AKAMAI TECHNOLOGIES INC

Previous wording

We develop and provide solutions for global enterprises to build, secure and accelerate their applications and digital experiences through our massively distributed global network, which underpins our security, delivery and cloud computing solutions, and is central to our financial success. The key factors that influence our financial success are our ability to build on recurring revenue commitments, increase traffic on our network, continue to develop, scale and successfully bring to market our compute platform and compute-to-edge solutions that meet the needs of professional users and enterprises, including with respect to reliability, effectively manage the prices we charge for our solutions, develop new products and appropriately manage our capital spending and other expenses. The purpose of this discussion and analysis section is to provide material information relevant to an assessment of our financial condition and results of operations from management’s perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are likely to impact our future performance.

Current wording

We develop and provide solutions for global enterprises to build, secure and accelerate their applications and digital experiences through our massively distributed global network, which underpins our security, delivery and cloud computing solutions, and is central to our financial success. The key factors that influence our financial success are our ability to build on recurring revenue commitments across both our established and higher growth security and compute product portfolios, increase traffic on our network, continue to develop, scale and successfully bring to market our compute platform and compute-to-edge solutions that meet the needs of professional users and enterprises, including with respect to reliability, effectively manage the prices we charge for our solutions, the continuous development of new and existing products and appropriately manage our capital spending and other operational expenses. The purpose of this discussion and analysis section is to provide material information relevant to an assessment of our financial condition and results of operations from management’s perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are likely to impact our future performance.

Previous wording

We primarily derive revenue from the sale of services to customers pursuant to contracts having terms of one year or longer, which allows us to have a consistent and predictable base level of revenue. Services included in our contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. In addition to a base level of revenue, we are also dependent on our ability to increase our product offerings and to cross-sell additional services to our new and existing customers, particularly for our security and cloud computing solutions portfolios. Our revenue is also impacted by customer renewals and the pricing for such renewals, the rate of adoption and timing of customer offerings, variability of one-time events, usage of cloud computing services and the amount of traffic we serve on our network. Geopolitical, economic and other developments that impact our customers' businesses can also impact our ability to attract new customers or continue to cross-sell additional services to existing customers and traffic levels for customers with variable usage. Over the longer term, our ability to expand our product portfolio and to effectively manage the prices we charge for our solutions are key factors impacting our revenue growth.

Current wording

We primarily derive revenue from the sale of services to customers pursuant to contracts having terms of one year or longer, which allows us to have a consistent and predictable base level of revenue. Services included in our contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. In addition to a base level of revenue, we are also dependent on our ability to increase our product offerings and to cross-sell additional services to our new and existing customers, particularly for our security and cloud computing solutions portfolios. Our revenue is also impacted by customer renewals and the pricing for such renewals, the rate of adoption and timing of customer offerings, variability of one-time events, usage of cloud computing services and the amount of traffic we serve on our network. Geopolitical, economic and other developments that impact our customers' businesses can also impact our ability to attract new customers or continue to cross-sell additional services to existing customers and traffic levels for customers with variable usage. Over the longer term, our ability to continually develop and expand our product portfolio and to effectively manage the prices we charge for our solutions are key factors impacting our revenue growth.

Previous wording

•Increased sales of our security solutions, led by application security solutions and Guardicore segmentation solutions and increased sales of our cloud computing solutions, attributable to our acquisition of Linode Limited Liability Company ("Linode") and enhanced services on our compute platform, have made a significant contribution to revenue growth. Our security and cloud computing solutions represented over two-thirds of our total revenue during 2024. We plan to continue to invest in these areas with a focus on further advancing our product portfolios and sales capabilities.

Current wording

•Increased sales of our security solutions, led by application security solutions and Guardicore segmentation solutions, and increased sales of our cloud computing solutions, attributable to enhanced services on our compute platform and growth in our cloud infrastructure services, have made a significant contribution to revenue growth. Our security and cloud computing solutions continue to contribute to a large portion of revenue. We plan to continue to invest in these areas with a focus on further advancing our product portfolios and sales capabilities.

