FULLTEXT DEL 1 AV 2
10-Q – 2026-05-08 – akam-20260331.htm
akam-20260331 false 2026 Q1 0001086222 12/31 0.0107513 0.0079170 0.0086073 P2Y 378 265 357 xbrli:shares iso4217:USD iso4217:USD xbrli:shares akam:location akam:country akam:city akam:segment akam:security akam:senior_note xbrli:pure akam:day akam:solution_category 0001086222 2026-01-01 2026-03-31 0001086222 2026-05-04 0001086222 2026-03-31 0001086222 2025-12-31 0001086222 2025-01-01 2025-03-31 0001086222 2024-12-31 0001086222 2025-03-31 0001086222 us-gaap:CommonStockMember 2025-12-31 0001086222 us-gaap:AdditionalPaidInCapitalMember 2025-12-31 0001086222 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-12-31 0001086222 us-gaap:TreasuryStockCommonMember 2025-12-31 0001086222 us-gaap:RetainedEarningsMember 2025-12-31 0001086222 us-gaap:CommonStockMember 2026-01-01 2026-03-31 0001086222 us-gaap:AdditionalPaidInCapitalMember 2026-01-01 2026-03-31 0001086222 us-gaap:TreasuryStockCommonMember 2026-01-01 2026-03-31 0001086222 us-gaap:RetainedEarningsMember 2026-01-01 2026-03-31 0001086222 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2026-01-01 2026-03-31 0001086222 us-gaap:CommonStockMember 2026-03-31 0001086222 us-gaap:AdditionalPaidInCapitalMember 2026-03-31 0001086222 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2026-03-31 0001086222 us-gaap:TreasuryStockCommonMember 2026-03-31 0001086222 us-gaap:RetainedEarningsMember 2026-03-31 0001086222 us-gaap:CommonStockMember 2024-12-31 0001086222 us-gaap:AdditionalPaidInCapitalMember 2024-12-31 0001086222 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-12-31 0001086222 us-gaap:TreasuryStockCommonMember 2024-12-31 0001086222 us-gaap:RetainedEarningsMember 2024-12-31 0001086222 us-gaap:CommonStockMember 2025-01-01 2025-03-31 0001086222 us-gaap:AdditionalPaidInCapitalMember 2025-01-01 2025-03-31 0001086222 us-gaap:TreasuryStockCommonMember 2025-01-01 2025-03-31 0001086222 us-gaap:RetainedEarningsMember 2025-01-01 2025-03-31 0001086222 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-01-01 2025-03-31 0001086222 us-gaap:CommonStockMember 2025-03-31 0001086222 us-gaap:AdditionalPaidInCapitalMember 2025-03-31 0001086222 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-03-31 0001086222 us-gaap:TreasuryStockCommonMember 2025-03-31 0001086222 us-gaap:RetainedEarningsMember 2025-03-31 0001086222 us-gaap:BankTimeDepositsMember 2026-03-31 0001086222 us-gaap:CommercialPaperMember 2026-03-31 0001086222 us-gaap:DomesticCorporateDebtSecuritiesMember 2026-03-31 0001086222 us-gaap:BankTimeDepositsMember 2025-12-31 0001086222 us-gaap:DomesticCorporateDebtSecuritiesMember 2025-12-31 0001086222 us-gaap:MoneyMarketFundsMember 2026-03-31 0001086222 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2026-03-31 0001086222 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member 2026-03-31 0001086222 us-gaap:BankTimeDepositsMember us-gaap:FairValueInputsLevel1Member 2026-03-31 0001086222 us-gaap:BankTimeDepositsMember us-gaap:FairValueInputsLevel2Member 2026-03-31 0001086222 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel1Member 2026-03-31 0001086222 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2026-03-31 0001086222 us-gaap:DomesticCorporateDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member 2026-03-31 0001086222 us-gaap:DomesticCorporateDebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2026-03-31 0001086222 us-gaap:MutualFundMember 2026-03-31 0001086222 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member 2026-03-31 0001086222 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel2Member 2026-03-31 0001086222 us-gaap:FairValueInputsLevel1Member 2026-03-31 0001086222 us-gaap:FairValueInputsLevel2Member 2026-03-31 0001086222 us-gaap:MoneyMarketFundsMember 2025-12-31 0001086222 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001086222 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member 2025-12-31 0001086222 us-gaap:BankTimeDepositsMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001086222 us-gaap:BankTimeDepositsMember us-gaap:FairValueInputsLevel2Member 2025-12-31 0001086222 us-gaap:CommercialPaperMember 2025-12-31 0001086222 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001086222 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2025-12-31 0001086222 us-gaap:DomesticCorporateDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001086222 us-gaap:DomesticCorporateDebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2025-12-31 0001086222 us-gaap:MutualFundMember 2025-12-31 0001086222 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001086222 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel2Member 2025-12-31 0001086222 us-gaap:FairValueInputsLevel1Member 2025-12-31 0001086222 us-gaap:FairValueInputsLevel2Member 2025-12-31 0001086222 us-gaap:TradeAccountsReceivableMember 2026-03-31 0001086222 us-gaap:TradeAccountsReceivableMember 2025-12-31 0001086222 akam:UnbilledAccountsReceivableMember 2026-03-31 0001086222 akam:UnbilledAccountsReceivableMember 2025-12-31 0001086222 akam:CommissionandIncentivePaymentsMember us-gaap:OtherCurrentAssetsMember 2026-03-31 0001086222 akam:CommissionandIncentivePaymentsMember us-gaap:OtherCurrentAssetsMember 2025-12-31 0001086222 akam:CommissionandIncentivePaymentsMember us-gaap:OtherAssetsMember 2026-03-31 0001086222 akam:CommissionandIncentivePaymentsMember us-gaap:OtherAssetsMember 2025-12-31 0001086222 akam:CommissionandIncentivePaymentsMember 2026-03-31 0001086222 akam:CommissionandIncentivePaymentsMember 2025-12-31 0001086222 us-gaap:DevelopedTechnologyRightsMember 2026-03-31 0001086222 us-gaap:DevelopedTechnologyRightsMember 2025-12-31 0001086222 us-gaap:CustomerRelationshipsMember 2026-03-31 0001086222 us-gaap:CustomerRelationshipsMember 2025-12-31 0001086222 us-gaap:TrademarksAndTradeNamesMember 2026-03-31 0001086222 us-gaap:TrademarksAndTradeNamesMember 2025-12-31 0001086222 us-gaap:LicensingAgreementsMember 2026-03-31 0001086222 us-gaap:LicensingAgreementsMember 2025-12-31 0001086222 us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:ConvertibleNotesMember us-gaap:ConvertibleDebtMember 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2033Member us-gaap:ConvertibleDebtMember 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2029Member us-gaap:ConvertibleDebtMember 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2027Member us-gaap:ConvertibleDebtMember 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2025Member us-gaap:ConvertibleDebtMember 2025-05-01 0001086222 akam:DebtConversionTermsOneMember akam:ConvertibleSeniorNotesDue2027Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:DebtConversionTermsOneMember akam:ConvertibleSeniorNotesDue2033Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:DebtConversionTermsOneMember akam:ConvertibleSeniorNotesDue2029Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:DebtConversionTermsTwoMember akam:ConvertibleSeniorNotesDue2033Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:DebtConversionTermsTwoMember akam:ConvertibleSeniorNotesDue2029Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:DebtConversionTermsTwoMember akam:ConvertibleSeniorNotesDue2027Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2027Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2029Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2033Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 us-gaap:ConvertibleDebtMember 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2033Member us-gaap:ConvertibleDebtMember 2025-12-31 0001086222 akam:ConvertibleSeniorNotesDue2029Member us-gaap:ConvertibleDebtMember 2025-12-31 0001086222 akam:ConvertibleSeniorNotesDue2027Member us-gaap:ConvertibleDebtMember 2025-12-31 0001086222 us-gaap:ConvertibleDebtMember 2025-12-31 0001086222 akam:A2025CreditAgreementMember 2025-01-31 0001086222 akam:A2025CreditAgreementMember 2026-03-31 0001086222 akam:A2022CreditAgreementMember 2025-05-31 0001086222 akam:A2022CreditAgreementMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember akam:BenchmarkRateMember srt:MinimumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember akam:BenchmarkRateMember srt:MaximumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember akam:ReferenceRateMember srt:MinimumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember akam:ReferenceRateMember srt:MaximumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember us-gaap:BaseRateMember srt:MinimumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember us-gaap:BaseRateMember srt:MaximumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember srt:MinimumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember srt:MaximumMember 2022-11-01 2022-11-30 0001086222 akam:A2022CreditAgreementMember 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2033Member us-gaap:ConvertibleDebtMember 2025-01-01 2025-03-31 0001086222 akam:ConvertibleSeniorNotesDue2029Member us-gaap:ConvertibleDebtMember 2025-01-01 2025-03-31 0001086222 akam:ConvertibleSeniorNotesDue2027Member us-gaap:ConvertibleDebtMember 2025-01-01 2025-03-31 0001086222 akam:ConvertibleSeniorNotesDue2025Member us-gaap:ConvertibleDebtMember 2026-01-01 2026-03-31 0001086222 akam:ConvertibleSeniorNotesDue2025Member us-gaap:ConvertibleDebtMember 2025-01-01 2025-03-31 0001086222 us-gaap:RevolvingCreditFacilityMember 2026-01-01 2026-03-31 0001086222 us-gaap:RevolvingCreditFacilityMember 2025-01-01 2025-03-31 0001086222 akam:Q42025ActionPlanMember 2026-01-01 2026-03-31 0001086222 akam:Q42025ActionPlanMember 2025-01-01 2025-03-31 0001086222 akam:AcquisitionsRelatedAndOtherMember 2026-01-01 2026-03-31 0001086222 akam:AcquisitionsRelatedAndOtherMember 2025-01-01 2025-03-31 0001086222 akam:Q42025ActionPlanMember 2025-12-31 0001086222 akam:AcquisitionsRelatedAndOtherMember 2025-12-31 0001086222 akam:Q42025ActionPlanMember 2026-03-31 0001086222 akam:AcquisitionsRelatedAndOtherMember 2026-03-31 0001086222 2024-05-31 0001086222 us-gaap:CommonStockMember 2026-01-01 2026-03-31 0001086222 us-gaap:CostOfSalesMember 2026-01-01 2026-03-31 0001086222 us-gaap:CostOfSalesMember 2025-01-01 2025-03-31 0001086222 us-gaap:ResearchAndDevelopmentExpenseMember 2026-01-01 