Core Insights - Fastly reported revenue of $144.47 million for Q1 2025, marking an 8.2% year-over-year increase and a 4.47% surprise over the Zacks Consensus Estimate of $138.29 million [1] - The company posted an EPS of -$0.05, consistent with the previous year, and exceeded the consensus EPS estimate of -$0.06 by 16.67% [1] Financial Performance - Fastly's shares have returned +16.6% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The company currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3] Customer Metrics - Fastly's enterprise customer count stands at 595, slightly below the average estimate of 600 from two analysts [4] - The total customer count is 3,072, which is lower than the estimated 3,140 by two analysts [4] - The last 12-month net retention rate (LTM NRR) is 100%, compared to the average estimate of 101.2% from two analysts [4]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $144.5 million, exceeding the guidance range of $136 million to $140 million, with an 8% year-over-year growth compared to 2% in Q4 2024 [8][23] - Operating loss was $5.8 million, better than the guidance range of $11 million to $7 million [12][27] - Gross margin for the quarter was 57.3%, slightly above projections but down from 59.6% in Q1 2024 [11][26] - Positive free cash flow of $8 million was generated, marking the first positive cash flow in eight quarters [13][29] Business Line Data and Key Metrics Changes - Network services revenue was $113.2 million, growing 7% year-over-year [23][24] - Security revenue also grew 7% year-over-year to $26.4 million, while other products, primarily compute, contributed $4.8 million, growing 64% year-over-year [24][20] - The enterprise customer count increased by 3% year-over-year, with average enterprise customer spend growing 4% quarter-over-quarter to $907,000 [10][9] Market Data and Key Metrics Changes - Revenue outside the top 10 customers grew 17% year-over-year, indicating revenue diversification [11][10] - The trailing twelve-month net retention rate was 100%, down from 102% in the prior quarter [25] Company Strategy and Development Direction - The company is focused on go-to-market transformation, emphasizing customer acquisition and cross-selling opportunities [9][14] - A new segmented go-to-market strategy has been implemented to enhance customer engagement and drive revenue growth [13][15] - The security portfolio has been expanded, with a focus on cross-selling security products to existing customers [19][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth despite macro uncertainties, expecting to achieve operating profit in the second half of 2025 [21][35] - The company is taking a cautious approach to guidance, particularly regarding potential impacts from TikTok's U.S. operations [31][32] - Management noted that they have not seen significant changes in buyer behavior or demand patterns, maintaining a conservative outlook for the rest of the year [45][46] Other Important Information - The company plans to attend several conferences in Q2 2025 to enhance visibility and investor relations [7] - The adjusted EBITDA for Q1 2025 was $7.8 million, an increase from $4.9 million in Q1 2024 [28] Q&A Session Summary Question: What is driving incremental customer demand in network services? - Management highlighted strong customer acquisition in strategic verticals and improved execution from the sales team [38] Question: What percentage of customers are using WAF, and what is the adoption rate for DDoS and bot mitigation? - Management indicated that almost half of customers use multiple product lines, with WAF adoption being lower, suggesting significant growth potential [40][41] Question: What drove the 64% growth in the compute and observability business? - The growth was primarily driven by demand for dynamic user experiences and innovative storage solutions [43] Question: What is the outlook for pricing stability in the market? - Management noted improvements in the pricing environment, expecting stabilization back to high teens percentage declines [61][64] Question: What are the drivers behind the sequential increase in RPO? - Strategic renewals, sales incentives, and the success of the packaging strategy contributed to the strong RPO growth [49][50] Question: How is the company addressing potential geopolitical risks with TikTok? - Management expressed optimism about the ongoing relationship with TikTok while remaining cautious about U.S. operations [58] Question: What is the expected growth rate for security products? - Management believes security growth can reach mid-teens rates, with significant potential for acceleration in bot and DDoS products [81]

