Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Akamai Technologies, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Akamai Technologies, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible instruments in 2022.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit

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preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described in Notes 2 and 16 to the consolidated financial statements, the Company’s total revenue was $3.8 billion for the year ended December 31, 2023. The Company primarily derives revenue from the sale of services to customers executing contracts having terms of one year or longer. Services included in the Company’s contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. Revenue is recognized upon transfer of control of promised services in an amount that reflects the consideration the Company expects to receive in exchange for those services. Most security, delivery and compute services represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Company. Accordingly, revenue for those services is recognized over time, generally ratably over the term of the arrangement due to consistent monthly usage commitments that expire each period. A small percentage of the Company’s contracts are satisfied at a point in time, such as one-time professional services contracts, integration services and most license sales where the primary obligation is delivery of the license at the start of the term. In these cases, revenue is recognized at a point in time of delivery or satisfaction of the performance obligation.

The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter are a high degree of auditor effort involved in performing procedures and evaluating audit evidence related to the Company’s revenue recognition.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the recording of revenue at the amount of consideration the Company expects to receive as the promised services are delivered to the customer. These procedures also included, among others, (i) evaluating and recalculating, on a sample basis, the revenue recognized by obtaining and inspecting source documents, such as executed contracts, invoices, and delivery documents; (ii) testing the delivery documents provided by management; and (iii) confirming a sample of outstanding customer invoice balances as of December 31, 2023, and for confirmations not returned, obtaining and inspecting source documents, such as executed contracts, invoices, delivery documents, and subsequent cash receipts.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 28, 2024

We have served as the Company’s auditor since 1998.

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)			December 31, 2023						December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	489,468					$	542,337
Marketable securities			374,971						562,979
Accounts receivable, net of reserves of $3,469 and $5,917 at December 31, 2023 and 2022, respectively			724,302						679,206
Prepaid expenses and other current assets			216,114						185,040
Total current assets			1,804,855						1,969,562
Marketable securities			1,431,354						320,531
Property and equipment, net			1,825,944						1,540,182
Operating lease right-of-use assets			908,634						813,372
Acquired intangible assets, net			536,143						441,716
Goodwill			2,850,470						2,763,838
Deferred income tax assets			418,297						337,677
Other assets			124,340						116,522
Total assets			$	9,900,037					$	8,303,400
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	146,927					$	145,420
Accrued expenses			352,181						367,017
Deferred revenue			107,544						105,109
Operating lease liabilities			222,944						196,094
Other current liabilities			6,442						5,228
Total current liabilities			836,038						818,868
Deferred revenue			23,006						22,117
Deferred income tax liabilities			24,622						18,400
Convertible senior notes			3,538,229						2,285,258
Operating lease liabilities			774,806						693,265
Other liabilities			106,181						105,305
Total liabilities			5,302,882						3,943,213
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 700,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued or outstanding			—						—
Common stock, $0.01 par value; 700,000,000 shares authorized; 151,232,908 and 156,494,816 shares issued and outstanding at December 31, 2023 and 2022, respectively			1,512						1,565
Additional paid-in capital			2,222,993						2,578,603
Accumulated other comprehensive loss			(95,330)						(140,332)
Retained earnings			2,467,980						1,920,351
Total stockholders’ equity			4,597,155						4,360,187
Total liabilities and stockholders’ equity			$	9,900,037					$	8,303,400

The accompanying notes are an integral part of the consolidated financial statements.

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)			For the Years Ended December 31,
2023						2022						2021
Revenue			$	3,811,920					$	3,616,654					$	3,461,223
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)			1,511,063						1,383,819						1,268,956
Research and development			406,048						391,434						335,372
Sales and marketing			533,226						502,409						461,967
General and administrative			600,851						584,206						553,024
Amortization of acquired intangible assets			66,751						64,983						48,019
Restructuring charge			56,643						13,529						10,737
Total costs and operating expenses			3,174,582						2,940,380						2,678,075
Income from operations			637,338						676,274						783,148
Interest and marketable securities income, net			45,194						3,258						15,620
Interest expense			(17,709)						(11,096)						(72,332)
Other (expense) income, net			(12,296)						(10,433)						1,785
Income before provision for income taxes			652,527						658,003						728,221
Provision for income taxes			(106,373)						(126,696)						(62,571)
Gain (loss) from equity method investment			1,475						(7,635)						(14,008)
Net income			$	547,629					$	523,672					$	651,642
Net income per share:
Basic			$	3.59					$	3.29					$	4.01
Diluted			$	3.52					$	3.26					$	3.93
Shares used in per share calculations:
Basic			152,510						159,089						162,665
Diluted			155,397						160,467						165,804

The accompanying notes are an integral part of the consolidated financial statements.

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			For the Years Ended December 31,
(in thousands)			2023						2022						2021
Net income			$	547,629					$	523,672					$	651,642
Other comprehensive gain (loss):
Foreign currency translation adjustments			18,439						(44,665)						(38,514)
Change in unrealized gain (loss) on investments, net of income tax (expense) benefit of $(8,562), $6,589 and $3,412 for the years ended December 31, 2023, 2022 and 2021, respectively			26,563						(26,562)						(10,390)
Other comprehensive gain (loss)			45,002						(71,227)						(48,904)
Comprehensive income			$	592,631					$	452,445					$	602,738

The accompanying notes are an integral part of the consolidated financial statements.

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)			For the Years Ended December 31,
2023						2022						2021
Cash flows from operating activities:
Net income			$	547,629					$	523,672					$	651,642
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			570,776						592,754						550,632
Stock-based compensation			328,467						217,185						202,759
Benefit for deferred income taxes			(22,987)						(104,971)						(47,794)
Amortization of debt discount and issuance costs			5,341						4,395						66,025
(Gain) loss on investments			(311)						15,895						10,328
Other non-cash reconciling items, net			50,221						31,063						11,495
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable			(49,203)						(21,214)						(24,096)
Prepaid expenses and other current assets			(18,726)						(20,125)						4,034
Accounts payable and accrued expenses			(39,825)						(26,499)						31,523
Deferred revenue			48						16,713						(2,865)
Other current liabilities			1,516						(5,318)						(20,404)
Other non-current assets and liabilities			(24,507)						51,126						(28,716)
Net cash provided by operating activities			1,348,439						1,274,676						1,404,563
Cash flows from investing activities:
Cash paid for business acquisitions, net of cash acquired			(106,171)						(872,091)						(598,825)
Cash paid for asset acquisitions			(120,985)						—						—
Purchases of property and equipment			(457,909)						(241,266)						(328,969)
Capitalization of internal-use software development costs			(272,131)						(217,036)						(216,261)
Purchases of short-and long-term marketable securities			(1,461,890)						(17,975)						(932,604)
Proceeds from sales of short-and long-term marketable securities			201,585						575,522						442,133
Proceeds from maturities and redemptions of short-and long-term marketable securities			375,332						156,658						991,949
Other, net			(6,069)						(6,122)						(4,322)
Net cash used in investing activities			(1,848,238)						(622,310)						(646,899)

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(in thousands)			For the Years Ended December 31,
2023						2022						2021
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility			90,000						125,000						—
Repayment of borrowings under revolving credit facility			(90,000)						(125,000)						—
Proceeds from the issuance of convertible senior notes, net of issuance costs			1,247,388						—						—
Proceeds from the issuance of warrants related to convertible senior notes			90,195						—						—
Purchases of note hedges related to convertible senior notes			(236,555)						—						—
Proceeds related to the issuance of common stock under stock plans			62,979						56,462						59,632
Employee taxes paid related to net share settlement of stock awards			(66,222)						(82,236)						(99,112)
Repurchases of common stock			(654,046)						(608,010)						(522,255)
Other, net			(360)						(393)						(268)
Net cash provided by (used in) financing activities			443,379						(634,177)						(562,003)
Effects of exchange rate changes on cash, cash equivalents and restricted cash			3,868						(12,918)						(11,376)
Net (decrease) increase in cash, cash equivalents and restricted cash			(52,552)						5,271						184,285
Cash, cash equivalents and restricted cash at beginning of year			543,022						537,751						353,466
Cash, cash equivalents and restricted cash at end of year			$	490,470					$	543,022					$	537,751
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds received of $11,006, $15,458 and $14,808 for the years ended December 31, 2023, 2022 and 2021, respectively			$	134,478					$	183,900					$	100,533
Cash paid for interest expense			6,328						6,158						5,750
Cash paid for operating lease liabilities			257,961						224,898						224,085
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities			333,590						202,409						218,753
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses			65,048						80,170						63,309
Capitalization of stock-based compensation			83,676						33,060						36,545
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents			$	489,468					$	542,337					$	536,725
Restricted cash			1,002						685						1,026
Cash, cash equivalents and restricted cash			$	490,470					$	543,022					$	537,751

The accompanying notes are an integral part of the consolidated financial statements.

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)			Common Stock												Additional Paid-in Capital						Treasury Stock						Accumulated Other Comprehensive Loss						Retained Earnings						Total Stockholders' Equity
Shares						Amount
Balance at January 1, 2021			162,709,720						$	1,627					$	3,664,820					$	—					$	(20,201)					$	605,050					$	4,251,296
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes			1,902,742						18						(99,774)																								(99,756)
Issuance of common stock under employee stock purchase plan			648,686						7						59,707																								59,714
Stock-based compensation															238,277																								238,277
Repurchases of common stock			(4,749,037)																		(522,255)																		(522,255)
Treasury stock retirement									(47)						(522,208)						522,255																		—
Net income																																	651,642						651,642
Foreign currency translation adjustment																											(38,514)												(38,514)
Change in unrealized loss on investments, net of tax																											(10,390)												(10,390)
Balance at December 31, 2021			160,512,111						$	1,605					$	3,340,822					$	—					$	(69,105)					$	1,256,692					$	4,530,014

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AKAMAI TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY, continued

(in thousands, except share data)			Common Stock												Additional Paid-in Capital						Treasury Stock						Accumulated Other Comprehensive Loss						Retained Earnings						Total Stockholders' Equity
Shares						Amount
Balance at December 31, 2021			160,512,111						$	1,605					$	3,340,822					$	—					$	(69,105)					$	1,256,692					$	4,530,014
Cumulative-effect adjustment from adoption of new accounting pronouncement															(375,414)																		139,987						(235,427)
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes			1,697,410						17						(82,294)																								(82,277)
Issuance of common stock under employee stock purchase plan			687,945						7						56,563																								56,570
Stock-based compensation															246,872																								246,872
Repurchases of common stock			(6,402,650)																		(608,010)																		(608,010)
Treasury stock retirement									(64)						(607,946)						608,010																		—
Net income																																	523,672						523,672
Foreign currency translation adjustment																											(44,665)												(44,665)
Change in unrealized loss on investments, net of tax																											(26,562)												(26,562)
Balance at December 31, 2022			156,494,816						1,565						2,578,603						—						(140,332)						1,920,351						4,360,187
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes			1,743,329						17						(69,621)																								(69,604)
Issuance of common stock under employee stock purchase plan			796,541						8						62,357																								62,365
Stock-based compensation															398,495																								398,495
Issuance of warrants related to convertible senior notes															90,195																								90,195
Purchase of note hedge related to convertible senior notes, net of deferred taxes of $57,628															(178,927)																								(178,927)
Repurchases of common stock			(7,801,778)																		(658,187)																		(658,187)
Treasury stock retirement									(78)						(658,109)						658,187																		—
Net income																																	547,629						547,629
Foreign currency translation adjustment																											18,439												18,439
Change in unrealized gain on investments, net of tax																											26,563												26,563
Balance at December 31, 2023			151,232,908						$	1,512					$	2,222,993					$	—					$	(95,330)					$	2,467,980					$	4,597,155

The accompanying notes are an integral part of the consolidated financial statements.

