AKAMAI TECHNOLOGIES INCAKAM
AKAMAI TECHNOLOGIES INC Stock Compensation Disclosure
Stock-Based Compensation
Equity Plans
In May 2013, the Company's stockholders approved the Akamai Technologies, Inc. 2013 Stock Incentive Plan, which was amended with Company shareholder approval in each of 2015, 2017, 2019, 2021, 2022, 2023, 2024 and 2025 (as amended and restated, the "2013 Plan"). The 2013 Plan allows for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards for up to 46.8 million shares of common stock, subject to certain adjustments, to employees, officers, directors, consultants and advisers of the Company. As of December 31, 2025, the Company had reserved 9.3 million shares of common stock available for future issuance of equity awards under the 2013 Plan.
The Company has assumed certain stock incentive plans and the outstanding stock incentives of companies that it has acquired (“Assumed Plans”). Stock awards outstanding as of the date of acquisition under the Assumed Plans were exchanged for the Company’s stock awards and adjusted to reflect the appropriate conversion ratio as specified by the applicable acquisition agreement, but are otherwise administered in accordance with the terms of the Assumed Plans. Stock awards under the Assumed Plans generally vest over three years to four years, and outstanding stock options under the Assumed Plans expire ten years from the date of grant.
Additionally, the Company has the 1999 ESPP that permits eligible employees to purchase up to 1.5 million shares each June 1 and December 1, provided that the aggregate number of shares issued shall not exceed 20.0 million. The 1999 ESPP allows participants to purchase shares of common stock at a 15% discount from the fair market value of the stock as determined on specific dates at six-month intervals. As of December 31, 2025, the Company had reserved 0.6 million shares of common stock available for future purchases under the 1999 ESPP.
Stock-Based Compensation Expense
Components of total stock-based compensation expense included in the Company’s consolidated statements of income for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of revenue | $ | 77,176 | $ | 61,177 | $ | 43,802 | |||||||||||
| Research and development | 169,404 | 152,114 | 123,896 | ||||||||||||||
| Sales and marketing | 90,198 | 77,593 | 66,453 | ||||||||||||||
| General and administrative | 122,624 | 102,494 | 94,316 | ||||||||||||||
| Total stock-based compensation | 459,402 | 393,378 | 328,467 | ||||||||||||||
| Provision for income taxes | (80,946) | (96,607) | (59,359) | ||||||||||||||
| Total stock-based compensation, net of taxes | $ | 378,456 | $ | 296,771 | $ | 269,108 | |||||||||||
In addition to the amounts of stock-based compensation reported in the table above, the Company’s consolidated statements of income for the years ended December 31, 2025, 2024 and 2023 also include stock-based compensation reflected as a component of amortization primarily consisting of capitalized internal-use software; the additional stock-based compensation was $50.4 million, $42.5 million and $32.5 million, respectively, before taxes.
As of December 31, 2025, total pre-tax unrecognized compensation cost for stock awards was $497.6 million. The expense is expected to be recognized through 2029 over a weighted average period of 1.5 years.
Employee Stock Purchase Plan
The following summarizes the activity under the 1999 ESPP (in thousands, except per share amounts):
| 2025 | 2024 | 2023 | |||||||||||||||
| Shares issued | 966 | 788 | 797 | ||||||||||||||
Weighted average purchase price per share | $ | 64.54 | $ | 77.60 | $ | 78.29 | |||||||||||
Issuance of common stock | $ | 62,322 | $ | 61,131 | $ | 62,365 | |||||||||||
As of December 31, 2025, $7.0 million had been withheld from employees for future purchases under the 1999 ESPP.
The Company uses the Black-Scholes option pricing model to determine the fair value of the stock awards issued under the Company’s 1999 ESPP. This model requires the input of subjective assumptions, including expected stock price volatility and the estimated term of each award. The estimated fair value of the stock awards issued under the Company's 1999 ESPP, less expected forfeitures, is amortized over the stock awards' six-month contribution period on a straight-line basis. Expected volatilities are based on the Company’s historical stock price volatility. The risk-free interest rate for periods commensurate with the expected term of the stock award is based on the U.S. Treasury yield rate in effect at the time of grant. The expected dividend yield is zero, as the Company currently does not pay a dividend and does not anticipate doing so in the future.
The grant-date fair values of awards granted under the 1999 ESPP during the years ended December 31, 2025, 2024 and 2023 were estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected term (in years) | 0.5 | 0.5 | 0.5 | ||||||||||||||
| Risk-free interest rate | 4.3 | % | 5.2 | % | 5.2 | % | |||||||||||
| Expected volatility | 38.3 | % | 24.4 | % | 29.1 | % | |||||||||||
| Dividend yield | — | % | — | % | — | % | |||||||||||
For the years ended December 31, 2025, 2024 and 2023, the weighted average fair value of awards granted under the 1999 ESPP was $22.00 per share, $22.63 per share and $23.12 per share, respectively.
