UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Commission file number 0-27275

Akamai Technologies, Inc.

(Exact name of registrant as specified in its charter)

8 Cambridge Center

Cambridge, MA 02142

(617) 444-3000

(Address, Including Zip Code, and Telephone Number, Including Area Code,

of Registrant’s Principal Executive Offices)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      The number of shares outstanding of the registrant’s common stock as of August 5, 2005: 139,156,388 shares.

AKAMAI TECHNOLOGIES, INC.

FORM 10-Q

For the quarterly period ended June 30, 2005

TABLE OF CONTENTS

PART I.     FINANCIAL INFORMATION

AKAMAI TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AKAMAI TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AKAMAI TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2005

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AKAMAI TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

      Akamai Technologies, Inc. (“Akamai” or the “Company”) provides services for accelerating and improving the delivery of content and business processes over the Internet. Akamai’s globally distributed platform comprises more than 17,000 servers in more than 950 networks in 69 countries. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. Akamai currently operates in one business segment: providing global services for accelerating and improving delivery of content and business processes over the Internet.

      The accompanying condensed consolidated financial statements of Akamai have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The financial information included herein, other than the condensed consolidated balance sheet as of December 31, 2004, has been prepared without audit. The condensed consolidated balance sheet at December 31, 2004 has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2004. In the opinion of management, these unaudited statements include all adjustments and accruals consisting only of normal recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in Akamai’s Annual Report on Form 10-K for the year ended December 31, 2004. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for future periods.

      The accompanying condensed consolidated financial statements include the accounts of Akamai and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications of prior year amounts have been made to conform to current year presentation. In connection with the preparation of the accompanying condensed consolidated financial statements, the Company concluded that it was appropriate to classify its investments in auction rate securities as short-term available-for-sale investments. Previously, such investments were classified as cash and cash equivalents. Accordingly, the Company has made revisions to the accompanying condensed consolidated statement of cash flows to reflect the gross purchases and sales of these securities as investing activities. As a result, cash used in investing activities increased by $55.8 million for the six months ended June 30, 2004. This revision in classification does not affect previously reported cash flows from operations or from financing activities for any period.

      On June 10, 2005, the Company acquired all of the outstanding common and preferred stock, including vested and unvested stock options, of Speedera in exchange for approximately 10.6 million shares of Akamai common stock and 1.7 million Akamai stock options. Speedera Networks, Inc. (“Speedera”) provides distributed content delivery services. The purchase of Speedera is intended to enable Akamai to better compete against larger managed services vendors and other content delivery providers, by expanding its customer base and providing customers with a broader suite of services.

      The aggregate purchase price, net of cash received, was approximately $143.2 million, which consisted of $122.1 million in shares of common stock, $18.4 million in fair value of the Company’s stock options and transaction costs of $2.7 million, which primarily consisted of fees for financial advisory and legal services. The

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

fair value of the Company’s stock options issued to employees was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:

      The intrinsic value allocated to the unvested options issued in the acquisition that had yet to be earned as of the acquisition date was $9.7 million and has been recorded as deferred compensation in the purchase price allocation.

      The acquisition was accounted for using the purchase method of accounting and the results of operations of the acquired business since June 10, 2005, the date of acquisition, were included in the financial statements of the Company for the three and six month periods ended June 30, 2005. The purchase price allocation is preliminary and a final determination of required purchase accounting adjustments will be made upon the completion of the Company’s integration plan. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition, as determined by management and, with respect to identified intangible assets, by management with the assistance of an appraisal provided by a third-party valuation firm. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from this acquisition can be attributed to a number of business factors including, but not limited to, potential sales opportunities of providing Akamai services to Speedera customers; trained technical workforce in place in the United States and India; existing sales pipeline and trained sales force; and cost synergies to be realized. In accordance with current accounting standards, the goodwill will not be amortized and will be tested for impairment at least annually as required by SFAS No. 142, “Goodwill and Other Intangible Assets” (See Note 7).

      The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following are identified intangible assets acquired and the respective estimated periods over which the assets will be amortized:

      The customer relationships are being amortized at the ratio that current revenues generated from those customer relationships bear to the total estimated revenues to be generated from those relationships from the date of acquisition. The completed technologies and non-compete agreements are being amortized using the straight-line method over their respective remaining lives. The values of the intangible assets acquired were determined using projections of revenues and expenses specifically attributed to the intangible assets. The income streams were then discounted to present value using estimated risk adjusted discount rates.

