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Akamai Technologies Q4 2021 Earnings Call Transcript


Listen to Conference Call

Participants

Corporate Executives

  • Tom Barth
    Head of Investor Relations
  • Tom Leighton
    Chief Executive Officer and Co-Founder
  • Adam Karon
    Chief Operating Officer, General Manager
  • Ed McGowan
    Executive Vice President, Chief Financial Officer

Presentation

Operator

Welcome to the Fourth Quarter 2021 Akamai Technologies Earnings and Acquisition of Linode Conference Call. [Operator Instruction]

I'd now like to hand the conference over to Tom Barth, Head of Investor Relations. Please go ahead.

Tom Barth
Head of Investor Relations at Akamai Technologies

Thank you operator, good afternoon everyone and thank you for joining Akamai's fourth quarter 2021 and acquisition of Linode Conference call. Before we get started with the Linode acquisition that we just announced. Today's earnings call format will be a bit different than normal. We will be presenting slides and associated content and the link to the webcast can be found in the Events section of our Investor Relations website. We plan to post the full slide deck following the call and I am now on Slide 2. As you can see from our agenda. Speaking today will be Tom Leighton, Akamai's Chief Executive Officer; Adam Karon, Akamai's Chief Operating Officer and General Manager of the Edge Technology Group; and Ed McGowan, Akamai's Chief Financial Officer.

Moving to Slide 3. Please note that today's comments include forward-looking statements, including statements regarding revenue and earnings guidance. While I don't intend to read this slide, these forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. These factors include uncertainty stemming from the COVID-19 pandemic, the integration of any acquisitions and any impact from unexpected geopolitical developments. Additional information concerning these factors is contained in Akamai's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q.

The forward-looking statements included in this call represent our Company's view on February 15, 2022. Akamai disclaims any obligation to update these statements to reflect future events or circumstances. As a reminder, we will be referring to some non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP and non-GAAP metrics can be found under the financial portion of the Investor Relations section at akamai.com.

And with that, let me turn the call over to Tom, and he will start on Slide 4.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Thanks, Tom, and thank you all for joining us today. Today is a very exciting day for Akamai. This afternoon, we announced that we've signed a definitive agreement to acquire Linode. We see this as a tremendous opportunity for Akamai and we believe that it will be transformational, as we expand our business into adjacent markets, become even more strategic for our customers and accelerate our growth and evolution as a company. We'll talk more about the note in a few minutes, but first I'd like to review some of the highlights from a very strong Q4 in 2021.

Turning to Slide 5. Q4 revenue was $905 million, up 7% year-over-year. Our revenue growth was driven by the continued strong demand for our security products as well as our fast-growing Edge Applications business. Non-GAAP operating margin in Q4 was 31%, up one point over Q4 in 2020. Q4 non-GAAP EPS was $1.49 per diluted share, up 12% year-over-year. For the full-year, revenue was $3.46 billion, up 8% over 2020. We expanded non-GAAP operating margin to 32% last year and we achieved this result while investing for future growth. Non-GAAP EPS last year was $5.74, up 10% over 2020.

2021 was also a very strong year for cash generation at Akamai. We generated $859 million in free cash flow last year, an increase of 78% over 2020. I think it's important to note that our excellent cash generation has allowed us to make strategic acquisitions like Guardicore in Q4 and now Linode to fuel our future growth, while also returning capital to shareholders. In Q4, we spent $271 million to buyback just over 2.4 million shares of stock. Over the course of the full year, we spent $522 million to buyback approximately 4.7 million shares.

Our primary use of cash is for M&A and offsetting the dilution from our equity compensation programs. Over the past 10 years, Akamai has also engaged an opportunistic buybacks that have resulted in a reduction of our fully diluted share count by about 12%. Last quarter, Security products continued their rapid growth, generating revenue of $365 million, up 23% year-over-year. For the full year, Security revenue reached $1.33 billion and grew 26% over 2020. Security represented 39% of our revenue last year, up from 33% in 2020. In recent years, Akamai has built one of the world's leading cloud security businesses. Our security solutions are highly differentiated and recognized as best-in-class by our customers.

We rely on Akamai to protect our most important digital assets from very determined and highly capable attackers. Results in Q4 were especially strong for our Bot Manager solution, which helps to defend against a wide range of automated attacks. Our new account protector solution, which provides account takeover protection also performed very well in Q4 in only a second quarter of availability. Our Web App Firewall offerings also posted excellent results in Q4, and Akamai was recognized as a leader in Gartner's 2021 Magic Quadrant for Web Application and API Protections, scoring the highest of 11 vendors and ability to execute.

In October, we acquired Guardicore to extend our Zero Trust solutions to help stop the spread of ransomware. As a part of Akamai, Guardicore has continued its strong growth momentum and closed major deals last quarter and one of the largest freight railways in the U.S., and at one of the largest telecommunication companies in South America. We're very excited about the value that Guardicore's micro-segmentation capabilities bring to our customers. And as Ed will talk about shortly, we now believe the Guardicore will drive significantly more revenue this year than we had initially forecast when we announced the transaction last fall.

Our CDN business generated revenue of $541 million in Q4, down 2% from Q4 in 2020. Traffic on our platform continue to be strong in Q4, peaking it over 200 terabits per second. Our Edge Application solutions had a great Q4, exiting the year with an annualized revenue run rate of more than $200 million and growing 30% for the full year. Our Akamai Edge Worker solution was adopted by a top sporting equipment company, a global Business Travel Service and one of the largest banks in the U.S. Overall, we're very pleased with our performance last year on both the top and bottom lines. We achieved our goals in 2021 and then some and I want to thank our employees for delivering such strong results as they continue to cope with the challenges of the pandemic.

I'll now move on to Slide 6. As many of you know, Akamai's mission is to power and protect life online, and our purpose in doing that is to make life better for billions of people, billions of times a day. Akamai has been doing this for more than 20 years. Enabled in part by a series of market to finding innovations, starting with the invention of content delivery networks in the late 1990s. As you can see on the next Slide #7, we follow this breakthrough in Internet technology with fundamental advances and video streaming, application acceleration, and web security. In each of these areas, Akamai was a major pioneer in enabling new capabilities. And in each of these areas, we're still the market leader today by far. Throughout the past 20 years, we've also been a pioneer and a leader in edge computing, beginning with the invention of edge site includes in the early 2000s, a technology that still used by thousands of our customers today.

And now turning to Slide 8. We're taking the next major step in our evolution by creating the world's most distributed compute platform, from cloud to edge, making it easier for developers and businesses to build, run and secure their applications online. As you can see in this afternoon's press release, we've entered into a definitive agreement to acquire Linode, the privately held company that makes cloud computing simple, affordable and accessible. Linode is known for its developer friendly services, the quality of their support and as a trusted infrastructure-as-a-service platform provider.

