Item 1. Financial Statements (Unaudited)

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Item 1. Financial Statements (Unaudited)

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share data) (unaudited)	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	448,042	$	489,468
Marketable securities	1,189,232		374,971
Accounts receivable, net of reserves of $2,928 and $3,469 at June 30, 2024, and December 31, 2023, respectively	699,258		724,302
Prepaid expenses and other current assets	233,928		216,114
Total current assets	2,570,460		1,804,855
Marketable securities	276,943		1,431,354
Property and equipment, net	1,911,012		1,825,944
Operating lease right-of-use assets	988,521		908,634
Acquired intangible assets, net	632,984		536,143
Goodwill	3,146,397		2,850,470
Deferred income tax assets	428,235		418,297
Other assets	132,980		124,340
Total assets	$	10,087,532	$	9,900,037

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS, continued


(in thousands, except share data) (unaudited)	June 30, 2024		December 31, 2023















LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	124,507	$	146,927
Accrued expenses	283,862		352,181
Deferred revenue	139,934		107,544
Convertible senior notes	1,147,826		—
Operating lease liabilities	242,223		222,944
Other current liabilities	7,524		6,442
Total current liabilities	1,945,876		836,038
Deferred revenue	28,526		23,006
Deferred income tax liabilities	26,442		24,622
Convertible senior notes	2,394,187		3,538,229
Operating lease liabilities	831,264		774,806
Other liabilities	106,561		106,181
Total liabilities	5,332,856		5,302,882
Commitments and contingencies
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; 154,411,275 shares issued and 151,913,207 shares outstanding at June 30, 2024, and 151,232,908 shares issued and outstanding at December 31, 2023	1,544		1,512
Additional paid-in capital	2,368,225		2,222,993
Accumulated other comprehensive loss	(136,921)		(95,330)
Treasury stock, at cost, 2,498,068 shares at June 30, 2024, and no shares at December 31, 2023	(253,258)		—
Retained earnings	2,775,086		2,467,980
Total stockholders’ equity	4,754,676		4,597,155
Total liabilities and stockholders’ equity	$	10,087,532	$	9,900,037

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

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data) (unaudited)	2024		2023		2024		2023
Revenue	$	979,580	$	935,721	$	1,966,550	$	1,851,419
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)	402,888		373,275		797,631		734,591
Research and development	113,352		99,041		230,284		190,904
Sales and marketing	139,039		136,554		273,609		265,661
General and administrative	153,854		151,811		306,284		297,950
Amortization of acquired intangible assets	21,076		15,898		42,099		31,810
Restructuring charge	1,385		9,357		1,929		54,080
Total costs and operating expenses	831,594		785,936		1,651,836		1,574,996
Income from operations	147,986		149,785		314,714		276,423
Interest and marketable securities income, net	26,628		4,509		54,469		9,801
Interest expense	(6,829)		(3,157)		(13,647)		(5,838)
Other expense, net	(949)		(1,130)		(438)		(3,493)
Income before provision for income taxes	166,836		150,007		355,098		276,893
Provision for income taxes	(35,148)		(21,191)		(47,992)		(50,971)

Net income	$	131,688	$	128,816	$	307,106	$	225,922
Net income per share:
Basic	$	0.86	$	0.85	$	2.02	$	1.47
Diluted	$	0.86	$	0.84	$	1.97	$	1.46
Shares used in per share calculations:
Basic	152,265		152,064		151,946		153,850
Diluted	153,588		153,454		155,527		154,795

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

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands) (unaudited)	2024		2023		2024		2023
Net income	$	131,688	$	128,816	$	307,106	$	225,922
Other comprehensive (loss) gain:
Foreign currency translation adjustments	(18,898)		(1,076)		(35,345)		10,646
Change in unrealized (loss) gain on investments, net of income tax benefit (expense) of $464, $(732), $2,026 and $(3,131) for the three and six months ended June 30, 2024 and 2023, respectively	(1,430)		2,273		(6,246)		9,722
Other comprehensive (loss) gain	(20,328)		1,197		(41,591)		20,368
Comprehensive income	$	111,360	$	130,013	$	265,515	$	246,290

