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UNITED STATES

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS

Commission File number 0-27275

Registrant’s telephone number, including area code:     (617) 444-3000

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value

      Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was approximately $500,105,750 based on the last reported sale price of the common stock on the Nasdaq National Market on June 30, 2003.

      The number of shares outstanding of the registrant’s common stock as of March 4, 2004: 122,633,463 shares.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relative to the registrant’s 2004 Annual Meeting of Stockholders to be held on May 25, 2004 are incorporated by reference into Items 10, 11, 12 and 13 of Part III of this annual report on Form 10-K.

AKAMAI TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2003

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PART I

      We believe that this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management based on information currently available to our management. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “should,” “likely” or similar expressions, indicate a forward-looking statement. Forward-looking statements involve risks, uncertainties and assumptions. Certain of the information contained in this annual report on Form 10-K consists of forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, those set forth under the heading “Factors Affecting Future Operating Results.”

Overview

      Akamai® is the global leader in distributed computing solutions and services, offering solutions designed to make the Internet predictable, scalable, and secure for customers seeking to conduct business over the Internet. The Akamai on demand platform enables customers to easily extend their Internet-facing operations without the cost of building out infrastructure. Akamai serves hundreds of today’s most successful enterprises and government agencies around the globe.

      We began selling our content delivery services in 1999 under the trade name FreeFlow®. Later that year, we added streaming media delivery services to our portfolio and introduced traffic management services that allow customers to monitor traffic patterns on their websites both on a continual basis and for specific events. In 2000, we began offering a software solution that identifies the geographic location and network origin from which end users access our customers’ websites, enabling content providers to customize content without compromising user privacy. In 2001, we commenced commercial sales of our EdgeSuite® offering, a suite of services that allows for high-performance and dynamic delivery of web content. In 2003, we began offering on a commercial basis our EdgeComputing^SM service, which allows for delivery of applications, such as store/dealer locators, promotional contests, search functionalities and user registration, over our network.

      Our services are easy to implement and are highly scalable. Historically, our FreeFlow customers selected bandwidth-intensive content, typically media-rich non-text objects such as photographs, banner advertisements and graphics, for delivery over our network. With the introduction of our EdgeSuite service, customers may dynamically deliver a broader range of content and applications — such as customer relationship management tools, pay-per-view video, software updates and entire websites — over our platform. The technology underlying our EdgeSuite service enables us to locate applications and content geographically closer to end-users. Customers of our EdgeComputing service are able to deploy applications that scale on demand and perform more reliably while reducing the demands on their own infrastructures. Using the proprietary algorithms we have developed that continuously monitor and load-balance our network in real-time, we determine the most efficient methods and routes available for delivering the applications and content to our customers’ end users.

      We were incorporated in Delaware in 1998 and have our corporate headquarters at 8 Cambridge Center, Cambridge, Massachusetts, 02142. Our Internet website address is www.akamai.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this annual report on Form 10-K.

      We are registered as a reporting company under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Accordingly, we file or furnish with the Securities and Exchange Commission, or the Commission, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as required by the Exchange Act and the rules and regulations of the Commission. We refer to these reports as Periodic Reports. The public may read and copy any Periodic Reports or other materials we file with the Commission at the Commission’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling

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      We make available, free of charge, on or through our Internet website our Periodic Reports and amendments to those Periodic Reports as soon as reasonably practicable after we electronically file them with the Commission.

Industry Background

      The end of the 20th century witnessed the explosive growth of the Internet and the emergence of e-business. E-business is the use of the Internet to streamline processes, improve productivity and increase efficiencies, enabling enterprises to communicate more effectively with customers, vendors and partners, connect back-end data systems and transact commerce in a secure manner. The Internet, however, is a complex system of networks that was not originally created to accommodate the volume or sophistication of today’s business communication demands. As a result, information is frequently delayed or lost on its way through the Internet as a result of many potential bottlenecks, including:

	•	bandwidth constraints between an end user and the end user’s network provider, such as an Internet Service Provider, or ISP, cable provider or digital subscriber line provider;
	•	Internet traffic exceeding the capacity of routing equipment;
	•	inefficient or nonfunctioning peering points, or points of connection, between ISPs; and
	•	traffic congestion at data centers.

      Driven by competition, globalization and cost-containment strategies, e-business is becoming a critical component for corporate enterprises. These trends require enterprises to rely on an agile e-business infrastructure to meet their real-time strategic and business objectives. We expect enterprises to favor a more decentralized information technology architecture to support their goals of disaster recovery, high availability, denial-of-service mitigation and back up. We also anticipate that enterprises will continue to expand their use of technologies that allow an enterprise to conduct business over the Internet, which are referred to as Internet Protocol, or IP, technologies.

      In recent years, government agencies have begun to migrate more and more of their processes from in-person, mail, or phone services to Internet-based applications. As a result, it has become essential to many public sector bodies that their websites be more reliable and that they deliver their content and applications more efficiently to their constituents. At the same time, budget cuts preclude development of an expensive self-managed infrastructure. We expect that an increasing number of public sector entities will look to third party content and application delivery providers like Akamai to solve these challenges.

Our Solutions

      Akamai provides proven services and solutions for predictable, scalable and secure e-business transactions, without the cost of building out infrastructure. Built on the globally distributed Akamai EdgePlatform, Akamai solutions extend Web operations anywhere, anytime, and improve insight and management of applications and content through our EdgeControl^SM technology.

