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Akamai Tech (AKAM) is sharply lower after reporting its Q4 results last night. The edge cloud and cybersecurity company beat EPS expectations, while revenue increased 7.4% yr/yr to $1.09 bln, also ahead of expectations. The negative reaction stems from guidance, particularly EPS, with Q1 and FY26 EPS of $1.50-1.67 and $6.20-7.20, respectively, both well below expectations, while Q1 and FY26 revenue guidance of $1.060-1.085 bln and $4.40-4.55 bln was in line. The softer EPS outlook largely reflects increased investment in AKAM's AI Inference Cloud and rising server costs due to soaring memory prices.

• Results were supported by continued AI and security tailwinds, with particular strength in Cloud Infrastructure Services (CIS), which AKAM is positioning as its next growth platform.
• CIS revenue accelerated, increasing 45% yr/yr to $94 mln (+39% Q3), driven by ISV solutions, IaaS and storage customers, and growing AI-related demand. Compute revenue increased 14% yr/yr to $191 mln.
• AKAM also signed a four-year $200 mln CIS commitment with a major U.S. tech customer, mostly tied to AI Inference Cloud, with revenue expected to begin ramping in 4Q26.
• Security revenue increased 11% yr/yr to $592 mln, led by high-growth products. API Security and Zero Trust enterprise security combined grew 36%, with API Security up more than 100%.
• Non-GAAP operating margin was flat yr/yr at 29%, but AKAM guided Q1 non-GAAP operating margin to 26-27%, and FY26 to 26-28%, down from 30% in FY25.
• On the softer EPS guidance, AKAM expects to invest about $250 mln of CapEx into AI Inference Cloud to support rising demand, along with an added $200 mln to FY26 CapEx due to higher server costs from memory price inflation. Q4 CapEx was $154 mln (14% of revenue), and Q1 CapEx is expected at $254-264 mln (23-25% of revenue).

Briefing.com Analyst Insight

AKAM's Q4 results reinforce the company's AI and security tailwinds, with accelerating CIS growth, solid security demand, and large customer wins, including a new four-year $200 mln AI Inference Cloud commitment. The issue is guidance. While Q1 includes some normal seasonal headwinds, the weaker-than-expected FY26 EPS outlook reflects a much heavier investment cycle, including AI Inference Cloud buildout and higher server costs from memory price inflation. That spending supports the longer-term growth story as AKAM pushes deeper into AI inference and edge compute, but the near-term margin and earnings pressure is weighing on shares. For now, demand and customer momentum remain strong, with the focus on CIS growth, large AI deal ramps, and whether AKAM can translate increased spending into stronger growth over time.