income and losses on mutual funds that are associated with our employee non-qualified deferred compensation plan. The decrease for the three months ended September 30, 2025, as compared to the same period in 2024, was primarily due to investing in marketable securities at lower rates of return due to lower market interest rates in 2025 as compared to 2024 and lower average investment balances for the three months ended September 30, 2025, as compared to the same period in 2024. The decrease for the nine months ended September 30, 2025, as compared to the same period in 2024 was due to a reduction of cash and marketable securities balances and re-positioning our investments to cash equivalents, yielding lower interest, in 2025 in order to repay our $1,150.0 million convertible senior notes that became due in May 2025. This decrease was partially offset by interest earned as a result of purchases of new marketable securities during the quarter with the proceeds of our convertible senior notes due 2033.
Interest expense is related to our debt transactions, which are described in Note 6 to the interim condensed consolidated financial statements.
Other expense, net primarily represents net foreign exchange gains and losses due to foreign exchange rate fluctuations on the remeasurement of monetary assets and liabilities that are not denominated in the functional currency and gains and losses on cost method investments, as well as other non-operating expense and income items. Other expense, net may fluctuate in the future based on changes in foreign currency exchange rates or other events.
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Provision for Income Taxes
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
(in thousands) 2025 2024 % Change 2025 2024 % Change
Provision for income taxes $ (32,995) $ (15,899) 108 % $ (131,527) $ (63,891) 106 %
As a percentage of revenue (3) % (2) % (4) % (2) %
Effective income tax rate (19) % (22) % (26) % (15) %
For the three months ended September 30, 2025, as compared to the same period in 2024, our provision for income taxes increased due to an increase in profitability and a shortfall in the tax benefit related to stock-based compensation. These amounts were partially offset by an increase in foreign income taxed at lower rates and a decrease in global intangible low-taxed income. For the nine months ended September 30, 2025, as compared to the same period in 2024, our provision for income taxes increased due to a shortfall in the tax benefit related to stock-based compensation, an increase in profitability and an increase in certain tax reserves.
For the three months ended September 30, 2025, our effective income tax rate was lower than the federal statutory tax rate due to foreign income taxed at lower rates, a change in the valuation allowance recorded against state credits and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and an increase in certain tax reserves. For the nine months ended September 30, 2025, our effective income tax rate was higher than the federal statutory tax rate due to non-deductible stock-based compensation, an increase in certain tax reserves and a shortfall in the tax benefit related to stock-based compensation. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits.
For the three months ended September 30, 2024, our effective income tax rate was higher than the federal statutory tax rate due to non-deductible stock-based compensation, partially offset by the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. For the nine months ended September 30, 2024, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the adoption of a 15% global minimum corporate income tax by certain OECD member countries.
In determining our net deferred tax assets and valuation allowances, annualized effective income tax rates and cash paid for income taxes, management is required to make judgments and estimates about domestic and foreign profitability, the timing and extent of the utilization of net operating loss carryforwards, applicable tax rates, transfer pricing methodologies and tax planning strategies. Judgments and estimates related to our projections and assumptions are inherently uncertain; therefore, actual results could differ materially from our projections.
Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on GAAP, we provide additional financial metrics that are not prepared in accordance with GAAP ("non-GAAP financial measures"). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation and to evaluate our financial performance. These non-GAAP financial measures are non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, Adjusted EBITDA, Adjusted EBITDA margin and impact of foreign currency exchange rates, as discussed below.
Management believes that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparison of financial results across accounting periods and may be comparable to those of our peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate our operating results and future prospects in the same manner as management. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent or not reflective of our ongoing operating results.
The non-GAAP financial measures do not replace the presentation of our GAAP financial measures and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP.
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The non-GAAP adjustments, and our basis for excluding them from non-GAAP financial measures, are outlined below:
• Amortization of acquired intangible assets – We have incurred amortization of intangible assets, included in our GAAP financial statements, related to various acquisitions we have made. The amount of an acquisition's purchase price allocated to intangible assets and term of its related amortization can vary significantly and is unique to each acquisition; therefore, we exclude amortization of acquired intangible assets from our non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results.
• Stock-based compensation and amortization of capitalized stock-based compensation – Stock-based compensation is an important aspect of the compensation paid to our employees which includes long-term incentive plans to encourage retention, performance-based plans to encourage achievement of specified financial targets, short-term incentive awards with a one year vest and shares issued as part of a retirement savings program. The grant date fair value of the stock-based compensation awards varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to interpret; therefore, we believe it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation from our non-GAAP financial measures in order to highlight the performance of our core business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies.
• Acquisition-related costs – Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities. Acquisition-related costs are impacted by the timing and size of the acquisitions, and we exclude acquisition-related costs from our non-GAAP financial measures to provide a useful comparison of operating results to prior periods and to peer companies because such amounts vary significantly based on the magnitude of our acquisition transactions and do not reflect our core operations.
• Restructuring charge – We have incurred restructuring charges from programs that have significantly changed either the scope of the business undertaken by us or the manner in which that business is conducted. These charges include severance and related expenses for workforce reductions, impairments of long-lived assets that will no longer be used in operations (including acquired intangible assets, right-of-use assets, other facility-related property and equipment and internal-use software) and termination fees for any contracts cancelled as part of these programs. We exclude these items from our non-GAAP financial measures when evaluating our continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of our business.