2026-03-31 0001086222 us-gaap:ResearchAndDevelopmentExpenseMember 2025-01-01 2025-03-31 0001086222 us-gaap:SellingAndMarketingExpenseMember 2026-01-01 2026-03-31 0001086222 us-gaap:SellingAndMarketingExpenseMember 2025-01-01 2025-03-31 0001086222 us-gaap:GeneralAndAdministrativeExpenseMember 2026-01-01 2026-03-31 0001086222 us-gaap:GeneralAndAdministrativeExpenseMember 2025-01-01 2025-03-31 0001086222 us-gaap:AccumulatedTranslationAdjustmentMember 2025-12-31 0001086222 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-12-31 0001086222 us-gaap:AccumulatedTranslationAdjustmentMember 2026-01-01 2026-03-31 0001086222 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2026-01-01 2026-03-31 0001086222 us-gaap:AccumulatedTranslationAdjustmentMember 2026-03-31 0001086222 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2026-03-31 0001086222 country:US 2026-01-01 2026-03-31 0001086222 country:US 2025-01-01 2025-03-31 0001086222 us-gaap:NonUsMember 2026-01-01 2026-03-31 0001086222 us-gaap:NonUsMember 2025-01-01 2025-03-31 0001086222 akam:SecurityMember 2026-01-01 2026-03-31 0001086222 akam:SecurityMember 2025-01-01 2025-03-31 0001086222 akam:DeliveryAndOtherCloudApplicationsMember 2026-01-01 2026-03-31 0001086222 akam:DeliveryAndOtherCloudApplicationsMember 2025-01-01 2025-03-31 0001086222 akam:CloudInfrastructureServicesMember 2026-01-01 2026-03-31 0001086222 akam:CloudInfrastructureServicesMember 2025-01-01 2025-03-31 0001086222 2026-04-01 2026-03-31 0001086222 2027-04-01 2026-03-31 0001086222 2028-04-01 2026-03-31 0001086222 akam:RestrictedStockAwardsRestrictedStockUnitsAndDeferredStockUnitsServiceBasedMember 2026-01-01 2026-03-31 0001086222 akam:RestrictedStockAwardsRestrictedStockUnitsAndDeferredStockUnitsServiceBasedMember 2025-01-01 2025-03-31 0001086222 akam:RestrictedStockRestrictedStockUnitsAndDeferredStockUnitsPerformanceBasedMember 2026-01-01 2026-03-31 0001086222 akam:RestrictedStockRestrictedStockUnitsAndDeferredStockUnitsPerformanceBasedMember 2025-01-01 2025-03-31 0001086222 us-gaap:ConvertiblesAndBondsWithWarrantsAttachedMember 2026-01-01 2026-03-31 0001086222 us-gaap:ConvertiblesAndBondsWithWarrantsAttachedMember 2025-01-01 2025-03-31 0001086222 akam:ReportableSegmentMember 2026-01-01 2026-03-31 0001086222 akam:ReportableSegmentMember 2025-01-01 2025-03-31 0001086222 akam:AdamKaronMember 2026-01-01 2026-03-31 0001086222 akam:PaulC.JosephMember 2026-01-01 2026-03-31 0001086222 akam:PaulC.JosephMember 2026-03-31 0001086222 akam:KimberlySalemJacksonMember 2026-01-01 2026-03-31 0001086222 akam:KimberlySalemJacksonMember 2026-03-31 0001086222 akam:RobertBlumofeMember 2026-01-01 2026-03-31 0001086222 akam:RobertBlumofeMember 2026-03-31
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 March 31, 2026
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 May 4, 2026: 145,385,451
1
Table of Contents
AKAMAI TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2026
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
3
Condensed Consolidated Balance Sheets at March 3 1 , 202 6 and December 31, 202 5
3
Condensed Consolidated Statements of Income for the three months ended March 3 1 , 202 6 and 202 5
5
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 3 1 , 202 6 and 202 5
6
Condensed Consolidated Statements of Cash Flows for the three months ended March 3 1 , 202 6 and 202 5
7
Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 3 1 , 202 6 and 202 5
9
Notes to Unaudited Condensed Consolidated Financial Statements
11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk
39
Item 4. Controls and Procedures
40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
41
Item 1A. Risk Factors
41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
58
Item 5. Other Information
59
Item 6. Exhibits
60
SIGNATURES
61
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) March 31,
2026 December 31,
2025
ASSETS
Current assets:
Cash and cash equivalents $ 622,383 $ 930,231
Marketable securities 308,062 256,302
Accounts receivable, net of reserves of $ 6,188 and $ 7,706 at March 31, 2026, and December 31, 2025, respectively
881,076 793,666
Prepaid expenses and other current assets 319,102 306,481
Total current assets 2,130,623 2,286,680
Marketable securities 802,670 733,228
Property and equipment, net 2,411,721 2,333,462
Operating lease right-of-use assets 1,665,915 1,469,700
Acquired intangible assets, net 589,355 614,542
Goodwill 3,202,906 3,206,525
Deferred income tax assets 627,603 622,776
Other assets 214,959 212,730
Total assets $ 11,645,752 $ 11,479,643
3
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, continued
(in thousands, except share data) (unaudited) March 31,
2026 December 31,
2025
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 151,439 $ 125,054
Accrued expenses 286,427 319,622
Deferred revenue 203,681 151,186
Operating lease liabilities 369,110 336,613
Other current liabilities 25,130 35,043
Total current liabilities 1,035,787 967,518
Deferred revenue 19,929 17,088
Deferred income tax liabilities 34,840 31,089
Convertible senior notes 4,107,607 4,105,355
Operating lease liabilities 1,390,988 1,233,420
Other liabilities 147,776 147,802
Total liabilities 6,736,927 6,502,272
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; 152,383,987 shares issued and 145,549,131 shares outstanding at March 31, 2026, and 149,711,094 shares issued and 144,711,094 outstanding at December 31, 2025
1,524 1,497
Additional paid-in capital 2,123,150 2,080,487
Accumulated other comprehensive loss ( 116,624 ) ( 94,756 )
Treasury stock, at cost, 6,834,856 shares at March 31, 2026, and 5,000,000 shares at December 31, 2025
( 630,473 ) ( 434,786 )
Retained earnings 3,531,248 3,424,929
Total stockholders’ equity 4,908,825 4,977,371
Total liabilities and stockholders’ equity $ 11,645,752 $ 11,479,643
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months
Ended March 31,
(in thousands, except per share data) (unaudited) 2026 2025
Revenue $ 1,073,610 $ 1,015,139
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below) 471,299 418,945
Research and development 141,576 123,549
Sales and marketing 157,062 134,131
General and administrative 163,809 155,933
Amortization of acquired intangible assets 25,187 27,637
Restructuring charge 183 361
Total costs and operating expenses 959,116 860,556
Income from operations 114,494 154,583
Interest and marketable securities income, net 17,547 19,530
Interest expense ( 8,257 ) ( 6,750 )
Other (expense) income, net ( 1,786 ) 6,020
Income before provision for income taxes 121,998 173,383
Provision for income taxes 15,679 50,212
Net income $ 106,319 $ 123,171
Net income per share:
Basic $ 0.73 $ 0.83
Diluted $ 0.71 $ 0.82
Shares used in per share calculations:
Basic 145,270 149,052
Diluted 150,022 151,064
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months
Ended March 31,
(in thousands) (unaudited) 2026 2025
Net income $ 106,319 $ 123,171
Other comprehensive (loss) gain:
Foreign currency translation adjustments ( 17,615 ) 21,784
Change in unrealized loss on investments, net of income tax benefit of $ 1,353 and $ 385 for the three months ended March 31, 2026 and 2025, respectively
( 4,253 ) ( 1,176 )
Other comprehensive (loss) gain
( 21,868 ) 20,608
Comprehensive income $ 84,451 $ 143,779
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
(in thousands) (unaudited) 2026 2025
Cash flows from operating activities:
Net income $ 106,319 $ 123,171
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 183,751 174,022
Stock-based compensation 128,681 111,978
(Benefit) provision for deferred income taxes
( 1,749 ) 31,383
Amortization of debt issuance costs 2,148 1,605
Gain on investments — ( 9,313 )
Other non-cash reconciling items, net 2,709 2,142
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable ( 94,272 ) ( 25,677 )
Prepaid expenses and other current assets ( 10,096 ) ( 37,129 )
Accounts payable and accrued expenses ( 42,035 ) ( 109,906 )
Deferred revenue 56,281 14,948
Other current liabilities ( 10,353 ) ( 20,276 )
Other non-current assets and liabilities ( 8,876 ) ( 5,748 )
Net cash provided by operating activities 312,508 251,200
Cash flows from investing activities:
Cash paid for asset acquisition
— ( 29,930 )
Purchases of property and equipment ( 101,686 ) ( 117,776 )
Capitalization of internal-use software development costs ( 90,161 ) ( 78,232 )
Purchases of short- and long-term marketable securities ( 161,455 ) ( 7,080 )
Proceeds from sales of short- and long-term marketable securities 5,606 265,806
Proceeds from maturities and redemptions of short- and long-term marketable securities 30,000 847,149
Other, net ( 1,798 ) ( 3,091 )
Net cash (used in) provided by investing activities ( 319,494 ) 876,846
7
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
For the Three Months
Ended March 31,
(in thousands) (unaudited) 2026 2025
Cash flows from financing activities:
Proceeds related to the issuance of common stock under stock plans 21,619 20,182
Employee taxes paid related to net share settlement of stock awards ( 106,574 ) ( 72,063 )
Repurchases of common stock ( 205,886 ) ( 499,963 )
Other, net ( 868 ) ( 406 )
Net cash used in financing activities ( 291,709 ) ( 552,250 )
Effects of exchange rate changes on cash, cash equivalents and restricted cash ( 5,672 ) 5,431
Net (decrease) increase in cash, cash equivalents and restricted cash ( 304,367 ) 581,227
Cash, cash equivalents and restricted cash at beginning of period 931,308 519,084
Cash, cash equivalents and restricted cash at end of period $ 626,941 $ 1,100,311
Supplemental disclosures of cash flow information:
Cash paid for interest expense 9,558 9,412
Cash paid for operating lease liabilities 109,442 74,729
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities 287,573 34,930
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses 71,979 85,155
Capitalization of stock-based compensation 34,993 32,064
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents $ 622,383 $ 1,097,026
Restricted cash 4,558 3,285
Cash, cash equivalents and restricted cash $ 626,941 $ 1,100,311
The accompanying notes are an integral part of the condensed consolidated financial statements.
