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AKAM | How the Business Works

Deep dive pages: Overview | Business Model | Financial Trends | Thematic Exposure | Management Quality | Investor Sentiment | Concerns, Catalysts & Risks

Prepared 2026-10-19. Fiscal year = calendar year. Last print FY2026Q2 (2026-08-06); next print FY2026Q3 on 2026-11-05. Akamai changed its segment reporting in 2026; quarterly figures use the restated Daloopa series.

Akamai owns and operates one of the largest distributed server networks on the internet (over 4,300 points of presence in 700+ cities and 130 countries) and sells capacity on it three ways. Security is the profit engine and the majority of revenue. Delivery, the original CDN, is a shrinking cash generator. Cloud Infrastructure Services (CIS) is the growth bet: rented compute that is shifting from pay-as-you-go cloud toward multi-year dedicated capacity contracts with AI labs.

Almost all revenue is recurring. Per the FY2025 10-K, contracts run one year or longer and "generally commit the customer to a minimum of monthly, quarterly or annual levels of usage and specify the rate at which the customer must pay for actual usage above the stated minimum." Revenue is recognized ratably over the term, with bursting above the commitment recognized when used. The same 10-K notes that prices paid by some delivery and security customers "have declined in recent years at contract renewal due to competition," which Akamai offsets by upselling.

Mix is moving away from Delivery: Security rose from 33% of revenue in FY2020 to 55% in Q2 2026, and CIS from a rounding error to 9%. FY2026 security revenue is guided to more than $2.4B (Q2 2026 call).

The pricing units matter for the AI-traffic debate. Delivery revenue scales with bytes at a falling unit price, so traffic growth does not translate into revenue growth (Delivery fell 25% from FY2022 to FY2025 while the 10-K describes traffic growth trends continuing into 2026). Security scales with the size of the protected estate and the threat surface, not with bytes. CIS scales with capacity racked, which is why capex now leads revenue by several quarters.

FY2020 and FY2021 Security is the pre-2022 "Security Technology group" basis; FY2022 onward is the current solution-category basis, so the FY2022 growth rate bridges two definitions. Security growth has stepped down from about 25% (FY2021) to about 15% (FY2022 to FY2024) to under 10% (FY2025). Delivery has declined every year since the series began.

cRPO is derived as RPO times the share Akamai says it will recognize in the next 12 months. Both inputs are rounded in the filings ($0.1B and 5-point steps), so treat cRPO as approximate. The falling 12-month share (65% to 40%) shows the book lengthening as multi-year CIS contracts land: RPO is up 77% YoY but cRPO only about 18%. Q2 2026 RPO includes the $1.8B May deal and does not yet include the $11.6B Anthropic plans signed Sept 18, 2026.

Akamai does not report profit by solution category, so segment margins are not available. What is disclosed is the company-level margin stack and management's deal-level framework for large CIS contracts.

The read: every incremental CIS dollar comes in at a lower margin than the legacy blend (corporate non-GAAP operating margin ran 29% to 31% through 2025), and the capex arrives first. Cash gross margin is down about 270 bps and adjusted EBITDA margin about 500 bps from the Q3 2025 peak, while capex intensity has gone from about 16% to 32% of revenue in eight quarters.

Akamai does not disclose server count, MW or GPU count. Its pitch is distribution, lower egress cost and backbone flexibility, not GPU scale: neocloud campuses (CoreWeave, Nebius, IREN) run to hundreds of MW. Cloudflare is the only rival with a comparable city count (330+ cities).

What the 8-K confirms. Anthropic is the counterparty under a Master Services Agreement dated May 5, 2026, two days before Akamai announced the $1.8B, 7-year "frontier model company" deal. Project Plans 2 and 3 (signed Sept 18, 2026) commit Anthropic to about $11.6B, subject to Akamai meeting delivery and service availability requirements. Anthropic can terminate a plan on a material outage, subject to conditions, or the MSA on a change of control in favor of a direct competitor. The 8-K does not size Plan 1, so the $1.8B link rests on the matching date.

