Akamai Technologies, Inc. Price & Performance (AKAM)

The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments, and any other risk factors identified in our filings with the SEC. The forward looking statements included in this call represent the company's views on 02/20/2025. Akamai undertakes no obligation to update any forward looking statements which speak only as of the date they are made. As a reminder, we will be referring to certain non GAAP financial metrics during today's call. A detailed reconciliation of GAAP to non GAAP metrics can be found under the financial portion of the InvestorRelationssectionofakamai.com. Also, as part of our ongoing commitment to transparency, we've enhanced our disclosures to provide investors a more comprehensive understanding of our business. This quarter, we've created a new presentation available in the Investor offering a bit more information on our product portfolios, financials and performance goals. This presentation supplements the information in our earnings release and annual filings. And we encourage you to review it. Within the presentation, you'll find an overview of select revenue and year over year revenue growth rates. Please note all growth rate percentages are reported on a constant currency basis. With that, I'll now hand the call off to our CEO, Doctor.

Tom Layton.

Thanks, Mark. As you can see in today's press release, Akamai delivered solid performance in the fourth quarter. Revenue coming in at $1,020,000,000 and non GAAP earnings per share coming in well above our guidance range at $1.66 I'm also pleased to report that we made excellent progress on our multiyear journey to transform Akamai from a CDN pioneer into the cyber security and cloud computing company that powers and protects Business Online. For the first time in Akamai's history, security delivered the majority of our annual revenue in 2024, surpassing the $2,000,000,000 threshold and growing at 16% year over year. Our cloud computing portfolio recorded $630,000,000 in revenue last year, growing 25%. Over 2023. The portion of this revenue derived from our cloud infrastructure services was $230,000,000 up 32% over 2023.

Our cloud infrastructure services primarily consist of the compute and storage solutions that we've developed based on Linode. They also include our Edge Workers product and ISV solutions running on our cloud platform. Combined, security and compute accounted for two thirds of Akamai revenue in 2024, growing 18% year over year. And we exceeded all our year end annualized the fastest growing areas of the business, namely for our GardaCore platform, our API security solution and enterprise revenue for our cloud infrastructure services. These are three of the key areas that we anticipate will draw In the area of security, Akamai has expanded into new adjacent markets growing beyond point solutions to provide a more holistic and comprehensive security offering. This has enabled us to expand our customer base for protecting infrastructure applications, APIs and user interactions in both cloud and on prem environments. Security growth in Q4 was driven by continued strong demand for our market leading GardaCore segmentation solution. As more enterprises relied on Akamai to defend against malware and [indiscernible] The GardaCore platform ended the year with an ARR of $190,000,000 up 31% year over year and surpassing our goal of $180,000,000 In Q4, we signed our largest deployment to date for Gardicor, with a leading IT services company in India.

The solution covers 30,000 servers and nearly 300,000 endpoints. We also displaced a competitor segmentation offering that was falling short at major banks, both Hong Kong and in The U. S. More than 80% of our segmentation revenue in 2024 came through channel partners. Including one of the world's leading SIs, Deloitte, which wraps its services and implementation expertise around our segmentation to create value for customers that Deloitte knows well.

Together, in Q4, we won a $5,800,000 contract with Petrobras in Brazil. To reduce the risk of a breach and ransomware attacks. We also partnered with Deloitte to help defend two large European banks from In Q4, Akamai also signed a large contract for API security with one of the biggest asset managers and brokerage firms in The U. S. Our API security solution ended 2024 with an ARR of $57,000,000 up from just $1,000,000 at the end of twenty twenty three. And exceeding our goal of $50,000,000 with $247,000,000 of ARR. As we look ahead, we expect to generate continued strong growth for these products, with a goal of increasing their combined ARR by 30% to 35% during the year. We also anticipate that over the next several years, the rapid growth and more meaningful amount of revenue from these new products will help offset the slower growth of our more widely adopted and market leading web app firewall and DDoS mitigation products. As a result, and as noted in our supplemental disclosure that Mark mentioned a few minutes ago, we believe that we can maintain a CAGR of about 10% in constant currency for our security products over the next three to five years with typical M and A. This would bring us to more than $3,000,000,000 in security revenue by the end of the decade.

While our security product line is performing very well, our compute product line is growing even faster. And has a much larger addressable market. We've come a long way since we expanded into the cloud computing And we made a lot of progress last year achieving what we set out to do in revenue growth, signing new enterprise customers, infrastructure deployment, product development, partner ecosystem expansion and migrating our own applications from hyper scalers to the Akamai Akamai. We continue to sign compute customers at a rapid pace in Q4, including two financial software companies in The U. S. Two of the largest retailers in The U. S. A cybersecurity provider in Europe an enterprise software company in Asia, one of the largest banks in Southeast Asia, and an intelligent transportation system provider in Latin America. When we measure the progress of our cloud infrastructure services, we've been looking at the results through two lenses. Our primary lens is the uptake of these solutions by larger enterprise customers. Such as those doing over $100,000 in ARR. The second lens is looking at the performance of these products across customers of all sizes. At year end, approximately 300 enterprises up significantly from the year before.

Collectively, these customers finished the year with an ARR of $115,000,000 for our cloud infrastructure services, far exceeding our goal When you include all customers, the ARR for our cloud infrastructure services finished 2024 at $259,000,000 up 35% year over year.

This is a substantial improvement from when we acquired Linode in when the ARR from these services was approximately $127,000,000 and was growing in the mid teens.

In addition to enabling customer growth, most important products from hyperscalers to Akamaize Cloud This has resulted in improved performance and savings of well over a hundred million dollars per year. Many of our customers have also significantly expanded their use of our cloud infrastructure services over the last year. Some by a factor of 4x or more. By year end, 15 customers were spending over $1,000,000 in ARR for our cloud infrastructure services, more than triple the number from 2023. And today, we announced our first customer to sign a contract committing to spend more than $100,000,000 for our cloud infrastructure services over the next several years. Signaling that an extremely sophisticated buyer of cloud services is confident in our ability to execute and provide a level of service and performance comparable to or better than the hyperscalers. Recent improvements that we've made to our cloud platform will enable us to do even more for enterprise customers in 2025. For example, in the last year, we expanded OCA core data center footprint to 41 locations in 36 cities around the world. Next week, we plan to announce that we've enabled our new Managed Container service in our 4,300 plus points of presence in more than 700 cities around the world.