      These services and solutions enable customers to reduce the complexity and cost of deploying and operating a uniform IP infrastructure while ensuring superior performance, reliability, scalability and manageability. Forming the core of these services are our EdgeSuite and EdgeComputing offerings, suites of services that allows enterprises to maximize performance and minimize cost while distributing their Internet-related content and applications using IP technology.

      Akamai also offers a set of solutions aimed at solving customers’ business problems, including online commerce, Web site security, e-business continuity and optimized extranets. These solutions combine various

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      By moving electronic content and applications closer to our customers’ end users, our EdgeSuite service allows enterprises to improve the end-user experience, boost reliability and scalability and reduce the cost of their e-business infrastructure. We believe that our EdgeSuite offering is the only service available in the industry capable of providing the benefits of distributed performance to an enterprise’s entire website and all aspects of its applications. Our EdgeSuite service reduces the amount of IP infrastructure that our customers must implement to maintain a global Internet presence. While, site owners maintain a control copy of their applications and content, our EdgeSuite service provides global delivery, load balancing and storage of these applications and content, enabling businesses to focus valuable resources on strategic matters, rather than tactical infrastructure issues.

      Customers of our EdgeSuite service have access to the following service features:

	•	Secure Content

Enterprises are increasingly aware that having the ability to transmit content securely over the Internet is a crucial component of their e-business program. Our services offer support for the distribution of secure Internet-related content. Using Secure Sockets Layer, or SSL, transport, our EdgeSuite offering ensures that content is distributed privately and reliably between two communicating applications.

	•	Tiered Distribution

As their websites and interactions become more complex, enterprises are seeking tools to manage their Internet presence. Tiered distribution is a hierarchical content distribution method that we use on behalf of participating customers. With this approach, we make available a set of well-connected “core” server regions to store given content and, thus, to alleviate the load on the customer’s origin servers. Akamai’s edge servers can obtain content from these core server regions in lieu of going to the customer’s origin servers. As a result, we are able to efficiently distribute our customers’ content so that our customers can significantly reduce the load on their IP infrastructure and protect their online business from unexpected spikes in demand.

	•	Site Fail Over

	It is essential that e-businesses maintain constant availability of their websites. Our EdgeSuite service guarantees delivery of default content in the event that the primary, or source, version of the website of an enterprise customer becomes unavailable. Our EdgeSuite offering’s default content capabilities provide a solution for:

	•	Site mirroring — we provide an economical way to mirror a website without the expense of investing in additional data centers to achieve redundancy.
	•	E-business continuity — we ensure content availability if an unforeseen event causes a customer’s website to crash.
	•	Site maintenance — we deliver fail-over service so that a website remains available to end users during updates and maintenance.

	•	Net Storage

For an enterprise to most effectively utilize the Internet, it must have available efficient content storage solutions from which to access content for delivery to site visitors. Our EdgeSuite service provides a complete solution for digital storage needs for all content types. Our EdgeSuite Net Storage feature uses multiple terabytes of storage capacity, geographical replication, a scalable architecture and proprietary mapping and routing technology to ensure that content is consistently available.

	•	Global Traffic Management

	Our EdgeSuite service substantially reduces the amount of Internet infrastructure required to maintain a global Internet presence by providing geographically distributed IP infrastructures that reduce

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reliance on an origin site for presentation and application processing and enable site owners to maintain only a source copy of the website. Enterprises with geographically distributed IP infrastructures can use EdgeSuite Global Traffic Management to improve the availability, responsiveness and reliability of a multi-location website. When we need to access a customer’s origin site that has been mirrored elsewhere, we rely on our Global Traffic Management feature to choose the optimal mirrored site. Global Traffic Management frees enterprises from managing complex hardware and allows them to concentrate on their core business. Global Traffic Management reduces the need for enterprises to purchase, maintain or house hardware that can rapidly become obsolete and provides continuous monitoring and support from our Network Operations Command Center.

	•	Content Targeting

Content targeting allows our customers to customize content by accurately identifying the visiting user’s geographic location, connection speed, device type or other specified information so that content can be targeted for each visitor in real time and be delivered from our servers located in networks throughout the Internet. Content targeting enables content providers to deliver localized content, customized store-fronts, targeted advertising and adaptive marketing. We believe that these site attributes encourage individuals to visit sites with these features more frequently and for longer periods of time.

	•	Digitized Downloads

Digitized downloads consist of software applications and documents that may be downloaded onto the computers of permitted recipients. Our EdgeSuite service provides a solution for digital file distribution that offers our customers the ability to leverage the Internet as a distribution channel, resulting in expanded customer reach, significant cost efficiencies and time-to-market advantage. The unique, globally distributed network architecture on which the Akamai platform is based enhances the security and reliability of downloads while reducing infrastructure and bandwidth requirements at the origin site.

	•	Business Intelligence

The Akamai EdgeControl provides detailed real-time and historical information about site visitors, their activities while visiting a customer’s site. This can help our customers understand the effectiveness of a website’s content in meeting their goals. It also provides IP infrastructure information with details on website performance, site visitors’ access points, traffic patterns and automated delivery of logs containing information about website traffic and usage in industry-standard formats. Companies use Business Intelligence’s comprehensive tools to evaluate their strategic investments in website functionality.