Previous wording

•Traffic on our network has moderated as compared to prior years. We, and the industry more broadly, are seeing growth at a slower pace than we have experienced in the past. In particular, customers in verticals such as media and gaming have optimized their traffic to manage through underlying business challenges at a time of global economic and geopolitical headwinds. For instance, a large social media customer has taken steps to lower costs and reduce reliance on U.S. providers by optimizing its platform, including using a “do-it-yourself” component, which reduced traffic on our network and negatively impacted our revenue in 2024. We expect this trend to continue in 2025. However, we are seeing incremental traffic from contracts acquired as part of our recent asset acquisitions, such as Edgio, Inc. If our customers' businesses continue to be impacted by economic and geopolitical headwinds, they may reduce their spending, optimize their traffic or increase their reliance on “do-it-yourself” solutions, which could negatively impact traffic on our network and revenue.

Current wording

•Traffic on our network has improved, but remains moderated as compared to prior years. We, and the industry more broadly, are seeing growth at a slower pace than we have experienced in the past. In particular, customers in verticals such as media and gaming have optimized their traffic to manage through underlying business challenges at a time of global macroeconomic and geopolitical headwinds. Some of our customers' businesses have been impacted by these headwinds, and as a result, they may continue to reduce their spending, optimize their traffic or increase their reliance on “do-it-yourself” solutions, which would reduce traffic on our network and revenue. However, we are seeing incremental traffic from contracts acquired as part of our recent asset acquisitions. We expect these traffic growth trends to continue for the remainder of 2025.

Previous wording

•Network bandwidth costs are also a significant portion of our cost of revenue. Historically, we have been able to mitigate increases in these costs through investment in internal-use software development to improve the performance and efficiency of our network. We will need to continue to focus on effectively managing our bandwidth costs to maintain or improve current levels of profitability.

Current wording

•Network bandwidth costs are also a significant portion of our cost of revenue. We have been able to manage these costs through investment in internal-use software development to improve the performance and efficiency of our network and, more recently, improved pricing on contract renewals with our bandwidth providers. We will need to continue to focus on effectively managing our bandwidth costs to maintain or improve current levels of profitability.

Previous wording

•Network build-out and supporting service costs represent another significant portion of our cost of revenue. These costs include maintenance and supporting services, as well as partner program costs, incurred as we continue to build out our compute platform and maintain our global network, and costs of third-party cloud providers used for some of our operations. We have seen these costs increase in recent years as a result of our network expansion, and particularly the build out of our compute platform. We previously experienced increased costs from third-party cloud providers, but continue to mitigate those costs by migrating to our own compute solutions and working to optimize third-party cloud spend. We will need to continue to effectively manage our network build-out and supporting service costs and continue to migrate third-party cloud services to our compute platform in an effort to manage costs.

Current wording

•Network build-out and supporting service costs represent another significant portion of our cost of revenue. These costs include maintenance and supporting services, as well as partner program costs, incurred as we continue to build out our compute platform and maintain our global network, and costs of third-party cloud providers used for some of our operations. We have seen some of these costs increase in recent years as a result of our network expansion, and particularly the build out of our compute platform. While we have previously experienced increased costs from third-party cloud providers, we have been able to reduce those costs by migrating to our own compute solutions and working to optimize any remaining third-party cloud spend. We will need to continue to effectively manage our network build-out and supporting service costs and continue to migrate third-party cloud services to our compute platform in an effort to manage costs.

Previous wording

•Our employees are core to the operations of our business, and payroll and related costs, including stock-based compensation, is our largest expense. It is important to the success of our operations that we offer competitive compensation packages. However, we are focused on remaining disciplined in allocating our resources to support our faster growing security and cloud computing solutions, including maintaining operational efficiencies to mitigate the rising cost of talent. Over the past few years, we redesigned one of our non-executive short-term incentive compensation programs by shifting certain employees from a cash-based to stock-based program and introduced a non-executive incentive program tied to key initiatives. These programs were designed to better align employee incentives with the interests of our stockholders, which increased our stock-based compensation.