• Amortization of debt issuance costs and capitalized interest expense – The issuance costs of our convertible senior notes are amortized to interest expense and are excluded from our non-GAAP results because management believes the non-cash amortization expense is not representative of ongoing operating performance.
• Gains and losses on cost method investments – We have recorded gains and losses from the disposition, changes to fair value and impairment of cost method investments. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to these gains and losses are not representative of our core business operations and ongoing operating performance.
• Income tax effect of non-GAAP adjustments and certain discrete tax items – The non-GAAP adjustments described above are reported on a pre-tax basis. The income tax effect of non-GAAP adjustments is the difference between GAAP and non-GAAP income tax expense. Non-GAAP income tax expense is computed on non-GAAP pre-tax income (GAAP pre-tax income adjusted for non-GAAP adjustments) and excludes certain discrete tax items (such as the impact of intercompany sales of intellectual property related to our acquisitions), if any. We believe that applying the non-GAAP adjustments and their related income tax effect allows us to highlight income attributable to our core operations.
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The following table reconciles GAAP income from operations to non-GAAP income from operations and non-GAAP operating margin for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Income from operations $ 166,024 $ 70,637 $ 472,068 $ 385,351
Amortization of acquired intangible assets 27,783 24,368 83,141 66,467
Stock-based compensation 115,423 102,607 340,177 294,333
Amortization of capitalized stock-based compensation and capitalized interest expense 12,753 11,089 37,400 31,646
Restructuring (benefit) charge
(15) 82,013 3,449 83,942
Acquisition-related costs 17 5,036 1,386 7,387
Non-GAAP income from operations $ 321,985 $ 295,750 $ 937,621 $ 869,126
GAAP operating margin 16 % 7 % 15 % 13 %
Non-GAAP operating margin 31 % 29 % 30 % 29 %
The following table reconciles GAAP net income to non-GAAP net income for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Net income $ 140,170 $ 57,907 $ 366,959 $ 365,013
Amortization of acquired intangible assets 27,783 24,368 83,141 66,467
Stock-based compensation 115,423 102,607 340,177 294,333
Amortization of capitalized stock-based compensation and capitalized interest expense 12,753 11,089 37,400 31,646
Restructuring (benefit) charge
(15) 82,013 3,449 83,942
Acquisition-related costs 17 5,036 1,386 7,387
Amortization of debt issuance costs 1,926 1,591 5,176 4,933
(Gain) loss on cost method investments, net
— — (9,313) 66
Income tax effect of above non-GAAP adjustments and certain discrete tax items (29,150) (41,097) (52,016) (112,130)
Non-GAAP net income $ 268,907 $ 243,514 $ 776,359 $ 741,657
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The following table reconciles GAAP net income per diluted share to non-GAAP net income per diluted share for the periods presented (in thousands, except per share data):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
GAAP net income per diluted share $ 0.97 $ 0.38 $ 2.50 $ 2.36
Amortization of acquired intangible assets 0.19 0.16 0.57 0.43
Stock-based compensation 0.80 0.67 2.31 1.90
Amortization of capitalized stock-based compensation and capitalized interest expense 0.09 0.07 0.25 0.20
Restructuring (benefit) charge
— 0.54 0.02 0.54
Acquisition-related costs — 0.03 0.01 0.05
Amortization of debt issuance costs 0.01 0.01 0.04 0.03
(Gain) loss on cost method investments, net
— — (0.06) —
Income tax effect of above non-GAAP adjustments and certain discrete tax items (0.20) (0.27) (0.35) (0.72)
Adjustment for shares (1)
— — — 0.03
Non-GAAP net income per diluted share (2)
$ 1.86 $ 1.59 $ 5.28 $ 4.82
Shares used in GAAP per diluted share calculations 144,811 153,240 147,041 154,765
Impact of benefit from note hedge transactions (1)
— (294) — (869)
Shares used in non-GAAP per diluted share calculations (1)
144,811 152,946 147,041 153,896
(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three and nine months ended September 30, 2024, for the benefit of our note hedge transactions. During these periods, our average stock price was in excess of $95.10, which was the initial conversion price of our convertible senior notes that matured in May 2025. See further definition below.
(2) Amounts may not foot due to rounding.
Non-GAAP net income per diluted share is calculated as non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average common shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to us pursuant to the note hedge transactions entered into in connection with the issuances of our convertible senior notes. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, we would receive a benefit from the note hedge transactions and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. With respect to the convertible senior notes due in each of 2033, 2029 and 2027, and those that matured in 2025, unless our weighted average stock price is greater than $93.01, $126.31, $116.18 and $95.10, respectively, the initial conversion prices, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.
We consider Adjusted EBITDA to be another important indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Adjusted EBITDA eliminates items that we do not consider to be part of our core operations. We define Adjusted EBITDA as GAAP net income excluding the following items: interest and marketable securities income and losses; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; legal settlements; foreign exchange gains and losses; interest expense; amortization of capitalized interest expense; gains and losses on cost method investments; and other non-recurring or unusual items that may arise from time to time. Adjusted EBITDA margin represents Adjusted EBITDA stated as a percentage of revenue.