We're currently testing this service with customer workloads in over 100 cities. We significantly upgraded our object storage solution with a 5x increase in scalability and a 10x increase in performance. Making it comparable to the hyperscalers, but with much lower egress fees due to the efficiencies of our unique edge platform. We added GPUs for a variety of AI and media use cases One customer ran a proof of concept between Akamai and a hyperscaler and then chose Akamai for text to image AI inferencing workloads. Another customer uses our cloud for AI powered speech recognition for its in vehicle voice assistant. And an OTT provider switched from a hyperscaler to Akamai to provide a more cost effective platform for its ad supported streaming TV service. We enhanced the scale and security of our Lannode Coupe engine product Traditional cloud providers run Kubernetes platform from a relatively small number of core data centers. Akamai's differentiated approach will combine the computing power of our cloud platform with the proximity and efficiency of our edge, to put workloads closer to users than any other cloud provider. Building on technology that we acquired from Red Cubes last year, we released the Akamai Akamai platform to enable developers to build and deploy highly distributed applications in just a few clicks.

And we added nine compute ISV partners last year, bringing our total to 23. Our ISV partners accounted for $36,000,000 of cloud infrastructure services ARR [indiscernible] We're very excited about our opportunity for continued strong growth as we bring the power of compute to the edge with our broadly deployed network getting compute instances closer to end users, with an open platform that ensures flexibility and portability, orchestrated resource deployment to ensure efficient scaling and operations and predictable pricing with an unmatched ability to minimize egress costs. I think our rapid progress in cloud computing is summed up well an evaluation of public cloud platforms released last month by IDC. Their worldwide public cloud market scape or IaaS identified Akamai as a major player relative to industry peers [indiscernible] Akamai has accelerated its journey into the public cloud IS space. Transforming from a pure play CDN provider into a formidable public cloud competitor, In addition, Gartner positioned Akamai as an emerging leader for Gen AI specialized infrastructure in their recent innovation guide for generative AI technologies. As we noted in the supplemental materials Mark mentioned, we're supporting a growing number of AI use cases with a special focus on inferencing.

While it's still early days, are excited about the long term revenue opportunity and we believe that the unique properties of Akamai's cloud position us to be a major player in AI inferencing in the years to come. As we look forward to the rest of 2025, our goal is to grow our total cloud services ARR by 40% to 45% in constant currency. We believe that the accelerating growth of our cloud infrastructure services revenue will be driven primarily by enterprise customers. Given the great success that we're having with our cloud infrastructure services, we plan to focus more of our compute investments in this area. In particular, we're in the process of migrating some of our older cloud image and video management and live streaming workflow to ISV partners who specialize in these areas. And you plan to move some or all of their workloads to Akamai's cloud.

In addition to converting former competitors in we believe this transition will enable us to focus more of our internal resource on further development and expansion of our cloud infrastructure services. The transition also means that we expect that the revenue from some of our cloud applications will decline in 2025. And as Ed will discuss shortly, that we're projecting about 15% growth for our cloud computing solutions as a whole in 2025. As our cloud infrastructure service revenue continues to rapidly increase, we we believe that we can reaccelerate the overall cloud computing revenue growth rate to achieve a CAGR of at least 20% over the next three to five years in constant currency. This would make cloud computing our third billion dollars I'll next talk about content delivery. Which continues to be an important generator of profit that we use to develop new products to fuel our future growth. Our unique edge platform with over 4,300 points of presence in over 700 cities continues to be a major differentiator. In terms of lowering our costs, enabling massive scale, and providing superior performance. And this is true not only for delivery, but also for security and compute. In security, we use the platform to provide a massive shield against all sorts of attacks without impacting performance or raising costs.

And in compute, we use the platform to provide function as a service with our Edge Workers product. And as we'll announce next week, We'll also use this same platform to run our new managed container service in thousands of pops across hundreds of cities. This capability is unique in the market and it will enable our customers to get their compute workloads much closer to users. Akamai achieved substantial cost synergies using the same physical server to support our delivery, security and now compute services over 4,300 POPs in 700 cities.

It's a unique capability and a key reason why Akamai has been so profitable while many of our competitors have struggled. Our installed base of delivery customers also continues to be a key contributor to our growth in security and cloud computing. As we harvest the competitive and performance advantages of offering delivery, security and compute as a bundle on the same platform. That synergy works especially well for our security and compute customers to their relationship with us over other vendors. In Q4, we signed many deals that included security and compute solutions alongside our best in class delivery. And we won back delivery business for competitors at one of the leading tech players in AI as a leading player in streaming media. And in December, we acquired select customer contracts from Edgio, to offer their customers [indiscernible] of security and cloud solutions. I'm pleased to report that we're beginning to see signs of improvement in the delivery marketplace with more customers willing to sign multiyear contracts with predictable pricing, a more stable pricing environment generally and early signs of stabilizing traffic growth. As a result and as Ed will discuss in a few minutes, we now expect to see the year over year decline in delivery revenue shrink to about 10% this year.

If the favorable trends hold, we should see the decline in delivery revenue continue to lessen in 2026 and beyond. As we noted in our call last May, our largest customer is navigating political challenges and is pursuing a DIY strategy. As a result, we expect that the revenue from this customer will produce a headwind of about 1% to 2% per year on our overall revenue growth rate the next couple of years before stabilizing at a level similar to some of our hyperscaler customers, which would be about 2% to 3% of our total revenue. That said, I'm pleased to report that we entered into a five year committed relationship with this customer in Q4, that includes a substantial minimum annual spend which provides greater predictability and which reduces our in The U. S. While we're pleased with progress that we made last year on our multiyear transformation journey, still have work to do to reach more new customers and cross sell our new capabilities in security and cloud computing to our installed base. To drive greater top line growth over the next three to five years, we're transforming our go to market strategy to align more resources to accelerate the pace at which we add new customers.

In particular, we've already begun to raise the ratio of hunters to farmers in sales and to increase the number of specialized sellers and presales resources that support sales of our GardaCore platform API security and cloud infrastructure services. We're also investing more in partner enablement as the channel has become a major source of revenue growth for us. Based on advice from one of the world's top consulting firms, we're also embarking on a major project to optimize our sales operating model, account coverage framework compensation structure pricing strategy, and the way that we leverage our channel partner ecosystem. As we disclosed in the supplemental forecast posted on Investor Relations website, We believe that the combination of double digit security growth very fast growth in cloud computing, a stabilizing delivery should enable us to accelerate revenue growth in the years ahead and to achieve double digit revenue growth by the end of the decade, if not sooner. In fact, if you remove the impact of foreign exchange headwinds and the large customer I mentioned earlier, you can see that the acceleration is already underway. Excluding these two factors, revenue growth accelerated in 2024 over 2023, And as Ed will describe shortly, we anticipate further acceleration in 2025.

