0001086222-25-000218
SEC filingAkamai's revenue grew 7% to $1.04B in Q2 2025 led by security and cloud computing growth, while GAAP net income fell 21% due to higher stock-based compensation and restructuring costs.
In Q2 2025, Akamai reported total revenue of $1,043.5 million, a 7% increase from $979.6 million in Q2 2024. Growth was driven by security solutions (+11%) and cloud computing (+13%), partially offset by a 3% decline in delivery solutions. Gross profit increased 7% to $616.9 million, with gross margin expanding slightly from 58.9% to 59.1%, as cost of revenue remained at 41% of revenue. Operating income rose 2.4% to $151.5 million, but GAAP operating margin contracted to 14.5% (from 15.1%) due to higher stock-based compensation and restructuring charges. Net income fell 21% to $103.6 million, resulting in diluted EPS of $0.71 versus $0.86 in the prior year. On a non-GAAP basis, operating margin improved to 30% from 29%, and non-GAAP diluted EPS grew to $1.73 from $1.58, reflecting adjusted profitability gains.
The increase in cost of revenue was driven by co-location fees (+16%), network build-out and supporting services (+26%), and depreciation of network equipment (+19%), partly offset by lower bandwidth fees (-25%). Operating expenses rose across all categories, with R&D up 11%, sales & marketing up 5%, and G&A up 6%, primarily due to higher stock-based compensation from the shift to a stock-based 401(k) match program and headcount growth.
Security revenue reached $551.9 million, up 11% YoY, fueled by API security, web application, and Guardicore segmentation solutions. Cloud computing revenue grew 13% to $171.5 million, driven by cloud infrastructure services (Linode-based compute and storage) and EdgeWorkers. Delivery revenue declined 3% to $320.1 million, as downward pricing at contract renewals and macroeconomic headwinds led to customer cost optimization and reduced traffic, partially offset by incremental revenue from the Edgio asset acquisition. International revenue grew 10% YoY (8% constant currency) and represented 49% of total revenue, while U.S. revenue grew 4%.
Management expects revenue growth to continue, with security and cloud computing as primary drivers. However, delivery revenue may remain under pressure from pricing and traffic optimization trends. Operating expenses are expected to increase, particularly in cost of revenue (co-location, depreciation, network build-out) and R&D, as the company invests in compute platform expansion and security solutions. Sales and marketing and G&A are expected to see modest increases. The company anticipates capital expenditures will remain elevated to support network expansion and a new enterprise cloud computing customer. No specific numerical guidance was provided, but the company expects traffic growth trends to continue for the rest of 2025.
As of June 30, 2025, Akamai held $850.3M in cash and cash equivalents and $707.5M in marketable securities (short-term: $116.3M, long-term: $591.2M). Total debt stood at $4,101.0M, primarily from convertible senior notes (2033, 2029, and 2027 issuances). Shareholders' equity was $4,467.5M. The company maintains a solid liquidity position with $1.558B in cash and marketable securities.
Akamai disclosed $4.3B in remaining performance obligations (RPO) from customer contracts, of which ~60% is expected to be recognized over the next 12 months and ~35% over the next two to three years. The company has no material purchase commitments or off-balance-sheet arrangements detailed in the notes.
Akamai repurchased 10.0M shares for $800.0M during the first half of 2025, with $1,180.5M remaining under the $2.0B authorization (authorized May 2024). The company also executed significant debt management: issued $1,725.0M in 2033 convertible notes and repaid $1,150.0M of maturing 2025 notes. Capital expenditures (property and equipment plus internal-use software) totaled $419.8M for the six months, representing 20.4% of revenue. No dividends were paid or declared.
The company operates as one reportable segment. Revenue by geography: U.S. $1,056.3M (51.3%) and International $1,002.3M (48.7%) for the six months ended June 30, 2025. Revenue by solution category: Security $1,082.6M (52.6%), Delivery $639.1M (31.0%), and Cloud Computing $336.9M (16.4%). No country other than the U.S. exceeded 10% of total revenue.
Net cash provided by operating activities was $710.3 million for the six months ended June 30, 2025, compared to $782.8 million in the prior year period, a decrease of 9.3%. Net income for the same period was $226.8 million, yielding a CFO-to-net-income ratio of 3.1x, indicating strong cash generation relative to earnings. Depreciation and amortization ($349.5 million) and stock-based compensation ($224.8 million) were the primary non-cash add-backs. Working capital changes consumed $132.7 million, driven by a $84.5 million decrease in accounts payable and accrued expenses and a $33.1 million increase in accounts receivable.
Capital expenditures (including capitalized software development costs) totaled $419.8 million, up 24.5% from $337.3 million in the prior year, reflecting increased investment in property and equipment and software. Free cash flow is not explicitly stated but implied as operating cash flow less capex would be $290.5 million, down from $445.6 million in the prior year. The company returned $800.0 million to shareholders through share repurchases, more than triple the prior year's $253.3 million, funded by a combination of operating cash flow and financing activities including $1.7 billion in convertible note issuance and $250 million in revolving credit facility borrowings (subsequently repaid).
Investing activities provided $194.0 million, driven by maturities and sales of marketable securities, partly offset by purchases. Financing activities used $593.5 million, primarily due to share repurchases and repayment of convertible notes, partially offset by proceeds from the new convertible issuance. The overall cash position increased by $332.4 million to $851.5 million.