Akamai: Underappreciated Shift to Security and Compute Drives Value

Steven Gorelik of Firebird Management presented his in-depth investment thesis on Akamai Technologies (US: AKAM) at Best Ideas 2026.

Thesis summary:

Akamai is a “growth at a reasonable price” opportunity navigating a pivotal business transformation. The core thesis rests on the company’s evolution from a legacy Content Delivery Network (CDN) provider into a diversified enterprise security and cloud compute platform. While the traditional delivery business—which historically dominated revenues—has faced secular headwinds from customer DIY efforts and competition, Akamai has successfully reinvested cash flows into higher-growth segments. The Security and Compute divisions now generate approximately two-thirds of total revenue and are growing at double-digit rates, effectively offsetting the decline in the legacy delivery segment. This shift marks a critical inflection point where overall revenue growth is expected to re-accelerate from mid-single digits to high single or double digits.

Akamai’s competitive advantage leverages its massive distributed edge network, comprising over 4,000 locations and relationships with 1,000+ ISPs globally. This infrastructure provides a unique moat for its Security business, which has grown to over $2 billion in revenue through acquisitions and cross-selling to an existing base of large enterprise clients. Furthermore, the company’s entry into the Compute market, catalyzed by the acquisition of Linode, capitalizes on the need for distributed, low-latency processing. This is particularly relevant for emerging workloads such as AI inference, where Akamai’s edge capabilities offer distinct performance and cost benefits compared to centralized hyperscalers. The company’s deep relationships with CTOs and CIOs facilitate the cross-selling of these new services to a sticky enterprise customer base.

From a capital allocation perspective, management has demonstrated discipline by balancing M&A with shareholder returns. Since 2014, Akamai has generated $6.6 billion in FCF, deploying $3.5 billion toward strategic acquisitions to build out its security and compute capabilities, while returning $5 billion to shareholders via buybacks. This has reduced the share count by 16% over the last decade, despite regular equity-based compensation. Consequently, FCF per share has compounded at 9% annually. The transition to higher-margin Security and Compute segments is expected to further support profitability, with these divisions boasting EBITDA margins comparable to or higher than the legacy business.

Valuation remains compelling relative to peers and historical averages. The shares recently traded at a free cash flow yield of approximately 5.2%, representing a discount to the company’s historical trading range. Steve noted that pure-play competitors in the security and edge compute spaces typically command significantly higher multiples. As the revenue mix continues to shift toward these faster-growing segments, Akamai is positioned for potential multiple expansion. With FCF expected to grow by 25% over the next three years—and potentially faster on a per-share basis due to buybacks—the current valuation offers an attractive entry point for a business with accelerating fundamentals.

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About the instructor:

In addition to being Head of Research at Firebird Management, Steve Gorelik is the Lead Fund Manager of Firebird U.S. Value Fund as well as portfolio manager of Firebird’s Eastern Europe and Russia Funds. He joined Firebird in 2005 from Columbia University Graduate School of Business while completing education from a highly selective Value Investing Program. Prior to business school, Steve was an operational strategy consultant at Deloitte working with companies in various industries including banking, healthcare, and retail. He holds a BS degree from Carnegie Mellon University as well as a CFA (chartered financial analyst) charter and a membership in Beta Gamma Sigma honor society. Steve serves on the number of supervisory boards of listed and private companies in the Baltics. He speaks Russian, English and his native Belarussian.