Core Insights - Fastly reported revenue of $148.71 million for the quarter ended June 2025, reflecting a year-over-year increase of 12.3% [1] - The company's EPS was -$0.03, an improvement from -$0.07 in the same quarter last year, with a surprise of +40% compared to the consensus estimate of -$0.05 [1] - Fastly's revenue exceeded the Zacks Consensus Estimate of $145.07 million by 2.51% [1] Financial Performance Metrics - Fastly's enterprise customer count reached 622, surpassing the two-analyst average estimate of 600 [4] - Revenue from enterprise customers was $139.26 million, exceeding the average estimate of $135.45 million, marking a year-over-year increase of 15.4% [4] - Revenue by product included $4.5 million from Other, slightly above the average estimate of $4.47 million, $29.3 million from Security, compared to the average estimate of $29.65 million, and $114.9 million from Network Services, exceeding the average estimate of $111.21 million [4] Stock Performance - Fastly's shares have declined by 12.7% over the past month, while the Zacks S&P 500 composite increased by 0.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Fastly (FSLY) came out with a quarterly loss of $0.03 per share versus the Zacks Consensus Estimate of a loss of $0.05. This compares to a loss of $0.07 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +40.00%. A quarter ago, it was expected that this cloud software developer would post a loss of $0.06 per share when it actually produced a loss of $0.05, delivering a surprise of +16.67%. Over the last four quarters, the compan ...

Financial Data and Key Metrics Changes - Q2 revenue was $148.7 million, representing a 12% year-over-year growth, an improvement from 8% in Q1 [15][30] - Gross margin improved to 59%, a 170 basis point gain quarter-over-quarter [16][32] - Operating loss was $4.6 million, better than the guidance midpoint of $6 million [17][33] - Cash flow from operations was $26 million, or 17% of revenue, indicating strong cash management [18][35] - Free cash flow for Q2 was $10.9 million, a significant improvement from negative $18.5 million in Q2 2024 [36] Business Line Data and Key Metrics Changes - Security revenue reached a record high of $29.3 million, accounting for 20% of total revenue, with a 15% year-over-year growth [16][30] - Network services revenue was $114.9 million, growing 10% year-over-year [29] - Other products revenue grew 60% year-over-year, primarily driven by compute products [30] Market Data and Key Metrics Changes - Total customer count increased to 3,097, with enterprise customer count at 622, reflecting a 27 increase from the previous quarter [19] - LTM Net Revenue Retention (NRR) improved to 104%, up from 100% in Q1 [19][31] - Revenue from customers outside the top 10 grew 17% year-over-year, outpacing overall revenue growth [20][30] Company Strategy and Development Direction - The company aims to accelerate growth and drive towards profitability, focusing on customer needs and product responsiveness [9][10] - Three pillars of expansion include targeting performance-focused customers, cross-selling within the existing customer base, and geographic expansion [20][22] - A new leadership position was created to drive opportunities in the APJ region, indicating a focus on international revenue growth [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the pricing environment, citing increased discipline in negotiations and a stable macro environment [48][50] - The company anticipates continued double-digit growth rates year-over-year for Q3 revenue [18] - Guidance for 2025 revenue was raised to a range of $594 million to $602 million, reflecting a 10% annual growth at the midpoint [41] Other Important Information - The company announced leadership changes, with a new CFO, Richard Wong, joining the team [11][12] - The company is focused on improving customer acquisition and reducing onboarding friction, with a 50% increase in packages sold year-over-year [24] Q&A Session Summary Question: Is the management change a new chapter for Fastly? - Management acknowledged the change as a new chapter and emphasized the opportunity to build on established momentum and accelerate results [44][46] Question: What is the outlook for the pricing environment? - Management noted an improving pricing environment due to increased discipline in negotiations and stability in the macro environment [47][50] Question: Can you provide insights on the cross-sell initiative? - Management highlighted strong customer interest in new products and the impact of the platform strategy on cross-selling opportunities [53][55] Question: What is driving the volatility in security revenue growth? - Management explained that volatility was due to historical trends and customer concentration, but stability is expected moving forward [78][81] Question: Can you elaborate on competitive displacements in DDoS? - Management indicated that new DDoS and bot mitigation products have led to consolidations from third-party vendors, enhancing customer experience [82]