	•	Streaming Services

Our streaming services provide for the delivery of streaming audio and video content to Internet users. We offer streaming services in all major formats. We principally focus on enterprise streaming applications such as video broadcasting of large events over IP networks and video archives of corporate events or public news events. We believe that we have demonstrated superior streaming network performance and quality, particularly for broadband users.

	•	Edge Side Includes and Dynamic Content Assembly

Edge Side Includes (ESI) accelerates dynamic web-based applications by identifying cacheable and non-cacheable website page components that can be aggregated, assembled and delivered at the network edge. EdgeSuite Dynamic Content Assembly gives enterprises the ability to deliver rich, dynamically-rendered pages without any performance penalty. EdgeSuite Dynamic Content Assembly allows companies to assemble and customize website pages at an optimal location within the Akamai’s global network of servers. Customized content is delivered quickly and reliably to each user without forcing interaction with a centralized application server.

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      Enterprises can position themselves to grow revenue and market share, compete more effectively and reduce business costs by enabling World Wide Web applications that improve promotion and sales, customer service, and vendor and partner management. However, most enterprise IT infrastructures are not equipped to handle these applications, which can include store/ dealer locators, promotional contests, search functionality, user registration, product/ pricing configurators and other key tools. Akamai EdgeComputing enables enterprises to deliver Java (J2EE) Web applications that scale on demand and perform faster and more reliably worldwide than they could relying on their internal IT infrastructures. At the same time, we help them reduce the demands on their own IT infrastructures and simplify their support requirements.

      EdgeComputing allows enterprises to extend more of their applications into the network, closer to end users, including customers, partners, suppliers, and employees. By adding application server capabilities and support for application and development frameworks, such as Java (J2EE) and Microsoft .NET, we are striving to become a pervasive, distributed, and standards-based high performance deployment platform for enterprise applications, Internet-based services and website content of all kinds.

      In May 2003, we launched Akamai EdgeComputing^SM Powered by IBM WebSphere®, a new solution that enables enterprises to deploy Java-based software applications over the Akamai network on a “pay-as-you-go” basis. Our customers can now extend applications built on IBM’s WebSphere Internet infrastructure software to Akamai’s distributed network of servers to handle everyday Web application traffic and spikes in demand. Specific application functions, such as creating and viewing a personalized portal, can now be securely “pushed” to the edge of our network and executed closer to the user.

      Akamai Online Commerce is a highly secure, on demand business solution that helps customers more efficiently conduct e-business transactions by meeting peak performance needs to deliver a positive customer experience, increasing conversion rates and ensuring transaction completion while reducing infrastructure build-out costs.

      Akamai e-Business Continuity is an e-business solution designed to provide Internet-enabled enterprises with 100% availability of their most critical Web operations, providing online business continuity by distributing applications over a global network.

      Akamai Site Security is a set of controls that help protect e-businesses against malicious and random traffic from hackers, worms, and viruses, while providing insight into the effectiveness of their security systems.

      Akamai Optimized Extranets is an e-business solution that improves the performance, scalability and security of extranet business applications, without requiring expensive build-outs.

      Underlying all of Akamai’s services and solutions is our EdgeControl technology which provides comprehensive reporting and management capabilities. Often businesses use outsourced services to extend the reach and scope of their e-business initiatives and achieve the performance and reliability benefits that these services can deliver. However, for many enterprises, outsourcing also means handing over the control of their e-business infrastructure to a third party. Typically, relying on outside organizations forces a difficult choice: gain the significant advantages of third-party content delivery services or maintain visibility and control of your own infrastructure and the flow of your own information.

      Our EdgeControl technology offers a suite of enterprise-class management services for content and applications across the Internet that help eliminate the need to make this choice by:

	•	providing our customers with unprecedented visibility and control over their content and infrastructure across the Internet;

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	•	enabling companies to optimize, monitor and manage the performance of their e-business infrastructure; and
	•	ensuring the effectiveness of information and applications.

      Our EdgeControl offering seamlessly integrates with existing enterprise management systems, allowing customers to manage their distributed content and applications via a common interface. EdgeControl provides integration with third party network management tools, including those offered by IBM, Hewlett-Packard and BMC Software. Having created one of the industry’s first examples of a commercially proven utility computing platform, we now provide a global network of servers that can be utilized “on demand,” allowing customers to view and manage usage, billing, troubleshooting, monitoring, and reporting, based on their individual business requirements.

Business Segments and Geographic Information

      We operate in one business segment: providing e-business infrastructure services and solutions. For the years ended December 31, 2003 and 2002, approximately 16% and 13%, respectively, of revenue was derived from our operations outside the United States, of which 13% and 10%, respectively, relate to Europe. No single country accounted for 10% or more of revenue derived outside of the United States. For all other years, less than 10% of revenue was derived from sources outside of the United States. Revenue from services accounted for 98%, 89% and 83%, respectively, of our total revenue for the years ended December 31, 2003, 2002 and 2001. For more information on our segments and geographic areas, including revenues from customers, see our consolidated financial statements appearing in our annual report on Form 10-K, including Note 19 thereto.

The Akamai EdgePlatform

      The EdgePlatform is the foundation of Akamai’s business solutions. We believe it is the world’s largest globally distributed computing platform, with over 14,000 servers deployed in over 1,000 networks in 71 countries. It includes specialized technologies, including advanced routing, load balancing, data collection and monitoring that lay over the Internet, making it a predictable, scalable, and secure platform for conducting profitable e-business.