We believe that improving our top line growth and product mix combined with our continued efforts to improve efficiency help to improve operating margins so that we can meet and then exceed our goal of 30% over the next several years. We also believe that we can resume growing our non GAAP EPS in 2020 While we still have much to do, we're very optimistic about the future. Our cloud computing strategy is taking hold as we envision. Our expanded security portfolio is enabling us to deepen and expand our relationships with customers and partners. And we continue to invest in Akamai's future growth, while also maintaining strong profitability. Now I'll turn the call over to Ed for more on our results Ed? Thank you, Tom.

Before I begin, I want to reiterate what Mark mentioned at the start of the call. And highlight some of the new disclosures we issued earlier today. The materials we posted to the IR section of our website include a bit more detail than what we will cover in today's prepared remarks. Our aim is to provide deeper insights into our business and present our updated long term goals. While we do not intend to provide this level of disclosure every quarter, we will occasionally offer additional context if we believe it will be helpful. Today, I plan to cover our Q4 results, provide some color on 2025, including a few new disclosures and then cover our Q1 and full year 2025 guidance and I will close with our long term thoughts on revenue and profitability goals. Now let's cover our Q4 results starting with revenue. Total revenue was $1,020,000,000 up 3% year over year as reported and in constant currency. We continue to see solid growth in our compute and security portfolios during the fourth EGGEO contributed approximately $9,000,000 of revenue in the quarter which was in line with our expectations. Compute revenue grew to $167,000,000 a 24% year over year increase as reported 25% in constant currency.

In the fourth quarter, compute revenue was comprised of $65,000,000 from our cloud infrastructure services and $102,000,000 from our other cloud applications. As Tom pointed out, one of our largest customers is committed to spending at least $100,000,000 on our cloud infrastructure services over the next few years.

We expect that their workloads will begin ramping up by the end of twenty twenty five.

Moving to security revenue. Security revenue was $535,000,000 growing 14% year over year as reported and in constant currency. During Q4, we had approximately $12,000,000 of one time license revenue compared to $5,000,000 in Q4 of last year. As noted in our added disclosure, our security revenue was comprised of $25,000,000 from Zero Trust Enterprise plus API Security, which grew 51% in constant currency year over year and $1,840,000,000 from all other security products, which grew 14% in constant currency year over year.

Combined, compute and security revenue grew 16% year over year as reported and seven 9% of total revenue. Our delivery revenue was $318,000,000 slightly ahead of our expectations and down 18% year over year as reported and in constant [indiscernible] We anticipate an improvement in delivery revenue in 2025 driven by a more positive outlook on delivery as Tom discussed earlier. International revenue was $490,000,000 up 2% year over year or 4% in constant currency, which representing 48% of total revenue in Q4. Finally, foreign exchange fluctuations had a negative impact on revenue of $8,000,000 on a sequential basis and a negative $6,000,000 impact on a year over year basis. Moving to profitability. In Q4, we generated non GAAP net income of $254,000,000 or $1.66 of earnings per diluted share. Down 2% year over year flat in constant currency and well above the high end of our guidance range. These EPS results exceeded our guidance driven primarily by slightly higher than expected revenue, Lower than expected transition services or TSA costs related to the EGGIO transaction greater savings from the headcount actions we announced in Q3, and lower payroll costs due to some hiring pushing from Q4 into Q1. Finally, our Q4 CapEx was $193,000,000 or 19% from revenue.

Moving to our capital allocation strategy. During the fourth quarter, we spent approximately $138,000,000 to buy back approximately 1,400,000.0 shares.

The full year, we spent $557,000,000 to buy back approximately 5,600,000.0 shares.

Ended 2024 with approximately $2,000,000,000 remaining on our current repurchase authorization. It's worth noting that over the past decade, we have not only met our objective of buying back shares to offset dilution from our employee equity programs, but we have also decreased our shares outstanding by approximately 16% over that timeframe. Going forward, our capital allocation strategy remains the same to continue buying back shares over time to offset dilution from employee equity programs and to be opportunistic in both M and A and share repurchases. Before I move to guidance, there are several items that I want to highlight to help with your 2025 models. The first relates to revenue from the Egeo transaction. We now expect approximately $85,000,000 to $105,000,000 in EGO revenue for 2025. In addition, we expect to have related to EGGIO, approximately $4,000,000 of those costs will be included in cost of goods sold and the remainder in operating expense. We do not anticipate any TSA costs beyond Q1. Second, we expect our CapEx to be approximately two percentage points higher than last year for the following reasons. First, we plan to increase spend by about 1% of revenue to accommodate the increased traffic resulting from the Eggio transaction.

Second, we anticipate approximately another 1% of revenue will be used for geo specific infrastructure builds to support the we announced earlier today. Additionally, we expect our CapEx spend will be heavily front end loaded with the first quarter seeing significantly higher expenditures compared to the rest of the year. Is due in part to the items I mentioned above and our plans to pull forward approximately $1,015,000,000 dollars of CapEx into the first quarter to help mitigate the risk of potential tariffs that may be announced later this year. Third, we expect interest income to decline in 2025 due to lower cash balances resulting from recent acquisitions, and our plan to retire our $1,150,000,000 convertible debt instrument that matures on 05/01/2025, along with expected lower investment yields as interest rates come down throughout the year. Fourth, for 2025, we anticipate continued heightened volatility in foreign currency markets driven by unpredictable timing and magnitude of Federal Reserve policy changes and their impact on interest rates. As an example of how impactful FX can be to our results, since our last earnings call in early November. The strength of the U. S. Dollar has negatively impacted our 2025 expectations by approximately $18,000,000 in revenue on an annual basis negatively impacted our non GAAP operating margin by approximately 30 basis points.

And negatively impacted our non GAAP EPS expectations by approximately nine approximately $0.09 per share. As a reminder related to currency, we have approximately $1,200,000,000 of annual revenue that is generated from foreign currency with the euro, yen and Great British pound being the largest non U. S. Dollar sources of revenue. In addition, our costs in non U. S. Dollars tend to be significantly lower than revenue and are primarily in Indian rupee Israeli shekel and Polish Lati. Fifth and finally, as Tom mentioned and illustrated in our supplemental disclosure, the traction that we are seeing in our business is being obscured by the challenges facing our largest customer, in the significant FX [indiscernible] If we exclude the effect of this customer in FX, our revenue growth rate would have accelerated year over year in 2024 compared to '23. Now moving to guidance.

