# How Akamai Technologies makes money

CXProWealth Business Lens · Akamai Technologies (AKAM) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-07 with the SEC (accession 0001086222-26-000086): https://www.sec.gov/Archives/edgar/data/1086222/000108622226000086/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $1.1B (+5.4% on the year)
- Operating income: $80.3M (operating margin 7.3%)
- Net income: $79.4M (net margin 7.2%)
- Gross margin: 55.8%
- Free cash flow: $181.3M (16.5% of revenue)
- Cash conversion (operating cash flow / net income): 4.11x
- Capital expenditure: 13.2% of revenue

## Where the money goes (Q2 FY2026)

- Revenue → Total costs and operating expenses: $1.0B
- Total costs and operating expenses → Cost of revenue (exclusive of amortization of acquired intangible assets shown below): $485.9M
- Total costs and operating expenses → Research and development: $148.8M
- Total costs and operating expenses → Sales and marketing: $170.0M
- Total costs and operating expenses → General and administrative: $187.7M
- Total costs and operating expenses → Amortization of acquired intangible assets: $25.1M
- Total costs and operating expenses → Restructuring charge: $1.8M
- Revenue → Income from operations: $80.3M
- Income from operations → Other (expense) income, net: $2.9M
- Income from operations → Interest expense: $9.1M
- Income from operations → Income before provision for income taxes: $68.4M
- Interest and marketable securities income, net → Income before provision for income taxes: $31.7M
- Income before provision for income taxes → Provision for income taxes: $20.6M
- Income before provision for income taxes → Net income: $79.4M

## Where the revenue comes from

### ContractWithCustomerSalesChannel (Revenue from Contracts with Customers - Schedule of Revenue by Geographical and Solution Category (Details))

| Member | Value | Share |
|---|---:|---:|
| Security | $604.4M | 55.0% |
| Delivery and other cloud applications | $395.9M | 36.0% |
| Cloud infrastructure services | $99.3M | 9.0% |

The members sum to total revenue.

## Key insights

### The compute build is spending ahead of revenue

Costs rose 14.3% against revenue's 5.4%, so operating income nearly halved in a quarter when sales still grew.

Total costs and operating expenses were $1.02B, 92.7% of revenue, 7.2 points more than a year earlier. Income from operations fell 47.0% to $80.3M from $151.5M, and the operating margin fell to 7.3% from 14.5%. It was the third quarter in a row below the $166.0M earned in the third quarter of FY2025. _(from the filing)_
Every major cost line grew faster than revenue. Cost of revenue rose 13.9% and took 44.2% of revenue, up 3.3 points; research and development rose 18.3%, sales and marketing 16.3% and general and administrative 15.4%. The filing names partner costs in its compute program, co-location, depreciation and bandwidth from the platform build, headcount growth, and a new retirement benefit that brings stock-based compensation forward. _(from the filing)_
The filing explains why costs lead revenue: new co-location leases carry financial commitments that are expensed evenly over the lease term, so “in some cases, we are incurring costs in advance of these locations being fully utilized.” _(from the filing)_
The squeeze is older than this quarter. The operating margin was 22.6% in FY2021 on revenue of $3.46B, and 13.5% in FY2025 on revenue of $4.21B. _(from the filing)_
Analysis: margins would recover mainly if compute revenue fills the leased capacity faster than new sites are added. A useful marker would be cost of revenue ceasing to rise as a share of revenue while cloud infrastructure services keep growing. _(analysis)_

### Borrowed cash, parked in securities, propped up profit

Interest on cash raised through convertible notes, plus a lower tax rate, kept net income falling far less than operating income.

Interest and marketable securities income rose 124.2% to $31.7M from $14.1M, and equalled 31.7% of pre-tax income of $100.0M, against 9.3% a year earlier. The filing attributes the rise primarily to interest on marketable securities bought during the quarter with the proceeds of new convertible senior notes. _(from the filing)_
The tax provision fell 57.3% to $20.6M, an effective rate of 20.6% against 31.8% a year earlier. The filing ties the drop to lower profit, a larger excess tax benefit from stock-based compensation, a change in the valuation allowance on state credits and lower tax reserves. Together these left net income down 23.4% to $79.4M while income from operations fell 47.0%. _(from the filing)_
Interest income was 3.5x interest expense of $9.1M, since the newest notes carry zero coupon interest. The cost of the money shows in the share count instead: diluted shares were 153.7M against 144.7M basic, compared with 145.2M diluted a year earlier, and diluted earnings per share were $0.52 against $0.71. _(from the filing)_
Analysis: the company intends to spend a portion of the proceeds on accelerated capital expenditure. As that cash moves into servers and sites, the interest it earns would shrink, and reported profit would depend more on the operating line recovering. _(analysis)_

### The network earns far more cash than profit shows

Heavy non-cash charges keep cash flow well above net income, but free cash flow still fell to $181.3M from $313.6M.

Operating cash flow was $326.3M against net income of $79.4M. The cash flow statement adds back non-cash charges, chiefly depreciation and amortization of the network and stock-based compensation, which reduce reported profit but not cash. _(from the filing)_
The gap is not new. In FY2025 free cash flow was $1.01B against net income of $452.0M, 2.2x. _(from the filing)_
Cash still weakened. Free cash flow was $181.3M, 16.5% of revenue, against $313.6M, 30.1% of revenue, a year earlier. Capital spending barely moved, $144.9M against $145.5M; the drop came from operating cash flow, which fell to $326.3M from $459.1M. For the half year the filing cites the timing of customer collections, higher payroll and higher lease payments for co-location facilities. _(from the filing)_
Analysis: the added-back charges are still costs. Depreciation is the delayed cost of servers already bought, and stock pay is borne by shareholders through dilution, so cash flow above profit partly reflects how costs are recorded rather than costs avoided. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of Akamai Technologies (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what Akamai Technologies's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Akamai Technologies 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/1086222/000108622226000086/ (2026-08-07)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03