8
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2026
(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, 2026 144,711,094 $ 1,497 $ 2,080,487 $ ( 94,756 ) $ ( 434,786 ) $ 3,424,929 $ 4,977,371
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes 2,672,893 27 ( 127,293 ) ( 127,266 )
Stock-based compensation 169,956 169,956
Repurchases of common stock ( 1,952,142 ) ( 205,886 ) ( 205,886 )
Re-issuance of treasury stock for 401(k) employer match
117,286 10,199 10,199
Net income 106,319 106,319
Foreign currency translation adjustment ( 17,615 ) ( 17,615 )
Change in unrealized loss on investments, net of tax
( 4,253 ) ( 4,253 )
Balance at March 31, 2026 145,549,131 $ 1,524 $ 2,123,150 $ ( 116,624 ) $ ( 630,473 ) $ 3,531,248 $ 4,908,825
9
Table of Contents
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued
Three Months Ended March 31, 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 2,119,218 22 ( 85,728 ) ( 85,706 )
Stock-based compensation 141,236 141,236
Repurchases of common stock ( 6,158,235 ) ( 503,091 ) ( 503,091 )
Re-issuance of treasury stock for 401(k) employer match 100,723 9,986 9,986
Net income 123,171 123,171
Foreign currency translation adjustment 21,784 21,784
Change in unrealized loss on investments, net of tax ( 1,176 ) ( 1,176 )
Balance at March 31, 2025
146,086,802 $ 1,578 $ 2,673,892 $ ( 135,385 ) $ ( 1,051,593 ) $ 3,096,069 $ 4,584,561
The accompanying notes are an integral part of the condensed consolidated financial statements.
10
Table of Contents
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 over 130 countries and approximately 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, 2025, filed with the Securities and Exchange Commission on February 20, 2026. The December 31, 2025 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.
Recently Adopted Accounting Pronouncements
In July 2025, the Financial Accounting Standards Board ("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. The Company adopted this guidance on January 1, 2026 on a prospective basis. The adoption of this standard did not have a material impact on the Company's condensed 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. The Company adopted this guidance on January 1, 2026 on a prospective basis. The adoption of this standard did not have an impact on the Company's condensed consolidated financial statements as it did not have any induced conversions.
Recent Accounting Pronouncements
In September 2025, the 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 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.
11
Table of Contents
2. Investments and Fair Value Measurements
Available-for-sale marketable securities held as of March 31, 2026 and December 31, 2025 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 March 31, 2026
Time deposits
$ 32,286 $ — $ — $ 32,286 $ 32,286 $ —
Commercial paper 19,772 — ( 15 ) 19,757 19,757 —
Corporate bonds 1,029,555 904 ( 2,706 ) 1,027,753 250,694 777,059
$ 1,081,613 $ 904 $ ( 2,721 ) $ 1,079,796 $ 302,737 $ 777,059
As of December 31, 2025
Time deposits $ 31,035 $ — $ — $ 31,035 $ 31,035 $ —
Corporate bonds 920,142 3,921 ( 127 ) 923,936 217,139 706,797
$ 951,177 $ 3,921 $ ( 127 ) $ 954,971 $ 248,174 $ 706,797
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 March 31, 2026, the Company did no t hold any available-for-sale marketable securities in a continuous unrealized loss position for more than 12 months.
Contractual maturities of the Company’s available-for-sale marketable securities held as of March 31, 2026 and December 31, 2025 were as follows (in thousands):
March 31,
2026 December 31,
2025
Due in 1 year or less $ 302,737 $ 248,174
Due after 1 year through 5 years 777,059 706,797
$ 1,079,796 $ 954,971
12
Table of Contents
Fair Value Measurements
The fair value measurements within the fair value hierarchy of the Company’s financial assets as of March 31, 2026 and December 31, 2025 were as follows (in thousands):
Total Fair Value Fair Value Measurements at
Reporting Date Using
Level 1 Level 2
As of March 31, 2026
Cash Equivalents and Marketable Securities:
Money market funds $ 155,008 $ 155,008 $ —
Time deposits 110,997 — 110,997
Commercial paper 19,757 — 19,757
Corporate bonds 1,027,753 — 1,027,753
Mutual funds 28,346 28,346 —
$ 1,341,861 $ 183,354 $ 1,158,507
As of December 31, 2025
Cash Equivalents and Marketable Securities:
Money market funds $ 409,326 $ 409,326 $ —
Time deposits 103,038 — 103,038
Commercial paper 34,962 — 34,962
Corporate bonds 923,936 — 923,936
Mutual funds 28,981 28,981 —
$ 1,500,243 $ 438,307 $ 1,061,936
As of March 31, 2026 and December 31, 2025, 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).
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.
3. Accounts Receivable
Net accounts receivable consisted of the following as of March 31, 2026 and December 31, 2025 (in thousands):
March 31,
2026 December 31,
2025
Trade accounts receivable $ 665,104 $ 577,914
Unbilled accounts receivable 222,160 223,458
Gross accounts receivable 887,264 801,372
Allowances for current expected credit losses and other reserves ( 6,188 ) ( 7,706 )
Accounts receivable, net $ 881,076 $ 793,666
13
Table of Contents
A summary of activity in the accounts receivable allowance for current expected credit losses and other reserves for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
March 31,
2026 March 31,
2025
Beginning balance $ 7,706 $ 3,522
Charges to income from operations 2,072 3,038
Collections from customers previously reserved and other ( 3,590 ) ( 1,700 )
Ending balance $ 6,188 $ 4,860
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 March 31, 2026 and December 31, 2025 were as follows (in thousands):
March 31,
2026 December 31,
2025
Deferred costs included in prepaid expenses and other current assets $ 72,847 $ 69,983
Deferred costs included in other assets 86,908 92,525
Total deferred costs $ 159,755 $ 162,508
Information related to incremental costs to obtain a contract with a customer for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Amortization expense related to deferred costs
$ 20,731 $ 13,789
Incremental costs capitalized
$ 18,841 $ 14,301
Amortization expense related to deferred costs is primarily included in sales and marketing expense in the interim condensed consolidated statements of income.
5. Acquired Intangible Assets and Goodwill
Acquired intangible assets that are subject to amortization consisted of the following as of March 31, 2026 and December 31, 2025 (in thousands):
March 31, 2026 December 31, 2025
Gross
Carrying
Amount Accumulated Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Completed technologies $ 465,832 $ ( 258,982 ) $ 206,850 $ 465,832 $ ( 250,436 ) $ 215,396
Customer-related intangible assets 725,844 ( 379,546 ) 346,298 725,494 ( 363,724 ) 361,770
Trademarks and trade names 15,253 ( 12,374 ) 2,879 15,247 ( 12,080 ) 3,167
Acquired license rights 44,810 ( 11,482 ) 33,328 44,810 ( 10,601 ) 34,209
Total $ 1,251,739 $ ( 662,384 ) $ 589,355 $ 1,251,383 $ ( 636,841 ) $ 614,542
Based on the Company’s acquired intangible assets as of March 31, 2026, aggregate expense related to amortization of acquired intangible assets is expected to be $ 75.0 million for the remainder of 2026, and $ 85.6 million, $ 79.0 million,
14
Table of Contents
$ 74.0 million and $ 66.7 million for 2027, 2028, 2029 and 2030, respectively.
The changes in the carrying amount of goodwill for the three months ended March 31, 2026 were as follows (in thousands):
Balance as of January 1, 2026 $ 3,206,525
Measurement period adjustments related to an acquisition completed in prior year
( 18 )
Foreign currency translation ( 3,601 )
Balance as of March 31, 2026 $ 3,202,906
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
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.
15
Table of Contents
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.
