[Second Quarter 2025 Performance Overview](index=2&type=section&id=Second%20Quarter%202025%20Investor%20Supplement) Fastly's Q2 2025 saw strong revenue growth, positive free cash flow, product enhancements, key customer wins, and significant leadership appointments [Product Innovation and Developments](index=2&type=section&id=Product%20Innovation%20and%20Developments) In Q2 2025, Fastly focused on enhancing its security and delivery offerings, launching Attack Insights for DDoS Protection, AI Bot Management, and expanded IPv6 support - Enhanced DDoS Protection with **Attack Insights** for better visibility into attack mitigation[8](index=8&type=chunk) - Released Fastly **AI Bot Management** to General Availability (GA), giving customers granular control over AI bot interactions[8](index=8&type=chunk) - Introduced **IPv6 to Origin support** in Fastly Delivery, enabling full dual-stack traffic handling[8](index=8&type=chunk) - Expanded into Mexico with the first **Point of Presence** to improve speed and lower latency for customers in the region[8](index=8&type=chunk) - Product package deals grew **over 50% year-over-year** in the second quarter, with deals involving renewals growing **over 130% YoY**[8](index=8&type=chunk) [Customer Highlights](index=2&type=section&id=Customer%20Highlights) Fastly secured several significant new customers and cross-selling opportunities in Q2 2025, highlighting the appeal of its integrated network services and security platform - A cloud-native, SaaS core banking platform selected Fastly for its **Network Services and Security offerings**[8](index=8&type=chunk) - A premier programmable financial services company adopted Fastly's **DDoS technology** in a key cross-selling deal[8](index=8&type=chunk) - A leading global omnichannel retailer of sports fashion and a major international warehouse club both selected Fastly's **full platform offerings**[8](index=8&type=chunk) [Corporate Highlights](index=2&type=section&id=Corporate%20Highlights) The second quarter featured significant leadership changes aimed at strengthening the company's executive team and go-to-market strategy - Appointed **Kip Compton as Chief Executive Officer**[9](index=9&type=chunk) - Appointed **Richard Wong as Chief Financial Officer**, succeeding Ronald Kisling[9](index=9&type=chunk) - Scott Lovett, Chief Revenue Officer, was named **President, Go to Market**, unifying the revenue and marketing organizations[9](index=9&type=chunk) [Key Financial & Metrics Highlights](index=2&type=section&id=Key%20Financial%20%26%20Metrics%20Highlights) Fastly reported strong financial performance in Q2 2025 with 12% year-over-year revenue growth to $148.7 million, driven by a 15% increase in security revenue Q2 2025 Financial & Metrics Summary | Metric | Q2 2025 Value | Year-over-Year Change | | :--- | :--- | :--- | | Total Revenue | $148.7 million | +12% | | Security Revenue | $29.3 million | +15% | | Free Cash Flow | $10.9 million | Positive (vs. -$18.5M in Q2 2024) | | Enterprise Customer Count | 622 | +21 from Q2 2024 | | LTM Net Retention Rate (NRR) | 104% | Up from 100% in Q1 2025 | | Remaining Performance Obligations (RPO) | $315 million | +41% | [Third Quarter and Full Year 2025 Guidance](index=2&type=section&id=Third%20Quarter%20and%20Full%20Year%202025%20Guidance) Fastly provided its financial outlook for the third quarter and full fiscal year of 2025, projecting Q3 revenue between $149.0 million and $153.0 million Q3 and Full Year 2025 Guidance | Metric | Q3 2025 Guidance | Full Year 2025 Guidance | | :--- | :--- | :--- | | Total Revenue | $149.0M - $153.0M | $594.0M - $602.0M | | Non-GAAP Operating Income (Loss) | ($1.0M) - $3.0M | ($9.0M) - ($3.0M) | | Non-GAAP Net Income (Loss) per share | ($0.02) - $0.02 | ($0.10) - ($0.04) | [Key Metrics and Definitions](index=2&type=section&id=Key%20Metrics%20and%20Definitions) This section details Fastly's key performance indicators, including enterprise customer growth, net retention rate, and remaining