Akamai 2025 Full Year Results: Security and Cloud Growth Offset Delivery Decline

What happened

Akamai posted full-year 2025 revenue of $4.21 billion, up 5% from 2024, with security and cloud computing solutions driving growth while delivery revenue declined. Security revenue grew 10% to $2.24 billion, supported by API security, web application security, and Guardicore microsegmentation products. Cloud computing revenue rose 12% to $708 million, driven by Cloud Infrastructure Services including compute, storage, and networking solutions. Delivery revenue fell 5% to $1.26 billion, pressured by downward pricing at contract renewals and a large social media customer implementing cost-optimization and DIY strategies that reduced traffic on Akamai's network. GAAP operating margin held at 13% despite rising costs, while non-GAAP operating margin expanded to 30% from 29%. Net income declined to $452 million from $505 million in 2024, primarily due to a shortfall in stock-based compensation tax benefits and revaluation of deferred tax assets. Operating cash flow remained stable at $1.52 billion, while capital expenditures increased to $819.5 million to support compute platform buildout. The company acquired Fermyon in November 2025 and certain customer contracts from Edgio in December 2024. Cash and marketable securities totaled $1.9 billion at year-end.

Why it matters for investors

The results demonstrate Akamai's successful diversification from legacy delivery services into higher-growth security and cloud computing markets, though execution challenges remain. Security now represents 53% of revenue and is growing at double-digit rates, validating the company's strategic pivot. However, the persistent decline in delivery revenue—down 15% in 2024 and another 5% in 2025—highlights ongoing structural headwinds from pricing competition and customer optimization initiatives. The large social media customer's DIY shift specifically illustrates concentration risk and customer leverage in the delivery business. The 12% cloud computing growth reflects early traction in a competitive market, but rising co-location and server costs due to hyperscaler purchasing power are compressing margins. Co-location costs rose 13% to $349.2 million in 2025, while depreciation of network equipment increased 16% to $328.2 million, signaling capital intensity is climbing. Management acknowledged that market dynamics driven by hyperscalers are creating significant cost pressures on server components and data center capacity. Operating margin declined from 17% in 2023 to 13% in 2024-2025, though non-GAAP margins held steady near 30%. The stable operating cash flow of $1.52 billion provides financial flexibility for continued investment, though rising capex and restructuring charges ($58 million in 2025, $95 million in 2024) indicate organizational strain. The company's $4.14 billion convertible debt load and $800 million in share repurchases during 2025 reflect capital allocation balancing growth investment with shareholder returns.

Key highlights

Akamai's 2025 results reflect a business in strategic transition, pivoting from legacy content delivery toward security and cloud computing while managing structural headwinds. Security solutions reached $2.24 billion with 10% growth, representing over half of total revenue and validating the company's repositioning. Cloud computing grew 12% to $708 million, though still represents just 17% of revenue. Delivery revenue continued its multi-year decline, falling 5% in 2025 on top of a 15% drop in 2024, pressured by pricing competition and customer DIY initiatives including a large social media customer optimizing costs. Operating margin held at 13% despite rising infrastructure costs—co-location expenses increased 13% and network depreciation rose 16% as hyperscaler purchasing power drives up server, memory, and data center costs. Management acknowledged these market dynamics will continue pressuring cost structure. Operating cash flow remained strong at $1.52 billion, though capital expenditures jumped to $819.5 million to build out compute platform capacity. The company acquired Fermyon and Edgio customer contracts in late 2025, issued $1.73 billion in convertible notes due 2033, and repurchased $800 million in stock. Non-GAAP operating margin of 30% and Adjusted EBITDA margin of 43% demonstrate underlying profitability, though GAAP net income declined to $452 million from $505 million in 2024 due to tax timing and deferred asset revaluation.

Management commentary

Management stated that 'the key factors that influence our financial success are our ability to build on recurring revenue commitments across our security, delivery and cloud computing product portfolios, increase traffic on our network, continue to develop, scale and successfully bring to market our compute platform, including AIC and compute-to-edge solutions, that meet the needs of professional users and enterprises.' Management acknowledged that '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,' and noted that 'a large social media customer has taken steps to lower costs and reduce reliance on U.S. providers by optimizing its platform, including using a DIY component, which reduced traffic on our network and negatively impacted our revenue in 2024 and may continue to do so in the future.' Regarding cost pressures, management disclosed that 'with the build out of our compute platform, we are experiencing a significant increase in server and memory costs due to market dynamics driven by hyperscalers,' and that 'we are experiencing continued volatility in certain server component costs.' On the security business, management highlighted that 'increased sales of our security solutions, led by application security solutions and our microsegmentation solutions, and increased sales of our cloud computing solutions, attributable to enhanced services on our compute platform, and growth in our Cloud Infrastructure Services, have made a significant contribution to revenue growth.' Management also noted that 'we plan to continue to invest in these areas with a focus on higher growth security products and Cloud Infrastructure Services to further advance our product portfolios and sales capabilities.'

What to watch next

Investors should monitor:

• Delivery revenue trajectory and whether pricing stabilizes at contract renewals, along with further developments regarding the large social media customer's DIY strategy and potential expansion of optimization efforts by other high-traffic customers.

• Cloud computing revenue growth acceleration or deceleration as the company scales its compute platform and launches AIC for AI inference workloads, particularly whether it can compete effectively against established hyperscalers despite facing disadvantaged pricing for servers, memory, and co-location.

• Operating margin trend given management's acknowledgment that co-location, server, and memory costs are rising significantly due to hyperscaler market dynamics, and whether revenue growth from security and cloud can offset these structural cost increases.

• Capital expenditure levels and free cash flow generation as the company continues compute infrastructure buildout, particularly whether 2026 capex remains elevated above the $819.5 million spent in 2025 and impacts cash available for share repurchases or debt reduction.

This summary is based solely on excerpts from the company's Form 10-K filing.