AKAMAI TECHNOLOGIES INC

Previous wording

This quarterly report on Form 10-Q, particularly Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth below, and notes to our unaudited interim condensed consolidated financial statements included herein contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Akamai Technologies, Inc., which we refer to as “we,” “us,” or the “Company.” All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as “believes,” “could,” “expects,” “anticipates,” “intends,” “plans,” “seeks,” “projects,” “estimates,” “should,” “would,” “forecasts,” “if,” “continues,” “goal,” “likely,” “may,” “will,” variations of such words or similar expressions are intended to identify a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Actual results may differ materially from the forward-looking statements we make as a result of various factors, including, but not limited to: potential slowing revenue growth, global economic and geopolitical conditions, including changes in customer spending and inflation, tariffs, trade restrictions, export controls and retaliatory measures, our ability to acquire or develop new solutions, our ability to compete effectively, including our ability to continue to grow our artificial intelligence ("AI") infrastructure, compute services and solutions, including risks that our AI initiatives may not be successful or may introduce operational, security or regulatory risks, security risks stemming from ineffective information technology systems or cybersecurity breaches, risks of maintaining global operations, including physical attacks on or destruction of data centers and critical infrastructure in regions affected by armed conflict, regulatory developments, supply chain disruptions, significant increases in server, memory and co-location costs due to market dynamics, intellectual property claims or disputes, investment related risks and maintaining an effective system of internal controls. See “Risk Factors” elsewhere in this quarterly report on Form 10-Q and in our other reports filed with the Securities and Exchange Commission for a discussion of certain risks associated with our business. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise, including the potential impact of any mergers, acquisitions, divestitures or other events that may be announced after the date hereof.

Current wording

This quarterly report on Form 10-Q, particularly Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth below, and notes to our unaudited interim condensed consolidated financial statements included herein contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Akamai Technologies, Inc., which we refer to as “we,” “us,” or the “Company.” All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as “believes,” “could,” “expects,” “anticipates,” “intends,” “plans,” “seeks,” “projects,” “estimates,” “should,” “would,” “forecasts,” “if,” “continues,” “goal,” “likely,” “may,” “will,” variations of such words or similar expressions are intended to identify a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Actual results may differ materially from the forward-looking statements we make as a result of various factors, including, but not limited to: potential slowing revenue growth, global economic and geopolitical conditions, including changes in customer spending and inflation, tariffs, trade restrictions, export controls and retaliatory measures, our ability to meet our commitments under multi-year arrangements, our ability to operate our business with a negative cash flow, our ability to acquire or develop new solutions, our ability to compete effectively, including our ability to continue to grow our artificial intelligence ("AI") infrastructure, compute services and solutions, including risks that our AI initiatives may not be successful or may introduce operational, security or regulatory risks, security risks stemming from ineffective information technology systems or cybersecurity breaches, risks of maintaining global operations, including physical attacks on or destruction of data centers and critical infrastructure in regions affected by armed conflict, regulatory developments, supply chain disruptions, significant increases in server, memory and co-location costs due to market dynamics, intellectual property claims or disputes, investment related risks and maintaining an effective system of internal controls. See “Risk Factors” elsewhere in this quarterly report on Form 10-Q and in our other reports filed with the Securities and Exchange Commission for a discussion of certain risks associated with our business. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise, including the potential impact of any mergers, acquisitions, divestitures or other events th…

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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 infrastructure, which underpins our security, delivery and other cloud applications and cloud infrastructure services solutions, and is central to our financial success. Together, these solutions are positioned to benefit from the rapid evolution of AI. The key factors that influence our financial success include our ability to build on recurring revenue commitments across our product portfolios and increase traffic on our network. We must also continue to develop, scale and successfully bring to market our cloud infrastructure services, including Akamai Cloud and compute-to-edge solutions, that meet the reliability needs of professional users and enterprises. Additionally, our performance depends on our ability to effectively manage the prices we charge for our solutions considering the market dynamics on our cost structure driven by hyperscalers, continuously develop new and existing products and appropriately manage our capital spending and other operational expenses.