      The relief-from-royalty method was used to value the completed technologies. The relief-from-royalty method is used to estimate the cost savings that accrue to the owner of an intangible asset that would otherwise be required to pay royalties or license fees on revenues earned through the use of the asset. The royalty rate used is based on an analysis of empirical, market-derived royalty rates for guideline intangible assets. Typically, revenue is projected over the expected remaining useful life of the intangible asset. The market-derived royalty rate is then applied to estimate the royalty savings. The key assumptions used in valuing the completed technologies are as follows: royalty rate 5%, discount rate 18.0%, tax rate 40% and estimated average economic life of 1-4 years.

      The customer relationships were valued using the income approach. The key assumptions used in valuing the customer relationships are as follows: discount rate 18%, tax rate 40% and estimated average economic life of 8 years.

      The lost profits method was used to value the non-compete agreements of three founders of Speedera. The lost profits method recognizes that the current value of an asset may be premised upon the expected receipt of future economic benefits protected by clauses within an agreement. These benefits are generally considered to be higher income resulting from the avoidance of a loss in revenue that would likely occur without an agreement. The key assumptions used in valuing the non-compete agreements are as follows: discount rate 18%, tax rate 40% and estimated average economic life of 3 years.

      The following table reflects unaudited pro forma results of operations of the Company for the three and six months ended June 30, 2005 and 2004 assuming that the Speedera acquisition had occurred on January 1, 2005 and January 1, 2004, respectively (in thousands, expect per share data):

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment (revised 2004),” which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under SFAS No. 123R, pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. SFAS No. 123R is effective for the first annual period beginning after June 15, 2005. The Company expects to adopt this standard as of the beginning of fiscal year 2006 under the modified prospective transition method. Under this method, a company records compensation expense for all new awards and awards modified, repurchased, or cancelled after the required effective date. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosure in accordance with the provisions of SFAS No. 123. The Company is currently assessing the future impact of adopting SFAS No. 123R on its consolidated results of operations but expects that the adoption will have a material impact. The pro forma information included in Note 4 illustrates what the effect of SFAS No. 123R would have been on the historical periods presented.

      In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment.” SAB No. 107 was issued to assist preparers by providing guidance regarding the application of SFAS No. 123R. SAB No. 107 describes the Staff’s views on share-based payment transactions with non-employees and covers key topics, including valuation models, expected volatility and expected term. The Company will apply the principles of SAB No. 107 in conjunction with its adoption of SFAS No. 123R during the first quarter of 2006.

      Akamai accounts for stock-based awards to employees using the intrinsic value method as prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, no compensation expense is recorded for stock-based awards issued to employees and directors in fixed amounts and with fixed exercise prices at least equal to the fair market value of the Company’s common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period for restricted stock grants, deferred stock units and stock options granted where the exercise price is below the market price on the date of grant. Akamai applies the provisions of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123, Accounting for Stock-Based Compensation,” through disclosure only for stock-based awards issued to employees and directors. All stock-based awards granted to non-employees are accounted for at their fair value in accordance with SFAS No. 123.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following table illustrates the effect on net income and net income per share if the Company had accounted for stock options issued to employees and directors under the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148 (in thousands, except per share data):

      The pro forma results above for the three and six months ended June 30, 2004 reflect the cumulative effect of a change by the Company in its estimate of expected rates of forfeitures of stock-based awards to employees based upon a review of actual forfeitures experienced in prior periods. The cumulative effect of this change in estimates for the three and six months ended June 30, 2004 was to increase pro forma stock-based employee compensation expense by approximately $12.3 million.

      The fair value of each option granted during the three and six months ended June 30, 2005 and 2004 is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

      Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable quarter. Diluted net income per share is computed using the weighted average number of common shares outstanding during the quarter, plus the dilutive effect of potential common stock. Potential common stock consists of stock options, deferred stock units, warrants, unvested restricted common stock and convertible notes.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following table sets forth the components used in the computation of basic and diluted net income per common share (in thousands, except per share data):

      The following potential common shares have been excluded from the computation of diluted net income per share for the periods presented because their effect would have been antidilutive (in thousands):

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following table presents the calculation of comprehensive income and its components (in thousands):

      Accumulated other comprehensive income consisted of (in thousands):

      The Company acquired goodwill and other intangible assets through business acquisitions during the year ended December 31, 2000. The Company also acquired license rights from the Massachusetts Institute of Technology in 1999. During the three months ended June 30, 2005, the Company acquired goodwill of $92.2 million and $43.2 million of other intangible assets through the acquisition of Speedera (See Note 2).