Current wording

•Our employees are core to the operations of our business, and payroll and related costs, including stock-based compensation, is our largest expense. It is important to the success of our operations that we offer competitive compensation packages. However, we are focused on remaining disciplined in allocating our resources to support our faster growing security and cloud computing solutions, including maintaining operational efficiencies to mitigate the rising cost of talent. Over the past few years, we redesigned one of our non-executive short-term incentive compensation programs by shifting certain employees from a cash-based to stock-based program and introduced a non-executive incentive program tied to key initiatives. These programs are designed to better align employee incentives with the interests of our stockholders, which has increased our stock-based compensation.

Previous wording

Global macroeconomic and geopolitical conditions continue to impact our customers, as well as our business and revenue growth rates. We, along with our customers, continue to manage through an uncertain period of fluctuating inflation, regulatory policies and resources that may negatively impact business, economic and political uncertainty, decreased consumer confidence and pressure on prices during contract renewals, uncertain energy supplies, heightened geopolitical tensions and conflict, potential for supply chain disruptions, changes in U.S. and international tax laws, volatility and increasing tensions related to announced or expected tariffs, fluctuations in foreign exchange rates and elevated interest rates. To the extent these macroeconomic conditions continue, the impact may adversely affect our business, operations and financial results.

Current wording

Global macroeconomic and geopolitical conditions continue to impact our customers, as well as our business and revenue growth rates. We, along with our customers, continue to manage through an uncertain period of fluctuating inflation, regulatory policies and resources that may negatively impact business, economic and political uncertainty, decreased consumer confidence and pressure on prices during contract renewals, uncertain energy supplies, heightened geopolitical tensions and conflict, potential for supply chain disruptions, changes in legislation and regulations, including U.S. and international tax laws, volatility and increasing tensions related to changing trade policies, including announced or expected tariffs, fluctuations in foreign exchange rates and elevated interest rates. To the extent these macroeconomic conditions continue, the impact may adversely affect our business, operations and financial results.

Previous wording

During the three months ended March 31, 2025, the increase in our revenue, as compared to the same period in 2024, was primarily the result of continued growth in sales of our security and cloud computing solutions, partially offset by a decline in revenue from our delivery solutions due to impacts from economic and geopolitical uncertainty our customers are facing which resulted in the continued downward pricing of contract renewals.

Current wording

During the three and six months ended June 30, 2025, the increase in our revenue, as compared to the same periods in 2024, was primarily the result of continued growth in sales of our security and cloud computing solutions, partially offset by a decline in revenue from our delivery solutions due to downward pricing of contract renewals.

Previous wording

The increase in security solutions revenue for the three months ended March 31, 2025, as compared to the same period in 2024, was due to growth in sales of key products in our security solutions portfolio, including our web application, API security and Guardicore segmentation solutions.

Current wording

The increase in security solutions revenue for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was due to growth in sales of key products in our security solutions portfolio, including our API security, web application and Guardicore segmentation solutions.

Previous wording

The decrease in delivery solutions revenue for the three months ended March 31, 2025, as compared to the same period in 2024, was due to continued downward pricing of contract renewals, which we believe has been influenced by the economic and geopolitical headwinds our customers are facing. These headwinds are also causing a large social media customer to increase their focus on cost optimization and "do-it-yourself" solutions, which reduced traffic on our network and had a negative impact on our delivery revenue.

Current wording

The decrease in delivery solutions revenue for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was due to downward pricing of contract renewals which we believe is moderating compared to recent periods. Additionally, we believe macroeconomic and geopolitical headwinds are causing some customers to increase their focus on cost optimization and "do-it-yourself" solutions, which reduced traffic on our network and our delivery revenue. These decreases were partially offset by incremental revenue from contracts acquired as part of our recent asset acquisitions, such as Edgio, Inc.

Previous wording

The increase in cloud computing solutions revenue for the three months ended March 31, 2025, as compared to the same period in 2024, was due to growth in sales of cloud computing products, including cloud optimization solutions, to new and existing customers.