      Our servers are deployed in over 1,000 networks including Tier 1 providers, medium and small ISPs, cable modem and satellite providers, universities and other networks. We also deploy our servers at smaller and medium-sized domestic and international ISPs through our Akamai Accelerated Network Program. Under this program, we typically do not pay for rack space to house our servers or bandwidth to deliver content from our servers to Internet users. In exchange, ISPs host our servers and obtain access to popular content from the Internet that is served from our platform. As a result, when this content is requested by an enduser, the ISP does not need to pay for the bandwidth otherwise necessary to retrieve the content from the originating website.

      The key to the EdgePlatform’s effectiveness is its use of a distributed computing model in which both content and computing applications are exchanged in a system of widely distributed networks of servers, and processed at the most efficient places within the network. Through a combination of architecture and services, Akamai’s EdgePlatform helps organizations maximize e-business efforts quickly, without adding equipment, cost, or complexity to existing IT infrastructure.

      Akamai’s EdgePlatform is also the first e-business platform to support Edge Side Includes (ESI), an open specification for dynamic assembly and delivery of highly dynamic Web content at the edge of the Internet. Using ESI and the Akamai EdgePlatform, companies can accelerate e-business applications while reducing complexity, development time and deployment costs. As the first application server to support ESI, the Oracle9i Application Server allows customers to seamlessly write and deploy applications that are optimized to deliver dynamic Web content at top speed across the Akamai EdgePlatform and Oracle9iAS.

      Our EdgePlatform is designed so that sites download and run more quickly, deflect security threats and reliably process applications and deliver content — anywhere in the world. Customers are also able to control

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      We monitor the EdgePlatform through our Network Operations Command Center, or NOCC, located at our corporate headquarters, with a back-up facility in California. Our experienced network operations personnel staff the NOCC 24 hours per day, seven days a week. We perform real-time monitoring of our own servers and of the Internet to make certain that content is delivered to users with the best possible performance and reliability. A key design principle of our system is the use of a distributed network of servers with no single point of failure. As a result, if any computer, data center or portion of the Internet fails, our services will continue operating. We constantly monitor the performance of connections between various locations around the Internet and our regions using numerous types of network information to determine the performance of these connections. The result is a “map” of the optimal Akamai region for each location at that point in time. We rebuild this map periodically to reflect changing conditions.

      Our technology is designed so that our servers maintain redundancy with other servers in our network to ensure the highest level of performance and reliability for our customers. This is increasingly important for reliably delivering the mission-critical content and applications of an enterprise over IP networks that, on their own, are often unreliable.

Customers

      Our customer base is centered on enterprises. As of December 31, 2003, our customers included many of the world’s leading enterprises, including Apple Computer, Inc., Best Buy.com, Inc., FedEx Corporation, General Motors Corporation, Microsoft Corporation, NASDAQ, MTV Networks, Sony Ericsson Mobile Communications and Victoria’s Secret. We have also begun to address the needs of the government market and, as of December 31, 2003, had customers such as the Centers for Disease Control and Prevention, the Department of Defense, the Department of Education, the Food and Drug Administration, the U.S. Army Recruitment, the U.S. Geological Survey’s Earthquake Hazards Program and the Voice of America. For the year ended December 31, 2003, Microsoft Corporation accounted for 15% of total revenue. No customer accounted for 10% or more of total revenue for the years ended December 31, 2001 or 2002.

Sales, Services and Marketing

      Our sales and service professionals are located in eight offices in the United States with additional locations in Europe and Japan. We market and sell our services and solutions domestically and internationally through our direct sales and services organization and through more than 25 active resellers including Electronic Data Systems Corporation, IBM, InterNap Network Services Corporation MCI, Telefonica Group and others. In addition to entering into agreements with reseller partners, we have several other types of alliances, including: Edge Architecture Design Partners, ASP Partners, Agency Partners, Technology Partners and Network Partners. By aligning with these companies, we are better able to market our services and adoption of our technology throughout the industry.

      Our sales and support organization includes employees in direct and channel sales, professional services, account management and technical consulting. As of December 31, 2003, we had 212 employees in our sales and support organization, including 98 sales representatives whose performance is measured on the basis of achievement of quota objectives. Our ability to achieve significant revenue growth in the future will depend in large part on whether we successfully recruit, train and retain sufficient direct sales, technical and global services personnel, and how well we establish and maintain relationships with our strategic partners. We believe that the complexity of our services will continue to require a number of highly trained global sales and services personnel.

      To support our sales efforts and promote the Akamai name, we conduct comprehensive marketing programs. Our marketing strategies include an active public relations campaign, print advertisements, on-line advertisements, trade shows, strategic partnerships and on-going customer communication programs. As of December 31, 2003, we had 20 employees in our global marketing organization.

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Research and Development

      Our research and development organization is continuously enhancing and improving our existing services, strengthening our network and creating new services in response to our customers’ needs and market demand. As of December 31, 2003, we had 146 employees in our research and development organization, many of whom hold advanced degrees in their field. Our research and development expenses were $13.0 million, $21.8 million and $44.8 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Competition

      The market for our services remains relatively new, intensely competitive and characterized by rapidly changing technology, evolving industry standards and frequent new product and service installations. We expect competition for our services to increase both from existing competitors and new market entrants. We compete primarily on the basis of:

	•	performance of services and software;
	•	return on investment in terms of cost savings and new revenue opportunities for our customers;
	•	reduced infrastructure complexity;
	•	scalability;
	•	ease of implementation and use of service;
	•	customer support; and
	•	price.

