filings.toolsItem 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) | March 31, 2026 | December 31, 2025 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 622,383 | $ | 930,231 | |||||||
| Marketable securities | 308,062 | 256,302 | |||||||||
| Accounts receivable, net of reserves of $6,188 and $7,706 at March 31, 2026, and December 31, 2025, respectively | 881,076 | 793,666 | |||||||||
| Prepaid expenses and other current assets | 319,102 | 306,481 | |||||||||
| Total current assets | 2,130,623 | 2,286,680 | |||||||||
| Marketable securities | 802,670 | 733,228 | |||||||||
| Property and equipment, net | 2,411,721 | 2,333,462 | |||||||||
| Operating lease right-of-use assets | 1,665,915 | 1,469,700 | |||||||||
| Acquired intangible assets, net | 589,355 | 614,542 | |||||||||
| Goodwill | 3,202,906 | 3,206,525 | |||||||||
| Deferred income tax assets | 627,603 | 622,776 | |||||||||
| Other assets | 214,959 | 212,730 | |||||||||
| Total assets | $ | 11,645,752 | $ | 11,479,643 | |||||||
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, continued
| (in thousands, except share data) (unaudited) | March 31, 2026 | December 31, 2025 | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 151,439 | $ | 125,054 | |||||||
| Accrued expenses | 286,427 | 319,622 | |||||||||
| Deferred revenue | 203,681 | 151,186 | |||||||||
| Operating lease liabilities | 369,110 | 336,613 | |||||||||
| Other current liabilities | 25,130 | 35,043 | |||||||||
| Total current liabilities | 1,035,787 | 967,518 | |||||||||
| Deferred revenue | 19,929 | 17,088 | |||||||||
| Deferred income tax liabilities | 34,840 | 31,089 | |||||||||
| Convertible senior notes | 4,107,607 | 4,105,355 | |||||||||
| Operating lease liabilities | 1,390,988 | 1,233,420 | |||||||||
| Other liabilities | 147,776 | 147,802 | |||||||||
| Total liabilities | 6,736,927 | 6,502,272 | |||||||||
| 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; 152,383,987 shares issued and 145,549,131 shares outstanding at March 31, 2026, and 149,711,094 shares issued and 144,711,094 outstanding at December 31, 2025 | 1,524 | 1,497 | |||||||||
| Additional paid-in capital | 2,123,150 | 2,080,487 | |||||||||
| Accumulated other comprehensive loss | (116,624) | (94,756) | |||||||||
| Treasury stock, at cost, 6,834,856 shares at March 31, 2026, and 5,000,000 shares at December 31, 2025 | (630,473) | (434,786) | |||||||||
| Retained earnings | 3,531,248 | 3,424,929 | |||||||||
| Total stockholders’ equity | 4,908,825 | 4,977,371 | |||||||||
| Total liabilities and stockholders’ equity | $ | 11,645,752 | $ | 11,479,643 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (in thousands, except per share data) (unaudited) | 2026 | 2025 | |||||||||||||||||||||
| Revenue | $ | 1,073,610 | $ | 1,015,139 | |||||||||||||||||||
| Costs and operating expenses: | |||||||||||||||||||||||
| Cost of revenue (exclusive of amortization of acquired intangible assets shown below) | 471,299 | 418,945 | |||||||||||||||||||||
| Research and development | 141,576 | 123,549 | |||||||||||||||||||||
| Sales and marketing | 157,062 | 134,131 | |||||||||||||||||||||
| General and administrative | 163,809 | 155,933 | |||||||||||||||||||||
| Amortization of acquired intangible assets | 25,187 | 27,637 | |||||||||||||||||||||
| Restructuring charge | 183 | 361 | |||||||||||||||||||||
| Total costs and operating expenses | 959,116 | 860,556 | |||||||||||||||||||||
| Income from operations | 114,494 | 154,583 | |||||||||||||||||||||
| Interest and marketable securities income, net | 17,547 | 19,530 | |||||||||||||||||||||
| Interest expense | (8,257) | (6,750) | |||||||||||||||||||||
| Other (expense) income, net | (1,786) | 6,020 | |||||||||||||||||||||
| Income before provision for income taxes | 121,998 | 173,383 | |||||||||||||||||||||
| Provision for income taxes | 15,679 | 50,212 | |||||||||||||||||||||
| Net income | $ | 106,319 | $ | 123,171 | |||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | 0.73 | $ | 0.83 | |||||||||||||||||||
| Diluted | $ | 0.71 | $ | 0.82 | |||||||||||||||||||
| Shares used in per share calculations: | |||||||||||||||||||||||
| Basic | 145,270 | 149,052 | |||||||||||||||||||||
| Diluted | 150,022 | 151,064 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (in thousands) (unaudited) | 2026 | 2025 | |||||||||||||||||||||
| Net income | $ | 106,319 | $ | 123,171 | |||||||||||||||||||
| Other comprehensive (loss) gain: | |||||||||||||||||||||||
| Foreign currency translation adjustments | (17,615) | 21,784 | |||||||||||||||||||||
| Change in unrealized loss on investments, net of income tax benefit of $1,353 and $385 for the three months ended March 31, 2026 and 2025, respectively | (4,253) | (1,176) | |||||||||||||||||||||
| Other comprehensive (loss) gain | (21,868) | 20,608 | |||||||||||||||||||||