Current wording

We develop and provide solutions to power and protect an AI-driven world through our massively distributed global infrastructure, which underpins our security, delivery and other cloud applications and cloud infrastructure services solutions, and is central to our financial success. Together, these solutions are positioned to benefit from the rapid evolution of AI. The key factors that influence our financial success include our ability to build on recurring revenue commitments across our product portfolios and increase traffic on our network. We must also continue to develop, scale and successfully bring to market our cloud infrastructure services, including Akamai Cloud and compute-to-edge solutions, that meet the reliability needs of professional users and enterprises. Additionally, our performance depends on our ability to effectively manage the prices we charge for our solutions considering the market dynamics on our cost structure driven by hyperscalers, continuously develop new and existing products and appropriately manage our capital spending and other operational expenses.

Previous wording

We primarily derive revenue from the sale of solutions 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, the delivery of content, applications and software over the internet, cloud infrastructure 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 solutions to our new and existing customers, particularly for our security and cloud infrastructure services 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, to successfully bring those products to market and to effectively manage the prices we charge for our solutions considering the market dynamics on our cost structure driven by hyperscalers, are key factors impacting our revenue growth.

Current wording

We primarily derive revenue from the sale of solutions to customers pursuant to multi-year contracts, which allows us to have a consistent and predictable base level of revenue. Services included in our contracts consist of security, the delivery of content, applications and software over the internet, cloud infrastructure 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 solutions to our new and existing customers, particularly for our security and cloud infrastructure services 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, to successfully bring those products to market and to effectively manage the prices we charge for our solutions considering the market dynamics on our cost structure driven by hyperscalers, are key factors impacting our revenue growth.

Previous wording

•Increased sales of our security solutions, led by application security solutions and microsegmentation solutions, and increased sales of our cloud infrastructure services solutions, attributable to enhanced services on our platform, have made a significant contribution to revenue growth. Our security and cloud infrastructure services solutions continue to contribute to a large portion of our revenue. We plan to continue to invest in these areas with a focus on AI applications for our security products and cloud infrastructure services, including expanding our platform, to further advance our product portfolios, sales capabilities and our recent large multi-year cloud infrastructure services commitments.

Current wording

•Our security solutions, led by application security solutions and microsegmentation solutions, supported by enhanced services on our platform, continue to contribute to a large portion of our revenue. We plan to continue to invest in our security portfolio, with a focus on AI applications for our security products, to further advance our product offerings and sales capabilities.

Previous wording

•Traffic growth 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 or optimize their traffic, which would reduce traffic on our network and revenue. In prior years we also experienced incremental traffic growth from past asset acquisitions. We expect the moderation of traffic growth trends to continue for the remainder of 2026.

Current wording

•Our delivery revenue, in particular, is impacted by traffic growth on our network, which remains moderated as compared to prior years. We 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 or optimize their traffic, which would reduce traffic on our network and revenue. In prior years we also experienced incremental traffic growth from past asset acquisitions. We expect the moderation of traffic growth trends to continue for the remainder of 2026.

Previous wording

•The prices paid by some of our delivery and security customers have declined in recent years at contract renewal due to competition, which negatively impacts our revenue growth rates. We have been able to mitigate some of the negative impacts to our revenue growth rates by upselling incremental solutions to our existing customers. We are taking steps upon contract renewals to sign customers to multi-year contracts that reflect the significant cost increases we have experienced from hyperscaler market dynamics and their traffic volumes to better align unit pricing.

Current wording

•The prices paid by some of our delivery and security customers have declined in recent years at contract renewal due to competition, which negatively impacts our revenue growth rates. We have been able to mitigate some of the negative impacts to our revenue growth rates by upselling incremental solutions to our existing customers. We are taking steps upon contract renewals to sign customers to multi-year contracts that take into account the significant cost increases we have experienced from hyperscaler market dynamics and their traffic volumes to better align unit pricing.

Previous wording

•Revenue from our international operations continues to grow, particularly from new customer acquisition and cross-selling of incremental solutions. Because we publicly report in U.S. dollars, our reported revenue results are negatively impacted when the U.S. dollar strengthens and benefit when the U.S. dollar weakens.

Current wording

•Revenue from our international operations continues to grow, particularly in terms of traffic growth, new customer acquisition and cross-selling of incremental solutions. Because we publicly report in U.S. dollars, our reported revenue results are negatively impacted when the U.S. dollar strengthens and benefit when the U.S. dollar weakens.