performance obligations, along with their precise definitions [Quarterly Key Metrics](index=2&type=section&id=Calculations%20of%20Key%20and%20Other%20Selected%20Metrics%20%E2%80%93%20Quarterly) In Q2 2025, enterprise customer count increased to 622, with revenue from this segment growing to 94% of total revenue, and RPO showing strong year-over-year growth Key Metrics Trend (Q2 2024 vs Q2 2025) | Metric | Q2 2024 | Q1 2025 | Q2 2025 | | :--- | :--- | :--- | :--- | | Enterprise Customer Count | 601 | 595 | 622 | | Enterprise Customer Revenue % | 91% | 93% | 94% | | Total Customer Count | 3,295 | 3,035 | 3,097 | | LTM Net Retention Rate (NRR) | 110% | 100% | 104% | | Remaining Performance Obligation (RPO) (millions) | $223.1 | $303.0 | $315.1 | [Definitions of Key Metrics](index=4&type=section&id=Definitions%20of%20Key%20Metrics) The company provides specific definitions for its key performance indicators, including enterprise customers, LTM Net Retention Rate, and Remaining Performance Obligations - **Enterprise Customers:** Defined as customers with annualized current quarter revenue exceeding **$100,000**[10](index=10&type=chunk) - **LTM Net Retention Rate (NRR):** Calculated by dividing the revenue from a cohort of customers in the last twelve months (including expansion and contraction) by the revenue from the same cohort in the prior twelve-month period[10](index=10&type=chunk) - **Remaining Performance Obligations (RPO):** Includes future committed revenue for periods within current customer contracts, as well as deferred revenue[10](index=10&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) This section presents Fastly's consolidated financial statements, including GAAP and non-GAAP results, balance sheet, and cash flow analysis for the reported periods [Consolidated Statements of Operations (GAAP)](index=8&type=section&id=Consolidated%20Statements%20of%20Operations%20%E2%80%93%20Quarterly) For the second quarter of 2025, Fastly reported total revenue of $148.7 million, an increase from $132.4 million in the prior year's quarter, with a GAAP net loss of $37.5 million Q2 2025 Statement of Operations Highlights (GAAP, in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $148,709 | $132,371 | | Gross Profit | $81,116 | $72,901 | | Loss from Operations | ($36,943) | ($46,734) | | Net Loss | ($37,541) | ($43,729) | | Net Loss Per Share | ($0.26) | ($0.32) | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures%20-%20Quarterly) Fastly adjusts its GAAP results to provide non-GAAP metrics, primarily by excluding stock-based compensation, amortization of acquired intangibles, and other non-recurring items Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $81,116 | $6,629 | $87,745 | | Operating Loss | ($36,943) | $32,349 | ($4,594) | | Net Loss | ($37,541) | $32,566 | ($4,975) | | Net Loss per Share | ($0.26) | | ($0.03) | [Consolidated Balance Sheets](index=12&type=section&id=Consolidated%20Balance%20Sheets%20-%20Quarterly) As of June 30, 2025, Fastly's balance sheet showed total assets of $1.46 billion, with cash and equivalents at $321.2 million and total liabilities at $520.5 million Balance Sheet Summary (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $82,487 | $286,175 | | Total current assets | $464,663 | $440,195 | | Total assets | $1,463,177 | $1,451,359 | | **Liabilities & Equity** | | | | Total current liabilities | $312,803 | $104,456 | | Total liabilities | $520,530 | $486,109 | | Total stockholders' equity | $942,647 | $965,250 | [Consolidated Statements of Cash Flows](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Quarterly) In Q2 2025, the company generated $25.8 million in cash from operating activities, resulting in a net decrease in cash of $43.0 million for the quarter Q2 2025 Cash Flow Summary (in thousands) | Cash Flow Category | Q2 2025 | | :--- | :--- | | Net cash provided by operating activities | $25,798 | | Net cash used in investing activities | ($69,954) | | Net cash provided by financing