| Comprehensive income | $ | 84,451 | $ | 143,779 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Three Months Ended March 31, | |||||||||||
| (in thousands) (unaudited) | 2026 | 2025 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 106,319 | $ | 123,171 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 183,751 | 174,022 | |||||||||
| Stock-based compensation | 128,681 | 111,978 | |||||||||
| (Benefit) provision for deferred income taxes | (1,749) | 31,383 | |||||||||
| Amortization of debt issuance costs | 2,148 | 1,605 | |||||||||
| Gain on investments | — | (9,313) | |||||||||
| Other non-cash reconciling items, net | 2,709 | 2,142 | |||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||||||
| Accounts receivable | (94,272) | (25,677) | |||||||||
| Prepaid expenses and other current assets | (10,096) | (37,129) | |||||||||
| Accounts payable and accrued expenses | (42,035) | (109,906) | |||||||||
| Deferred revenue | 56,281 | 14,948 | |||||||||
| Other current liabilities | (10,353) | (20,276) | |||||||||
| Other non-current assets and liabilities | (8,876) | (5,748) | |||||||||
| Net cash provided by operating activities | 312,508 | 251,200 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Cash paid for asset acquisition | — | (29,930) | |||||||||
| Purchases of property and equipment | (101,686) | (117,776) | |||||||||
| Capitalization of internal-use software development costs | (90,161) | (78,232) | |||||||||
| Purchases of short- and long-term marketable securities | (161,455) | (7,080) | |||||||||
| Proceeds from sales of short- and long-term marketable securities | 5,606 | 265,806 | |||||||||
| Proceeds from maturities and redemptions of short- and long-term marketable securities | 30,000 | 847,149 | |||||||||
| Other, net | (1,798) | (3,091) | |||||||||
| Net cash (used in) provided by investing activities | (319,494) | 876,846 | |||||||||
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
| For the Three Months Ended March 31, | |||||||||||
| (in thousands) (unaudited) | 2026 | 2025 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds related to the issuance of common stock under stock plans | 21,619 | 20,182 | |||||||||
| Employee taxes paid related to net share settlement of stock awards | (106,574) | (72,063) | |||||||||
| Repurchases of common stock | (205,886) | (499,963) | |||||||||
| Other, net | (868) | (406) | |||||||||
| Net cash used in financing activities | (291,709) | (552,250) | |||||||||
| Effects of exchange rate changes on cash, cash equivalents and restricted cash | (5,672) | 5,431 | |||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (304,367) | 581,227 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 931,308 | 519,084 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 626,941 | $ | 1,100,311 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest expense | 9,558 | 9,412 | |||||||||
| Cash paid for operating lease liabilities | 109,442 | 74,729 | |||||||||
| Non-cash activities: | |||||||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | 287,573 | 34,930 | |||||||||
| Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses | 71,979 | 85,155 | |||||||||
| Capitalization of stock-based compensation | 34,993 | 32,064 | |||||||||
| Reconciliation of cash and cash equivalents, and restricted cash: | |||||||||||
| Cash and cash equivalents | $ | 622,383 | $ | 1,097,026 | |||||||
| Restricted cash | 4,558 | 3,285 | |||||||||
| Cash, cash equivalents and restricted cash | $ | 626,941 | $ | 1,100,311 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
| Three Months Ended March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||
| (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, 2026 | 144,711,094 | $ | 1,497 | $ | 2,080,487 | $ | (94,756) | $ | (434,786) | $ | 3,424,929 | $ | 4,977,371 | ||||||||||||||||||||||||||||
| Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes | 2,672,893 | 27 | (127,293) | (127,266) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 169,956 | 169,956 | |||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (1,952,142) | (205,886) | (205,886) | ||||||||||||||||||||||||||||||||||||||
| Re-issuance of treasury stock for 401(k) employer match | 117,286 | 10,199 | 10,199 | ||||||||||||||||||||||||||||||||||||||
| Net income | 106,319 | 106,319 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | (17,615) | (17,615) | |||||||||||||||||||||||||||||||||||||||
| Change in unrealized loss on investments, net of tax | (4,253) | (4,253) | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | 145,549,131 | $ | 1,524 | $ | 2,123,150 | $ | (116,624) | $ | (630,473) | $ | 3,531,248 | $ | 4,908,825 |
