Akamai Technologies (AKAM) Q3 2026 earnings review
Akamai signs $14 billion in cloud deals, but profit drops
Akamai signed a wave of long-term cloud contracts while its upfront server spending pushed cash flow negative. Third-quarter revenue rose 6% from a year ago to $1.12 billion, but profit per share excluding one-offs fell 5% as data-center costs climbed. Chief executive Tom Leighton cut the full-year 2026 revenue outlook slightly, yet set a 2027 growth plan of 17% to 22%.
| Revenue | $1,122M +6% from a year ago (+7% excluding currency) |
|---|---|
| Profit per share, excluding one-offs | $1.77 -5% from a year ago |
| Signed 2026 cloud commitments | >$14B up from $2.8B last quarter |
| 2027 revenue growth outlook | Raised to 17–22% prior view: low-teens growth |
⚖️ Verdict: 🟢 Bullish
The story got better because signed multi-year commitments for Cloud Infrastructure Services — Akamai's business of renting computing power and storage — multiplied from $2.8 billion in June to over $14 billion. That backlog backs a 2028 revenue target above $7 billion. The caution: fourth-quarter revenue was planned below what the prior outlook implied by our math, and server purchases pushed free cash flow negative.
The question now is whether these huge cloud contracts will earn healthy profit margins or lock Akamai into years of heavy capital spending and lower returns. One view is that contracted revenue will lift earnings once the servers go live; the other is that hardware bills and debt will eat the cash. The 2027 margin and capital plan next quarter will tell.
🐂 Bull Case
Signed Cloud Commitments Multiplied Fivefold to $14 Billion
Cloud Infrastructure Services (CIS) is Akamai's business of renting computing power and data storage to companies running artificial intelligence and cloud software. Three months ago, the internet infrastructure group had signed $2.8 billion of multi-year customer contracts for this service in 2026.
Chief executive Tom Leighton said the company now has "more than $14 billion worth of multi-year commitments signed so far this year". By our math, customers signed at least $11.2 billion of new contracts during the third quarter alone.
- Year-to-date signed cloud commitments: over $14 billion, up from $2.8 billion in the second quarter
- Third-quarter CIS revenue: $108.8 million, up 34.0% from a year ago
- 2027 CIS revenue outlook: $1.1 billion to $1.3 billion, roughly triple this year's pace
This backlog matters because dedicated computing contracts turn into recurring sales once Akamai installs the servers, which usually takes six to nine months. Even though current CIS growth slowed from 39% last quarter to 34% in the third quarter, the signed deals lock in the 2027 revenue jump.
What to watch: fourth-quarter CIS revenue and the backlog note in the upcoming quarterly filing. Those disclosures will show how much of the $14 billion has moved into active service.
Multi-Year Plan Lifts 2027 Growth Above 17%
Akamai has grown total sales at only 5% to 7% a quarter for the past two years because shrinking web-delivery revenue offset steady cybersecurity gains. Last quarter, management aimed for total revenue growth in the low teens for 2027.
"Given our CIS momentum, track record of execution and continued strong pipeline, we expect Akamai's overall revenue growth to accelerate to 17% to 22% year-over-year when adjusted for foreign exchange* in 2027," Leighton said. He added that 2028 total revenue should "exceed $7.0 billion", up from about $4.45 billion this year.
The numbers work because the new $1.1 billion to $1.3 billion CIS target for 2027 adds roughly $800 million of new sales in a single year by our math. That single business line is enough to lift the entire company's growth rate by nearly 18 percentage points without needing faster growth from security or web delivery.
What to watch: the full-year 2027 profit and capital spending plan on the fourth-quarter call in February. That update will show how much profit reaches the bottom line from the first $1.2 billion of cloud sales.
🐻 Bear Case
Fourth-Quarter Plan Cuts the Late-2026 Ramp
Management had previously told investors to expect a sharp jump in cloud revenue in the fourth quarter of 2026 as the first big artificial intelligence contracts went live. By our math, the prior full-year revenue target of $4.445 billion to $4.530 billion required fourth-quarter sales of $1.167 billion to $1.227 billion.
Instead, the cloud group cut its 2026 revenue outlook by $35 million at the middle of the range and set the fourth-quarter plan at $1.145 billion to $1.170 billion. In addition, third-quarter capital spending on an accrual basis — equipment recorded when received rather than when paid for — was $464.1 million, missing management's $475 million to $525 million plan for a second straight quarter.
This cut challenges management's narrative of a fourth-quarter inflection because the new plan points to 5.7% fourth-quarter revenue growth by our math, slower than the third quarter's 6.4%. Because customers only pay once Akamai installs their dedicated servers, the lower capital spending and reduced fourth-quarter outlook indicate that data-center setup slipped into 2027.
What to watch: whether Akamai repeats its prior target of at least 50% full-year CIS growth on the conference call. A cut to that figure would confirm that late-2026 contract starts moved into early next year.
Server Spending Turned Free Cash Flow Negative
Building data centers for $14 billion of cloud contracts requires Akamai to buy servers and rent space months before customers start paying. While that expansion drives the 2027 sales outlook, it is draining cash and cutting profit margins today.