Previous wording

•Co-location costs are a significant portion of our cost of revenue. As we continue to scale our cloud infrastructure services, including our platform to support AI applications, we have experienced a significant increase in our co-location costs, particularly as competition for data center space has continued to increase, including from hyperscalers. We have entered into, and expect to continue to enter into, longer term leases that include certain financial commitments. The costs of the financial commitments are expensed ratably over the lease term, and, as a result, in some cases, we are incurring costs in advance of these locations being fully utilized. We continue to improve our internal-use software and remain disciplined in managing our hardware deployments, which enables us to use servers more efficiently. We will need to continue to effectively manage our co-location costs to maintain or improve current levels of profitability.

Current wording

•Co-location costs are a significant portion of our cost of revenue. As we continue to scale our cloud infrastructure services, including our platform to support AI applications and our multi-year cloud infrastructure services arrangements, we have experienced, and will continue to experience, a significant increase in our co-location costs, particularly as competition for data center space continues to increase, including from hyperscalers. We have entered into, and expect to continue to enter into, longer term leases that include certain financial commitments. The costs of the financial commitments are expensed ratably over the lease term, and, as a result, in some cases, we are incurring costs in advance of these locations being fully utilized. We will need to continue to effectively manage our co-location costs to maintain or improve current levels of profitability.

Previous wording

•Depreciation expense related to our network equipment also contributes to our overall expense levels. In recent years, we have invested in our network, particularly as part of building out our platform to support our cloud infrastructure services, which increased our capital expenditures and resulting depreciation expense. We plan to continue investing in our platform to support our faster growing cloud infrastructure services, including support for new enterprise customers, and to support future revenue growth from AI applications. We are also experiencing a significant increase in server and memory costs due to market dynamics driven by hyperscalers, which will increase our future capital expenditures and resulting depreciation expense.

Current wording

•Depreciation expense related to our network equipment also contributes to our overall expense levels. In recent years, we have invested in our network, particularly as part of building out our platform to support our cloud infrastructure services, which increased our capital expenditures and resulting depreciation expense. We plan to continue investing in our platform to support our faster growing cloud infrastructure services, including support for new enterprise customers and the large multi-year cloud infrastructure services arrangements we entered into in 2026. We are also experiencing a significant increase in server and memory costs due to market dynamics driven by hyperscalers, which will increase our future capital expenditures and resulting depreciation expense.

Previous wording

During the three and six months ended June 30, 2026, the increase in our revenue, as compared to the same periods in 2025, was primarily the result of continued growth in sales of our security and cloud infrastructure services solutions, partially offset by a decline in revenue from our delivery and other cloud applications solutions due to downward pricing of contract renewals.

Current wording

During the three and nine months ended September 30, 2026, the increase in our revenue, as compared to the same periods in 2025, was primarily the result of continued growth in sales of our security and cloud infrastructure services solutions, partially offset by a decline in revenue from our delivery and other cloud applications solutions due to downward pricing of contract renewals.

Previous wording

The increase in security solutions revenue for the three and six months ended June 30, 2026, as compared to the same periods in 2025, was due to growth in sales of key products in our security solutions portfolio, including our API security, web application and Guardicore segmentation solutions.

Current wording

The increase in security solutions revenue for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, 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 and other cloud applications solutions revenue for the three and six months ended June 30, 2026, as compared to the same periods in 2025, was driven by a decrease in delivery revenue due to downward pricing of contract renewals. Additionally, we believe macroeconomic headwinds are causing some delivery and other cloud applications customers to increase their focus on cost optimization, which negatively impacted traffic on our network and had a negative impact on delivery and other cloud applications revenue.

Current wording

The decrease in delivery and other cloud applications solutions revenue for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was driven by a decrease in delivery revenue due to downward pricing of contract renewals. Additionally, we believe macroeconomic headwinds are causing some delivery and other cloud applications customers to increase their focus on cost optimization, which negatively impacted traffic on our network and had a negative impact on delivery and other cloud applications revenue.

Previous wording

The increase in cloud infrastructure services solutions revenue for the three and six months ended June 30, 2026, as compared to the same periods in 2025, was due to growth in sales to new and existing customers of our compute solutions, as well as the compute partner solutions running on our platform.