Financial Data and Key Metrics Changes - Q1 2025 revenue was $144.5 million, exceeding guidance of $136 million to $140 million, representing an 8% year-over-year growth compared to 2% in Q4 2024 [6][7][24] - Gross margin for Q1 2025 was 57.3%, slightly above projections but down from 59.6% in Q1 2024 [10][27] - Operating loss was $5.8 million, better than the guidance range of $11 million to $7 million [11][28] - Positive free cash flow of $8 million was generated, marking the first positive cash flow in eight quarters [12][30] Business Line Data and Key Metrics Changes - Network services revenue was $113.2 million, growing 7% year-over-year [24] - Security revenue was $26.4 million, also growing 7% year-over-year [24] - Revenue from other products, primarily compute, grew 64% year-over-year, contributing $4.8 million [20][24] Market Data and Key Metrics Changes - Revenue outside the top 10 customers grew 17% year-over-year, indicating revenue diversification [10][24] - The top 10 customers represented 33% of revenue, down from 38% in Q1 2024 [9][10] - The trailing twelve-month net retention rate was 100%, down from 102% in the prior quarter [26] Company Strategy and Development Direction - The company is focusing on a go-to-market transformation, enhancing customer acquisition and cross-selling efforts [7][12] - Emphasis on diversifying revenue sources and reducing reliance on top customers is evident, with a strategy to grow enterprise customer mix [10][12] - The security portfolio has been expanded, with three core offerings now available, aiming for increased penetration in existing customer accounts [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2025, expecting to achieve operating profit [21][37] - Despite macro uncertainties, no significant changes in buyer behavior or demand patterns have been observed [21][49] - The company raised its 2025 revenue guidance to $585 million to $595 million, reflecting a 9% annual growth at the midpoint [36] Other Important Information - The company is attending several conferences in Q2 2025 to enhance visibility and investor relations [5] - The impact of TikTok's U.S. operations on revenue has been cautiously managed, with guidance excluding potential revenue from TikTok after June 19 [33][34] Q&A Session Summary Question: What is driving incremental customer demand in network services? - Management noted strong customer acquisition in strategic verticals and enhanced sales execution under new leadership [39][40] Question: What percentage of customers are using WAF, and what is the adoption rate for DDoS and bot mitigation? - Approximately half of customers use multiple product lines, with WAF adoption being lower, indicating significant growth potential [43][44] Question: What drove the 64% growth in compute and observability? - The growth was primarily driven by demand for dynamic user experiences and innovative storage solutions [46][47] Question: What is the outlook for pricing stability in the market? - Management indicated a return to a more favorable pricing environment, expecting stabilization in pricing dynamics [64][65] Question: What are the drivers behind the sequential increase in RPO? - Strategic renewals, sales incentives, and the success of the packaging strategy contributed to the record RPO growth [52][53] Question: How is the company addressing potential geopolitical risks with TikTok? - Management expressed optimism about maintaining a strong relationship with TikTok and leveraging opportunities across the portfolio [60][61] Question: What is the expected EBITDA outlook for the year? - Management expects to see positive EBITDA for the year, particularly in the second half [78] Question: Why is security growth currently slow? - Management believes there is significant potential for growth in the security segment, particularly with new product offerings [82][83]