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

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Six Months Ended June 30,
(in thousands) (unaudited)	2024		2023
Cash flows from operating activities:
Net income	$	307,106	$	225,922
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	314,732		274,582
Stock-based compensation	191,726		149,327
Provision for deferred income taxes	3,479		409
Amortization of debt issuance costs	3,342		2,196
Loss (gain) on investments	66		(201)
Other non-cash reconciling items, net	3,958		38,654
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	16,802		(22,778)
Prepaid expenses and other current assets	(24,763)		(18,097)
Accounts payable and accrued expenses	(47,426)		(83,785)
Deferred revenue	22,697		37,051
Other current liabilities	980		16,145
Other non-current assets and liabilities	(9,858)		(19,615)
Net cash provided by operating activities	782,841		599,810
Cash flows from investing activities:
Cash paid for business acquisitions, net of cash acquired	(434,066)		(106,326)
Cash paid for asset acquisition	(4,796)		—

Purchases of property and equipment	(184,745)		(254,005)
Capitalization of internal-use software development costs	(152,546)		(144,529)
Purchases of short- and long-term marketable securities	(186,122)		(134,821)
Proceeds from sales of short- and long-term marketable securities	307,614		200,568
Proceeds from maturities and redemptions of short- and long-term marketable securities	211,861		91,637
Other, net	4,535		(20,766)
Net cash used in investing activities	(438,265)		(368,242)

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued


	For the Six Months Ended June 30,
(in thousands) (unaudited)	2024		2023




























Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility	—		90,000
Repayment of borrowings under revolving credit facility	—		(70,000)



Proceeds related to the issuance of common stock under stock plans	28,266		31,331
Employee taxes paid related to net share settlement of stock awards	(141,247)		(39,606)
Repurchases of common stock	(253,258)		(485,958)

Other, net	(10,187)		(256)
Net cash used in financing activities	(376,426)		(474,489)
Effects of exchange rate changes on cash, cash equivalents and restricted cash	(9,306)		(710)
Net decrease in cash, cash equivalents and restricted cash	(41,156)		(243,631)
Cash, cash equivalents and restricted cash at beginning of period	490,470		543,022
Cash, cash equivalents and restricted cash at end of period	$	449,314	$	299,391

Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds received of $5,033 and $691 for the six months ended June 30, 2024 and 2023, respectively	$	87,375	$	100,017
Cash paid for interest expense	10,145		3,349
Cash paid for operating lease liabilities	136,628		113,698
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	206,460		196,338
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses	46,837		104,215
Capitalization of stock-based compensation	53,989		36,505

Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents	$	448,042	$	298,612
Restricted cash	1,272		779
Cash, cash equivalents and restricted cash	$	449,314	$	299,391

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

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


	Three Months Ended June 30, 2024
(in thousands, except share data) (unaudited)	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Total Stockholders' Equity
Shares		Amount
Balance at April 1, 2024	152,411,363		$	1,536	$	2,230,875	$	(116,593)	$	(125,449)	$	2,643,398	$	4,633,767

Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes	487,380		4		(15,066)								(15,062)
Issuance of common stock under employee stock purchase plan	369,920		4		28,365								28,369
Stock-based compensation					124,051								124,051



Repurchases of common stock	(1,355,456)								(127,809)				(127,809)

Net income											131,688		131,688
Foreign currency translation adjustment							(18,898)						(18,898)
Change in unrealized loss on investments, net of tax							(1,430)						(1,430)
Balance at June 30, 2024	151,913,207		$	1,544	$	2,368,225	$	(136,921)	$	(253,258)	$	2,775,086	$	4,754,676

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued


	Three Months Ended June 30, 2023
(in thousands, except share data) (unaudited)	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Total Stockholders' Equity
Shares		Amount
Balance at April 1, 2023	152,743,828		$	1,573	$	2,625,244	$	(121,161)	$	(351,772)	$	2,017,457	$	4,171,341

Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes	283,464		3		(9,909)								(9,906)
Issuance of common stock under employee stock purchase plan	399,395		4		31,265								31,269
Stock-based compensation					105,081								105,081



Repurchases of common stock	(1,635,826)								(138,631)				(138,631)

Net income											128,816		128,816
Foreign currency translation adjustment							(1,076)						(1,076)
Change in unrealized gain on investments, net of tax							2,273						2,273
Balance at June 30, 2023	151,790,861		$	1,580	$	2,751,681	$	(119,964)	$	(490,403)	$	2,146,273	$	4,289,167