Current wording

The increase in cloud infrastructure services solutions revenue for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was due to growth in sales to new and existing customers of our compute solutions, as well as the compute partner solutions running on our platform. Due to the large cloud infrastructure services arrangements we have executed in 2026, which will begin earning revenue in the fourth quarter, and accelerate in 2027, we expect cloud infrastructure services revenue and revenue growth rates to increase, which will primarily be derived in the U.S.

Previous wording

For the three and six months ended June 30, 2026 and 2025, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates negatively impacted our revenue by $1.1 million during the three months ended June 30, 2026 and positively impacted our revenue by $17.5 million during the six months ended June 30, 2026, as compared to the same periods in 2025.

Current wording

For the three and nine months ended September 30, 2026 and 2025, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates negatively impacted our revenue by $6.8 million during the three months ended September 30, 2026 and positively impacted our revenue by $10.6 million during the nine months ended September 30, 2026, as compared to the same periods in 2025.

Previous wording

The increase in cost of revenue during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to:

Current wording

The increase in cost of revenue during the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily due to:

Previous wording

The increase in research and development expenses during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth from our strategic initiatives and the impact of annual merit increases. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026 and from achievement of our performance-based compensation plan.

Current wording

The increase in research and development expenses during the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth from our strategic initiatives and the impact of annual merit increases. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026 and from achievement of our performance-based compensation plan.

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 June 30, 2026 and 2025, we capitalized $37.1 million and $29.0 million, respectively, of stock-based compensation. During the six months ended June 30, 2026 and 2025, we capitalized $69.0 million and $58.4, respectively. 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 September 30, 2026 and 2025, we capitalized $31.7 million and $29.4 million, respectively, of stock-based compensation. During the nine months ended September 30, 2026 and 2025, we capitalized $100.7 million and $87.8 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.

Previous wording

The increase in sales and marketing expenses during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to higher payroll and related costs as a result of headcount growth as part of our reinvestment in our go-to-market strategy. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026 and from achievement of our performance-based compensation plan. The increase in sales and marketing expenses during the six months ended June 30, 2026, as compared to the same period in 2025, was also due to marketing programs and related costs from the timing of events and increased campaigns.

Current wording

The increase in sales and marketing expenses during the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily due to higher payroll and related costs as a result of headcount growth as part of our reinvestment in our go-to-market strategy. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026 and from achievement of our performance-based compensation plan.

Previous wording

The increase in general and administrative expenses during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth to support our operations and the impact of the annual merit increases. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026 and from achievement of our performance-based compensation plan.

Current wording

The increase in general and administrative expenses during the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily due to higher payroll and related costs and stock-based compensation as a result of headcount growth to support our operations and the impact of the annual merit increases. Additionally, stock-based compensation increased as a result of a new benefit that reduced the service period for retirement eligible employees effective in 2026 and from achievement of our performance-based compensation plan. The increase during the three months ended September 30, 2026 was also due to an increase in other expenses related to professional service fees to support our business.

Previous wording

The decrease in amortization of acquired intangible assets for the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to a decrease in the value of acquired intangible assets as a result of impairments of certain completed technologies recognized in the fourth quarter of 2025. Based on acquired intangible assets at June 30, 2026, we expect amortization of acquired intangible assets to be approximately $49.8 million for the remainder of 2026, and $85.6 million, $79.0 million, $74.0 million and $66.7 million for 2027, 2028, 2029 and 2030, respectively.

Current wording

The decrease in amortization of acquired intangible assets for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily due to a decrease in the value of acquired intangible assets as a result of impairments of certain completed technologies recognized in the fourth quarter of 2025. Based on acquired intangible assets at September 30, 2026, we expect amortization of acquired intangible assets to be approximately $26.0 million for the remainder of 2026, and $90.1 million, $83.4 million, $79.1 million and $72.8 million for 2027, 2028, 2029 and 2030, respectively.

Previous wording

The restructuring charge for the three and six months ended June 30, 2026 was driven by management's commitment to an action initiated during the fourth quarter of 2025 to restructure certain parts of the company to align investments and simplify organizational structure to long-term growth priorities, as well as actions related to our acquisitions. We do not expect to incur material additional charges related to these actions.

Current wording

The restructuring charge for the three and nine months ended September 30, 2026 was driven by management's commitment to an action initiated during the fourth quarter of 2025 to restructure certain parts of the company to align investments and simplify organizational structure to long-term growth priorities, as well as actions related to our acquisitions. We do not expect to incur material additional charges related to these actions.