      We compete primarily with companies offering products and services that address Internet performance problems, including companies that provide Internet content delivery and hosting services, streaming content delivery services and equipment-based solutions to Internet performance problems, such as load balancers and server switches. Some of these companies resell our services. We also compete with companies that host online conferences using proprietary conferencing applications. We do not believe that any other company currently offers the range of solutions that we offer through our EdgeSuite service.

Proprietary Rights and Licensing

      Our success and ability to compete are dependent on our ability to develop and maintain the proprietary aspects of our technology and operate without infringing on the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws and contractual restrictions to protect the proprietary aspects of our technology. We currently have numerous issued United States patents covering our content delivery technology, and we have numerous additional patent applications pending. Our issued patents extend to various dates between approximately 2015 and 2020. In October 1998, we entered into a license agreement with the Massachusetts Institute of Technology, or MIT, under which we were granted a royalty-free, worldwide right to use and sublicense the intellectual property rights of MIT under various patent applications and copyrights relating to Internet content delivery technology. Two of these patent applications have now been issued. These patents will expire in 2018. We seek to limit disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements with us and by restricting access to our source code.

Employees

      As of December 31, 2003, we had a total of 535 full-time and part-time employees. Our future success will depend in part on our ability to attract, retain and motivate highly qualified technical and management personnel for whom competition is intense. Our employees are not represented by any collective bargaining unit. We believe our relations with our employees are good.

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Factors Affecting Future Operating Results

      The following important factors, among other things, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this annual report on Form 10-K or presented elsewhere by management from time to time.

      We have never been profitable under generally accepted accounting principles. We have incurred significant losses since inception in 1998 and expect to continue to incur losses through at least the first half of 2004. We have large fixed expenses, and we expect to continue to incur significant bandwidth, sales and marketing, product development, administrative, interest and other expenses. Therefore, we will need to generate higher revenue to achieve and maintain profitability. There are numerous factors that could, standing alone or combined with other factors, impede our ability to increase revenue and/or moderate expenses, including:

	•	failure to increase sales of our EdgeSuite and EdgeComputing services and related features and functions;
	•	significant increases in bandwidth costs or other operating expenses;
	•	any lack of market acceptance of our services due to continuing concerns about commercial use of the Internet, including security, reliability, speed, cost, ease of access, quality of service and regulatory initiatives;
	•	any failure of our current and planned services and software to operate as expected;
	•	a failure by us to respond rapidly to technological changes in our industry that could cause our services to become obsolete;
	•	a continuation of adverse economic conditions worldwide that have contributed to slowdowns in capital expenditures by businesses, particularly capital spending in the information technology market;
	•	failure of a significant number of customers to pay our fees on a timely basis or at all or to continue to purchase our services in accordance with their contractual commitments; and
	•	inability to attract high-quality customers to purchase and implement our current and planned services and software.

      The market for our Internet-related services is relatively new. We cannot be certain that a broad-based market for our services will emerge or be sustainable. Many of our customers are early adopters of new technologies such as those we offer. If we are unable to maintain pricing levels or our market share among these companies, our revenues will not grow and may decrease. If enterprises that are less aggressive in adopting new technologies are reluctant to purchase our services, we will have fewer opportunities to sell our services and will have difficulty generating growth and profits.

      We have significant long-term debt, and we may not be able to make interest or principal payments when due. As of December 31, 2003, our total long-term debt was approximately $386.0 million and our stockholders’ deficit was approximately $175.4 million. In January 2004, we issued an additional $25.0 million of our 1.0% convertible senior notes due December 15, 2033. Our substantial level of indebtedness could adversely affect our future operations, by increasing our vulnerability to adverse changes in general economic

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      Neither our existing 5 1/2% convertible subordinated notes due 2007, nor our 1.0% convertible senior notes due in 2033, restrict our ability or our subsidiaries’ ability to incur additional indebtedness. Our ability to satisfy our obligations will depend upon our future performance, which is subject to many factors, including factors beyond our control.

      In December 2003 and January 2004, we repurchased $99.0 million in principal amount of our 5 1/2% convertible subordinated notes. In February 2004, we announced a tender offer to repurchase up to an additional $101.0 million in aggregate principal amount of the 5 1/2% convertible subordinated notes. The tender offer period is scheduled to expire on March 10, 2004. There can be no assurance, however, that we will complete the tender offer in whole or in part. In order to reduce further future cash interest payments, as well as future payments due at maturity, we may, from time to time, depending on market conditions, repurchase or redeem additional outstanding 5 1/2% convertible subordinated notes for cash; exchange 5 1/2% convertible subordinated notes for shares of our common stock, warrants, preferred stock, debt or other consideration; or a combination of any of the foregoing. If we exchange shares of our capital stock, or securities convertible into or exercisable for our capital stock, for outstanding 5 1/2% convertible subordinated notes, the number of shares that we might issue as a result of such exchanges could significantly exceed the number of shares originally issuable upon conversion of the 5 1/2% convertible subordinated notes. We cannot assure you that we will repurchase, redeem or exchange any additional 5 1/2% convertible subordinated notes.