By combining Linode's developer-centric cloud advantages with Akamai's deep enterprise strengths, we believe that we can provide tremendous value to developers and enterprises as they build cloud applications on Akamai. We see plenty of opportunity for a differentiated offering among customers, who desire ease of use, wider reach beyond just a few parts, lower latency, stronger security and greater resiliency, all from a single platform and all at an affordable price point. Akamai's highly distributed edge platform as the global reach to enable any cloud application to deliver the best end-user experience anywhere that users or services consume apps. From the cloud to the edge, where more compute services will there as 5G and IoT take hold and expand.

The Akamai platform is uniquely suited for workloads that require high throughput, low latency and instant scalability on demand. Akamai has been perfecting this capability for many years and it's very hard to do. Akamai also has the capabilities needed to integrate seamlessly with both DIY Cloud apps, and third party cloud vendors as part of the larger cloud ecosystem. We believe that this flexibility will appeal to enterprises that want multi-vendor cloud strategy. To mitigate their vendor concentration risk and to ensure resiliency and seamless availability in case one vendor service experiences an outage and with Akamai's category-leading security solutions customers will be able to secure their apps from their point of origin to the edge.

All under Akamai's protective umbrella. Security delivered at the Edge offers unique advantages since it enables customers to manage security policies across all their apps and infrastructure, wherever they are located. We believe that such an end to end security approach will appeal to customers who want increased efficiency and greater resiliency along with lower security risk. The net of all this is that we believe that Akamai and Linode can solve customers' needs in ways that are not addressed in the market today. Forming a powerful winning combination that will enable customers to build, deliver and secure their apps on the platform that powers and protects life online.

Moving to slide 9 we see the acquisition of Linode as a transformational opportunity for Akamai. This slide shows the way that we presented our business at our Investor Day last year. With Linode Akamai will expand beyond security and delivery, into the world's most distributed cloud services provider with leading solutions for security, delivery and compute as shown here on slide 10. We will offer customers a breadth and depth of services uncommon in the cloud space today. A massive content delivery platform, the best application performance, easily use cloud and edge compute and category-leading security solutions. All backed by expert services and support professionals to help power and protect life online.

Given that we're announcing this acquisition at the same time as our earnings. I thought it would be helpful to have Adam Karon join us on the call today to talk more about Linode. Adam is our COO and he is responsible for running our compute and delivery businesses. Later this year, we'll also plan to hold an Investor Day when you'll be able to hear from Mani Sundaram, who leads our security business as well as from other Akamai executives. After Adam speaks Ed will cover the financial aspects of the acquisition and provide our outlook for 2022. Adam?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Thanks, Tom. I'll start on slide 12. Tom just spoke about the three core product pillars will have at Akamai. Security, delivery and compute. I'm going to focus a bit deeper into the compute portfolio and what we think it will look like after the integration of Linode. Turning to slide 13, I'll start with the existing Linode product portfolio which is split into four product groupings. The first being compute which has offerings like dedicated and shared CPUs, bare metal GPUs and Kubernetes.

The next being storage, which provide services like block storage, object storage and a managed database service and data. Next cloud orchestration and finally an award winning set of developer tools that make it really easy for developers to use their platform. Their products are sold in traditional cloud models are using online trials and online purchases. Turning to slide 14 after the acquisition closes the Akamai compute product portfolio we envision would consist of five product groupings. The first being compute, inherited from Linode containing shared is dedicated CPUs, GPUs, Kubernetes, storage, which would contain the block and object storage that came from Linode, but would also now include Akamai's net storage.

We have cloud optimization that would include Akamai's Global Traffic Manager, Cloud Wrapper, and Direct Connect solutions. Next, the developer tools we get from Linode as well as the existing Akamai developer tools now make the Akamai compute platform easy and accessible to developers all over the world. And last but certainly not least our Edge applications, which contain our EdgeWorkers and EdgeKV products that execute, compute right at our edge. It will also include our Cloudlets, image and video manager and of course our API acceleration product.

One of the exciting synergies would be in go-to-market. Akamai's compute products would not only be sold online, but because our current globally located enterprise sales force works closely with the buyers for cloud compute they have the right relationships and we would not need to create an overlay sales force another exciting go to market synergy would be our existing robust in global channel ecosystem. That could also take these cloud compute offerings to market and in both cases new wallet share within the customer base could be opened for future growth.

Turning to slide 15 now let's talk about how we think about compute. Now computing at the Edge or near end-users and devices brings unique benefits for critical use cases that are in many locations in where data is in motion or femoral whereas computing in the cloud brings other benefits that are usually for applications running in a smaller number of locations and where data is stored and persistent. Our combined platform would have both Edge and Cloud Computing and since modern applications are built as a collection of services, each was different compute needs and data needs only by combining the Edge and cloud can we fulfill the varied needs of our customer base, like data localization and low latency containerized compute as well as more typical compute needs that are persistent and in fewer locations.

The unique capabilities can come together when we are able to combine Akamai's Edge platform with Linode's cloud computing capabilities and then add in our Global Traffic Manager product to round across multiple clouds in filed locations. Our global large private network and efficiently connects cloud and Edge locations and messaging, bringing it altogether coordinating cloud and edge services. You end up with the world's most distributed compute platform from cloud to Edge making it easier for developers and businesses to build run and secure applications. Now on slide 16, while Linode and Akamai consult a number of customer use cases separately.

I thought it would be useful to cover just a few examples of the used cases, we believe we can help fulfill for our customers with this unique combination of products. In the sports vertical, you could imagine a sports league, you could leverage the new Akamai platform to deploy WebRTC services to enable a watch along app that allows a group of friends to watch a game in sync while communicating with each other in real time and they would be able to do that using our distributed BMs, load balancing and high throughput egress when you think of IoT and fleet management. You could see a shipping company building a distributed app to collect in parts video and telemetry data in trucks in route before backhauling the data to their data warehouse and they'd be able to do that using our supportive MQTT, our distributed BMs and direct connect capabilities. In e-commerce site to leverage Akamai to dynamically personalize their site based on the users' previous and current browsing activity without having to go back to their data link.

All using our managed database services, Cooper Netis and functions as a service. In the Metaverse we can help create a persistent virtual experience when a game studio needs to connect users from across the globe in a fully immersive VR experience from any console, mobile device or browser all using our distributed GPU's low latency and private backbone and in Healthcare, a hospital could leverage Akamai to create a platform that captures and archives videos of surgical procedures to help train doctors, a new and emerging techniques using bare-metal and our ObjectStore.

