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

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

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

      The number of shares outstanding of the registrant’s common stock as of November 7, 2005: 151,984,866 shares.

AKAMAI TECHNOLOGIES, INC.

FORM 10-Q

For the quarterly period ended September 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 Nine Months Ended September 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 18,000 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 condensed 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 unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2005 to reflect the gross purchases and sales of these securities as investing activities. As a result, cash used in investing activities increased by $54.7 million for the nine months ended September 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 Networks, Inc. (“Speedera”) in exchange for approximately 10.6 million shares of Akamai common stock and 1.7 million Akamai stock options. Speedera provided distributed content delivery services. The purchase of Speedera was intended to enable Akamai to better compete against larger managed services vendors and other content delivery providers, by expanding its customer base and by providing customers with a broader suite of services.

      The aggregate purchase price, net of cash received, was approximately $143.0 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 $2.5 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 $9.4 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 nine month periods ended September 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 final working capital balance sheet adjustments. 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 intangible assets, identified 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 nine months ended September 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 will 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 approximate impact of applying SFAS No. 123R to the Company’s historical periods is illustrated on the pro forma presentation included in Note 4.

      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 SEC’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 principals of SAB No. 107 in conjunction with its adoption of SFAS No. 123R during the first quarter of 2006.

      In June 2005, FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” This statement replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” The statement applies to all voluntary changes in accounting for and reporting of changes in accounting principles. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principles unless it is not practical to do so. APB No. 20 previously required that most voluntary changes in accounting principles be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors made occurring in fiscal years beginning after May 31, 2005. The adoption of SFAS No. 154 will not have a material impact on the Company’s financial position or results of operations.

      Akamai accounts for stock-based awards to employees using the intrinsic value method as prescribed by APB 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

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

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.

      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 fair value of each option granted during the three and nine months ended September 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):

      For the periods presented, accumulated other comprehensive income consisted of (in thousands):

      The Company acquired and recorded goodwill and other intangible assets as a result of 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 nine months ended September 30, 2005, the Company recorded goodwill of $96.7 million and acquired intangible assets of $43.2 million as a result of the acquisition of Speedera. The change in the carrying amount of goodwill recorded as a result of the Speedera acquisition during the three months ended September 30, 2005 was as follows (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 goodwill recorded as a result of the Speedera acquisition, will next be tested for impairment at January 1, 2006.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

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

      Aggregate expense related to amortization of other intangible assets for the three months ended September 30, 2005 and 2004 was $2.3 million and $12,000, respectively. Aggregate expense related to amortization of other intangible assets for the nine months ended September 30, 2005 and 2004 was $2.8 million and $36,000, respectively. Aggregate expense related to amortization of other intangible assets is expected to be $2.3 million for the remainder of 2005 and $8.4 million, $7.4 million, $6.1 million, $4.8 million and $4.1 million for fiscal years 2006, 2007, 2008, 2009 and 2010, respectively.

      As of September 30, 2005, the Company had issued $4.5 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 $730,000 are classified as short-term marketable securities on the unaudited condensed consolidated balance sheet as of September 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 to help ensure 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 September 30, 2005 or as of December 31, 2004.

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

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

      In January 2003, the Company adopted SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses the accounting and reporting requirements for obligations associated with the retirement of tangible long-lived assets. As a result of adoption of this statement, the Company recorded an asset retirement obligation and associated long-lived asset of $109,000 as of January 1, 2003 for the fair value of a contractual obligation to remove leasehold improvements at the conclusion of the Company’s facility lease in Cambridge, Massachusetts. The obligation and asset are classified on the Company’s condensed consolidated balance sheets as of September 30, 2005 and December 31, 2004 as non-current liabilities and property and equipment, respectively. The Company will amortize the asset and accrete the obligation over the remaining life of the associated leasehold improvements. As of September 30, 2005, the Company has approximately $123,000 recorded as the non-current asset obligation.

      Accrued expenses consist of the following (in thousands):

      As of September 30, 2005, the Company had approximately $4.0 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

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

of Liabilities in Connection with a Purchase Business Combination,” the Company recorded a liability of $1.8 million related to a workforce reduction of approximately 30 employees from Speedera. This liability primarily consisted of employee severance and outplacement costs. The Company expects that this liability will be fully paid by June 2008. For the period from June 10, 2005, the date of acquisition, through September 30, 2005, $440,000 in payments were charged against the severance accrual.