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| (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, 2025 | 150,025,096 | $ | 1,556 | $ | 2,618,384 | $ | (155,993) | $ | (558,488) | $ | 2,972,898 | $ | 4,878,357 | ||||||||||||||||||||||||||||
| Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes | 2,119,218 | 22 | (85,728) | (85,706) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 141,236 | 141,236 | |||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (6,158,235) | (503,091) | (503,091) | ||||||||||||||||||||||||||||||||||||||
| Re-issuance of treasury stock for 401(k) employer match | 100,723 | 9,986 | 9,986 | ||||||||||||||||||||||||||||||||||||||
| Net income | 123,171 | 123,171 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 21,784 | 21,784 | |||||||||||||||||||||||||||||||||||||||
| Change in unrealized loss on investments, net of tax | (1,176) | (1,176) | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | 146,086,802 | $ | 1,578 | $ | 2,673,892 | $ | (135,385) | $ | (1,051,593) | $ | 3,096,069 | $ | 4,584,561 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
AKAMAI TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Basis of Presentation
Akamai Technologies, Inc. (the “Company”) develops and provides solutions for global enterprises to build, secure and accelerate their applications and digital experiences. Its massively distributed global network is comprised of core and distributed compute sites, more than 4,300 edge points-of-presence in over 130 countries and approximately 700 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 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, 2025, filed with the Securities and Exchange Commission on February 20, 2026. The December 31, 2025 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.
Recently Adopted Accounting Pronouncements
In July 2025, the Financial Accounting Standards Board ("FASB") issued guidance which provides targeted improvements and clarifications related to the recognition and measurement of expected credit losses, particularly for off-balance-sheet credit exposures and certain practical expedients. The Company adopted this guidance on January 1, 2026 on a prospective basis. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.
In November 2024, the FASB issued guidance which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The Company adopted this guidance on January 1, 2026 on a prospective basis. The adoption of this standard did not have an impact on the Company's condensed consolidated financial statements as it did not have any induced conversions.
Recent Accounting Pronouncements
In September 2025, the FASB issued guidance which modernizes the accounting for internal-use software by removing all references to software development stages given the evolution of software development. The targeted improvements aim to increase the operability of the recognition guidance for internal-use software. The guidance also seeks to clarify the disclosure requirements for internal-use software. This guidance will be effective for the Company on January 1, 2028, and is to be applied prospectively, modified prospectively or retrospectively. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.
In November 2024, the FASB issued guidance to enhance income statement disclosures through additional disclosures of specified information about certain costs and expenses. This guidance will be effective for the Company's annual period ending December 31, 2027 and interim periods beginning on January 1, 2028, 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.
2. Investments and Fair Value Measurements
Available-for-sale marketable securities held as of March 31, 2026 and December 31, 2025 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 March 31, 2026 | |||||||||||||||||||||||||||||||||||
| Time deposits | $ | 32,286 | $ | — | $ | — | $ | 32,286 | $ | 32,286 | $ | — | |||||||||||||||||||||||
| Commercial paper | 19,772 | — | (15) | 19,757 | 19,757 | — | |||||||||||||||||||||||||||||
| Corporate bonds | 1,029,555 | 904 | (2,706) | 1,027,753 | 250,694 | 777,059 | |||||||||||||||||||||||||||||
| $ | 1,081,613 | $ | 904 | $ | (2,721) | $ | 1,079,796 | $ | 302,737 | $ | 777,059 | ||||||||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Time deposits | $ | 31,035 | $ | — | $ | — | $ | 31,035 | $ | 31,035 | $ | — | |||||||||||||||||||||||
| Corporate bonds | 920,142 | 3,921 | (127) | 923,936 | 217,139 | 706,797 | |||||||||||||||||||||||||||||
| $ | 951,177 | $ | 3,921 | $ | (127) | $ | 954,971 | $ | 248,174 | $ | 706,797 |
The Company holds money market funds and mutual funds, which 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 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 March 31, 2026, the Company did not hold any available-for-sale marketable securities in a continuous unrealized loss position for more than 12 months.