Now turning to slide 17 the combination of Akamai and Linode can be a truly unique offering in the market. We plan to combine ease of use and developer friendly friendliness, Linode is known for with the wider reach, lower latency, strong security and greater resiliency that are Akamai's hallmarks. We expect our new combined offering to appeal to developers by offering core cloud compute functionality, ease of use and tools they need appeal to enterprises with security, uptime and reliability and drive future use cases as new applications can take advantage of the throughput performance and distribution of a market-leading global network.

Turning to slide 18, so with Akamai and Linode we can have highly secure Elastic Compute along with storage capabilities on the world's largest Edge network, category-leading security in Edge computing platform for latency sensitive workloads all on Akamai's large global private network with a globally located enterprise sales force and robust channel ecosystem all setting us up to win in the marketplace. And now I'll pass it to Ed to discuss the transaction details.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Thank you, Adam. I will start my remarks with a brief highlights of our very strong Q4 results. Then provide some insight into the financial aspects of the Linode acquisition and then close with our Q1 and full year 2022 guidance.

So moving to Slide 20. Starting with the Q4 highlights, we are very pleased with our strong Q4 results, capping off an excellent year for Akamai. Q4 revenue was $905 million, up 7% year-over-year or 8% in constant currency. Revenue was led by another quarter of very strong growth in security as well as strength in our edge applications business. Security revenue growth in Q4 was 23% year-over-year or 25% in constant currency, with Guardicore contributing revenue of approximately $10 million. We are very pleased with the initial momentum we've seen from Guardicore as well as the continued growth of the pipeline. It is also worth noting that our edge applications business surpassed a $200 million annual revenue run rate in Q4 and grew 30% for the full year 2021.

International revenue growth was another bright spot with revenue increasing 13% year-over-year or 16% in constant currency. Sales in our international markets represented 47% of total revenue in Q4, up 2 points from Q4 2020. These strong results were despite foreign exchange fluctuations, which had a negative impact [Technical Issues] basis and negative $10 million on a year-over-year basis. Non-GAAP net income was $243 million or $1.49 of earnings per diluted share, up 12% year-over-year, up 14% in constant currency and $0.05 above the high-end of our guidance range. Finally, as Tom mentioned, we had an exceptional year from a cash flow perspective. Moving to capital deployment. During the fourth quarter, we spent approximately $271 million to buy back approximately 2.4 million shares. Our intention is to continue to buy back shares to offset dilution from employee equity programs over time and to be opportunistic, both M&A and share repurchases.

Turning now to Linode on Slide 21. As you heard from Tom and Adam, we believe the combination of Akamai-Linode will create the world's most distributed platform for developers and businesses to build, run and secure their applications. Under the terms of the agreement, Akamai has agreed to acquire Linode in exchange for approximately $900 million of cash. The transaction will be treated as an asset purchase for tax purposes. And as a result, we anticipate significant cash income tax savings over the next 15 years. While this benefit will not impact our non-GAAP effective tax rate, we estimate the present value of these savings to be approximately $120 million.

Turning to Slide 22. We believe that Linode currently has a very attractive financial profile and that there are considerable revenue and cost synergy opportunities in the future. Assuming a late Q1 close in 2022, we expect the acquisition to add revenue of approximately $100 million, have no material impact to our non-GAAP operating margin, and be accretive to non-GAAP EPS by $0.05 to $0.06 per share. Looking beyond this year, we expect Linode to be additive to our non-GAAP operating margin as we continue to capitalize on revenue and cost synergies, including leveraging our go-to-market channel and marketing organizations to accelerate revenue from enterprise customers, realizing significant cost savings by utilizing our very large global private network that Adam previously talked about, as well as leveraging our significant scale and supply chain along with our network deployment expertise.

From a capex perspective, we expect Linode to add approximately 2 points to capex as a percentage of revenue in 2022, as we plan to expand Linode's capacity and locations to meet anticipated customer demand. However, over the long-term, we do not expect the acquisition to meaningfully change our previously communicated goal of capex being in the mid-teens as a percentage of revenue.

Turning to Slide 23. As Tom and Adam previously mentioned, upon closing the acquisition, we plan to update our revenue reporting to reflect three separate business groups; security, delivery and compute. The first revenue grouping security will remain unchanged from the existing reporting of our security technologies group. The second revenue group will be delivery. Delivery will be comprised of edge delivery and services portion of our existing ETG organization, but will exclude our net storage and Edge Application businesses that were previously included as part of ETG revenue. For context, our edge applications business, which had revenue of approximately $196 million in 2021 and our net storage business, which had revenue of approximately $57 million for 2021. We'll move to our new compute business. The third and final revenue group will be called compute. Compute will include Linode plus our edge applications and net storage businesses, I just mentioned. We believe that was strong execution. We can deliver more than $500 million of annual compute revenue in 2023.

Turning to Slide 24. Before I provide our Q1 in 2022 guidance, I wanted to highlight a couple of factors to consider for your models. First, the Q1 in full year 2022 guidance I am about to provide, does not reflect the revenue and non-GAAP EPS contribution we anticipate from Linode that I previously mentioned since the acquisition does not yet closed. We plan to update our full-year guidance to include Linode on the first earnings conference call after the deal has closed. second, international revenue now represents nearly half of our total revenue and the dollar has continued to strengthen since we reported in early November. Therefore, we currently expect a meaningful foreign exchange headwind 2022. The current spot rates, our guidance assumes that foreign exchange will have a negative $45 million impact on revenue on a year-over-year basis.

Finally, similar to 2019, we have 8 of our top 10 customers renewing in the first half of the year. As a reminder, we define our top customers as anyone contributing revenue of 1% or more and that customer -- that group of customers contributed approximately 19% of total revenue in 2021. Although we expect to see a negative impact to revenue growth in the near term, we expect to see incremental revenue over time, as these customers traffic grows with us. I'd also note that while the cluster timing of these renewals is unusual, the pricing contract terms are consistent with the broader trends in the market and these renewals have been factored into our guidance. So with all that in mind, turning to our Q1 guidance on Slide 25. We are projecting revenue in the range of $896 million to $910 million,, were up 6% to 8% as reported, or 8% to 10% in constant currency over Q1 2021.

Foreign exchange fluctuations are expected to have a negative $2 million impact on Q1 revenue compared to Q4 levels and the negative $17 million impact year-over-year. At these revenue levels, we expect cash gross margins of approximately 76%. Q1 non-GAAP operating expenses are projected to be $292 million, $296 million. We anticipate Q1 EBITDA margins of approximately 43%. We expect non-GAAP depreciation expense to be between $123 million to $124 million and we expect non-GAAP operating margin of approximately 30% for Q1.