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued


	Six Months Ended June 30, 2024
(in thousands, except share data) (unaudited)	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Total Stockholders' Equity
Shares		Amount
Balance at January 1, 2024	151,232,908		$	1,512	$	2,222,993	$	(95,330)	$	—	$	2,467,980	$	4,597,155

Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes	2,808,447		28		(142,086)								(142,058)
Issuance of common stock under employee stock purchase plan	369,920		4		28,365								28,369
Stock-based compensation					258,953								258,953



Repurchases of common stock	(2,498,068)								(253,258)				(253,258)

Net income											307,106		307,106
Foreign currency translation adjustment							(35,345)						(35,345)
Change in unrealized loss on investments, net of tax							(6,246)						(6,246)
Balance at June 30, 2024	151,913,207		$	1,544	$	2,368,225	$	(136,921)	$	(253,258)	$	2,775,086	$	4,754,676

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AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued


	Six Months Ended June 30, 2023
(in thousands, except share data) (unaudited)	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Total Stockholders' Equity
Shares		Amount
Balance at January 1, 2023	156,494,816		$	1,565	$	2,578,603	$	(140,332)	$	—	$	1,920,351	$	4,360,187

Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes	1,088,017		11		(41,253)								(41,242)
Issuance of common stock under employee stock purchase plan	399,395		4		31,265								31,269
Stock-based compensation					183,066								183,066



Repurchases of common stock	(6,191,367)								(490,403)				(490,403)

Net income											225,922		225,922
Foreign currency translation adjustment							10,646						10,646
Change in unrealized gain on investments, net of tax							9,722						9,722
Balance at June 30, 2023	151,790,861		$	1,580	$	2,751,681	$	(119,964)	$	(490,403)	$	2,146,273	$	4,289,167

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

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AKAMAI TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED 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 over 700 cities and approximately 130 countries. 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 interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation in the accompanying interim condensed consolidated financial statements.

Certain information and footnote disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes have been condensed in, or omitted from, these interim financial statements. Accordingly, the unaudited interim condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 28, 2024. The December 31, 2023 condensed consolidated balance sheet included herein is derived from the Company's audited consolidated financial statements.

The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited interim condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of the results of all interim periods reported herein.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board ("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 in the process of evaluating the significant expenses of its single segment and determining the appropriate enhanced disclosures.

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2. Fair Value Measurements

Available-for-sale marketable securities held as of June 30, 2024 and December 31, 2023 were as follows (in thousands):


			Gross Unrealized						Classification on Balance Sheet
	Amortized Cost		Gains		Losses		Aggregate Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities
As of June 30, 2024
Time deposits	$	6,257	$	—	$	—	$	6,257	$	6,257	$	—
Commercial paper	4,397		—		(11)		4,386		4,386		—
Corporate bonds	1,099,180		21		(3,829)		1,095,372		895,764		199,608
U.S. government agency obligations	330,268		29		(776)		329,521		275,162		54,359
	$	1,440,102	$	50	$	(4,616)	$	1,435,536	$	1,181,569	$	253,967

As of December 31, 2023
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

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 equity securities. Additionally, the Company holds certain money market funds that are classified as equity securities. These securities are not included in the available-for-sale securities table above but are included in marketable securities in the interim condensed 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 interim condensed consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest and marketable securities income, net in the interim condensed consolidated statements of income. As of June 30, 2024, the Company held investments in corporate bonds and U.S. government agency obligations with a fair value of $179.6 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 $1.4 million and are included in accumulated other comprehensive loss as of June 30, 2024. 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 June 30, 2024 and December 31, 2023 were as follows (in thousands):


	Total Fair Value			Fair Value Measurements at Reporting Date Using
			Level 1			Level 2
As of June 30, 2024
Cash Equivalents and Marketable Securities:
Money market funds	$	45,047		$	45,047		$	—
Time deposits	52,585			—			52,585
Commercial paper	4,386			—			4,386
Corporate bonds	1,095,372			—			1,095,372
U.S. government agency obligations	329,521			—			329,521
Mutual funds	25,081			25,081			—
	$	1,551,992		$	70,128		$	1,481,864




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 June 30, 2024 and December 31, 2023, the fair value of the Company's financial assets were determined utilizing a Level 1 or Level 2 valuation. Level 1 valuations are based upon the market prices for such investments that are readily available in active markets and Level 2 valuations are based upon the available quoted prices for similar assets in active markets (or identical assets in an inactive market). 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 six months ended June 30, 2024.