activities | $982 | | Net decrease in cash | ($42,997) | [Free Cash Flow](index=14&type=section&id=Free%20Cash%20Flow) Fastly achieved positive free cash flow of $10.9 million in Q2 2025, a significant improvement from the negative $18.5 million reported in Q2 2024 Free Cash Flow Calculation (in thousands) | Component | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $25,798 | ($4,948) | | Capital expenditures | ($14,887) | ($13,617) | | **Free Cash Flow** | **$10,911** | **($18,541)** | [Disclosures and Non-GAAP Measures](index=5&type=section&id=Disclosures%20and%20Non-GAAP%20Measures) This section outlines the company's forward-looking statements and explains the use and reconciliation of non-GAAP financial measures for clearer operational insights [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This investor supplement includes forward-looking statements concerning future financial performance, product capabilities, and strategic plans, which are subject to various risks and uncertainties - The report contains forward-looking statements about future financial and operating performance, product enhancements, and business strategies; actual results may differ materially[11](index=11&type=chunk) [About Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) Fastly utilizes non-GAAP financial measures to provide a clearer view of its core operational performance by excluding certain non-cash or non-recurring expenses - The company uses non-GAAP measures like **non-GAAP gross profit**, **non-GAAP operating loss**, and **adjusted EBITDA** to supplement GAAP financials[12](index=12&type=chunk) - Key exclusions from GAAP measures include **stock-based compensation**, **amortization of acquired intangible assets**, **executive transition costs**, **impairment expenses**, and **restructuring charges**[13](index=13&type=chunk)[14](index=14&type=chunk)[19](index=19&type=chunk) - Starting Q1 2025, the company also excludes **amortization of capitalized stock-based compensation** from its non-GAAP measures and has recast prior periods for consistency[36](index=36&type=chunk)

Core Viewpoint - Fastly (FSLY) is expected to report its second-quarter 2025 results on August 6, with anticipated revenue growth and a narrower non-GAAP loss compared to the previous year [1][2][9]. Revenue Expectations - FSLY expects revenues in the range of $143 million to $147 million, representing a 10% year-over-year increase at the midpoint [1][9]. - The Zacks Consensus Estimate for revenues is $145.1 million, indicating a 9.6% increase from the same quarter last year [1]. Loss Forecast - The company anticipates a non-GAAP loss between 4 and 8 cents per share, with the consensus mark for loss at 5 cents per share, which is an improvement from the 7 cents loss reported in the previous year [2][9]. Key Growth Drivers - Fastly's content delivery and edge computing platform is expected to benefit from go-to-market transformation efforts and packaging improvements, aiding in deal acquisition and steady revenue growth [3]. - Enterprise demand for advanced digital experiences and security solutions is likely to support top-line growth, with the Security segment benefiting from ongoing portfolio enhancements [4]. Market Dynamics - Adoption of edge computing solutions, particularly for dynamic content and AI-driven workloads, has been a significant catalyst for growth [4]. - Traditional content delivery remains the primary revenue driver, while security and compute offerings are helping to diversify the revenue mix [4]. Challenges - Competitive industry pricing may constrain gross margin expansion, and profitability is closely tied to operating discipline [6]. - Macroeconomic uncertainty and regulatory factors related to specific customer relationships are expected to negatively impact second-quarter results [6]. Earnings Outlook - According to the Zacks model, FSLY has an Earnings ESP of -53.13% and a Zacks Rank of 3, indicating lower odds of an earnings beat [7].