      The Company reviews goodwill and other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may exceed their fair value. SFAS No. 142, “Goodwill and Other Intangible Assets,” requires the Company to test goodwill for impairment at least annually. The Company concluded that it had one reporting unit and assigned the entire balance of goodwill to this reporting unit as of January 1, 2005 for purposes of performing an impairment test. The fair value of the reporting unit was determined using the Company’s market capitalization as of January 1, 2005. The fair value on January 1, 2005 exceeded the net assets of the reporting unit, including goodwill. The carrying value of goodwill, including that resulting from the Speedera acquisition, will be tested for impairment at January 1, 2006.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      Other intangible assets subject to amortization consist of the following (in thousands):

      Aggregate amortization expense for the three months ended June 30, 2005 and 2004 was $520,000 and $12,000, respectively. Aggregate amortization expense for the six months ended June 30, 2005 and 2004 was $532,000 and $24,000, respectively. Amortization expense is expected to be $4.6 million for the remainder of 2005 and $8.4 million, $7.4 million, $6.1 million, $4.8 million and $4.1 million for 2006, 2007, 2008, 2009 and 2010, respectively.

      As of June 30, 2005, the Company had issued $4.6 million in irrevocable letters of credit in favor of third-party beneficiaries, primarily related to facility leases. The letters of credit are collateralized by restricted marketable securities, of which $3.7 million are classified as long-term marketable securities and $932,000 are classified as short-term marketable securities on the condensed consolidated balance sheet as of June 30, 2005. The restrictions on these marketable securities lapse as the Company fulfills its obligations or as such obligations expire as provided by the letters of credit. These restrictions are expected to lapse at various times through May 2009.

      Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, marketable securities and accounts receivable. The Company maintains the majority of its cash, cash equivalents and marketable securities balances principally with domestic financial institutions that the Company believes are of high credit standing. Concentrations of credit risk with respect to accounts receivable are limited to certain customers to which the Company makes substantial sales. To reduce risk, the Company routinely assesses the financial strength of its customers and, as a consequence, believes that its accounts receivable credit risk exposure is limited to its estimated reserves. No customer accounted for 10% or more of accounts receivable as of June 30, 2005 or December 31, 2004.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      Net accounts receivable consists of the following (in thousands):

      Accrued expenses consist of the following (in thousands):

      As of June 30, 2005, the Company had approximately $4.7 million of accrued restructuring liabilities. As part of the Speedera acquisition, the Company’s management committed to a plan to exit certain activities of the Company. In accordance with Emerging Issues Task Force (“EITF”) No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination,” the Company recorded a liability of $1.7 million related to a workforce reduction of 29 Speedera employees. This liability primarily consisted of employee severance and outplacement costs. The Company expects that this liability will be fully paid in June 2008. For the period from June 10, 2005, the date of acquisition, through June 30, 2005, approximately $10,000 in payments were charged against the severance accrual.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The following table summarizes the restructuring activity for the six months ended June 30, 2005 (in millions):

      All existing lease restructuring liabilities will be fully paid through August 2007. The amount of restructuring liabilities associated with facility leases has been estimated based on the most recent available market data and discussions with the Company’s lessors and real estate advisors as to the likelihood that the Company will be able to partially offset its obligations with sublease income. As of June 30, 2005, there was no sublease income included in the restructuring balance.

      In June 2000, Akamai issued $300.0 million in aggregate principal amount of 5¹/2% convertible subordinated notes due July 1, 2007 for aggregate net proceeds of approximately $290.2 million (net of initial purchaser fees and other offering expenses of $9.8 million). As of June 30, 2005, the Company had $56.6 million in aggregate principal amount of its 5¹/2% convertible subordinated notes outstanding. The 5¹/2% convertible subordinated notes are convertible at any time into the Company’s common stock at a conversion price of $115.47 per share (equivalent to 8.6603 shares of common stock per $1,000 principal amount of 5¹/2% convertible subordinated notes), subject to adjustment in certain events. In the event of a change of control, Akamai may be required to repurchase the 5¹/2% convertible subordinated notes at a repurchase price of 100% of the principal amount together with accrued and unpaid interest. Interest on the 5¹/2% convertible subordinated notes began to accrue as of the issue date and is payable semiannually on January 1 and July 1 of each year. The 5¹/2% convertible subordinated notes are unsecured obligations and are subordinated to all existing and future senior indebtedness of Akamai. Deferred financing costs of $9.8 million, including underwriting fees and other offering expenses, for the 5¹/2% convertible subordinated notes are being amortized over the term of the notes. For the three and six months ended June 30, 2005, amortization of deferred financing costs was approximately $66,000 and $131,000, respectively. For the three and six months ended June 30, 2004, amortization of deferred financing costs was approximately $134,000 and $368,000, respectively.

