Fourth quarter highlights

• Revenue of $995 million, up 7% year-over-year and when adjusted for foreign exchange*
• Security and compute revenue represented 61% of total revenue in the fourth quarter and grew 18% year-over-year and 17% when adjusted for foreign exchange*
• GAAP net income per diluted share of $1.03, up 26% year-over-year and up 24% when adjusted for foreign exchange*, and non-GAAP net income per diluted shared* of $1.69, up 23% year-over-year and up 22% when adjusted for foreign exchange*

Full-year highlights

• Revenue of $3.812 billion, up 5% year-over-year and up 6% when adjusted for foreign exchange*
• Security and compute revenue represented 60% of total revenue in 2023 and grew 17% year-over-year and when adjusted for foreign exchange*
• GAAP net income per diluted share of $3.52, up 8% year-over-year and up 9% when adjusted for foreign exchange*, and non-GAAP net income per diluted share * of $6.20, up 15% year-over-year and up 16% when adjusted for foreign exchange*

CAMBRIDGE, Mass., Feb. 13, 2024 /PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM), the cloud company that powers and protects life online, today reported financial results for the fourth quarter and full-year ended December 31, 2023.

"Akamai's fourth quarter financial performance capped off an excellent year for the company highlighted by very strong profitability," said Dr. Tom Leighton, Akamai's Chief Executive Officer. "We were very pleased with our Security and Cloud Computing results in 2023 which now represent 60% of total revenue. Looking to 2024, we plan to continue driving profitability in delivery, expanding our market leading security offerings, and extending our cloud computing platform to the edge to provide customers with better performance at a lower cost."

Akamai delivered the following results for the fourth quarter and full-year ended December 31, 2023:

Revenue: Revenue for the fourth quarter was $995 million, a 7% increase over fourth quarter 2022 revenue of $928 million and a 7% increase when adjusted for foreign exchange.* Total revenue for 2023 was $3.812 billion compared to $3.617 billion for 2022, up 5% year-over-year and up 6% when adjusted for foreign exchange.*

Revenue by solution:

• Security revenue for the fourth quarter was $471 million, up 18% year-over-year and up 17% when adjusted for foreign exchange.* Security revenue for 2023 was $1.765 billion, up 14% year-over-year and up 15% when adjusted for foreign exchange.*
• Delivery revenue for the fourth quarter was $389 million, down 6% year-over-year and down 7% when adjusted for foreign exchange.* Delivery revenue for 2023 was $1.542 billion, down 8% year-over-year and down 7% when adjusted for foreign exchange.*
• Compute revenue for the fourth quarter was $135 million, up 20% year-over-year and when adjusted for foreign exchange.* Compute revenue for 2023 was $504 million, up 24% year-over-year and up 25% when adjusted for foreign exchange.*

Revenue by geography:

• U.S. revenue for the fourth quarter was $516 million, up 7% year-over-year. U.S. revenue for 2023 was $1.969 billion, up 4% year-over-year.
• International revenue for the fourth quarter was $479 million, up 8% year-over-year and up 6% when adjusted for foreign exchange.* International revenue for 2023 was $1.843 billion, up 7% year-over-year and up 8% when adjusted for foreign exchange.*

Income from operations: GAAP income from operations for the fourth quarter was $185 million, a 10% increase from fourth quarter 2022 income from operations of $167 million. GAAP operating margin for the fourth quarter was 19%, up 1 percentage point from the same period last year. GAAP income from operations for 2023 was $637 million, a 6% decrease from the prior year's GAAP income from operations of $676 million. Full-year GAAP operating margin was 17%, down 2 percentage points from the same period last year.

Non-GAAP income from operations* for the fourth quarter was $303 million, a 17% increase from fourth quarter 2022 non-GAAP income from operations of $258 million. Non-GAAP operating margin* for the fourth quarter was 30%, up 2 percentage points from the same period last year. Non-GAAP income from operations* for 2023 was $1.136 billion, a 10% increase from the prior year's non-GAAP income from operations of $1.033 billion. Full-year non-GAAP operating margin* was 30%, up 1 percentage point from the same period last year.