      Historically, we have had negative cash flow from operations. For the year ended December 31, 2003, net cash used in operating activities was approximately $18.0 million. As of March 9, 2004, we had $201.0 million in aggregate principal amount of our 5 1/2% convertible subordinated notes outstanding. Assuming no additional 5 1/2% convertible subordinated notes are converted or redeemed our annual interest payments on our 5 1/2% convertible subordinated notes will be approximately $11.1 million and annual interest payment on our 1.0% convertible senior notes will be approximately $2.0 million. In addition, if our 5 1/2% convertible subordinated notes are converted or if we do not repurchase, redeem, exchange or otherwise repay our outstanding 5 1/2% convertible subordinated notes prior to 2007, they will become due. The holders of our 1.0% convertible senior notes have the right to require us to redeem such notes in December 2010. Unless we are able to generate sufficient operating cash flow to service and, in 2007, pay the 5 1/2% convertible subordinated notes and service the 1.0% convertible senior notes, we will be required to raise additional funds or default on our obligations under our 5 1/2% convertible subordinated notes and 1.0% convertible senior notes.

      The holders of our 5 1/2% convertible subordinated notes have the right to convert those notes into our common stock. The conversion price for the 5 1/2% convertible subordinated notes is $115.47 per share. The current market price for shares of our common stock is significantly below the conversion price of the 5 1/2% convertible subordinated notes. If the market price for our common stock does not exceed the conversion price, the holders of the notes are unlikely to convert their securities into common stock and we will be required instead to pay the holders of such notes.

      Our 1% convertible senior notes are convertible into shares of our common stock at the option of the holder under certain circumstances at an initial conversion price of $15.45 per share. The conversion of some or all of the 1% convertible senior notes and any sales in the public market of our common stock issuable upon such conversion could adversely affect the prevailing market price of our common stock. In addition, the existence of the 1% convertible senior notes may encourage short selling by market participants because the conversion of the notes could depress our common stock price.

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      If our revenue decreases or grows more slowly than we anticipate or if our operating expenses increase more than we expect or cannot be reduced in the event of lower revenue, we may need to obtain funding from outside sources. If we are unable to obtain this funding, our business would be materially and adversely affected. In addition, even if we were to find outside funding sources, we might be required to issue securities with greater rights than the securities we have outstanding today. We might also be required to take other actions that could lessen the value of our common stock, including borrowing money on terms that are not favorable to us, if at all.

      We compete in markets that are new, intensely competitive, highly fragmented and rapidly changing. We have experienced and expect to continue to experience increased competition. Many of our current competitors, as well as a number of our potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances and substantially greater financial, technical and marketing resources than we do. Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements. Some of our current or potential competitors may bundle their services with other services, software or hardware in a manner that may discourage website owners from purchasing any service we offer or ISPs from installing our servers. Increased competition could result in price and revenue reductions, loss of customers and loss of market share, which could materially and adversely affect our business, financial condition and results of operations.

      Prices we have been charging for some of our services have declined in recent years. We expect that this decline may continue in the future as a result of, among other things, existing and new competition in the markets we address. Consequently, our historical revenue rates may not be indicative of future revenue based on comparable traffic volumes. If we are unable to sell our services at acceptable prices relative to our costs or if we are unsuccessful with our strategy of “upselling” our higher-priced services to our EdgeSuite delivery customers, our revenue and gross margins will decrease, and our business and financial results will suffer.

      For the year ended December 31, 2003, Microsoft accounted for more than 10% of our revenue. In September 2003, we entered into an amendment to our content delivery services customer agreement with Microsoft that has a two-year term and includes a minimum usage commitment. Microsoft will have the right to reduce its commitment levels by 50% for the second year of the term and convert the contract to a month-to-month term after the first year if the parties fail to reach agreement as to appropriate price changes after the first year of the term. While we expect revenue from Microsoft to be greater than 10% of our total revenue in 2004, an unexpected, significant decline in sales to Microsoft would reduce our revenue and cause our business and financial results to suffer.

      The market price of our common stock has been volatile. Trading prices may continue to fluctuate in response to a number of events and factors, including the following:

	•	quarterly variations in operating results and announcements of innovations;
	•	new products, services and strategic developments by us or our competitors;
	•	business combinations and investments by us or our competitors;

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	•	variations in our revenue, expenses or profitability;
	•	changes in financial estimates and recommendations by securities analysts;
	•	failure to meet the expectations of public market analysts;
	•	performance by other companies in our industry;
	•	any adverse determination in pending or future litigation;
	•	news reports relating to trends in the content delivery, Internet or other product or service industries; and
	•	geopolitical conditions such as acts of terrorism or military conflicts.

      Any of these events may cause the price of our shares to fall. In addition, the stock market in general and the market prices for technology companies in particular have experienced significant volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the market price of our shares, regardless of our operating performance.

      Our business is dependent on providing our customers with fast, efficient and reliable distribution of application and content delivery services over the Internet. For our core services, we currently provide a guarantee that our networks will deliver Internet content 24 hours a day, seven days a week, 365 days a year. If we do not meet this standard, our customer does not pay for all or a part of its services on that day. Our network or services could be disrupted by numerous events, including natural disasters, failure or refusal of our third-party network providers to provide the capacity, power losses, and intentional disruptions of our services, such as disruptions caused by software viruses or attacks by unauthorized users. Any widespread loss or interruption of our network or services would reduce our revenue and could harm our business, financial results and reputation.