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AKAMAI TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Akamai Technologies, Inc. (the “Company”) provides solutions to power and protect life online. Its massively distributed edge and cloud platform, or Akamai Connected Cloud, comprises more than 4,100 edge points-of-presence in approximately 130 countries and nearly 750 cities. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. The Company is currently organized and operates as one operating and reportable segment.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying consolidated financial statements. The presentation of certain items in the consolidated statements of cash flows has changed for the prior periods to be comparable with the presentation for the year ended December 31, 2023. The change had no net impact on the Company's cash flows from operating, investing or financing activities for the prior periods.

2. Summary of Significant Accounting Policies

Use of Estimates

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the amounts disclosed in the related notes to the consolidated financial statements. Actual results and outcomes may differ materially from management’s estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, valuation and impairment of investments and marketable securities, valuation and useful lives of acquired intangible assets, useful lives and realizability of long-lived assets, capitalized internal-use software development costs, income tax reserves and accounting for stock-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the consolidated financial statements prospectively from the date of the change in estimate.

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash held in bank deposit accounts and short-term, highly-liquid investments with remaining maturities of three months or less at the date of purchase. Marketable securities consist of corporate, government and other securities. Securities having remaining maturities of less than one year from the date of the balance sheet are classified as short-term, and those with maturities of more than one year from the date of the balance sheet are classified as long-term in the consolidated balance sheets.

The Company classifies its fixed income securities with readily determinable market values as available-for-sale. These investments are classified as marketable securities on the consolidated balance sheets and are carried at fair market value, with unrealized gains and losses considered to be temporary in nature and reported as accumulated other comprehensive loss, a separate component of stockholders’ equity. The Company reviews all investments for reductions in fair value that are other-than-temporary. When such reductions occur, the cost of the investment is adjusted to fair value through recording a loss on investments in the consolidated statements of income. Gains and losses on investments are calculated on the basis of specific identification.

Marketable securities are considered to be impaired when a decline in fair value below cost basis is determined to be other-than-temporary. The Company periodically evaluates whether a decline in fair value below cost basis is other-than-temporary by considering available evidence regarding these investments including, among other factors: the duration of the period that, and extent to which, the fair value is less than cost basis; the financial health and business outlook of the issuer, including industry and sector performance and operational and financing cash flow factors; overall market conditions and trends; and the Company’s intent and ability to retain its investment in the security for a period of time sufficient to allow for an anticipated recovery in market value. Once a decline in fair value is determined to be other-than-temporary, a write-down is recorded and a new cost basis in the security is established. Assessing the above factors involves inherent uncertainty. Write-downs, if recorded, could be materially different from the actual market performance of marketable securities in the Company’s portfolio if, among other things, relevant information related to the marketable securities was not publicly available or other factors not considered by the Company would have been relevant to the determination of impairment.

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Accounts Receivable and Related Reserves

The Company’s accounts receivable balance includes unbilled amounts that represent revenue recorded for customers that are typically billed monthly in arrears. The Company records reserves against its accounts receivable balance which primarily consists of allowances for current expected credit losses. Increases and decreases in the allowance for current expected credit losses are included as a component of general and administrative expense in the consolidated statements of income. The allowance for current expected credit losses has been developed using historical loss rates for the previous twelve months as well as expectations about the future where the Company has been able to develop forecasts to support its estimates. In addition, the allowance considers outstanding balances on a customer-specific, account-by-account basis. The Company assesses collectibility based upon a review of customer receivables from prior sales with collection issues where the Company no longer believes that the customer has the ability to pay for services previously provided. The Company also performs ongoing credit evaluations of its customers. If such an evaluation indicates that payment is no longer reasonably assured for services provided, any future services provided to that customer will result in the creation of a cash-basis reserve until the Company receives consistent payments. The Company does not have any off-balance sheet credit exposure related to its customers.

Incremental Costs to Obtain a Contract with a Customer

The Company capitalizes incremental costs associated with obtaining customer contracts, specifically certain commission and incentive payments. The Company pays commissions and incentives up-front based on contract value upon signing a new arrangement with a customer and upon renewal and upgrades of existing contracts with customers if the renewal and upgrades result in an incremental increase in contract value. To the extent commissions and incentives are earned, the expenses, including estimated payroll taxes, are deferred on the Company's consolidated balance sheet and amortized over the expected life of the customer arrangement on a straight-line basis. Based on the nature of the Company's unique technology and services, and the rate at which the Company continually enhances and updates its technology, the expected life of the customer arrangement is determined to be approximately three years. Additionally, the Company may pay commissions and incentives based upon contract value, rather than incremental increase in contract value, to certain sales groups within the Company. For these commission arrangements, the Company amortizes capitalized costs for contract renewals over an average renewal contract period of 16 months. The Company also incurs commission expense on an ongoing basis based upon revenue recognized. In these cases, no incremental costs are deferred, as the commissions are earned and expensed in the same period for which the associated revenue is recognized.

Amortization of the costs is primarily included in sales and marketing expense in the consolidated statements of income. The current portion of deferred commission and incentive payments is included in prepaid expenses and other current assets, and the long-term portion is included in other assets on the Company's consolidated balance sheets.

Concentrations of Credit Risk

The amounts reflected in the consolidated balance sheets for accounts receivable, other current assets, accounts payable, accrued liabilities and other current liabilities approximate fair values due to their short-term maturities. The Company maintains the majority of its cash, cash equivalents and marketable securities with major financial institutions that the Company believes to be of high credit standing. The Company believes that, as of December 31, 2023, its concentration of credit risk related to cash equivalents and marketable securities was not significant.

Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers to which the Company makes substantial sales. The Company’s customer base consists of a large number of geographically-dispersed customers diversified across several industries. To reduce risk, the Company routinely assesses the financial strength of its customers. Based on such assessments, the Company believes that its accounts receivable credit risk exposure is limited. For the years ended December 31, 2023, 2022 and 2021, no customer accounted for more than 10% of total revenue. As of December 31, 2023, no customer had an accounts receivable balance greater than 10% of total accounts receivable, and as of December 31, 2022, there was one customer with an accounts receivable balance greater than 10% of total accounts receivable. The Company believes that, as of December 31, 2023 and 2022, its concentration of credit risk related to accounts receivable was not significant.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When the Company has certain financial assets and liabilities recorded at fair value, principally cash

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equivalents and short- and long-term marketable securities, they are classified as Level 1, 2 or 3 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the reporting date. Fair values determined by Level 2 inputs utilize data points other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Fair values determined by Level 3 inputs are based on unobservable data points for the asset or liability.

Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Property and equipment generally include purchases of items with a per-unit value greater than $1,000 and an estimated useful life greater than one year. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the related lease terms or their estimated useful lives.

The Company periodically reviews the estimated useful lives of property and equipment. Changes to the estimated useful lives are recorded prospectively from the date of the change. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in income from operations. Repairs and maintenance costs are expensed as incurred.

The Company has implemented software and hardware initiatives to manage its global network more efficiently and, as a result, the expected average useful life of its servers increased from five years to six years, effective January 1, 2023. These changes decreased depreciation expense by $62.7 million for the year ended December 31, 2023, and increased net income by $52.3 million, or $0.34 per share, for the year ended December 31, 2023.

Operating Leases

The Company enters 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 its servers and other networking equipment. The Company determines if an arrangement contains a lease at the inception of a contract by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration and the right to obtain the economic benefits from the use of the identified asset.

Upon commencement of a lease, the Company records a right-of-use asset that represents the Company’s right to use the underlying asset for the lease term and a lease liability that represents an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Lease payments are discounted at the lease commencement date. As the implicit rates in the Company’s leases are not readily determinable, an incremental borrowing rate has been applied based on the Company's credit-adjusted risk-free rate.

The Company often enters into contracts that contain both lease and non-lease components. Real estate non-lease components include real estate taxes, insurance, maintenance, parking and other operating costs. Co-location non-lease components include utilities and other operating costs. The Company accounts for both lease and non-lease components of fixed costs in its lease arrangements as a single lease component. Variable costs, primarily utilities based on actual usage, common area maintenance and real estate taxes, are not included in the measurement of right-of-use assets and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs.

The Company’s lease terms often include renewal options and, particularly in the case of co-location arrangements, may include evergreen provisions. The Company’s right-of-use assets and lease liabilities generally do not include the options to extend, or terminate, unless it is reasonably certain that the Company will exercise these options. The Company has elected to exclude leases for certain networking equipment and leases assumed through acquisitions with terms of 12 months or less from its right-of-use assets and lease liabilities on its consolidated balance sheets.

Lease expense is recognized on a straight-line basis over the expected lease term. Reductions in right-of-use assets and changes in lease liabilities are presented on a net basis within other non-current assets and liabilities within the operating section of the Company's consolidated statement of cash flows.

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Equity Method Investments

The Company accounts for equity investments in which it has significant influence, but not a controlling financial interest, using the equity method of accounting. Under the equity method of accounting, investments are initially recorded at cost, less impairment, and subsequently adjusted to recognize the Company’s share of earnings or losses.

The Company and Mitsubishi UFJ Financial Group ("MUFG") established Global Open Network, Inc. ("GO-NET") as a joint venture. The Company's 20% stake in GO-NET was accounted for using the equity method. In 2022, MUFG announced its intention to suspend operations and liquidate GO-NET. The liquidation was finalized in 2023. Due to these actions, the Company impaired its remaining investment of $7.5 million in GO-NET in 2022. In 2023, a gain of $1.5 million was recognized related to the Company's receipt of its share of GO-NET's remaining assets upon final liquidation.

While GO-NET was in operation, the Company recognized a loss of $14.0 million during the year ended December 31, 2021, which reflects its share of losses incurred by GO-NET during that year. The Company also recognized revenue of $4.0 million and $10.1 million for the years ended December 31, 2022 and 2021, respectively, for services provided to GO-NET. The Company no longer provided these services after June 2022 due to the suspension of operations.

Goodwill, Acquired Intangible Assets and Long-Lived Assets

Goodwill is the amount by which the cost of acquired net assets in a business combination exceeds the fair value of the net identifiable assets on the date of purchase and is carried at its historical cost. The Company tests goodwill for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs its impairment test of goodwill as of December 31 each year. As of December 31, 2023, 2022 and 2021, the Company concluded that it has one reporting unit and that its chief operating decision maker is its chief executive officer and the executive management team. The Company has assigned the entire balance of goodwill to one reporting unit. The fair value of the reporting unit was based on the Company's market capitalization as of each of December 31, 2023 and 2022, and it was substantially in excess of the carrying value of the reporting unit at each date. The fair value of the Company's reporting unit was determined by the Company's enterprise value as of the years ended December 31, 2023, 2022 and 2021.