      The following table summarizes the restructuring activity for the nine months ended September 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 September 30, 2005, there was no sublease income included in the restructuring balance.

      During the three months ended September 30, 2005, the Company redeemed an aggregate of $56.6 million in principal amount of its remaining outstanding 5¹/2% convertible subordinated notes due 2007 (the “5¹/2% convertible subordinated notes”) for total cash payments of $58.1 million. The purchase price was $1,015.71 for each $1,000 in principal amount repurchased. The Company recorded the outstanding deferred financing costs relating to these repurchased notes and premium paid of $481,000 and $889,000, respectively, for the three months ended September 30, 2005, to loss on early extinguishment of debt. For the three and nine months ended September 30, 2005, amortization of deferred financing costs on the 5¹/2% convertible subordinated notes was $44,000 and $175,000, respectively. For the three and nine months ended September 30, 2004, amortization of deferred financing costs on the 5¹/2% convertible subordinated notes was $99,000 and $466,000, respectively.

      During nine months ended September 30, 2004, in individually negotiated transactions, the Company repurchased an aggregate of $106.6 million in principal amount of its outstanding 5¹/2% convertible subordinated notes for total cash payments of $109.7 million. The purchase prices ranged between $1,018.00 and $1,023.57 for each $1,000 in principal amount repurchased. 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. For the nine months ended September 30, 2004, the Company recorded the outstanding deferred financing costs

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

relating to the repurchased notes and premium paid of $2.1 million and $2.3 million, respectively, to loss on early extinguishment of debt. Additionally, the Company incurred $1.5 million of advisory services and offering expenses in connection with the tender offer and repurchases, which is included in loss on early extinguishment of debt.

      In December 2003 and January 2004, Akamai issued $200.0 million in aggregate principal amount of 1% convertible senior notes due December 15, 2033 (the “1% convertible senior notes”) for aggregate 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 100% of the principal amount plus accrued and unpaid interest 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. The 1% convertible senior notes rank senior to all of the Company’s subordinated indebtedness. 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 September 30, 2005 and 2004. For the nine months ended September 30, 2005 and 2004, amortization of deferred financing costs of the 1% convertible senior notes was approximately $631,000 and $628,000, 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

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

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 an aggregate of 58,366 deferred stock units (“DSUs”) under the Company’s 1998 Stock Incentive Plan, as amended, to the non-employee 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.

      On July 21, 2005, the Company granted 12,448 DSUs under the Company’s 1998 Stock Incentive Plan, as amended, to the Company’s Executive Chairman. 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. At the grant date, the Company recorded deferred compensation of $180,000 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 September 30, 2005, Akamai operated in one business segment: providing 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 September 30, 2005, the Company had approximately $34.1 million and $8.4 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 the three and nine-month periods ended September 30, 2005, approximately 20% and 21%, respectively, of revenues was derived from the Company’s operations outside the United States, including 15% and 16%, respectively, from Europe. For each of the three and nine-month periods ended September 30, 2004, approximately 18% of revenues was derived from the Company’s operations outside the United States, including 14% from Europe. No single country accounted for 10% or more of revenues derived outside the United States during these periods. For the three and nine months ended September 30, 2005, no customer accounted for more than 10% of total revenues. For the three and nine-month periods ended September 30, 2004, one customer accounted for 10% and 11%, respectively, of total revenues. No other customers accounted for more than 10% of revenues for any other period reported in these unaudited condensed consolidated financial statements.