Previous wording

The restructuring charge 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 action.

Current wording

The restructuring (benefit) charge for the three and nine months ended September 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 action.

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 increase for the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to interest earned from marketable securities purchased during the three months ended June 30, 2026 using proceeds from our convertible senior notes due 2032 and 2030.

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 increase for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily due to interest earned from marketable securities purchased during the nine months ended September 30, 2026 using proceeds from our convertible senior notes due 2032 and 2030.

Previous 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.

Current wording

Other expense, 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, net may fluctuate in the future based on changes in foreign currency exchange rates or other events.

Previous wording

For the three months ended June 30, 2026, as compared to the same period in 2025, our provision for income taxes decreased due to a decrease in profitability, an increase in the excess tax benefit related to stock-based compensation, a change in the valuation allowance recorded against state credits and a decrease in certain tax reserves. These amounts were partially offset by a decrease in foreign income taxed at lower rates. For the six months ended June 30, 2026, as compared to the same period in 2025, our provision for income taxes decreased due to an increase in the excess tax benefit related to stock-based compensation, a decrease in profitability, a decrease in certain tax reserves and a decrease in net controlled foreign corporation tested income (formerly global intangible low-taxed income). These amounts were partially offset by a decrease in foreign income taxed at lower rates.

Current wording

For the three months ended September 30, 2026, as compared to the same period in 2025, our provision for income taxes decreased due to a decrease in profitability, an increase in the benefit of U.S. federal, state and foreign research and development credits and an increase in the excess tax benefit related to stock-based compensation. These amounts were partially offset by a decrease in foreign income taxed at lower rates. For the nine months ended September 30, 2026, as compared to the same period in 2025, our provision for income taxes decreased due to an increase in the excess tax benefit related to stock-based compensation, a decrease in profitability, an increase in the benefit of U.S. federal, state and foreign research and development credits and a change in the valuation allowance recorded against state credits. These amounts were partially offset by a decrease in foreign income taxed at lower rates.

Previous wording

For the three months ended June 30, 2026, our effective income tax rate was consistent with the federal statutory tax rate as the impacts of the excess tax benefit related to stock-based compensation and the benefit of U.S. federal, state and foreign research and development credits were largely offset by an increase in certain tax reserves and non-deductible stock-based compensation. For the six months ended June 30, 2026, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates. These amounts were partially offset by an increase in certain tax reserves and non-deductible stock-based compensation.

Current wording

For the three months ended September 30, 2026, our effective income tax rate was lower than the federal statutory tax rate due to the benefit of U.S. federal, state and foreign research and development credits, foreign income taxed at lower rates and a change in the valuation allowance recorded against state credits. These items were partially offset by non-deductible stock-based compensation and non-deductible transfer pricing. For the nine months ended September 30, 2026, our effective income tax rate was lower than the federal statutory tax rate due to the benefit of U.S. federal, state and foreign research and development credits, the excess tax benefit related to stock-based compensation and foreign income taxed at lower rates. These amounts were partially offset by non-deductible stock-based compensation and non-deductible transfer pricing.

Previous 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.

Current wording

For the three months ended September 30, 2025, our effective income tax rate was lower than the federal statutory tax rate due to foreign income taxed at lower rates, a change in the valuation allowance recorded against state credits 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 an increase in certain tax reserves. For the nine months ended September 30, 2025, our effective income tax rate was higher than the federal statutory tax rate due to non-deductible stock-based compensation, an increase in certain tax reserves and a shortfall in the tax benefit related to 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.

Previous wording

In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2026. The OBBBA did not have a material impact on our condensed consolidated financial statements.

Current wording

In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2026. The OBBBA did not have a material impact on our interim condensed consolidated financial statements.

Previous wording

(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three and six months ended June 30, 2026, for the benefit of our note hedge transactions. During these periods, our average stock price was in excess of one or more of our convertible senior notes' initial conversion prices. See further definition below.

Current wording

(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three and nine months ended September 30, 2026, for the benefit of our note hedge transactions. During these periods, our average stock price was in excess of one or more of our convertible senior notes' initial conversion prices. See further definition below.

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 June 30, 2026, our cash, cash equivalents and marketable securities, which are detailed in Note 2 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q, totaled $4.6 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.

