Akamai Technologies (AKAM) Citi's 2024 Global TMT Conference summary

Business overview and growth drivers

• Three main business segments: legacy CDN, security, and compute, each at different growth stages.

• Security now represents 51% of revenue, with a $2B run rate and growth in the teens.

• Compute business, boosted by the Linode acquisition, is rapidly scaling, expected to reach $100M+ run rate by year-end.

• Delivery (CDN) business faces challenges due to historically low internet traffic growth.

• API traffic is a fast-growing segment, influencing strategic acquisitions like Noname Security.

CDN/delivery business trends and challenges

• Internet traffic growth is unusually weak, with streaming, gaming, and software downloads as main drivers.

• Gaming and streaming have seen recent stagnation due to fewer hit titles and less new content.

• DIY CDN is limited to a handful of massive customers; multi-CDN strategies are common but not materially impacting results.

• Regulatory risks, such as potential bans on major social media customers, could impact revenue by ~$50M.

• Pricing discipline has increased, with rate declines now more closely tied to customer traffic growth.

Compute business expansion

• Compute now accounts for 15% of revenue, up from near zero two years ago.

• Linode acquisition enabled entry into traditional compute, targeting both existing and new enterprise customers.

• Enterprise compute run rate expected to double from $50M to $100M by year-end, with broad vertical adoption.

• Cost savings achieved by migrating internal workloads from hyperscalers to in-house compute.

• CapEx for compute is steady, with existing capacity supporting near-term growth.