Contractual maturities of the Company’s available-for-sale marketable securities held as of March 31, 2026 and December 31, 2025 were as follows (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Due in 1 year or less | $ | 302,737 | $ | 248,174 | |||||||
| Due after 1 year through 5 years | 777,059 | 706,797 | |||||||||
| $ | 1,079,796 | $ | 954,971 |
Fair Value Measurements
The fair value measurements within the fair value hierarchy of the Company’s financial assets as of March 31, 2026 and December 31, 2025 were as follows (in thousands):
| Total Fair Value | Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||||
| Level 1 | Level 2 | ||||||||||||||||||||||
| As of March 31, 2026 | |||||||||||||||||||||||
| Cash Equivalents and Marketable Securities: | |||||||||||||||||||||||
| Money market funds | $ | 155,008 | $ | 155,008 | $ | — | |||||||||||||||||
| Time deposits | 110,997 | — | 110,997 | ||||||||||||||||||||
| Commercial paper | 19,757 | — | 19,757 | ||||||||||||||||||||
| Corporate bonds | 1,027,753 | — | 1,027,753 | ||||||||||||||||||||
| Mutual funds | 28,346 | 28,346 | — | ||||||||||||||||||||
| $ | 1,341,861 | $ | 183,354 | $ | 1,158,507 | ||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||
| Cash Equivalents and Marketable Securities: | |||||||||||||||||||||||
| Money market funds | $ | 409,326 | $ | 409,326 | $ | — | |||||||||||||||||
| Time deposits | 103,038 | — | 103,038 | ||||||||||||||||||||
| Commercial paper | 34,962 | — | 34,962 | ||||||||||||||||||||
| Corporate bonds | 923,936 | — | 923,936 | ||||||||||||||||||||
| Mutual funds | 28,981 | 28,981 | — | ||||||||||||||||||||
| $ | 1,500,243 | $ | 438,307 | $ | 1,061,936 |
As of March 31, 2026 and December 31, 2025, 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).
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.
3. Accounts Receivable
Net accounts receivable consisted of the following as of March 31, 2026 and December 31, 2025 (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Trade accounts receivable | $ | 665,104 | $ | 577,914 | |||||||
| Unbilled accounts receivable | 222,160 | 223,458 | |||||||||
| Gross accounts receivable | 887,264 | 801,372 | |||||||||
| Allowances for current expected credit losses and other reserves | (6,188) | (7,706) | |||||||||
| Accounts receivable, net | $ | 881,076 | $ | 793,666 |
A summary of activity in the accounts receivable allowance for current expected credit losses and other reserves for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
| March 31, 2026 | March 31, 2025 | ||||||||||
| Beginning balance | $ | 7,706 | $ | 3,522 | |||||||
| Charges to income from operations | 2,072 | 3,038 | |||||||||
| Collections from customers previously reserved and other | (3,590) | (1,700) | |||||||||
| Ending balance | $ | 6,188 | $ | 4,860 |
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 March 31, 2026 and December 31, 2025 were as follows (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Deferred costs included in prepaid expenses and other current assets | $ | 72,847 | $ | 69,983 | |||||||
| Deferred costs included in other assets | 86,908 | 92,525 | |||||||||
| Total deferred costs | $ | 159,755 | $ | 162,508 |
Information related to incremental costs to obtain a contract with a customer for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Amortization expense related to deferred costs | $ | 20,731 | $ | 13,789 | |||||||||||||||||||
| Incremental costs capitalized | $ | 18,841 | $ | 14,301 |
Amortization expense related to deferred costs is primarily included in sales and marketing expense in the interim condensed consolidated statements of income.