Financial Performance - For the three months ended March 31, 2025, revenue was $144.5 million, an increase of 8% from $133.5 million in the same period of 2024[154]. - The company incurred a net loss of $39.1 million for the three months ended March 31, 2025, compared to a net loss of $43.4 million in the same period of 2024[154]. - Total revenue for the three months ended March 31, 2025, was $144.5 million, an increase of 8% from $133.5 million in the same period of 2024[200]. - Gross profit for the three months ended March 31, 2025, was $76.8 million, with a gross margin of 53%, down from 55% in the same period of 2024[197][199]. - The net loss attributable to common stockholders for the three months ended March 31, 2025, was $39.1 million, compared to a net loss of $43.4 million in 2024[197]. - Interest income fell to $3.0 million, a decrease of 23% from $3.8 million in Q1 2024, attributed to lower interest rates and investment balances[211]. - Interest expense surged to $3.2 million, an increase of 448% from $0.6 million in Q1 2024, primarily due to the coupon interest of the 2028 Notes issued in December 2024[212]. - As of March 31, 2025, the company had cash and cash equivalents totaling $307.3 million, indicating a strong liquidity position[215]. - Net cash provided by operating activities was $17.3 million for the three months ended March 31, 2025, compared to $11.1 million in Q1 2024[225]. Customer Metrics - The top 10 customers contributed 32% of total revenue for the trailing 12 months ended March 31, 2025, down from 38% in 2024[154]. - The total customer count decreased to 3,035 as of March 31, 2025, down from 3,290 in 2024, indicating a decline in customer adoption[175][177]. - The enterprise customer count increased to 595, contributing 93% of total annualized current quarter revenue, up from 577 customers contributing 91% in the previous year[178]. - The Last-Twelve Months Net Retention Rate (LTM NRR) was 100.0% for the trailing twelve months ended March 31, 2025, down from 114.0% in 2024, reflecting challenges in customer retention[179][180]. Revenue Breakdown - Network Services revenue was $113.3 million, a 7% increase from $106.0 million in the same period of 2024, driven by growth in usage from existing customers[200][202]. - Security revenue also increased by 7% to $26.4 million, compared to $24.6 million in the prior year[200]. - U.S. revenue reached $110.5 million, accounting for 77% of total revenue, a 12% increase from $98.5 million in Q1 2024, while international revenue decreased by 3% to $33.9 million[204]. Expenses and Investments - Research and development expenses as a percentage of revenue were 26% for the three months ended March 31, 2025, compared to 29% in the same period of 2024[171]. - Research and development expenses were $37.4 million, accounting for 26% of revenue, a decrease from 29% in the previous year[197][199]. - Cost of revenue rose to $67.7 million, an increase of $7.4 million or 12% compared to $60.3 million in Q1 2024, primarily due to higher bandwidth costs[205]. - Total operating expenses decreased by 4% to $114.98 million from $119.49 million in Q1 2024, with general and administrative expenses down 11%[207]. - The company expects to continue incurring operating losses in the foreseeable future due to ongoing investments and strategic initiatives[217]. Strategic Initiatives - The company plans to continue investing in its platform and network infrastructure to support revenue growth and customer needs[171]. - The company aims to expand its customer base across diverse industry verticals by enhancing product experience and leveraging its partner ecosystem[157]. - The company is focused on increasing its sales and marketing efforts globally, particularly targeting enterprise customers[168]. - The company intends to expand its international presence, which may increase complexity and costs[166]. - The company has acquired Glitch to enhance its product offerings and support developer project management[171]. Risk Factors - The company is closely monitoring geopolitical events that could impact its business, particularly concerning customers operating in regions affected by conflict[167]. - The company does not currently engage in hedging activities to reduce exposure to currency fluctuations, although it may consider this in the future[242]. - The company identified certain triggering events for goodwill impairment, including a decrease in stock price and market capitalization, but concluded that fair value exceeds carrying amount[237]. - A hypothetical 10% change in interest rates or foreign exchange rates would not have had a material impact on the company's financial statements[241][242].