Current wording

The increase in cloud computing solutions revenue for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was due to growth in cloud infrastructure services, which includes our compute and storage solutions based on Linode, as well as our EdgeWorkers product and the partner solutions running on our cloud platform.

Previous wording

For the three months ended March 31, 2025 and 2024, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates unfavorably impacted our revenue by $14.0 million during the three months ended March 31, 2025 as compared to the same period in 2024.

Current wording

For the three and six months ended June 30, 2025 and 2024, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates favorably impacted our revenue by $8.1 million during the three months ended June 30, 2025 and unfavorably impacted our revenue by $5.9 million during the six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

Previous wording

The increase in cost of revenue for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to:

Current wording

The increase in cost of revenue for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was primarily due to:

Previous wording

•network build-out and supporting services, particularly due to our partner program costs related to growth from our cloud computing solutions; and

Current wording

•network build-out and supporting services, particularly due to our partner program costs related to our cloud computing solutions; and

Previous wording

These increases were partially offset by lower bandwidth fees as a result of improved pricing on contract renewals with our bandwidth network providers and operational efficiencies on our network. Additionally, third-party cloud costs, which is included in network build-out and supporting services, decreased as we continue migrating third-party cloud services onto our own compute platform.

Current wording

These increases were partially offset by lower bandwidth fees as a result of improved pricing on contract renewals with our bandwidth providers and operational efficiencies on our network. Additionally, for the six months ended June 30, 2025, as compared to the same period in 2024, third-party cloud costs, which is included in network build-out and supporting services, decreased from the migration of third-party cloud services onto our own compute platform.

Previous wording

The increase in research and development expenses during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to higher stock-based compensation and payroll and related costs as a result of headcount growth from our strategic initiatives. Additionally, stock-based compensation increased due to the shift from cash-based to stock-based of our employer 401(k) match program, effective in 2025, which partially offset the increase in payroll and related costs.

Current wording

The increase in research and development expenses during the three and six months ended June 30, 2025, as compared to the same periods in 2024, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth from our strategic initiatives. Additionally, stock-based compensation increased due to the shift from cash-based to stock-based of our employer 401(k) match program, effective in 2025, which partially offset the increase in payroll and related costs.

Previous wording

Research and development costs are expensed as incurred, other than certain internal-use software development costs eligible for capitalization. Capitalized development costs consist of payroll and related costs for personnel and external consulting expenses involved in the development of internal-use software used to deliver our services and operate our network. During the three months ended March 31, 2025 and 2024, we capitalized $29.4 million and $24.8 million, respectively, of stock-based compensation. These capitalized internal-use software development costs are amortized to cost of revenue over their estimated useful lives, ranging from two to ten years based on the software developed and its expected useful life.

Current wording

Research and development costs are expensed as incurred, other than certain internal-use software development costs eligible for capitalization. Capitalized development costs consist of payroll and related costs for personnel and external consulting expenses involved in the development of internal-use software used to deliver our services and operate our network. During the three months ended June 30, 2025 and 2024, we capitalized $29.0 million and $25.5 million, respectively, of stock-based compensation. During the six months ended June 30, 2025 and 2024, we capitalized $58.4 million and $50.3 million, respectively, of stock-based compensation. These capitalized internal-use software development costs are amortized to cost of revenue over their estimated useful lives, ranging from two to ten years based on the software developed and its expected useful life.

Previous wording

The increase in general and administrative expenses during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to higher stock-based compensation as a result of the shift in our employer 401(k) match program from cash-based to stock-based effective in 2025 and an increase in the number of participants in the equity compensation program, partially offset by lower payroll and related costs due to the shift of the 401(k) match program.

Current wording

The increase in sales and marketing expenses during the three and six months ended June 30, 2025, as compared to the same periods in 2024, was primarily due to higher stock-based compensation as a result of the shift in our employer 401(k) match program from cash-based to stock-based effective in 2025, which partially offset the change to payroll and related costs. Additionally, other expenses increased for these periods as a result of professional service fees associated with our go-to-market transformation initiative.