      As of June 30, 2005, the Company’s U.S. and foreign net operating losses (“NOLs”) and other deferred tax assets were fully offset by a valuation allowance primarily because, at June 30, 2005, pursuant to SFAS No. 109, “Accounting for Income Taxes,” the Company did not have sufficient history of income to

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

conclude that it was more likely than not that the Company would be able to realize the tax benefits of those deferred tax assets. Based upon the Company’s cumulative operating results through September 30, 2005 and an assessment of the Company’s expected future results of operations, during the third quarter of 2005, the Company determined that it has become more likely than not that it would be able to realize a substantial portion of its U.S. and foreign net operating loss carryforward tax assets prior to their expiration and other deferred tax assets. As a result, at September 30, 2005, the Company released a total of $321.8 million of its U.S. and foreign deferred tax asset valuation allowance. Of the $321.8 million, $255.3 million of the valuation release was recorded as a discrete benefit for income taxes on the Company’s unaudited condensed consolidated statement of operations, and $61.0 million of the valuation release was attributable to stock option exercises, which was recorded as an increase in additional paid in capital on the unaudited condensed consolidated balance sheet as of September 30, 2005. Approximately $2.7 million of the valuation release was recorded as a reduction to acquired goodwill and intangibles.

      As of September 30, 2005, the Company has a remaining valuation allowance of approximately $35.6 million. Of the remaining valuation allowance as of September 30, 2005, $6.9 million relates to certain state NOLs that the Company expects will expire without being utilized. It is expected that the remaining $28.7 million of the valuation allowance will be released during the fourth quarter of 2005 as a result of the requirement under SFAS No. 109 to use an annualized effective tax rate for each interim period during the year including current year interim periods after a valuation allowance release has occurred.

      As of September 30, 2005, the Company had United States federal and state NOL carryforwards of approximately $1.1 billion and research and development tax credit carryforward tax assets of $10.6 million, which will expire at various dates through 2024. As of September 30, 2005, the Company has foreign NOL carryforwards of $9.6 million.

      The Company plans to reinvest indefinitely undistributed foreign earnings.

      The following table summarizes the Company’s deferred tax assets, net (in thousands):

      The following table summarizes the Company’s (benefit) provision for income taxes included in its unaudited condensed consolidated statements of operations for the periods indicated (in thousands):

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

      The Company has recorded certain tax reserves, which approximated $8.1 million as of September 30, 2005, to address potential exposures involving its sales and use and franchise tax positions. These potential tax liabilities 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 nine months ended September 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 $1.8 million resulting in a corresponding credit to general and administrative expenses. Additionally, during the nine months ended September 30, 2005, the Company made payments of approximately $1.7 million against these reserves as a result of such resolutions.

      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 equipment under capital leases that expire on various dates through April 2006. The minimum aggregate future obligations under non-cancelable leases as of September 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 $4.2 million, $4.1 million and $233,000, respectively. The Company had an equipment purchase commitment of approximately $500,000 as of September 30, 2005. This purchase commitment expires in August 2006. Additionally, as of September 30, 2005, the Company has entered into purchase orders with various vendors for aggregate purchase commitments of $4.8 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

AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (Continued)

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. On August 31, 2005, the Court preliminarily approved the modifications to the settlement and scheduled a hearing on April 24, 2006 to consider whether to grant final approval. 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 is not presently able to estimate potential losses, if any, related to this lawsuit.

      The Company and Speedera were involved in lawsuits against each other regarding patent infringement and false advertising and trade secrets claims. 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 September 30, 2005 was determined to be immaterial.

      On October 18, 2005, the Company announced that its Chief Financial Officer will retire in early 2006.

      On October 31, 2005, the Company entered into an agreement with an underwriter pursuant to which the underwriter purchased 12,000,000 shares of the Company’s common stock at a price of $16.855 per share in connection with a public offering. The Company’s net proceeds from the offering were approximately $202 million after related expenses. The Company has also granted to the underwriter an option, exercisable for 30 days after the closing of the offering, to purchase up to an additional 1,800,000 shares of the Company’s common stock solely for the purpose of covering overallotments, if any.

      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 as of the date hereof 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 expressly disclaim any 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 18,000 servers in more than 950 networks in 69 countries.

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

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

      Based on our analysis of the aforementioned trends and events, we expect to continue to generate net income on a quarterly basis during the remainder of 2005 and in 2006; 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, including a positive net income.

Recent Events

      On October 18, 2005, the Company announced that its Chief Financial Officer will retire in early 2006.

      On October 31, 2005, we entered into an agreement with an underwriter pursuant to which the underwriter purchased 12,000,000 shares of our common stock at a price of $16.855 per share in connection with a public offering. Our net proceeds from the offering were approximately $202 million after related expenses. We have also granted to the underwriter an option, exercisable for 30 days after the closing of the offering, to purchase up to an additional 1,800,000 shares of our common stock solely for the purpose of covering overallotments, if any.