Financial Performance - Total revenue for Q1 2025 was $144.5 million, representing an 8% year-over-year growth[9]. - Q2 2023 revenue was $122.831 million, increasing to $144.474 million by Q1 2025, representing a growth of approximately 17.6%[36]. - Gross profit for Q2 2023 was $70.366 million, with a projected increase to $82.853 million by Q1 2025, indicating a growth of about 17.8%[36]. - Gross profit for Q3 2023 was $66.086 million, with an expected increase to $76.798 million by Q1 2025, indicating a growth of about 16.2%[32]. - The company reported a net loss of $(3.779) million in Q2 2023, with a projected loss of $(6.597) million by Q1 2025, indicating a worsening financial position[36]. - Net loss for Q3 2023 was $54.311 million, with a projected decrease to $39.148 million by Q1 2025, indicating an improvement of about 28%[32]. - The company reported a net loss of $54,311 thousand in Q3 2023, an increase from a net loss of $10,704 thousand in Q2 2023[40]. - Non-GAAP operating loss for Q2 2025 is projected to be between $8.0 million and $4.0 million, with a non-GAAP net loss per share between $0.08 and $0.04[5]. Customer Metrics - The enterprise customer count increased to 595, up 18 from Q1 2024, while total customer count decreased to 3,035, down 255 from Q1 2024[9]. - Fastly's top ten customers accounted for 33% of revenue in Q1 2025, down from 38% in Q1 2024[9]. - Last 12-month net retention rate (LTM NRR) decreased to 100% in Q1 2025 from 102% in Q4 2024[9]. Cash Flow and Expenses - The company generated $8.2 million of positive free cash flow in Q1 2025, compared to $2.2 million of negative free cash flow in Q1 2024[9]. - Free cash flow for Q3 2023 was negative at $(19,694) thousand, a decline from $7,753 thousand in Q2 2023[41]. - Total operating expenses in Q2 2023 were $77.311 million, projected to rise to $88.698 million by Q1 2025, an increase of about 14.7%[36]. - Total operating expenses in Q3 2023 were $124.428 million, with a forecasted decrease to $114.977 million by Q1 2025, reflecting a reduction of approximately 7.5%[32]. Research and Development - Research and development expenses in Q3 2023 were $39.068 million, expected to decrease to $37.429 million by Q1 2025, a reduction of approximately 4.2%[32]. - Research and development expenses were $25.216 million in Q2 2023, expected to increase to $28.536 million by Q1 2025, a growth of approximately 13.0%[36]. - Research and development expenses for Q3 2023 were $39,068 thousand, with non-GAAP R&D expenses at $26,236 thousand, highlighting a focus on innovation[33]. Financial Health and Liabilities - Long-term debt decreased from $472,823 thousand in Q3 2023 to $149,874 thousand in Q1 2025, a reduction of about 68.3%[39]. - Total liabilities decreased from $672,091 thousand in Q3 2023 to $492,222 thousand in Q1 2025, reflecting a decrease of approximately 26.7%[39]. - Total current assets decreased from $551,458 thousand in Q3 2023 to $440,195 thousand in Q1 2025, representing a decline of approximately 20.2%[39]. - Total stockholders' equity decreased from $968,572 thousand in Q3 2023 to $957,023 thousand in Q1 2025, a slight decrease of approximately 1.6%[39]. - Accumulated deficit increased from $811,366 thousand in Q3 2023 to $1,031,958 thousand in Q1 2025, indicating a worsening of about 27.1%[39]. Product Development and Recognition - Fastly released several new products, including Fastly Client-Side Protection and Fastly HTTP Cache API, enhancing its service offerings[8]. - Fastly's Next-Gen WAF was recognized as a Strong Performer in The Forrester Wave™: Web Application Firewall Solutions, Q1 2025[9]. - Product package deals in Q1 2025 more than doubled year-over-year, with new logo packages growing over 80% year-over-year[8]. Future Outlook - Future outlook includes continued focus on market expansion and product development, with an emphasis on maintaining cost efficiency and improving margins[33]. - Management emphasizes that non-GAAP financial measures provide a clearer view of the company's core business performance and facilitate comparisons with peers[30]. - The company plans to exclude amortization of capitalized stock-based compensation from non-GAAP financial measures starting Q1 2025, enhancing the clarity of financial performance[34].