Previous wording

The increase in amortization of acquired intangible assets for the three months ended March 31, 2025, as compared to the same period in 2024, was the result of amortization of acquired intangible assets related to our recent acquisitions. Based on acquired intangible assets at March 31, 2025, we expect amortization of acquired intangible assets to be approximately $83.6 million for the remainder of 2025, and $104.0 million, $89.2 million, $81.8 million and $75.9 million for 2026, 2027, 2028 and 2029, respectively.

Current wording

The increase in amortization of acquired intangible assets for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was the result of amortization of acquired intangible assets related to our acquisitions in 2024. Based on acquired intangible assets at June 30, 2025, we expect amortization of acquired intangible assets to be approximately $55.7 million for the remainder of 2025, and $104.0 million, $89.2 million, $81.8 million and $75.9 million for 2026, 2027, 2028 and 2029, respectively.

Previous wording

The restructuring charge for the three months ended March 31, 2025 was primarily driven by management's commitment to an action initiated during the third quarter of 2024 with the primary intent to redeploy headcount and resources to support our faster growing security and cloud computing solutions. The charge recognized during this period mostly included severance and related expenses for certain headcount reductions. We do not expect to incur material additional charges related to this action.

Current wording

The restructuring charges for the three and six months ended June 30, 2025 was primarily driven by management's commitment to redeploy headcount and resources to support our faster growing security and cloud computing solutions. The charges recognized during these periods include severance and related expenses for certain headcount reductions and impairments to capitalized internal-use software. We do not expect to incur material additional charges related to this activity.

Previous wording

The restructuring charge for the three months ended March 31, 2024 was primarily driven by our flexible workplace program as we exited certain facilities that were no longer needed, resulting in impairments of right-of-use-assets and leasehold improvements. We do not expect to incur material additional charges related to this program.

Current wording

The restructuring charge for the three and six months ended June 30, 2024 was primarily driven by our flexible workplace program as we exited certain facilities that were no longer needed, resulting in impairments of right-of-use-assets and leasehold improvements. We do not expect to incur material additional charges related to this program.

Previous wording

Interest and marketable securities income, net consists of interest earned on invested cash and marketable securities balances and income and losses on mutual funds that are associated with our employee non-qualified deferred compensation plan. The decrease for the three months ended March 31, 2025, as compared to the same period in 2024, was due to a reduction of cash and marketable securities balances and re-positioning our investments to cash equivalents, yielding lower interest, in 2025 in order to repay our $1,150.0 million convertible senior notes due in May 2025.

Current wording

Interest and marketable securities income, net consists of interest earned on invested cash and marketable securities balances and income and losses on mutual funds that are associated with our employee non-qualified deferred compensation plan. The decrease for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was due to a reduction of cash and marketable securities balances and re-positioning our investments to cash equivalents, yielding lower interest, in 2025 in order to repay our $1,150.0 million convertible senior notes that became due in May 2025. This decrease was partially offset by interest earned as a result of purchases of new investments during the quarter with the proceeds of our convertible senior notes due 2033.

Previous wording

Other income, net primarily represents net foreign exchange gains and losses mainly due to foreign exchange rate fluctuations on the remeasurement of monetary assets and liabilities that are not denominated in the functional currency and gains and losses on cost method investments, as well as other non-operating expense and income items. Other income, net may fluctuate in the future based on changes in foreign currency exchange rates or other events.

Current wording

Other (expense) income, net primarily represents net foreign exchange gains and losses due to foreign exchange rate fluctuations on the remeasurement of monetary assets and liabilities that are not denominated in the functional currency and gains and losses on cost method investments, as well as other non-operating expense and income items. Other (expense) income, net may fluctuate in the future based on changes in foreign currency exchange rates or other events.

Previous wording

For the three months ended March 31, 2025, as compared to the same period in 2024, our provision for income taxes increased due to a shortfall in the tax benefit related to stock-based compensation, a decrease in foreign income taxed at lower rates and the revaluation of certain foreign income tax liabilities due to foreign exchange rate fluctuations.

