Akamai Technologies, Inc.

Good afternoon and welcome to the Akamai Technologies, Inc. fourth 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 telephone keypad. To withdraw your question, please press star then 2. 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 fourth quarter 2023 earnings call. Speaking today will be Tom Leighton, 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 optimized 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 February 13th, 2024. 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'll 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. Before I turn the call over to Tom, I'd like to let everyone know that I have transitioned the head of Akamai Investor Relations role to Mark Stoutenberg. Many of you have met Mark over the past year, and I'm confident you will find him extremely helpful about all things Akamai. I'll be moving into another role internally and want to thank Tom personally for bringing me into the Akamai culture 10 years ago. It's been a privilege to work with so many wonderful people, both here at Akamai and, of course, all of you externally. I wish you all happiness and good fortune. And now I'd like to turn the call over to Tom.

Thanks, Tom. And thank you very much for the terrific job that you've done over the last 10 years at Akamai. It's truly been a pleasure working with you, and I'd like to join you in welcoming Mark as your successor. Turning now to our Q4 results, I'm pleased to report that Akamai delivered a strong finish to a very successful 2023. Fourth quarter revenue grew to $995 million, and non-GAAP operating margin was 30%. Non-GAAP earnings per share in Q4 was $1.69. up 23% year-over-year and up 22% in constant currency. For the full year, revenue was $3.81 billion and non-GAAP operating margin was 30%. Full year non-GAAP earnings per share was $6.20, up 15% year-over-year and up 16% in constant currency. Security revenue in Q4 grew 17% year-over-year and was up 18% in constant currency, contributing nearly half of our total revenue in the quarter. Security growth was driven in part by continued strong demand for our market-leading GardaCore segmentation solution, as more enterprises relied on Akamai to defend against malware and ransomware. Customers who purchased segmentation in Q4 included one of the largest global tech firms in India and a leading payment systems company based in Hong Kong that handles 15 million transactions a day. We've also seen strong interest in our new API security solution that we announced in August. Early adopters of this new solution include three major financial institutions, several major retail brands in Europe and North America, and a leading industrial automation company in Europe. Our customers are seeing the value of this new capability, with several already paying over half a million dollars per year for the service. Akamai's API security solution also earned recognition from industry analysts in Q4. Kuppinger-Kohl named Akamai an overall industry leader in their API security and management leadership compass report. And Gartner validated our strong and expanded API capabilities in its market guide for cloud web application and API protection. Turning now to cloud computing, I'm pleased to say that we accomplished what we set out to achieve last year in terms of infrastructure deployment, product development, jumpstarting our partner ecosystem, onboarding the first mission-critical apps from some major enterprise customers, and achieving substantial cost savings as we moved our own applications from hyperscalers to the Akamai Connected Cloud. After launching Akamai Connected Cloud last year, we rolled out 14 new core computing regions around the world, giving us a total of 25 overall. We also enhanced our cloud compute offering by doubling the capacity of our object storage solution and adding premium instances for large commercial workloads that are designed to deliver consistent performance with predictable resource and cost allocation. Also, our Akamai Global Load Balancer is now live. This integrated service is designed to route traffic requests to the optimal data center to minimize latency and ensure no single point of failure. Last year, we also amplified our go-to-market approach with our cloud computing partner program. The collaborative nature of the program provides a unique model for Akamai to engage with customers at a consultative level, to deeply understand their requirements and pain points, and to provide a complete solution leveraging the combined strength of the partner's technology and Akamai's distributed compute platforms. We've already partnered with several leading SaaS and PaaS providers and cloud data and processing platforms. We're very pleased with the progress that we've made thus far and are looking forward to adding more new partnerships in 2024. We've also begun to gain traction with some of our largest customers as they migrate mission critical apps onto our cloud platform. For example, one of the world's best known social media platforms, spent approximately $5 million on computing services with us last year, and they're already on a run rate to do more than double that this year. And two of the world's best-known software companies recently signed on and are already spending about a quarter of a million dollars per month on cloud computing with Akamai. In Q4, we also signed up a major global media measurement and analytics company, and we displaced a hyperscaler when we signed Blue TV, the largest VOD streaming company in Turkey. The streaming customer told us that they found our platform to be simple to use, automated and intuitive, cloud agnostic for a smooth multi-cloud migration, and affordable with very low egress cost, all backed by a trusted and reliable partner. In addition to exceeding our full-year cloud computing revenue goal of $500 million last year, We also derive significant cost savings by migrating several of our own applications from hyperscalers to Akamai Connected Cloud. Our bot manager and enterprise application access solutions were among the first to migrate. Together, these products are used by over 1,000 customers, and they generate over $300 million in annual revenue for Akamai. But all that is just the beginning. Today, we're excited to announce the next phase of our multi-year strategy to transform the cloud marketplace, taking cloud computing to the edge by embedding cloud computing capabilities into Akamai's massively distributed edge network. Akamai's new initiative, codename GEKO, which stands for generalized edge compute, combines the computing power of our cloud platform with the proximity and efficiency of the edge to put workloads closer to users than any other cloud provider. Traditional cloud providers support virtual machines and containers in a relatively small number of core data centers. Gecko is designed to extend this capability to our edge pops, bringing full stack computing power to hundreds of previously hard to reach locations. Deploying our cloud computing capabilities into Akamai's worldwide edge platform will also enable us to take advantage of existing operational tools, processes, and observability, enabling developers to innovate across the entire continuum of compute and providing a consistent experience from centralized cloud to distributed edge. Nobody else in the marketplace does this today. In the latest implementation phase that we're announcing today, Akamai aims to embed compute with support for virtual machines into about 100 cities by the end of the year. We've deployed new Gecko architected regions in four countries already, as well as in cities that lack a concentrated hyperscaler presence. These initial locations are listed in today's press release. Following that, we plan to add support for containers. And then we plan to develop automated workload orchestration to make it easier for developers to build applications across hundreds of distributed locations. We've been conducting early trials of Gecko with several of our enterprise customers that are eager to deliver better experiences for their customers by running workloads closer to users, devices, and sources of data. Their early feedback has been very encouraging. as they evaluate Gecko for tasks such as AI inferencing, deep learning for recommendation engines, data analytics, multiplayer gaming, accelerating banking transactions, personalization for e-commerce, and a variety of media workflow applications, such as transcoding. In short, I'm incredibly excited for the prospects of Gecko as we move full-stack compute to the edge. Turning now to content delivery, I'm pleased to report that Akamai remains the market leader by a wide margin, providing the scale and performance required by the world's top brands as we help them deliver reliable, secure, and near flawless online experiences. Our delivery business continues to be an important generator of profit that we use to develop new products to fuel Akamai's future growth. And it's an important driver of our security and cloud computing businesses as we harvest the competitive and cost advantages of offering delivery, security, and compute on the same platform as a bundle. As we've noted in past calls, we're selective when it comes to less profitable delivery opportunities. And this is a discipline that we intend to maintain and in some cases increase in 2024. To be clear, we still aim to be the best in delivery for our customers. And we believe that our disciplined approach will benefit our business by allowing us to focus more of our investment in security and cloud computing, which are now approaching two-thirds of Akamai's revenue and growing at a rapid rate. In summary, we're pleased to have accomplished what we said we would do in 2023. Our cloud computing plans are taking shape as we envisioned. Our expanded security portfolio is enabling us to deepen our relationships with customers. 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 results and our outlook for Q1 and 2024. Ed?