Moving on to capex. We expect to spend approximately $120 million to $124 million excluding equity compensation and capitalized interest in the first quarter. This represents approximately 13% to 14% of anticipated total revenue, which is down approximately 4 points from Q1 2021 levels. And with the overall revenue and spend configuration I just outlined. We expect Q1 non-GAAP EPS in the range of $1.39 to $1.43. This EPS guidance assumes taxes of $38 million to $39 million based on an estimated quarterly non-GAAP tax rate of approximately 14.5%. It also reflects a fully diluted share count of approximately 162 million shares.

Moving to Slide 26. Looking ahead to the full year, we expect revenue of $3.673 billion, the $3.728 billion, which is up 6% to 8% year-over-year as reported 7% to 9% in constant currency. We expect security revenue growth to be at least 20% for the full year 2022. This includes an expected Guardicore contribution of approximately $50 million to $55 million. We are estimating non-GAAP operating margin of approximately 29% to 30% and non-GAAP earnings per diluted share of $5.82 to $5.97 and this non-GAAP earnings guidance is based on a non-GAAP effective tax rate of approximately 14.5%, a fully diluted share count of approximately 162 million shares.

Finally, full year capex is anticipated to be approximately 13% to 14% of revenue. In closing we are very pleased with our 2021 performance and are excited to close on the node help customers build run and secure their applications. Now I'd like to turn the call back over to Tom to say a few words before we take your questions. Tom?

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Thanks, Ed. I'll wrap up now on Slide 28. As I mentioned earlier, Akamai has had a rich and exciting history of innovation that has fundamentally enabled the Internet to provide enormous benefit to billions of people around the world. We are truly making life better for billions of people billions of times a day. As incredible as Akamai's contributions to the Internet have been, I want you to know that I couldn't be more excited about Akamai's potential for the future as we expand our business with Linode and Guardicore provide even greater value for our customers and shareholders and make life even better for Internet users everywhere. Ed, Adam and I will now be happy to take your questions.


Questions and Answers

Operator

[Operator Instructions]

Our first question comes from Sterling Auty with JPMorgan.

Sterling Auty
Analyst at J.P. Morgan

Yeah, thanks. Hi guys. I wondered if you could give us some context. In terms of what kind of growth was Linode experiencing for the acquisition and then when you talked about kind of 2023 and beyond. I want to make sure I understand that new compute area of the $500 million. What kind of growth rate do you expect out of that segment. Thank you.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yes Sterling, this is Ed, thanks for the question. So before the acquisition. They were growing at about 15% give or take. The bigger customers are growing faster and they were sort of containing their growth. A bit it was a very closely held company, so they were holding back a bit on their investment in go-to-market and in their build out. So obviously, that's one of the major synergies we bring. So we think we can accelerate that business pretty considerably. Now when I talked about the different components of the business.

If you take the net storage business plus the Edge applications business plus where Linode is. I soon like talk about how we grew the Edge applications business 30% and if you remember back on Investor Day, that was our long-term target. Our net storage business as it is today is kind of a flattish business kind of grows like the CDN. We expect that to obviously accelerate as we add new capabilities and then the Linode business should accelerate quite a bit. So if you were to put those pieces together I talked about in '23 that I expected that we would be above $500 million in revenue. I sort of get you that 32% to 35% kind of growth rate and that business. Once you get through the acquisition.

Sterling Auty
Analyst at J.P. Morgan

Right and then, but given those pieces. Would you expect that growth to be durable at that level or kind of settle back into more of a 15% to 20% that just so we understand the longer-term context. And that's all for me. Thank you.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yes, that's a great question and I'll ask Adam to chime in a little bit here as well. Obviously we're getting into a very, very big market and what pushed us into this market was our customers, we were getting more and more request for folks to continue, come with different use cases ourselves. We're spending quite a bit on third-party cloud. Today, whether it's through acquisitions or through IT projects. Just the overall growth of this market is so significant that we think there is certainly the market there to do that. I'll let Adam talk a little bit about some of his plans in terms of future integration and the growth prospects going forward. But it's quite possible that that could be a durable growth rate going forward for that business.

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yeah, I agree. And I think what we see that market growing very rapidly outside what Akamai had before, and we see that with our customers in demand of our edge applications and asking us for this type of cloud computing as well. So we do expect it to be durable as that market continues to grow quite rapidly.

Sterling Auty
Analyst at J.P. Morgan

Thank you.

Operator

Our next question comes from Keith Weiss with Morgan Stanley.

Keith Weiss
Analyst at Morgan Stanley

Excellent. Thank you guys for taking the question, maybe two questions, one on the Linode acquisition, I just wanted to kind of better understand kind of like the buy versus like a partner decision. Can I first understand what's interesting about sort of buying this asset? We, you could do owning sort of Linode versus partnering with Linode or other type of cloud computing platforms out there, number one. And then number 2, you for Ed. Just looking at FY '22 in the margins coming down. You had nice margin performance in Q4 and all throughout 2021. Can you talk to us a little bit about what's going to be pressuring margins into 2022?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yeah, by owning one node, we could really scale up that business. We have a lot of expertise in network deployment and doing that in a cost effective way to get enormous scale. Also, we've got a large enterprise sales force and a customer base that is hungry for us to bring them this kind of capability. We know how to make large scale systems be reliable and perform well and we can bring it all together.

As part of an end-to-end solution, so that our customers can take their major applications, build them easily on Akamai and that's where Linode comes in, run them, of course, we have the world's largest and best content delivery platform to deliver it and then wrap it all together under our security umbrella, to make sure it stays secure and so that's a compelling reason for us to make the acquisition here and provide the end-to-end service versus just partnering with the various cloud providers. Ed, do you want to -- your take on the margin question of that.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yeah, sure. Yes, sure. Keith just to add on that. If I just look at the financial profile of the business, we just acquired. Think about getting up to that sort of scale of revenue, the type of investment you need to make, how long will it take you to get there? It's rare that you find companies that have profitability margins like we do. So, to be able to bolt that on it's immediately accretive gets us to market much faster. There is a brilliant for the simplicity in terms of how they approach and how simple it is to use their system.

That's an expertise that we're acquiring as well. So there's a lot to like about that. Now in terms of the margins. So a couple of things going on there. One of the points that I made in my prepared remarks was about foreign exchange. That's a big headwind for us and we're very profitable outside the U.S. So that does put a little bit of pressure on margins for us. But also we're making investments and keep in mind, if you have the full Guardicore business, we only had about two -- the lower two months in the first -- in the fourth quarter and the first quarter, we have full Guardicore and we -- costs in the business and you've got in the middle of the year is when we do our merit increase.

