Akamai Technologies, Inc.

Good afternoon and welcome to the Akamai Technology third quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Tom Barth, head of investor relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining Akamai's third quarter 2023 earnings call. Speaking today will be Tom Layton, Akamai's chief executive officer, and Ed McGowan, Akamai's chief financial officer. Please note that today's comments include forward-looking statements, including statements regarding revenue and earnings guidance. These forward-looking statements are subject to risk and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. The factors include any impact from macroeconomic trends, the integration of any acquisitions, and any impact from geopolitical developments. Additional information concerning these factors is contained in Occamized Filings with the SEC, including our annual report on Form 10-K, and quarterly reports on Form 10-Q. The forward-looking statements included in this call represent the company's view on November 7, 2023. Akamai disclaims any obligation to update these statements to reflect new information, future events, or circumstances, except as required by law. As a reminder, we will be referring to some non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP, and non-GAAP metrics can be found under the financial portion of the investor relations section of Akamai.com. And with that, I'll turn the call over to Tom.

Thanks, Tom, and thank you all for joining us today. I'm pleased to report that Akamai delivered excellent results in the third quarter, with revenue, operating margin, and earnings all exceeding the high end of our guidance range. Revenue grew to $965 million in Q3, up 9% year-over-year. Non-GAAP operating margin was 31%. And non-GAAP earnings per share was $1.63, up 29% year-over-year. Ed will cover the key factors that drove our bottom-line performance in his portion of the call. I'll now say a few words about each of our three main product areas, starting with securities. our largest source of revenue. Security revenue grew 20% year-over-year in Q3. The acceleration in security growth was driven in part by especially strong demand for our market-leading GuardaCore segmentation solution, as enterprises confront the ever-present threats from malware and especially ransomware. CISOs and corporate boards everywhere have seen the recent headlines about devastating ransomware attacks. including at two casino hotels in Las Vegas, a major manufacturer of cleaning products in the U.S., and had a multinational provider of systems for smart buildings. One of them reportedly paid $15 million to get ransomware out of their systems. Another is reportedly spending $25 million to deal with the after effects. And a third has reported more than $100 million in losses from the attack. Customers who purchased our segmentation solution last quarter include a major global services provider, one of the world's most recognized entertainment brands, and a leading bank in Switzerland that renewed their segmentation protection with a significant upgrade. We also saw strong demand for our market-leading web app firewall solutions in Q3. where we continue to win against competitors who are challenged to provide the levels of reliability and performance required by major enterprises. Customers who switched to Akamai, including a nationwide retail chain in the U.S. and a leading global manufacturer based in India, also told us that our competitors simply can't provide the level of support and professional services that they need and have come to depend on from Akamai. Customers also value being able to purchase an entire suite of integrated security products from Akamai, a provider who they trust to keep them safe against a wide variety of attacks. For example, we're seeing very strong interest in our new API security solution that we announced last quarter. This new product is in its very early days, but we've already integrated it with our market-leading web app firewall solution to make it even easier for customers to implement. At the Black Hat Security Conference last quarter, Akamai API Security was named one of the 20 hottest new cybersecurity tools by CRN, a major trade publication for channel resellers. And as with GuardaCore, you don't need to be a CDN customer to benefit from this new solution. Turning now to cloud computing. I'm pleased to say that we're on track with our product development, infrastructure deployment, and conversations with customers about use cases well suited for the Akamai Connected Cloud. Since our last call, we've gone live with seven more core compute regions in Amsterdam, Jakarta, Los Angeles, Miami, Milan, Osaka, and Sao Paulo. In addition to the six that we opened earlier this year, and the 11 that we acquired from Linode, this brings our total to 24 core compute regions to serve Akamai connected cloud customers. Of course, there are other cloud companies with a few dozen data centers, but Akamai is unique in having these data centers interconnected to the world's most distributed edge platform with more than 4,100 points of presence across 750 cities and 130 countries. As one trade pub, Block and Files, recently wrote, Akamai is focusing on a future where scale becomes more about the size of the network versus the size of its data centers, more effectively powering modern applications. We agree. Akamai's massively distributed edge network, 25 years in the making, and managed by Akamai's team of experts around the world, is a key differentiator in our strategy. We believe that next generation applications will need next generation cloud infrastructure, and we intend to chart the course for the next decade of cloud computing, when more of the compute will be done closer to the end user, and where we believe our platform will have an important edge over more centralized models. As IDC put it in July, Akamai brings the simplicity, affordability, and accessibility of its cloud computing services to larger commercial customers on an architecture built for the next decade, not the last. The Akamai Connected Cloud will put containers and VMs closer to end users and bring enterprise workloads to locations around the world that are otherwise difficult for organizations to reach. Customers are responding to Akamai's unique offering, and we've already gained cloud computing business across multiple verticals in every major geography, including a European streaming media company, a digital advertising company in Japan, a large financial institution in Indonesia, an e-commerce platform in Korea, major carriers in EMEA in Central America, and a television network in South America. In addition to direct sales, we're seeing good traction in our cloud computing partner ecosystem, where we're acquiring new customers by selling with cloud service providers and managed service providers. We've also partnered successfully with independent software vendors and SaaS and PaaS providers. In fact, we recently signed one of the world's best known SaaS providers in our second largest cloud computing deal since we acquired Linode. Turning now to content delivery, I'm pleased to report that we saw an acceleration of traffic growth in Q3. In addition, we acquired enterprise customer contracts from StackPath and Lumen Technologies following their decisions to exit the CDN market. As Ed will talk about shortly, the financial terms of the acquisitions were very attractive for Akamai shareholders. In addition to the delivery business that we acquired, we're planning to introduce these customers to our full portfolio of security and cloud computing solutions to help them power and protect their businesses online. In summary, we are very pleased by our performance in Q3. Our expanded security portfolio is deepening our relationships with customers. Our cloud computing plans are executing on schedule. And we continue to invest in Akamai's future growth while also enhancing our profitability. Now I'll turn the call over to Ed for more on our Q3 results and our outlook for Q4 and the full year. Ed?