Web content delivery and security company Akamai (NASDAQ: AKAM) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 2.9% year on year to $1.02 billion. The company expects next quarter’s revenue to be around $1.02 billion, coming in 1.1% above analysts’ estimates. Its non-GAAP profit of $1.70 per share was 8.6% above analysts’ consensus estimates.

Is now the time to buy AKAM? Find out in our full research report (it’s free).

StockStory’s Take

Akamai’s first quarter performance was shaped by continued momentum in its security and compute businesses, which together accounted for 69% of total revenue. CEO Tom Leighton attributed growth in security to strong demand for Guardicore segmentation and API security solutions, highlighting notable competitive wins in the financial services and public sector. The company also saw better-than-expected results in its delivery segment, with CFO Ed McGowan noting improved traffic across video, gaming, and software downloads. Both executives emphasized the company’s ongoing transformation from a content delivery network provider into a diversified cybersecurity and cloud computing platform. Management acknowledged that operating margin declined year-over-year, but attributed non-GAAP earnings outperformance to lower transition costs, improved bandwidth expenses, and lower payroll taxes.

Looking ahead, Akamai’s leadership expects security and compute to remain key drivers, with management maintaining guidance for double-digit growth in these segments. Tom Leighton pointed to the early interest in newly launched products, such as the firewall for AI, as a sign of emerging demand for advanced cybersecurity solutions as generative AI and AI agents proliferate in enterprise settings. Ed McGowan cautioned that operating expenses will rise in the next quarter due to higher marketing spend, merit cycle impacts, and currency fluctuations, but reiterated confidence in the company’s ability to deliver annual growth. Management is closely monitoring global economic volatility, potential tariff impacts, and evolving customer preferences, especially among international and U.S. public sector clients. As Leighton stated, “Our job is to make sure that [customers] understand they can continue to rely on Akamai, no matter what happens with the geopolitics and the rhetoric.”

Key Insights from Management’s Remarks

Management attributed Q1 growth to strong demand for security and compute products, improved delivery traffic, and initial traction from sales realignment, while acknowledging margin pressures and macroeconomic risks.

• Security product momentum: Akamai’s Guardicore segmentation and API security solutions saw robust adoption, with management citing competitive wins at major banks, government agencies, and global manufacturers. Enterprises increasingly value segmentation as ransomware and malware threats escalate, and Akamai’s ability to identify undocumented APIs has led to significant new customer wins.

• New product launches: The firewall for AI, launched during the quarter, is designed to protect AI-powered applications and large language models (LLMs) from emerging threats such as data leaks and model manipulation. Early customer feedback highlighted its ability to provide visibility into AI-agent interactions and prevent misuse, with management expecting increasing enterprise adoption as AI deployment grows.

• Delivery segment stabilization: After multiple periods of decline, delivery revenue benefitted from improved traffic across video, gaming, and commerce, supplemented by new customer accounts from the Edgio acquisition. Management remains cautious about declaring a turnaround in delivery, but noted sequential stabilization and broad-based traffic improvements as positive trends.

• Cloud computing advances: Akamai continued to scale its compute business, introducing new edge capabilities such as the Akamai Cloud inference solution and managed container services (MCS) that enable customers to run workloads closer to end users. Management emphasized proof-of-concept wins, faster response times, and cost savings for customers migrating from legacy or hyperscaler platforms.

• Sales transformation progress: The ongoing shift to a “hunter” sales model—targeting new customers for high-growth products—has begun to show results. Management estimates they are about one-third through this transition, with early signs of improved new account acquisition and incentives for longer-term contracts.

Drivers of Future Performance

Akamai’s outlook is anchored in continued security and compute growth, tempered by delivery trends, macroeconomic uncertainty, and rising operating expenses.

• Security and compute expansion: Management expects security and compute segments to deliver double-digit annual growth, supported by strong demand for Guardicore, API security, and cloud infrastructure services. The company is confident in 30–35% annual recurring revenue growth for its Zero Trust and API security offerings, as well as 40–45% growth in cloud infrastructure ARR.

• Operating margin headwinds: While Akamai projects healthy non-GAAP margins, rising operating expenses from planned marketing, merit increases, and currency impacts are expected to pressure margins in the near term. Management highlighted that margin improvement will depend on scaling compute, further security growth, and delivery stabilization.

• External risks and customer sentiment: Leadership is monitoring geopolitical tensions, tariffs, and potential U.S. public sector budget cuts. Some international customers have expressed concerns about relying on U.S.-based infrastructure, though management believes Akamai’s security capabilities and reliability continue to set it apart.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the pace of security and compute revenue growth, especially the adoption of new products like firewall for AI; (2) whether delivery segment trends continue to stabilize or return to decline; and (3) the impact of the ongoing sales transformation on new customer acquisition. We will also track how Akamai manages operating expenses and monitors macroeconomic and geopolitical developments that could influence customer sentiment and budget decisions.

Akamai currently trades at a forward price-to-sales ratio of 2.8×. Should you double down or take your chips? Find out in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.