5. Acquired Intangible Assets and Goodwill
Acquired intangible assets that are subject to amortization consisted of the following as of March 31, 2026 and December 31, 2025 (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
| Completed technologies | $ | 465,832 | $ | (258,982) | $ | 206,850 | $ | 465,832 | $ | (250,436) | $ | 215,396 | |||||||||||||||||||||||
| Customer-related intangible assets | 725,844 | (379,546) | 346,298 | 725,494 | (363,724) | 361,770 | |||||||||||||||||||||||||||||
| Trademarks and trade names | 15,253 | (12,374) | 2,879 | 15,247 | (12,080) | 3,167 | |||||||||||||||||||||||||||||
| Acquired license rights | 44,810 | (11,482) | 33,328 | 44,810 | (10,601) | 34,209 | |||||||||||||||||||||||||||||
| Total | $ | 1,251,739 | $ | (662,384) | $ | 589,355 | $ | 1,251,383 | $ | (636,841) | $ | 614,542 |
Based on the Company’s acquired intangible assets as of March 31, 2026, aggregate expense related to amortization of acquired intangible assets is expected to be $75.0 million for the remainder of 2026, and $85.6 million, $79.0 million,
$74.0 million and $66.7 million for 2027, 2028, 2029 and 2030, respectively.
The changes in the carrying amount of goodwill for the three months ended March 31, 2026 were as follows (in thousands):
| Balance as of January 1, 2026 | $ | 3,206,525 | |||
| Measurement period adjustments related to an acquisition completed in prior year | (18) | ||||
| Foreign currency translation | (3,601) | ||||
| Balance as of March 31, 2026 | $ | 3,202,906 |
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.
6. Debt
Convertible Senior Notes
The Company has three convertible senior notes ("2033 Notes", "2029 Notes" and "2027 Notes") outstanding with a par value totaling $4,140.0 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 | ||||||||||||||||||||||||||||||
| 2033 Notes | May 19, 2025 | May 15, 2033 | (1) | $ | 1,725,000 | 0.250 | % | 0.484 | % | ||||||||||||||||||||||||||
| 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 | % |
(1) Holders of the 2033 Notes have the right to require the Company to repurchase for cash all or a portion of their 2033 Notes on May 15, 2031 if the last reported sale price of the Company’s common stock on the trading day immediately preceding the business day immediately preceding May 15, 2031 is less than the conversion price per share. The repurchase price will be equal to 100% of the principal amount of the 2033 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the optional repurchase date.
Additionally, on May 1, 2025, the Company repaid $1,150.0 million in par value of convertible senior notes that matured (“2025 Notes”). The 2025 Notes were senior unsecured obligations of the Company and bore interest at 0.125%.
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 September 30, 2025 for the 2033 Notes, December 31, 2023 for the 2029 Notes and December 31, 2019 for the 2027 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 for the outstanding Notes as of March 31, 2026 are as follows:
| Notes | Conversion Date | Conversion Rate (1) | Conversion Price per Share (1) | |||||||||||||||||||||||
| 2033 Notes | January 15, 2033 | 10.7513 | $ | 93.01 | ||||||||||||||||||||||
| 2029 Notes | October 15, 2028 | 7.9170 | $ | 126.31 | ||||||||||||||||||||||
| 2027 Notes | May 1, 2027 | 8.6073 | $ | 116.18 |
(1) The conversion rate for the Notes is established as a number of shares of the Company's common 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 March 31, 2026 and December 31, 2025 (in thousands):
| 2033 Notes | 2029 Notes | 2027 Notes | Total | ||||||||||||||||||||
| As of March 31, 2026 | |||||||||||||||||||||||
| Principal | $ | 1,725,000 | $ | 1,265,000 | $ | 1,150,000 | $ | 4,140,000 | |||||||||||||||
| Less: issuance costs, net of amortization | (20,408) | (9,388) | (2,597) | (32,393) | |||||||||||||||||||
| Net carrying amount | $ | 1,704,592 | $ | 1,255,612 | $ | 1,147,403 | $ | 4,107,607 | |||||||||||||||
| Estimated fair value (1) | $ | 2,383,398 | $ | 1,444,630 | $ | 1,330,217 | $ | 5,158,245 | |||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||
| Principal | $ | 1,725,000 | $ | 1,265,000 | $ | 1,150,000 | $ | 4,140,000 | |||||||||||||||