What it costs. About $5.5B of capex for the $11.6B (Ex. 99.1), and about $1.7B added to 2026 capex to pre-purchase memory through Jabil, which holds the components on consignment and buys them back at cost as they are used. The 8-K does not say whether the $1.7B counts toward the $5.5B. Anthropic also gets a warrant for up to 7.74M as-converted shares (about 5%) at $111.33: 40% vests on the first payment under Plan 3, then 20% per additional $3.0B of committed value.

What it means. At full ramp the signed contracts add about $2.1B a year, roughly 6.7x FY2025 CIS revenue, and Anthropic alone could be 25% to 30% of revenue by 2028. See Thematics for the deal economics and Valuation for the return math.

• Who buys. Global 2000 CISOs and infrastructure teams (banks, retail, governments), media and gaming companies, and now AI labs. The 10-K names customers including Spotify, RTL, Telefonica, Toshiba, Ubisoft, WarnerMedia and The Washington Post, and public-sector buyers including the U.S. Departments of Defense, Labor, Transportation and the Treasury.
• Concentration today. No customer was 10% or more of revenue in FY2023, FY2024 or FY2025 (10-K). The largest legacy customer (reported as TikTok/ByteDance) was about 6% of revenue at the February 2025 disclosure and is in managed decline as it builds its own delivery.
• Concentration tomorrow. Anthropic replaces it: about $1.66B a year at full ramp against FY2025 total revenue of $4.2B.
• Channels. A direct field sales force plus partners and resellers including Microsoft Azure, Deloitte, Kyndryl, Carahsoft, Optiv, Presidio, SHI and WWT (10-K).

Revenue is split about evenly between the U.S. and International, and International has grown faster (6% to 11% YoY since Q2 2025 vs 1% to 4% in the U.S.). FY2025 International was $2,069.0M of $4,208.2M (49%). Direct China revenue is not disclosed and is likely low single digits.

• Security: a Gartner cloud WAAP Leader alongside Cloudflare and Imperva. No vendor-level revenue share is published. The hard data point: Cloudflare's total revenue passed Akamai Security in Q4 2025 and is growing about 3.8x faster (+35.9% vs +9.5% in Q2 2026). Cloudflare's revenue includes delivery and other services, so this is not a like-for-like security comparison, but it shows who is gaining the incremental enterprise edge dollar.
• Delivery: one of three majors with Cloudflare and Amazon CloudFront, and a price taker ("Pricing environment remains competitive," Q4 2025 call). Multi-CDN makes it replaceable within a year.
• Compute: well under 1% of global IaaS. Against neoclouds, Akamai's CIS revenue ($99.3M in Q2 2026) is about 4% of CoreWeave's and 17% of Nebius's, but its distributed footprint is what won the Anthropic CPU work. Hyperscalers set the price ceiling.

• Policy shift. Akamai bought back $800M in 2025 and $616M in 1H26, then paused repurchases in Q2 2026 "to reallocate capital to support our high growth CIS pipeline" (Q2 2026 call). It kept its investment-grade rating and has not issued equity.
• FY2026 capex, one number: about $3.5B. The August guide was capex of about 40% of revenue on the $4.445B to $4.530B revenue guide, or about $1.8B. The 2026-09-24 8-K then added about $1.7B to 2026 capex for the Anthropic memory pre-buy. $1.8B plus $1.7B is about $3.5B, roughly 78% of revenue at the guide midpoint. We use this figure on every page because it is the latest company-sourced view; the Q3 print on 2026-11-05 should update it.
• Debt, one number. Gross debt is $7.64B of convertible notes (principal), or about $9.4B including $1.78B of operating leases, against $4.62B of cash and securities at June 30, 2026.
• M&A. Tuck-ins that built the security portfolio (Guardicore, Noname, LayerX for about $205M in July 2026) and delivery contracts acquired from Edgio, Lumen and StackPath.

Data sourced from Daloopa