The conversion rights for the outstanding Notes as of March 31, 2026 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 common 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 March 31, 2026 and December 31, 2025 (in thousands):
2033 Notes 2029 Notes 2027 Notes
Total
As of March 31, 2026
Principal $ 1,725,000 $ 1,265,000 $ 1,150,000 $ 4,140,000
Less: issuance costs, net of amortization ( 20,408 ) ( 9,388 ) ( 2,597 ) ( 32,393 )
Net carrying amount $ 1,704,592 $ 1,255,612 $ 1,147,403 $ 4,107,607
Estimated fair value (1)
$ 2,383,398 $ 1,444,630 $ 1,330,217 $ 5,158,245
As of December 31, 2025
Principal $ 1,725,000 $ 1,265,000 $ 1,150,000 $ 4,140,000
Less: issuance costs, net of amortization ( 21,390 ) ( 10,187 ) ( 3,068 ) ( 34,645 )
Net carrying amount $ 1,703,610 $ 1,254,813 $ 1,146,932 $ 4,105,355
Estimated fair value (1)
$ 1,918,062 $ 1,254,981 $ 1,158,407 $ 4,331,450
(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
16
Table of Contents
capital. The Company does not recognize subsequent changes in fair value of the note hedges in its interim condensed consolidated financial statements.
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
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 March 31, 2026.
In November 2022, the Company entered into a revolving credit agreement (“2022 Credit Agreement”), which was amended in May 2025 to increase the aggregate revolving commitments to $ 1.0 billion. 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 March 31, 2026, 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 March 31, 2026.
17
Table of Contents
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 months ended March 31, 2026 and 2025 was as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Amortization of debt issuance costs $ 2,643 $ 1,959
Coupon interest payable on 2033 Notes 1,078 —
Coupon interest payable on 2029 Notes 3,558 3,558
Coupon interest payable on 2027 Notes 1,078 1,078
Coupon interest payable on 2025 Notes — 359
Interest payable and commitment fees under the credit agreements 395 150
Capitalization of interest expense ( 495 ) ( 354 )
Total interest expense $ 8,257 $ 6,750
7. Restructuring
During the fourth quarter of 2025, manage ment committed to an action to restructure certain parts of the Company to align investments and simplify organizational structure to long-term growth priorities (“Q4 2025 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 completed technologies and customer-related acquired intangible assets, as well as capitalized internal-use software. The Company does not expect to incur 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 charges during the three months ended March 31, 2026 and 2025 were as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Q4 2025 action $ 243 $ —
Acquisitions related and other ( 60 ) 361
Total restructuring charge $ 183 $ 361
18
Table of Contents
The liability for restructuring charges for employee severance and related expenses is substantially included in other current liabilities on the interim condensed consolidated balance sheets. The changes in the liability for the three months ended March 31, 2026 were as follows (in thousands):
Q4 2025 Action Acquisitions Related and Other Total
Balance as of January 1, 2026 $ 20,750 $ 1,646 $ 22,396
Costs incurred 317 ( 94 ) 223
Cash disbursements ( 9,352 ) ( 495 ) ( 9,847 )
Translation adjustments and other ( 41 ) ( 18 ) ( 59 )
Balance as of March 31, 2026 $ 11,674 $ 1,039 $ 12,713
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 $ 974.6 million remains available for repurchase as of March 31, 2026. 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 March 31, 2026, the Company repurchased 2.0 million shares of its common stock for $ 205.9 million.
Stock-Based Compensation
Components of total stock-based compensation included in the Company’s interim condensed consolidated statements of income for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Cost of revenue $ 21,677 $ 18,928
Research and development 48,857 42,268
Sales and marketing 24,981 22,440
General and administrative 33,166 28,342
Total stock-based compensation 128,681 111,978
Provision for income taxes ( 35,221 ) ( 14,797 )
Total stock-based compensation, net of income taxes $ 93,460 $ 97,181
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 $ 14.9 million and $ 12.2 million for the three months ended March 31, 2026 and 2025, respectively, before taxes.
In 2026, the Company introduced a new benefit allowing retirement-eligible employees to qualify for continued vesting of all unvested equity awards post-employment, subject to the satisfaction of specified conditions. This reduced the service periods which resulted in an immaterial increase in stock-based compensation expense for the three months ended March 31, 2026.
19
Table of Contents
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 three months ended March 31, 2026 were as follows (in thousands):
Foreign Currency Translation Net Unrealized Gains (Losses) on Investments
Total
Balance as of January 1, 2026 $ ( 97,536 ) $ 2,780 $ ( 94,756 )
Other comprehensive loss
( 17,615 ) ( 4,253 ) ( 21,868 )
Balance as of March 31, 2026 $ ( 115,151 ) $ ( 1,473 ) $ ( 116,624 )
There were no amounts reclassified from accumulated other comprehensive loss to net income for the three months ended March 31, 2026.
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 months ended March 31, 2026 and 2025 was as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
U.S. $ 543,147 $ 528,739
International 530,463 486,400
Total revenue $ 1,073,610 $ 1,015,139
Beginning with the first quarter of 2026, the Company began reporting its revenue in three solution categories: security, delivery and other cloud applications and cloud infrastructure services. Recognizing cloud infrastructure services as a primary growth area and a significant focus of investment in the Company's cloud computing portfolio, the Company began reporting its revenue separately. Prior period amounts reported in the table below for revenue by solution category have been recast to reflect this change.
Security includes solutions that are designed to protect business online by keeping infrastructure, websites, applications, APIs, networks and users safe. Delivery and other cloud applications is comprised of delivery solutions that are designed to enable business online, including media delivery and web and mobile performance, as well as other cloud applications. Cloud infrastructure services includes compute and storage solutions, EdgeWorkers product and the compute partner solutions running on the Company's platform. Revenue by solution category included in the Company’s interim condensed consolidated statements of income for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Security $ 589,790 $ 530,695
Delivery and other cloud applications 389,208 416,843
Cloud infrastructure services
94,612 67,601
Total revenue $ 1,073,610 $ 1,015,139
Most of the Company's solutions represent stand-ready 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
20
Table of Contents
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 three months ended March 31, 2026 and 2025, the Company recognized $ 79.3 million and $ 69.3 million of revenue that was included in deferred revenue as of December 31, 2025 and 2024, respectively.
As of March 31, 2026, the aggregate amount of remaining performance obligations from contracts with customers was $ 5.5 billion. The Company expects to recognize approximately 50 % 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 three months ended March 31, 2026 and 2025, 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 12.9 % and 29.0 % for the three months ended March 31, 2026 and 2025, respectively. The lower effective tax rate for the three months ended March 31, 2026 was primarily due to an increase in the excess tax benefit related to stock-based compensation, an increase in foreign income taxed at lower rates and a decrease in net controlled foreign corporation tested income (formerly global intangible low-taxed income). These amounts are partially offset by an increase in certain tax reserves.
For the three months ended March 31, 2026, the effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates. These amounts were partially offset by non-deductible transfer pricing and non-deductible stock-based compensation.
For the three months ended March 31, 2025, the effective income tax rate was higher than the federal statutory tax rate due to a shortfall in the tax benefit related to stock-based compensation, non-deductible stock-based compensation and non-deductible transfer pricing. These amounts were partially offset by the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates.
In July 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 2026. The OBBBA did not have a material impact on the Company's condensed consolidated financial statements.
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.
21
Table of Contents
The components used in the computation of basic and diluted net income per share for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except per share data):
For the Three Months
Ended March 31,
2026 2025
Numerator:
Net income $ 106,319 $ 123,171
Denominator:
Shares used for basic net income per share 145,270 149,052
Effect of dilutive securities:
Stock awards 3,414 2,012
Convertible senior notes 1,338 —
Warrants related to issuance of convertible senior notes — —
Shares used for diluted net income per share 150,022 151,064
Basic net income per share $ 0.73 $ 0.83
Diluted net income per share $ 0.71 $ 0.82
For the three months ended March 31, 2026 and 2025, 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 months ended March 31, 2026 and 2025 were as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Service-based stock awards 5,873 7,743
Market- and performance-based stock awards 1,800 1,583
Warrants related to issuance of convertible senior notes 38,459 32,006
Total shares excluded from computation 46,132 41,332
13. Segment Information
The Company’s chief operating decision-maker ("CODM") is the chief executive officer and the executive management team. As of March 31, 2026, 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.
22
Table of Contents
Information regarding the Company's one operating segment for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025
Revenue $ 1,073,610 $ 1,015,139
Less:
Co-location costs 98,870 83,761
Bandwidth fees 52,809 47,823
Network build-out and supporting services 67,383 54,074
Payroll and related costs 427,324 380,514
Capitalized salaries and related costs ( 90,022 ) ( 80,771 )
Facilities-related costs 20,775 21,869
Software and related services 19,968 20,118
Other segment items (1)
50,153 46,712
Depreciation and amortization 183,751 174,022
Stock-based compensation 128,681 111,978
Restructuring charge 183 361
Acquisition-related (benefit) costs
( 759 ) 95
Interest and marketable securities income, net ( 17,547 ) ( 19,530 )
Interest expense 8,257 6,750
Other expense (income), net 1,786 ( 6,020 )
Provision for income taxes
15,679 50,212
Net income $ 106,319 $ 123,171
(1) Other segment items includes marketing programs and related costs, third-party professional service fees, non-income related tax expense and other expenses.