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The following table reconciles GAAP net income to Adjusted EBITDA and Adjusted EBITDA margin for the periods presented (in thousands):
For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2025 2024 2025 2024
Net income $ 140,170 $ 57,907 $ 366,959 $ 365,013
Interest and marketable securities income, net (18,893) (23,065) (52,552) (77,534)
Provision for income taxes 32,995 15,899 131,527 63,891
Depreciation and amortization 136,428 130,517 406,489 383,180
Amortization of capitalized stock-based compensation and capitalized interest expense 12,753 11,089 37,400 31,646
Amortization of acquired intangible assets 27,783 24,368 83,141 66,467
Stock-based compensation 115,423 102,607 340,177 294,333
Restructuring (benefit) charge
(15) 82,013 3,449 83,942
Acquisition-related costs 17 5,036 1,386 7,387
Interest expense 7,915 6,735 22,866 20,382
(Gain) loss on cost method investments, net
— — (9,313) 66
Other expense, net 3,837 13,161 12,581 13,533
Adjusted EBITDA $ 458,413 $ 426,267 $ 1,344,110 $ 1,252,306
Net income margin 13 % 6 % 12 % 12 %
Adjusted EBITDA margin 43 % 42 % 43 % 42 %
Impact of Foreign Currency Exchange Rates
Revenue and earnings from our international operations have historically been important contributors to our financial results. Consequently, our financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, when the local currencies of our international subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.
Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount. The percentage growth rate impacted by foreign currency exchange rates, sometimes referred to as constant currency, is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period.
Liquidity and Capital Resources
To date, we have financed our operations primarily through public and private sales of debt and equity securities and cash generated by operations. As of September 30, 2025, our cash, cash equivalents and marketable securities, which are detailed in Note 2 to the interim condensed consolidated financial statements, totaled $1.8 billion. We place our cash investments in instruments that meet high-quality credit standards, as specified in our investment policy. Our investment policy is also designed to limit the amount of our credit exposure to any one issue or issuer and seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity at all times.
Changes in cash, cash equivalents and marketable securities are dependent upon changes in, among other things, working capital items such as accounts receivable, deferred revenue, accounts payable, various accrued expenses and operating lease obligations, as well as changes in our capital and financial structure due to common stock repurchases, debt repayments and issuances, purchases and sales of marketable securities, cash paid for acquisitions and similar events. We believe our strong balance sheet, cash position and access to funds available under our revolving credit facilities are important competitive
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differentiators that provide the financial stability and flexibility to enable us to continue to make investments at opportune times. We expect to continue to evaluate strategic investments to strengthen our business.
As of September 30, 2025, we had cash and cash equivalents of $416.4 million held in accounts outside the U.S. The U.S. Tax Cuts and Jobs Act establishes a territorial tax system in the U.S., which provides companies with the potential ability to repatriate earnings with minimal U.S. federal income tax impact. As a result, our liquidity is not expected to be materially impacted by the amount of cash and cash equivalents held in accounts outside the U.S.
Cash Provided by Operating Activities
For the Nine Months
Ended September 30,
(in thousands) 2025 2024
Net income $ 366,959 $ 365,013
Non-cash reconciling items included in net income 891,833 826,422
Changes in operating assets and liabilities (106,611) (16,052)
Net cash provided by operating activities $ 1,152,181 $ 1,175,383
The decrease in cash provided by operating activities for the nine months ended September 30, 2025, as compared to the same period in 2024, was due to timing of customer collections and severance payments occurring in 2025 related to our restructuring action in the third quarter of 2024, as well as higher income tax payments driven by intercompany sales of intellectual property.
Cash Used in Investing Activities
For the Nine Months
Ended September 30,
(in thousands) 2025 2024
Cash received (paid) for business acquisitions, net of cash acquired
$ 790 $ (434,066)
Cash paid for asset acquisitions (29,930) (4,862)
Purchases of property and equipment and capitalization of internal-use software development costs (614,805) (522,408)
Net marketable securities activity 474,959 402,683
Other, net (5,365) 4,160
Net cash used in investing activities $ (174,351) $ (554,493)
The decrease in cash used in investing activities during the nine months ended September 30, 2025, as compared to the same period in 2024, was due to:
• the acquisition of Noname Security in June 2024 that did not recur in 2025; and
• an increase in net marketable securities activity, primarily due to higher maturities and sales compared to purchases; which resulted from repayment and proceeds from our convertible senior notes activities.
These increases were partially offset by higher purchases of property and equipment related to network expansion, primarily for our compute locations.
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Net Cash Used in Financing Activities
For the Nine Months
Ended September 30,
(in thousands) 2025 2024
Net convertible senior notes activity $ 276,839 $ —
Activity related to stock-based compensation (61,084) (109,407)
Repurchases of common stock (799,963) (419,097)
Other, net (2,126) (10,291)
Net cash used in financing activities $ (586,334) $ (538,795)
The increase in cash used in financing activities during the nine months ended September 30, 2025, as compared to the same period in 2024, was primarily due to an increase in repurchases of common stock, partially offset by our net convertible senior notes activity. During the nine months ended September 30, 2025, we issued $1,725.0 million in par value of convertible senior notes and repaid $1,150.0 million in convertible senior notes which were due in May 2025.
In May 2024, our board of directors authorized a $2.0 billion share repurchase program, effective May 2024 through June 2027. During the nine months ended September 30, 2025, we repurchased 10.0 million shares of common stock at a weighted average price of $79.77 per share for an aggregate of $800.0 million. As of September 30, 2025, $1.2 billion remained available for future share repurchases under the authorization program. Our goals for the share repurchase program are to offset the dilution created by our employee equity compensation programs over time and provide the flexibility to return capital to stockholders as business and market conditions warrant, while still preserving our ability to pursue other strategic opportunities. The timing and amount of any future share repurchases will be determined by our management based on its evaluation of market conditions and other factors.