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 June 30, 2024 and December 31, 2023 were as follows (in thousands):


	June 30, 2024		December 31, 2023
Due in 1 year or less	$	1,181,569	$	372,014
Due after 1 year through 5 years	253,967		1,409,504
	$	1,435,536	$	1,781,518

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3. Accounts Receivable

Net accounts receivable consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Trade accounts receivable	$	499,108	$	516,175
Unbilled accounts receivable	203,078		211,596
Gross accounts receivable	702,186		727,771
Allowances for current expected credit losses and other reserves	(2,928)		(3,469)
Accounts receivable, net	$	699,258	$	724,302

A summary of activity in the accounts receivable allowance for current expected credit losses and other reserves for the six months ended June 30, 2024 and 2023 was as follows (in thousands):


	June 30, 2024		June 30, 2023
Beginning balance	$	3,469	$	5,917
Charges to income from operations	2,867		6,152
Collections from customers previously reserved and other	(3,408)		(4,031)
Ending balance	$	2,928	$	8,038

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

4. Incremental Costs to Obtain a Contract with a Customer

Deferred costs associated with obtaining customer contracts, specifically commission and incentive payments, as of June 30, 2024 and December 31, 2023 were as follows (in thousands):


	June 30, 2024		December 31, 2023
Deferred costs included in prepaid expenses and other current assets	$	53,349	$	44,383
Deferred costs included in other assets	44,740		42,738
Total deferred costs	$	98,089	$	87,121

Information related to incremental costs to obtain a contract with a customer for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Amortization expense related to deferred costs	$	15,374	$	12,210	$	29,737	$	24,385
Incremental costs capitalized	23,364		17,381		42,706		29,798

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

5. Acquisitions

Business acquisition costs during the three and six months ended June 30, 2024 were $2.2 million and $2.4 million, respectively, and are included in general and administrative expense in the interim condensed consolidated statements of income. Pro forma results of operations for the acquisition completed during the six months ended June 30, 2024 have not been presented because the effects of the acquisition were not material to the Company's consolidated financial results. Revenue and

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earnings of the acquired company since the date of the acquisition are included in the Company's interim condensed consolidated statements of income and are not presented separately because they are not material.

Noname Security

In June 2024, the Company acquired all the outstanding equity interests of Noname Gate Ltd. ("Noname Security") for $452.3 million in cash, subject to post-closing adjustments. Noname Security is intended to expand the Company’s existing API Security offering by providing more flexible deployment options, extensive vendor integrations and enhanced attack analysis. The Company believes this acquisition will accelerate its ability to meet increasing customer and market demand. As of June 30, 2024, the purchase price allocation is preliminary, pending finalization of the fair value of the intangible assets acquired, certain income tax matters and net working capital.

The preliminary allocation of the purchase price for Noname Security and fair values the assets acquired and liabilities assumed were as follows (in thousands):


Total purchase consideration	$	452,319

Allocation of the purchase consideration:
Cash	$	18,253
Accounts receivable	6,189
Prepaid expenses and other current assets	2,849


Identifiable intangible assets	137,800
Deferred income tax assets	9,328

Total assets acquired	174,419
Accounts payable	(2,194)
Accrued expenses	(3,524)
Deferred revenue	(18,592)



Total liabilities assumed	(24,310)
Identifiable net assets acquired	150,109
Goodwill	302,210
Total purchase price allocation	$	452,319

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

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


	Gross Carrying Amount		Estimated Useful Life (in years)
Completed technologies	$	132,300	10.5
Customer-related intangible assets	4,800		10.5
Trademarks	700		2.5

Total	$	137,800

The Company applied the multi-period excess earnings method to estimate the fair values of the completed technologies and customer-related acquired intangible assets, and the relief-from-royalty method to estimate the fair values of the trademarks. The total weighted average amortization period for the intangible assets acquired from Noname Security is 10.5 years. The intangible assets are amortized using a method that approximates their economic benefit over their estimated useful lives.