23
Table of Contents
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 regarding future events and the future results of Akamai Technologies, Inc., which we refer to as “we,” “us,” or the “Company.” 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, tariffs, trade restrictions, export controls and retaliatory measures, our ability to acquire or develop new solutions, our ability to compete effectively, including our ability to continue to grow our artificial intelligence ("AI") infrastructure, compute services and solutions, including risks that our AI initiatives may not be successful or may introduce operational, security or regulatory risks, security risks stemming from ineffective information technology systems or cybersecurity breaches, risks of maintaining global operations, including physical attacks on or destruction of data centers and critical infrastructure in regions affected by armed conflict, regulatory developments, supply chain disruptions, significant increases in server, memory and co-location costs due to market dynamics, 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 filed with the Securities and Exchange Commission for a discussion of certain risks associated with our business. We disclaim any obligation to update any 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.
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, 2025 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 infrastructure, which underpins our security, delivery and other cloud applications and cloud infrastructure services solutions, and is central to our financial success. Together, these solutions are positioned to benefit from the rapid evolution of AI. The key factors that influence our financial success are our ability to build on recurring revenue commitments across our product portfolios, increase traffic on our network, continue to develop, scale and successfully bring to market our cloud infrastructure services, including Akamai Inference Cloud ("AIC") 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 considering the market dynamics on our cost structure driven by hyperscalers, 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.
24
Table of Contents
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 infrastructure 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 infrastructure services 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 considering the market dynamics on our cost structure driven by hyperscalers, 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 microsegmentation solutions, and increased sales of our cloud infrastructure services solutions, attributable to enhanced services on our platform, have made a significant contribution to revenue growth. Our security and cloud infrastructure services solutions continue to contribute to a large portion of our revenue. We plan to continue to invest in these areas with a focus on AI applications for our security products and cloud infrastructure services, including expanding our platform, 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. In prior years we also experienced incremental traffic growth from past asset acquisitions. We expect the moderation of traffic growth trends to continue for the remainder of 2026.
• 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 are taking steps upon contract renewals to sign customers to multi-year contracts that reflect the significant cost increases we have experienced from hyperscaler market dynamics and their traffic volumes to better align 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 signings and 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 scale our cloud infrastructure services, including our platform to support AI applications, we have experienced a significant increase in our co-location costs, particularly as competition for data center space has continued to increase, including from hyperscalers. We have entered into, and expect to continue to enter into, longer term leases that include certain financial
25
Table of Contents
commitments. 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 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 incurred as we continue to operate our growing network, compute partner program costs incurred as we expand our use of partners 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 platform to support our cloud infrastructure services. We will need to continue to effectively manage our network build-out and supporting service costs in an effort to control 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 infrastructure services solutions, including maintaining operational efficiencies to mitigate the rising cost of talent. Over the past few years, we redesigned some of our compensation programs by shifting certain plans from a cash-based to stock-based program, such as our 401(k) match program in 2025. Additionally, in 2026, we introduced a new retirement benefit to our existing compensation programs. 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 platform to support our cloud infrastructure services, which increased our capital expenditures and resulting depreciation expense. We plan to continue investing in our platform to support our faster growing cloud infrastructure services, including support for new enterprise customers, all to support future revenue growth from AI applications. We are experiencing a significant increase in server and memory costs due to market dynamics driven by hyperscalers, which will increase our future capital expenditures and resulting depreciation expense.
• 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.
Global Economic 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.
26
Table of Contents
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 March 31,
2026 2025
Revenue 100 % 100 %
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below) 44 41
Research and development 13 12
Sales and marketing 15 13
General and administrative 15 15
Amortization of acquired intangible assets 2 3
Restructuring charge — —
Total costs and operating expenses (1)
89 85
Income from operations (1)
11 15
Interest and marketable securities income, net 2 2
Interest expense (1) (1)
Other (expense) income, net — 1
Income before provision for income taxes (1)
11 17
Provision for income taxes 1 5
Net income (1)
10 % 12 %
(1) Amounts may not foot due to rounding.
Revenue
Beginning in the first quarter of 2026, revenue by solution was reported as security, delivery and other cloud applications and cloud infrastructure services. Recognizing cloud infrastructure services as a primary growth area and a significant focus of investment in our cloud computing portfolio, we began reporting its revenue separately. Prior period amounts reported in the table below for revenue by solution category have been recast to reflect this change. Revenue by solution category during the periods presented was as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025 % Change % Change at Constant Currency
Security $ 589,790 $ 530,695 11 % 9 %
Delivery and other cloud applications 389,208 416,843 (7) (8)
Cloud infrastructure services
94,612 67,601 40 39
Total revenue $ 1,073,610 $ 1,015,139 6 % 4 %
During the three months ended March 31, 2026, the increase in our revenue, as compared to the same period in 2025, was primarily the result of continued growth in sales of our security and cloud infrastructure services solutions, partially offset by a decline in revenue from our delivery and other cloud applications solutions due to downward pricing of contract renewals.
The increase in security solutions revenue for the three months ended March 31, 2026, as compared to the same period in 2025, was due to growth in sales of key products in our security solutions portfolio, including our API security, web application and Guardicore segmentation solutions.
27
Table of Contents
The decrease in delivery and other cloud applications solutions revenue for the three months ended March 31, 2026, as compared to the same period in 2025, was driven by a decrease in delivery revenue due to downward pricing of contract renewals. Additionally, we believe macroeconomic headwinds are causing some delivery and other cloud applications customers to increase their focus on cost optimization, which negatively impacted traffic on our network and had a negative impact on delivery and other cloud applications revenue.
The increase in cloud infrastructure services solutions revenue for the three months ended March 31, 2026, as compared to the same period in 2025, was due to growth in sales to new and existing customers of our compute solutions, as well as the compute partner solutions running on our platform.
Revenue derived in the U.S. and internationally during the periods presented was as follows (in thousands):
For the Three Months
Ended March 31,
2026 2025 % Change % Change at Constant Currency
U.S. $ 543,147 $ 528,739 3 % 3 %
As a percentage of revenue 51 % 52 %
International 530,463 486,400 9 5
As a percentage of revenue 49 % 48 %
Total revenue $ 1,073,610 $ 1,015,139 6 % 4 %
For the three months ended March 31, 2026 and 2025, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates positively impacted our revenue by $18.5 million during the three months ended March 31, 2026 as compared to the same period in 2025.
Cost of Revenue
Cost of revenue consisted of the following for the periods presented (in thousands):
For the Three Months
Ended March 31,
2026 2025 % Change
Co-location costs $ 98,870 $ 83,761 18 %
Bandwidth fees 52,809 47,823 10
Network build-out and supporting services 67,383 54,074 25
Payroll and related costs 90,133 84,460 7
Stock-based compensation, including amortization of prior capitalized amounts 35,336 30,297 17
Depreciation of network equipment 84,048 78,325 7
Amortization of internal-use software 42,720 40,205 6
Total cost of revenue $ 471,299 $ 418,945 12 %
As a percentage of revenue 44 % 41 %
The increase in cost of revenue during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to:
• co-location costs and depreciation of network equipment as a result of investment in our network, particularly as we build out our platform, including to support cloud infrastructure services and AI applications, to support future growth and scalability;
• network build-out and supporting services, particularly due to partner costs as we expand our compute partner program;
• payroll and related costs as a result of headcount growth to support our operations and the impact of the prior year
28
Table of Contents
annual merit increases; and
• stock-based compensation as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026.
During the remainder of 2026, we expect our cost of revenue to increase as compared to 2025, in particular our co-location costs, bandwidth fees, depreciation of network equipment and amortization of internal-use software as we continue to invest in our platform to support cloud infrastructure services to provide us the ability to scale. Due to the market dynamics driven by the hyperscalers, we are also experiencing price increases for co-location, server and memory costs, which will increase our co-location costs and depreciation of network equipment. Additionally, we expect network build-out and supporting services to increase due to our compute partner programs to support the growth of our cloud infrastructure services solutions and stock-based compensation to increase as a result of a new benefit that reduced the service period for retirement eligible employees.
Research and Development Expenses
Research and development expenses consisted of the following for the periods presented (in thousands):
For the Three Months
Ended March 31,
2026 2025 % Change
Payroll and related costs $ 165,044 $ 146,592 13 %
Stock-based compensation 48,857 42,268 16
Capitalized salaries and related costs (80,748) (72,078) 12
Other expenses 8,423 6,767 24
Total research and development $ 141,576 $ 123,549 15 %
As a percentage of revenue 13 % 12 %
The increase in research and development expenses during the three months ended March 31, 2026, as compared to the same period in 2025, 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 impact of prior year annual merit increases. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026.
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 March 31, 2026 and 2025, we capitalized $31.9 million and $29.4 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 2026, we expect our research and development costs to increase as compared to 2025, in particular payroll and related costs, including stock-based compensation, in support of our faster growing security and cloud infrastructure services solutions. We also expect stock-based compensation to increase during the remainder of 2026 as a result of a new benefit that reduced the service period for retirement eligible employees. However, we plan to continue to carefully manage costs in an effort to manage our operating margins.
29
Table of Contents
Sales and Marketing Expenses
Sales and marketing expenses consisted of the following for the periods presented (in thousands):
For the Three Months
Ended March 31,
2026 2025 % Change
Payroll and related costs $ 108,523 $ 92,364 17 %
Stock-based compensation 24,981 22,440 11
Marketing programs and related costs 16,123 11,215 44
Other expenses 7,435 8,112 (8)
Total sales and marketing $ 157,062 $ 134,131 17 %
As a percentage of revenue 15 % 13 %
The increase in sales and marketing expenses during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to:
• payroll and related costs as a result of headcount growth as part of our reinvestment in our go-to-market strategy;
• stock-based compensation as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026; and
• marketing programs and related costs from the timing of events and increased campaigns.