| Less: issuance costs, net of amortization | (21,390) | (10,187) | (3,068) | (34,645) | |||||||||||||||||||
| Net carrying amount | $ | 1,703,610 | $ | 1,254,813 | $ | 1,146,932 | $ | 4,105,355 | |||||||||||||||
| Estimated fair value (1) | $ | 1,918,062 | $ | 1,254,981 | $ | 1,158,407 | $ | 4,331,450 |
(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):
| 2033 Notes | 2029 Notes | 2027 Notes | |||||||||||||||||||||
| Note hedge transaction costs | $ | 605,820 | $ | 236,555 | $ | 312,225 | |||||||||||||||||
| Shares covered by note hedge transactions | 18,546 | 10,015 | 9,898 | ||||||||||||||||||||
| Shares related to warrant transactions | 18,546 | 10,015 | 9,898 | ||||||||||||||||||||
| Strike price per share related to warrant transactions | $ | 155.02 | $ | 180.44 | $ | 178.74 | |||||||||||||||||
| Aggregate proceeds from sale of warrants | $ | 330,855 | $ | 90,195 | $ | 185,150 |
Revolving Credit Facilities
In January 2025, the Company entered into a $150.0 million uncommitted revolving credit agreement ("2025 Credit Agreement"). Any outstanding borrowings are secured by collateral, consisting primarily of available-for-sale marketable securities. Borrowings under the 2025 Credit Agreement may be used to finance working capital needs and for general corporate purposes. The 2025 Credit Agreement does not expire but is cancellable at any time and any borrowings can be due on demand. Borrowings under the 2025 Credit Agreement will bear a specified interest rate, based on the Secured Overnight Financing Rate, and interest period at the time of the confirmed borrowing. There were no outstanding borrowings under the 2025 Credit Agreement as of March 31, 2026.
In November 2022, the Company entered into a revolving credit agreement (“2022 Credit Agreement”), which was amended in May 2025 to increase the aggregate revolving commitments to $1.0 billion. Borrowings under the 2022 Credit Agreement may be used to finance working capital needs and for general corporate purposes. The 2022 Credit Agreement expires on November 22, 2028, and any amounts outstanding thereunder will become due and payable, subject to up to a one-year extension 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, 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 March 31, 2026, 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 March 31, 2026.
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 months ended March 31, 2026 and 2025 was as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Amortization of debt issuance costs | $ | 2,643 | $ | 1,959 | |||||||||||||||||||
| Coupon interest payable on 2033 Notes | 1,078 | — | |||||||||||||||||||||
| Coupon interest payable on 2029 Notes | 3,558 | 3,558 | |||||||||||||||||||||
| Coupon interest payable on 2027 Notes | 1,078 | 1,078 | |||||||||||||||||||||
| Coupon interest payable on 2025 Notes | — | 359 | |||||||||||||||||||||
| Interest payable and commitment fees under the credit agreements | 395 | 150 | |||||||||||||||||||||
| Capitalization of interest expense | (495) | (354) | |||||||||||||||||||||
| Total interest expense | $ | 8,257 | $ | 6,750 |
7. Restructuring
During the fourth quarter of 2025, management committed to an action to restructure certain parts of the Company to align investments and simplify organizational structure to long-term growth priorities (“Q4 2025 Action”). As a result, certain headcount reductions were necessary. Additionally, the Company planned for the end of life of certain solutions which resulted in impairments to completed technologies and customer-related acquired intangible assets, as well as capitalized internal-use software. The Company does not expect to incur material additional charges related to this action.
The Company also recognizes restructuring charges related to completed acquisitions for severance and related expenses paid to redundant employees, fees paid to terminate redundant contracts and impairments of redundant long-lived assets, primarily duplicative facility-related assets, acquired intangible assets and capitalized internal-use software. The Company does not expect to incur material additional charges related to past acquisitions.