Acquired intangible assets consist of completed technologies, customer-related intangible assets, trademarks and trade names, non-compete agreements and acquired license rights. Acquired intangible assets, other than goodwill, are amortized over their estimated useful lives based upon the estimated economic value derived from the related intangible asset. Significant judgment is used in determining fair values of acquired intangibles assets and their estimated useful lives. Fair value and useful life determinations may be based on, among other factors, estimates of future expected cash flows, royalty cost savings and appropriate discount rates used in calculating present values.

Long-lived assets, including property and equipment, operating lease right-of-use assets and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances, such as service discontinuance, technological obsolescence, significant decreases in the Company’s market capitalization, facility closures or work-force reductions indicate that the carrying amount of the long-lived asset may not be recoverable. When such events occur, the Company compares the carrying amount of the asset to the undiscounted expected future cash flows related to the asset. If this comparison indicates that an impairment is present, the amount of the impairment is calculated as the difference between the carrying amount and the fair value of the asset.

Contract Liabilities

Contract liabilities primarily represent payments received from customers for which the related performance obligations have not yet been satisfied. These balances consist of the unearned portion of monthly service fees and integration fees and prepayments made by customers for future periods. The current and long-term portions of the Company's contract liabilities are included in deferred revenue in the respective sections of the Company's consolidated balance sheets.

Revenue Recognition

The Company primarily derives revenue from the sale of services to customers executing contracts having terms of one year or longer. Services included in the Company's contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. Revenue is recognized upon transfer of control of promised services in an amount that reflects the consideration the Company expects to receive in exchange for those services.

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The Company enters into contracts that may include various combinations of these services, which are generally capable of being distinct and accounted for as separate performance obligations. These contracts generally commit the customer to a minimum of monthly, quarterly or annual levels of usage and specify the rate at which the customer must pay for actual usage above the stated minimum. Based on the typical structure of the Company's contracts, which are generally for monthly recurring services that are essentially the same over time and have the same pattern of transfer to the customer, most performance obligations represent a promise to deliver a series of distinct services over time.

The Company's contracts with customers sometimes include promises to deliver multiple services to a customer. Determining whether services are distinct performance obligations often requires the exercise of judgment by management. For example, advanced features that enhance a service and are highly interrelated are generally not considered distinct; rather, they are combined with the service they relate to into one performance obligation. Different determinations related to combining services into performance obligations could result in differences in the timing and amount of revenue recognized in a period.

Generally, the transaction price in a contract is equal to the committed price stated in the contract, less any discounts or rebates. The Company's typical contracts qualify for series accounting, and the pricing terms generally do not require estimation of the transaction price beyond the reporting period. As a result, any incremental fees generated as a result of usage or “bursting” over committed contract levels are recorded in the period to which the services relate. The amount of consideration recognized for usage above contract minimums is limited to the amount the Company expects to be entitled to receive in exchange for providing the services. Once the transaction price has been determined, the Company allocates such price among all performance obligations in the contract on a relative standalone selling price (“SSP”) basis.

Determination of SSP requires the exercise of judgment by management. SSP is based on observable inputs such as the price the Company charges for the service when sold separately or the discounted list price per management’s approved price list. In cases where services are not sold separately or price list rates are not available, a cost-plus-margin approach or adjusted market approach is used to determine SSP.

Most security, delivery and compute services represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Company. Accordingly, revenue for those services is recognized over time, generally ratably over the term of the arrangement due to consistent monthly usage commitments that expire each period. Any bursting over given commitments is recognized in the period in which the usage was served. For services that involve traffic consumption, revenue is recognized in an amount that reflects the level of traffic served to a customer in a given period. For custom arrangements, other methods may be used as a measure of progress towards satisfying the performance obligations.

Some of the Company's contracts are satisfied at a point in time, such as one-time professional services, integration services and most license sales where the primary obligation is delivery of the license at the start of the term. In these cases, revenue is recognized at the point in time of delivery or satisfaction of the performance obligation.

From time to time, the Company enters into contracts to sell its services or license its technology to unrelated enterprises at or about the same time that it enters into contracts to purchase products or services from the same enterprises. Consideration payable to a customer is reviewed as part of the transaction price. If the payment to the customer does not represent payment for a distinct service, revenue is recognized only up to the net amount of consideration after customer payment obligations are considered. The Company may also resell the licenses or services of third parties. If the Company is acting as an agent in an arrangement with a customer to provide third party services, the transaction price reflects only the net amount to which the Company will be entitled, after accounting for payments made to the third party responsible for satisfying the performance obligation.

Cost of Revenue

Cost of revenue consists primarily of fees paid to network providers for bandwidth and to third-party network data centers for housing servers, also known as co-location costs. Cost of revenue also includes employee costs for services delivery and network operation, build-out and support of the Company's network; network storage costs; cost of software licenses; depreciation of network equipment used to deliver the Company’s services; amortization of network-related internal-use software; and costs for the production of live events streamed by the Company for customers. The Company enters into contracts for bandwidth with third-party network providers with terms typically ranging from several months to five years. These contracts generally commit the Company to pay minimum monthly fees plus additional fees for bandwidth usage above the committed level. In some circumstances, internet service providers (“ISPs”) make rack space available for the Company to locate its servers and provide access to their bandwidth at a discount or no cost. Although the Company does not provide any goods or services to the ISPs or the ISPs’ customers under these arrangements, the ISPs and their customers indirectly benefit

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by accessing content through a local Company server, resulting in better content delivery. The Company records the cost of these vendor relationships at their negotiated transaction price, which is either at a discount or no cost.

Research and Development Costs and Capitalized Internal-Use Software

Research and development costs consist primarily of payroll and related personnel costs for the design, development, deployment, testing and enhancement of the Company’s solutions and Akamai Connected Cloud. Costs incurred in the development of the Company’s services are expensed as incurred, except certain internal-use software development costs eligible for capitalization.

Capitalized costs include external consulting fees, payroll and payroll-related costs and stock-based compensation for employees in the Company’s engineering, research and development and information technology groups who are directly associated with, and who devote time to, the Company’s internal-use software projects. Capitalization begins when the planning stage is complete and the Company commits resources to the software project; capitalization continues during the application development stage. Capitalization ceases when the software has been tested and is ready for its intended use. Costs incurred during the planning, training and post-implementation stages of the software development life-cycle are expensed as incurred. The Company amortizes completed internal-use software that is used on its network to cost of revenue over its estimated useful life.

Restructuring Charges

The Company classifies certain expenses as restructuring charges that result from programs that have significantly changed either the scope of the business undertaken by management or the manner in which that business is conducted. These charges include employee severance and related expenses for workforce reductions, impairments of long-lived assets that will no longer be used in operations (including right-of-use assets, other facility-related property and equipment and internal-use software) and termination fees for any contracts cancelled as part of these programs.

Employee severance and related expenses are recognized when the action giving rise to the expense is probable. Employee severance and related expenses are based upon contractual severance plans.

Accounting for Stock-Based Compensation

The Company issues various forms of stock-based compensation, which includes stock options, restricted stock, restricted stock units and deferred stock units, and has an employee stock purchase plan (collectively referred to as "stock awards"). The Company’s stock awards are classified as equity and the fair value is determined at the time of grant, unless the number of shares to be granted is unknown. Stock awards that are settleable in shares based upon a future determinable stock price are classified as liabilities until the price is established and the resulting number of shares are known, at which time the stock awards are re-classified to equity. For liability-classified awards, the fair value is determined each reporting period beginning at the grant date until final vesting.

The Company has selected the Black-Scholes option-pricing model to determine the fair value of its stock options. For stock awards with market-based vesting conditions, the Company uses a Monte Carlo simulation to determine the fair value of the award. For stock awards that contain only a service-based vesting feature, the Company recognizes compensation cost on a straight-line basis over the award's vesting period. For awards with a performance-based vesting condition feature, the Company recognizes compensation cost on a graded-vesting basis over the award's expected vesting period, commencing when achievement of the performance condition is deemed probable. In addition, for awards that vest and become exercisable only upon achievement of specified performance conditions, the Company makes judgments and estimates each quarter about the probability that such performance conditions will be met or achieved.

Foreign Currency Translation and Forward Currency Contracts

The assets and liabilities of the Company's subsidiaries are translated at the applicable exchange rate as of the balance sheet date, and revenue and expenses are translated at an average rate over the period. Resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss, a separate component of stockholders’ equity. Gains and losses on inter-company and other non-functional currency transactions are recorded in other (expense) income, net.

The Company enters into short-term foreign currency forward contracts to offset foreign exchange gains and losses generated by the re-measurement of certain assets and liabilities recorded in non-functional currencies. Changes in the fair value of these derivatives, as well as re-measurement gains and losses, are recognized in current earnings in other income

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(expense), net. As of December 31, 2023 and 2022, the fair value of the forward currency contracts and the underlying gains and losses for the years ended December 31, 2023, 2022 and 2021 were immaterial.

The Company's foreign currency forward contracts may be exposed to credit risk to the extent that its counterparties are unable to meet the terms of the agreements. The Company seeks to minimize counterparty credit (or repayment) risk by entering into transactions only with major financial institutions of investment grade credit rating.

Income Taxes

The Company's provision for income taxes is comprised of a current and a deferred portion. The current income tax provision is calculated as the estimated taxes payable or refundable on tax returns for the current year. The deferred income tax provision is calculated as the estimated future tax effects attributable to temporary differences and carryforwards using expected tax rates in effect in the years during which the differences are expected to reverse or the carryforwards are expected to be realized.

The Company currently has net deferred tax assets consisting of net operating loss (“NOL”) carryforwards, tax credit carryforwards and deductible temporary differences. Management periodically weighs the positive and negative evidence to determine if it is more-likely-than-not that some or all of the deferred tax assets will be realized.

The Company has recorded certain tax reserves to address potential exposures involving its income tax positions. These potential tax liabilities result from the varying application of statutes, rules, regulations and interpretations by different taxing jurisdictions. The Company's estimate of the value of its tax reserves contains assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the costs of the ultimate tax liability or benefit from these matters may be more or less than the amount the Company estimated.

Uncertainty in income taxes is recognized in the Company's consolidated financial statements using a two-step process. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed more-likely-than-not to be sustained based on technical merit, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

Recently Adopted Accounting Pronouncements

Effective January 1, 2022, the Company adopted guidance issued by the Financial Accounting Standards Board ("FASB") associated with accounting for convertible instruments and contracts in an entity’s own equity on a modified retrospective basis. Prior to the adoption of this guidance, the Company separated its convertible senior notes into a liability and an equity component. The equity portion was eliminated. The net effect of adoption was recorded as an increase of $140.0 million to retained earnings as of January 1, 2022.

With the elimination of the debt discount created by the equity component, amortization of the debt discount to interest expense was eliminated. Additionally, the guidance eliminated the application of the treasury stock method and required the application of the if-converted method for convertible instruments that can be settled in whole or in part with equity, when calculating diluted earnings per share.

Recent Accounting Pronouncements

In December 2023, the FASB issued guidance to improve income tax disclosures, primarily through enhanced disclosures for the rate reconciliation and income taxes paid, in addition to the modification or elimination of other disclosures. This guidance will be effective for the Company's annual period ending December 31, 2025 and is to be applied prospectively with the option to adopt retrospectively. The Company is evaluating the impact the update will have on its disclosures.