      During January 2004, in individually negotiated transactions, the Company repurchased an aggregate of $25.0 million in principal amount of its outstanding 5¹/2% convertible subordinated notes at a repurchase price equal to 100% of the principal amount plus accrued interest. Additionally, in February 2004, the Company commenced a tender offer to repurchase up to $101.0 million in aggregate principal amount of its outstanding 5¹/2% convertible subordinated notes at a purchase price between $1,000 and $1,005 for each $1,000 of principal amount tendered. In March 2004, the Company amended the tender offer to increase the maximum price at which it was willing to repurchase the 5¹/2% convertible subordinated notes to $1,012.50 per $1,000 principal amount of the notes. Pursuant to the tender offer, in March 2004, the Company repurchased $37.9 million in aggregate principal amount of the 5¹/2% convertible subordinated notes for a total cash payment of $38.3 million. The purchase price was $1,012.50 for each $1,000 of principal amount tendered.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      In April 2004 and June 2004, in a limited number of individually negotiated transactions, the Company repurchased an aggregate of $68.5 million in principal amount of its outstanding 5¹/2% convertible subordinated notes for total cash payments of $71.2 million. The purchase prices ranged between $1,018.00 and $1,023.57 for each $1,000 in principal amount repurchased.

      For the three and six months ended June 30, 2004, the following costs were included in loss on early extinguishment of debt as a result of such repurchases of its outstanding 5¹/2% convertible subordinated notes.

      On August 4, 2005, the Company announced its intention to redeem the 5¹/2% convertible subordinated notes (See Note 18).

      In December 2003 and January 2004, Akamai issued $200.0 million in aggregate principal amount of 1% convertible senior notes due December 15, 2033 for aggregate net proceeds of approximately $194.1 million, net of an initial purchaser’s discount and offering expenses of $5.9 million. The initial conversion price of the 1% convertible senior notes is $15.45 per share (equivalent to 64.7249 shares of common stock per $1,000 principal amount of 1% convertible senior notes). The notes may be converted into shares of the Company’s common stock at the option of the holder in the following circumstances:

      The Company may redeem the 1% convertible senior notes on or after December 15, 2010 at the Company’s option at 100% of the principal amount together with accrued and unpaid interest. Conversely, holders of the 1% convertible senior notes may require the Company to repurchase the notes at par value on certain specified dates beginning on December 15, 2010. In the event of a change of control, the holders may require Akamai to repurchase their 1% convertible senior notes at a repurchase price of 100% of the principal amount plus accrued interest. Interest on the 1% convertible senior notes began to accrue as of the issue date and is payable semiannually on June 15 and December 15 of each year. The 1% convertible senior notes are senior unsecured obligations and are the same rank as all existing and future senior indebtedness of Akamai.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

The 1% convertible senior notes rank senior to all of the Company’s subordinated indebtedness, including its 5¹/2% convertible subordinated notes. Deferred financing costs of $5.9 million, including the initial purchaser’s discount and other offering expenses, for the 1% convertible senior notes are being amortized over the first seven years of the term of the notes to reflect the put and call rights discussed above. Amortization of deferred financing costs of the 1% convertible senior notes was approximately $210,000 for each of the three months ended June 30, 2005 and 2004. For the six months ended June 30, 2005 and 2004, amortization of deferred financing costs of the 1% convertible senior notes was approximately $421,000 and $418,000, respectively. Using the interest method, the Company records the amortization of deferred financing costs as interest expense in the consolidated statement of operations.