Core Insights - Fastly (FSLY) provides edge cloud infrastructure aimed at enhancing digital experiences, with over 90% of its revenue coming from enterprise customers, making customer engagement and platform adoption critical for future growth [1][9] Enterprise Metrics - Fastly's enterprise customer count is projected to increase to 600 in Q2 from 595 in the previous quarter, with enterprise revenues estimated at $135 million, reflecting an 11.6% year-over-year growth. However, net retention is expected to drop to 100.46% from 109.6% in the same quarter last year [2] Product Development and Partnerships - The company is expanding its product suite with AI-driven features such as bot detection and real-time cache APIs, which are designed to enhance secure, high-speed delivery for performance-sensitive workloads. Partnerships with major companies like Alphabet, VMware, Shopify, Azure, and AWS are expected to bolster long-term customer engagement [3] Revenue Guidance - Fastly has guided Q2 revenues to be between $143 million and $147 million, with the Zacks Consensus Estimate at $145.07 million, indicating a 9.59% year-over-year growth [4][9] Competitive Landscape - Fastly faces significant competition from Cloudflare and Akamai, both of which offer similar edge delivery and web security solutions. Cloudflare is enhancing its programmable edge platform, while Akamai is focusing on cloud security and enterprise solutions [5][6] Stock Performance and Valuation - FSLY shares have decreased by 28.9% year-to-date, contrasting with a 7.5% increase in the broader Zacks Computer & Technology sector and a 14.1% rise in the Zacks Internet Software industry. The current forward 12-month price-to-sales ratio for FSLY is 1.58X, significantly lower than the industry's 5.72X [7][10] Earnings Estimates - The Zacks Consensus Estimate for FSLY's loss in 2025 is projected at 9 cents per share, unchanged over the past month. The company reported a loss of 12 cents per share in the same quarter last year [13]

Industry Overview - The content delivery network (CDN) space is expected to grow at a CAGR of 18.04% from 2025 to 2034, indicating strong industry growth potential [1][2]. Company Analysis: Cloudflare - Cloudflare focuses on global expansion and offers a high-performance CDN platform that enhances content delivery while ensuring secure web connectivity [3][4]. - The company employs advanced technologies such as tiered caching and Argo smart routing to optimize delivery efficiency [3]. - Cloudflare's revenue is significantly influenced by international sales, making it vulnerable to U.S. tariffs and competitive pressures from major players like Amazon and Akamai [5]. - Despite revenue growth, Cloudflare's margins are under pressure due to competitive pricing strategies and heavy investments in sales and marketing [6]. - The Zacks Consensus Estimate for Cloudflare's 2025 revenues is $2.09 billion, reflecting a year-over-year growth of 25.4%, while earnings are estimated at 79 cents, indicating a growth of 5.33% [6][7]. Company Analysis: Fastly - Fastly specializes in high-performance, programmable CDN solutions, providing customers with control through dedicated servers within private networks [9][10]. - The company emphasizes faster first-byte delivery and offers features like DDoS protection and advanced rate limiting [10][11]. - Fastly's CDN platform is designed for efficiency, with capabilities that reduce costs and enhance configurability [11]. - The Zacks Consensus Estimate for Fastly's 2025 loss is projected at 9 cents, indicating a year-over-year improvement of 25% [12][13]. Stock Performance and Valuation - Year-to-date, Cloudflare's stock has increased by 69.5%, while Fastly's stock has decreased by 26% [14]. - Cloudflare trades at a forward sales multiple of 28.19X, significantly higher than Fastly's multiple of 1.67X [15]. - Fastly is noted for its robust bottom-line growth expectations and comparatively lower valuation, giving it a potential edge over Cloudflare [17].

