Akamai outlines 40%–45% CIS ARR growth target for 2025 while launching Inference Cloud

Earnings Call Insights: Akamai Technologies (AKAM) Q3 2025

MANAGEMENT VIEW

* CEO F. Leighton stated that "Akamai had a strong third quarter with results coming in above expectations for revenue, margin and earnings per share." He reported revenue of $1.055 billion, a 5% year-over-year increase, and highlighted non-GAAP operating margin improvement to 31% and EPS growth to $1.86. Leighton emphasized accelerating momentum for Cloud Infrastructure Services (CIS), strong demand for security products, and stabilization in delivery revenue. He pointed to the transformation of Akamai from a CDN pioneer to a leader in cloud security and distributed cloud computing, encouraging investors to review an IDC report on Akamai's strategic shift.
* Leighton noted that all top three U.S. cloud providers now use Akamai CIS, with one signing an expanded multiyear renewal in Q3. He cited a 39% year-over-year increase in CIS revenue to $81 million and detailed multiple new and expanded contracts, including a $37 million, two-year renewal from a multinational gaming company in Japan.
* He announced the launch of Akamai Inference Cloud, stating it is "our platform to support the growing demand to scale AI Inference on the Internet." The platform is available in 17 locations globally, with plans for expansion as demand grows. Leighton positioned Akamai as enabling "distributed low-latency, globally scalable inference at the edge, with response times measured in a few tens of milliseconds."
* Leighton highlighted continued strong demand for segmentation and API security solutions, with high-growth security products growing revenue by 35% year-over-year. Notable wins included a $7 million API security contract with a major European bank and large contracts with global financial and airline customers.
* CFO Ed McGowan said, "We delivered strong third quarter results with total revenue of $1.055 billion, up 5% year-over-year as reported and 4% in constant currency." He reported non-GAAP EPS of $1.86 per share, up 17% year-over-year, "$0.20 above the high end of our guidance range." McGowan reiterated CIS ARR growth expectations of 40% to 45% for 2025 and a $100 million run rate target for API security by year-end. He noted security revenue of $568 million and CapEx of $224 million for the quarter.

OUTLOOK

* McGowan provided Q4 guidance for revenue between $1.065 billion and $1.085 billion, up 4% to 6% as reported, with cash gross margins expected at 72% to 73%. Non-GAAP EPS is projected in the range of $1.65 to $1.85, and non-GAAP operating margin between 28% and 30%. CapEx is expected to be $171 million to $181 million.
* For the full year 2025, Akamai expects total revenue to grow 4% to 5% in constant currency, non-GAAP operating margin of approximately 29% to 30%, and EPS between $6.93 and $7.13.
* McGowan stated, "We continue to expect CIS ARR year-over-year growth in the range of 40% to 45% in constant currency at year-end," and "the combined ARR for our high-growth security solutions to increase by 30% to 35% year-over-year in constant currency for 2025."

FINANCIAL RESULTS

* Akamai reported revenue of $1.055 billion for Q3, with $180 million from compute revenue, $81 million from CIS (up 39% year-over-year), and $568 million from security. High-growth security products reached $77 million.
* Non-GAAP net income was $269 million or $1.86 per diluted share. International revenue totaled $525 million. CapEx for the quarter was $224 million.
* The company ended the quarter with approximately $1.8 billion in cash, cash equivalents, and marketable securities. No shares were repurchased in Q3, but $800 million was spent year-to-date on buybacks.

Q&A

* Michael Cikos, Needham: Asked about guidance reiteration for security and compute growth. McGowan responded, "with compute, will be maybe a touch under 15% for the year as some of the bigger contracts ramped up a little bit later in the year than we had expected, but definitely picking up momentum in CIS."
* Cikos inquired about parameters for 2026. McGowan replied guidance would come in February but noted, "there's a very good chance we could accelerate growth in our CIS business next year."
* Rishi Jaluria, RBC: Asked about Akamai's positioning amid hyperscaler capacity constraints. Leighton explained, "Akamai has a unique platform. Nobody is like us... We already have this distributed platform."
* Jaluria followed up on API security's future in Agentic protocols. Leighton confirmed, "Absolutely, and we're already doing that... to protect that with our new AI firewall service."
* James Fish, Piper Sandler: Inquired about CapEx for inferencing and NVIDIA partnership. McGowan noted, "CapEx will very closely be followed by revenue, and it will be informed by demand... you could potentially have slightly better margins."
* Gabriela Borges, Goldman Sachs: Asked about large inference deals and delivery business trends. McGowan described seeing "some customers reach out to us for some pretty sizable deal sizes" and noted delivery pricing stabilization due to fewer competitors.
* Other analysts probed topics including sales rep hiring, security penetration, international revenue shifts, and the Inference Cloud's strategic importance.

SENTIMENT ANALYSIS

* Analysts pressed for specifics on growth drivers, future guidance, and competitive positioning, with a generally positive but probing tone, especially regarding CIS momentum, security demand, and AI infrastructure opportunities.
* Management maintained a confident, upbeat tone in both prepared remarks and Q&A, emphasizing strong execution, contract momentum, and unique platform advantages. Leighton referred to the Inference Cloud launch as "the first inning of a very exciting game" and McGowan attributed operating margin outperformance to "good execution across the board."
* Compared to the previous quarter, analyst sentiment remained constructive but focused more on AI-driven opportunities and guidance details. Management's tone was more assertive regarding CIS acceleration and the Inference Cloud's potential.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for compute growth was adjusted slightly below 15% for the full year as some contracts ramp later than expected, versus prior quarter's projection of approximately 15% in constant currency.
* CIS revenue growth accelerated to 39% year-over-year, up from 30% in Q2. Security products maintained strong double-digit growth, with API security highlighted as a major contributor.
* Management's confidence in CIS and the Inference Cloud increased, with more focus on AI edge opportunities than in the previous quarter.
* Analysts shifted their focus more toward the medium-term impact of AI infrastructure and the scale of contracts in CIS.
* Operating margin guidance for Q4 and the year remained broadly consistent with earlier projections, with more emphasis on CapEx alignment to CIS demand.

RISKS AND CONCERNS

* Management cited the unpredictability of Q4 seasonal demand, especially in delivery and e-commerce.
* McGowan noted, "delivery is hard to call in Q4. So I wouldn't read it as we're expecting anything negative necessarily with delivery." Pricing stabilization in delivery reflects fewer competitors but remains a potential risk.
* Analysts raised concerns about the ramp period for new sales hires, the sustainability of security revenue growth, and the possibility of further headwinds in legacy compute and delivery segments.
* CapEx requirements for AI Inference Cloud deployments were discussed, with McGowan stating that "CapEx will very closely be followed by revenue" and could impact margins in the short term.

FINAL TAKEAWAY

Akamai's Q3 2025 call highlighted accelerating momentum in Cloud Infrastructure Services, robust security product growth, and the strategic launch of Akamai Inference Cloud. Management reaffirmed strong revenue and earnings guidance for Q4 and 2025, with particular emphasis on 40% to 45% CIS ARR growth by year-end and a $100 million run rate for API security. The company continued to stress its unique platform advantages and deepening partnerships, while acknowledging delivery and CapEx uncertainties as areas to watch heading into the next quarter.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/akam/earnings/transcripts]

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