Convertible Senior Notes
In May 2025, we issued $1,725.0 million in principal amount of convertible senior notes due 2033 and entered into related convertible note hedge and warrant transactions. We intend to use a portion of the net proceeds to repay at maturity our $1,150.0 million outstanding aggregate principal amount of convertible senior notes due in 2027. Additionally, we used a portion of the net proceeds to repay $250.0 million in borrowings made in April 2025 under our revolving credit agreement entered into in November 2022 ("2022 Credit Agreement") and for share repurchases.
As of September 30, 2025, we had $4,140.0 million of convertible senior notes outstanding that are senior unsecured obligations and bear interest payable semi-annually in arrears. These notes mature between September 2027 and May 2033. The terms of the notes and hedge and warrant transactions are discussed more fully in Note 6 to the interim condensed consolidated financial statements.
Revolving Credit Facilities
In January 2025, we entered into a $150.0 million uncommitted revolving credit agreement ("2025 Credit Agreement"). Any outstanding borrowings are secured by collateral, consisting primarily of available-for-sale marketable securities. The 2025 Credit Agreement does not expire but is cancellable at any time and any borrowings can be due on demand. Borrowings under the 2025 Credit Agreement will bear a specified interest rate, based on the Secured Overnight Financing Rate, and interest period at the time of the confirmed borrowing. There were no outstanding borrowings under the 2025 Credit Agreement as of September 30, 2025.
In November 2022, we entered into a $500.0 million 2022 Credit Agreement, which allows us to borrow at various interest rates and contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement was amended in May 2025 to increase the aggregate revolving commitments from $500.0 million to $1.0 billion and to extend the expiration one year. As of September 30, 2025, we were in compliance with all covenants. There were no outstanding borrowings under the 2022 Credit Agreement as of September 30, 2025.
The terms of the revolving credit agreements are discussed more fully in Note 6 to the interim condensed consolidated financial statements.
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Operating Leases
We have entered into operating leases for real estate assets related to office space and co-location assets related to space or racks at co-location facilities and related equipment for our servers and other networking equipment. As of September 30, 2025, there have been no significant changes in our obligations under these operating lease arrangements from those reported on Form 10-K for the year ended December 31, 2024, other than normal period-to-period variations, particularly as we execute on our expansion plans for our compute locations.
Purchase Commitments
We enter into long-term agreements with network and internet service providers for bandwidth, as well as execute purchase orders for the purchase of goods or services in the ordinary course of business, which may contain minimum commitments. These minimum commitments may vary from period to period depending on the timing and length of contract renewals with our vendors, and on our plans for network expansion, including our expansion plans related to our compute locations.
Liquidity Outlook
Based on our present business plan, we expect our current cash, cash equivalents and marketable securities balances and our forecasted cash flows from operations to be sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures, investments in information technology, potential strategic acquisitions, anticipated share repurchases, lease and purchase commitments and settlements of other liabilities.
Off-Balance Sheet Arrangements
We have entered into indemnification agreements with third parties, including vendors, customers, landlords, our officers and directors, stockholders of acquired companies, joint venture partners and third parties to which we license technology. Generally, these indemnification agreements require us to reimburse losses suffered by a third-party due to various events, such as lawsuits arising from patent or copyright infringement or our negligence. These indemnification obligations are considered off-balance sheet arrangements in accordance with the authoritative guidance for guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others. See also Note 13 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2024 for further discussion of these indemnification agreements. The fair value of guarantees issued or modified during the nine months ended September 30, 2025 was determined to be immaterial.
As of September 30, 2025, we did not have any additional material off-balance sheet arrangements.
Significant Accounting Policies and Estimates
See Note 2 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2024. There have been no material changes to our significant accounting policies and estimates from those reported in our annual report on Form 10-K for the year ended December 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our portfolio of cash equivalents and short- and long-term investments is maintained in a variety of securities that are detailed in Note 2 to the interim condensed consolidated financial statements. The majority of our investments are classified as available-for-sale securities and carried at fair market value with cumulative unrealized gains or losses recorded as a component of accumulated other comprehensive loss within stockholders' equity. A sharp rise in interest rates could have an adverse impact on the fair market value of certain securities in our portfolio. We do not currently hedge our interest rate exposure and do not enter into financial instruments for trading or speculative purposes. If market interest rates were to increase by 100 basis points, reflected uniformly across the yield curve regardless of the duration to maturity, from September 30, 2025 levels, the fair value of our available-for-sale portfolio would decline by approximately $12.9 million.
As of September 30, 2025, we had $4,140.0 million in aggregate principal amount of convertible senior notes outstanding that are senior unsecured obligations with fixed annual interest rates. The terms of the notes are discussed more fully in Note 6
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to the interim condensed consolidated financial statements. Due to the fixed annual interest rate, these notes do not give rise to financial or economic interest exposure associated with changes in interest rates. However, the fair value of fixed rate debt instruments fluctuates when interest rates change. Additionally, the fair value can be affected when the market price of our common stock fluctuates. We carry the notes at face value less an unamortized discount on our interim condensed consolidated balance sheet, and we present the fair value for required disclosure purposes only.
Our exposure to risk for changes in interest rates relates primarily to any borrowings under our credit agreements, which have variable rates of interest. As of September 30, 2025, we had no outstanding borrowings under the 2025 Credit Agreement or the 2022 Credit Agreement.