The first quarter of twenty twenty five, we are projecting revenue in the range of $1,000,000,000 to $1,020,000,000 up 1% to 3% as reported or up 3% to 5% in constant currency over Q1 twenty twenty four.

We anticipate that Q1 revenue levels will be slightly lower than Q4 due to the following: lower revenue from our largest customer as we discussed earlier the negative impact of foreign exchange, reduced one time license revenue in Q1 from Q4 levels two fewer calendar days in Q1 compared to Q4, thus two less days of usage revenue and finally a significant number of delivery customers have calendar year end dates on their contracts. Therefore, the aggregate impact of all those renewals tends to have a negative impact on Q1 revenue compared to Q4 levels.

Note that we expect these items will be partially offset by a full quarter's benefit [indiscernible] At current spot rates, foreign exchange fluctuations are expected to have a negative $7,000,000 impact on Q1 compared to Q4 levels. And a negative $15,000,000 impact year over year. At these revenue levels, we expect cash gross margin of approximately 72%. Q1 non GAAP operating expenses are projected to be $310,000,000 We anticipate Q1 EBITDA margin of approximately 41%. We expect non GAAP depreciation expense of $132,000,000 operating margin of approximately 28% And with this overall revenue and spend configuration I just outlined, we expect Q1 non GAAP EPS in the range of $1.54 to $1.59 were down 6% to 3% as reported and down 2% to up 1% in constant currency. This EPS guidance assumes taxes of $57,000,000 to $59,000,000 based on an estimated quarterly non GAAP tax rate of approximately 19.5%.

Also reflects a fully diluted share count of approximately 152,000,000 shares.

Moving on to CapEx, we expect to spend approximately $27,000,000 to $245,000,000 excluding equity compensation and capitalized interest in the first quarter. Represents approximately 24% of total revenue. As noted earlier, we anticipate that our CapEx spending will be heavily front end loaded with the first quarter seeing significantly high expenditures compared to the rest of the year. Looking ahead to the full year, we expect revenue of $4,000,000,000 to $4,200,000,000 which is flat to up 5% as reported up 1% to 6% in constant currency.

We are providing a wider range than past practice due to the larger scale of our business, uncertainty around our largest customer continuing macroeconomic and geopolitical factors. We would expect to come in at the higher end of that range if we see significant weakening of the U. S. Dollar traffic growth materially exceeds our current levels and there is no ban in The U. S. For our largest customer. Would expect to come in at the lower end of this range if we see significant strengthening of the U. S. Dollar traffic materially slows from current levels and our largest customer is banned in The U. S. Moving on to security. We expect security revenue growth of approximately 10% in constant currency in 2025.

In Q4, included in Security, the combined ARR for our Zero Trust enterprise and API security solutions was approximately $247,000,000 We expect the combined ARR of these two products to increase by 30% to 35% year over year in constant currency for 2025. For Compute, we expect revenue growth to be approximately 15% in constant currency. Included in compute, our cloud infrastructure services delivered $259,000,000 in ARR exiting 2024. We expect cloud 45% in constant currency for 2025.

At current spot rates, our guidance assumes foreign exchange will have a negative $38,000,000 impact to revenue in 2025 on a year over year basis. Moving to operating margins. For 2025, we are estimating a non GAAP operating margin of approximately 28% as measured in today's FX rates. Decline in operating margin for the full year 2025 is due mainly to depreciation expense being approximately 90 basis points higher than last year and the negative impact of foreign exchange year over year. Anticipate that our full year capital expenditures will be approximately 19% of total revenue up approximately two points from 2024. Due to the items that I listed earlier. As a percentage of total revenue, our 2025 CapEx is expected to be roughly broken down as follows: approximately 4% for delivery and security, approximately 6% for compute, approximately 8% for capitalized and the remainder is for IT and facilities related spending. Moving to EPS. For the full year 2025, we expect non GAAP earnings per diluted share in the range of $6 to $6.4 This non GAAP earnings guidance is based on non GAAP effective rate of approximately 19.5% and a fully diluted share count of approximately 152,000,000 shares.

Before closing, I wanted to comment on our revenue and profitability goals for the next three to five years. Cloud Infrastructure Services is experiencing significant growth which we believe will be the main driver of our total compute revenue in the near to medium term.

Our goal is to grow total compute revenue at a compounded annual growth rate of approximately 20% over the next three to five years. Moving to security, given the size and scale in our security business, it is natural that we will see some products reach maturity and experience slowing growth rates, while other products in emerging areas will see more rapid growth. As a result, we expect security growth over the next three to five years to be led mainly by our newer GardaCore platform and API security products. However, some of our largest security products like Web Application Firewall or WAF and Prolexic are examples of some of our more mature products. We've been offering these products for over a decade and have reached a very high penetration rate within our [indiscernible] As a result, we expect the growth rate for these products to begin slowing in 2025 and continue to moderate throughout the remainder of the decade. These dynamics in our security portfolio, our goal is to grow total security revenue at an overall compounded annual growth rate of about 10% over the next three to five years including our typical level of M and A. We anticipate delivery revenue declines will moderate in 2025 increasing stabilization expected over the next few years.

In summary, we anticipate that the combination of double digit growth of our security products, the rapid expansion in our compute services, a stabilizing delivery business a continuously improving product mix away from delivery will allow us to achieve double digit top line revenue growth by the end of the decade if not sooner. As for profitability, we expect operating margins to reach 30% plus by the end of the decade. And with accelerating top line and expanding operating margins, our goal would be to deliver strong growth in non GAAP EPS over the next few years. Finally, we're not providing specific guidance for 2026, we do anticipate revenue acceleration and margin expansion compared to 2025 levels. With that, I'll wrap things up and Tom and I are happy to take your questions. Operator?

We will now begin the question and answer session. The first question comes from Roger Boyd with UBS. Please go ahead.

Great. Thank you for taking my question and congrats on the quarter and congrats on the large cloud deal. Tom, I'd love if you could maybe expand a little bit on that, provide any more details on the nature of workloads this customer is bringing over? And it sounds like it's probably coming off a hyperscaler, but any additional info you can provide on the competitive environment there as it relates to pricing performance, edge presence, think Ed noted there's some geo specific conditions the customer is looking for. And I know that's a lot, but thanks.

Yes. They already have been using substantial cloud infrastructure services at Akamai for a variety of media applications. And we'll increase that usage. In addition, they have some special needs in Scandinavia and we are building out a data center there for them to handle substantial applications for them throughout Europe. So they're using the services in a normal way, plus we have a special situation that we're doing a build out for them and development for them that ultimately we think many of our customers will use.

