Akamai(AKAM)2024-11-08 01:07Financial Data and Key Metrics - Total revenue for Q3 2024 was 1 billion quarter [12] - Compute revenue grew to 7 million one-time benefit from a legacy contract [12] - Security revenue was 3 million in one-time license revenue [13] - Delivery revenue declined 16% year-over-year to 1.59, in line with guidance [3][12] Business Line Performance - Security business exceeded 70 million deal with a major financial institution [3][4] - Compute business saw strong momentum, with revenue growing 28% year-over-year, and enterprise compute solutions on track to achieve a 480 million, up 3% year-over-year, representing 48% of total revenue [14] - Strong interest in Prolexic DDoS protection due to large attacks in Asia, with the company thwarting two of the largest DDoS attacks ever seen [4] - Compute wins were seen across various regions, including the US, Europe, Latin America, and APJ, with significant deals in retail, SaaS, and media [6] Strategic Direction and Industry Competition - The company is shifting from a content delivery pioneer to a cybersecurity and cloud computing leader, with security and compute now accounting for over two-thirds of revenue [3][10] - Investments are being made in cloud computing capabilities, new security products, and go-to-market resources to expand the enterprise market [10][11] - The company is leveraging generative AI to enhance security solutions, such as Guardicore and WAF, and is differentiating itself with threat visibility and managed services [3][5] Management Commentary on Operating Environment and Future Outlook - Management noted macroeconomic headwinds impacting the delivery business but expects traffic growth to rebound in the future [9][14] - The company is focusing on profitability and cross-selling opportunities in delivery while reinvesting cash flow into faster-growing areas like security and compute [9][10] - Management is optimistic about the potential for future growth in cloud computing and security, with plans to shift more investment into these areas [10][11] Other Important Information - The company took an 45 million in annualized savings [15] - Q4 revenue guidance is projected between 1.020 billion, with non-GAAP operating margin expected to be 27% to 28% [16] - Full-year 2024 revenue is expected to be 3.991 billion, with security growth of 15% to 17% and compute growth of approximately 25% [18] Q&A Session Summary Question: Role of GenAI in Security - GenAI is being used by malicious actors to increase attacks, but the company is leveraging AI and ML in its security products for anomaly detection, bot detection, and customer deployment management [21] Question: Impact of Industry Consolidation - Consolidation in the delivery market is seen as positive, with the company expecting a stabilization of the market and potential for increased profitability [23][24] Question: Shift in Go-to-Market Strategy - The company is investing in hunters, sales specialists, and channel partners to accelerate growth in compute and security, driven by strong traction in API security and enterprise compute [26] Question: Advanced Security Package Penetration - The advanced security package has reached high penetration, with year-over-year comparisons now reflecting sales in both quarters [28] Question: Compute Profitability and CapEx - Compute profitability is still scaling, with better flow-through expected as the business grows, while CapEx is expected to remain stable in the near term [32][33] Question: Delivery Revenue Decline - Delivery revenue decline is attributed to slow traffic growth and tough year-over-year comparisons, with pricing pressure easing but not yet offsetting the decline [36] Question: Compute Use Cases and Vertical Performance - Compute use cases span multiple verticals, with a sweet spot in media workflow, and strong adoption across new and existing customers [39][44] Question: Security Product Performance - Security products, including WAF and DDoS, showed strong performance, with continued growth across all segments [40]