In November 2023, the FASB issued guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense and application of all segment disclosure requirements to entities with a single reportable segment. This guidance will be effective for the Company's annual period ending December 31, 2024 and interim periods beginning on January 1, 2025 and is to be applied retrospectively. The Company is evaluating the impact the update will have on its disclosures.

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3. Fair Value Measurements

Available-for-sale marketable securities held as of December 31, 2023 and 2022 were as follows (in thousands):

									Gross Unrealized												Aggregate Fair Value						Classification on Balance Sheet
			Amortized Cost																					Short-Term Marketable Securities						Long-Term Marketable Securities
As of December 31, 2023						Gains						Losses
Time deposits			$	14,426					$	—					$	—					$	14,426					$	14,426					$	—
Commercial paper			6,249						—						(5)						6,244						6,244						—
Corporate bonds			1,328,980						6,429						(4,201)						1,331,208						276,975						1,054,233
U.S. government agency obligations			428,157						2,462						(979)						429,640						74,369						355,271
			$	1,777,812					$	8,891					$	(5,185)					$	1,781,518					$	372,014					$	1,409,504
As of December 31, 2022
Time deposits			$	19,530					$	—					$	—					$	19,530					$	19,530					$	—
Corporate bonds			624,082						—						(21,029)						603,053						362,458						240,595
U.S. government agency obligations			252,573						—						(10,391)						242,182						180,320						61,862
			$	896,185					$	—					$	(31,420)					$	864,765					$	562,308					$	302,457

The Company offers certain eligible employees the ability to participate in a non-qualified deferred compensation plan. The mutual funds held by the Company that are associated with this plan are classified as restricted trading securities. Additionally, the Company holds certain money market funds that are classified as marketable securities. These securities are not included in the available-for-sale securities table above but are included in marketable securities in the consolidated balance sheets.

Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive loss in the consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest and marketable securities income, net in the consolidated statements of income. As of December 31, 2023, the Company held for investment corporate bonds and U.S. government agency obligations with a fair value of $313.5 million, which are classified as available-for-sale marketable securities and have been in a continuous unrealized loss position for more than 12 months. The unrealized losses related to these securities were $4.9 million and are included in accumulated other comprehensive loss as of December 31, 2023. The unrealized losses are attributable to changes in interest rates. Based on the evaluation of available evidence, the Company does not believe any unrealized losses represent other than temporary impairments.

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The fair value measurements within the fair value hierarchy of the Company’s financial assets as of December 31, 2023 and 2022 were as follows (in thousands):

			Total Fair Value						Fair Value Measurements at Reporting Date Using
			Level 1						Level 2
As of December 31, 2023
Cash Equivalents and Marketable Securities:
Money market funds			$	177,240					$	177,240					$	—
Time deposits			39,670						—						39,670
Commercial paper			6,244						—						6,244
Corporate bonds			1,331,208						—						1,331,208
U.S. government agency obligations			429,640						—						429,640
Mutual funds			22,942						22,942						—
			$	2,006,944					$	200,182					$	1,806,762
As of December 31, 2022
Cash Equivalents and Marketable Securities:
Money market funds			$	999					$	999					$	—
Time deposits			285,830						—						285,830
Corporate bonds			603,053						—						603,053
U.S. government agency obligations			242,182						—						242,182
Mutual funds			18,745						18,745						—
			$	1,150,809					$	19,744					$	1,131,065

As of December 31, 2023 and 2022, the Company grouped money market funds and mutual funds using a Level 1 valuation because market prices for such investments are readily available in active markets. As of December 31, 2023 and 2022, the Company grouped time deposits, commercial paper, corporate bonds and U.S. government agency obligations using a Level 2 valuation because quoted prices for similar assets in active markets (or identical assets in an inactive market) are available. The Company did not have any transfers of assets or liabilities between Level 1 or Level 2 of the fair value measurement hierarchy during the years ended December 31, 2023 and 2022.

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about the assumptions market participants would use to estimate the fair value of a financial instrument.

Contractual maturities of the Company’s available-for-sale marketable securities held as of December 31, 2023 and 2022 were as follows (in thousands):

			December 31, 2023						December 31, 2022
Due in 1 year or less			$	372,014					$	562,308
Due after 1 year through 5 years			1,409,504						302,457
			$	1,781,518					$	864,765

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4. Accounts Receivable

Net accounts receivable consisted of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Trade accounts receivable			$	516,175					$	490,162
Unbilled accounts receivable			211,596						194,961
Gross accounts receivable			727,771						685,123
Allowances for current expected credit losses and other reserves			(3,469)						(5,917)
Accounts receivable, net			$	724,302					$	679,206

A summary of activity in the accounts receivable allowance for current expected credit losses and other reserves for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

			2023						2022						2021
Beginning balance			$	5,917					$	1,397					$	1,822
Charges to income from operations			13,431						9,292						4,576
Collections from customers previously reserved and other			(15,879)						(4,772)						(5,001)
Ending balance			$	3,469					$	5,917					$	1,397

Charges to income from operations primarily represents charges to provision for doubtful accounts for increases in the allowance for current expected credit losses.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Prepaid income taxes			$	33,448					$	33,898
Prepaid sales and other taxes			40,843						31,285
Prepaid software and related service costs			29,155						28,022
Deferred commissions			44,383						37,316
Other prepaid expenses			26,316						39,520
Other current assets			41,969						14,999
Total			$	216,114					$	185,040

Incremental Costs to Obtain a Contract with a Customer

Deferred costs associated with obtaining customer contracts, specifically commission and incentive payments, as of December 31, 2023 and 2022 were as follows (in thousands):

			December 31, 2023						December 31, 2022
Deferred costs included in prepaid expenses and other current assets			$	44,383					$	37,316
Deferred costs included in other assets			42,738						29,069
Total deferred costs			$	87,121					$	66,385

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Information related to incremental costs to obtain a contract with a customer for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			2023						2022						2021
Amortization expense related to deferred costs			$	50,414					$	52,691					$	58,433
Incremental costs capitalized			70,072						47,416						56,509

Amortization expense related to deferred costs is primarily included in sales and marketing expense in the consolidated statements of income.

6. Property and Equipment

Property and equipment consisted of the following as of December 31, 2023 and 2022 (in thousands, except years):

			December 31, 2023						December 31, 2022						Estimated Useful Life (in years)
Computer and networking equipment			$	2,456,470					$	2,139,518					3-7
Purchased software			96,979						89,695						3-10
Furniture and fixtures			67,657						71,427						1-7
Office equipment			40,546						41,866						3-5
Leasehold improvements			214,712						229,037						1-15
Internal-use software			1,829,933						1,529,264						2-10
Property and equipment, gross			4,706,297						4,100,807
Accumulated depreciation and amortization			(2,880,353)						(2,560,625)
Property and equipment, net			$	1,825,944					$	1,540,182

Depreciation and amortization expense on property and equipment and capitalized internal-use software for the years ended December 31, 2023, 2022 and 2021 was $504.0 million, $527.8 million and $502.6 million, respectively. During the years ended December 31, 2023, 2022 and 2021, the Company capitalized $81.8 million, $32.3 million and $35.0 million, respectively, of stock-based compensation related to employees who developed and enhanced internal-use software applications.

During the years ended December 31, 2023 and 2022, the Company wrote off $174.3 million and $210.2 million, respectively, of property and equipment, gross, along with the associated accumulated depreciation and amortization. The write-offs were primarily related to computer and networking equipment and internal-use software no longer in use. These assets had been substantially depreciated and amortized. In addition, the Company wrote off $13.8 million and $9.1 million during the years ended December 31, 2023 and 2022, respectively, related to internal-use software and facility-related property and equipment as a result of certain restructuring actions.

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7. Acquired Intangible Assets and Goodwill

Acquired intangible assets that are subject to amortization consisted of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023																		December 31, 2022
Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Completed technologies			$	354,539					$	(196,572)					$	157,967					$	327,848					$	(162,323)					$	165,525
Customer-related intangible assets			616,267						(273,758)						342,509						480,817						(244,158)						236,659
Non-compete agreements			—						—						—						244						(183)						61
Trademarks and trade names			14,659						(9,117)						5,542						14,642						(7,585)						7,057
Acquired license rights			34,810						(4,685)						30,125						34,810						(2,396)						32,414
Total			$	1,020,275					$	(484,132)					$	536,143					$	858,361					$	(416,645)					$	441,716

Aggregate expense related to amortization of acquired intangible assets for the years ended December 31, 2023, 2022 and 2021 was $66.8 million, $65.0 million and $48.0 million, respectively. Based on the Company's acquired intangible assets as of December 31, 2023, aggregate expense related to amortization of acquired intangible assets is expected to be $84.8 million, $80.5 million, $76.1 million, $62.0 million and $49.6 million for the years ending December 31, 2024, 2025, 2026, 2027 and 2028, respectively.

The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 were as follows (in thousands):

			2023						2022
Beginning balance			$	2,763,838					$	2,156,254
Acquisition of StorageOS, Inc.			14,046						—
Acquisition of Neosec, Inc.			66,882						—
Acquisition of Linode Limited Liability Company			—						617,292
Measurement period adjustments related to acquisitions completed in prior years			—						724
Foreign currency translation			5,704						(10,432)
Ending balance			$	2,850,470					$	2,763,838

8. Acquisitions

Asset Acquisitions

Lumen

In October 2023, the Company acquired certain customer contracts from Lumen Technologies, Inc. ("Lumen"), a content delivery provider, and certain of its affiliates. The preliminary purchase price was $81.8 million and was allocated to a customer-related intangible asset that will be amortized over 12.2 years in a pattern that matches expense with expected economic benefits. The purchase price is subject to adjustment for certain post-closing activities expected to be completed in the first half of 2024. The acquisition is intended to further strengthen the Company's existing content delivery and other businesses as the Company transitions the acquired customers to its Akamai Connected Cloud and offers its portfolio of other services to such customers.

StackPath

In August 2023, the Company acquired certain customer contracts from StackPath, LLC ("StackPath"), a content delivery provider, and certain of its affiliates. The preliminary purchase price was $51.4 million which includes costs to acquire assets and an estimated additional payment for the expected achievement of certain post-closing milestones. As of December 31, 2023, the Company paid $41.0 million of the purchase price in cash to StackPath and expects to pay the remaining

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consideration, if payable, by the end of the second quarter of 2024. The purchase price was allocated to a customer-related intangible asset that will be amortized over 13.4 years in a pattern that matches expense with expected economic benefits. The acquisition is intended to further strengthen the Company’s existing content delivery and other businesses as the Company transitions the acquired customers to its Akamai Connected Cloud and offers its portfolio of other services to such customers.

Business Acquisitions

Business acquisition-related costs were $2.7 million, $10.7 million and $13.3 million during the years ended December 31, 2023, 2022 and 2021, respectively, and are included in general and administrative expense in the consolidated statements of income. Pro forma results of operations for the acquisitions completed in the years ended December 31, 2023, 2022 and 2021 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company's consolidated financial results. Revenue and earnings of the acquired companies since the dates of the acquisitions are included in the Company's consolidated statements of income and are not presented separately because they are not material.