Industry Overview - The AI infrastructure space is experiencing significant growth, with fears related to DeepSeek being overblown. Confidence among market participants has increased due to potential trade deals, expected rate cuts by the Fed, and reduced recession worries in the U.S. economy [1] - The AI sector is supported by a bullish demand scenario, with major companies planning to invest $325 billion in AI infrastructure by 2025, representing a 46% year-over-year increase in capital spending [4] Investment Recommendations - Five mid-cap AI infrastructure stocks are recommended for investment, having outperformed the S&P 500 in the past three months and offering deep discounted value for long-term growth. The stocks include UiPath Inc. (PATH), Five9 Inc. (FIVN), C3.ai Inc. (AI), Qualys Inc. (QLYS), and Fastly Inc. (FSLY) [2][3] Company Insights UiPath Inc. (PATH) - UiPath provides an end-to-end automation platform with a focus on robotic process automation solutions. The company has introduced new generative AI features to enhance its automation capabilities [8][10] - Expected revenue and earnings growth rates for UiPath are 8.5% and 5.7%, respectively, for the current year, with a P/E ratio of 23.9X compared to the industry average of 29.7X [11] Five9 Inc. (FIVN) - Five9 offers intelligent cloud software for contact centers, benefiting from the growing adoption of AI tools. The company recently launched its Intelligent CX Platform powered by Five9 Genius AI [12][14] - Expected revenue and earnings growth rates for Five9 are 9.6% and 11.7%, respectively, for the current year, with a P/E ratio of 10.1X compared to the industry average of 29.7X [15] C3.ai Inc. (AI) - C3.ai specializes in enterprise AI applications and aims to deepen its alignment with major cloud providers and government institutions. The company focuses on deploying actionable AI solutions [16][17] - Expected revenue and earnings growth rates for C3.ai are 20.1% and 9.8%, respectively, for the current year, but it has yet to generate profit, with an industry P/E of 20.2X [18] Qualys Inc. (QLYS) - Qualys is experiencing increased demand for cloud-based cybersecurity solutions, supported by strategic acquisitions that enhance its threat detection capabilities [19][21] - Expected revenue and earnings growth rates for Qualys are 7.3% and 0.7%, respectively, for the current year, with a P/E ratio of 8.8X compared to the industry average of 11.6X [22] Fastly Inc. (FSLY) - Fastly provides infrastructure software for cloud computing and has introduced the Fastly AI Accelerator to optimize generative AI applications [23][24] - Expected revenue and earnings growth rates for Fastly are 8.6% and 25%, respectively, for 2025, but it has yet to generate profit, with an industry P/E of 29.7X [25]

Core Insights - Fastly's Security segment is becoming a significant contributor to its edge platform strategy, with Q1 2025 revenues of $26.4 million, reflecting a 7% year-over-year increase and accounting for 18% of total revenues [1][10] Group 1: Security Segment Performance - The Security portfolio is designed for low-latency, automated protection across web and API environments, including solutions like Client-Side Protection, API shielding, DDoS detection, and bot mitigation [2] - Ongoing product additions and upgrades are driving momentum in the Security portfolio, with features like Client-Side Protection for unauthorized activity detection and Attack Insights for real-time DDoS traffic visibility [3][4] Group 2: Competitive Landscape - Fastly's Security stack faces competition from Fortinet and Cloudflare, both enhancing their solutions for secure digital infrastructure [5] - Fortinet is gaining traction with advanced capabilities in bot protection and API security, making it a strong competitor in Fastly's core markets [6] - Cloudflare is expanding its security platform with advanced DDoS protection and bot management, positioning it as a direct competitor to Fastly [7] Group 3: Financial Performance and Valuation - Fastly's shares have declined 25.5% year-to-date, contrasting with a 7% increase in the broader Zacks Computer & Technology sector and a 14.4% appreciation in the Zacks Internet Software industry [8] - Fastly's forward 12-month price-to-sales ratio is 1.63X, significantly lower than the industry's 5.74X, indicating a potential undervaluation [11] - The Zacks Consensus Estimate for Fastly's second-quarter loss is 5 cents per share, reflecting a 28.57% improvement year-over-year, while the 2025 loss estimate is 9 cents per share, indicating a 25% year-over-year improvement [14]