Restricted Stock Units, Restricted Stock and Deferred Stock Units
Restricted stock units ("RSUs") represent the right to receive one share of the Company’s common stock upon vesting, while restricted stock is a grant of one share of the Company's common stock subject to vesting conditions. These awards are granted at the discretion of the board of directors, a committee thereof or, subject to defined limitations, the Chief Executive Officer of the Company, acting as a committee of one director, to whom such authority has been delegated. The Company has issued service-based RSUs and restricted stock that vest based on the passage of time assuming continued service with the Company, market-based RSUs that vest based upon total shareholder return ("TSR") measured against the benchmark TSR of a peer group and performance-based RSUs that vest only upon the achievement of defined internal performance metrics tied primarily to defined financial metrics.
In addition to granting RSUs and restricted stock to its employees, the Company has granted deferred stock units ("DSUs") to non-employee members of its board of directors. These DSUs are granted at the discretion of the board of directors, subject to defined limitations. Each DSU represents the right to receive one share of the Company’s common stock upon vesting. The holder may elect to defer receipt of the vested shares of stock represented by the DSU for a period of at least one year but not more than ten years from the grant date. DSUs vest 100% on the first anniversary of the grant date. If a director has completed one year of service, vesting of 100% of the DSUs held by such director will accelerate at the time of his or her departure from the board.
The RSUs, restricted stock and DSUs granted by the Company during the year ended December 31, 2025 were as follows (in thousands):
| December 31, 2025 | |||||
Service-based (1) | 6,499 | ||||
Market-based | 249 | ||||
Performance-based | 135 | ||||
| Total | 6,883 | ||||
(1) Includes DSU grants of 36,948 shares
For service-based RSUs, restricted stock and DSUs, the fair value is calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is being recognized over the vesting period. The majority of these awards vest over a - or four-year period following the grant date, with some programs vesting over less time.
For market-based RSUs, the Company uses the Monte Carlo simulation model to determine the fair value. This model requires the input of assumptions, including the estimated term of each award, the risk-free interest rate, historical stock price volatility of the Company's shares and historical stock price volatility of peer-company shares. The grant-date fair values of the TSR-based RSUs granted during the years ended December 31, 2025, 2024 and 2023 were estimated using a Monte Carlo simulation model with the following assumptions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected term (in years) | 3.0 | 3.0 | 3.0 | ||||||||||||||
| Risk-free interest rate | 3.9 | % | 4.3 | % | 4.5 | % | |||||||||||
| Akamai historical share price volatility | 31.5 | % | 25.6 | % | 28.8 | % | |||||||||||
| Average volatility of peer-company share price | 30.2 | % | 30.6 | % | 33.6 | % | |||||||||||
For performance-based RSUs, management measures compensation expense based upon a review of the Company’s expected achievement against specified financial performance targets. Such compensation cost is being recognized using a graded-vesting method for each series of grants of performance-based RSUs, to the extent management has deemed that such awards are probable of vesting based upon the expected achievement against the specified targets. Each reporting period, management reviews the Company’s expected performance and adjusts the compensation cost, if needed, at such time.
RSU, restricted stock and DSU activity for the year ended December 31, 2025 was as follows:
| Units (in thousands) | Weighted Average Grant Date Fair Value | ||||||||||
| Outstanding at January 1, 2025 | 7,710 | $ | 100.04 | ||||||||
| Granted | 6,883 | 81.43 | |||||||||
Vested (1) | (4,932) | 98.22 | |||||||||
| Forfeited | (691) | 99.04 | |||||||||
| Outstanding at December 31, 2025 | 8,970 | $ | 86.81 | ||||||||
(1) Includes DSUs of 20,900 shares which have vested and been distributed. Excludes DSUs which have vested, but have not yet been distributed.
The pre-tax intrinsic value and fair value of RSUs, restricted stock and DSUs were as follows (in thousands, except per share amounts):
| 2025 | 2024 | 2023 | |||||||||||||||
Pre-tax intrinsic value of awards vested | $ | 479,587 | $ | 429,491 | $ | 254,686 | |||||||||||
Fair value of awards vested | $ | 484,411 | $ | 433,026 | $ | 259,919 | |||||||||||
Weighted average fair value of awards granted, per share (1) | $ | 81.43 | $ | 108.09 | $ | 74.89 | |||||||||||
(1) The grant-date fair value is calculated based upon the Company’s closing stock price on the date of grant.
As of December 31, 2025, outstanding and unvested RSUs, restricted stock and DSUs had an aggregate intrinsic value of $782.6 million and a weighted average remaining vesting period of approximately 1.5 years. These awards are expected to vest on various dates through 2029.
As of December 31, 2025 and 2024, the Company had liability-classified awards outstanding of $18.0 million and $10.0 million, respectively. The liability-classified awards outstanding at December 31, 2025 are expected to vest and be re-classified to equity in 2026. The liability-classified awards outstanding at December 31, 2024 vested and were re-classified to equity in 2025.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.