Akamai (AKAM) Q4 2025: CIS Accelerates 45% as Inference Cloud Drives $200M AI Commitment
Akamai’s fourth quarter marked an inflection as cloud infrastructure services (CIS) revenue growth accelerated and the company secured a landmark $200 million AI inference cloud contract. Security solutions maintained robust momentum, while higher CapEx signals full-throttle investment in AI-driven infrastructure and edge compute. Management’s guidance and pipeline commentary highlight a business pivoting decisively from legacy CDN to high-value cloud and security services, with AI as the central growth engine for 2026 and beyond.
Summary
- AI Inference Cloud Adoption Surges: Akamai’s platform won a $200 million, four-year commitment, validating its distributed edge AI strategy.
- Security and CIS Outpace Legacy Delivery: High-growth security and compute segments now drive the business mix, with CIS representing half of compute revenue.
- CapEx Rises to Fuel AI Scale: Hardware cost inflation and capacity build-out for AI workloads will pressure margins but position Akamai for long-term share gains.
Performance Analysis
Akamai delivered a strong Q4, with total revenue increasing 7% year-over-year, propelled by a 45% surge in cloud infrastructure services (CIS) revenue. CIS now comprises half of total compute revenue, reflecting the company’s ongoing pivot from legacy content delivery network (CDN) to distributed cloud and AI solutions. Security revenue also posted double-digit growth, with API security exceeding a $100 million run rate and Guardicore segmentation gaining new large enterprise wins.
Meanwhile, the delivery segment continued to decline, down 2% year-over-year, underscoring the shift in business mix and the waning contribution of traditional CDN. International revenue was robust, accounting for 50% of total revenue and growing 11% year-over-year. Akamai’s profitability remained healthy, with operating margins supported by high renewal rates in term license security contracts and a favorable product mix.
- CIS Growth Accelerates: The 45% year-over-year CIS growth rate outpaced all other segments, with broad-based demand across ISV, storage, and edge compute customers.
- Security Momentum Sustained: API security and Guardicore segmentation combined grew 36% year-over-year, with API security more than doubling revenue and expanding into new verticals.
- Legacy Delivery Steadies: Delivery revenue continued its slow decline, but trends stabilized relative to prior years, with pricing discipline maintained despite competitive pressure.
CapEx spiked to 14% of revenue in Q4 and will rise further in 2026 as Akamai invests heavily in inference cloud capacity, responding to both customer demand and hardware cost inflation. The company’s $1.9 billion cash balance and record annual buyback activity provide strategic flexibility as it intensifies its AI infrastructure build-out.
Executive Commentary
"Last quarter, Akamai took a major step toward the future with the launch of Akamai Inference Cloud, our platform to support the growing demand to scale AI inference on the internet. Akamai's architecture uniquely positions us to power and protect AI the way we power and protect the web."
Dr. Tom Layton, Chief Executive Officer
"We're very excited that this technology company has committed to a minimum four-year spend of approximately $200 million, on our cloud infrastructure services with a large majority of that spend for our AI inference cloud. We expect to start recognizing revenue from this contract in the fourth quarter of 2026."
Ed McGowan, Chief Financial Officer
Strategic Positioning
1. AI Inference Cloud and Edge Compute Expansion
Akamai’s Inference Cloud, designed for distributed, low-latency AI at the edge, is the centerpiece of its transformation. The platform’s ability to bring AI physically closer to users is attracting high-value, multi-year commitments, including a landmark $200 million contract with a leading US tech company. Early deployments in 20 cities are already sold out, prompting a $250 million CapEx surge to scale capacity and accommodate a growing pipeline of AI-native and traditional enterprise customers.
2. Security Portfolio Evolution
Security solutions—especially API security and Guardicore segmentation—are scaling rapidly and winning with both new and existing customers. The company’s API security offering more than doubled revenue year-over-year, while Guardicore landed large contracts in financial services, telecom, and government. Akamai’s distributed platform and threat intelligence differentiate it in a market where AI-driven attacks are increasing complexity and risk for enterprises.
3. Capital Allocation and Investment Intensity
CapEx intensity is set to climb to 23-26% of revenue in 2026, up from historical norms, as Akamai aggressively builds out AI infrastructure. Management remains committed to opportunistic buybacks and targeted M&A, but the near-term focus is on scaling inference cloud capacity to capture outsized AI demand. Hardware cost inflation, especially in memory chips, is a headwind, but leadership views these investments as critical to sustaining CIS growth and competitive advantage.
4. Business Mix Shift and Segment Reporting Changes
Effective Q1 2026, Akamai will report CIS as a standalone revenue category, reflecting its emergence as the company’s primary growth engine. Delivery and other cloud apps will be consolidated, with legacy delivery expected to decline mid-single digits in 2026. This reporting realignment underscores the company’s strategic emphasis on cloud and security as the core of its future business model.