Foreign Currency Risk
Growth in our international operations will incrementally increase our exposure to foreign currency fluctuations as well as other risks typical of international operations that could impact our business, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures and other regulations and restrictions. Because we publicly report in U.S. dollars, our reported revenue results are negatively impacted when the U.S. dollar strengthens and benefit when the U.S. dollar weakens and has an opposite effect on our expenses where our expenses are positively impacted when the U.S. dollar strengthens and are negatively impacted when the U.S. dollar weakens. However, the impact to expenses only partially offsets the impact to our revenue.
Transaction Exposure
Foreign exchange rate fluctuations may adversely impact our consolidated results of operations as exchange rate fluctuations on transactions denominated in currencies other than functional currencies result in gains and losses that are reflected in our interim condensed consolidated statements of income. We enter into short-term foreign currency forward contracts to offset foreign exchange gains and losses generated by the re-measurement of certain assets and liabilities recorded in non-functional currencies. Changes in the fair value of these derivatives, as well as re-measurement gains and losses, are recognized in our interim condensed consolidated statements of income within other expense, net. Foreign currency transaction gains and losses from these forward contracts were determined to be immaterial during the nine months ended September 30, 2025. We do not enter into derivative financial instruments for trading or speculative purposes.
Translation Exposure
To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency-denominated transactions will result in increased revenue and operating expenses. Conversely, our revenue and operating expenses will decrease when the U.S. dollar strengthens against foreign currencies. A hypothetical 10% strengthening or weakening in the value of the U.S. dollar relative to the foreign currencies in which our revenues and expenses are denominated would not result in a material impact to our interim condensed consolidated financial statements.
Foreign exchange rate fluctuations may also adversely impact our consolidated financial condition as the assets and liabilities of our international operations are translated into U.S. dollars in preparing our interim condensed consolidated balance sheet. These gains or losses are recorded as a component of accumulated other comprehensive loss within stockholders' equity.
Credit Risk
Concentrations of credit risk with respect to accounts receivable are limited to certain customers to which we make substantial sales. Our customer base consists of a large number of geographically dispersed customers diversified across numerous industries. We believe that our accounts receivable credit risk exposure is limited. As of September 30, 2025 and December 31, 2024, no customer had an accounts receivable balance of 10% or more of our accounts receivable. We believe that at September 30, 2025, the concentration of credit risk related to accounts receivable was insignificant.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("the Exchange Act"), means controls and other procedures
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of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended September 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are party to various litigation matters, governmental proceedings, investigations, claims and disputes that we consider routine and incidental to our business. We do not currently expect the results of any of these matters to have a material effect on our business, results of operations, financial condition or cash flows.
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Item 1A. Risk Factors
Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.
Financial and Operational Risks
Slowing revenue growth has in the past and may continue to negatively impact our profitability and stock price.
The overall revenue growth we have enjoyed in recent years may not continue in future periods and could decline, which could negatively impact our profitability and stock price. Our ability to generate revenue depends on the amount of services we deliver, continued growth in demand for our security, delivery and cloud computing solutions and our ability to maintain the prices we charge for them.
Revenue we generate from our delivery solutions is impacted by pricing pressure due to competition and fluctuations in content traffic as a result of, among other factors, changes in the popularity of our customers' content including video delivery and gaming, and economic pressures on our customers that can cause them to take steps to optimize their platforms, including through "do-it-yourself" ("DIY") initiatives or redistributing their traffic among multiple providers. Such steps by our customers have in the past and may in the future reduce traffic on our network, negatively impacting revenue. Although the rate of decline has diminished in recent periods, we have continued to experience revenue declines in our delivery solutions, and ongoing competition, pricing pressure, and potential further shifts toward DIY or alternative sourcing strategies may continue to impact our delivery revenue in the future.
Our security solutions currently generate the largest portion of our revenue. Our ability to generate revenue in our security business depends on our ability to increase our industry recognition as a provider of security solutions, navigate a highly competitive market, develop or acquire new solutions in a rapidly-changing environment where security threats are constantly evolving and ensure that our solutions operate effectively and are competitive with products offered by others, particularly as larger providers increasingly offer broader platforms of security services. Further, security revenue for some products is impacted by traffic levels on our network and has, and may continue to be, negatively impacted by reduced traffic on our network.
In addition, an increasing proportion of our revenue has been generated by our cloud computing solutions. Our ability to generate revenue in our cloud computing solutions is dependent on our ability to successfully continue building our compute platform, attract a customer base that has traditionally partnered with more established companies in the cloud computing industry, and develop effective, price competitive and attractive solutions.
If we are unable to increase revenues, our profitability and stock price could suffer. See the risk factor titled, "Global conditions have in the past and may in the future harm our industry, business and results of operations" below.
Global conditions have in the past and may in the future harm our industry, business and results of operations.