That said two things to point out. Number one, we're going to be -- so we do about 30% in Q1. We've done very well, managing costs and then we also told you when we did the acquisition of Guardicore that in '23. We'd expect to get above 30% margins again. So we'll be expanding margins might be slightly under 30% this year as I said, somewhere between 29% and 30% but we anticipate to get back above that in '23.

Keith Weiss
Analyst at Morgan Stanley

Excellent, thanks so much guys.

Operator

Our next question comes from James Breen with William Blair.

James Breen
Analyst at William Blair

Thanks for taking the question. Just looking at the Edge Technology Group growth this year has been flattish off of some pretty high numbers from 2020 as a result of the pandemic. As you think about that going forward and some of the repricing this year. Can you just talk about some of the puts and takes relative repricing some of those contracts as well as some of the sectors that were hit most by the pandemic potentially eventually improving?

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Thanks. Yeah, this is Ed, I'll take that one. So, yeah, as far as the renewals go as we've talked in the past. Whenever we have a combination of renewals we'll always call it out for you guys. Here's what I would expect with that group of customers typical renewal pricing. Nothing unusual in terms of anything in the market to call out there.

I'd expect that group of customers to decline a bit in Q1 decline a bit in Q2 so, I got about half the renewals already done. And got about half coming up here in April. And then I would expect that revenue to start to grow again. It's pretty typical of what you see in the CDN business. We have a cluster of renewals. Now those customers have varying contract, some of them are one-year, some of them are two, some of them are three and some of them have revenue commitments that will be used up before the contract over. So it's very unusual to have this sort of a cluster. So that will put some pressure on growth here for the next couple of quarters, but then I expect that customer group to grow. There have been very busy buying up our security products, our compute products. We expect now they great targets for the new acquisition we just picked up here. So I expect to expand the wallet share within those group of accounts and this is just something that's pretty typical on the CDN business and where we're seeing the pricing pressure is on the delivery side. We're not seeing it in the security side, not seeing it at Edge apps, seeing it just in delivery. As far as the pandemic, we are starting to see a little bit of improvement in travel and hospitality, and as a reminder, that group was about 4% of our total revenue. I think that will sort of ebb and flow with how the pandemic goes, as we start to have these waves of new variants, travel slows down as it goes away, and travel picks up. Retail is still a bit sluggish, not really seeing a significant improvement and just remember, we had set up a zero overage in the biggest acquirers of that type of contract or the retailers, especially in the U.S., so you see a little bit of a muted seasonality here in Q4 related to retail, but still some way to go there on retail. Travel is improving a bit, and in general, as we get past these renewals, we'll start to see the delivery business improve a bit.

James Breen
Analyst at William Blair

Great. Thanks.

Operator

Our next question comes from Colby Synesael with Cowen.

Michael Elias
Analyst at Cowen

Hi, this is Michael on for Colby. Two questions if I may. First, following this acquisition, you also did Guardicore. How would you describe the appetite for additional M&A? And it's part of that, how does this acquisition impact the way that you're thinking about additional buybacks? I thought there was a pretty notable step up in the fourth quarter. And then one other question of squeeze it in, with this acquisition $100 million of revenue coming in, and we talked about 15% growth achieved durable, how does this change the way you're thinking about the long-term revenue growth profile for the company? Thank you.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Yes. Good questions. Obviously, we've done two large deals. The largest deals we've done in about 20 years over the last several months. I wouldn't expect to see us continue at that rate certainly. We probably will do more tech tuck-ins and smaller acquisitions. In terms of the buyback, our primary use of cash is for M&A and to buyback equity to offset the dilution from compensation programs. Now as I mentioned, that said, we do also opportunistically buyback additional stock. And if you look over the last 10 years, it's averaged a little more than 1% a year. And so I think our general approach to use of capital is not changing here. Just we saw two exceptional opportunities. First, with Guardicore and now with Linode. Guardicore really is a huge boost to our Enterprise Security business, Zero Trust capabilities. We believe they have the best solution to stop the impact of ransomware and that's a huge, huge deal and you see that in the improved guidance we've given and just we closed the deal a few months ago and we're looking at this year then of doing $30 million to $35 million and now as you heard from Ed, substantially more than that. And I can tell you from talking to many of our customers, many of the world's major banks, they are very interested in what Guardicore can do, both the visibility it gives customers into their own networks and the ability to mitigate the impacts of ransomware. Now, in terms of the durability of revenue growth from the node in the past, they were doing 15%. I think Ed and Adam talked about, we think we can do a lot more than that. I just consider that Linode doesn't really have a sales force. Never mind a sales force like Akamai is going after major enterprises and you combine that with the fact that our major enterprise customers have wanted us to have this capability for them. So we think we can really accelerate their growth and that it could well be that the 30% is sustainable, so we're certainly going to try to do that. And if we're successful there, you can see Akamai as a whole back in double-digit revenue growth on a more sustainable basis, and that's certainly our goal.

Michael Elias
Analyst at Cowen

Thank you for the color. Really appreciate it.

Operator

Our next question comes from James Fish with Piper Sandler.

James Fish
Analyst at Piper Sandler Companies

Hey guys, thanks for the question. Securities grew 22%. I'm actually I'm sorry 25% constant currency, but seemed like new business slowed and the normalized security number was slightly down versus last quarter, so really why are we growing faster in the segment when the market has come directly towards savvy and it's healthy for security market as we probably seen since 2014. And have we seen a pickup at all in selling security outside the existing CDN installed base? And just was squeezing in another one here, but what was the growth in our annual customer metrics you guys typically give in Q4 regarding the individual product and sub-segments like an access control?

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

I'll start with that and then hand it over to Ed. We are very pleased to see our security business grow 25% in constant currency. You talked about Asavie and that is a very small portion of our business today. In fact savvy technically wouldn't even include micro-segmentation. I would imagine that's going to change in the near future because it's so important and it's going to become a requirement, I believe for many of the world's major enterprises, certainly in the financial vertical. So the savvy framework is a small amount of Akamai revenue and with Guardicore growing rapidly, the vast majority of our security revenue was in the web security area where we're protecting, think of it is B2C apps, from denial of service, from content corruption, from account staffed, from data ex-filtration, those kinds of attacks, which technically is in part of this Asavie framework. And so, what you would think of is, maybe more towards Asavie, we're getting very good growth on a small number. And of course, the lion's share of our security business is in the web security app, API protection, where we're the market leaders, and growing at a very fast clip on a good size number for us. And Ed, maybe you want to take the rest of the question.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yes. So, Jim, we don't break this out every quarter. But I'll just go back to the IR Day we set targets for application security, network security and security services. And as a reminder, those goals were of reputation security 20, 25% in network security and then security services of 10 to 15. I can tell you that we rate -- we achieved all of those and exceeded in many cases those metrics. And other metrics that you were looking for to give -- mentioned something about customers.