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 September 30, 2026, our cash, cash equivalents and marketable securities, which are detailed in Note 2 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q, totaled $4.2 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

Changes in cash, cash equivalents and marketable securities are dependent upon changes in, among other things, working capital items such as accounts receivable, deferred revenue, accounts payable, various accrued expenses and operating lease obligations, as well as changes in our capital and financial structure due to common stock repurchases, debt repayments and issuances, purchases and sales of marketable securities, cash paid for acquisitions and similar events. We believe our strong balance sheet, cash position and access to funds available under our revolving credit facilities are important competitive differentiators that provide the financial stability and flexibility to enable us to continue to make investments at opportune times. We expect to continue to evaluate strategic investments to strengthen our business.

Current wording

Changes in cash, cash equivalents and marketable securities are dependent upon changes in, among other things, working capital items such as accounts receivable, deferred revenue, accounts payable, various accrued expenses and operating lease obligations, as well as changes in our capital and financial structure due to common stock repurchases, debt repayments and issuances, purchases and sales of marketable securities, capital expenditures, cash paid for acquisitions and similar events. We believe our strong balance sheet, cash position, cash flows from operations and access to funds available under our revolving credit facilities are important competitive differentiators that provide the financial stability and flexibility to enable us to continue to make investments at opportune times, including in support of our large, multi-year cloud infrastructure services arrangements.

Previous wording

As of June 30, 2026, we had cash and cash equivalents of $363.5 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 September 30, 2026, we had cash and cash equivalents of $421.0 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.

Previous wording

The decrease in cash provided by operating activities for the six months ended June 30, 2026, as compared to the same period in 2025, was due to timing of customer collections, higher payroll and related costs due to increased headcount and higher lease payments for co-location facilities as we expand our network.

Current wording

The decrease in cash provided by operating activities for the nine months ended September 30, 2026, as compared to the same period in 2025, was due to timing of customer collections, higher payroll and related costs due to increased headcount and higher lease payments for co-location facilities as we expand our network.

Previous wording

The increase in cash used in investing activities during the six months ended June 30, 2026, as compared to the same period in 2025, was primarily due to an increase in purchases of marketable securities using proceeds from our convertible senior notes, which were issued in May 2026.

Current wording

The increase in cash used in investing activities during the nine months ended September 30, 2026, as compared to the same period in 2025, was primarily due to:

Previous wording

The increase in cash provided by financing activities during the six months ended June 30, 2026, as compared to the same period in 2025, was primarily due to our net convertible senior notes activity. During the six months ended June 30, 2026, we issued $3,500.0 million in par value of convertible senior notes. During the six months ended June 30, 2025, we issued $1,725.0 million in par value of convertible senior notes and repaid $1,150.0 million in convertible senior notes which were due in May

Current wording

The increase in cash provided by (used in) financing activities during the nine months ended September 30, 2026, as compared to the same period in 2025, was primarily due to our net convertible senior notes activity. In May 2026, we issued $3,500.0 million in par value of convertible senior notes. In May 2025, we issued $1,725.0 million in par value of convertible senior notes and repaid $1,150.0 million in convertible senior notes which were due in May 2025.

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 six months ended June 30, 2026, we repurchased 5.0 million shares of common stock at a weighted average price of $123.19 per share for an aggregate of $615.7 million. As of June 30, 2026, $564.8 million remained available for future share repurchases under the authorization program. Our goals for the share repurchase program are 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 is determined by our management based on its evaluation of market conditions and other factors. We do not expect any share repurchases for the remainder of 2026 as we continue to invest in our platform to support cloud infrastructure services.

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 nine months ended September 30, 2026, we repurchased 5.0 million shares of common stock at a weighted average price of $123.19 per share for an aggregate of $615.7 million. As of September 30, 2026, $564.8 million remained available for future share repurchases under the authorization program. Our goals for the share repurchase program are 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. We paused our share repurchases during the three months ended September 30, 2026 as we continue to invest in our platform to support cloud infrastructure services. The timing and amount of any future share repurchases is determined by our management based on its evaluation of market conditions, opportunities in the market and constraints on our liquidity.