      Our operations are dependent in part upon transmission capacity provided by third-party telecommunications network providers. We believe that we have access to adequate capacity to provide our services; however, there can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands by our customers. In addition, the bandwidth we have contracted to purchase may become unavailable for a variety of reasons. For example, a number of these network providers are operating under the protection of the federal bankruptcy laws. As a result, there is uncertainty about whether such providers, or others that enter into bankruptcy, will be able to continue to provide services to us. Any failure of these network providers to provide the capacity we require, due to financial or other reasons, may result in a reduction in, or interruption of, service to our customers. If we do not have access to third-party transmission capacity, we could lose customers. If we are unable to obtain transmission capacity on terms commercially acceptable to us, our business and financial results could suffer. In addition, our telecommunications and network providers typically provide rack space for our servers. Damage or destruction of, or other denial of access to, a facility where our servers are housed could result in a reduction in, or interruption of, service to our customers.

      Our services are highly complex and are designed to be deployed in and across numerous large and complex networks. From time to time, we have needed to correct errors and defects in our software. In the future, there may be additional errors and defects in our software that may adversely affect our services. If we are unable to efficiently fix errors or other problems that may be identified, we could experience loss of revenues and market share, damage to our reputation, increased expenses and legal actions by our customers.

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      Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments about, including without limitation taxes, revenue recognition, capitalization of internal-use software, contingent obligations, doubtful accounts and restructuring charges, that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued by us, such as those made in connection with our restructuring charges, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. If our estimates or the assumptions underlying them are not correct, we may need to accrue additional charges which could adversely affect our results of operations, which in turn could adversely affect our stock price.

      We have licensed technology from MIT covered by various patents, patent applications and copyrights relating to Internet content delivery technology. Some of our technology is based in part on the technology covered by these patents, patent applications and copyrights. Our license is effective for the life of the patents and patent applications; however, under limited circumstances, such as a cessation of our operations due to our insolvency or our material breach of the terms of the license agreement, MIT has the right to terminate our license. A termination of our license agreement with MIT could have a material adverse effect on our business.

      Other companies or individuals, including our competitors, may obtain patents or other proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our services. As a result, we may be found to infringe the proprietary rights of others. In the event of a successful claim of infringement against us and our failure or inability to license the infringed technology, our business and operating results would be significantly harmed. Companies in the Internet market are increasingly bringing suits alleging infringement of their proprietary rights, particularly patent rights. We have been named as a defendant in several lawsuits alleging that we have violated other companies’ intellectual property rights. Any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and require us to do one or more of the following:

	•	cease selling, incorporating or using products or services that incorporate the challenged intellectual property;
	•	pay substantial damages;
	•	obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; and
	•	redesign products or services.

      If we are forced to take any of these actions, our business may be seriously harmed.

      We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We have brought numerous lawsuits against entities that we believe are infringing on our intellectual property rights. These legal protections afford only limited protection. Monitoring unauthorized use of our services is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws

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      Our future success depends upon the continued services of our executive officers and other key technology, sales, marketing and support personnel who have critical industry experience and relationships that they rely on in implementing our business plan. None of our officers or key employees is bound by an employment agreement for any specific term. We have a “key person” life insurance policy covering only the life of F. Thomson Leighton, our Chief Scientist and a member of our Board of Directors. The loss of the services of any of our key employees could delay the development and introduction of and negatively impact our ability to sell our services.

      We have operations in several foreign countries and may continue to expand our sales and support organizations internationally. Such expansion could require us to make significant expenditures. We are increasingly subject to a number of risks associated with international business activities that may increase our costs, lengthen our sales cycle and require significant management attention. These risks include:

	•	lack of market acceptance of our software and services abroad;
	•	increased expenses associated with marketing services in foreign countries;
	•	general economic conditions in international markets;
	•	currency exchange rate fluctuations;
	•	unexpected changes in regulatory requirements resulting in unanticipated costs and delays;
	•	tariffs, export controls and other trade barriers;
	•	longer accounts receivable payment cycles and difficulties in collecting accounts receivable; and
	•	potentially adverse tax consequences.

      We have made acquisitions of other companies in the past and may enter into additional business combinations and acquisitions in the future. Acquisitions are typically accompanied by a number of risks, including the difficulty of integrating the operations and personnel of the acquired companies, the potential disruption of our ongoing business, the potential distraction of management, expenses related to the acquisition and potential unknown liabilities associated with acquired businesses. If we are not successful in completing acquisitions that we may pursue in the future, we may be required to reevaluate our business strategy, and we may have incurred substantial expenses and devoted significant management time and resources without a productive result. In addition, with future acquisitions, we could use substantial portions of our available cash or make dilutive issuances of securities. Future acquisitions or attempted acquisitions could have an adverse effect on our ability to achieve and maintain profitability.

      Laws and regulations that apply to communications and commerce over the Internet are becoming more prevalent. In particular, the growth and development of the market for online commerce has prompted calls

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      Terrorist attacks in New York, Pennsylvania and Washington, D.C. in September 2001 disrupted commerce throughout the United States and other parts of the world. The continued threat of terrorism within the United States and abroad, and the potential for military action and heightened security measures in response to such threat, may cause significant disruption to commerce throughout the world. To the extent that such disruptions result in delays or cancellations of customer orders, a general decrease in corporate spending on information technology, or our inability to effectively market, sell or operate our services and software, our business and results of operations could be materially and adversely affected.