      On April 12, 2005, the Company’s Board of Directors approved amendments to the Company’s 1999 Employee Stock Purchase Plan (“1999 ESPP”). The amendments to the 1999 ESPP are as follows: the duration of the offering periods was changed from 24 months to six months; the number of times a participant may elect to change his or her percentage was changed from four times to two times; the definition of “compensation” was amended to clarify that it includes cash bonuses and other cash incentive payments; and a provision was added to clarify that upon termination of an offering period, each eligible participant will be automatically enrolled in the next offering period. These amendments became effective June 1, 2005, the commencement of the next offering period under the 1999 ESPP.

      On May 24, 2005, the Company granted 58,366 deferred stock units (“DSUs”) under the Company’s 1998 Stock Incentive Plan, as amended, to members of its Board of Directors. Each DSU represents the right to receive one share of the Company’s common stock upon vesting. The DSUs vest 50% on May 24, 2006 with the remaining 50% vesting in equal installments of 12.5% each quarter thereafter. The holder may elect to defer receipt of all or a portion of the vested shares of stock represented by the DSU for a period of at least one year, but not more than ten years from the grant date. At the grant date, the Company recorded deferred compensation of $750,000 for the intrinsic value of these DSUs. The deferred compensation is being recognized as compensation expense over the expected two-year vesting period.

      Akamai’s chief decision-maker, as defined under SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” is the Chief Executive Officer and the executive management team. As of June 30, 2005, Akamai operated in one business segment: providing global services for accelerating and improving the delivery of content and business processes over the Internet.

      The Company deploys its servers into networks worldwide. As of June 30, 2005, the Company had approximately $31.9 million and $7.4 million of property and equipment, net of accumulated depreciation, located in the United States and foreign locations, respectively. As of December 31, 2004, the Company had approximately $22.4 million and $2.8 million of property and equipment, net of accumulated depreciation, located in the United States and foreign locations, respectively. Akamai sells its services and licenses through a direct sales force located both domestically and abroad. For each of the three- and six-month periods ended June 30, 2005, approximately 21% of revenues was derived from the Company’s operations outside the United States, including 17% and 16%, respectively, from Europe. For the three- and six-month periods ended June 30, 2004, approximately 17% and 18%, respectively, of revenues were derived from the Company’s operations outside the United States, including 13% and 14%, respectively, from Europe. No single country accounted for 10% or more of revenues derived outside the United States during these periods. For the three and six months ended June 30, 2005, no customer accounted for more than 10% of total revenues. For each of the three- and six-month periods ended June 30, 2004, one customer accounted for 11% of total revenues. No

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

other customers accounted for more than 10% of revenues for any other period reported in these condensed consolidated financial statements.

      The Company’s provision for income taxes is comprised of a current and deferred portion. The current income tax provision is calculated as the estimated taxes payable or refundable on tax returns for the current year. The deferred income tax provision is calculated as the estimated future tax effects attributable to temporary differences and carryforwards using expected tax rates in effect in the years during which the differences are expected to reverse.

      The Company currently has significant deferred tax assets, resulting from net operating loss carryforwards, tax credit carryforwards, and deductible temporary differences. The Company provides a full valuation allowance of approximately $346.7 million against its deferred tax assets. Management weighs the positive and negative evidence to determine if it is more likely than not that some or all of the deferred tax assets will be realized. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in past years. Despite the Company’s profitability in the fiscal year ended December 31, 2004 and during the six months ended June 30, 2005, the Company will continue to maintain a full valuation allowance on its tax benefits until profitability has been sustained over an appropriate time period and in amounts that are sufficient to support a conclusion that it is more likely than not that all or a portion of its deferred tax assets will be realized. A significant decrease in the Company’s valuation allowance would result in an immediate material income tax benefit and an increase in total assets and stockholder’s equity and could have a significant impact on the Company’s earnings in future periods.

      The Company has recorded certain tax reserves, approximately $9.0 million as of June 30, 2005, to address potential exposures involving its sales and use and franchise tax positions. These potential exposures result from the varying application of statutes, rules, regulations and interpretations by different jurisdictions. The Company’s estimate of the value of its tax reserves contains assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the ultimate resolution of these matters may be greater or less than the amount that the Company estimated. During the three and six months ended June 30, 2005, based upon the resolution of its sales and use and franchise tax matters in various jurisdictions, the Company reduced such tax reserves by approximately $825,000 and $1.8 million, respectively. Additionally, during the three months ended June 30, 2005, the Company made payments of approximately $1.5 million as a result of such resolution.