Neosec

In May 2023, the Company acquired all the outstanding equity interests of Neosec, Inc. ("Neosec") for $91.4 million in cash. Neosec is an application programming interface ("API") detection and response platform based on data and behavioral analytics. The acquisition is intended to complement the Company's application and API security portfolio by extending its visibility into the rapidly growing API threat landscape. The Company allocated $66.9 million of the purchase price to goodwill and $19.9 million to identifiable intangible assets, primarily consisting of completed technologies. The total weighted average useful life of the intangible assets acquired from Neosec is 9.7 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized. The value of the goodwill can be attributed to a number of business factors, including the expected impact from the ability to interface with the Company's platform. The Company expects that $33.8 million of the goodwill related to the acquisition of Neosec will be deductible for tax purposes as a result of post-acquisition transactions. As of December 31, 2023, the purchase price allocation was substantially complete except for the finalization of certain income tax matters.

StorageOS

In March 2023, the Company acquired all the outstanding equity interests of StorageOS, Inc. ("StorageOS"), also known as Ondat, a cloud-based storage technology provider for $20.6 million in cash. The acquisition of StorageOS's cloud storage technology and its industry-recognized talent is intended to strengthen the Company's cloud computing offerings. Storage is a key component of any cloud computing offering, and this acquisition is expected to enhance the Company's storage capabilities, allowing the Company to offer a fundamentally different approach to cloud that integrates core and distributed computing sites with a massively scaled edge network. The Company allocated $14.0 million of the purchase price to goodwill and $4.5 million to a completed technology identifiable intangible asset with a useful life of 8.8 years. The intangible asset is being amortized based upon the pattern in which the economic benefit of the intangible asset is being utilized. The value of the goodwill is primarily attributable to synergies related to the integration of StorageOS technology onto the Company's platform as well as a trained technical workforce. All of the goodwill related to the acquisition of StorageOS is expected to be deductible for tax purposes as a result of post-acquisition transactions. As of December 31, 2023, the purchase price allocation was substantially complete except for the finalization of certain income tax matters.

Linode

In March 2022, the Company acquired all the outstanding equity interests of Linode Limited Liability Company ("Linode") for $898.5 million in cash. Linode is an infrastructure-as-a-service platform provider that allows for developer-friendly cloud computing capabilities. The acquisition is intended to enhance the Company’s computing services by enabling it to create a unique cloud platform to build, run and secure applications from the cloud to the edge. Revenue attributable to Linode in the year of acquisition, included in the Company's consolidated statements of income, for 2022 was $103.5 million. Earnings included in the Company's consolidated statements of income since the date of the acquisition are not material. The Company finalized its allocation of the purchase price in the first quarter of 2023.

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The allocation of the purchase price for Linode was as follows (in thousands):

Total purchase consideration						$	898,516
Allocation of the purchase consideration:
Cash						$	26,678
Accounts receivable						7,171
Prepaid expenses and other current assets						4,478
Property and equipment						56,268
Operating lease right-of-use assets						17,000
Identifiable intangible assets						196,020
Deferred income tax assets						2,528
Other assets						292
Total assets acquired						310,435
Accounts payable						(5,767)
Accrued expenses						(1,958)
Operating lease liabilities						(17,235)
Other liabilities						(4,251)
Total liabilities assumed						(29,211)
Net assets acquired						281,224
Goodwill						$	617,292

The value of the goodwill can be attributed to a number of business factors, including a trained technical workforce and cost synergies expected to be realized. The Company expects that all of the goodwill related to the acquisition of Linode will be deductible for tax purposes as a result of post-acquisition transactions.

Identified intangible assets acquired and their respective weighted average useful lives were as follows (in thousands, except years):

			Gross Carrying Amount						Weighted Average Useful Life (in years)
Customer-related intangible assets			$	84,200					16.8
Completed technologies			70,900						5.8
Acquired license rights			34,320						15.0
Trademarks and trade name			6,600						8.8
Total			$	196,020

The Company applied the relief-from-royalty method to estimate the fair values of the completed technologies and trademarks and the multi-period excess earnings method under the income approach to estimate the fair values of the customer-related acquired intangible assets. The Company applied significant judgment in estimating the fair values of the acquired intangible assets, which involved significant estimates and assumptions with respect to forecasted revenue growth rates, cost of revenue, operating expenses, contributory asset charges and discount rates. The Company used readily available market data to estimate the fair values of the acquired license rights. The total weighted average amortization period for the intangible assets acquired from Linode is 12.2 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.

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Guardicore

In October 2021, the Company acquired all the outstanding equity interests of Guardicore Ltd. ("Guardicore"), for $610.7 million in cash. Guardicore's micro-segmentation solution is designed to limit user access to only those applications that are authorized to communicate with each other, thereby limiting the spread of malware and protecting the flow of enterprise data across the network. The acquisition is intended to enhance the Company's security portfolio with the addition of Guardicore's micro-segmentation technology. The Company finalized its allocation of the purchase price in the fourth quarter of 2022.

The allocation of the purchase price for Guardicore was as follows (in thousands):

Total purchase consideration						$	610,693
Allocation of the purchase consideration:
Cash						$	27,252
Accounts receivable						10,179
Prepaid expenses and other current assets						1,307
Property and equipment						1,211
Operating lease right-of-use assets						2,657
Identifiable intangible assets						123,600
Deferred income tax assets						9,686
Other assets						890
Total assets acquired						176,782
Accounts payable						(1,523)
Accrued liabilities						(7,742)
Deferred revenue						(35,658)
Operating lease liabilities						(1,000)
Total liabilities assumed						(45,923)
Net assets acquired						$	130,859
Goodwill						479,834

The value of the goodwill can be attributed to a number of business factors, including a trained technical and sales workforce and cost synergies expected to be realized. The Company expects that most of the goodwill related to the acquisition of Guardicore will be deductible for tax purposes as a result of post-acquisition transactions.

Identified intangible assets acquired and their respective weighted average useful lives were as follows (in thousands, except years):

			Gross Carrying Amount						Weighted Average Useful Life (in years)
Completed technologies			$	79,000					15.0
Customer-related intangible assets			44,200						14.0
Trademarks			400						1.9
Total			$	123,600

The Company applied the relief-from-royalty method to estimate the fair values of the completed technologies and trademarks, and the excess earnings method to estimate the fair values of the customer-related acquired intangible assets. The Company applied significant judgment in estimating the fair values of the acquired intangible assets, which involved significant estimates and assumptions with respect to forecasted revenue growth rates and discount rates. The total weighted average amortization period for the intangible assets acquired from Guardicore is 14.6 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.

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Inverse

In February 2021, the Company acquired all the outstanding equity interests of Inverse, Inc. ("Inverse"), for $17.1 million. Inverse provides a data repository and algorithms capable of identifying device types accessing the internet. The acquisition enhances the Company's enterprise security capabilities. The Company allocated $10.7 million of the cost of the acquisition to goodwill and $7.6 million to a technology-related identifiable intangible asset with an average useful life of 14.0 years. The acquired goodwill and intangible assets are partially offset by acquired negative working capital balances. The value of the goodwill is primarily attributable to synergies related to the integration of Inverse technology onto the Company's platform as well as a trained technical workforce. The total amount of goodwill related to the acquisition of Inverse expected to be deductible for tax purposes as a result of post-acquisition transactions is $10.7 million. The Company finalized its allocation of purchase price in the fourth quarter of 2021.

9. Accrued Expenses

Accrued expenses consisted of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Payroll and other related benefits			$	143,010					$	172,670
Income taxes payable			70,017						76,459
Bandwidth and co-location expenses			78,210						79,937
Property, use and other taxes			38,270						30,711
Convertible senior notes interest			6,807						1,613
Other accrued expenses			15,867						5,627
Total			$	352,181					$	367,017

10. Restructuring

During the first quarter of 2023, management committed to an action to restructure certain parts of the Company to enable it to prioritize investments in the fastest growing areas of the business. As a result, certain headcount reductions were necessary. The Company incurred $20.7 million related to this action during the year ended December 31, 2023. The Company does not expect to incur material additional charges related to this action.

The Company launched its FlexBase program in May 2022, which is a flexible workspace arrangement that allows employees to choose to work from their home office, a Company office or a combination of both, which is a significant change to the way employees worked prior to the program. The Company began to identify certain facilities that were no longer needed in the fourth quarter of 2021. As a result, impairments of right-of-use assets and facility-related assets were recognized. The Company has incurred expenses of $27.7 million, $3.6 million and $3.8 million during the years ended December 31, 2023, 2022 and 2021, respectively, related to this program. As the Company continues to execute its FlexBase program, additional charges related to this action are expected to occur into early 2024, however, the Company does not expect to incur any material additional restructuring charges related to this action.

As a result of MUFG's suspension of GO-NET's operations, the Company recognized as a restructuring charge an impairment of $7.5 million during the year ended December 31, 2022, primarily related to certain capitalized internal-use software assets that will no longer be used in operations or will not generate sufficient future cash flows to support their values. The Company does not expect to incur any additional charges related to this action.

The Company also recognizes restructuring charges for redundant employees, facilities, contracts and capitalized internal-use software assets associated with completed acquisitions. Restructuring charges related to acquisitions were not material in any of the years ended December 31, 2023, 2022 and 2021.

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The activity of the Company's accrual for employee severance and related benefits for all restructuring actions during the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			2023						2022						2021
Beginning balance			$	541					$	1,188					$	22,051
Costs incurred			21,085						747						6,600
Cash disbursements			(20,748)						(1,209)						(27,095)
Translation adjustments and other			(41)						(185)						(368)
Ending balance			$	837					$	541					$	1,188

11. Debt

Convertible Senior Notes

The Company has three convertible senior notes ("2029 Notes", "2027 Notes" and "2025 Notes") outstanding with a par value totaling $3,565.0 million (collectively, the "Notes") that are senior unsecured obligations of the Company and bear interest payable semi-annually in arrears. The following table summarizes further details of the Notes:

Notes						Issuance Date						Maturity Date						Principal Amount (in thousands)						Coupon Interest Rate						Effective Interest Rate
2029 Notes						August 18, 2023						February 15, 2029						$	1,265,000					1.125		%				1.388		%
2027 Notes						August 16, 2019						September 1, 2027						$	1,150,000					0.375		%				0.539		%
2025 Notes						May 21, 2018						May 1, 2025						$	1,150,000					0.125		%				0.350		%

Conversion Rights of the Notes

At their option, holders may exercise the conversion right of the respective Notes at the following specified times and rates to receive the principal amount in cash and receive any amount in excess of the principal amount in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election.

Prior to the close of business on the business day immediately preceding the conversion date, as noted in the table below, under the following circumstances a holder may exercise their conversion right:

• during any calendar quarter commencing after the calendar quarter ended December 31, 2023 for the 2029 Notes, December 31, 2019 for the 2027 Notes and June 30, 2018 for the 2025 Notes (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the respective Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or

• upon the occurrence of specified corporate events.

On or after the respective conversion date, as noted in the table below, holders may convert all or any portion of their respective Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

If the Company undergoes a fundamental change at any time prior to the maturity date, holders of the Notes will have the right, at their option, to require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

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The conversion rights of the Notes are as follows:

Notes						Conversion Date						Conversion Rate (1)						Conversion Price per Share (1)
2029 Notes						October 15, 2028						7.9170						$	126.31
2027 Notes						May 1, 2027						8.6073						$	116.18
2025 Notes						January 1, 2025						10.5150						$	95.10

(1) The conversion rate for the Notes is established as a number of shares of the Company's commons stock per $1,000 principal amount of the Notes, that is equivalent to the conversion price per share, subject to adjustments in certain events. Upon the occurrence of certain corporate events the Company will increase the conversion rate for a holder that elects to convert its Notes.