Current wording

For the three months ended June 30, 2025, as compared to the same period in 2024, our provision for income taxes increased due to an increase in certain tax reserves, an increase in the valuation allowance recorded against state credits and a shortfall in the tax benefit related to stock-based compensation. These amounts were partially offset by a decrease in profitability. For the six months ended June 30, 2025, as compared to the same period in 2024, our provision for income taxes increased due to a shortfall in the tax benefit related to stock-based compensation, an increase in certain tax reserves, an increase in the valuation allowance against state and foreign credits and the revaluation of certain foreign income tax liabilities due to foreign exchange rate fluctuations. These amounts were partially offset by a decrease in profitability.

Previous wording

For the three months ended March 31, 2025, our effective income tax rate was higher than the federal statutory tax rate due to a shortfall in the tax benefit related to stock-based compensation, non-deductible stock-based compensation and non-deductible transfer pricing. These amounts were partially offset by the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates.

Current wording

For the three months ended June 30, 2025, our effective income tax rate was higher than the federal statutory tax rate due to an increase in certain tax reserves and non-deductible stock-based compensation. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. For the six months ended June 30, 2025, our effective income tax rate was higher than the federal statutory tax rate due to a shortfall in the tax benefit related to stock-based compensation, non-deductible stock-based compensation and an increase in certain tax reserves. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits.

Previous wording

For the three months ended March 31, 2024, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the 15% global minimum corporate income tax.

Current wording

For the three months ended June 30, 2024, our effective income tax rate was higher than the federal statutory tax rate due to non-deductible stock-based compensation, tax on an intercompany transaction and the 15% global minimum corporate income tax. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. For the six months ended June 30, 2024, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the 15% global minimum corporate income tax.

Previous wording

•Acquisition-related costs– Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities, as well as certain additional compensation costs payable to employees acquired from the Linode acquisition if employed for a certain period of time. The additional compensation cost was initiated by and determined by the seller and is in addition to normal levels of compensation, including retention programs, offered by Akamai. Acquisition-related costs are impacted by the timing and size of the acquisitions, and we exclude acquisition-related costs from our non-GAAP financial measures to provide a useful comparison of operating results to prior periods and to peer companies because such amounts vary significantly based on the magnitude of our acquisition transactions and do not reflect our core operations.

Current wording

•Acquisition-related costs– Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities, as well as certain additional compensation costs payable to employees acquired from the Linode Limited Liability Company ("Linode") acquisition if employed for a certain period of time. The additional compensation cost was initiated by and determined by the seller and is in addition to normal levels of compensation, including retention programs, offered by Akamai. Acquisition-related costs are impacted by the timing and size of the acquisitions, and we exclude acquisition-related costs from our non-GAAP financial measures to provide a useful comparison of operating results to prior periods and to peer companies because such amounts vary significantly based on the magnitude of our acquisition transactions and do not reflect our core operations.

Previous wording

•Amortization of debt issuance costs and capitalized interest expense– We have convertible senior notes outstanding that mature in 2029, 2027 and 2025. The issuance costs of the convertible senior notes are amortized to interest expense and are excluded from our non-GAAP results because management believes the non-cash amortization expense is not representative of ongoing operating performance.

Current wording

•Amortization of debt issuance costs and capitalized interest expense– The issuance costs of our convertible senior notes are amortized to interest expense and are excluded from our non-GAAP results because management believes the non-cash amortization expense is not representative of ongoing operating performance.

Previous wording

(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three months ended March 31, 2024, for the benefit of our note hedge transactions. During this period, our average stock price was in excess of $95.10, which is the initial conversion price of our convertible senior notes due in May 2025. See further definition below.

Current wording

(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three and six months ended June 30, 2024, for the benefit of our note hedge transactions. During this period, our average stock price was in excess of $95.10, which is the initial conversion price of our convertible senior notes which matured in May 2025. See further definition below.

Previous wording

Non-GAAP net income per diluted share is calculated as non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average common shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to us pursuant to the note hedge transactions entered into in connection with the issuance of $1,265 million of convertible senior notes due 2029 and the issuances of $1,150 million of convertible senior notes due 2027 and 2025, respectively. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, we would receive a benefit from the note hedge transactions and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. With respect to the convertible senior notes due in each of 2029, 2027 and 2025, unless our weighted average stock price is greater than $126.31, $116.18 and $95.10, respectively, the initial conversion prices, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.