The Company's restructuring charges during the three months ended March 31, 2026 and 2025 were as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Q4 2025 action | $ | 243 | $ | — | |||||||||||||||||||
| Acquisitions related and other | (60) | 361 | |||||||||||||||||||||
| Total restructuring charge | $ | 183 | $ | 361 |
The liability for restructuring charges for employee severance and related expenses is substantially included in other current liabilities on the interim condensed consolidated balance sheets. The changes in the liability for the three months ended March 31, 2026 were as follows (in thousands):
| Q4 2025 Action | Acquisitions Related and Other | Total | |||||||||||||||
| Balance as of January 1, 2026 | $ | 20,750 | $ | 1,646 | $ | 22,396 | |||||||||||
| Costs incurred | 317 | (94) | 223 | ||||||||||||||
| Cash disbursements | (9,352) | (495) | (9,847) | ||||||||||||||
| Translation adjustments and other | (41) | (18) | (59) | ||||||||||||||
| Balance as of March 31, 2026 | $ | 11,674 | $ | 1,039 | $ | 12,713 |
8. Stockholders’ Equity
Share Repurchase Program
In May 2024, the board of directors authorized a $2.0 billion share repurchase program, effective May 2024 through June 2027, of which $974.6 million remains available for repurchase as of March 31, 2026. The Company's goals for the share repurchase program 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 months ended March 31, 2026, the Company repurchased 2.0 million shares of its common stock for $205.9 million.
Stock-Based Compensation
Components of total stock-based compensation included in the Company’s interim condensed consolidated statements of income for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Cost of revenue | $ | 21,677 | $ | 18,928 | |||||||||||||||||||
| Research and development | 48,857 | 42,268 | |||||||||||||||||||||
| Sales and marketing | 24,981 | 22,440 | |||||||||||||||||||||
| General and administrative | 33,166 | 28,342 | |||||||||||||||||||||
| Total stock-based compensation | 128,681 | 111,978 | |||||||||||||||||||||
| Provision for income taxes | (35,221) | (14,797) | |||||||||||||||||||||
| Total stock-based compensation, net of income taxes | $ | 93,460 | $ | 97,181 |
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 $14.9 million and $12.2 million for the three months ended March 31, 2026 and 2025, respectively, before taxes.
In 2026, the Company introduced a new benefit allowing retirement-eligible employees to qualify for continued vesting of all unvested equity awards post-employment, subject to the satisfaction of specified conditions. This reduced the service periods which resulted in an immaterial increase in stock-based compensation expense for the three months ended March 31, 2026.
9. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss, net of tax, which is reported as a component of stockholders' equity, for the three months ended March 31, 2026 were as follows (in thousands):
| Foreign Currency Translation | Net Unrealized Gains (Losses) on Investments | Total | |||||||||||||||
| Balance as of January 1, 2026 | $ | (97,536) | $ | 2,780 | $ | (94,756) | |||||||||||
| Other comprehensive loss | (17,615) | (4,253) | (21,868) | ||||||||||||||
| Balance as of March 31, 2026 | $ | (115,151) | $ | (1,473) | $ | (116,624) |
There were no amounts reclassified from accumulated other comprehensive loss to net income for the three months ended March 31, 2026.
10. 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 months ended March 31, 2026 and 2025 was as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| U.S. | $ | 543,147 | $ | 528,739 | |||||||||||||||||||
| International | 530,463 | 486,400 | |||||||||||||||||||||
| Total revenue | $ | 1,073,610 | $ | 1,015,139 |
Beginning with the first quarter of 2026, the Company began reporting its revenue in three solution categories: security, delivery and other cloud applications and cloud infrastructure services. Recognizing cloud infrastructure services as a primary growth area and a significant focus of investment in the Company's cloud computing portfolio, the Company began reporting its revenue separately. Prior period amounts reported in the table below for revenue by solution category have been recast to reflect this change.
Security includes solutions that are designed to protect business online by keeping infrastructure, websites, applications, APIs, networks and users safe. Delivery and other cloud applications is comprised of delivery solutions that are designed to enable business online, including media delivery and web and mobile performance, as well as other cloud applications. Cloud infrastructure services includes compute and storage solutions, EdgeWorkers product and the compute partner solutions running on the Company's platform. Revenue by solution category included in the Company’s interim condensed consolidated statements of income for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Security | $ | 589,790 | $ | 530,695 | |||||||||||||||||||
| Delivery and other cloud applications | 389,208 | 416,843 | |||||||||||||||||||||
| Cloud infrastructure services | 94,612 | 67,601 | |||||||||||||||||||||
| Total revenue | $ | 1,073,610 | $ | 1,015,139 |
Most of the Company's solutions represent stand-ready 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 three months ended March 31, 2026 and 2025, the Company recognized $79.3 million and $69.3 million of revenue that was included in deferred revenue as of December 31, 2025 and 2024, respectively.