James Fish
Analyst at Piper Sandler Companies

Yes. I mean, we used to kind of talk about penetration of number of customers that are on on your vast solution at this point. And I thought at the Analyst Day, we were going to get the annual update on those sub-segments, maybe you're saving that for the Analyst Day?

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Yes. That's where we're going to do on Analyst Day, we'll have a deep dive on that. What I'll do is I'll provide this metric before in terms of the number of customers that buy security product. It's up to 68.5%. So it's of about 6% year-over-year, two or more is up to 34.5%, that's up about 3%, three or more is up 20%, and we increased our customer base by about 6% -- the total customer base is up about 6% security penetrations up about 6% year-over-year.

James Fish
Analyst at Piper Sandler Companies

Helpful. If I can squeeze in one more one-node, we've heard on some of the smaller developer focused solutions like and what one-node is that organizations tend to kind of graduate from these solutions to an AWS or Azure. What investments are you looking to make prevent the sort of graduation and make it more enterprise grade for the Akamai installed base or is it more about taking Akamai down market and be that developer focus that we've been looking for?

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

I'll hand this over to Adam in just a minute, but we're interested in the developer base for sure because our large enterprise customers, their apps are built in many cases managed by the developers. So we really care about a developer friendly solution, but we are going to take this to our large enterprise customers and Adam has a robust roadmap of added capabilities and Adam wanted to talk a little bit about that.

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Sure, Tom. I think Tom mentioned earlier, some of our expertise is just building and deploying larger network presence all over the globe. So that would be our first area to go and make those locations that Linode has just more robust and available to our customers. But building in things like availability zones, VPC, identity access management and then building in compliance like SaaS 2 and PCI are really on the core parts of our roadmap, so that customers can not only bring their apps onto the platform for graduate and continue to grow and scale globally as they build running security application right on the Akamai platform.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

And I just would add, our customers have been pretty explicit with us that they are very interested in us having this capability and put it together, we have the world's best content delivery capabilities, the world's best application performance and the world's best security solutions to provide an end-to-end solution. So I think you have not seen this will be a situation where they migrate from say Linode to a hyperscaler. But our customers are interested in alternatives and end-to-end solutions that maybe there are some functions on hyperscalers today that I think we would migrate to Akamai's new cloud platform will be the world's most distributed cloud platform. We have now market leading solutions in not just delivery and security, but also compute.

James Fish
Analyst at Piper Sandler Companies

Thanks guys.

Operator

Our next question comes from Rishi Jaluria with RBC.

Rishi Jaluria
Analyst at RBC Capital Markets

Wonderful, thanks so much for taking my questions, just two. One on Linode and maybe an inverse of the last question, obviously we have a great traction down market. What do you think about the of ability Akamai's cross sell into Linode base. You're obviously very, very strong in the larger enterprises with both security as well as the core delivery and Edge applications business. Can you talk about your ability to actually take some of your enterprise grade products and actually sell them successfully down market once Linode acquisition closes? And then I wanted to drill a little bit more into Q4 and what you saw from the e-commerce season. I know you've talked a little bit about retail bounce back being sluggish, but I know when we're on this call three months ago. One of the concerns just with supply chain concerns in the top comps, e-commerce is going to be a little bit challenged in Q4, I just wanted to get a sense for what did you see specifically on the e-commerce side, in Q4. Thanks.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

I'll take the first question. Ed will take the second. We certainly can cross sale into the Linode base that's not our primary objective here. The primary objective is to take Linode and really scale that up and sell it into the large enterprise space. I think that's far more lucrative for us then taking our existing solutions and selling into the large number of small customers. And that the focus will be moving the Linode's capabilities into our platform and having a comprehensive solution for large enterprise customers. And I also recently...

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yeah. I got it. So Rishi on the commerce. You're right, when we had the Q3 call. We did talk about sort of a variety of potential outcomes with farmers. I would say that we pretty much ended where we expected. We didn't really bake in a ton of upside for that there's for 2 reasons. One was just uncertainty around supply chain people potentially ordering earlier in the year. But the bigger factor was around the zero overage that's we've been in market now for over 2 years and we've got a pretty high penetration, so that you don't see as much of a burst thing in Q4 as you do from the commerce customers and as I said, it's been a mixed bag. Some companies are doing pretty well, some are doing so great. So again, I'd say it's kind of, as expected, but we weren't going in expecting a ton out of our retail vertical this of Q4.

Rishi Jaluria
Analyst at RBC Capital Markets

Got it, thank you so much.

Operator

Our next question comes from Fatima Boolani with Citi.

Fatima Boolani
Analyst at Smith Barney Citigroup

Good afternoon and thank you for taking my question. Maybe a jump ball for you all. Just with respect to some of the new revenue classifications that we're going to be expecting in the next couple of months here. If I think back to your last Analyst Day, it was certainly helpful for us is to get a sense of what type of traffic mix you're expecting in the delivery franchise. So I'm curious with Linode in the family or soon to be and how you expect that mix of traffic to change relative to some of your expectations. Within the long and medium term guide and then I had a quick follow-up if I could well.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

The traffic measured by delivered is 95% plus big media and software downloads gaming downloads. That's the vast majority of the traffic that won't change with Linode. In fact, I would expect we'd be selling compute services to those same big media customers, in fact, several of them have expressed interest in that capability. So Linode won't change our traffic mix and when we get together at IR Day, we'll do the deep dive in each of these categories, you get a better feel of how the revenue is breaking down.

Fatima Boolani
Analyst at Smith Barney Citigroup

That's very helpful and for Ed. I wanted to talk a little bit about the margin upside in the quarter with the media business, having some nice outperformance, we were still able to see a nice leverage fall through the model. So I'm just curious if you can walk us through some of the puts and takes within the cost control elements of the business in the quarter that would be helpful. Thank you.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yeah, sure. Good question. So a couple of things to note on that one is just a mix issue. So we always had a strong security quarter all it better on security. So that drives very high incremental margins in the business. The other thing on the cost to goods sold line the margins came in on the gross margin line or bit better. Team's done a phenomenal job on driving down our bandwidth costs, as I look out towards next year we expect traffic to grow sort of at normal rates and my bandwidth costs are not really going up very much. So it will drive down bandwidth costs, that will be the big thing and we're getting good efficiency starting to see capex come down quite a bit, we won't see the depreciation fall off here. We got a peak. And so in the next year and a half or so then it will start to come off but just around the -- around all the different organizations which is doing really focused on efficiency and we're seeing good flow through, when we get a little bit of revenue upside.

Fatima Boolani
Analyst at Smith Barney Citigroup

Appreciate that detail. Thank you.

Operator

Our next question comes from Alex Henderson with Needham and Company.