Components and Fair Value of the Notes

The Notes consisted of the following components as of December 31, 2023 and 2022 (in thousands):

			2029 Notes						2027 Notes						2025 Notes						Total
As of December 31, 2023
Principal			$	1,265,000					$	1,150,000					$	1,150,000					$	3,565,000
Less: issuance costs, net of amortization			(16,478)						(6,831)						(3,462)						(26,771)
Net carrying amount			$	1,248,522					$	1,143,169					$	1,146,538					$	3,538,229
Estimated fair value (1)			$	1,376,915					$	1,289,219					$	1,467,274					$	4,133,408
As of December 31, 2022
Principal			$	—					$	1,150,000					$	1,150,000					$	2,300,000
Less: issuance costs, net of amortization			—						(8,707)						(6,035)						(14,742)
Net carrying amount			$	—					$	1,141,293					$	1,143,965					$	2,285,258
Estimated fair value (1)			$	—					$	1,111,038					$	1,209,076					$	2,320,114

(1) The fair values were determined based on the quoted prices of the Notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 within the fair value hierarchy.

Note Hedges and Warrants

To minimize the impact of potential dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock concurrently with each respective note issuance. The note hedge transactions cover an approximate number of shares of the Company’s common stock at a strike price that corresponds to the conversion prices for the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The note hedge transactions expire upon the respective maturity dates of the Notes. The Company determined that the note hedges meet the definition of a derivative and are classified in stockholders’ equity, as the note hedges are indexed to the Company's common stock, and the Company, at its election, may receive cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The Company recorded the purchase of the hedges as a decrease to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the note hedges in its consolidated financial statements.

Separately, the Company also entered into warrant transactions concurrently with each of the note issuances, whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, shares of the Company’s common stock at a predetermined strike price per share. The convertible note hedge and warrant transactions will generally have the effect of increasing the conversion price of each of the Notes to the respective strike price related to the warrant transactions. The Company determined that the warrants meet the definition of a derivative and are classified in stockholders’ equity, as the warrants are indexed to the Company's common stock, and the Company, at its election, may pay or deliver to holders cash or shares of the Company's common stock. The Company recorded the proceeds from the issuance of the warrants as an increase to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the warrants in its

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consolidated financial statements. The following table summarizes the main terms impacting the note hedges and warrants (in thousands, except per share data):

			2029 Notes						2027 Notes						2025 Notes
Note hedge transaction costs			$	236,555					$	312,225					$	261,740
Shares covered by note hedge transactions			10,015						9,898						12,093
Shares related to warrant transactions			10,015						9,898						12,093
Strike price per share related to warrant transactions			$	180.44					$	178.74					$	149.18
Aggregate proceeds from sale of warrants			$	90,195					$	185,150					$	119,945

Revolving Credit Facility

In May 2018, the Company entered into a $500.0 million five-year, revolving credit agreement (the “2018 Credit Agreement”). Borrowings under the 2018 Credit Agreement bore interest, at the Company's option, at a base rate plus a spread of 0.00% to 0.25% or an adjusted LIBOR rate plus a spread of 0.875% to 1.25%, in each case with such spread being determined based on the Company's consolidated leverage ratio specified in the 2018 Credit Agreement. Regardless of what amounts, if any, outstanding under the 2018 Credit Agreement, the Company was also obligated to pay an ongoing commitment fee on undrawn amounts at a rate of 0.075% to 0.15%, with such rate being based on the Company's consolidated leverage ratio specified in the 2018 Credit Agreement.

In November 2022, the Company entered into a $500.0 million five-year, revolving credit agreement (the “2022 Credit Agreement”). The 2022 Credit Agreement replaces the 2018 Credit Agreement. Borrowings under the 2022 Credit Agreement may be used to finance working capital needs and for general corporate purposes. The 2022 Credit Agreement provides for an initial $500.0 million in revolving loans. Under specified circumstances, the facility can be increased to up to $1.0 billion in aggregate principal amount. The 2022 Credit Agreement expires, and any amounts outstanding thereunder will become due and payable, on November 22, 2027, subject to up to two one-year extensions at the Company's request and with the consent of the lenders party thereto.

Borrowings under the 2022 Credit Agreement bear interest, at the Company's option, and subject to a credit spread adjustment, at a term benchmark rate plus a spread of 0.75% to 1.125%, a reference rate plus a spread of 0.75% to 1.125%, or a base rate plus a spread of 0.00% to 0.125%, in each case with such spread being determined based on the Company's consolidated leverage ratio specified in the 2022 Credit Agreement. Regardless of what amounts, if any, are outstanding under the 2022 Credit Agreement, the Company is also obligated to pay an ongoing commitment fee on undrawn amounts at a rate of 0.07% to 0.125%, with such rate being based on the Company's consolidated leverage ratio specified in the 2022 Credit Agreement.

The 2022 Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The negative covenants include restrictions on subsidiary indebtedness, liens and fundamental changes. These covenants are subject to a number of important exceptions and qualifications. The principal financial covenant requires a maximum consolidated leverage ratio. There were no outstanding borrowings under the 2022 Credit Agreement as of December 31, 2023.

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Interest Expense

The Notes bear interest at fixed rates that are payable semi-annually in arrears on their respective interest payment dates each year. Interest expense, together with ongoing commitment fees under the terms of the Company's credit agreements, included in the consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

			2023						2022						2021
Amortization of debt discount and issuance costs			$	5,803					$	4,688					$	69,697
Coupon interest payable on 2029 Notes			5,218						—						—
Coupon interest payable on 2027 Notes			4,312						4,312						4,313
Coupon interest payable on 2025 Notes			1,436						1,437						1,437
Interest payable and commitment fees under the credit agreements			1,402						952						557
Capitalization of interest expense			(462)						(293)						(3,672)
Total interest expense			$	17,709					$	11,096					$	72,332

Prior to the adoption of the new guidance for accounting for convertible instruments on January 1, 2022, the Company also amortized as interest expense the value of debt discounts of the 2027 Notes and the 2025 Notes.

12. Leases

The Company has entered into various operating lease agreements for its offices and co-location sites and related equipment. The Company has also entered into sublease agreements with tenants of various offices previously vacated by the Company. These operating leases have lease periods expiring between 2024 and 2034. The Company’s operating lease costs for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			Real Estate Arrangements						Co-location Arrangements						Total
2023
Operating lease cost			$	74,054					$	179,552					$	253,606
Short-term lease cost			133						23,565						23,698
Variable lease cost			25,860						62,084						87,944
Sublease income			(32,024)						—						(32,024)
Total operating lease costs			$	68,023					$	265,201					$	333,224
2022
Operating lease cost			$	82,761					$	152,215					$	234,976
Short-term lease cost			52						21,741						21,793
Variable lease cost			25,167						35,025						60,192
Sublease income			(25,743)						—						(25,743)
Total operating lease costs			$	82,237					$	208,981					$	291,218
2021
Operating lease cost			$	84,100					$	136,673					$	220,773
Short-term lease cost			58						17,660						17,718
Variable lease cost			22,016						31,428						53,444
Sublease income			(21,033)						—						(21,033)
Total operating lease costs			$	85,141					$	185,761					$	270,902

Lease costs for real estate arrangements are included in general and administrative expenses in the consolidated statements of income. Lease costs for co-location arrangements are primarily included in cost of revenue.

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Weighted average remaining lease terms and discount rates related to the Company's operating leases as of December 31, 2023 and 2022 were as follows:

			December 31, 2023												December 31, 2022
			Real Estate Arrangements						Co-location Arrangements						Real Estate Arrangements						Co-location Arrangements
Weighted average remaining lease term (in years)			9.9						4.6						10.3						3.9
Weighted average discount rate			3.5		%				4.2		%				3.6		%				2.8		%

Maturities of operating lease liabilities as of December 31, 2023 were as follows (in thousands):

			Real Estate Arrangements						Co-location Arrangements
2024			$	68,713					$	155,505
2025			68,522						100,765
2026			64,607						80,545
2027			58,988						64,765
2028			54,725						46,010
Thereafter			313,506						67,519
Total lease payments			629,061						515,109
Less: imputed interest			97,716						48,704
Total lease liabilities			$	531,345					$	466,405

As of December 31, 2023, the Company had additional operating leases for co-location sites that had not yet commenced of $195.0 million, of which a majority will commence in 2024, with lease terms of one year to ten years. The table above excludes $207.4 million of future sublease income that is expected to be recognized through 2034.

As of December 31, 2023, the Company had outstanding letters of credit in the amount of $4.9 million, primarily related to operating leases. The letters of credit remain in effect until the Company fulfills its obligations under these leases or as such obligations expire under the terms of the letters of credit.

13. Commitments and Contingencies

Purchase Commitments

The Company enters into long-term agreements with network and internet service providers for bandwidth, as well as executes 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 vendors, and on the Company's plans for network expansion, including expansion plans related to the Company's compute business. Minimum commitments are not recorded as liabilities on the consolidated balance sheet until the Company has received the related good or service.

Legal Matters

The Company is party to various litigation matters that management considers routine and incidental to its business. Management does not expect the results of any of these routine actions to have a material effect on the Company’s business, results of operations, financial condition or cash flows.

Indemnification

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company agrees to indemnify, hold harmless and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company's business partners, vendors or customers, in connection with its provision of its services. Generally, these obligations are limited to claims relating to infringement of a patent, copyright or other intellectual property right or the Company’s negligence, willful misconduct or violation of law. Subject to applicable

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statutes of limitation, the term of each of these indemnification agreements is generally perpetual from the time of execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company carries insurance that covers certain third-party claims relating to its services and activities and that could limit the Company’s exposure in that respect.

The Company has agreed to indemnify each of its officers and directors, or employees who serve as officers or directors of its subsidiaries at management's request, during his or her lifetime for certain events or occurrences that happen by reason of the fact that the officer or director is or was or has agreed to serve as an officer or director of the Company. The Company has director and officer insurance policies that may limit its exposure and may enable the Company to recover a portion of certain future amounts paid.

To date, the Company has not encountered material costs as a result of such indemnification obligations and has not accrued any related liabilities in its consolidated financial statements. In assessing whether to establish an accrual, the Company considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.

14. Stockholders’ Equity

Stock Repurchase Program

In November 2018, the board of directors authorized a $1.1 billion repurchase program through December 2021. In October 2021, the board of directors authorized a new $1.8 billion share repurchase program, effective January 2022 through December 2024. The Company's goals for the share repurchase programs are to offset the dilution created by its employee equity compensation programs over time and provide the flexibility to return capital to shareholders as business and market conditions warrant, while still preserving its ability to pursue other strategic opportunities.

The following summarizes the share repurchase activity pursuant to the share repurchase programs described above (in thousands):

			2023						2022						2021
Repurchases of common stock			$	654,046					$	608,010					$	522,255
Number of shares repurchased			7,802						6,403						4,749

As of December 31, 2023, the Company had $537.9 million available for future purchases of shares under the current repurchase program.

