Key Takeaways on Delivery Pricing and Traffic Growth From Akamai’s Q1 Earnings Call

On Akamai’s Q1 earnings call, the company gave details regarding their delivery business. Akamai expects to see $3 million – $4 million in revenue due to the Olympics. Due to a social media customer who has optimized their platform to save money, Akamai said it would take a hit of $40 million – $60 million in revenue for the year due to less traffic from this single customer. Akamai did not name the customer, but it is TikTok. They have been pre-fetching less content and optimizing their entire infrastructure stack for the past few quarters.

Outside of TikTok, Akamai said that due to “slowing traffic growth across the industry” (they highlighted gaming in particular), they expect to see $20M-$30M less delivery revenue for the year. The company said that by the end of the quarter, they will have repriced five of their seven largest delivery customers and expect the remaining two to reprice by Q3. Regarding the repricing, Akamai said the pricing they are seeing is in line with what they expected. For those who have suggested that Akamai is dropping their delivery pricing just to win business, they’re not. The company confirmed that there is delivery traffic that Akamai is not taking on as it’s not “profitable” or “strategic.” Akamai also mentioned that their delivery business is “highly profitable” and that they have reduced their delivery capex costs to “low single digits,” a 50% reduction from a few years ago.

Here’s a breakdown of Akamai’s delivery revenue over the past 13 quarters:

    • Q1 2024: $351,758
    • Q4 2023: $389,048
    • Q3 2023: $379,304
    • Q2 2023: $379,698
    • Q1 2023: $394,384
    • Q4 2022: $415,183
    • Q3 2022: $393,248
    • Q2 2022: $416,678
    • Q1 2022: $444,148
    • Q4 2021: $470,767
    • Q3 2021: $462,068
    • Q2 2021: $466,739
    • Q1 2021: $473,669

For those wondering why the overall traffic growth rate is down, just look at the subscriber numbers from OTT platforms. Some, like Sling TV, lost subs in Q1, and so did Hulu+ Live TV. Subscriber growth across the industry wasn’t strong in Q1. Akamai also noted that traffic growth in the gaming industry was lower.