Current wording

Non-GAAP net income per diluted share is calculated as non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average common shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to us pursuant to the note hedge transactions entered into in connection with the issuances of our convertible senior notes. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, we would receive a benefit from the note hedge transactions and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. With respect to the convertible senior notes due in each of 2033, 2029 and 2027, and those that matured in 2025, unless our weighted average stock price is greater than $93.01, $126.31, $116.18 and $95.10, respectively, the initial conversion prices, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.

Previous wording

We consider Adjusted EBITDA to be another important indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Adjusted EBITDA eliminates items that we do not consider to be part of our core operations. We define Adjusted EBITDA as GAAP net income excluding the following items: interest and marketable securities income and losses; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; legal settlements; foreign exchange gains and losses; interest expense; amortization of capitalized interest expense; gains and losses on cost method investments; gains and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time. Adjusted EBITDA margin represents Adjusted EBITDA stated as a percentage of revenue.

Current wording

We consider Adjusted EBITDA to be another important indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Adjusted EBITDA eliminates items that we do not consider to be part of our core operations. We define Adjusted EBITDA as GAAP net income excluding the following items: interest and marketable securities income and losses; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; legal settlements; foreign exchange gains and losses; interest expense; amortization of capitalized interest expense; gains and losses on cost method investments; and other non-recurring or unusual items that may arise from time to time. Adjusted EBITDA margin represents Adjusted EBITDA stated as a percentage of revenue.

Previous wording

To date, we have financed our operations primarily through public and private sales of debt and equity securities and cash generated by operations. As of March 31, 2025, our cash, cash equivalents and marketable securities, which are detailed in Note 2 to the interim condensed consolidated financial statements, totaled $1.3 billion. Factoring in our convertible senior notes due May 2025, our net cash at March 31, 2025 was $194.3 million. We place our cash investments in instruments that meet high-quality credit standards, as specified in our investment policy. Our investment policy is also designed to limit the amount of our credit exposure to any one issue or issuer and seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity at all times.

Current wording

To date, we have financed our operations primarily through public and private sales of debt and equity securities and cash generated by operations. As of June 30, 2025, our cash, cash equivalents and marketable securities, which are detailed in Note 2 to the interim condensed consolidated financial statements, totaled $1.6 billion. We place our cash investments in instruments that meet high-quality credit standards, as specified in our investment policy. Our investment policy is also designed to limit the amount of our credit exposure to any one issue or issuer and seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity at all times.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of $330.0 million held in accounts outside the U.S. The U.S. Tax Cuts and Jobs Act establishes a territorial tax system in the U.S., which provides companies with the potential ability to repatriate earnings with minimal U.S. federal income tax impact. As a result, our liquidity is not expected to be materially impacted by the amount of cash and cash equivalents held in accounts outside the U.S.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $341.8 million held in accounts outside the U.S. The U.S. Tax Cuts and Jobs Act establishes a territorial tax system in the U.S., which provides companies with the potential ability to repatriate earnings with minimal U.S. federal income tax impact. As a result, our liquidity is not expected to be materially impacted by the amount of cash and cash equivalents held in accounts outside the U.S.

Previous wording

The decrease in cash provided by operating activities for the three months ended March 31, 2025, as compared to the same period in 2024, was due to timing of customer collections and payroll funding, severance payments related to our restructuring action in the third quarter of 2024, as well as higher income tax payments.

Current wording

The decrease in cash provided by operating activities for the six months ended June 30, 2025, as compared to the same period in 2024, was due to timing of customer collections and severance payments occurring in 2025 related to our restructuring action in the third quarter of 2024, as well as higher income tax payments driven by intercompany sales of intellectual property.