The board of directors authorized the retirement of all the outstanding shares of its treasury stock as of each of December 31, 2023, 2022 and 2021. The retired shares were returned to the number of authorized but unissued shares of the Company's common stock, and the retirement was recorded to additional paid-in capital.

15. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss, net of tax, which is reported as a component of stockholders' equity, for the years ended December 31, 2023 and 2022 were as follows (in thousands):

			Foreign Currency Translation						Net Unrealized Gains (Losses) on Investments						Total
Balance as of January 1, 2022			$	(71,809)					$	2,704					$	(69,105)
Other comprehensive loss			(44,665)						(26,562)						(71,227)
Balance as of December 31, 2022			(116,474)						(23,858)						(140,332)
Other comprehensive income			18,439						26,563						45,002
Balance as of December 31, 2023			$	(98,035)					$	2,705					$	(95,330)

Amounts reclassified from accumulated other comprehensive loss to net income were immaterial for the years ended December 31, 2023 and 2022.

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16. Revenue from Contracts with Customers

The Company sells its services through a sales force located both domestically and internationally. Revenue derived from operations outside of the U.S. is determined based on the country in which the sale originated. Other than the U.S., no single country accounted for 10% or more of the Company’s total revenue for any reported period. Revenue by geography included in the Company’s consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

			2023						2022						2021
U.S.			$	1,968,779					$	1,902,051					$	1,837,508
International			1,843,141						1,714,603						1,623,715
Total revenue			$	3,811,920					$	3,616,654					$	3,461,223

The Company reports its revenue in three solution categories: security, delivery and compute. Security includes solutions that are designed to protect business online by keeping infrastructure, websites, applications and users safe. Delivery includes solutions that are designed to enable business online, including media delivery and web performance. Compute includes cloud computing, edge applications, cloud optimization and storage. Revenue by solution category included in the Company’s consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

			2023						2022						2021
Security			$	1,765,267					$	1,541,941					$	1,334,836
Delivery			1,542,434						1,669,257						1,873,243
Compute			504,219						405,456						253,144
Total revenue			$	3,811,920					$	3,616,654					$	3,461,223

Most security, delivery and compute services represent obligations that are satisfied over time as the customer simultaneously receives and consumes the services provided by the Company. Accordingly, the majority of the Company's revenue is recognized over time, generally ratably over the term of the arrangement due to consistent monthly usage commitments that expire each period. Any usage over a given commitment is recognized in the period in which the units are served. A small percentage of the Company's contracts are satisfied at a point in time, such as one-time professional services contracts, integration services and most license sales where the primary obligation is delivery of the license at the start of the term. In these cases, revenue is recognized at a point in time of delivery or satisfaction of the performance obligation.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized $105.9 million, $105.1 million and $78.8 million of revenue that was included in deferred revenue as of December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2023, the aggregate amount of remaining performance obligations from contracts with customers was $3.4 billion. The Company expects to recognize approximately 65% of its remaining performance obligations as revenue over the next 12 months. The majority of the remaining balance is expected to be recognized over the next two to three years. Remaining performance obligations represent the amount of the transaction price under contracts with customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the reporting date. This consists of future committed revenue for monthly, quarterly or annual periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced in prior periods for which the related performance obligations have not been satisfied. It excludes estimates of variable consideration such as usage-based contracts with no committed contract as well as anticipated renewed contracts. Revenue recognized during the years ended December 31, 2023, 2022 and 2021, related to performance obligations satisfied in previous periods was not material.

17. Employee Benefit Plan

The Company has established a savings plan for its employees that is designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to this plan through payroll deductions within statutory and plan limits. The Company contributed $19.7 million, $18.8 million and $17.7 million of cash to the savings plan for the years ended December 31, 2023, 2022 and 2021, respectively, under a matching program.

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18. Stock-Based Compensation

Equity Plans

In May 2013, the Company's stockholders approved the Akamai Technologies, Inc. 2013 Stock Incentive Plan, which was amended with Company shareholder approval in each of 2015, 2017, 2019, 2021, 2022 and 2023 (as amended and restated, the "2013 Plan"). The 2013 Plan replaced the Akamai Technologies, Inc. 2009 Stock Incentive Plan (the "2009 Plan"), which in turn replaced the Akamai Technologies, Inc. 2006 Stock Incentive Plan, the Akamai Technologies, Inc. 2001 Stock Incentive Plan and the Akamai Technologies, Inc. 1998 Stock Incentive Plan (such plans, together with the 2009 Plan, the "Previous Plans"). The Company no longer issues equity awards under the Previous Plans, and there are no outstanding equity awards related to those plans. The 2013 Plan allows for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards for up to 33.8 million shares of common stock, subject to certain adjustments, to employees, officers, directors, consultants and advisers of the Company. There are no shares of common stock that are currently outstanding under the Previous Plans available to grant under the 2013 Plan. As of December 31, 2023, the Company had reserved 7.4 million shares of common stock available for future issuance of equity awards under the 2013 Plan.

The Company has assumed certain stock incentive plans and the outstanding stock incentives of companies that it has acquired (“Assumed Plans”). Stock awards outstanding as of the date of acquisition under the Assumed Plans were exchanged for the Company’s stock awards and adjusted to reflect the appropriate conversion ratio as specified by the applicable acquisition agreement, but are otherwise administered in accordance with the terms of the Assumed Plans. Stock awards under the Assumed Plans generally vest over three years to four years, and outstanding stock options under the Assumed Plans expire ten years from the date of grant.

Additionally, the Company has the 1999 Employee Stock Purchase Plan ("1999 ESPP") that permits eligible employees to purchase up to 1.5 million shares each June 1 and December 1, provided that the aggregate number of shares issued shall not exceed 20.0 million. The 1999 ESPP allows participants to purchase shares of common stock at a 15% discount from the fair market value of the stock as determined on specific dates at six-month intervals.

Stock-Based Compensation Expense

Components of total stock-based compensation expense included in the Company’s consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			2023						2022						2021
Cost of revenue			$	43,802					$	28,354					$	27,143
Research and development			123,896						78,116						65,950
Sales and marketing			66,453						47,789						46,342
General and administrative			94,316						62,926						63,324
Total stock-based compensation			328,467						217,185						202,759
Provision for income taxes			(59,359)						(46,829)						(56,084)
Total stock-based compensation, net of taxes			$	269,108					$	170,356					$	146,675

In addition to the amounts of stock-based compensation reported in the table above, the Company’s consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 also include stock-based compensation reflected as a component of amortization primarily consisting of capitalized internal-use software; the additional stock-based compensation was $32.5 million, $31.3 million and $32.4 million, respectively, before taxes.

During 2023, the Company redesigned one of its non-executive short-term incentive compensation programs from a cash-based to a stock-based program that vests in one year. The Company also introduced a non-executive incentive program tied to its initiative to migrate certain applications from third-party cloud platforms onto Akamai Connected Cloud that vests over two years. These programs, headcount growth, an increase in equity award sizes to some new hires and existing employees due to market conditions and expected achievement of executive performance-based compensation plans increased stock-based compensation for the year ended December 31, 2023.

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As of December 31, 2023, total pre-tax unrecognized compensation cost for stock awards was $462.1 million. The expense is expected to be recognized through 2027 over a weighted average period of 1.6 years.

Employee Stock Purchase Plan

The following summarizes the activity under the 1999 ESPP (in thousands, except per share amounts):

			2023						2022						2021
Shares issued			797						688						649
Weighted average purchase price of shares issued, per share			$	78.29					$	82.83					$	92.05
Issuance of common stock			$	62,365					$	56,570					$	59,714

As of December 31, 2023, $6.3 million had been withheld from employees for future purchases under the 1999 ESPP.

The Company uses the Black-Scholes option pricing model to determine the fair value of the stock awards issued under the Company’s 1999 ESPP. This model requires the input of subjective assumptions, including expected stock price volatility and the estimated term of each award. The estimated fair value of the stock awards issued under the Company's 1999 ESPP, less expected forfeitures, is amortized over the stock awards' six-month contribution period on a straight-line basis. Expected volatilities are based on the Company’s historical stock price volatility. The risk-free interest rate for periods commensurate with the expected term of the stock award is based on the U.S. Treasury yield rate in effect at the time of grant. The expected dividend yield is zero, as the Company currently does not pay a dividend and does not anticipate doing so in the future.

The grant-date fair values of awards granted under the 1999 ESPP during the years ended December 31, 2023, 2022 and 2021 were estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:

			2023						2022						2021
Expected term (in years)			0.5						0.5						0.5
Risk-free interest rate			5.2		%				1.9		%				0.1		%
Expected volatility			29.1		%				26.0		%				32.2		%
Dividend yield			—		%				—		%				—		%

For the years ended December 31, 2023, 2022 and 2021, the weighted average fair value of awards granted under the 1999 ESPP was $23.12 per share, $33.26 per share and $36.17 per share, respectively.

Stock Options

As of December 31, 2023 there were no stock options outstanding. The total pre-tax intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was insignificant. The total pre-tax intrinsic value of options exercised during the year ended December 31, 2021 was $0.6 million. No options vested during the years ended December 31, 2023, 2022 and 2021.

Restricted Stock Units, Restricted Stock and Deferred Stock Units

Restricted stock units ("RSUs") represent the right to receive one share of the Company’s common stock upon vesting, while restricted stock is a grant of one share of the Company's common stock subject to vesting conditions. These awards are granted at the discretion of the board of directors, a committee thereof or, subject to defined limitations, the Chief Executive Officer of the Company, acting as a committee of one director, to whom such authority has been delegated. The Company has issued service-based RSUs and restricted stock that vest based on the passage of time assuming continued service with the Company, market-based RSUs that vest based upon total shareholder return ("TSR") measured against the benchmark TSR of a peer group, and performance-based RSUs that vest only upon the achievement of defined internal performance metrics tied primarily to defined financial metrics.

In addition to granting RSUs and restricted stock to its employees, the Company has granted deferred stock units ("DSUs") to non-employee members of its board of directors. These DSUs are granted at the discretion of the board of directors, subject to defined limitations. Each DSU represents the right to receive one share of the Company’s common stock upon vesting. The holder may elect to defer receipt of the vested shares of stock represented by the DSU for a period of at least one year but not

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more than ten years from the grant date. DSUs vest 100% on the first anniversary of the grant date. If a director has completed one year of service, vesting of 100% of the DSUs held by such director will accelerate at the time of his or her departure from the board.

The RSUs, restricted stock and DSUs granted by the Company during the year ended December 31, 2023 were as follows (in thousands):

			December 31, 2023
Service-based (1)			5,767
Market-based			199
Performance-based			284
Total			6,250

(1) Includes DSU grants of 30,953 shares

For service-based RSUs, DSUs and restricted stock, the fair value is calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is being recognized over the vesting period. The majority of these awards vest over a three- or four-year period following the grant date, with some programs vesting over less time.

