CDSA

Continued strong demand for Akamai’s security solutions and record traffic levels on its platform drove strong results for the company in its fourth quarter (ended Dec. 31), according to Tom Leighton, its CEO and co-founder.

Akamai also announced an organizational realignment that it said Feb. 9 was “intended to position the company to become even more agile in delivering its market-leading solutions for making the internet fast, intelligent and secure for major enterprises.”

The goal was to “facilitate continued strong growth for Akamai’s $1 billion security business, make it easier for developers to take advantage of the power of serverless computing on the largest internet edge platform in the world, and give customers easier access to Akamai’s full portfolio of solutions,” it said.

Akamai “delivered excellent results for both the both the fourth quarter and the full year in spite of extraordinary challenges that we all faced in 2020,” Leighton told analysts on an earnings call.

Q4 revenue grew 10% from a year earlier to $846 million. That “strong result was driven by the continued rapid growth of our security business and continued high traffic on our intelligent Edge platform,” Leighton said.

Akamai’s Cloud Security Solutions business “continued to be the fastest growing part of our business in Q4, generating” revenue of $296 million, he said. That was a 24% increase from a year earlier. For the full fiscal year, security revenue exceeded $1 billion ($1.1 billion) and grew 25% over 2019. That “puts Akamai in rare company as few firms generated more than $1 billion in annual revenue from cybersecurity solutions and fewer still grew at 25% last year,” Leighton said.

Security represented one third of all Akamai revenue last year, up from 29% in 2019 and 24% in 2018, he noted. Bookings were especially strong for its Prolexic service in Q4 as Akamai “helped dozens of major enterprises defend against a wave of ransom” distributed denial-of-service (DDoS) attacks that started in Q3, he said. “DDoS protection has been a mainstay of our portfolio for years and has never been more relevant for customers,” he added.

Akamai also saw strong bookings for its Bot Manager solution in Q4, he said, noting Bot Manager “helps defend against credential abuse attacks, which were about four times greater in 2020 than the year before.”

2020 was also a “strong year for innovation, with the release of Page Integrity Manager and Secure Web Gateway,” he said, telling analysts “bookings for both are off to an excellent start as enterprises increasingly need to deal with malware and third-party software and applications and the addition of Secure Web Gateway to our Enterprise Threat Protector service better positions us to compete in the fast-growing enterprise security market.”

Akamai also closed on its acquisition of private network automation and management specialist Asavie in Q4, he noted. That purchase, announced in October, “helps advance our security capabilities for cellular devices and networks,” he said.

Akamai’s Media and Carrier Division also had a strong Q4 “as a result of continued high levels of traffic” for over-the-top (OTT) video services and downloads of gaming software, he told analysts. Revenue in the business grew 15% to $408 million. On Nov. 10, traffic on the Akamai platform reached an all-time high of 181 terabits per second, 50% greater than 2019, Leighton said, adding the company “already exceeded last year’s traffic feat just last week.”

Revenue from Internet Platform Customers was $58 million, up 11% from a year earlier and “above our expectations due to higher-than-expected traffic,” according to Akamai CFO Ed McGowan.

The SolarWinds Hack

The recent SolarWinds hack “illustrates the importance” of companies using a Zero Trust security strategy, according to Leighton. “It was obviously a devastating attack and it highlights the need for products, for example, like our Enterprise Threat Protector,” he said.

Meanwhile, with “third-party malware showing up everywhere” online, it is “why our Page Integrity Manager service is so important,” he said.

More Details on the Realignment

As Akamai looks to the future, “we see substantial opportunity for enterprises to increase their use of the Akamai Intelligent Edge platform,” Leighton said, adding: “We believe the Edge is where new applications and new business models will come to life, where intelligence will be built into how data is collected and analyzed, where the promise of 5G” and the Internet of Things (IoT) “will be realized and where security will provide the online world’s first and most important line of defense.”

And, “to better take advantage of these opportunities and to better serve our customers,” Akamai will be “realigning our organization around two major groups of products – products that enable business online and products that protect business online, he said.

Those two product groups are Security Technology and Edge Technology, “both of which will be supported by a single global sales organization,” he noted.

Products that enable business online will be the focus of the new Edge Technology Group, which will be led by Adam Karon as COO and general manager. “This group will be responsible for our media delivery, web performance and Edge computing solutions, as well the Edge platform that underpins everything we do,” Leighton said. “These products generate about two thirds of our total revenue today,” he noted.

Meanwhile, the products that “protect business online will come together in a new Security Technology Group” to be led by Rick McConnell as president and general manager, Leighton said. This new group will be responsible for all of Akamai’s security solutions, including Kona Site Defender, Bot Manager and Prolexic, as well as its enterprise security products including Enterprise Application Access and Enterprise Threat Protector and carrier security products including its DNS secure business offering and new secure mobile service.

Akamai’s Forecast

The company expects revenue for 2021 to grow 4-6%, a revenue outlook that McGowan said “assumes that the pandemic-related impacts to areas like work-from-home and travel will last at least for the first half of 2021.”

As a result of that, “we expect to see continued challenges in our retail and travel verticals,” he said, adding: “From a traffic perspective, as life returns to a more normalized pre-pandemic state, we do not expect to see our traffic on our platform decrease. We believe the pandemic has accelerated consumer usage of the Internet in areas like OTT video, gaming, and e-commerce and we believe this usage pattern will likely persist going forward. However, we expect to see traffic continue to grow in 2021, but at a rate more in line with pre-2020 historical levels.”