      The Company leases its facilities and certain equipment under non-cancelable operating leases. These operating leases expire at various dates through June 2010 and generally require the payment of real estate taxes, insurance, maintenance and operating costs. As part of the Speedera acquisition, the Company acquired

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

equipment under capital leases that expire on various dates through April 2006. The minimum aggregate future obligations under non-cancelable leases as of June 30, 2005 are as follows (in thousands):

      The Company has long-term purchase commitments for bandwidth usage and co-location with various network and Internet service providers. For the remainder of 2005 and for the years ended December 31, 2006 and 2007, the minimum commitments are approximately $8.4 million, $3.7 million and $98,000, respectively. The Company had an equipment purchase commitment of approximately $500,000 as of June 30, 2005. This purchase commitment expires in August 2005. Additionally, as of June 30, 2005, the Company has entered into purchase orders with various vendors for aggregate purchase commitments of $9.9 million, which are expected to be paid during the remainder of 2005.

      Between July 2, 2001 and November 7, 2001, purported class action lawsuits seeking monetary damages were filed in the United States District Court for the Southern District of New York against the Company as well as against the underwriters of its October 28, 1999 initial public offering of common stock. The complaints were filed allegedly on behalf of persons who purchased the Company’s common stock during different time periods, all beginning on October 28, 1999 and ending on various dates. The complaints are similar and allege violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 primarily based on the allegation that the underwriters received undisclosed compensation in connection with the Company’s initial public offering. On April 19, 2002, a single consolidated amended complaint was filed, reiterating in one pleading the allegations contained in the previously filed separate actions. The consolidated amended complaint defines the alleged class period as October 28, 1999 through December 6, 2000. A Special Litigation Committee of Akamai’s Board of Directors authorized management to negotiate a settlement of the pending claims substantially consistent with a Memorandum of Understanding that was negotiated among class plaintiffs, all issuer defendants and their insurers. The parties negotiated a settlement that is subject to approval by the Court. On February 15, 2005, the Court issued an Opinion and Order preliminarily approving the settlement, provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The Company believes that it has meritorious defenses to the claims made in the complaint and, if the settlement is not finalized and approved, it intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company’s financial condition and results of operations in the period in which the lawsuit is resolved. The Company does not expect losses related to this lawsuit.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The Company and Speedera were involved in lawsuits against each other regarding patent infringement and false advertising and trade secrets. Upon completion of the acquisition of Speedera, all lawsuits between Akamai and Speedera were dismissed.

      In November 2002, the FASB issued Interpretation 45, or FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. FIN 45 also clarifies that at the time an entity issues a guarantee, the entity must recognize an initial liability for the fair value, or market value, of the obligations it assumes under the guarantee and must disclose that information in its interim and annual financial statements. The disclosure provisions of FIN 45 were effective for the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. The initial recognition and initial measurement provisions of FIN 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002. The fair value of the Company’s guarantees issued or modified during the three months ended June 30, 2005 was determined to be immaterial.

      On August 4, 2005, the Company announced it will redeem all of its outstanding 5¹/2% convertible subordinated notes due July 2007. Under the terms of the Indenture governing the 5¹/2% convertible subordinated notes, all of the $56.6 million principal amount will be redeemed at a redemption price of 101.571%, plus accrued interest on September 7, 2005.

      This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management based on information currently available to our management. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “should,” “likely” or similar expressions, indicate a forward-looking statement. Forward-looking statements involve risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, those set forth under the heading “Factors Affecting Future Operating Results.” We assume no obligation to update any such forward-looking statements.

Overview

      Akamai provides services for accelerating and improving the delivery of content and business processes over the Internet. Our globally distributed platform comprises more than 17,000 servers in more than 950 networks in 69 countries.

      The following sets forth, as a percentage of revenues, certain consolidated statements of operations data for the periods indicated:

      We were profitable during 2004 and for the six months ended June 30, 2005; however, we cannot guarantee continued profitability for any period in the future. We have observed the following known trends and events that are likely to have an impact on our financial condition and results of operations in the future:

      Based on our analysis of the aforementioned known trends and events, we expect to continue to generate net income on a quarterly basis during the remainder of 2005; however, our future results will be affected by many factors identified below in “Factors Affecting Future Operating Results,” including our ability to:

      As a result, there is no assurance that we will achieve our expected financial objectives.