For market-based RSUs, the Company uses the Monte Carlo simulation model to determine the fair value. This model requires the input of assumptions, including the estimated term of each award, the risk-free interest rate, historical stock price volatility of the Company's shares and historical stock price volatility of peer-company shares. The grant-date fair values of the TSR-based RSUs granted during the years ended December 31, 2023, 2022 and 2021 were estimated using a Monte Carlo simulation model with the following assumptions:

			2023						2022						2021
Expected term (in years)			3.0						3.0						3.0
Risk-free interest rate			4.5		%				1.7		%				0.3		%
Akamai historical share price volatility			28.8		%				30.3		%				32.7		%
Average volatility of peer-company share price			33.6		%				40.7		%				39.6		%

For performance-based RSUs, management measured compensation expense based upon a review of the Company’s expected achievement against specified financial performance targets. Such compensation cost is being recognized using a graded-vesting method for each series of grants of performance-based RSUs, to the extent management has deemed that such awards are probable of vesting based upon the expected achievement against the specified targets. Each reporting period, management reviews the Company’s expected performance and adjusts the compensation cost, if needed, at such time.

RSUs, restricted stock and DSUs award activity for the year ended December 31, 2023 was as follows:

			Units (in thousands)						Weighted Average Grant Date Fair Value
Outstanding at January 1, 2023			5,278						$	121.92
Granted			6,250						74.89
Vested (1)			(2,531)						102.70
Forfeited			(920)						99.07
Outstanding at December 31, 2023			8,077						$	83.12

(1) Includes DSUs of 24,422 shares which have vested and been distributed. Excludes DSUs which have vested, but have not yet been distributed

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The pre-tax intrinsic value and fair value of RSUs, restricted stock and DSUs were as follows (in thousands, except per share amounts):

			2023						2022						2021
Pre-tax intrinsic value of awards vested			$	254,686					$	227,143					$	226,414
Fair value of awards vested			$	259,919					$	231,708					$	233,027
Weighted average fair value of awards granted, per share (1)			$	74.89					$	107.17					$	99.09

(1) The grant-date fair value is calculated based upon the Company’s closing stock price on the date of grant.

As of December 31, 2023, outstanding and unvested RSUs, restricted stock and DSUs had an aggregate intrinsic value of $955.9 million and a weighted average remaining vesting period of approximately 1.6 years. These awards are expected to vest on various dates through 2027.

As of December 31, 2023 and 2022, the Company had liability-classified awards outstanding of $16.3 million and $3.0 million, respectively. The liability-classified awards outstanding at December 31, 2023 are expected to vest and be re-classified to equity in less than one year. The liability-classified awards outstanding at December 31, 2022 vested and were re-classified to equity in 2023.

19. Income Taxes

The components of income before provision for income taxes were as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands):

			2023						2022						2021
U.S.			$	20,146					$	61,383					$	70,300
Foreign			632,381						596,620						657,921
Income before provision for income taxes			$	652,527					$	658,003					$	728,221

The provision for income taxes consisted of the following for the years ended December 31, 2023, 2022 and 2021 (in thousands):

			2023						2022						2021
Current tax provision:
Federal			$	23,406					$	49,808					$	11,824
State			6,731						9,214						8,515
Foreign			99,223						172,645						90,026
Deferred tax benefit:
Federal			(18,213)						(73,826)						(33,366)
State			(6,692)						(18,657)						(14,611)
Foreign			(2,536)						(16,595)						(4,358)
Change in valuation allowance			4,454						4,107						4,541
Total			$	106,373					$	126,696					$	62,571

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The Company’s effective tax rate differed from the U.S. federal statutory tax rate as follows for the years ended December 31, 2023, 2022 and 2021:

			2023						2022						2021
U.S. federal income tax rate			21.0		%				21.0		%				21.0		%
State taxes			1.0						0.7						0.7
Stock-based compensation			3.6						2.0						0.1
U.S. federal, state and foreign research and development credits			(4.7)						(5.1)						(3.7)
Foreign earnings			(6.5)						(6.6)						(7.3)
Nondeductible (nontaxable) foreign items			(0.2)						0.7						—
Global intangible low-taxed income			1.1						2.5						0.5
Release of uncertain tax position reserve			(0.4)						(0.7)						(1.0)
Intercompany sale of intellectual property			0.6						4.0						—
Valuation allowance			0.7						0.6						0.6
Foreign-derived intangible income			(1.1)						(0.8)						(0.5)
Other			1.2						1.0						(1.8)
			16.3		%				19.3		%				8.6		%

The components of the net deferred tax assets and liabilities and the related valuation allowance as of December 31, 2023 and 2022 were as follows (in thousands):

			2023						2022
Accrued bonus			$	3,716					$	21,181
Deferred revenue			14,223						11,925
Operating lease liabilities			116,752						125,567
Stock-based compensation			42,856						19,874
NOLs			19,791						18,172
Tax credit carryforwards			96,020						93,672
Capitalized research and development costs			108,592						43,215
Convertible senior notes interest			111,509						75,603
Depreciation and amortization			66,053						79,595
Other			21,856						28,879
Deferred tax assets			601,368						517,683
Acquired intangible assets			(12,126)						(530)
Operating lease right-of-use assets			(103,392)						(113,118)
Deferred commissions			(14,752)						(12,949)
Capitalized internal-use software development costs			(31,719)						(30,559)
Deferred tax liabilities			(161,989)						(157,156)
Valuation allowance			(45,704)						(41,250)
Net deferred tax assets			$	393,675					$	319,277

As summary of activity in the valuation allowance on deferred tax assets for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

			2023						2022						2021
Beginning balance			$	41,250					$	37,143					$	32,602
Charges to income tax expense			4,814						4,392						4,707
Release of valuation allowance			(360)						(285)						(166)
Ending balance			$	45,704					$	41,250					$	37,143

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Valuation allowances will be recognized on deferred tax assets if it is more-likely-than-not that some or all of the deferred tax assets will not be utilized. In measuring deferred tax assets, the Company considers all available evidence, both positive and negative, to determine whether a valuation allowance is needed. As of December 31, 2023, the Company recorded a $45.7 million valuation allowance against deferred tax assets related to state and foreign tax credits, foreign tax deductions and state and foreign NOLs in which it is more-likely-than-not that such attributes will expire prior to utilization. The increase in the valuation allowance during 2023 was $4.5 million. The increase in the valuation allowance is primarily related to state tax credits and foreign tax deductions.

The Company's NOL and tax credit carryforwards in U.S. federal, state and foreign jurisdictions as of December 31, 2023 and 2022 were as follows (in thousands, except years):

			2023						2022						Expirations at Various Dates Through:
NOL carryforwards:
Federal			$	32,700					$	30,100					2037
State			33,100						22,400						2043
Foreign			42,600						40,100						2039
Federal and state research and development tax credit and other credit carryforwards			125,200						121,300						2038

A portion of the Company's U.S. federal, state and foreign NOL carryforwards relate to acquisitions completed between 2012 and 2023.

As of December 31, 2023, accumulated earnings outside the U.S. totaled $2.1 billion, the majority of which have been taxed due to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings and the tax on global intangible low-taxed income required by the U.S. Tax Cuts and Jobs Act ("TCJA"). No provision for U.S. state income taxes and foreign withholding taxes has been provided for any remaining undistributed foreign earnings not subject to tax under the TCJA, or any additional basis differences inherent in the Company's international subsidiaries, as these amounts continue to be indefinitely reinvested. Determination of the amount of the unrecognized deferred tax liability on outside basis differences is not practicable because of the complexity of laws and regulations, the varying tax treatment of alternative repatriation scenarios and the variation due to multiple potential assumptions relating to the timing of any future repatriation.

The changes in the Company’s unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			2023						2022						2021
Balance at beginning of year			$	67,958					$	22,563					$	24,105
Gross increases – tax positions of prior periods			2,074						3,880						4,293
Gross increases – current period tax positions			4,091						45,975						3,607
Gross decreases – tax positions of prior periods			(3,685)						(688)						(816)
Gross decreases – lapse of applicable statute of limitations			(1,780)						(3,772)						(8,626)
Balance at end of year			$	68,658					$	67,958					$	22,563

As of December 31, 2023, 2022 and 2021, the Company had $39.1 million, $38.3 million and $23.1 million of unrecognized tax benefits, respectively. Total interest and penalties for unrecognized tax benefits includes $11.0 million, $8.6 million and $7.2 million as of December 31, 2023, 2022 and 2021, respectively. Interest and penalties related to unrecognized tax benefits are recorded in the provision for income taxes and were $2.4 million, $2.0 million and $0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. The amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate is $36.0 million.

As of December 31, 2023, it is reasonably possible that $3.8 million of unrecognized tax benefits may be recognized within the next 12 months due to the expiration of local statutes of limitations. Certain U.S. state and foreign income tax returns from 2015 through 2021 are currently under audit. The Company has reserved for those positions that are not more-likely-than-not to be sustained.

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20. Net Income per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common stock. Potential common stock consists of shares issuable pursuant to stock awards, convertible senior notes and warrants issued by the Company. For the year ended December 31, 2023 and 2022, the dilutive effect of outstanding stock awards is reflected in diluted earnings per share by application of the treasury stock method and the dilutive effect of the convertible securities is reflected in diluted earnings per share by application of the if-converted method. For the year ended December 31, 2021, the dilutive effect of outstanding stock awards and convertible securities is reflected in diluted earnings per share by application of the treasury stock method.

The components used in the computation of basic and diluted net income per share for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands, except per share data):

			2023						2022						2021
Numerator:
Net income			$	547,629					$	523,672					$	651,642
Denominator:
Shares used for basic net income per share			152,510						159,089						162,665
Effect of dilutive securities:
Stock awards			2,312						658						1,539
Convertible senior notes			575						720						1,600
Warrants related to issuance of convertible senior notes			—						—						—
Shares used for diluted net income per share			155,397						160,467						165,804
Basic net income per share			$	3.59					$	3.29					$	4.01
Diluted net income per share			$	3.52					$	3.26					$	3.93

For the years ended December 31, 2023, 2022 and 2021, certain potential outstanding shares from service-based stock awards, convertible senior notes and warrants were excluded from the computation of diluted net income per share because the effect of including these items was anti-dilutive. Additionally, certain market- and performance-based stock awards were excluded from the computation of diluted net income per share because the underlying market and performance conditions for such stock awards had not been met as of these dates. The number of potentially outstanding shares excluded from the computation of diluted net income per share for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			2023						2022						2021
Service-based stock awards			2,947						2,211						776
Market- and performance-based stock awards			1,371						1,030						1,199
Convertible senior notes			—						—						9,898
Warrants related to issuance of convertible senior notes			26,998						21,991						21,991
Total shares excluded from computation			31,316						25,232						33,864

21. Segment and Geographic Information

The Company’s chief operating decision-maker is the chief executive officer and the executive management team. As of December 31, 2023, the Company is currently organized and operates as one operating and reportable segment. The Company is not organized by market and is managed and operated as one business. A single management team that reports to the chief executive officer comprehensively manages the entire business. The Company does not operate any material separate lines of business or separate business entities with respect to its services. Accordingly, the Company does not accumulate discrete financial information with respect to separate entities and does not have separate operating or reportable segments.

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The Company deploys its servers into networks worldwide. Net property and equipment, excluding internal-use software, and operating lease right-of-use assets, located in the U.S. and international locations, as of December 31, 2023 and 2022 was as follows (in thousands):

			December 31, 2023						December 31, 2022
Property and equipment, net, excluding internal-use software, located in the U.S.			$	639,816					$	568,590
Property and equipment, net, excluding internal-use software, located internationally			616,750						516,127
Operating lease right-of-use assets located in the U.S.			624,489						608,854
Operating lease right-of-use assets located internationally			284,145						204,518