Net income: GAAP net income for the fourth quarter was $161 million, a 25% increase from fourth quarter 2022 GAAP net income of $129 million. GAAP net income for 2023 was $548 million, a 5% increase from the prior year's GAAP net income of $524 million.

Non-GAAP net income* for the fourth quarter was $263 million, a 21% increase from fourth quarter 2022 non-GAAP net income of $216 million. Non-GAAP net income* for 2023 was $960 million, a 12% increase from the prior year's non-GAAP net income of $858 million.

EPS: GAAP net income per diluted share for the fourth quarter was $1.03, a 26% increase from fourth quarter 2022 GAAP net income per diluted share of $0.82 and a 24% increase when adjusted for foreign exchange.* GAAP net income per diluted share for 2023 was $3.52, an 8% increase from the prior year's GAAP net income per diluted share of $3.26 and a 9% increase when adjusted for foreign exchange.*

Non-GAAP net income per diluted share* for the fourth quarter was $1.69, a 23% increase from fourth quarter 2022 non-GAAP net income per diluted share of $1.37 and a 22% increase when adjusted for foreign exchange.* Non-GAAP net income per diluted share* for 2023 was $6.20, a 15% increase from the prior year's non-GAAP net income per diluted share of $5.37 and a 16% increase when adjusted for foreign exchange.*

Adjusted EBITDA*: Adjusted EBITDA* for the fourth quarter was $426 million, a 12% increase from fourth quarter 2022 Adjusted EBITDA of $382 million. Adjusted EBITDA* for 2023 was $1.608 billion, a 5% increase from the prior year's Adjusted EBITDA of $1.530 billion.

Supplemental cash information: Cash from operations for the fourth quarter was $389 million, or 39% of revenue. Cash from operations for 2023 was $1.348 billion, or 35% of revenue. Cash, cash equivalents and marketable securities was $2.3 billion as of December 31, 2023.

Share repurchases: The Company spent $55 million in the fourth quarter of 2023 to repurchase 0.5 million shares of its common stock at an average price of $110.75 per share. For the full-year 2023, the Company spent $654 million to repurchase 7.8 million shares of its common stock at an average price of $83.83 per share. The Company had 151 million shares of common stock outstanding as of December 31, 2023.

Financial guidance: The Company reports the following financial guidance for the three months ending March 31, 2024:

The Company reports the following financial guidance for the year ending December 31, 2024, of which the revenue and earnings guidance has been adjusted to use a constant foreign currency exchange rate:

This guidance is provided on a non-GAAP basis and cannot be reconciled to the closest GAAP measures without unreasonable effort because of the unpredictability of the amounts and timing of events affecting the items Akamai excludes from non-GAAP measures. For example, stock-based compensation is unpredictable for Akamai's performance-based awards, which can fluctuate significantly based on current expectations of the future achievement of performance-based targets. Amortization of intangible assets, acquisition-related costs and restructuring costs are all impacted by the timing and size of potential future actions, which are difficult to predict. In addition, from time to time, Akamai excludes certain items that occur infrequently, which are also inherently difficult to predict and estimate. It is also difficult to predict the tax effect of the items Akamai excludes and to estimate certain discrete tax items, such as the resolution of tax audits or changes to tax laws. As such, the costs that are being excluded from non-GAAP guidance are difficult to predict and a reconciliation or a range of results could lead to disclosure that would be imprecise or potentially misleading. Material changes to any one of the exclusions could have a significant effect on our guidance and future GAAP results.

Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-833-634-5020 (or 1-412-902-4238 for international calls) and using passcode Akamai Technologies call. A live webcast of the call may be accessed at www.akamai.com in the Investor Relations section. In addition, a replay of the call will be available for two weeks following the conference by calling 1-877-344-7529 (or 1-412-317-0088 for international calls) and using passcode 5593330. The archived webcast of this event may be accessed through the Akamai website.