Part I - Financial Information [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements for the period ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $82,487 | $286,175 | | Total current assets | $464,663 | $440,195 | | Goodwill | $670,356 | $670,356 | | Total assets | $1,463,177 | $1,451,359 | | **Liabilities & Equity** | | | | Total current liabilities | $312,803 | $104,456 | | Long-term debt | $149,883 | $337,614 | | Total liabilities | $520,530 | $486,109 | | Total stockholders' equity | $942,647 | $965,250 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $148,709 | $132,371 | $293,183 | $265,891 | | Gross Profit | $81,116 | $72,901 | $157,914 | $146,135 | | Loss from Operations | $(36,943) | $(46,734) | $(75,122) | $(92,994) | | Net Loss | $(37,541) | $(43,729) | $(76,689) | $(87,156) | | Net Loss Per Share | $(0.26) | $(0.32) | $(0.53) | $(0.64) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,086 | $6,184 | | Net cash provided by (used in) investing activities | $(248,839) | $41,675 | | Net cash provided by (used in) financing activities | $1,810 | $(8,673) | | **Net (decrease) increase in cash** | **$(203,688)** | **$39,125** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Revenue by Product Line (in thousands) | Product Line | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Network Services | $114,877 | $104,158 | $228,106 | $210,154 | | Security | $29,267 | $25,368 | $55,702 | $49,968 | | Other | $4,565 | $2,845 | $9,375 | $5,769 | | **Total Revenue** | **$148,709** | **$132,371** | **$293,183** | **$265,891** | - As of June 30, 2025, the company had remaining performance obligations of **$315.1 million**, with approximately **72%** expected to be recognized as revenue over the next 12 months[49](index=49&type=chunk) Debt Instruments Carrying Value (in thousands) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Principal amount | $338,594 | $338,594 | | Less: unamortized debt issuance costs | $(659) | $(980) | | Less: current portion of long-term debt | $(188,052) | — | | **Long-term debt, less current portion** | **$149,883** | **$337,614** | - The company is involved in a securities class action lawsuit and related stockholder derivative actions, but **no significant accruals for loss contingencies have been recorded** as a loss is not considered probable[109](index=109&type=chunk)[110](index=110&type=chunk)[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial performance, highlighting 12% YoY revenue growth and discussing key metrics, operations, and liquidity [Overview and Key Business Metrics](index=38&type=section&id=Overview%20and%20Key%20Business%20Metrics) - Fastly's edge cloud platform enables developers to build, secure, and deliver digital experiences for a diverse customer base[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) Key Business Metrics as of June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Customer Count | 3,097 | 3,295 | | Enterprise Customer Count | 622 | 601 | | Last-Twelve Months Net Retention Rate (LTM NRR) | 104.4% | 109.6% | - Enterprise customers generated **94% of total annualized revenue** in Q2 2025, an increase from 91% in Q2 2024[191](index=191&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Revenue Growth (Q2 2025 vs Q2 2024) | Product Line | Q2 2025 Revenue (M) | Q2 2024 Revenue (M) | YoY Growth | | :--- | :--- | :--- | :--- | | Network Services | $114.9 | $104.2 | 10% | | Security | $29.3 | $25.4 | 15% | | Other | $4.5 | $2.8 | 60% | | **Total** | **$148.7** | **$132.4** | **12%** | - **Gross margin remained flat at 55%** for Q2 2025 compared to Q2 2024, as revenue growth was matched by increased network-related costs[221](index=221&type=chunk)[223](index=223&type=chunk) - Operating expenses decreased by 1% YoY in Q2 2025, driven by: - Sales and Marketing: Decreased by 4% due to lower personnel-related costs[225](index=225&type=chunk) - General and Administrative: Decreased by 14% due to lower stock-based compensation[226](index=226&type=chunk) - Research and Development: Increased by 20% due to higher stock-based compensation and lower capitalized software costs[228](index=228&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had **$321.2 million in cash, cash equivalents, and marketable securities**, which is considered sufficient for the next twelve months[242](index=242&type=chunk)[244](index=244&type=chunk) - Net cash from operating activities **increased significantly to $43.1 million** for the first six months of 2025, compared to $6.2 million in the prior year period[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - The company amended its Senior Secured Credit Facilities Agreement, reducing the commitment to **$60.0 million** and extending the maturity date to April 30, 2027[245](index=245&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate and currency exchange fluctuations, which are not considered material - The company's primary market risks are interest rate fluctuations affecting its **$321.2 million** in cash and investments, and foreign currency exchange rate changes[267](index=267&type=chunk)[268](index=268&type=chunk) - The company **does not currently use derivative financial instruments** to manage interest rate or currency risk exposure[267](index=267&type=chunk)[268](index=268&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective due to a material weakness in the revenue process, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2025, due to a material weakness[270](index=270&type=chunk) - The material weakness relates to deficiencies in the revenue process, caused by a lack of qualified personnel and insufficient controls over its third-party billing system[272](index=272&type=chunk) - Despite the material weakness, management concluded that the financial statements are **fairly presented in all material respects** in conformity with GAAP[271](index=271&type=chunk) Part II - Other Information [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company faces a securities class action lawsuit and related derivative actions with an uncertain outcome - A securities class action lawsuit was filed against the company and certain officers on May 24, 2024, with a motion to dismiss filed on January 15, 2025[109](index=109&type=chunk)[279](index=279&type=chunk) - Several stockholder derivative actions with substantially similar allegations have also been filed and are **currently stayed** pending the resolution of the motion to dismiss[110](index=110&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) Key business risks include customer concentration, a material weakness in internal controls, and a history of operating losses - The company has **significant revenue concentration** from a limited number of customers, and a potential U.S. ban on TikTok could negatively impact business[298](index=298&type=chunk)[299](index=299&type=chunk) - A **material weakness in internal control over financial reporting** has been identified in the revenue process, which could lead to a loss of investor confidence if not remediated[394](index=394&type=chunk)[395](index=395&type=chunk) - The company has a history of operating losses, with an **accumulated deficit of $1,069.5 million** as of June 30, 2025, and expects to continue incurring losses[303](index=303&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=96&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[484](index=484&type=chunk) [Other Information](index=97&type=section&id=Item%205.%20Other%20Information) Several executives, including the current and former CEO, adopted Rule 10b5-1 trading plans during the quarter Executive Rule 10b5-1 Trading Plan Adoptions (Q2 2025) | Name and Position | Adoption Date | Total Shares to be Sold | | :--- | :--- | :--- | | Todd Nightingale (Former CEO) | 6/3/2025 | 441,000 | | Charles Compton (CEO) | 6/3/2025 | 181,634 | | Artur Bergman (CTO) | 6/3/2025 | 2,917,357 | [Exhibits](index=98&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements and officer certifications

[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]