Recent Events

      On June 10, 2005, we acquired all of the outstanding common and preferred stock, including vested and unvested stock options, of Speedera in exchange for approximately 12.3 million shares of our common stock. Consideration for the acquisition was valued at $122.1 million in shares of common stock and $8.7 million in shares issuable upon the exercise of vested stock options, plus transaction costs of approximately $2.7 million. We have accounted for the acquisition under the purchase method of accounting. Our results of operations for the three and six months ended June 30, 2005 reflect the operating results of Speedera from June 10, 2005 through June 30, 2005. Upon completion of the acquisition, all lawsuits between Akamai and Speedera were dismissed.

      On August 4, 2005, we announced that we will redeem all of our outstanding 5¹/2% convertible subordinated notes due July 2007. Under the terms of the Indenture governing the 5¹/2% convertible subordinated notes, all of the $56.6 million principal amount will be redeemed at a redemption price of 101.571%, plus accrued interest on September 7, 2005.

Critical Accounting Policies and Estimates

      Our management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related items, including, but not limited to, revenue recognition, accounts receivable reserves, investments, intangible assets, income and other taxes, depreciable lives of property and equipment, restructuring accruals and contingent obligations. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from the amounts which are derived from these estimates. See the section entitled “Application of Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2004 for further discussion of these critical accounting policies and estimates. There were no material changes to our critical accounting policies and estimates during the quarter ended June 30, 2005.

Results of Operations

      Revenues. We derive revenue from sales of services and licenses of technology and data. Total revenues increased 27%, or $13.9 million, to $64.6 million for the three months ended June 30, 2005 as compared to $50.8 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, total revenues increased 26%, or $25.6 million, to $124.7 million as compared to $99.2 million for the six months ended June 30, 2004. The increase in total revenues for the three months ended June 30, 2005 as compared to the same period in the prior year was attributable to an increase in service revenue of $13.7 million and an increase in software and software-related revenue of $129,000. The increase in total revenues for the six months ended June 30, 2005 as compared to the same period in the prior year was due to an increase in service revenue of $25.9 million, offset by a reduction in software and software-related revenue of $291,000. The increase in service revenue was primarily attributable to an increase in the number of customers under recurring revenue contracts, as well as an increase in traffic delivered and additional services sold to new and existing customers. Additionally, included in service revenue for the three months ended June 30, 2005, was revenue contributed by the former Speedera operations of $2.5 million from June 10, 2005, the acquisition date, to the end of the second quarter. As of June 30, 2005, we had 1,736 customers under recurring revenue contracts as compared to 1,214 as of June 30, 2004. The Company added 305 customers during the three months ended June 30, 2005 as a result of the Speedera acquisition. These increases resulted in higher average

revenue per customer during the three months ended June 30, 2005 as compared to the same period in the prior year. Software and software-related revenues from customized software projects and technology licensing remained relatively consistent across the periods presented.

      For the three months ended June 30, 2005 and 2004, 21% and 17%, respectively, of our total revenues were derived from our operations located outside of the United States, including 17% and 13%, respectively, derived from Europe. For the six months ended June 30, 2005 and 2004, 21% and 18%, respectively, of our total revenues were derived from our operations located outside of the United States, including 16% and 14%, respectively, derived from Europe. No single country outside of the United States accounted for 10% or more of revenues during these periods. Resellers accounted for 25% of revenues for each of the three- and six-month periods ended June 30, 2005 as compared to 26% of revenues for each of the three- and six-month periods ended June 30, 2004. For the three- and six-month periods ended June 30, 2005, no customer accounted for 10% or more of total revenues. For each of the three- and six-month periods ended June 30, 2004, Microsoft Corporation accounted for 11% of total revenues. No other customer accounted for 10% or more of revenues during these periods.

      Cost of Revenues. Cost of revenues includes fees paid to network providers for bandwidth and co-location of our network equipment. Cost of revenues also includes payroll and related costs and equity-related compensation for network operations personnel, cost of licenses, depreciation of network equipment used to deliver our services and amortization of internal-use software.

      Cost of revenues increased 15%, or $1.7 million, to $12.8 million for the three months ended June 30, 2005 as compared to $11.1 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, cost of revenues increased 4%, or $1.0 million, to $24.3 million as compared to $23.2 million for the six months ended June 30, 2004. These increases were primarily due to an increase in aggregate bandwidth costs due to higher traffic levels, offset by a slight reduction in depreciation expense of network equipment as our network assets become fully depreciated. Traffic delivered over our network increased significantly in the three months ended June 30, 2005 as compared to the same period in the prior year. Overall bandwidth are increasing at a lower rate because we have reduced our network bandwidth costs per unit.