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 included elsewhere in this quarterly report on Form 10-Q, 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, 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 our 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 during the quarter ended September 30, 2005.

Results of Operations

      Revenues. We derive revenue from sales of services and granting licenses of technology and data. Total revenues increased 42%, or $22.4 million, to $75.7 million for the three months ended September 30, 2005 as compared to $53.3 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, total revenues increased 32%, or $48.0 million, to $200.5 million as compared to $152.4 million for the nine months ended September 30, 2004. The increase in total revenues for the three and nine months ended September 30, 2005 as compared to the same periods in the prior year was primarily attributable to an increase in service revenue of $23.4 million and $49.3 million in the three and nine months ended September 30, 2005, respectively. 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, the service revenue for both the three and nine months ended September 30, 2005, included revenue contributed by the former Speedera operations from June 10, 2005, the acquisition date, to the end of the third quarter. As of September 30, 2005, we had 1,830 customers under recurring revenue contracts as compared to 1,258 as of September 30, 2004.

      For the three and nine months ended September 30, 2005, software and software-related revenues decreased $1.0 million and $1.3 million, respectively, as compared to the same periods in the prior year. Software and software-related revenues includes sales of customized software projects and technology licensing. The decrease in software and software-related revenues over the periods presented reflect a reduction in the number of customized software projects that we undertook for customers and a decrease in the number of software licenses executed with customers.

      For the three months ended September 30, 2005 and 2004, 20% and 18%, respectively, of our total revenues were derived from our operations located outside of the United States, including 15% and 14%, respectively, derived from Europe. For the nine months ended September 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 24% of total revenues for each of the three and nine-month periods ended September 30, 2005 as compared to 26% of revenues for each of the three and nine-month periods ended September 30, 2004. For the three and nine-month periods ended September 30, 2005, no customer accounted for 10% or more of total revenues. For the three and nine-month periods ended September 30, 2004, one customer accounted for 10% and 11%, respectively, 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 30%, or $3.5 million, to $15.3 million for the three months ended September 30, 2005 as compared to $11.7 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, cost of revenues increased 13%, or $4.6 million, to $39.6 million as compared to $35.0 million for the nine months ended September 30, 2004. These increases were primarily due to an increase in aggregate bandwidth costs due to higher traffic levels and an increase in depreciation expense of network equipment as we continue to invest in our infrastructure. These increases were offset by a reduction in cost of software licenses of approximately $900,000 as a result of a decrease in the number of software licenses executed during each of the three and nine months ended September 30, 2005. Overall, bandwidth expenses are increasing at a lower rate because we have reduced our network bandwidth costs per unit.

      Cost of revenues during the three and nine months ended September 30, 2005 also included credits of approximately $326,000 and $916,000, respectively, as a result of settlements and renegotiations entered into in connection with billing disputes related to bandwidth contracts. During the three and nine months ended September 30, 2004, cost of revenues included similar credits of $99,000 and $852,000, respectively. Credits of this nature may occur in the future; however, the timing and amount of future 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 related to bandwidth usage and co-location services are approximately $4.2 million, $4.1 million and $233,000, respectively.

      We expect that cost of revenues will increase in the fourth quarter of 2005. We expect to deliver more traffic on our network in the fourth quarter of 2005, 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 nine months ended September 30, 2005, we capitalized software development costs of $2.2 million and $6.4 million, respectively. These development costs consisted of external consulting and payroll and payroll-related costs for personnel involved in the development of internal-use software used to deliver our services and operate our network. During the three and nine months ended September 30, 2004, we capitalized $1.9 million and $5.4 million, respectively, of software development costs. These capitalized internal-use software costs are amortized to costs of revenues over their estimated useful lives of two years.

      Research and development expenses increased 54%, or $1.7 million, to $5.0 million for the three months ended September 30, 2005 as compared to $3.2 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, research and development expenses increased 49%, or $4.3 million, to $13.1 million as compared to $8.8 million for the nine months ended September 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. The following table quantifies the net increase in the various components of our research and development expenses for the periods presented (in millions):