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6. Acquired Intangible Assets and Goodwill

Acquired intangible assets that are subject to amortization consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Completed technologies	$	491,236	$	(211,150)	$	280,086	$	354,539	$	(196,572)	$	157,967
Customer-related intangible assets	616,055		(297,725)		318,330		616,267		(273,758)		342,509

Trademarks and trade names	15,334		(9,747)		5,587		14,659		(9,117)		5,542
Acquired license rights	34,810		(5,829)		28,981		34,810		(4,685)		30,125
Total	$	1,157,435	$	(524,451)	$	632,984	$	1,020,275	$	(484,132)	$	536,143

Based on the Company’s acquired intangible assets as of June 30, 2024, aggregate expense related to amortization of acquired intangible assets is expected to be $43.1 million for the remainder of 2024, and $82.7 million, $84.1 million, $79.3 million and $74.2 million for 2025, 2026, 2027 and 2028, respectively.

The changes in the carrying amount of goodwill for the six months ended June 30, 2024 were as follows (in thousands):


Balance as of January 1, 2024	$	2,850,470
Acquisition of Noname Security	302,210
Measurement period adjustments related to acquisitions completed in prior years	18

Foreign currency translation	(6,301)
Balance as of June 30, 2024	$	3,146,397

The Company tests goodwill for impairment at least annually. Through the date the interim condensed consolidated financial statements were issued, no triggering events have occurred that would indicate that a potential impairment exists.

7. 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	%

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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.

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.

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Components and Fair Value of the Notes

The Notes consisted of the following components as of June 30, 2024 and December 31, 2023 (in thousands):


	2029 Notes		2027 Notes		2025 Notes		Total
As of June 30, 2024
Principal	$	1,265,000	$	1,150,000	$	1,150,000	$	3,565,000
Less: issuance costs, net of amortization	(14,921)		(5,892)		(2,174)		(22,987)
Net carrying amount	$	1,250,079	$	1,144,108	$	1,147,826	$	3,542,013

Estimated fair value (1)	$	1,197,462	$	1,113,534	$	1,198,151	$	3,509,147

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

(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 month. 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 interim condensed 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 interim condensed 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 cost	$	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

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Revolving Credit Facility

In November 2022, the Company entered into a $500.0 million five-year, revolving credit agreement (the “2022 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 on November, 22, 2027, and any amounts outstanding thereunder will become due and payable, 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. As of June 30, 2024, the Company was in compliance with all covenants. 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 June 30, 2024.

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 interim condensed consolidated statements of income for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Amortization of debt issuance costs	$	1,949	$	1,167	$	3,895	$	2,333
Coupon interest payable on 2029 Notes	3,558		—		7,116		—
Coupon interest payable on 2027 Notes	1,078		1,078		2,156		2,156
Coupon interest payable on 2025 Notes	359		359		718		718
Interest payable and commitment fees under the 2022 credit agreement	174		622		315		768
Capitalization of interest expense	(289)		(69)		(553)		(137)
Total interest expense	$	6,829	$	3,157	$	13,647	$	5,838

8. 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 has incurred $20.7 million of restructuring charges related to this action, of which $20.5 million was incurred during the six months ended June 30, 2023. There were no material charges incurred during the six months ended June 30, 2024, and 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 leasehold improvements were recognized. The Company has incurred $36.8 million of restructuring charges related to this action, of which $0.9 million and $6.8 million were incurred during the three months ended June 30, 2024 and 2023, respectively, and $1.7 million and $25.4 million were incurred

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during the six months ended June 30, 2024 and 2023, respectively. The Company does not expect to incur material additional charges related to this action.

The Company also recognizes restructuring charges for redundant employees, facilities and contracts associated with completed acquisitions.

9. Stockholders’ Equity

Share Repurchase Program

Effective January 2022, the board of directors of the Company authorized a $1.8 billion share repurchase program through December 2024, of which $284.7 million remains available for repurchase as of June 30, 2024. In May 2024, the board of directors authorized a new $2.0 billion share repurchase program, effective May 2024 through June 2027, all of which remains available for repurchase as of June 30, 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.

During the three and six months ended June 30, 2024, the Company repurchased 1.4 million and 2.5 million shares of its common stock, respectively, for $127.8 million and $253.3 million, respectively.

Stock-Based Compensation

Components of total stock-based compensation included in the Company’s interim condensed consolidated statements of income for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Cost of revenue	$	15,864	$	11,339	$	28,482	$	20,668
Research and development	36,951		32,258		74,996		54,102
Sales and marketing	18,976		17,723		37,787		31,268
General and administrative	26,675		26,124		50,461		43,289
Total stock-based compensation	98,466		87,444		191,726		149,327
Provision for income taxes	(21,741)		(18,808)		(62,081)		(30,221)
Total stock-based compensation, net of income taxes	$	76,725	$	68,636	$	129,645	$	119,106

In addition to the amounts of stock-based compensation reported in the table above, the Company’s interim condensed consolidated statements of income also include stock-based compensation reflected as a component of amortization primarily consisting of capitalized internal-use software; the additional stock-based compensation was $10.3 million and $20.3 million for the three and six months ended June 30, 2024, respectively, before taxes, and $7.9 million and $15.4 million for the three and six months ended June 30, 2023, respectively, before taxes.

10. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss, net of tax, which is reported as a component of stockholders' equity, for the six months ended June 30, 2024 were as follows (in thousands):


	Foreign Currency Translation		Net Unrealized Gains (Losses) on Investments		Total
Balance as of January 1, 2024	$	(98,035)	$	2,705	$	(95,330)
Other comprehensive loss	(35,345)		(6,246)		(41,591)
Balance as of June 30, 2024	$	(133,380)	$	(3,541)	$	(136,921)

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Amounts reclassified from accumulated other comprehensive loss to net income were insignificant for the six months ended June 30, 2024.

11. 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 interim condensed consolidated statements of income for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
U.S.	$	508,696	$	480,062	$	1,021,043	$	953,895
International	470,884		455,659		945,507		897,524
Total revenue	$	979,580	$	935,721	$	1,966,550	$	1,851,419

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 interim condensed consolidated statements of income for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Security	$	498,708	$	432,946	$	989,389	$	838,498
Delivery	329,399		379,698		681,157		774,082
Compute	151,473		123,077		296,004		238,839
Total revenue	$	979,580	$	935,721	$	1,966,550	$	1,851,419

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 six months ended June 30, 2024 and 2023, the Company recognized $84.8 million and $82.1 million of revenue that was included in deferred revenue as of December 31, 2023 and 2022, respectively.

As of June 30, 2024, 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 and approximately 30% over the next two to three years, with the remaining thereafter. 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 six months ended June 30, 2024 and 2023, related to performance obligations satisfied in previous periods was not material.

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12. Income Taxes

The Company's effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods. Potential discrete adjustments include tax charges or benefits related to stock-based compensation, changes in tax legislation, settlements of tax audits or assessments, uncertain tax positions and acquisitions, among other items.

The Company’s effective income tax rate was 13.5% and 18.4% for the six months ended June 30, 2024 and 2023, respectively. The lower effective tax rate for the six months ended June 30, 2024 was primarily due to an increase in the excess tax benefit related to stock-based compensation, a decrease in tax on global intangible low-taxed income and a decrease in the valuation allowance recorded against state and foreign credits. These amounts were partially offset by a decrease in foreign income taxed at lower rates and the impact of the enactment of a 15% global minimum corporate income tax that the Organisation for Economic Co-operation and Development ("OECD") and OECD member countries have begun implementing and which impacted the Company beginning January 1, 2024.

For the six months ended June 30, 2024, the effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the 15% global minimum corporate income tax.

For the six months ended June 30, 2023, the effective income tax rate was lower than the federal statutory tax rate due to foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by tax on global intangible low-taxed income, non-deductible stock-based compensation and a shortfall related to stock-based compensation.

13. 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. The dilutive effect of outstanding 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.

The components used in the computation of basic and diluted net income per share for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except per share data):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net income	$	131,688	$	128,816	$	307,106	$	225,922
Denominator:
Shares used for basic net income per share	152,265		152,064		151,946		153,850
Effect of dilutive securities:

Stock awards	1,124		1,390		2,425		945
Convertible senior notes	199		—		1,156		—
Warrants related to issuance of convertible senior notes	—		—		—		—
Shares used for diluted net income per share	153,588		153,454		155,527		154,795
Basic net income per share	$	0.86	$	0.85	$	2.02	$	1.47
Diluted net income per share	$	0.86	$	0.84	$	1.97	$	1.46

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For the three and six months ended June 30, 2024 and 2023, certain potential outstanding shares from service-based stock awards 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 three and six months ended June 30, 2024 and 2023 were as follows (in thousands):


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2024	2023	2024	2023

Service-based stock awards	3,269	2,159	3,715	5,013
Market- and performance-based stock awards	1,315	1,270	1,321	1,425

Warrants related to issuance of convertible senior notes	32,006	21,991	32,006	21,991
Total shares excluded from computation	36,590	25,420	37,042	28,429

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