Previous wording

The increase in cash provided by (used in) investing activities during the three months ended March 31, 2025, as compared to the same period in 2024, was due to an increase in maturities and sales of marketable securities, that were not reinvested in order to repay our $1,150.0 million convertible senior notes, which we paid in May 2025. The increase was partially offset by remaining consideration paid for the Edgio, Inc. asset acquisition.

Current wording

The increase in cash provided by (used in) investing activities during the six months ended June 30, 2025, as compared to the same period in 2024, was due to:

Previous wording

In May 2024, our board of directors authorized a $2.0 billion share repurchase program, effective May 2024 through June 2027. During the three months ended March 31, 2025, we repurchased 6.2 million shares of common stock at a weighted average price of $81.19 per share for an aggregate of $500.0 million. As of March 31, 2025, $1.5 billion remained available for future share repurchases under the authorization program. Our goals for the share repurchase program is to offset the dilution created by our employee equity compensation programs over time and provide the flexibility to return capital to stockholders as business and market conditions warrant, while still preserving our ability to pursue other strategic opportunities. The timing and amount of any future share repurchases will be determined by our management based on its evaluation of market conditions and other factors.

Current wording

In May 2024, our board of directors authorized a $2.0 billion share repurchase program, effective May 2024 through June 2027. During the six months ended June 30, 2025, we repurchased 10.0 million shares of common stock at a weighted average price of $79.77 per share for an aggregate of $800.0 million. As of June 30, 2025, $1.2 billion remained available for future share repurchases under the authorization program. Our goals for the share repurchase program is to offset the dilution created by our employee equity compensation programs over time and provide the flexibility to return capital to stockholders as business and market conditions warrant, while still preserving our ability to pursue other strategic opportunities. The timing and amount of any future share repurchases will be determined by our management based on its evaluation of market conditions and other factors.

Previous wording

As of March 31, 2025, we had $3,565.0 million of convertible senior notes outstanding that are senior unsecured obligations and bear interest payable semi-annually in arrears. These notes mature between May 2025 and February 2029. The terms of the notes and hedge and warrant transactions are discussed more fully in Note 6 to the interim condensed consolidated financial statements. In May 2025, we repaid at maturity $1,150.0 million of the convertible senior notes outstanding, such that we have $2,415.0 million of convertible senior notes outstanding as of the date of the filing of these financial statements.

Current wording

As of June 30, 2025, we had $4,140.0 million of convertible senior notes outstanding that are senior unsecured obligations and bear interest payable semi-annually in arrears. These notes mature between September 2027 and May 2033. The terms of the notes and hedge and warrant transactions are discussed more fully in Note 6 to the interim condensed consolidated financial statements.

Previous wording

In November 2022, we entered into a $500.0 million, five-year revolving credit agreement ("2022 Credit Agreement"). The 2022 Credit Agreement allows us to borrow up to $500.0 million at various interest rates and contains customary representations and warranties, affirmative and negative covenants and events of default. As of March 31, 2025, we were in compliance with all covenants. There were no outstanding borrowings under the 2022 Credit Agreement as of March 31, 2025. In April 2025, we borrowed $250.0 million under the 2022 Credit Agreement.

Current wording

In November 2022, we entered into a $500.0 million 2022 Credit Agreement, which allows us to borrow at various interest rates and contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement was amended in May 2025 to increase the aggregate revolving commitments from $500.0 million to $1.0 billion and to extend the expiration one year. As of June 30, 2025, we were in compliance with all covenants. There were no outstanding borrowings under the 2022 Credit Agreement as of June 30, 2025.

Previous wording

Based on our present business plan, we expect our current cash, cash equivalents and marketable securities balances, our forecasted cash flows from operations and our access to additional liquidity from our 2022 Credit Agreement to be sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures, investments in information technology, potential strategic acquisitions, anticipated share repurchases, lease and purchase commitments, debt repayments and settlements of other liabilities.

Current wording

Based on our present business plan, we expect our current cash, cash equivalents and marketable securities balances, our forecasted cash flows from operations to be sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures, investments in information technology, potential strategic acquisitions, anticipated share repurchases, lease and purchase commitments and settlements of other liabilities.