Super helpful. Appreciate the color.

The next question comes from Madeline Brooks with Bank of America. Please go ahead.

Hi, team. Thanks so much for taking my question. First is for housekeeping. I just want to clarify that the $100,000,000 compute deal is not the same as the five year deal that you signed with your largest delivery customer? And then I have a quick follow-up to that.

They are the same customer.

Got it. Okay. Thank you. And then the other one too would be, just give us more details outside of just the geolocation on why they chose Akamai Akamai? Does it have anything to do with maybe newer products that you have, work on AI or intelligence, things of that nature would be helpful. Thank you.

Yes, they chose Akamai for superior performance.

And better pricing. We are very well connected throughout Europe. Nobody has the points of presence that we do. And so we can handle requests for this customer throughout the continent and get it into the data center facility they'd like to have. In Scandinavia. And do that very efficiently at a favorable price point. Because of our existing platform and capabilities. The next question comes from Amit Darianani with Evercore. Please go ahead. [indiscernible] for taking my question. I guess I have two quick ones hopefully. The first one with your largest customer, the $60,000,000 headwind that you talked about, hope you could just maybe expand a little bit on that. Is that headwind going to happen [indiscernible] I'm just trying to understand like, is this more about them intending to move some of the CDN in house or is it more of an executive order? 60,000,000 headwind doesn't happen irrespective and sounds like it's another 60,000,000 in '26 Maybe just level set that kind of what's happening then how to ring fence it, that would be helpful. And then just a question on operating margins, what do you think it takes for Akamai to get back to a 30% operating margin number over time?

Any kind of help on revenue or cost control would be helpful. Thank you. Yes. So headwind is by and large because of their DIY build out. As we've talked about. So they'll be taking on more of the services themselves. And there are political challenges obviously in The U. S. As a result of the five year agreement. Our exposure there is mitigated quite a bit. As we talked about in a disclosure last year, we had about $50,000,000 have about $50,000,000 of U. S. Business with this customer that obviously would be taken away if they are banned in The U. S. However, as a result of the minimum commitments made, our exposure there is less. As Ed pointed out, if they are banned in The U. S, then we would have less revenue from them than if they continue to operate. And if they continue to operate, there would be upside. To the upper end of the range.

And Ed, do you want to talk about the margins? Sure.

Yes. So mostly the expansion is going to come through two things. One, the mix is going to move more towards security and compute. And then just from an operating leverage perspective with the revenue growth, we just believe we can scale the business accordingly. And a lot of that additional growth will drop to the bottom line. The changes that Tom is talking about or mentioned on the call about go to market, some of that's already been funded by the action that we took before and we'll be very responsible with future investments. So we expect to see some scale as we grow top line.

Great. Thank you very much. The next question comes from Fatima Boolani with Citi.

Please go ahead.

Good afternoon. Thank you for taking my questions. Tom or Ed, please feel free to chime in on this. With regards to TikTok, you talked specifically about the delivery business and some of the minimal minimum commitments they've made to you to protect you. But I was actually curious if you can opine or comment on if that is a customer that has adopted other solutions in your portfolio, I. E. Specifically anything in the security realm, that we have to be mindful of eroding away? And then I have a quick follow-up on the good market as well.

Yes. Like any large customer, they pretty much use all our services. So they're a large delivery customer. They use a lot of our security services. And actually a growing amount of our compute our cloud infrastructure services. And we have factored that in to the guidance we've given, both the guidance for this year and three to five year guidance.

Great. And just from a go to market perspective, Tom, you were very explicit in that there's been a lot of thoughtful change and maybe a little bit of an overhaul in the go to market organization by way of account segmentation pricing strategy, etcetera. I'm wondering how far along are you in the process of ironing out or cementing a lot of these changes because it does seem like there might be a couple of things in flux from an aggregate go to market strategy perspective. So, would love to hear kind of where you are on the journey to kind of overhaul the go to market organization and how we should think about you coming out the other end of that? Thank you. Yes, great question. I think of this as sort of a two year process roughly speaking. And we're in the beginning stages. We've already increased the number of our hunters and as I said the ratio of hunting to farming. We've already increased and we'll do further increases in the specialized sales team We are working now, thinking through pricing structure changes contract, potential contract structure changes. Making progress in segmentation for the field, So a lot of work still underway.

And you want to, I think, position this in the context that we're transforming the company. And you look at our products that and we're evolving substantially from what was a delivery company and then delivery and say the web app firewall, company where most of our revenue has been And you look at the products that are really growing and driving us forward to the future and you're looking at segment take Articor segmentation, Enterprise Zero Trust Security, you're looking at API security, huge greenfield there for us. And best of all, you're looking at our cloud infrastructure services, which you just really taken off. It's It's remarkable, I think when you see what's happened. Bought Linode about three years ago had about $127,000,000 ARR growing mid teens at best and today more than double now growing at 35% last year and we're forecasting 40% to 45% this year.

And I think what's really exciting about that is the addressable market for us is literally over $100,000,000,000 and that's probably just in our current customer base. So tremendous potential and it's really taking off now. So that changes the company. And it changes what we need from the sales force, what they need to be doing. Obviously, we want to to protect and grow the revenue in our existing base, but want to be out there selling those new products both in the existing base and to a lot of new customers.

We're in the process of transforming the sales force to get the the capabilities that we need to continue the very strong growth we're seeing in these new areas. Thank you.

The next question comes from Frank Louthan with Raymond James. Please go ahead. Great. Thank you. Can you give us an idea of what the logo growth was in the quarter? That would be great. And is there any particular group security, compute, etcetera, that saw a better or a worse growth from new logos? Thanks. Yes. Hey, Frank, this is Ed.

Actually, logo growth obviously was probably most positively impacted from the Edgio contracts that we acquired. We added a few hundred logos there.

Over 100 of those were new to the company. So that was the biggest addition. As far as where the new logos are coming from, it's mostly in security in the two new areas that Tom talked about, GardaCore and API security, and also in the compute side as well. So I would say it's probably stronger than normal New acquisition quarter in Q4, just normal course and then obviously, Edgio helped quite a bit as well?

And what's your outlook for being able to retain those EdgeEO likelihood of those converting into more permanent customers?

Yes.

