AKAM Q2 Deep Dive: Security and Cloud Growth Offset Delivery Shifts Amid Market Skepticism

August 12, 2025 at 03:07 AM EDT

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Web content delivery and security company Akamai (NASDAQ: AKAM) announced better-than-expected revenue in Q2 CY2025, with sales up 6.5% year on year to $1.04 billion. Guidance for next quarter’s revenue was better than expected at $1.04 billion at the midpoint, 0.6% above analysts’ estimates. Its non-GAAP profit of $1.73 per share was 13.2% above analysts’ consensus estimates.

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

Akamai (AKAM) Q2 CY2025 Highlights:

Revenue: $1.04 billion vs analyst estimates of $1.02 billion (6.5% year-on-year growth, 2.2% beat)
Adjusted EPS: $1.73 vs analyst estimates of $1.53 (13.2% beat)
Adjusted Operating Income: $308.6 million vs analyst estimates of $282.3 million (29.6% margin, 9.3% beat)
The company lifted its revenue guidance for the full year to $4.17 billion at the midpoint from $4.13 billion, a 1.1% increase
Management raised its full-year Adjusted EPS guidance to $6.70 at the midpoint, a 7.2% increase
Operating Margin: 14.5%, in line with the same quarter last year
Market Capitalization: $10.12 billion

StockStory’s Take

Akamai’s Q2 results showed better-than-expected revenue and non-GAAP earnings, yet the market responded negatively. Management cited strong growth in cloud infrastructure services and ongoing momentum in security offerings as key drivers, while the delivery segment stabilized amid less competitive pressure. CEO Tom Leighton emphasized the company’s focus on expanding high-growth areas, noting, “Our cloud infrastructure services portfolio grew 30% year-over-year, and we see substantial opportunities associated with AI.”

Looking ahead, Akamai’s updated guidance is shaped by accelerating demand for cloud infrastructure and security solutions, particularly as businesses deploy more AI-powered applications at the edge. Management expects large contracts signed earlier in the year to begin contributing meaningfully in the second half, but acknowledged that timing of customer migrations could impact when revenue is recognized. CFO Ed McGowan stated, “It really just comes down to when the customers ramp up, but we feel very confident with the business we’ve signed up.”

Key Insights from Management’s Remarks

Management attributed Q2’s performance to rapid cloud infrastructure adoption, resilient security demand, and a more rational delivery market, while highlighting new product launches and changes in the competitive landscape.

Cloud infrastructure accelerating: The cloud infrastructure services segment grew 30% year-over-year, driven by customer demand for compute and storage solutions closer to end users. Management highlighted several large multi-year contracts, with expectations for further revenue acceleration as these deals ramp up in the second half.
AI-focused product launches: Akamai launched its AI Gateway solution and firewall for AI, targeting enterprises deploying generative AI applications. These products address key customer concerns around performance, security, and cost, and management sees early market traction with dozens of proofs of concept underway.
Security product momentum: Strong demand for Guardicore Segmentation and API security solutions drove growth in Akamai’s security portfolio. Customers are increasingly looking for visibility and protection for thousands of exposed APIs and against rising ransomware threats, with management citing double-digit ARR growth in these categories.
Delivery segment stabilization: The delivery business saw improved pricing and healthier traffic trends, attributed partly to the exit and acquisition of several competitors. Management noted that while this segment is still in decline, the rate has moderated, and upselling to acquired customer bases has helped offset headwinds.
Evolving go-to-market strategy: Investments to expand sales capacity and strengthen channel partnerships are underway, aiming to support growth in newer offerings like cloud infrastructure and advanced security, even though these efforts may temporarily pressure operating margins as headcount ramps up.

Drivers of Future Performance

Akamai’s guidance is anchored in robust demand for edge cloud and security solutions, but hinges on customer adoption timelines and continued delivery market stability.

Cloud infrastructure ramp and contracts: Management expects accelerated growth from cloud infrastructure services in the back half of the year, driven by several large contracts with minimum commitments. However, revenue recognition is dependent on when customers migrate applications, introducing some uncertainty in the timing of reported growth.
Security segment expansion: The company anticipates ongoing double-digit growth in security, especially in API and Zero Trust solutions, as enterprises prioritize defenses against ransomware and API vulnerabilities. Segment growth may be tempered by slower expansion in legacy security products tied to delivery.
Margin and investment headwinds: Akamai will continue investing in sales capacity and partner channels to capture new business, which may weigh on operating margins in the near term. Additionally, increases in colocation and compute capacity costs, as well as partner solution resales with lower gross margins, could pressure profitability even as these moves support long-term top-line growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace at which large cloud infrastructure contracts convert to revenue as customers migrate workloads to Akamai’s edge platform, (2) sustained growth in high-demand security products like Guardicore and API protection, and (3) ongoing margin trends as the company invests in sales capacity and absorbs higher infrastructure costs. The effectiveness of AI-focused product launches and stabilization in the delivery business will also be key signposts of execution.

Akamai currently trades at $70.40, down from $74.91 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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