      Provisions of our amended and restated certificate of incorporation, by-laws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. In addition, our Board of Directors has adopted, and recently amended, a shareholder rights plan the provisions of which could make it more difficult for a potential acquirer of Akamai to consummate an acquisition transaction. See “Description of Capital Stock.”

      We are named as a defendant in a purported class action lawsuit filed in 2001 alleging that the underwriters of our initial public offering received undisclosed compensation in connection with our initial public offering of common stock in violation of the Securities Act and the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. This litigation could be expensive and divert the attention of our management and other resources. We can provide no assurance as to the outcome of this action. Any conclusion of these matters in a manner adverse to us could have a material adverse affect on our financial position and results of operations.

      In the ordinary course of business, we may become involved in litigation, administrative proceedings and governmental proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. Furthermore, there can be no assurance that the results of any of these actions will not have a material adverse effect on our business, results of operations or financial condition.

      Our headquarters are located in approximately 89,000 square feet of leased office space in Cambridge, Massachusetts. Our primary west coast office is located in approximately 25,000 square feet of leased office space in San Mateo, California. We maintain leased office space in several other locations in the United States, including in or near Los Angeles, California; Atlanta, Georgia; Chicago, Illinois; New York, New York; Fairfax, Virginia and Seattle, Washington. We also maintain leased office space in Europe and Asia in or near the following cities: Munich, Germany; Paris, France; London, England; Tokyo, Japan; and Singapore.

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      We are subject to legal proceedings, claims and litigation arising in the ordinary course of business. We do not expect the ultimate costs to resolve these matters to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

      Between July 2, 2001 and August 31, 2001, purported class action lawsuits seeking monetary damages were filed in the United States District Court for the Southern District of New York against us as well as against the underwriters of our October 28, 1999 initial public offering of common stock. The complaints were filed allegedly on behalf of persons who purchased our common stock during different time periods, all beginning on October 28, 1999 and ending on various dates. The complaints are similar and allege violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 primarily based on the allegation that the underwriters received undisclosed compensation in connection with our initial public offering. On April 19, 2002, a single consolidated amended complaint was filed, reiterating in one pleading the allegations contained in the previously filed separate actions. The consolidated amended complaint defines the alleged class period as October 28, 1999 through December 6, 2000. Although we believe that we have meritorious defenses to the claims made in the complaint, an adverse resolution of the action could have a material adverse effect on our financial condition and results of operations in the period in which the lawsuit is resolved. We are not presently able to estimate potential losses, if any, related to this lawsuit.

      In February 2002, we filed suit against Speedera Networks, Inc., or Speedera, in federal court in Massachusetts, alleging patent infringement and false advertising by Speedera. In April 2003, we amended our complaint to include an allegation that Speedera infringes a newly-issued content delivery patent held by MIT and licensed to Akamai. In response, Speedera filed a counterclaim in this case alleging that Akamai has infringed a Speedera patent relating to the combined provision of traffic management and content delivery services. We believe that we have meritorious defenses to the claims made in the counterclaim and intend to contest them vigorously; however, there can be no assurance that we will be successful. We are not presently able to reasonably estimate potential losses, if any, related to this counterclaim.

      In June 2002, we filed suit against Speedera in California Superior Court alleging theft of Akamai trade secrets from an independent company that provides website performance testing services. In connection with this suit, in September 2002, the Court issued a preliminary injunction to restrain Speedera from continuing to access our confidential information from the independent company’s database and from using any data obtained from such access. In October 2002, Speedera filed a cross-claim against us seeking monetary damages and injunctive relief and alleging that we engaged in various unfair trade practices, made false and misleading statements and engaged in unfair competition. We believe that we have meritorious defenses to the claims made in Speedera’s cross-claim and intend to contest the allegations vigorously; however, there can be no assurance that we will be successful. We are not presently able to reasonably estimate potential losses, if any, related to this cross-claim.

      In September 2002, Teknowledge Corporation, or Teknowledge, filed suit in the United States District Court for the District of Delaware against Akamai, C&W and Inktomi Corporation alleging that certain services offered by each company infringe a Teknowledge patent relating to automatic retrieval of changed files by a network software agent. We believe that we have meritorious defenses to the claims made in the complaint and intend to contest the lawsuit vigorously; however, there can be no assurance that we will be successful. We are not presently able to reasonably estimate potential losses, if any, related to this lawsuit.

      In November 2002, we filed suit against Speedera in federal court in Massachusetts for infringement of a patent held by Akamai. In January 2003, Speedera filed a counterclaim in this case alleging that Akamai has infringed a patent held by Speedera. We believe that we have meritorious defenses to the claims made in the counterclaim and intend to contest them vigorously; however, there can be no assurance that we will be successful. We are not presently able to reasonably estimate potential losses, if any, related to this counterclaim.

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Item 4.     Submission of Matters to a Vote of Security Holders

      None.

PART II

Item 5.     Market For Registrant’s Common Equity and Related Stockholder Matters

      Our common stock trades under the symbol “AKAM.” From the time that public trading of our common stock commenced on October 29, 1999 until September 3, 2002 and since May 5, 2003, our common stock was listed on The NASDAQ National Market. Our common stock was listed on The NASDAQ SmallCap Market between September 3, 2002 and May 2, 2003. Prior to October 29, 1999, there was no public market for our common stock. The following table sets forth, for the periods indicated, the high and low sale price per share of the common stock on The NASDAQ National Market and The NASDAQ SmallCap Market, as applicable: