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Akamai Q3 Earnings Beat Estimates on Security and Cloud Growth
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Key Takeaways
Akamai's Q3 2026 earnings beat estimates by 5.99%, while revenues rose 6% on strong cloud demand.
Security revenues grew 9%, while CIS sales surged 34%, backed by more than $14 billion in 2026 commitments.
Higher infrastructure costs squeezed margins, while Akamai projects CIS revenues of $1.1-$1.3 billion in 2027.
Akamai Technologies, Inc. (AKAM - Free Report) reported third-quarter 2026 results, with adjusted earnings and revenues surpassing the Zacks Consensus Estimate. Non-GAAP earnings were $1.77 per share, which declined 5% year over year but beat the consensus estimate of $1.67 by 5.99%.
Revenues increased 6% year over year to $1.12 billion, surpassing the consensus estimate by 0.31%. Strong demand for cybersecurity solutions and Cloud Infrastructure Services (CIS) supported growth, with CIS revenues up 34% year over year. However, higher infrastructure investments continued to weigh on profitability.
AKAM's Net Income Declines on Higher Expenses
GAAP net income fell to $117.1 million, or 77 cents per share, from $140.2 million, or 97 cents per share, in the year-ago quarter. Higher operating expenses and cloud infrastructure investments impacted the bottom line despite revenue growth.
Non-GAAP net income was $262 million compared with approximately $270 million in the prior-year period. Non-GAAP operating income declined 11% year over year to $286 million, while the corresponding operating margin contracted 600 basis points to 25%.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Security revenues increased 9% year over year to $621.9 million from $568.4 million. Growth was primarily driven by demand for API Security, Guardicore Segmentation and Web Application Firewall solutions. Increasing adoption of artificial intelligence (AI) applications continues to support demand for advanced cybersecurity offerings.
Cloud Infrastructure Services revenues rose 34% to $108.8 million from $81.2 million in the year-earlier quarter. However, the growth rate moderated from 39% in the preceding quarter. Management highlighted more than $14 billion in multiyear CIS commitments signed during 2026, including a $11.6 billion agreement with Anthropic.
Delivery and other cloud applications revenues declined 3% year over year to $391.3 million from $405 million. Management indicated that delivery pricing conditions were stabilizing, supported by a selective approach toward large media contracts.
Revenues from the United States increased 5% year over year to $558.6 million from $530 million in the prior-year quarter.
International revenues reached $563.3 million, which rose 7% from $524.7 million a year ago. On a constant-currency basis, international revenues increased 9%, reflecting a negative foreign exchange impact on reported growth.
Akamai's Operating Costs and Margins Face Pressure
Total costs and operating expenses increased to $1.013 billion from $888.6 million in the year-ago quarter. Research and development expenses rose to $141.4 million from $124.7 million, while sales and marketing expenses increased to $164.4 million from $144.9 million.
Adjusted EBITDA declined 5% year over year to $435 million. GAAP operating margin contracted to 10% from 16% in the prior-year quarter, reflecting the impact of higher costs associated with infrastructure expansion.
Capital expenditures totaled $464.1 million, representing 41% of revenues, compared with $224.2 million or 21% of revenues a year ago. Investments were primarily directed toward expanding cloud capacity and supporting large customer commitments.
AKAM's Cash Flow and Liquidity Position
Operating cash flow was $433 million compared with $441.8 million in the year-ago quarter. During the first nine months of 2026, operating cash flow totaled $1.072 billion against $1.152 billion in the corresponding prior-year period.
As of Sept. 30, 2026, cash, cash equivalents and marketable securities totaled $4.239 billion. The company did not repurchase shares during the quarter but had repurchased approximately 5 million shares for $616 million year to date.
Management expects to fund planned CIS investments primarily through existing liquidity and operating cash flows, supplemented by additional financing if necessary.
Akamai's Outlook Highlights Accelerating Cloud Growth
For the fourth quarter of 2026, management expects revenues between $1.145 billion and $1.170 billion. Non-GAAP earnings per share are projected between $1.50 and $1.70, with an operating margin of approximately 24%.
For full-year 2026, revenues are forecast between $4.440 billion and $4.465 billion, while non-GAAP earnings per share are expected in the range of $6.47-$6.68. The company anticipates a non-GAAP operating margin of approximately 25%.
For 2027, CIS revenues are projected between $1.1 billion and $1.3 billion, driving total revenue growth of 17-22% on a constant-currency basis. Management expects approximately 70-75% of annual CIS revenues to be generated in the second half.
Akamai also projects total revenues exceeding $7 billion in 2028. However, supply-chain and third-party data-center delays are expected to shift approximately $30 million in CIS revenues from the fourth quarter of 2026 into 2027.
The company anticipates fully ramped large CIS contracts to generate approximately 75% adjusted EBITDA margins and 30% non-GAAP operating margins, highlighting the profitability potential of its expanding cloud infrastructure business.
Sanmina Corporation (SANM - Free Report) is set to release fourth-quarter fiscal 2026 earnings Nov. 9. The Zacks Consensus Estimate for earnings is pegged at $3.27 per share, implying growth of 95.8% from the year-ago reported figure.
Sanmina has a long-term earnings growth expectation of 27.4%. The company delivered an average earnings surprise of 16.68% in the last four reported quarters.
Cisco Systems, Inc. (CSCO - Free Report) is scheduled to release first-quarter fiscal 2027 earnings on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $1.33 per share, suggesting growth of 33% from the year-ago reported figure.
Analog Devices has a long-term earnings growth expectation of 10.88%. The company delivered an average earnings surprise of 2.55% in the last four reported quarters.
NVIDIA Corporation (NVDA - Free Report) is set to release third-quarter fiscal 2027 earnings on Nov. 17. The Zacks Consensus Estimate for earnings is pegged at $2.49 per share, implying growth of 100.8% from the year-ago reported figure.
NVIDIA has a long-term earnings growth expectation of 14%. The company delivered an average earnings surprise of 5.82% in the last four reported quarters.
View the Zacks #1 Rank List
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Akamai Q3 Earnings Beat Estimates on Security and Cloud Growth
Key Takeaways
Akamai Technologies, Inc. (AKAM - Free Report) reported third-quarter 2026 results, with adjusted earnings and revenues surpassing the Zacks Consensus Estimate. Non-GAAP earnings were $1.77 per share, which declined 5% year over year but beat the consensus estimate of $1.67 by 5.99%.
Revenues increased 6% year over year to $1.12 billion, surpassing the consensus estimate by 0.31%. Strong demand for cybersecurity solutions and Cloud Infrastructure Services (CIS) supported growth, with CIS revenues up 34% year over year. However, higher infrastructure investments continued to weigh on profitability.
AKAM's Net Income Declines on Higher Expenses
GAAP net income fell to $117.1 million, or 77 cents per share, from $140.2 million, or 97 cents per share, in the year-ago quarter. Higher operating expenses and cloud infrastructure investments impacted the bottom line despite revenue growth.
Non-GAAP net income was $262 million compared with approximately $270 million in the prior-year period. Non-GAAP operating income declined 11% year over year to $286 million, while the corresponding operating margin contracted 600 basis points to 25%.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Akamai Technologies, Inc. price-consensus-eps-surprise-chart | Akamai Technologies, Inc. Quote
Akamai's Revenues Rise on Security and CIS Demand
Security revenues increased 9% year over year to $621.9 million from $568.4 million. Growth was primarily driven by demand for API Security, Guardicore Segmentation and Web Application Firewall solutions. Increasing adoption of artificial intelligence (AI) applications continues to support demand for advanced cybersecurity offerings.
Cloud Infrastructure Services revenues rose 34% to $108.8 million from $81.2 million in the year-earlier quarter. However, the growth rate moderated from 39% in the preceding quarter. Management highlighted more than $14 billion in multiyear CIS commitments signed during 2026, including a $11.6 billion agreement with Anthropic.
Delivery and other cloud applications revenues declined 3% year over year to $391.3 million from $405 million. Management indicated that delivery pricing conditions were stabilizing, supported by a selective approach toward large media contracts.
AKAM's Geographic Performance Reflects Broad Growth
Revenues from the United States increased 5% year over year to $558.6 million from $530 million in the prior-year quarter.
International revenues reached $563.3 million, which rose 7% from $524.7 million a year ago. On a constant-currency basis, international revenues increased 9%, reflecting a negative foreign exchange impact on reported growth.
Akamai's Operating Costs and Margins Face Pressure
Total costs and operating expenses increased to $1.013 billion from $888.6 million in the year-ago quarter. Research and development expenses rose to $141.4 million from $124.7 million, while sales and marketing expenses increased to $164.4 million from $144.9 million.
Adjusted EBITDA declined 5% year over year to $435 million. GAAP operating margin contracted to 10% from 16% in the prior-year quarter, reflecting the impact of higher costs associated with infrastructure expansion.
Capital expenditures totaled $464.1 million, representing 41% of revenues, compared with $224.2 million or 21% of revenues a year ago. Investments were primarily directed toward expanding cloud capacity and supporting large customer commitments.
AKAM's Cash Flow and Liquidity Position
Operating cash flow was $433 million compared with $441.8 million in the year-ago quarter. During the first nine months of 2026, operating cash flow totaled $1.072 billion against $1.152 billion in the corresponding prior-year period.
As of Sept. 30, 2026, cash, cash equivalents and marketable securities totaled $4.239 billion. The company did not repurchase shares during the quarter but had repurchased approximately 5 million shares for $616 million year to date.
Management expects to fund planned CIS investments primarily through existing liquidity and operating cash flows, supplemented by additional financing if necessary.
Akamai's Outlook Highlights Accelerating Cloud Growth
For the fourth quarter of 2026, management expects revenues between $1.145 billion and $1.170 billion. Non-GAAP earnings per share are projected between $1.50 and $1.70, with an operating margin of approximately 24%.
For full-year 2026, revenues are forecast between $4.440 billion and $4.465 billion, while non-GAAP earnings per share are expected in the range of $6.47-$6.68. The company anticipates a non-GAAP operating margin of approximately 25%.
For 2027, CIS revenues are projected between $1.1 billion and $1.3 billion, driving total revenue growth of 17-22% on a constant-currency basis. Management expects approximately 70-75% of annual CIS revenues to be generated in the second half.
Akamai also projects total revenues exceeding $7 billion in 2028. However, supply-chain and third-party data-center delays are expected to shift approximately $30 million in CIS revenues from the fourth quarter of 2026 into 2027.
The company anticipates fully ramped large CIS contracts to generate approximately 75% adjusted EBITDA margins and 30% non-GAAP operating margins, highlighting the profitability potential of its expanding cloud infrastructure business.
Zacks Rank
Akamai currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Sanmina Corporation (SANM - Free Report) is set to release fourth-quarter fiscal 2026 earnings Nov. 9. The Zacks Consensus Estimate for earnings is pegged at $3.27 per share, implying growth of 95.8% from the year-ago reported figure.
Sanmina has a long-term earnings growth expectation of 27.4%. The company delivered an average earnings surprise of 16.68% in the last four reported quarters.
Cisco Systems, Inc. (CSCO - Free Report) is scheduled to release first-quarter fiscal 2027 earnings on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $1.33 per share, suggesting growth of 33% from the year-ago reported figure.
Analog Devices has a long-term earnings growth expectation of 10.88%. The company delivered an average earnings surprise of 2.55% in the last four reported quarters.
NVIDIA Corporation (NVDA - Free Report) is set to release third-quarter fiscal 2027 earnings on Nov. 17. The Zacks Consensus Estimate for earnings is pegged at $2.49 per share, implying growth of 100.8% from the year-ago reported figure.
NVIDIA has a long-term earnings growth expectation of 14%. The company delivered an average earnings surprise of 5.82% in the last four reported quarters.