During the remainder of 2026, we expect our sales and marketing expenses to increase as compared to 2025, in particular payroll and related costs primarily due to our reinvestment in headcount as part of our go-to-market strategy to drive acquisition of new customers for our faster growing security and cloud infrastructure services solutions, and from stock-based compensation as a result of a new benefit that reduced the service period for retirement eligible employees. However, we plan to continue to carefully manage costs in an effort to manage our operating margins.
General and Administrative Expenses
General and administrative expenses consisted of the following for the periods presented (in thousands):
For the Three Months
Ended March 31,
2026 2025 % Change
Payroll and related costs $ 62,870 $ 56,492 11 %
Stock-based compensation 33,166 28,342 17
Depreciation and amortization 18,138 16,486 10
Facilities-related costs 20,775 21,869 (5)
Provision for doubtful accounts 1,117 1,155 (3)
Acquisition-related costs (759) 95 (899)
Software and related service costs 16,309 16,746 (3)
Other expenses 12,193 14,748 (17)
Total general and administrative $ 163,809 $ 155,933 5 %
As a percentage of revenue 15 % 15 %
The increase in general and administrative expenses during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth to support our operations and the impact of the prior year annual merit increases. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026.
During the remainder of 2026, we expect our general and administrative expenses to increase as compared to 2025, to
30
Table of Contents
support the operations of the business. In particular, we expect stock-based compensation to increase as a result of a new benefit that reduced the service period for retirement eligible employees. However, we plan to continue to carefully manage costs in an effort to manage our operating margins.
Amortization of Acquired Intangible Assets
For the Three Months
Ended March 31,
(in thousands) 2026 2025 % Change
Amortization of acquired intangible assets $ 25,187 $ 27,637 (9) %
As a percentage of revenue 2 % 3 %
The decrease in amortization of acquired intangible assets for the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to a decrease in the value of acquired intangible assets as a result of impairments of certain completed technologies recognized in the fourth quarter of 2025. Based on acquired intangible assets at March 31, 2026, we expect amortization of acquired intangible assets to be approximately $75.0 million for the remainder of 2026, and $85.6 million, $79.0 million, $74.0 million and $66.7 million for 2027, 2028, 2029 and 2030, respectively.
Restructuring Charge
For the Three Months
Ended March 31,
(in thousands) 2026 2025 % Change
Restructuring charge $ 183 $ 361 (49) %
As a percentage of revenue — % — %
The restructuring charge for the three months ended March 31, 2026 was primarily driven by management's commitment to an action initiated during the fourth quarter of 2025 to restructure certain parts of the company to align investments and simplify organizational structure to long-term growth priorities. We do not expect to incur material additional charges related to this action.
The restructuring charge for the three months ended March 31, 2025 was primarily driven by management's commitment to an action initiated during the third quarter of 2024 with the primary intent to redeploy headcount and resources to support our faster growing security and cloud infrastructure services solutions. We do not expect to incur material additional charges related to this action.
Non-Operating Income
For the Three Months
Ended March 31,
(in thousands) 2026 2025 % Change
Interest and marketable securities income, net $ 17,547 $ 19,530 (10) %
As a percentage of revenue 2 % 2 %
Interest expense $ (8,257) $ (6,750) 22 %
As a percentage of revenue (1) % (1) %
Other (expense) income, net $ (1,786) $ 6,020 (130) %
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 March 31, 2026, as compared to the same period in 2025, was primarily the result of investing in marketable securities at lower rates of return due to lower interest rates in 2026 as compared to the same period in 2025.
31
Table of Contents
Interest expense is related to our debt transactions, which are described in Note 6 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.
Other (expense) income, 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) income, net may fluctuate in the future based on changes in foreign currency exchange rates or other events.
Provision for Income Taxes
For the Three Months
Ended March 31,
(in thousands) 2026 2025 % Change
Provision for income taxes $ 15,679 $ 50,212 (69) %
As a percentage of revenue 1 % 5 %
Effective income tax rate 13 % 29 %
For the three months ended March 31, 2026, as compared to the same period in 2025, our provision for income taxes decreased due to an increase in the excess tax benefit related to stock-based compensation, a decrease in profitability and a decrease in net controlled foreign corporation tested income (formerly global intangible low-taxed income). These amounts were partially offset by an increase in certain tax reserves.
For the three months ended March 31, 2026, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates. These amounts were partially offset by non-deductible transfer pricing and non-deductible stock-based compensation.
For the three months ended March 31, 2025, our effective income tax rate was higher than the federal statutory tax rate due to a shortfall in the tax benefit related to stock-based compensation, non-deductible stock-based compensation and non-deductible transfer pricing. These amounts were partially offset by the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates.
In July 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 2026. The OBBBA did not have a material impact on our condensed consolidated financial statements.
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 to those of our peer companies. Management also believes that these non-GAAP financial measures
32
Table of Contents
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.
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
33
Table of Contents
believe that applying the non-GAAP adjustments and their related income tax effect allows us to highlight income attributable to our core operations.
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 March 31,
2026 2025
Income from operations $ 114,494 $ 154,583
Amortization of acquired intangible assets 25,187 27,637
Stock-based compensation 128,681 111,978
Amortization of capitalized stock-based compensation and capitalized interest expense 15,016 12,359
Restructuring charge 183 361
Acquisition-related (benefit) costs
(759) 95
Non-GAAP income from operations $ 282,802 $ 307,013
GAAP operating margin 11 % 15 %
Non-GAAP operating margin 26 % 30 %
The following table reconciles GAAP net income to non-GAAP net income for the periods presented (in thousands):
For the Three Months
Ended March 31,
2026 2025
Net income $ 106,319 $ 123,171
Amortization of acquired intangible assets 25,187 27,637
Stock-based compensation 128,681 111,978
Amortization of capitalized stock-based compensation and capitalized interest expense 15,016 12,359
Restructuring charge 183 361
Acquisition-related (benefit) costs
(759) 95
Amortization of debt issuance costs 2,148 1,605
Gain on cost method investments, net — (9,313)
Income tax effect of above non-GAAP adjustments and certain discrete tax items (37,515) (11,797)
Non-GAAP net income $ 239,260 $ 256,096
34
Table of Contents
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 March 31,
2026 2025
GAAP net income per diluted share $ 0.71 $ 0.82
Amortization of acquired intangible assets 0.17 0.18
Stock-based compensation 0.86 0.74
Amortization of capitalized stock-based compensation and capitalized interest expense 0.10 0.08
Restructuring charge — —
Acquisition-related (benefit) costs
(0.01) —
Amortization of debt issuance costs 0.01 0.01
Gain on cost method investments, net — (0.06)
Income tax effect of above non-GAAP adjustments and certain discrete tax items (0.25) (0.08)
Adjustment for shares (1)
0.02 —
Non-GAAP net income per diluted share (2)
$ 1.61 $ 1.70
Shares used in GAAP per diluted share calculations 150,022 151,064
Impact of benefit from note hedge transactions (1)
(1,338) —
Shares used in non-GAAP per diluted share calculations (1)
148,684 151,064
(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three months ended March 31, 2026, for the benefit of our note hedge transactions. During these periods, our average stock price was in excess of $93.01, which is the initial conversion price of Akamai's convertible senior notes due in May 2033. 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.
35
Table of Contents
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 March 31,
2026 2025
Net income $ 106,319 $ 123,171
Interest and marketable securities income, net (17,547) (19,530)
Provision for income taxes 15,679 50,212
Depreciation and amortization 143,867 134,304
Amortization of capitalized stock-based compensation and capitalized interest expense 15,016 12,359
Amortization of acquired intangible assets 25,187 27,637
Stock-based compensation 128,681 111,978
Restructuring charge 183 361
Acquisition-related (benefit) costs
(759) 95
Interest expense 8,257 6,750
Gain on cost method investments, net — (9,313)
Other expense, net 1,786 3,293
Adjusted EBITDA $ 426,669 $ 441,317
Net income margin 10 % 12 %
Adjusted EBITDA margin 40 % 43 %
Impact of Foreign Currency Exchange Rates
Revenue and earnings from our international operations have historically been an important contributor 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, generally 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 change at constant currency presented 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 March 31, 2026, our cash, cash equivalents and marketable securities, which are detailed in Note 2 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q, totaled $1.7 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 differentiators that provide the financial stability and flexibility to enable us to continue to make investments at opportune
36
Table of Contents
times. We expect to continue to evaluate strategic investments to strengthen our business.
As of March 31, 2026, we had cash and cash equivalents of $382.7 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 Three Months
Ended March 31,
(in thousands) 2026 2025
Net income $ 106,319 $ 123,171
Non-cash reconciling items included in net income 315,540 311,817
Changes in operating assets and liabilities (109,351) (183,788)
Net cash provided by operating activities $ 312,508 $ 251,200
The increase in cash provided by operating activities for the three months ended March 31, 2026, as compared to the same period in 2025, was due to timing of payroll funding and vendor payments, as well as lower income tax payments due to intercompany sales of intellectual property paid in the first quarter of 2025 which did not reoccur in 2026. These increases were partially offset by timing of customer collections.
Cash Used in Investing Activities
For the Three Months
Ended March 31,
(in thousands) 2026 2025
Cash paid for asset acquisition
$ — $ (29,930)
Purchases of property and equipment and capitalization of internal-use software development costs (191,847) (196,008)
Net marketable securities activity (125,849) 1,105,875
Other, net (1,798) (3,091)
Net cash (used in) provided by investing activities
$ (319,494) $ 876,846
The increase in cash used in investing activities during the three months ended March 31, 2026, as compared to the same period in 2025, was due to an increase in maturities and sales of marketable securities during the three months ended March 31, 2025, that were not reinvested in order to repay our $1,150.0 million convertible senior notes, which we paid in May 2025. The increase in cash used in investing activities was partially offset by remaining consideration paid for the Edgio, Inc. asset acquisition during the three months ended March 31, 2025, that did not recur in 2026.