      Cost of revenues during the three- and six-month periods ended June 30, 2005 also included credits received of approximately $134,000 and $590,000, respectively, as a result of settlements and renegotiations entered into in connection with billing disputes related to bandwidth contracts. During the three and six months ended June 30, 2004, cost of revenues included credits of $598,000 and $753,000, respectively. Credits of this nature may occur in the future; however, the timing and amount of these credits, if any, will vary.

      Cost of revenues was comprised of the following (in millions):

      We have long-term purchase commitments for bandwidth usage and co-location with various network and Internet service providers. For the remainder of 2005 and for the years ending December 31, 2006 and 2007, the minimum commitments are approximately $8.4 million, $3.7 million and $98,000, respectively.

      We expect that cost of revenues will increase during the remainder of 2005. We expect to deliver more traffic on our network, which would result in higher expenses associated with the increased traffic; however,

such costs are likely to be mitigated by lower bandwidth costs per unit. We expect increases in depreciation expense related to our network equipment and amortization of internal-use software development costs, along with payroll and related costs, including equity compensation, as we continue to make investments in our network.

      Research and Development. Research and development expenses consist primarily of payroll and related costs and equity-related compensation for research and development personnel who design, develop, test and enhance our services and our network. Research and development costs are expensed as incurred, except certain internal-use software development costs requiring capitalization. During the three and six months ended June 30, 2005, we capitalized software development costs of $2.1 million and $4.2 million, respectively, consisting of external consulting and payroll and payroll-related costs related to the development of internal-use software used to deliver our services and operate our network. During the three and six months ended June 30, 2004, we capitalized $1.9 million and $3.7 million, respectively, of software development costs. These capitalized internal-use software costs are amortized to cost of revenues over their estimated useful lives of two years.

      Research and development expenses increased 57%, or $1.6 million, to $4.5 million for the three months ended June 30, 2005 as compared to $2.9 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, research and development expenses increased 46%, or $2.5 million, to $8.1 million as compared to $5.6 million for the six months ended June 30, 2004. The increase in research and development expenses was primarily due to an increase in payroll and related costs due to an increase in headcount, offset by a slight increase in capitalization of internal-use software development costs. The following table quantifies the net increase in research and development expenses for the periods presented (in millions):

      We believe that research and development expenses will continue to increase for the remainder of 2005, as we continue to increase hiring of development personnel and make investments in our core technology and refinements to our other service offerings.

      Sales and Marketing. Sales and marketing expenses consist primarily of payroll and related costs, equity-related compensation and commissions for personnel engaged in marketing, sales and service support functions, as well as advertising and promotional expenses.

      Sales and marketing expenses increased 34%, or $4.7 million, to $18.4 million for the three months ended June 30, 2005 as compared to $13.7 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, sales and marketing expenses increased 27%, or $7.4 million, to $35.1 million as compared to $27.7 million for the six months ended June 30, 2004. The increase in sales and marketing expenses was primarily due to higher payroll and related costs, particularly commissions, due to revenue growth. Additionally, during the six months ended June 30, 2005, marketing and related costs increased due to

higher advertising and promotional costs as compared to same period in 2004. The following table quantifies the net increase in sales and marketing expenses for the periods presented (in millions):

      We believe that sales and marketing expenses will continue to increase during the remainder of 2005 due to an expected increase in commissions on higher forecasted sales, an increase in hiring of sales personnel and additional expected increases in other marketing costs such as advertising.

      General and Administrative. General and administrative expenses consist primarily of the following components:

      General and administrative expenses increased 8%, or $820,000, to $11.3 million for the three months ended June 30, 2005 as compared to $10.5 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, general and administrative expenses increased 7%, or $1.5 million, to $23.2 million as compared to $21.7 million for the six months ended June 30, 2004. The increase in general and administrative expenses was primarily due to an increase in payroll and related costs as a result of headcount growth, as well as an increase in equity compensation. This increase was offset by a reduction in expense related to legal, consulting and advisory services, particularly related to costs associated with lawsuits between Akamai and Speedera that were dismissed upon the acquisition of Speedera. The following table quantifies the increase in general and administrative expenses for the periods presented (in millions):