Alex Henderson
Analyst at Needham & Company LLC

Thank you very much. I was hoping we could talk little bit about the architecture that you're anticipating as we go forward, whether you're planning on integrating the platforms at the Edge, whether you're as described in the slide deck whether the Linode -- node are in fact relatively separate from your Edge compute platform. Do you anticipate moving to a single software stack within each node or will these be separate nodes. In that context.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

I'll start with that and then turn it over to Adam. You want to think of Akamai's platform is hierarchical there is a core where functions such as storage would live where there's dozens of locations for archive storage migrating out all the way to the Edge where there is thousand -- 4,000 pops where most of our capabilities live today something else that's closer to do in the quarter in dozens of locations would be the Prolexic service, but things like delivering video delivering software accelerating your bank statement and most all of the security, other than Prolexic all live on the very Edge out and 4,000 locations. EdgeWorkers lives out there too, EdgeKV lives out there and Linode starts in the core, 11 locations and we'll be expanding that quite a bit and it will all be integrated together as part of one hierarchical platform and then maybe, Adam, you could get a little bit deeper into that in terms of the software stack and so forth.

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yeah, I think you covered most of it, but I think the way you can think about it is that the Linode stack itself can be segmented at the multiple components just like Tom just described, you might have storage or databases that might exist closer to the core and as you have more a femoral type instantiation of applications you push those components further out towards our Edge. Ultimately, culminating in our deep edge where you'd have our Chrome V8 engines that can be instantiated on demand right on the the Edge itself. So that's our EdgeWorkers solution. But, but you can see kind of a Linode kind of stack like spanning the entire span and what Tom just described as the core all the way out to the Edge.

Alex Henderson
Analyst at Needham & Company LLC

If I could talk about them, you talked about the coder centric capabilities of Linode. Can you talk about the degree to which coders are writing to this platform. And for that matter to the Akamai platform, how many coders do you have right into your platform at this point?

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

So on that Adam will you take that?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yeah I'll take that one. Yeah, on a Linode platform they have over 150,000 customers today on their platform raising and deploying applications. And our -- was that the question?

Alex Henderson
Analyst at Needham & Company LLC

The degree to which the coders are writing to the platform? Yes. Yeah as opposed to necessarily customers, there's similar customers have to do some writing the customers...

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

The customers are develop -- yeah, the customers -- they're primarily developers which is one of the reasons for the benefit of bringing the developer centric community that Linode brings to the Akamai community and then those developers, as Tom described, a lot of them are the decision makers and that of our enterprise customer base developing and deploying and in some cases managing those applications and thus that developer community becomes appealing -- appeals through those enterprise customers right back to Akamai. So it's kind of a great system that they have.

Alex Henderson
Analyst at Needham & Company LLC

Can you give us the the Akamai-related data point role and coders are writing to your edge capabilities?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

I don't think I have that stat on hand right now.

Alex Henderson
Analyst at Needham & Company LLC

Thank you very much.

Operator

Our next question comes from Tim Horan with Oppenheimer.

Tim Horan
Analyst at Oppenheimer

Thanks, guys. We think much investment to consolidate and integrate Linode both from a software and hardware perspective. Then, we will be operating on relatively similar hardware and I guess for the sort of go-to-market strategy and I guess customer care and just a little bit about the overall investment. And then I just a quick follow-up?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Sure. So we are looking at the ways we can drive synergy between the hardware that the Linode platform runs on today and the Akamai platform and you can imagine, we have significant deep expertise in our network group in hardware engineering organizations that spend all of their time optimizing for that, which gives us great cards and capex benefit inside of Akamai. So we'll look to do that as we integrate Linode. And then, can you repeat the second half of the question? I think it was on go-to-market.

Tim Horan
Analyst at Oppenheimer

Yes. Just same thing for customer care and go-to-market we have invested much to integrate.

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yes. Now the great thing about the Linode platform is it is very self service, very frictionless for developers to come on board. They have amazing documentation that make developers use of their platform EV and they have a great customer care group inside of Linode that we've worked very closely with this and build up to the signing of this. And so we expect to have them operate more as a Tier II to our existing Akamai customer care organization, and of course, our existing enterprise sales force will be the sales force that goes to market, selling those products along with their existing self service model they have today.

Tim Horan
Analyst at Oppenheimer

And you mentioned you have a very large network obviously, do you think you can get into the enterprise private line or global line market or just overall enterprise networking directly?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Well. Can you ask it? I think in terms of enterprise win or whatnot, we do partner very closely with our Telco partners and that's something that we work very closely with them when they have opportunities. We use our network in combination whether it makes a synergy with those customers that want to use both our Telco partners and Akamai. Not sure if that's what you were getting out, we're or something.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Yes. Yes. I want to looking of Akamai as providing Internet connectivity to enterprises. That's not our business. That's our partnership business. Now we do provide clean access, so that an enterprise can sort of hide behind Akamai and only Akamai can come through, so that they maintain safety and security for their data centers. So we do that, but we're not. We don't provide based connectivity, that would be our partners, which would be the carriers.

Alex Henderson
Analyst at Needham & Company LLC

Thank you.

Operator

Our next question comes from Frank Louthan with Raymond James.

Frank Louthan
Analyst at Raymond James

Thank you. You mentioned earlier bringing scale to the business here, and I'm just curious what the strategy is. You're bringing scale to compete increasingly with large cloud companies that have some of the biggest scale in the world and why the strategic decision to move in that direction and that bolster more of the security of the core CDN business?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yes. When you think of scale, there's a couple of ways to do it. One is just how many servers do you have? Obviously, we have a lot, but the way we think about scale is more in terms of being distributed, and none of the hyperscalers come anywhere close to us in terms of being in 4,000 pops and having a real Edge network. Now what we haven't had before is the BM manage container services, and our customers have asked for that. That's been the one missing piece on our platform, because customers for many of their apps would like to take the entire app build it on Akamai, we're on it on Akamai, deliver it through us where they know they get fabulous performance, instant scalability, where it becomes relevant to do so, to have the edge computing really done on the edge, and then to have it all be secured, so that we can provide the end-to-end service, and so that's why we're doing this. And in some cases, there may be some, which we've been competing with the hyperscalers for 15 years and I think that will continue. And I think the hyperscalers themselves, some of them are our largest customers, and some of them are already using us for our compute capabilities and I expect that to increase with the acquisition of Linode. And so it's an environment where we compete, of course, have for many years and successfully and what we do, we do really well, and that will be taking an application, making it easy to build and deploy on Akamai and then they have the world's best performance, scalability, global reach and security and that's where Akamai excels. And then that's the goal and making this acquisition is really to complete that story to be able to have the end-to-end capability to handle their applications.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yes, just add -- I mean just want..