Net Cash Used in Financing Activities
For the Three Months
Ended March 31,
(in thousands) 2026 2025
Activity related to stock-based compensation $ (84,955) $ (51,881)
Repurchases of common stock (205,886) (499,963)
Other, net (868) (406)
Net cash used in financing activities $ (291,709) $ (552,250)
The decrease in cash used in financing activities during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to a decrease in repurchases of common stock, partially offset by increased employee taxes
37
Table of Contents
paid related to net share settlement of stock awards as a result of a higher stock price in 2026.
In May 2024, our board of directors authorized a $2.0 billion share repurchase program, effective May 2024 through June 2027. During the three months ended March 31, 2026, we repurchased 2.0 million shares of common stock at a weighted average price of $105.47 per share for an aggregate of $205.9 million. As of March 31, 2026, $974.6 million 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
As of March 31, 2026, 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 related hedge and warrant transactions are discussed more fully in Note 6 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.
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 March 31, 2026.
In November 2022, we entered into a revolving Credit Agreement ("2022 Credit Agreement"), which was amended in May 2025 to increase the aggregate revolving commitments to $1.0 billion, which allows us to borrow up to $1.0 billion at various interest rates and contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement expires on November 22, 2028. As of March 31, 2026, we were in compliance with all covenants. There were no outstanding borrowings under the 2022 Credit Agreement as of March 31, 2026.
The terms of the revolving credit agreements are discussed more fully in Note 6 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.
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. In addition, we have entered into an operating lease with a data center operator for space in the Virginia area that we contemporaneously subleased to an affiliate of a large social media customer. A portion of the space at the subleased data center commenced in 2025, and the remainder of the space commenced in January 2026. Both the lease payments and associated sublease income are expected to substantially offset each other. As of March 31, 2026, 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, 2025, other than normal period-to-period variations, particularly as we execute on our expansion plans for cloud infrastructure services.
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 cloud infrastructure services.
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.
38
Table of Contents
Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures, particularly planned investments in AI infrastructure, 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, 2025 for further discussion of these indemnification agreements. The fair value of guarantees issued or modified during the three months ended March 31, 2026 was determined to be immaterial.
As of March 31, 2026, 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, 2025. 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, 2025.
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 included elsewhere in this quarterly report on Form 10-Q. 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 March 31, 2026 levels, the fair value of our available-for-sale portfolio would decline by approximately $12.8 million.
As of March 31, 2026, 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 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q. 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 March 31, 2026, 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.
39
Table of Contents
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 three months ended March 31, 2026. 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 March 31, 2026, no customer had an accounts receivable balance greater than 10% of total accounts receivable. As of December 31, 2025, there was one customer with an accounts receivable balance of 10% of total accounts receivable. We believe that at March 31, 2026, 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 March 31, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures 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 March 31, 2026, 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 March 31, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
40
Table of Contents
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.
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.
Risk Factors Summary
The following is a summary of the principal risks that could materially adversely affect our business, results of operations and financial condition. This summary should be read in conjunction with the more detailed discussion of risks set forth in this section and the other information in this Quarterly Report on Form 10-Q, and should not be relied upon as an exhaustive summary of the material risks facing our business.
• Our revenue growth may slow, remain flat or decline, negatively impacting our profitability and stock price, due to pricing pressure from competition, customer optimization initiatives, “do-it-yourself” strategies by large customers and reduced traffic on our network.
• Global macroeconomic and geopolitical conditions, including inflation, elevated interest rates, tariffs, trade restrictions, energy costs, supply disruptions, economic uncertainty, and international tensions, have adversely affected and may continue to adversely affect customer demand, our costs and the pricing of our services.
• Our global operations subject us to risks that could harm our business, including geopolitical instability, warfare and armed conflict, physical attacks on data centers or critical infrastructure, foreign currency fluctuations, regulatory complexity and challenges in managing a geographically dispersed workforce.
• We face intense competition from companies in our markets, which may result in pricing pressure, loss of customers, or inability to grow our security, delivery and other cloud applications and cloud infrastructure services.
• We and the third parties upon which we rely face a variety of evolving cybersecurity threats, including threats enhanced by increasingly capable AI tools, that could cause security incidents or data breaches, resulting in significant costs, legal liability, regulatory enforcement, reputational harm and loss of business.
• Defects, errors or service disruptions in our platform, products, internal systems or third-party technology we rely upon could lead to customer losses, liability and harm to our business.
• We may not be successful in our AI initiatives, which could adversely affect our business, reputation or financial results; our use of AI may also introduce operational, security, intellectual property and regulatory risks.
• Evolving privacy regulations, including international data transfer restrictions, data localization requirements and “digital sovereignty” frameworks, could negatively impact our profitability and business operations.
• Other regulatory developments, including those affecting the internet, content liability, AI, cloud services or critical infrastructure, as well as potential amendments to Section 230 and emerging AI governance laws, could negatively impact our business or increase our exposure to legal liability.
• Our business strategy depends on the ability to source adequate transmission capacity, co-location facilities and equipment; failure to access those resources, including due to competition, supply constraints, tariff-driven cost increases or infrastructure damage, could lead to loss of revenue and service disruptions.
• Acquisitions and other strategic transactions could result in operating difficulties, dilution, diversion of management attention and other harmful consequences that may adversely impact our business and results of operations.
41
Table of Contents
• If we are unable to recruit and retain key employees and qualified sales, research and development, technical, marketing and support personnel, our ability to compete could be harmed.
• Our restructuring and reorganization activities may be disruptive to our operations and harm our business.
• Our stock price has been, and may continue to be, volatile, and your investment could lose value.
• Any failure to meet our debt obligations would damage our business; we have significant debt, and our ability to repay or refinance this debt depends on factors beyond our control.
Financial and Operational Risks
Slowing, flat or limited 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 and could decline, negatively impacting 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 other cloud applications and cloud infrastructure services solutions and our ability to maintain or increase the prices we charge for them. If we are unable to increase revenues, our profitability and stock price could suffer.
Revenue from our delivery and other cloud applications 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 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 and other cloud applications solutions, and ongoing competition, pricing pressure, and potential further shifts toward DIY or alternative sourcing strategies may continue to impact our delivery revenue.
Our security solutions currently generate the largest portion of our revenue. Our ability to generate security revenue 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, competition and pricing pressure has, and may continue to impact, revenue of certain of our security solutions, including during contract renewals. Reduced traffic levels on our network has in the past, and may in the future, negatively impact revenue from our security solutions.
In addition, an increasing proportion of our revenue has been generated by our cloud infrastructure services solutions. Our ability to generate revenue in our cloud infrastructure services solutions depends on our ability to successfully continue building our platform, developing AI capabilities, attract a customer base that has traditionally partnered with more established companies in the cloud computing industry, develop effective, price competitive and attractive solutions and increase prices without reducing customer adoption, usage or retention.
Global conditions have in the past and may in the future harm our industry, business and results of operations.
Because we operate globally, 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, inflation, foreign exchange rates, interest rates, tax rates, supply chain issues, energy prices or supply disruptions, economic uncertainty or contraction, political instability, warfare or acts of terrorism, public health crises, changes in laws, policy- and regulatory-related changes resulting from U.S. and non-U.S. government and regulators' actions and regulatory priorities, 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 and regional economic and geopolitical conditions can impact our customers, potentially making non-U.S. companies reluctant to enter into contracts with U.S. providers or to permit cross-border data transfers. Such conditions can also cause customers to take cost-savings measures, such as optimization and DIY initiatives, reduction or delay of information technology spending, contract renegotiation and lengthening of procurement and sales cycles, which 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 and inflation rates in the U.S. have been elevated compared to historical rates and have fluctuated. In addition, the current U.S. presidential administration has imposed or indicated an
42
Table of Contents
intention to impose tariffs or export controls (including on advanced computing and networking technologies and services) on certain countries that could further adversely impact trade relations, result in higher costs and 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, including the ongoing U.S-Israel military conflict with Iran and related hostilities in the Middle East, have impacted and could continue to impact global currency exchange rates, resources from our suppliers, availability or pricing of energy and other inputs, our ability to compete effectively and our ability to operate or grow our business. The emergence of armed conflict targeting commercial technology infrastructure, including physical attacks on data centers, could further disrupt global supply chains, impair availability of critical cloud and network services and heighten operational risks for technology companies, including us. Cybersecurity threats can also intensify during periods of geopolitical destabilization, increasing the risk of attempted attacks on our systems, suppliers and customers.
The ongoing military conflict between the United States and Iran, including broader hostilities involving Israel and other regional actors, has introduced risks to technology companies with operations or infrastructure in the Middle East. Recent events have demonstrated that commercial data centers and cloud infrastructure in the region may be physically targeted through missile, drone or other attacks, as evidenced by Iranian strikes on data center facilities in the Persian Gulf in early 2026. Such attacks have resulted in structural damage, prolonged service outages and the physical destruction of computing equipment, and state actors have publicly identified U.S. technology company assets in the region as potential military targets. Although our globally distributed network architecture is designed to provide a degree of resilience against localized infrastructure disruptions, including by enabling traffic to be routed across our platform, we rely on third-party co-location providers and network infrastructure in the Middle East and other conflict-affected regions, and any physical attacks on, or destruction of, such infrastructure could disrupt our network, impair our ability to deliver services to customers in the region and cause us to incur significant remediation costs. In addition, escalating hostilities have caused, and may continue to cause, disruptions to regional supply chains, telecommunications connectivity, undersea cables, energy infrastructure and transportation networks, any of which could adversely affect operations, increase our costs or impair our ability to serve customers.