We operate globally and as a result, our business, revenues and profitability are impacted by global macroeconomic and geopolitical conditions. The success of our activities is affected by general economic, political and market conditions, including, among others, inflation, foreign exchange rates, interest rates, tax rates, economic uncertainty, political instability, warfare, changes in laws, trade barriers including announced or expected tariffs, changes in export controls, the actual or perceived failure or financial difficulties of financial institutions, reduced consumer confidence, and spending and economic and trade sanctions. Global economic and geopolitical conditions can impact our customers, potentially making non-U.S. companies reluctant to enter into contracts with U.S. providers. Such conditions can also cause customers to take cost-savings measures that can include optimization and DIY initiatives, and such measures have in the past and may in the future negatively impact our revenues by reducing traffic on our network. The U.S. capital markets have recently experienced and may continue to experience extreme volatility and disruption. Furthermore, inflation rates in the U.S. have been elevated compared to historical rates and have fluctuated. In addition, the Trump administration has imposed or indicated an intention to impose tariffs or export controls on certain countries that could further adversely impact trade relations, result in higher costs and
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decreased purchasing power of our customers, put increased pressure on supply chains and create general market instability. Such economic volatility has in the past and could in the future adversely affect our business, financial condition, results of operations and cash flows and future market disruptions could negatively impact us. For example, these unfavorable economic conditions could slow our revenue growth or increase our operating costs, which could negatively impact our profitability. Geopolitical destabilization, the escalation of international tensions and warfare have impacted and could continue to impact global currency exchange rates, resources from our suppliers, our ability to compete effectively and our ability to operate or grow our business.
Additionally, we have offices and employees located in regions that historically have and may again experience periods of political instability, warfare, changes in laws, trade barriers, and economic and trade sanctions. Adverse conditions in these countries or actions by those countries to adopt policies that are not favorable to other countries in which we operate have in the past and may in the future affect our operations, including disruptions to our workforce, supply chains, networks, financial systems and other critical infrastructure, which could adversely affect our business, results of operations, financial condition and cash flows. For example, approximately six percent of our global employees are located in Israel, and have in the past been impacted by the Israel-Hamas war or other hostilities in and around or involving Israel. Any escalations or conflicts impacting Israel, including periodic escalations, could cause harm to our employees or otherwise impair their ability to work for extended periods of time.
Failure to control expenses could reduce our profitability, which would negatively impact our stock price.
Maintaining or improving our profitability depends both on our ability to increase our revenue and limit our expenses. We base our decisions about expense levels and investments on estimates of our future revenue and future anticipated rates of growth and may incur varying levels of expense based on strategic initiatives, including acquisitions and the build out of our network to support our cloud computing solutions. In addition, many of our expenses are fixed costs for a certain amount of time which may impact our ability to reduce costs in a timely manner or without incurring additional costs. If we are unable to increase revenue and limit expenses, our results of operations will suffer. We have in the past and may in the future take certain steps to reduce expenses, however, there are no assurances that we will be able to effectively reduce our expenses and such actions may negatively affect our ability to invest in our business for innovation, systems improvements and other initiatives.
If we do not develop or acquire new solutions that are attractive to our customers, our revenue and operating results could be adversely affected.
Innovation is important to our future success. In particular, as security and cloud computing solutions have become, and are expected to continue to be, an important part of our business, we must be particularly adept at developing new security solutions that meet the constantly-changing threat landscape and cloud computing, compute-to-edge and artificial intelligence ("AI") inference solutions that meet the needs of professional users and enterprises looking to increase the utility of the internet for their business.
The process of developing new solutions and product enhancements is complex, lengthy and uncertain and has become increasingly complex due to the sophistication of our customers’ needs. The development timetable is uncertain and we may commit significant resources to developing solutions for which a viable market may not ultimately develop. For example, we are investing significant resources in our cloud computing solutions and platform, working on expanding the capacity of these facilities, adding additional sites and developing increased cloud computing features and functionality. Success in these efforts is not guaranteed and will largely depend on our ability to create products that are competitive in the enterprise market, source additional co-location facilities, manage an uncertain supply chain for server related hardware and adapt our offerings to new or emerging technologies and changes in customer requirements, including those related to artificial intelligence workloads. In addition, we have experienced, and may in the future experience, delays in developing and releasing new products and product enhancements. This could cause our expenses to grow more rapidly than our revenue.
Trying to innovate through acquisition can be costly and with uncertain prospects for success; we may find that attractive acquisition targets are too expensive for us to pursue which could cause us to pursue more time-consuming internal development.
Failure to develop, on a cost-effective basis, innovative or enhanced solutions that are attractive to customers and profitable to us could have a material detrimental effect on our business, results of operations, financial condition and cash flows.
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If we are unable to compete effectively and adapt to changing market conditions, our business will be adversely affected.
We compete in markets that are intensely competitive and rapidly changing. Our current and potential competitors vary by size, product offerings and geographic region, and range from start-ups that offer solutions competing with a discrete part of our business to large technology or telecommunications companies that offer, or may be planning to introduce, products and services that are broadly competitive with what we do. The primary competitive factors in our market are differentiation of technology, global presence, quality of solutions, reliability, long-term product roadmap, customer service, technical expertise, security, ease-of-use, breadth of services offered, price and financial strength.
Many of our current and potential competitors have substantially greater financial, technical and marketing resources, larger customer bases, broader product portfolios, longer operating histories, greater brand recognition and more established relationships in the industry than we do. This is particularly true with respect to our cloud computing solutions, as a small number of very large competitors have established themselves as leaders in the cloud computing industry. As a result, some competitors have in the past and may in the future be able to: develop superior products or services; leverage better name recognition, particularly in the security and cloud computing markets; enter new markets more easily or better manage the impact of changes in general economic conditions, geopolitical conditions and industry pressures; gain greater market acceptance for their products and services; enter into long-term contracts with our potential customers; increase their points of presence and proximity to enterprise data centers and end users faster than us; expand their offerings more efficiently and more rapidly; bundle their products that are competitive with ours with other solutions they offer in a way that makes our offerings less appealing to, or more costly for, current and potential customers; more quickly adapt to new or emerging technologies and changes in customer requirements; take advantage of acquisition, investment and other opportunities more readily; offer lower prices than ours, including at levels that may not be profitable for us to match; spend more money on the promotion, marketing and sales of their products and services; offer higher salaries to talented professionals which may impact our ability to hire or retain engineering and other personnel; and implement shorter sales cycles with customers and prospects.
