00971TAN1 Filings — Akamai Technologies, Inc. - FilingSpy
00971TAN1
Akamai Technologies, Inc.
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A company that runs one of the world's largest content delivery networks, using a vast grid of edge servers to speed up websites, apps, and video for users everywhere, while also providing cybersecurity and cloud services. It was founded in 1998 by MIT professor Tom Leighton and graduate student Daniel Lewin, who built algorithms to solve the "World Wide Wait" — the crashes caused by sudden traffic spikes. The name comes from the Hawaiian word for "intelligent" or "clever," picked from a dictionary by the founders.
Gross margin fell to 55.8%, the lowest in the series, as compute build-out costs rose faster than revenue.
fell to 55.8%, the lowest quarterly level on record. rose 5.4% to $1.10 billion as 39% growth in cloud infrastructure services and 10% growth in security offset a 6% delivery decline, but cost of revenue reached 44% of sales, pushing down to 7.3%. The company issued $3.5 billion in convertible notes to fund an accelerated compute build-out, betting the is an investment rather than a reset.
Key takeaways
contracted 3.3 points to 55.8%, the lowest quarterly level in the series, as cost of rose to 44% of revenue driven by higher network build-out, co-location, and costs tied to the cloud infrastructure and AI platform expansion.
fell 47.0% to $80.3 million and narrowed 7.2 points to 7.3%, as operating expenses grew across R&D, sales and marketing, and G&A from headcount growth, annual merit increases, and a new retirement benefit that accelerated recognition.
Section summaries
Management's Discussion and Analysis
Akamai Q2 FY2026 revenue grew 5% to $1.1B, driven by 39% cloud infrastructure and 10% security growth, while delivery declined 6%.
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Total increased 5% to $1,099.7M, with security up 10% to $604.4M and cloud infrastructure services surging 39% to $99.3M, offsetting a 6% decline in delivery and other cloud applications to $395.9M.
Cloud infrastructure services rose 39% to $99.3 million, the fastest-growing , while security revenue rose 10% to $604.4 million; together they more than offset a 6% decline in delivery and other cloud applications to $395.9 million, where downward pricing on contract renewals continued to weigh.
fell 23.4% to $79.4 million and fell 26.8% to $0.52, though the dropped to 10% from 19% a year ago due to higher excess tax benefits from , partially cushioning the decline.
The company issued $3.5 billion in in May 2026, pushing to $5.86 billion, to fund accelerated for cloud infrastructure services; fell 42.2% to $181.3 million as capex rose.
Cash and equivalents rose 74.1% to $1.48 billion, reflecting the proceeds from the $3.5 billion note issuance, while the company repurchased $205.9 million in shares during the prior quarter.
What changed
fell to 55.8%, below the 58.7%–59.3% range it had occupied for five quarters and below the 56.1% Q1 2026 level that was then the series low, as co-location, network build-out, and costs continued to rise with the compute and AI platform expansion.
The delivery decline eased to 6% from 7% in Q1 2026 and 13.2% a year ago, continuing the moderation flagged in prior quarters, though the Edgio acquisition benefit is now annualizing and the large social media customer's DIY shift persists.
Cloud infrastructure services growth decelerated to 39% from 40% in Q1 2026, remaining the fastest-growing but showing the first quarter-over-quarter deceleration since the segment was broken out.
The fell to 10% from 13% in Q1 2026 and 19% a year ago, as higher excess tax benefits from continued to swing the rate, confirming the volatility flagged in prior quarters.
What to watch
Whether stabilizes near 55.8% or falls further as co-location, network build-out, and costs continue to rise with the accelerated compute and AI platform expansion funded by the $3.5 billion note issuance.
Whether cloud infrastructure services growth can sustain a rate near 39% and at what pace the from that 's build-out costs begins to ease as scales.
Whether the delivery decline stabilizes in the mid-single digits or deepens as the Edgio acquisition benefit annualizes and the large social media customer's DIY shift continues to reduce traffic.
Whether the remains near 10% or rises again, given the volatility in tax benefits that has swung the rate from 29% to 10% over the past four quarters.
Delivery fell due to downward pricing on contract renewals and customer cost optimization, while security growth was led by API security, web application, and Guardicore segmentation solutions.
contracted sharply to 7% from 15% as rose to 44% of , driven by higher network build-out, co-location, and costs.
increased across all functions, partly due to a new retirement benefit reducing the service period for eligible employees and achievement of performance-based plans.
The company issued $3.5B in in May 2026 to fund accelerated for cloud infrastructure services and for general corporate purposes.
Management expects continued cost increases in co-location, bandwidth, and for the rest of 2026, while planning to carefully manage operating margins.
Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk is the primary quantitative exposure, with a $25.8M fair-value sensitivity on investments; foreign currency and credit risks are deemed immaterial or limited.
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A 100 uniform increase in interest rates would reduce the fair value of the available-for-sale investment portfolio by approximately $25.8 million.
The company does not hedge its interest rate exposure and holds $7.64 billion in fixed-rate that carry no economic interest rate risk.
No borrowings were outstanding under the variable-rate 2025 or 2022 Credit Agreements as of June 30, 2026.
Short-term foreign currency forward contracts are used to hedge transaction exposure from non- re-measurement, with immaterial gains and losses.
A hypothetical 10% move in the U.S. dollar against foreign currencies would not materially impact the consolidated financial statements.
credit risk is considered limited, with no customer exceeding 10% of total receivables at quarter-end.
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…
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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.
Revenue growth faces pressure from competition, DIY customer shifts, and macro headwinds, while geopolitical conflict and AI-related risks are newly emphasized.
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may slow or decline due to pricing pressure, large customers shifting to 'do-it-yourself' solutions, and reduced network traffic, particularly impacting delivery and security segments.
Global macroeconomic and geopolitical conditions, including inflation, tariffs, and the U.S.-Israel military conflict with Iran, have adversely affected and may continue to affect customer demand and costs.
The ongoing U.S.-Israel military conflict with Iran introduces newly emphasized risks of physical attacks on data centers and infrastructure in the Middle East, potentially disrupting our network and increasing costs.
Our AI initiatives, including a new AI inferencing platform, face significant competition and evolving regulations, with failure potentially harming our business, reputation, or financial results.
We face intense competition from larger, well-resourced incumbents in cloud infrastructure and security, which could lead to pricing pressure, loss of customers, and inability to grow market share.
Evolving cybersecurity threats, increasingly enhanced by sophisticated AI tools, could cause security breaches, resulting in significant costs, legal liability, and reputational harm.