Additionally, we have offices, employees and infrastructure located in regions that historically have and may again experience periods of political instability, warfare or acts of terrorism, public health crises, changes in laws, trade barriers, and economic and trade sanctions. Approximately six percent of our global employees are located in Israel and have been impacted by military conflicts or other hostilities in and around or involving Israel, including being required to report for military duty. Any further escalations or conflicts impacting Israel 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 infrastructure services 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. Further, we are subject to cost increases that we may not be able to successfully mitigate or pass on to our customers and we could lose customers who are unwilling to accept price increases, which could reduce our revenue. If we are unable to increase revenue limit expenses, or manage increasing costs our results of operations will suffer. We have in the past and may in the future take certain steps to reduce expenses or to raise our prices to offset cost increases, however, there are no assurances that we will be able to effectively reduce or offset 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 infrastructure services 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 and cloud infrastructure services solutions that meet the constantly-changing threat landscape and compute-to-edge and AI inference solutions that meet the needs of professional users and enterprises looking to increase the utility of the internet for their business.
43
Table of Contents
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 develop. For example, we are investing significant resources in our cloud infrastructure services solutions and platform, working on expanding capacity, 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 AI 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; attractive acquisition targets may be too expensive for us to pursue which could cause us to pursue more time-consuming internal development.
Failure to develop or acquire, 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.
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, data center maintenance and acquisition, supply chain resilience, customer service, technical expertise, security, ease-of-use, breadth of services offered, price and financial strength. 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.
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. 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; secure server components (including memory), co-location space and power on preferred terms and with priority access, which can constrain industry supply and increase our costs; 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. This is particularly true with respect to our AI and cloud infrastructure services solutions, as a small number of very large competitors have established themselves as incumbents in these industries and exert significant purchasing power and priority access to servers, memory, co-location capacity and power.
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.
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
44
Table of Contents
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 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 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 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, which 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.
45
Table of Contents
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 and the third-parties upon which we rely face a variety of evolving threats, which could cause cybersecurity incidents and/or data breaches, such as cyber-attacks, malicious internet-based activity, online and offline fraud and other similar activities. Such threats are prevalent and continue to rise, are increasingly difficult to detect and come from a variety of sources and may be enhanced or facilitated by AI. In particular, advances in AI capabilities, including increasingly sophisticated AI models and associated coding agents capable of autonomously discovering and exploiting software vulnerabilities, are expected to become more broadly accessible over time, including to nation-state actors and other well-resourced threat actors. The availability of such capabilities could materially increase the speed, scale and effectiveness of cyberattacks against us, our customers and third-party providers, and could compress the time available to identify, test and deploy patches or other mitigations in response to newly discovered vulnerabilities, placing significant pressure on our vulnerability management, product development and security operations functions. 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 DDoS attacks, infrastructure attacks, botnets, malicious file uploads, computer malware, application abuse, credential abuse, social engineering (including phishing attacks), ransomware, bugs, viruses, worms malicious software programs, business email compromises, misuse of employee credentials and wrongful conduct by insider employees or vendors, all of which may be enhanced or facilitated by AI. Further, attempts to disrupt or gain unauthorized access to our and our third-party vendors' information systems from malicious third parties or insider threats may incorporate widely varying and frequently changing tactics, which may be enhanced or facilitated by AI. 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 and the U.S.-Israel military conflict with Iran and related hostilities in the Middle East. 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.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that such terms are sufficient to protect us from liabilities, damages, or claims related to our privacy and data security obligations. Further, although we maintain cyber liability insurance, this insurance may not provide adequate coverage against potential liabilities related to any experienced cybersecurity incident or breach.
Like other companies in our industry, we, and our third-party providers, have experienced and will continue to experience threats and cybersecurity incidents relating to our information technology systems and infrastructure. For example, 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 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 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
46
Table of Contents
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 continued build out of our platform to support cloud infrastructure services, 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 legal reporting obligations; 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 include: foreign exchange rate risks; uncertainty regarding liability for content or services, including uncertainty as a result of local laws and lack of legal precedent; loss of revenues if the U.S. or international governments impose limitations on doing business with significant current or potential customers; difficulty in staffing, training, developing and managing international operations as a result of distance, language, cultural differences, differences in employee/employer relationships or regulations; theft of intellectual property in high-risk countries where we operate; difficulties in enforcing contracts, collecting accounts and longer payment cycles in certain countries; difficulties in transferring funds from, or converting currencies in, certain countries; managing the costs and processes necessary to comply with export control, sanctions, anti-bribery and anti-corruption, data protection, cybersecurity and competition laws and regulations or other regulatory or contractual limitations on our ability to sell or develop our products and services in certain international markets; changes in regulatory rules or policies or changes in government enforcement priorities and resources; macroeconomic developments and changes in the labor markets in which we operate; geopolitical developments, including increasing international tensions or any that impact our or our customers’ ability to operate in or deliver content to a country; other circumstances outside of our control such as trade disputes, including the imposition of tariffs by the United States on imports from certain countries and any resulting counter-tariffs or macroeconomic impacts, political unrest, warfare, military or armed conflict, such as the Russian invasion of Ukraine, the Israel-Hamas war, the ongoing U.S.-Israel military conflict with Iran and related hostilities in the Middle East, terrorist attacks, public health emergencies, energy crises and natural disasters that could disrupt our ability to provide services or limit customer purchases of them. For example, approximately six percent of our global employees are located in Israel and have been and may continue to be impacted by hostilities in the region, including being required to report for military duty, which could impact our ability to operate and successfully complete ongoing initiatives.
In addition, we are subject to laws and regulations worldwide that differ among jurisdictions and may change, affecting our operations in areas such as intellectual property ownership and infringement; tax; anti-bribery and anti-corruption; technology sovereignty, internet, technology and export regulations; so-called "fair share" or internet content taxes; foreign exchange controls and cash repatriation; data privacy; cyber security; competition; consumer protection; corporate sustainability; and
47
Table of Contents
employment and immigration. Compliance with such requirements can be onerous and expensive and may otherwise impact our business operations negatively. Although we have policies, controls and procedures designed to help ensure compliance with applicable laws, there can be no assurance that our employees, contractors, suppliers, customers, channel partners, intermediaries, agents or acquired businesses will not violate such laws or our policies, or that our controls will timely prevent, detect or remediate misconduct. Violations of these laws and regulations can result in fines or disgorgement of profits; additional costs related to internal or governmental investigations; remedial undertakings; contract damages, criminal sanctions against us, our officers or our employees; suspension or debarment; loss of licenses or certifications; prohibitions on the conduct of our business; and damage to our reputation.
Our business strategy depends on the ability to source adequate transmission capacity, co-location facilities and the equipment we need to operate our network; failure to have access to those resources could lead to loss of revenue and service disruptions.
To operate and grow our globally distributed network serving our portfolio of services, we are dependent in part upon transmission capacity provided by third-party telecommunications network providers and co-location facilities to house our servers and equipment to support our operations. We may be unable to purchase the bandwidth and space we need from these providers due to limitations on their resources, increasing energy costs or other reasons outside of our control, including market dynamics driven by hyperscalers, significant cost increases in servers and memory, and shortages of data center space and power. In particular, our efforts to increase the size and scale of our network infrastructure have required and may continue to require procuring significant additional space in co-location facilities. Inability to access facilities where we would like to install servers, secure sufficient power capacity or perform maintenance on existing servers for any reason impedes our ability to expand or maintain capacity. In addition, co-location facilities and other physical infrastructure on which we depend may be vulnerable to damage or destruction from armed conflict, military or terrorist attacks, natural disasters or other catastrophic events. Recent military conflicts have demonstrated that data centers and related infrastructure in conflict zones can be physically targeted, resulting in structural damage, prolonged outages and equipment loss. As a result, there can be no assurance that we are adequately prepared for unexpected increases in capacity demands by our customers or unexpected loss of infrastructure capacity. Failure to put in place or maintain the capacity we require to operate our business effectively could result in a reduction in, or disruption of, service to our customers and ultimately a loss of those customers. In addition, these third-party providers can experience operational inefficiencies relating to power, climate controls, water, logistics, and other unforeseen events which could result in increased costs, service disruptions and diminished customer experiences. We cannot guarantee that these providers have adequate measures in place to avoid service events that could impact our ability to operate portions of our network.
Akamai's platforms, products and services rely on hardware equipment, including hundreds of thousands of servers deployed around the world. Increasing demand and manufacturing limitations for certain necessary equipment or components may significantly impact pricing and availability. In addition disruptions in our supply chain have occurred in the past and could occur in the future that prevent us from purchasing needed equipment at attractive prices or at all. For example, we are experiencing continued volatility in certain server component costs, including as a result of recently imposed tariffs, that support the continued build out of our AI infrastructure, cloud infrastructure and platform services. In addition, from time to time, it has been, and may continue to be, more difficult to purchase equipment that is manufactured in areas that face disruptions to operations due to war, unrest, trade sanctions or other political activity, public health issues, safety issues, natural disasters or general economic conditions. For example, tariffs imposed by the United States on other countries and any resulting counter-tariffs have in the past and will in the future likely lead to increasing costs and supply chain disruptions. Failure to have adequate equipment, including server and other networking equipment, could harm the quality of our services, which could lead to the loss of customers and revenue.
Acquisitions and other strategic transactions could result in operating difficulties, dilution, diversion of management attention and other harmful consequences that may adversely impact our business and results of operations.