As of March 31, 2026, the aggregate amount of remaining performance obligations from contracts with customers was $5.5 billion. The Company expects to recognize approximately 50% of its remaining performance obligations as revenue over the next 12 months and approximately 40% 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 three months ended March 31, 2026 and 2025, related to performance obligations satisfied in previous periods was not material.
11. 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 12.9% and 29.0% for the three months ended March 31, 2026 and 2025, respectively. The lower effective tax rate for the three months ended March 31, 2026 was primarily due to an increase in the excess tax benefit related to stock-based compensation, an increase in foreign income taxed at lower rates and a decrease in net controlled foreign corporation tested income (formerly global intangible low-taxed income). These amounts are partially offset by an increase in certain tax reserves.
For the three months ended March 31, 2026, the effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates. These amounts were partially offset by non-deductible transfer pricing and non-deductible stock-based compensation.
For the three months ended March 31, 2025, the effective income tax rate was higher than the federal statutory tax rate due to a shortfall in the tax benefit related to stock-based compensation, non-deductible stock-based compensation and non-deductible transfer pricing. These amounts were partially offset by the benefit of U.S. federal, state and foreign research and development credits and foreign income taxed at lower rates.
In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2026. The OBBBA did not have a material impact on the Company's condensed consolidated financial statements.
12. 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 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.
The components used in the computation of basic and diluted net income per share for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except per share data):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 106,319 | $ | 123,171 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Shares used for basic net income per share | 145,270 | 149,052 | |||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Stock awards | 3,414 | 2,012 | |||||||||||||||||||||
| Convertible senior notes | 1,338 | — | |||||||||||||||||||||
| Warrants related to issuance of convertible senior notes | — | — | |||||||||||||||||||||
| Shares used for diluted net income per share | 150,022 | 151,064 | |||||||||||||||||||||
| Basic net income per share | $ | 0.73 | $ | 0.83 | |||||||||||||||||||
| Diluted net income per share | $ | 0.71 | $ | 0.82 |
For the three months ended March 31, 2026 and 2025, 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 months ended March 31, 2026 and 2025 were as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Service-based stock awards | 5,873 | 7,743 | |||||||||||||||||||||
| Market- and performance-based stock awards | 1,800 | 1,583 | |||||||||||||||||||||
| Warrants related to issuance of convertible senior notes | 38,459 | 32,006 | |||||||||||||||||||||
| Total shares excluded from computation | 46,132 | 41,332 |
13. Segment Information
The Company’s chief operating decision-maker ("CODM") is the chief executive officer and the executive management team. As of March 31, 2026, 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. The CODM assesses performance and makes decisions on optimizing the allocation of resources across functions and strategic investments using consolidated net income. Segment assets represent total assets as reported on the interim condensed consolidated balance sheets.
Information regarding the Company's one operating segment for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Revenue | $ | 1,073,610 | $ | 1,015,139 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Co-location costs | 98,870 | 83,761 | |||||||||||||||||||||
| Bandwidth fees | 52,809 | 47,823 | |||||||||||||||||||||
| Network build-out and supporting services | 67,383 | 54,074 | |||||||||||||||||||||
| Payroll and related costs | 427,324 | 380,514 | |||||||||||||||||||||
| Capitalized salaries and related costs | (90,022) | (80,771) | |||||||||||||||||||||
| Facilities-related costs | 20,775 | 21,869 | |||||||||||||||||||||
| Software and related services | 19,968 | 20,118 | |||||||||||||||||||||
| Other segment items (1) | 50,153 | 46,712 | |||||||||||||||||||||
| Depreciation and amortization | 183,751 | 174,022 | |||||||||||||||||||||
| Stock-based compensation | 128,681 | 111,978 | |||||||||||||||||||||
| Restructuring charge | 183 | 361 | |||||||||||||||||||||
| Acquisition-related (benefit) costs | (759) | 95 | |||||||||||||||||||||
| Interest and marketable securities income, net | (17,547) | (19,530) | |||||||||||||||||||||
| Interest expense | 8,257 | 6,750 | |||||||||||||||||||||
| Other expense (income), net | 1,786 | (6,020) | |||||||||||||||||||||
| Provision for income taxes | 15,679 | 50,212 | |||||||||||||||||||||
| Net income | $ | 106,319 | $ | 123,171 |
(1) Other segment items includes marketing programs and related costs, third-party professional service fees, non-income related tax expense and other expenses.
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