So we've gone through the migration at this point. So we've moved everybody off. The Edge O' network is closed. So or shut down at this point. So we have a good idea of who's come over at this point. We don't anticipate significant churn from what we have today. We are very selective in what we took. We didn't take all the customers. There were certain things certain small customers that didn't make sense for us to take or some acceptable use policy violations that we wouldn't take and there were some economics with certain customers that we didn't want. So in fact, due to our guidance is what we think do with that customer base. I think there's probably some upside there with upsell.

Generally speaking, you want to land the customer, make sure they're happy and then start developing a pipeline with them. I want to just attack them right away. With the sales pitch. So pretty happy with what we were able to retain. It was pretty much right in line, maybe a little bit better than we Okay, great. Thank you.

The next question comes from Rishi Jaluria with RBC. Please go ahead.

Wonderful. Thanks so much for taking my questions. Just two quick ones. First, going back to some of the changes in go to market and changes in sales. What What can you do on your end to minimize the disruption from that? What are you assuming when you think about your 2025 guide? And I ask because in the history of software, we see sales rigor changes to go to market and they always end up being a lot more disruptive [indiscernible] maybe if you could walk us through your assumptions and what you can do to minimize disruption, that'd be helpful and I have a quick follow-up. Well, the first key is to avoid account breakage. And so we're not doing it all at once. As I mentioned, this is a two year journey. And of course, we're adding resource with specialization in the new products. And so those folks are helping do the cross sell and have a chance to hunt for new customers. And so the key really I think is is we will minimize the breakage of the rep associations with customers in the accounts. And Ed, is there anything you'd like to add to that?

Yes. Just say that as Tom mentioned, we're working with one of the large consulting firms and bringing some expertise in to help us think through that. But absolutely, we want to be very careful with how we we think about the movement from hunting to farming and how we support customers The less breakage, the better. Got it. No, that's helpful. And then just really quickly on Eggio.

Appreciate the color and the detailed guide. As we think maybe a little bit more longer term, given Edge Year is out of the fold now and you have those contracts and assets, How should we be thinking about the pricing environment for the delivery? And can just having fewer players in the space help maybe lead to a less aggressive pricing environment? Thanks, Yes. It really comes down to the Different buckets of customers. I'd say with some of the larger high volume customers, we are seeing some rationalization to some extent longer contract terms, which is helpful. Obviously, if you have less players, you do potentially have some better pricing, but we're already starting to see that in the market. So I'd say it's getting a little bit better, but it's always been a volume driven business. So to the extent that volumes continue to drive go higher, we'll still see the general trend in pricing to go down, but hopefully we'll see it moderate a little in the future.

Wonderful. Thank you.

The next question comes from John DiFucci with Guggenheim. Please go ahead.

Thank you.

So Tom and Ed, I think this applies to both you.

Business looks to be going as planned and we appreciate the three to five year goals.

And actually all the information you gave us, this is great. But the guidance for next year implies 3% growth. And I think there's a 1% of FX headwind, so that's about 4%.

I get the large customer issues, but there's always issues, right?

That aside for now, how do we get comfort that growth is going to accelerate to 10 of the of the business will more than offset the delivery business? And And or are you and or I guess, are you expecting improved macro backdrop in the forecast? Or does it I guess also related to this, does that 10% eventual 10% ink exclude any impacts from that large customer? All right. So I'll take this one, Tom. So I'll start with the back part. The large cost we've done is we've modeled out what their minimum spend would be.

For that five year contract. So think of that as being the bottom of the potential there for that customer. So it's more in terms of what we're seeing for growth, I think you have to kind of break the business down into the buckets and why we showed you all that data. We'll start with delivery first.

So delivery obviously has been a pretty big drag. It's starting to improve. We expect it to improve this year, continue to improve. So you should start to see some stabilization in delivery over that period of time. [indiscernible] think of that as that big drag sort of moderating significantly, so you don't have as much of a drag. So then when you take the businesses that we have, look at security, the bigger franchises are slowing a bit, but they're still growing. We're still getting some growth out of that. And underneath that, it's for example in our security products, we have new fraud products and we're introducing new products. So that that franchise will still grow, just won't be growing as fast as it was. But between GardaCore and API, those are very large We have market leading products. We think we'll be able to that included with some of the changes we're making in go to market, the investment we're making in hunting, we'll get more productivity out of the sales force.

There's still a long way to go there. So we think that that growth as it gets bigger get 10% growth out of security that we think is pretty durable. Given those factors. And then there's compute. So with compute, we're going through a little bit of a transformation as Tom talked about. With the sort of not I don't want to say the legacy, but some of the other older products in the other applications bucket where we're partnering with some of the ISV partners which has a little bit of a near term [indiscernible] flattening of revenue in that bucket but it gives us a much bigger opportunity to grow the market by partnering with those folks getting some of their own business, but also getting a product that's being invested in, etcetera. So we have a much more robust offering. And then again with the go to market investments we're making in compute, not only just with the hunters, but also with the overlay specialists, we think that will also help drive more productivity in the field. So hopefully that answered your question. Ed, that was really good. That's really helpful. It makes me think we need to do a lot more work around, especially compute, but it's exciting to think about Guardacort and API.

I guess just one thing, one last question on the compute business.

And one of the things that I can help to think about here is profitability. And it's always a question. Anybody that's coming into this business. But you allude to having some advantages entering this business given the delivery business. I guess can you describe that in a little more detail? I mean I kind of get the high level Is it as simple as you're utilizing underutilized assets across your network? Or is there something more to it?

There are several reasons. First, we probably move around more data than pretty much anybody.

And we've figured out how to do that very efficiently. And so for customers of our cloud infrastructure platform, when they compare our pricing to the hyperscalers were a lot less, at least for the applications where they're moving around data, they got a lot of hits. And that's a lot of the applications out there today. And so in head to head competition now with the hyperscalers, we can offer a much better price Second, is performance. And as we've talked about, we have the world's most distributed platform. We are in a position to get our customers' compute instances a lot closer to end users. And not only is that good for scalability, it's great for performance because the business logic is running close to the users. And so when we do head to head trials now against the hyperscalers, for a lot of the applications we perform better.

So we're able to offer better performance at a lower price point.

And now with the managed container service, that's super exciting. We can actually support our customers' containers in hundreds of cities. Nobody is doing that today. And so again, and those are the locations we've had already for the delivery business and the security business. So we're already there. So you get better performance and scalability at a lower price point. And then you combine that with the enormous market, that we have a chance to tap into And I think it's probably really important as you make the models to to look at our cloud infrastructure services revenue and what's happening there. We only really started selling that to enterprises last year and went from very little revenue to $115,000,000 ARR and the total for our cloud infrastructure services $259,000,000 and we're projecting that total number to grow by 40%.