Smaller and more nimble competitors have in the past and may in the future be able to: attract customers by offering less sophisticated versions of products and services than we provide at lower prices than those we charge; develop new business models that are disruptive to us; and respond more quickly than we can to new or emerging technologies, changes in customer requirements and market and industry developments, resulting in superior offerings.
Ultimately, any type of increased competition could result in price and revenue reductions, loss of customers and loss of market share or inability to penetrate new markets, each of which could materially impact our business, profitability, financial condition, results of operations and cash flows.
We and other companies that compete in this industry and these markets experience continually shifting business relationships, reputations, commercial focuses and business priorities, all of which occur in reaction to industry and market forces and the emergence of new opportunities. These shifts have led or could lead to our customers or partners becoming our competitors; customers implementing multi-vendor policies and seeking out one or more of our competitors to provide content and application delivery or security protection services; network suppliers no longer seeking to work with us; and technology companies that previously did not appear to show interest in the markets we seek to address entering into those markets as our competitors. With this constantly changing environment, we may face operational difficulties in adjusting to the changes or our core strategies could become obsolete. Any of these or other developments could harm our business.
Defects or disruptions in our products and IT systems could require us to increase spending on upgrading systems, diminish demand for our solutions or subject us to substantial liability.
Our solutions are highly complex and are designed to be deployed in and across numerous large and complex networks that we do not control. From time to time, we have needed to correct errors and defects in the proprietary and open-source software that underlies our platform that have given rise to service incidents, outages and disruptions or otherwise impacted our operations. We have in the past and could in the future face the loss of customers from these incidents as they seek alternative or supplemental providers. We have also periodically experienced customer dissatisfaction with the quality of some of our delivery, security, cloud computing and other services, which has led to a loss of business and could lead to a loss of customers in the future. Furthermore, most of our customer agreements contain service level commitments. If we fail to meet these contractual commitments, we have in the past and may in the future be obligated to provide credits for future service, or face contract termination with refunds of prepaid amounts, which could harm our business.
We may not have in place adequate quality assurance procedures to ensure that we detect errors in our hardware, software and open-source components that we use in a timely manner, and we may have insufficient resources to efficiently address
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multiple service incidents happening simultaneously or in rapid succession. If we are unable to efficiently and cost-effectively fix errors or other problems that we identify and improve the quality of our solutions or systems, or if there are unidentified errors that allow persons to improperly access our services or systems, we could experience litigation, the need to issue credits to customers, loss of revenue and market share, damage to our reputation, diversion of management attention, increased expenses, reduced profitability and other negative consequences which could harm our business.
Defects in our security solutions or human error could lead to negative publicity, loss of business, damages payments to customers, diminishing customer appeal and other negative consequences which could harm our business. As our solutions are adopted by an increasing number of enterprises and governments, it is possible that the adversaries behind advanced malicious actions will specifically focus on finding ways to defeat our products and services. If they are successful, we could experience a serious impact on our reputation and financial condition as a provider of security solutions.
We are devoting significant resources to develop and deploy our own competing cloud computing offering. The rapid development and deployment of new compute infrastructure—both hardware and software—bears the risk of bugs and unforeseen failures that could affect our reputation and ability to execute our strategies. The risks of such bugs and unforeseen failures introduced to our compute platform by our customers who control many aspects of their use of our cloud computing services and experimental technologies could affect our reputation, ability to execute our strategies and our financial condition. It is also uncertain whether our strategies to develop and deploy our own competing cloud computing offering will attract additional customers or generate enough revenue required to be successful. The costs related to these efforts may also reduce the gross and operating margins we have previously achieved . Failure to adequately and rapidly deploy additional points of presence, increased proximity to enterprise data centers and end users and develop competitive offerings could result in negative publicity, loss of business, diminishing customer appeal and other negative consequences which could harm our business.
Our business relies on our data systems, traffic measurement systems, billing systems, ordering processes and other operational and financial reporting and control systems. We also rely on third-party software for certain essential operational services and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectively. All of these systems have become increasingly complex due to the complexity of our business, use of third-party software and services, acquisitions of new businesses with different systems and changing regulation over controls and procedures. As a result, these systems have in the past and could in the future generate errors that impact traffic measurement or invoicing, revenue recognition and financial forecasting or other parts of our business. We will need to continue to upgrade and improve our data systems, traffic measurement systems, billing systems, ordering processes and other operational and financial systems, procedures and controls. These upgrades and improvements may be difficult and costly. If we are unable to adapt our systems and organization in a timely, efficient and cost-effective manner to accommodate changing circumstances, our business may be adversely affected.
Cybersecurity breaches and attacks on us, our contractors or our third-party vendors, as well as steps we need to take in an effort to prevent them, can lead to significant costs and disruptions that would harm our business, financial results and reputation.