About Akamai 
Akamai powers and protects life online. Leading companies worldwide choose Akamai to build, deliver, and secure their digital experiences – helping billions of people live, work, and play every day. Akamai Connected Cloud, a massively distributed edge and cloud platform, puts apps and experiences closer to users and keeps threats farther away. Learn more about Akamai's cloud computing, security, and content delivery solutions at akamai.com and akamai.com/blog, or follow Akamai Technologies on X, formerly known as Twitter, and LinkedIn.

Use of Non-GAAP Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai provides additional financial metrics that are not prepared in accordance with GAAP (non-GAAP financial measures). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation and to evaluate Akamai's financial performance. These non-GAAP financial measures are non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP tax rate, capital expenditures and impact of foreign currency exchange rates, as discussed below.

Management believes that these non-GAAP financial measures reflect Akamai's ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparison of financial results across accounting periods and to those of our peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate Akamai's operating results and future prospects in the same manner as management. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent or not reflective of Akamai's ongoing operating results.

The non-GAAP financial measures do not replace the presentation of Akamai's GAAP financial measures and should only be used as a supplement to, not as a substitute for, Akamai's financial results presented in accordance with GAAP. Akamai has provided a reconciliation of each non-GAAP financial measure used in its financial reporting and investor presentations to the most directly comparable GAAP financial measure. This reconciliation captioned "Reconciliation of GAAP to Non-GAAP Financial Measures" can be found on the Investor Relations section of Akamai's website.

The non-GAAP adjustments, and Akamai's basis for excluding them from non-GAAP financial measures, are outlined below:

• Amortization of acquired intangible assets – Akamai has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions Akamai has made. The amount of an acquisition's purchase price allocated to intangible assets and term of its related amortization can vary significantly and is unique to each acquisition; therefore, Akamai excludes amortization of acquired intangible assets from its non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results.
• Stock-based compensation and amortization of capitalized stock-based compensation – Although stock-based compensation is an important aspect of the compensation paid to Akamai's employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of Akamai's current financial results to previous and future periods difficult to interpret; therefore, Akamai believes it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation from its non-GAAP financial measures in order to highlight the performance of Akamai's core business and to be consistent with the way many investors evaluate its performance and compare its operating results to peer companies.
• Acquisition-related costs – Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities, as well as certain additional compensation costs payable to employees acquired from the Linode acquisition if employed for a certain period of time. The additional compensation cost was initiated by and determined by the seller, and is in addition to normal levels of compensation, including retention programs, offered by Akamai. Acquisition-related costs are impacted by the timing and size of the acquisitions, and Akamai excludes acquisition-related costs from its non-GAAP financial measures to provide a useful comparison of operating results to prior periods and to peer companies because such amounts vary significantly based on the magnitude of the acquisition transactions and do not reflect Akamai's core operations.
• Restructuring charge – Akamai has incurred restructuring charges from programs that have significantly changed either the scope of the business undertaken by the Company or the manner in which that business is conducted. These charges include severance and related expenses for workforce reductions, impairments of long-lived assets that will no longer be used in operations (including right-of-use assets, other facility-related property and equipment and internal-use software) and termination fees for any contracts cancelled as part of these programs. Akamai excludes these items from its non-GAAP financial measures when evaluating its continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of its business.
• Amortization of debt issuance costs and capitalized interest expense – Akamai has convertible senior notes outstanding that mature in 2029, 2027 and 2025. The issuance costs of the convertible senior notes are amortized to interest expense and are excluded from Akamai's non-GAAP results because management believes the non-cash amortization expense is not representative of ongoing operating performance.
• Gains and losses on investments – Akamai has recorded gains and losses from the disposition, changes to fair value and impairment of certain investments. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to these gains and losses are not representative of Akamai's core business operations and ongoing operating performance.
• Gains and losses from equity method investment – Akamai records income or losses on its share of earnings and losses from its equity method investment, and any gains from returns of investments or impairments. Akamai excludes such income and losses because it does not have direct control over the operations of the investment and the related income and losses are not representative of its core business operations.
• Income tax effect of non-GAAP adjustments and certain discrete tax items – The non-GAAP adjustments described above are reported on a pre-tax basis. The income tax effect of non-GAAP adjustments is the difference between GAAP and non-GAAP income tax expense. Non-GAAP income tax expense is computed on non-GAAP pre-tax income (GAAP pre-tax income adjusted for non-GAAP adjustments) and excludes certain discrete tax items (such as the impact of intercompany sales of intellectual property related to acquisitions), if any. Akamai believes that applying the non-GAAP adjustments and their related income tax effect allows Akamai to highlight income attributable to its core operations.