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Yes,

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

I was going to this doesn't take away from our investment in security and way to think about it is, you've now got two very exciting fast-growing businesses inside of Akamai, led by two different leaders in the company and the scale that we can bring turn the question around and think about if you're 100 plus million dollar company trying to scale to a billion, what would you need? You need an enterprise sales force. You need a global private network. You would want to have a low cost deployment model. You want to have access to customers and channel and we bring all that. So this to me was a very natural adjacency for us and I look at ourselves and what we're spending in third party cloud and looking at bringing that in-house driving some additional synergies and savings there, it's just a natural extension of what we're doing and entering a really, really big exciting market. And again, it doesn't take away from our ability to invest in security. As you saw, we did two very large acquisitions. One in security, one here in cloud and we're very fortunate with our profitability and our cash flow generation, to be able to do that.

Frank Louthan
Analyst at Raymond James

So is the end goal to be able to provide some these cloud computing functions on yourself that would -- that the large cloud companies with white label or are you going to be providing aspects that they just can't do themselves in their larger server farm deployments?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

I think both. There's things that we do today at a level that the hyperscalers don't do, I mean they have competing services, but in many cases, the hyperscalers use us, our news, our services for their own properties even though we compete with them. I do expect us to be partnering with certainly many of the world's major carriers and white labeling our survey, our channel partners with us today and I think that will increase through the acquisition of Linode, because they've had an interest in being able to offer that kind of capability and now it comes hand in hand with, well the whole solution, all put together.

Frank Louthan
Analyst at Raymond James

Okay. Thank you very much.

Operator

Our next question comes from Rudy Kessinger with DA Davidson.

Rudy Kessinger
Analyst at DA Davidson

Great. Thanks for taking my questions, guys. I want to go to two things here. Starting off, going back to say customers that are going to have the repricing, you said basically decline first half and then return to growth in the second half for the year in '22 over '21, what's your expectation for that group? Are they going to be slightly down or about breakeven on growth business?

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yes, good question. So I would expect those customers to be slightly up year-over-year. So as you decline in the first three quarters, you start growing the back up. Now there is also significant upside with Linode products as well. You can imagine these guys have just been tons of money in this area. So there is a potential there do you could continue to grow that base of customers, so not expecting that this year, but it's possible that we could start to tap into that. Obviously, we have to build a pipeline, get customers lined up, but that's obviously, certainly a very target rich group of customers.

Rudy Kessinger
Analyst at DA Davidson

Got it. And then, secondly, going back to third quarter, pretty substantial outperformance thus far, completed $10 million in the quarter. In the initial expectation in Q4 was $6 million to $7 million, then obviously $50 million to $55 million expected in '22 versus starting to the $35 million regionally. Just what's really driving that upside? What's really resonating well with this product both with the new customers and those that you're cross selling?

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Well, how do you see where is a big problem and we believe the Guardicore has the best solution. It is easier to use than competing solutions and my segmentation is a reputation for being really hard to implement an inflexible, it gives you great visibility in terms of what's going on in your network. Customers have really appreciated that it's really important with security and they have a solution that works with legacy systems that. The competition doesn't have. They have built their own custom firewalls and the competing services. We have to rely on the existing firewalls and whatever operating systems being used by a particular application in some cases doesn't even exist. And so they can't cover it.

So it's the best solution and to a big problem that's rapidly growing and so we've seen very strong interest in our customer base and of course we have a very large enterprise sales force that now can bring Guardicore into the large banks in the large enterprises in the initial reception has been very strong. So, yeah I'm very excited by their performance this year, and I'm looking forward to substantial growth in the future.

Rudy Kessinger
Analyst at DA Davidson

Thanks for taking my questions.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Operator, we probably have time for one more question. Thank you.

Operator

This question comes from Jeff Van Rhee with Craig-Hallum.

Jeff Van Rhee
Analyst at Craig-Hallum Capital Group

Just under the wire. So two quick ones from me. First I guess on the cross-sell back into your base of product how critical is it to win over the developers in your base, I mean, obviously you've got the relationship maybe you can come in and try to make the cross sell, but there is a lot of Power sitting in those developers, what is it about these tools that the developers will see as their best option and how do you win them over.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Adam, why don't you take that one.

Adam Karon
Chief Operating Officer, General Manager at Akamai Technologies

Sure, I mean that's one of the most attractive things to the Linode platform is that their developer centric tools make it really easy for customers who use their Cooper Netis engine use their managed BMs it's just very simple to configure on board. It comes with a ton of documentation makes it very simple for somebody to learn how to use and on board themselves and try their applications, very quickly on their platform, we heard from developers inside of our own company as well as developers inside of our customers that they love to use the tool there's simple easy and and that's really why we think we're to win over the developers using that type of platform something that simple, easy to use and has great documentation.

Jeff Van Rhee
Analyst at Craig-Hallum Capital Group

Yeah. And you may have missed it mentioned it if I missed it. Apologies, but in terms of the customer base, how many customers which an average spend per year for the Linode base in any particular concentrations for the base from vertical or other segmentation that matters?

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

So the Linode customer base is around 150,000 customers, we don't break them down like that, at least not yet, but we can tell you, I think I mentioned this earlier on the call that the larger segment of their customer base is growing much faster than the very, very small developers, but we don't give out the ARPU yet on the customer base.

Ed McGowan
Executive Vice President, Chief Financial Officer at Akamai Technologies

Yeah, just to add, there is no customer concentration risk in terms of any significant customers making up a large percentage of the revenue and earlier was Adam who mentioned that, from a go-to-market perspective, they didn't focus on selling into large enterprises. That's where we can bring in that synergies, I would expect that over time that customer base to change and look a lot more like our customer base, and obviously that small developer base will just continue to grow as we continue to market and that sort of thing, but it also opens up opportunities and some of our under-served verticals that you think about the spend in certain places that may not have as large of websites or web presence of what they're spending an awful lot in this area.

So, I do expect their customer base to change and we get to Analyst Day. We'll try to break that down a little bit for you to give you some views in terms of where, how we're thinking about growth in the future. And then as we get some months under our belt of operating the company as we come up with new metrics that we think are helpful. We'll obviously bring them to the table and disclose them for you.

Jeff Van Rhee
Analyst at Craig-Hallum Capital Group

Okay, good. Got it, thanks.

Tom Leighton
Chief Executive Officer and Co-Founder at Akamai Technologies

Okay, well thank you everyone. In closing, we will be presenting at several investor conferences and roadshows throughout the rest of the first quarter. Details of these can be found in the Investor Relations section of Akamai.com. Thank you for joining us, and all of us here at Akamai wish you continued good health and we wish you a happy evening. Thank you. [Operator Closing Remarks]

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