Key Takeaways
Akamai Technologies shares surged nearly 27% after the company announced a seven-year, $1.8 billion deal to provide cloud infrastructure for a major artificial intelligence lab, a move that that overshadowed mixed earnings and signaled a strategic pivot to the AI economy.
“We are very pleased to announce that a leading frontier model provider has committed to $1.8 billion over seven years for CIS, further validating our position as a key infrastructure provider in the AI economy,” Chief Executive Tom Leighton said in the earnings release.
The landmark deal, the largest in Akamai’s history, came as the company reported first-quarter revenue of $1.074 billion, a 6% year-over-year increase that met analyst expectations. Adjusted earnings were $1.61 per share, down from $1.70 a year earlier but slightly ahead of the $1.60 consensus. The stock, which had fallen 4.3% in regular trading, jumped to $146.73 after hours.
This agreement provides a significant boost to Akamai's Cloud Infrastructure Services (CIS) unit, which the company is positioning as a key growth engine. The deal is expected to require $800 million to $825 million in capital expenditures over the next year and is forecast to begin contributing $20 million to $25 million to revenue in the fourth quarter of 2026.
Akamai's first-quarter results highlight a company in transition. The newly broken-out Cloud Infrastructure Services (CIS) segment reported revenue of $95 million, up 40% year-over-year. The security division, its largest unit, grew 11% to $590 million. This growth was offset by a 7% decline in the legacy content delivery network (CDN) business, which posted revenue of $389 million.
Chief Financial Officer Ed McGowan said the company now expects CIS revenue to grow at least 50% year-over-year for the full year, a significant increase from prior forecasts. This rapid expansion is driving heavy investment, with second-quarter capital expenditures projected to spike to between $433 million and $453 million, or about 41% of revenue for the quarter.
Looking ahead, Akamai offered a mixed forecast for the second quarter, with expected adjusted earnings of $1.45 to $1.65 per share, below the $1.68 analysts had projected. However, the company raised its full-year revenue guidance to between $4.445 billion and $4.55 billion.
The scale of the new AI contract, combined with a previous $200 million cloud deal, led McGowan to state that Akamai now expects "total company annual top-line revenue growth to reach double digits in 2027." This long-term forecast suggests management is confident that its aggressive investments in data center capacity and NVIDIA GPU hardware will capture a meaningful share of the burgeoning market for AI workload infrastructure, challenging established hyperscalers. The company spent $206 million to repurchase 2 million shares in the first quarter.
This article is for informational purposes only and does not constitute investment advice.