5. Competitive Dynamics and Customer Wins
Akamai continues to win business from hyperscalers, with performance, scale, and cost cited as key differentiators in edge compute and security. Notably, all three major hyperscalers are Akamai compute customers, seeking distributed capabilities that their core clouds cannot match. The company is also expanding into new verticals, including life sciences and manufacturing, and is seeing a mix of direct and partner-driven pipeline growth.
Key Considerations
Akamai’s fourth quarter and 2026 guidance reveal a company executing a high-stakes pivot from legacy CDN to AI-driven cloud and security leadership. The strategic context is defined by surging demand for distributed AI, rising CapEx, and a business model increasingly anchored in long-term, high-value customer commitments.
Key Considerations:
- AI Infrastructure Scale-Up: The decision to invest $250 million in additional inference cloud capacity reflects management’s conviction in sustained AI demand and the need to outpace hyperscaler competition at the edge.
- Margin Compression Risk: Hardware cost inflation, especially in memory chips, will weigh on 2026 operating margins and CapEx efficiency, though leadership expects these headwinds to be transitory.
- Security Growth Runway: Penetration for API security remains below 10% of Akamai’s installed base, indicating significant upside as enterprises address new attack surfaces from AI adoption.
- Legacy Delivery Decline: While delivery revenue is stabilizing, it remains a drag on overall growth and underscores the urgency of CIS and security outperformance.
- Customer Trust as Differentiator: Akamai’s reputation for reliability and security is enabling it to secure large, multi-year contracts in both cloud and security, a key advantage in mission-critical AI workloads.
Risks
CapEx escalation and hardware inflation could pressure near-term returns, with margin compression likely as AI investments ramp ahead of revenue recognition. The competitive landscape remains intense, particularly with hyperscalers and specialized AI cloud providers. Macroeconomic volatility, foreign exchange swings, and the unpredictability of AI-driven demand cycles add further uncertainty. Management’s ability to convert pipeline into realized revenue and maintain pricing discipline in a cost-inflationary environment will be critical for sustaining investor confidence.
Forward Outlook
For Q1 2026, Akamai guided to:
- Revenue of $1.06 billion to $1.085 billion, up 4% to 7% year-over-year as reported
- Non-GAAP EPS of $1.50 to $1.67
- CapEx of $254 million to $264 million (23% to 25% of revenue)
For full-year 2026, management expects:
- Revenue of $4.4 to $4.55 billion, up 5% to 8% as reported
- CIS revenue growth of 45% to 50%
- Security revenue growth in high single digits
- Operating margin of 26% to 28%
Management emphasized that AI inference cloud will be the primary growth engine in the second half of 2026, with major contract revenue recognition ramping in Q4. Delivery and other cloud apps are expected to decline mid-single digits, while CapEx will remain elevated to support AI infrastructure build-out.
- Hardware cost inflation will persist in the near term, but leadership expects normalization over time.
- Long-term commitments from large customers provide revenue visibility and support continued investment in AI and security platforms.
Takeaways
Akamai’s Q4 results and 2026 guidance confirm the company’s transition into an AI and security-centric business, with CIS and security now driving the growth narrative.
- AI and Security Dominate Growth: CIS and security segments are now the clear growth engines, offsetting legacy delivery decline and underpinning Akamai’s business model evolution.
- CapEx and Margin Trade-Offs: Elevated CapEx and temporary margin compression are strategic bets on long-term AI infrastructure leadership, supported by robust customer demand and multi-year commitments.
- Pipeline and Customer Mix Expand: The pipeline includes new verticals and AI-native customers, with Akamai’s distributed edge and security expertise enabling wins against hyperscalers and positioning the company for sustained share gains in cloud and AI markets.
Conclusion
Akamai’s Q4 marked a decisive turn toward AI-driven growth, with CIS acceleration, a landmark inference cloud contract, and sustained security momentum. While hardware inflation and CapEx will pressure margins in the near term, management’s conviction in the AI opportunity and the company’s ability to secure large, multi-year deals suggest a durable strategic advantage in edge AI and security.
Industry Read-Through
Akamai’s results offer a clear signal that distributed edge AI is emerging as a critical battleground, not only for hyperscalers but also for specialized platforms with global reach and security pedigree. The rapid sell-out of inference cloud capacity and shift toward multi-year, high-value contracts highlight the urgency for cloud and CDN peers to accelerate AI infrastructure investments and edge compute capabilities. Security providers should note the expanding threat landscape from AI-driven attacks and the growing demand for API and segmentation solutions, while hardware suppliers can expect continued pricing power amid surging AI data center demand. The industry is entering a new phase where performance, proximity, and trust—not just scale—will determine winners in the AI era.