At least 40% to 45% this year. So I would encourage you to keep a close eye on that. Because that drives a lot of growth and profitability for going forward, Well, Tom, thank you. Just add on the profitability, there's four main synergies. One is the backbone. So we obviously can leverage that Obviously, the contracts that we serve there. Number two is with operations. So a lot of the folks that build the CDN also build out the data centers for our our compute business, so we didn't have to go hire a big team. Number three is engineering. We moved we earlier in the year that we moved about 1,000 people out of the engineering organization and our delivery business into the compute business, both in operation and engineering. And then the fourth thing is on go to market. So we can leverage our existing customer relationships and our reps and we're augmenting that a bit with some of our specialists, but we don't have to go on a whole new team. So there's an awful lot of operating expenses that we can take advantage of in terms of driving profitability.

Thank you, guys. This all makes sense. Now it's the easy part, you just have to execute.

That was a joke. It's not easy. Go ahead.

Thanks guys. The next question comes from Patrick Colville with Scotiabank.

Please go ahead.

Thanks for squeezing me in, guys. I guess this one's for probably Doctor. Tom and Ed.

Mean, in the prepared remarks, you touched on the reasons why compute is slow. But I just I'm going through my model now and the year on year delta is pretty stark. And so I just want to make sure I've got them completely nailed down. So I guess just to start off, This year, 25% growth in compute next year you're guiding to 15%. Can you just double coat, so what is driving that?

Yes, sure. So there's the two pieces. There's the cloud infrastructure security, which will continue to grow and actually accelerate.

So that piece, it's the smaller piece of the two businesses, but that's going to accelerate pretty significantly. When you look under covers of the other, the application services, there's a number things in there. For example, we have some of our legacy net storage business, which will be end of life in that soon in the next year or two some customers will migrate to [indiscernible] our cloud offering, some may decide to do something else, but that's going to be in a bit of a decline. And then we've got a lot of revenue that comes from some of these potential ISV partners. For example, we've got some of our transcoding. We announced something with a partner called Harmonic where We're partnering with them and we're migrating some of that business over there. They're using us now for their compute. So that's going to be shifting over time. And there's probably a four or five buckets, whether it's image manager, video manager, our waiting room application or visitor prioritization, those things we're going to be moving towards ISV partners and focusing more of our efforts on the infrastructure services. So you're going to see flattening to maybe slightly down in that bucket and you'll see that most of the growth coming from cloud infrastructure [indiscernible] [indiscernible] And then I guess there's a quick one because I've been getting this a lot from investors.

In terms of Akamai's exposure to the U. S. Fed should we think about that? And in 2024 and is there any expectations for that business embedded into guidance for '20 So when you say the U. S. Fed, you're talking about the Federal Reserve interest rate policy or are you talking about the federal government? It's like 72?

The latter.

Okay.

Yes. So we obviously do sell to the government It's not a huge portion of our business. It's way too early to tell with what the cost cutting efforts that are going on, how that would impact us. But it's not an overly material part of the business, so I wouldn't expect anything material out of that. We haven't modeled anything material, just kind of regular way business for now. So I'm not anticipating anything.

Crystal clear. All right. Thank you so much, guys. We appreciate it. The next question comes from James Fish with Piper Sandler. Please go ahead. Hey, guys. Appreciate all the details here.

And increased disclosures, I think investors will as well.

Maybe just following up on something you just said first, Ed.

You just walk us through some of that transition impact on the compute side? And which of the products you plan sort of be transitioning off and how to think about the utilization of the compute network today that we need to invest this much after two years of investing this much behind the compute business.

Yes.

So I mean, I gave you the terms of the investment, the percentage of revenue that we're spending for that, 1% of that of the 6% that we're using for compute will be specifically for that big customer. And I've always talked about how from time to time, if we do get large customers, you do tend to sometimes get outsized demand in a particular geo. We added an awful lot of investment this year in terms of bulking up a number of locations, [indiscernible] we're continuing to invest for that. But also keep in mind, we did migrate over $100,000,000 worth of our own applications that's running well over $500,000,000 of our revenue today and that business continues to grow. So we're still happy to to provide some investments support that, which is significantly less than what we would be paying if we were to continue to use third party cloud providers. Now in terms of the the two different components of revenue, I think I discussed the cloud infrastructure service. So I think you guys get that. That's the real fast growing stuff. And inside that other bucket where you'll see that flattening out to declining. And it's really just items I mentioned.

We've got video management, image management, visitor prioritization, And some various workflow components like transcoding that we have built from time to time for customers. There's not a ton of demand for it. It's grown decently, but it's not a specialty of ours. We want to make sure that we're investing in the right areas. So as we're migrating that to partners, And we shift our investment into the faster growing infrastructure as cloud services. You'll see a bottoming out here this year and then the growth will reaccelerate to 20% led by cloud infrastructure services. And also keep in mind, I've got about last time we broke it out, it was about $50,000,000 of legacy storage. So think of that as like the media companies spot not storing like a backup origin for their video files and music files and that sort of stuff. Images, etcetera. That business will be winding down over the next year or so. So that's going to have a bit of a drag on revenue as well. Understood. And I think a lot of investors here you guys are sitting here on an earnings call, giving a three to five year framework last time we got this type of framework from you guys was many years ago.

And I think in that framework, we had talked about 20% constant currency security growth, for example, in we didn't hit that. So you're talking about a 10% CAGR that includes M and A from here within security Just what's going to drive the reason that we actually achieved these results and that this is a reasonable expectation that that actually might be conservative as opposed to hoping that we hit that number.

Well, I mean to be fair, there were several years during that period of time when we did grow 20%. We always said 20% would include acquisitions. So we did some acquisitions along the way. We've looked, we just did put up 16%. So that business has been very healthy. We've been adding a couple of hundred million of high margin security revenue for years. Now. And if you do the math, we'll continue to do that. Terms of the impact of acquisitions going forward, we're not anticipating [indiscernible] whether it's tech tuck ins or smaller companies that are got a product that's in in market that's about to scale like API security where the company is looking at making a big investment and go to market or raising around or looking to exit, we buy something like that or like GardaCore and we scale that up and we've shown that we've got success there. So I think we've got confidence in our M and A strategy. It's not going to be a significant portion, but maybe over time it might be one of the faster growing products as we exit the decade. And what we've been why we these businesses out for you can see how well we're scaling a business now that's a couple hundred million growing extremely fast.