Industry Overview - The global cloud computing market is projected to nearly double from 2023 to 2028, reaching approximately $1.3 trillion by the end of that period, driven by increasing demand for cloud computing services [1] - Despite the cloud industry's establishment, competition among cloud infrastructure firms remains, with opportunities for new technological developments and market expansion [2] Company Analysis: Applied Digital Corp. - Applied Digital Corp. has a market capitalization of $1.2 billion and is recognized as a significant provider of data centers and AI cloud services, receiving unanimous support from Wall Street analysts with a consensus price target over double its current price [4] - The 12-month stock price forecast for Applied Digital is $10.67, indicating a potential upside of 102.79% from the current price of $5.26, with a high forecast of $20.00 and a low of $7.00 [5] - The company focuses on data centers for major tech firms like Amazon and Meta, which are investing tens of billions in cloud and AI infrastructure [5] - Applied Digital has experienced mixed stock performance, with a 68% gain over the last year but a decline of about 33% year-to-date, attributed to a disconnect between investor expectations and the company's results [6] - In the latest quarter, Applied Digital missed revenue expectations despite a year-over-year increase of over 22%, while its net loss per share was better than expected, raising questions about its future direction, including potential divestment of its cloud services business [7] Company Analysis: Couchbase Inc. - Couchbase Inc. offers database-as-a-service products for enterprise applications, allowing customers to manage Couchbase Server across various cloud environments [9] - The 12-month stock price forecast for Couchbase is $21.41, suggesting a 23.87% upside from the current price of $17.29, with a high forecast of $26.00 [10] - Couchbase reported a 16% year-over-year revenue improvement and a 17% growth in annual recurring revenue, indicating strong customer relationships [10] - The company has narrowed its operational losses but continues to face cash flow challenges, with a recent focus on its Edge server for offline low-latency data access [11][12] Company Analysis: Fastly Inc. - Fastly Inc. operates in the edge cloud platform space, generating revenue primarily from content delivery and security services [13] - The 12-month stock price forecast for Fastly is $8.28, indicating a 39.24% upside from the current price of $5.95, with a high forecast of $12.00 [14] - Fastly faces challenges with negative operating income and declining revenue from larger clients, leading to a consensus "Hold" rating from analysts [15]

Group 1: Radware Overview - Radware (RDWR) shares increased by 5.5% to $22.24, following a strong market recovery amid easing US-China trade tensions [1] - The stock had previously experienced an 8.4% decline over the past four weeks [1] - The upcoming quarterly earnings are expected to be $0.23 per share, reflecting a year-over-year increase of 43.8%, with revenues projected at $70.5 million, up 8.3% from the previous year [2] Group 2: Earnings Estimates and Market Position - The consensus EPS estimate for Radware has remained unchanged over the last 30 days, indicating a lack of upward revisions which typically correlate with stock price movements [3] - Radware holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook [3] - The company is part of the Zacks Internet - Software industry, which includes other players like Fastly (FSLY) [3] Group 3: Fastly Overview - Fastly's consensus EPS estimate for the upcoming report is -$0.06, representing a year-over-year decline of 20% [4] - Fastly currently has a Zacks Rank of 4 (Sell), indicating a negative outlook [4]

Core Viewpoint - Fastly is experiencing significant challenges with revenue growth and customer retention, which raises concerns about its long-term stability, despite potential opportunities in the AI market through new product innovations [12]. Group 1: Stock Performance - Fastly's shares have declined 27.4% year to date, underperforming the broader Zacks Computer & Technology sector's decline of 8% and the Zacks Internet - Software industry's fall of 2.8% [1]. - In comparison, Digital Turbine's shares have surged 98.3%, while Inseego and Atlassian have seen declines of 5.4% and 10.2%, respectively [1]. Group 2: Revenue and Earnings - Fastly reported fourth-quarter 2024 revenues of $140.6 million, reflecting a 2% year-over-year growth, primarily due to stagnant network services revenues [2]. - For the first quarter of 2025, Fastly expects revenues between $136 million and $140 million, indicating a 3% year-over-year growth at the mid-point [5]. - The company anticipates revenues of $575 million to $585 million for 2025, suggesting a 7% year-over-year growth at the mid-point [6]. Group 3: Customer Retention Challenges - Fastly is facing significant customer retention challenges, with a net retention rate falling to 102% in the fourth quarter from 105% the previous quarter and 113% a year ago [4]. - The company lost 182 customers year over year and 577 in the last quarter, indicating ongoing retention issues and potential weaknesses in customer growth [4]. Group 4: Product Innovations - Fastly's fourth-quarter 2024 results highlight significant product innovations, including the AI Accelerator and advanced security solutions, which may enhance its competitive edge in edge computing [8]. - The AI Accelerator addresses performance and cost challenges in LLM and generative AI applications, supporting OpenAI's ChatGPT and Google Gemini, thereby creating revenue opportunities in the growing AI market [9]. - Fastly's new DDoS Protection service enhances its security portfolio by providing automated threat defense, which may drive customer adoption and retention [10]. - The introduction of Object Storage, an S3-compatible solution with zero egress fees, aims to reduce origin costs and enhance performance for data-intensive users, positioning Fastly for accelerated revenue growth [11].