Cash paid for property, equipment and software more than tripled from a year ago to $605.2 million in the third quarter, pushing free cash flow to negative $172.1 million by our math. Operating margin, excluding one-offs, dropped 5.1 percentage points from a year ago to 25.5% because cost of revenue — the direct cost of running its server network — rose 4.3 percentage points to 45.0% of sales.
- Cash capital spending: $605.2 million, up from $195.0 million a year ago
- Accrual capital spending: $464.1 million, or 41.4% of revenue vs 21.3% a year ago
- Sales and marketing plus research and development: up 1.7 percentage points of revenue combined
- Convertible debt due within 12 months: $1.15 billion, alongside $6.42 billion of long-term debt
The company ended the quarter with $4.24 billion in cash and marketable securities after borrowing earlier this year, and it bought back zero shares in the third quarter. With fourth-quarter operating margin planned at 24%, margins have no path back to management's older 30% goal during the build-out.
What to watch: fourth-quarter cash capital spending and the 2027 capital budget. Those figures will show how much of the $4.24 billion cash pile the server build will consume before the new contracts pay for themselves.
Risks this quarter didn't answer
Three standing questions around the economics and risks of the cloud expansion received no new details in the earnings release.
- Customer concentration: Akamai did not disclose how many customers account for the $14 billion in commitments or their credit quality; the quarterly filing's backlog note may add detail.
- Server lifespan vs contract length: the release gives no update on depreciation schedules for artificial intelligence chips signed to multi-year deals; the filing's property footnote will show any changes.
- Hardware cost pass-throughs: management did not state whether rising memory and server prices are passed on in the new contracts; conference call remarks are the first check.
👓 Other Themes
New AI Tools Target Model Tuning and Agents
Akamai launched two software services on its cloud network: Akamai Inference and Akamai Agent Sandbox. Leighton said the tools let companies "build and tune open-weight models based on their proprietary data and run agents within strictly enforced boundaries". Separately, the cash flow statement shows $191.2 million paid for a business acquisition in the quarter, completing the security purchase announced earlier this year.
💲 Other KPIs
Security sales, which protect websites and applications from cyberattacks, grew 9.4% from a year ago and make up 55% of total revenue. Delivery and other cloud applications — Akamai's original business of speeding up web traffic — fell 3.4% from a year ago, a smaller drop than the 5.8% decline in the second quarter.
Money owed by customers (accounts receivable) rose 20.8% from the end of 2025 by our math, outpacing 5.8% nine-month revenue growth and absorbing $177.4 million of operating cash flow this year. Total deferred revenue — cash collected from customers for services not yet delivered — rose 30.8% over the same nine months to $220.0 million.
The share count used to calculate profit per share excluding one-offs rose 2.0% from a year ago, while the standard accounting share count rose 4.4% to 151.2 million because a higher stock price made convertible debt dilutive. The US company bought back zero shares in the quarter to save cash for server purchases.
🔮 Guidance
Cut against what the prior full-year plan implied. The middle of the range calls for $1,157.5 million, or 5.7% growth from a year ago by our math, down from 6.4% in the third quarter and $39 million below the previous implied middle.
Cut. Management lowered the middle of the full-year range by $35 million to $4,452.5 million, or 5.8% growth from 2025 by our math. After an initial $22.5 million raise in the first quarter, Akamai has cut the full-year midpoint twice in a row: -$10 million last quarter and -$35 million today.
Cut at the top end for the full year. The fourth-quarter plan of 24% is down from 25% in the third quarter and 29% in the fourth quarter of 2025, bringing the full-year target to 25% as data-center and depreciation expenses grow ahead of new cloud revenue.
Cut. The full-year middle moved down $0.15 to $6.575, a 7.7% drop from 2025 by our math. For the fourth quarter, the $1.60 middle represents a 13.0% drop from a year ago and a 9.6% drop from the third quarter, even with the planned tax rate trimmed from 19% to 18.5% for the year.
Raised for 2027 and newly issued for 2028. Management lifted the 2027 total revenue growth plan from the low teens to 17–22% excluding currency swings, driven by $1.1 billion to $1.3 billion in cloud infrastructure sales. By our math, the 2027 midpoint implies $5.32 billion in total sales, and the $7.0 billion floor for 2028 implies another 31.6% jump the year after.
❓ Key Questions
Who signed the $11.2 billion of new third-quarter cloud contracts?
Signed multi-year commitments jumped from $2.8 billion in June to over $14 billion in September. Investors need to know how many customers make up that $11.2 billion addition and whether any single buyer creates credit or cancellation risk.
Is the 50% cloud growth target for 2026 still intact?
The earnings release omitted the prior target of at least 50% constant-currency growth for Cloud Infrastructure Services in 2026 while cutting fourth-quarter total revenue. Management needs to clarify how much cloud revenue shifted from late 2026 into 2027.
What operating margin and capital spending do the 2027 targets require?
Akamai projected $1.1 billion to $1.3 billion of 2027 cloud sales and over $7.0 billion of 2028 total revenue, but gave no profit or capital spending targets. Supporting $14 billion of contracts may require another year of negative free cash flow.
How long will the new artificial intelligence servers last?
Cost of revenue rose 4.3 percentage points of sales as network depreciation climbed. Investors still lack the useful-life assumption Akamai uses to depreciate its graphics chips against four-to-seven-year customer contracts.