Akamai's definitions of its non-GAAP financial measures are outlined below:

Non-GAAP income from operations – GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; and other non-recurring or unusual items that may arise from time to time.

Non-GAAP operating margin – Non-GAAP income from operations stated as a percentage of revenue.

Non-GAAP net income – GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; amortization of debt issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; gains and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time. 

Non-GAAP tax rate – GAAP tax rate excluding the tax effect of non-GAAP adjustments and certain discrete tax items.

Non-GAAP net income per diluted share, or EPS – Non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average common shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to Akamai pursuant to the note hedge transactions entered into in connection with the issuances of $1,265 million of convertible senior notes due 2029 and the issuances of $1,150 million of convertible senior notes due 2027 and 2025, respectively. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, Akamai would receive a benefit from the note hedge transactions and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. With respect to the convertible senior notes due in each of 2029, 2027 and 2025, unless Akamai's weighted average stock price is greater than $126.31, $116.18 and $95.10, respectively, the initial conversion prices, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.

Adjusted EBITDA – GAAP net income excluding the following items: interest and marketable securities income and losses; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; foreign exchange gains and losses; interest expense; amortization of capitalized interest expense; certain gains and losses on investments; gains and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time.

Adjusted EBITDA margin – Adjusted EBITDA stated as a percentage of revenue.

Capital expenditures, or capex, excluding stock-based compensation and interest expense – Purchases of property and equipment and capitalization of internal-use software development costs presented on an accrual basis, which differs from the cash-basis presentation included in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end versus prior periods.

Capex as a percentage of revenue – Capital expenditures, or capex, excluding stock-based compensation and interest expense, stated as a percentage of revenue.

Impact of foreign currency exchange rate – Revenue and earnings from international operations have historically been important contributors to Akamai's financial results. Consequently, Akamai's financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, when the local currencies of our international subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.

Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods.

The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount. The percentage change at constant currency presented is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period. 

The financial guidance for the year ended December 31, 2024 is calculated by comparing the forecasted amounts translated using the December 31, 2023 month end foreign currency exchange rates. The forecasted growth rates are calculated based upon the year ended December 31, 2023 as reported results.

Akamai Statement Under the Private Securities Litigation Reform Act
This release and/or our quarterly earnings conference call scheduled for later today contain statements that are not statements of historical fact and constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about expected future financial performance, expectations, plans and prospects of Akamai. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, inability to continue to generate cash at the same level as prior years; failure of our investments in innovation to generate solutions that are accepted in the market; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; effects of competition, including pricing pressure and changing business models; impact of macroeconomic trends, including economic uncertainty, turmoil in the financial services industry, the effects of inflation, rising and fluctuating interest rates, foreign currency exchange rate fluctuations, securities market volatility and monetary supply fluctuations; conditions and uncertainties in the geopolitical environment, including sanctions and disruptions resulting from the ongoing war in Ukraine; continuing supply chain and logistics costs, constraints, changes or disruptions; defects or disruptions in our products or IT systems, including cyber-attacks, data breaches or malware; failure to realize the expected benefits of any of our acquisitions or reorganizations; changes to economic, political and regulatory conditions in the United States and internationally; our ability to attract and retain key personnel; impact of the COVID-19 pandemic; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents filed with the SEC.

In addition, the statements in this press release and on our quarterly earnings conference call represent Akamai's expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.

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SOURCE Akamai Technologies, Inc.