Previous wording

As of June 30, 2026, we had $7,640.0 million of convertible senior notes outstanding that are senior unsecured obligations and bear interest payable semi-annually in arrears, except for the 2030 Notes and 2032 Notes, which have zero coupon interest. These notes mature between September 2027 and May 2033. We have reclassified the carrying value of the convertible senior notes due 2033 ("2033 Notes") from non-current liabilities to current liabilities in the interim condensed consolidated balance sheets as of June 30, 2026 because the market price trigger condition for the 2033 Notes was met as of June 30, 2026. Accordingly, the 2033 Notes are convertible at the option of the holders during the three months ended September 30, 2026. As of June 30, 2026, and through the date of this filing, no holders have submitted notes for conversion, and no conversions have occurred. The terms of the notes and related hedge and warrant transactions are discussed more fully in Note 7 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Current wording

As of September 30, 2026, we had $7,640.0 million of convertible senior notes outstanding that are senior unsecured obligations and bear interest payable semi-annually in arrears, except for the 2030 Notes and 2032 Notes, which have zero coupon interest. These notes mature between September 2027 and May 2033. The terms of the notes and related hedge and warrant transactions are discussed more fully in Note 7 to the interim condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Previous wording

We have entered into operating leases for real estate assets related to office space and co-location assets related to space or racks at co-location facilities and related equipment for our servers and other networking equipment. In addition, we have entered into an operating lease with a data center operator for space in the Virginia area that we contemporaneously subleased to an affiliate of a large social media customer. A portion of the space at the subleased data center commenced in 2025, and the remainder of the space commenced in January 2026. Both the lease payments and associated sublease income are expected to substantially offset each other. As of June 30, 2026, there have been no significant changes in our obligations under these operating lease arrangements from those reported on Form 10-K for the year ended December 31, 2025, other than normal period-to-period variations, particularly as we execute on our expansion plans for cloud infrastructure services.

Current wording

We have entered into operating leases for real estate assets related to office space and co-location assets related to space or racks at co-location facilities and related equipment for our servers and other networking equipment. In addition, we have entered into an operating lease with a data center operator for space in the Virginia area that we contemporaneously subleased to an affiliate of a large social media customer. A portion of the space at the subleased data center commenced in 2025, and the remainder of the space commenced in January 2026. Both the lease payments and associated sublease income are expected to substantially offset each other. In addition, as we meet our obligations under our large multi-year cloud infrastructure services arrangements, we have begun entering into operating leases for additional co-location space. As of September 30, 2026, we had additional operating leases for co-location arrangements that had not yet commenced of $2.4 billion, of which a majority are expected to commence by the end of 2027, with lease terms of one year to twenty years. Subsequent to September 30, 2026, we have added and expect to continue to add additional co-location lease commitments over the next year in support of these large cloud infrastructure services arrangements.

Previous wording

We enter into long-term agreements with network and internet service providers for bandwidth, as well as execute purchase orders for the purchase of goods or services in the ordinary course of business, which may contain minimum commitments. These minimum commitments may vary from period to period depending on the timing and length of contract renewals with our vendors, and on our plans for network expansion, including our expansion plans related to our cloud infrastructure services.

Current wording

We enter into long-term agreements with network and internet service providers for bandwidth, as well as execute purchase orders for the purchase of goods or services in the ordinary course of business, which may contain minimum commitments. These minimum commitments may vary from period to period depending on the timing and length of contract renewals with our vendors, and on our plans for network expansion, including our expansion plans related to our cloud infrastructure services. Additionally, we have entered into agreements to purchase servers and related equipment to support our large multi-year cloud infrastructure services arrangements, most of which include customary cancellation clauses; however, approximately $1.0 billion of these commitments are noncancellable, except upon customer cancellation.

Previous wording

Based on our present business plan, we expect our current cash, cash equivalents and marketable securities balances and 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, particularly planned investments in support of our cloud infrastructure services and our AI infrastructure, investments in information technology, potential strategic acquisitions, anticipated share repurchases, lease and purchase commitments and settlements of other liabilities.

Current wording

Based on our present business plans, we expect our current cash, cash equivalents and marketable securities balances our forecasted cash flows from operations and access to funds available under our revolving credit facilities 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 and other expenditures in support of our large, multi-year cloud infrastructure services arrangements; investments in information technology; potential strategic acquisitions; lease and purchase commitments; repayment of our convertible senior notes due in 2027 and settlements of other liabilities.