So I think we have pretty good confidence. And again, yes, you can we can quibble over the 20% and maybe a couple of years are in the high teens. But we said, that would have included acquisitions and always doing. But I thought we did pretty well over that period of time. And we just thought now that we're getting to a scale of couple of billion, it made sense to update expectations as we see some of our products we've been in the market for over a decade slowing down.

The next question comes from Will Power with Paired. Please go ahead.

Okay, great.

Hey, Tom, you provided some good examples in the prepared remarks, I think, of some of the applications that are being used in our network. I mean, it seemed for some time that should be well positioned for inference at the edge. And I just wonder if you may be update us just as along the lines of the tone of conversations you're having, what kind of the pipeline looks like, just kind of that activity level you're seeing in terms of taking advantage of particularly some of these generative AI [indiscernible] maybe it's starting to develop or you just think it's going to start to develop?

Yes, I think there's a lot. AI powered ad image normalization, so that the various images have the same [indiscernible] image classification, even for things like detecting disease in crops.

AI powered speech recognition in cars, AI powered chatbots, sentiment analysis, text to image, inferencing for a variety of applications All sorts of applications are ready using Gen AI on the platform. And we have partners, our ISV partners, some of them doing AI on the [indiscernible] AI inferencing, So I would say it's early days, but all sorts of things being done on our cloud infrastructure services today.

Okay. And then as we look at the cloud infrastructure, assumed acceleration, I think you're looking for 40% to 45% ARR growth. Any further breakdown? I mean, how much is inferencing influencing that? Or is that is that still early And if not, what are the kind of the key drivers of the acceleration there including impact of the $100,000,000 deal? How does that factor in?

Yes. The $100,000,000 deal doesn't do a lot this year. That doesn't really ramp up until the end of the year. So I don't think that's a material impact on our 40% to 45% projection. That will certainly help us in 2026 and beyond. And I don't think AI inferencing is a big part of the growth year either. There could be some, but I think that will fall more into the upside category. I think it's just more the traditional uses of compute. On the platform. And keep in mind that's $100,000,000,000 market today plus without getting into AI or the new large deal that we've done. And just as examples, with our ISV partners, database at the edge, observability for all sorts of [indiscernible] media workflow, things like file transcoding and live encoding, video pack, interactive WebRTC, these are what our our ISV partners have their applications doing on our cloud infrastructure platform, digital asset management, video optimization, game orchestration, fleet management, DRM, Kubernetes activity and auto scaling, ad insertion, server side ad insertion, So there's just a bunch of stuff that is just good old regular compute that's running on the platform. I would say we're as you can see from the examples we've given, we're selling it into pretty much all the verticals.

Lot of financial companies are starting to use it now. Media broadly construed is still I think the sweet spot and partly that's by design because those customers need to get great performance, they need to cut cost, They don't like writing a huge check to their biggest competitor. And they're big Akamai customers and they like Akamai a lot. So that's sort of the center of mass, but it goes across verticals and across a lot of use cases And I'd say we're excited about AI that's upside and probably comes down the road.

That's helpful. Thank you. The next question comes from Mark Murphy with JPMorgan. Please go ahead.

Thank you very much. Tom, interested to get your view of the ramifications for Akamai of all of the technological advancements and efficiencies that we've seen with the deep seek model and whether you see any signs of that opening up kind of a broader wave of experimentation on for doing edge inferencing on Akamai compute. Maybe some of those AI applications are going to become more economically viable? And then I had a quick follow-up for Ed.

Yes. I think DeepSeq phenomenon or announcement, whatever you want to call it, is very consistent with what we've been saying is going to happen. I think you'll see further improvements It's great for us because it validates what we've been saying and how we've So fact, there's already entities running DeepSeq on our cloud infrastructure So And it does mean that it is a lot less expensive. It doesn't need the giant core GPUs. It could be run on lighter weight GPUs. There'll be a lot of use cases where you want that on the edge. And I think it's great and very much what we've expected to happen. And I think you'll see more developments along those lines. Okay. That's great to hear. And Ed, as follow-up on the security CAGR where you're expecting about 10% in the next three to five years. That's fairly close I believe, to the overall market growing something like 12% to 14%.

And you said that it includes typical level of M and A. If we think about it organically, should we pencil out something like maybe mid to high single digits organically and then if you're able to find some of the in some of these tuck ins, you've done an incredible job picking those out and executing on those. Recently and they're growing like a weed.

Then maybe the inorganic piece gives you a couple of few points there over the next three to five years?

Is that a decent framework? Yes, I think that's a good way to think about it Mark.

I mean obviously at the scale we're at now over $2,000,000,000 and we talk about even the bigger revenue companies we've acquired have been $20,000,000 to $30,000,000 insignificant, it's about a point in total from inorganic. In terms of the near term, there's going to be mostly from organic. But yes, probably maybe one point something like that. You get out a couple of years. And then obviously, if we pick a good company like we did with Noname or like we did with Gardicore. As you get out further, we consider that organic growth at that point that might be contributing because it's a faster growing area if we get into a hot space that's growing quickly. But in terms of like the to make a number in any given year, we don't anticipate getting much more than maybe 1% from an acquisition inorganically.

Okay. Understood. Thank you so much.

I understand that we have time for with William Blair and Company. Please go ahead.

Excellent. And let me echo the the thank you for the additional disclosure.

Just one question from me. How concerned should we be with potential tariff impacts? And can you maybe pass through higher costs that are associated with that? I know you're trying to maybe accelerate some investment ahead of time. Particularly given your need to invest on the compute side over the long run it does seem like there's maybe some exposure here. Just wanted to understand the implications there.

Thank you.

Yes.

I mean, it's obviously tough to call just given we don't know what the endgame is here in terms of ten hours. But to the extent we do have the ability to move supply chains around and we're looking at obviously doing that.

There was some talk about Canada and Mexico. We do get some server builds out of there. But so we fast forwarded some, I gave you the number $10,000,000 to $15,000,000 so it's not significant. In terms of can we pass some of these pricing costs along, we're certainly exploring that as part of the work we're doing with the consulting firm we hired Overall pricing strategy is part of it. And to the extent that it becomes somewhat material in any way, we certainly would have to bake that into our pricing.

But it's tough to say at this point because we just don't know what the final end state is.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Mark Stautenberg for any closing remarks.

Thank you, everyone. As usual, we will be attending investor conferences throughout the rest of the quarter. We look forward to seeing you there and discussing everything that we talked about today. Thanks again for joining us tonight. I know it's a long call.

We hope that you have a rest, nice of your evening. Nice Operator, can end the call now.

The conference has now concluded.