Core Viewpoint - Fastly's shares have declined 26.4% year to date, underperforming the Zacks Internet Software industry's appreciation of 14.8% and the broader Zacks Computer & Technology sector's return of 5.7%, reflecting macroeconomic uncertainty and near-term softness in enterprise IT spending [1][2] Group 1: Company Performance - Fastly's strong partner ecosystem, expanding product portfolio, and consistent enterprise traction provide visibility into sustained execution, making the recent dip an attractive entry point for investors [2][17] - Fastly closed the first quarter of 2025 with 577 enterprise customers, contributing 93% of total revenue, and remaining performance obligations rose 33.5% year over year to $303 million [11][17] - The company expects revenues between $143 million and $147 million for the second quarter of 2025, indicating sequential growth from the March quarter, with a non-GAAP operating loss projected between $8 million and $4 million [15][17] Group 2: Product Innovations - Fastly continues to enhance its platform by introducing capabilities that address modern infrastructure challenges, evolving into a full-stack edge cloud platform [5][17] - New features include Client-Side Protection for browser-based security, expanded Bot Management capabilities, and HTTP Cache API support for programmatic cache control, improving developer experience and security [6][7][8] Group 3: Market Positioning - Fastly benefits from a rich partner base, including Microsoft, Alphabet, and Palo Alto Networks, enhancing its positioning in multi-cloud environments and security-led use cases [9][10] - Fastly shares are attractively valued, trading at a forward 12-month price-to-sales (P/S) of 1.63X, significantly lower than the industry's 5.76X [12][17] Group 4: Future Outlook - The company's stable second-quarter outlook and disciplined execution offer added visibility, with positive estimate trends supporting the case for accumulation [17][18]

Core Insights - Fastly (NYSE: FSLY) is experiencing a slowdown in top-line growth, a concern for investors since the end of the COVID-19 pandemic [1] Group 1 - The company has recently achieved an important milestone despite the growth slowdown [1]

Industry Overview - The Internet Software and Services sector is experiencing growth due to increased IT spending on solutions that support hybrid operating environments [1] - The Internet Software industry is ranked in the top 17% of Zacks Industry Rank, indicating an expectation to outperform the market in the next three to six months [2] Company Highlights UiPath Inc. (PATH) - UiPath offers an end-to-end automation platform with a range of robotic process automation solutions [6] - The platform includes AI, ML, and NLP capabilities, enhancing decision-making and information processing [7] - Expected revenue and earnings growth rates for the current year are 8.5% and 3.8%, respectively, with a 1.9% improvement in earnings estimates over the last week [8] Five9 Inc. (FIVN) - Five9 provides intelligent cloud software for contact centers, enabling a wide range of customer service functions [11] - The platform includes AI-driven features such as virtual agents and workflow automation, benefiting from the growing adoption of AI tools [13] - Expected revenue and earnings growth rates for the current year are 9.6% and 11.7%, respectively, with a 5.7% improvement in earnings estimates over the last 60 days [14] Fastly Inc. (FSLY) - Fastly offers infrastructure software for cloud computing, security, and edge computing solutions [15] - The Fastly AI Accelerator was introduced to optimize LLM generative AI applications [15] - Expected revenue and earnings growth rates for 2025 are 8.6% and 25%, respectively, with a 10% improvement in earnings estimates over the last week [17] Calix Inc. (CALX) - Calix provides cloud and software platforms for broadband service providers [18] - The company has integrated AI into its platforms to enhance operations and service delivery [20] - Expected revenue and earnings growth rates for 2025 are 7.1% and 65.4%, respectively, with a 21.1% improvement in earnings estimates over the last 60 days [20] Confluent Inc. (CFLT) - Confluent operates a data streaming platform that allows real-time data streaming for various industries [21][22] - Expected revenue and earnings growth rates for the current year are 19% and 24.1%, respectively, with a 2.9% improvement in earnings estimates over the last 60 days [23]

Financial Data and Key Metrics Changes - The preliminary results indicate that all nominees for the Board of Directors have been elected, and the ratification of Deloitte as the independent auditors for the current fiscal year has passed [11] - The compensation of named executive officers has been approved [11] Business Line Data and Key Metrics Changes - No specific data or metrics related to individual business lines were discussed in the meeting [10] Market Data and Key Metrics Changes - No specific market data or metrics were provided during the meeting [10] Company Strategy and Development Direction and Industry Competition - The meeting focused on the election of directors and the approval of auditor selection, with no detailed discussion on company strategy or competitive positioning [9][10] Management's Comments on Operating Environment and Future Outlook - Management did not provide specific comments on the operating environment or future outlook during this meeting [10] Other Important Information - The meeting was conducted virtually, and stockholders were able to submit questions through a text box on the virtual meeting screen [8] - A complete list of stockholders entitled to vote was available online [5] Q&A Session Summary - There were no questions submitted during the Q&A session [10]