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AKAM Q3 Earnings Call Highlights AI Cloud Deals and 2027 Outlook
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Key Takeaways
AKAM signs an $11.6B Anthropic deal, lifting cloud commitments up $14B, targeting $2.2B annual revenues.
Akamai projects CIS revenues of $1.1-$1.3B in 2027 and total revenues exceeding $7B in 2028.
AKAM expects 75% EBITDA margins on major cloud deals but faces $30M in delayed revenues and heavy capex.
Akamai Technologies, Inc. (AKAM - Free Report) highlighted substantial artificial intelligence infrastructure commitments and an ambitious multiyear growth outlook during its third-quarter 2026 earnings call. Management emphasized expanding Cloud Infrastructure Services (“CIS”) while addressing near-term deployment delays and rising capital requirements.
The discussion focused on a major Anthropic agreement, expected cloud profitability and infrastructure execution. Executives also defended projected investment returns and outlined expectations for accelerating revenue growth through 2028.
Third-quarter revenues of $1.122 billion broadly matched the Zacks Consensus Estimate of $1.12 billion. Non-GAAP earnings were $1.77 per share, exceeding the Zacks Consensus Estimate of $1.67.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
CEO and Co-Founder Tom Leighton highlighted an $11.6 billion, seven-year agreement with Anthropic, bringing total multiyear CIS commitments signed during 2026 above $14 billion.
Leighton said two of the first three major contracts have started generating revenues, with the third expected to follow during the fourth quarter.
Management expects these contracts to generate approximately $2.2 billion in annual revenues when fully operational. The company anticipates completing the revenue ramp by the end of 2028.
AKAM Projects Stronger Growth Through 2028
Chief financial officer Ed McGowan projected CIS revenues of $1.1-$1.3 billion in 2027, more than doubling from expected 2026 levels.
Management anticipates companywide constant-currency revenue growth of 17-22% in 2027, followed by total revenues exceeding $7 billion in 2028.
However, supply-chain and third-party data center delays shifted approximately $30 million of anticipated fourth-quarter revenues into 2027. During questions from Guggenheim, Leighton emphasized that the issues were resolved and would not affect total contractual revenues.
Akamai Details Cloud Contract Profitability
McGowan expects the major CIS agreements to deliver approximately 75% adjusted EBITDA margins and 30% non-GAAP operating margins at full deployment.
The contracts carry an estimated 13% after-tax internal rate of return and approximately 15% average annual adjusted return on invested capital.
During questions from JPMorgan and Evercore ISI, executives explained that longer commitments and larger volumes receive more favorable pricing. Management indicated that smaller contracts generally command higher unit prices and potentially stronger returns.
Third-quarter revenues increased 6% year over year. However, earnings declined 5% year over year. Security revenues increased 9% to $622 million, while CIS revenues climbed 34% to $109 million. Delivery and other cloud applications revenues declined 3% to $391 million.
Akamai Expands Security and AI Capabilities
Leighton highlighted sustained demand for API Security, Guardicore Segmentation and web application firewall products.
The company also launched Akamai Inference and Agent Sandbox, extending its cloud portfolio into AI inference and controlled agent execution.
During questions from Craig-Hallum, Leighton described encouraging early progress integrating LayerX. McGowan also noted improving delivery pricing stability, although the company remains selective about lower-return media contracts.
AKAM Faces Heavy Near-Term Infrastructure Spending
McGowan projected fourth-quarter capital expenditures of $2.445-$2.645 billion, including substantial hardware and memory purchases supporting Anthropic.
During questions from KeyBanc, McGowan acknowledged that colocation expenses incurred ahead of revenues could pressure operating margins during early 2027. He expects margins to improve as cloud deployments accelerate.
Akamai ended September with approximately $4.2 billion in cash, cash equivalents and marketable securities. During questions from Morgan Stanley, McGowan emphasized management's preference to maintain investment-grade credit ratings while funding expansion.
Akamai Focuses on Contract Execution
Management maintained confidence in long-term cloud demand while acknowledging the importance of meeting deployment schedules and controlling infrastructure costs.
Executives emphasized fulfilling existing large commitments before pursuing additional multibillion-dollar agreements. Near-term priorities include infrastructure delivery, margin management and converting contracted capacity into recognized revenues.
What AKAM's Zacks Rank and Style Scores Indicate
AKAM currently carries a Zacks Rank #4 (Sell), indicating unfavorable near-term earnings estimate revision trends under the Zacks methodology.
Its Value Score and Momentum Score of B reflect favorable characteristics in those categories, while the Growth Score of D indicates weaker growth attributes. The VGM Score of C presents a mixed overall profile. Despite favorable individual Style Scores, the weaker Zacks Rank warrants caution and may change as analysts revise estimates following the quarterly results.
View the Zacks #1 Rank List
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AKAM Q3 Earnings Call Highlights AI Cloud Deals and 2027 Outlook
Key Takeaways
Akamai Technologies, Inc. (AKAM - Free Report) highlighted substantial artificial intelligence infrastructure commitments and an ambitious multiyear growth outlook during its third-quarter 2026 earnings call. Management emphasized expanding Cloud Infrastructure Services (“CIS”) while addressing near-term deployment delays and rising capital requirements.
The discussion focused on a major Anthropic agreement, expected cloud profitability and infrastructure execution. Executives also defended projected investment returns and outlined expectations for accelerating revenue growth through 2028.
Third-quarter revenues of $1.122 billion broadly matched the Zacks Consensus Estimate of $1.12 billion. Non-GAAP earnings were $1.77 per share, exceeding the Zacks Consensus Estimate of $1.67.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Akamai Technologies, Inc. price-consensus-eps-surprise-chart | Akamai Technologies, Inc. Quote
Akamai Secures Major AI Cloud Commitments
CEO and Co-Founder Tom Leighton highlighted an $11.6 billion, seven-year agreement with Anthropic, bringing total multiyear CIS commitments signed during 2026 above $14 billion.
Leighton said two of the first three major contracts have started generating revenues, with the third expected to follow during the fourth quarter.
Management expects these contracts to generate approximately $2.2 billion in annual revenues when fully operational. The company anticipates completing the revenue ramp by the end of 2028.
AKAM Projects Stronger Growth Through 2028
Chief financial officer Ed McGowan projected CIS revenues of $1.1-$1.3 billion in 2027, more than doubling from expected 2026 levels.
Management anticipates companywide constant-currency revenue growth of 17-22% in 2027, followed by total revenues exceeding $7 billion in 2028.
However, supply-chain and third-party data center delays shifted approximately $30 million of anticipated fourth-quarter revenues into 2027. During questions from Guggenheim, Leighton emphasized that the issues were resolved and would not affect total contractual revenues.
Akamai Details Cloud Contract Profitability
McGowan expects the major CIS agreements to deliver approximately 75% adjusted EBITDA margins and 30% non-GAAP operating margins at full deployment.
The contracts carry an estimated 13% after-tax internal rate of return and approximately 15% average annual adjusted return on invested capital.
During questions from JPMorgan and Evercore ISI, executives explained that longer commitments and larger volumes receive more favorable pricing. Management indicated that smaller contracts generally command higher unit prices and potentially stronger returns.
Third-quarter revenues increased 6% year over year. However, earnings declined 5% year over year. Security revenues increased 9% to $622 million, while CIS revenues climbed 34% to $109 million. Delivery and other cloud applications revenues declined 3% to $391 million.
Akamai Expands Security and AI Capabilities
Leighton highlighted sustained demand for API Security, Guardicore Segmentation and web application firewall products.
The company also launched Akamai Inference and Agent Sandbox, extending its cloud portfolio into AI inference and controlled agent execution.
During questions from Craig-Hallum, Leighton described encouraging early progress integrating LayerX. McGowan also noted improving delivery pricing stability, although the company remains selective about lower-return media contracts.
AKAM Faces Heavy Near-Term Infrastructure Spending
McGowan projected fourth-quarter capital expenditures of $2.445-$2.645 billion, including substantial hardware and memory purchases supporting Anthropic.
During questions from KeyBanc, McGowan acknowledged that colocation expenses incurred ahead of revenues could pressure operating margins during early 2027. He expects margins to improve as cloud deployments accelerate.
Akamai ended September with approximately $4.2 billion in cash, cash equivalents and marketable securities. During questions from Morgan Stanley, McGowan emphasized management's preference to maintain investment-grade credit ratings while funding expansion.
Akamai Focuses on Contract Execution
Management maintained confidence in long-term cloud demand while acknowledging the importance of meeting deployment schedules and controlling infrastructure costs.
Executives emphasized fulfilling existing large commitments before pursuing additional multibillion-dollar agreements. Near-term priorities include infrastructure delivery, margin management and converting contracted capacity into recognized revenues.
What AKAM's Zacks Rank and Style Scores Indicate
AKAM currently carries a Zacks Rank #4 (Sell), indicating unfavorable near-term earnings estimate revision trends under the Zacks methodology.
Its Value Score and Momentum Score of B reflect favorable characteristics in those categories, while the Growth Score of D indicates weaker growth attributes. The VGM Score of C presents a mixed overall profile. Despite favorable individual Style Scores, the weaker Zacks Rank warrants caution and may change as analysts revise estimates following the quarterly results.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.