Core Insights - Fastly (FSLY) reported revenue of $140.58 million for the quarter ended December 2024, marking a year-over-year increase of 2% [1] - The company recorded an EPS of -$0.03 for the same period, compared to an EPS of $0.01 a year ago [1] Financial Performance - Revenue for the quarter was $140.58 million, reflecting a slight growth of 2% year-over-year [1] - The earnings per share (EPS) decreased to -$0.03 from $0.01 in the previous year [1]

Financial Performance - Fastly's Last-Twelve Months Net Retention Rate (LTM NRR) metrics measure revenue growth from existing customers due to increased platform usage and additional product purchases[31]. - As of December 31, 2024, the company had cash, cash equivalents, and marketable securities totaling $295.9 million[100]. - Research and development expenses for the year ended December 31, 2024, were $138.0 million[88]. - The company employed 1,100 employees worldwide, with 240 located outside the United States as of December 31, 2024[80]. - The research and development team consisted of 389 employees as of December 31, 2024[88]. - A hypothetical 10% change in interest rates would not have had a material impact on the company's consolidated financial statements[100]. - A hypothetical 10% change in foreign exchange rates would not have had a material impact on the consolidated financial statements[460]. Product and Service Offerings - Fastly's Points of Presence (POPs) are architected with robust customized servers, yielding colocation cost savings compared to traditional architectures[35]. - The company has built a fully programmable platform using Varnish Configuration Language (VCL) and flexible APIs, allowing customers to control content caching and end-user request responses[35]. - Fastly Compute enables app developers to build high-performance, personalized applications without managing underlying infrastructure, enhancing scalability and security[56]. - The Instant Purge feature allows customers to clear cached content globally in milliseconds, improving performance for dynamic content delivery[43]. - Fastly's DDoS Protection offers zero attack fee billing, ensuring customers are not charged for attack traffic while providing robust application layer protection[52]. - Fastly's Origin Shield reduces costs and improves performance by collapsing multiple content requests into a single request during high traffic events[43]. - The Advanced Rate Limiting feature helps customers manage high-volume web requests, ensuring legitimate traffic is prioritized while blocking malicious requests[50]. - Fastly's observability offerings provide real-time insights for continuous performance improvements and faster debugging during development[40]. - Fastly's Compute platform offers features like TLS termination, serverless execution, and data access at the edge, enhancing performance and reducing latency for users[57][58][59]. - Fastly's Managed CDN provides maximum control and flexibility, allowing deployment on dedicated POPs within a customer's private network[63]. - Fastly's professional services include real-time logging and actionable insights to optimize performance and user experience for customers[62]. Strategic Initiatives - The acquisition of Glitch, Inc. in May 2022 expanded Fastly's developer community to over 3.1 million registered developers, supporting learning initiatives and code samples[59]. - The company plans to simplify customer onboarding and service usage, with a focus on a unified platform for managing all Fastly services[65]. - Fastly's growth strategy includes expanding into additional vertical markets and increasing wallet-share from existing customers through new products and features[68]. - The company has established partnerships with major cloud providers like Google Cloud and AWS to enhance service offerings and minimize egress fees[71]. - The Fast Forward program supports eligible open source projects by providing free Fastly products, promoting a free and open internet[60]. Compliance and Security - The company supports compliance with regulations such as HIPAA and GDPR, enhancing data privacy and security for customers[55]. - Fastly's Next-Gen WAF launched in Q1 2022 aims to enhance application security across various environments, with ongoing investments in this area[66]. Workforce and Culture - The company focuses on building a global, healthy, and safe workforce with an inclusive culture[79]. - The company has a unique support model designed for developers, with first-line support employees typically having an engineering background[83]. Currency and Financial Exposure - The functional currency of the foreign subsidiaries is the U.S. dollar, exposing the company to foreign exchange rate fluctuations[460]. - Foreign subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates[460]. - Revenue and expense accounts are remeasured at the average exchange rate during the period[460]. - The company does not currently engage in hedging activities to reduce potential exposure to currency fluctuations[460].