We regularly face attempts to gain unauthorized access or deliver malicious software to Akamai's platforms, products and services and our internal IT systems, with the goal of stealing proprietary information related to our business, products, employees and customers; disrupting our systems and services or those of our customers or others; or demanding ransom to return control of such systems and services. These attempts take a variety of forms, including Distributed Denial of Service ("DDoS") attacks, infrastructure attacks, botnets, malicious file uploads, application abuse, credential abuse, social engineering, ransomware, bugs, viruses, worms and malicious software programs. Additionally, the use of artificial intelligence by bad actors has heightened the sophistication and effectiveness of these types of attacks, and may be used to create attacks that current processes and technologies are unable to adequately address. There have in the past and could in the future be attempts to infiltrate our systems through our supply chain and contractors. Malicious actors are known to attempt to fraudulently induce employees and suppliers to disclose sensitive information through illegal electronic spamming, phishing or other tactics. Other parties may attempt to gain unauthorized physical access to our facilities in order to infiltrate our internal-use information systems. Furthermore, nation state and hacktivist attacks against us or our customers have in the past and may in the future intensify during periods of heightened geopolitical tensions or armed conflict, such as the ongoing war in Ukraine, the Israel-Hamas war and the escalation of military conflict between Israel and Iran, as well as broader military confrontations involving the United States. We may not be able to anticipate the techniques used in such attacks, as they change frequently and may not be recognized until launched. The rapidly changing technological and geopolitical landscape may also create new, unexpected, or unknown risks for which we may not immediately be prepared, requiring increased risk mitigation expenditures. While we have, from time to time, experienced threats to and breaches of our and our third-party vendors' data and systems, to date, to our
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knowledge, cyber threats and other attacks have not resulted in any material adverse effect to our business or operations, but such threats are constantly evolving, increasing the difficulty of detecting and successfully defending against them.
The complexities in managing the security profile of a distributed network with vast scale and geographic reach that evolves to incorporate new capabilities expose us to both known and unknown vulnerabilities. We have discovered vulnerabilities in software and hardware used in our technology, such as the AMD "Inception" vulnerability identified in mid-2023 that potentially impacted a large portion of the internet ecosystem, and may have other undiscovered vulnerabilities. Vulnerabilities, resident in software, hardware or configurations, have in the past and may in the future require significant operational efforts to mitigate and may persist for extended periods of time and the effects of any such vulnerability could be exacerbated. Similar security risks exist with respect to acquired companies, our business partners and the third-party vendors that we rely on for aspects of our information technology support services and administrative functions. As a result, we are subject to risks that the activities of our business partners and third-party vendors may adversely affect our business even if an attack or breach does not directly target our systems.
To protect our corporate and deployed networks, we aim to continuously engineer more secure solutions, enhance security and reliability features, improve the deployment of software updates to address security vulnerabilities, develop mitigation technologies that help to secure customers from attacks and maintain the digital security infrastructure that protects the integrity of our network and services. For example, our ongoing efforts to continually enhance the security and reliability of our globally distributed infrastructure, customer applications, and corporate systems comprise various initiatives and mitigation efforts, including but not limited to upgrading access and configuration controls; improving security instrumentation, monitoring, detection and prevention tools; enhancing software inventory and tracking and patching systems; upgrading encryption processes and protections; enhancing authorization methods in applications; enhancing data loss prevention and endpoint security management capabilities; upgrading vulnerability identification, assessment, and remediation processes and technologies; and enhancing the security of passwords and other credentials, as applicable and appropriate. Our efforts to engineer more secure solutions are frequently costly, with a negative impact on near-term profitability, and may be unsuccessful in preventing security incidents that may have an adverse effect on our business and reputation.
For example, with the acquisition of Linode Limited Liability Company ("Linode"), we continue to adapt procedures for mitigating risks that have in the past or may in the future materialize, including any harms that may arise from abuse of our cloud computing products. If we fail to mitigate these harms or if there is a significant cybersecurity event using our cloud computing products or our cloud computing products are perceived to be less reliable than our competitors, it could result in loss of customers and reputational damage.
Any actual, alleged or perceived breach of network security in our systems or networks, or any other actual, alleged or perceived outage, compromise or data security incident we, our customers or our third-party suppliers suffer, has in the past and could in the future result in damage to our reputation; negative publicity; loss of channel partners, customers and sales; loss of revenue; loss of competitive advantages; increased costs to remedy any problems and otherwise respond to any incident; regulatory investigations and enforcement actions and fines; costly litigation; and other liabilities.
If we cannot maintain compatibility with our customers’ IT infrastructure, including their chosen third-party services, our business will be harmed.
Our products interoperate with our customers' IT infrastructures that often have different specifications, utilize diverse technology, and require compatibility with multiple communication protocols. Therefore, the functionality of our technology often needs to have, and maintain, compatibility with our customers' technology environment, including their chosen third-party technology. Aspects of our technology's compatibility with our customers' technology is dependent on our customers because our customers, and in particular those who implement third-party applications within their environments, may change features, restrict our access to, or alter their applications within their discretion and in a manner that causes incompatibilities or causes us significant costs to maintain compatibility. Such changes could functionally limit or prevent the compatibility of our products with our customers’ IT infrastructure, which would negatively affect adoption of our products and harm our business. If we fail to update our products to achieve compatibility with new third-party applications that our customers use, we may not be able to offer the functionality that our customers need, which would harm our business.
We face risks associated with global operations that could harm our business.
A significant portion of our hiring, new customers and revenue growth in recent years has been attributable to our business outside the U.S. Our operations in international countries subject us to risks that may increase our costs, impact our financial results, disrupt our operations or make our operations less efficient and require significant management attention. These risks
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