Financial Data and Key Metrics Changes - The company reported Q3 2025 revenue of $158.2 million, exceeding the high end of guidance and marking a record high [6][16] - Gross margin improved to 62.8%, up 380 basis points sequentially, and operating income reached a record $11.6 million, significantly above guidance [6][19] - Free cash flow for the quarter was $18 million, demonstrating strong financial performance [6][21] Business Line Data and Key Metrics Changes - Network services revenue grew 11% year over year to $118.8 million, with healthy traffic levels contributing to this growth [16][17] - Security revenue increased 30% year over year to $34 million, representing 21% of total revenue, driven by an expanded security portfolio [17][19] - Other products revenue surged 51% year over year to $5.4 million, primarily from compute products [17] Market Data and Key Metrics Changes - The top 10 customers accounted for 32% of revenue, with revenue from customers outside the top 10 growing 17% year over year [17] - The trailing 12-month net retention rate improved to 106%, up from 104% in the prior quarter [17][18] Company Strategy and Development Direction - The company is focused on accelerating growth and innovation while maintaining operational discipline, raising full-year guidance for revenue and profitability [5][12] - Strategic initiatives include expanding the security portfolio and enhancing the customer experience through AI integration [8][11] - The company aims to increase international expansion, particularly in the APJ region, to capture more market opportunities [11][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its strategy and raised financial targets for the upcoming quarters [12][24] - The company anticipates continued revenue growth driven by successful cross-sell and upsell motions, with Q4 revenue guidance set at $159-$163 million [22][24] Other Important Information - The company discovered an error in the historical calculation of RPO, which has been recapped in the investor supplement, but this change will not impact customer growth focus [18] - The company is implementing a rigorous budgeting process to enhance financial discipline and ROI on spending [15] Q&A Session Summary Question: Concerns about delivery business expansion - Management noted that network services delivered 11% year-over-year growth, indicating ongoing strength in that segment [26] Question: One-time items in the quarter - Management clarified that the strong performance was due to a combination of successful cross-sell efforts and strong bookings linearity [29] Question: Strength in security portfolio - Management highlighted broad-based demand for new security offerings, including AI bot management and DDoS capabilities [30] Question: International expansion returns - Management emphasized that the international strategy focuses on sales coverage and is seeing early positive results, particularly in the APJ region [34][35] Question: Stability of security revenue - Management confirmed that the $34 million in security revenue is expected to continue, with no one-time revenue recognition impacting future quarters [37] Question: Net retention rate outlook - Management expressed optimism about improving the net retention rate in Q4, indicating potential for further growth [46]

Core Viewpoint - Fastly reported record GAAP revenue of $148.7 million in Q2 2025, exceeding analyst expectations, while also narrowing its non-GAAP net loss per share, indicating operational progress despite ongoing profitability pressures [1][5][11] Financial Performance - GAAP revenue reached $148.7 million, a 12% increase year-over-year from $132.4 million in Q2 2024 [2][5] - Non-GAAP net loss per share improved to ($0.03), better than the anticipated ($0.05) loss, marking a 50% improvement from ($0.06) in Q2 2024 [2] - Free cash flow turned positive at $10.9 million, a significant recovery from a negative $18.5 million in the previous year [2][6] - Non-GAAP gross margin slightly decreased to 59.0%, down 0.4 percentage points from the previous year [2][6] - Operating loss on a non-GAAP basis narrowed to $4.6 million, a 60% improvement year-over-year from $11.5 million [2][6] Revenue Breakdown - Network services revenue was $114.9 million, up 10% year-over-year, while security revenue increased by 15% to $29.3 million [5] - The "Other" segment, which includes Compute and Observability products, surged 60% to $4.5 million [5][9] Customer Trends - Revenue concentration from the top 10 customers decreased to 31%, down from 34% a year ago, indicating improved diversification [7] - Revenue from customers outside the top ten grew by 17%, compared to only 2% growth from the top ten [7] - Remaining performance obligations reached a record $315 million, representing a 41% year-over-year growth [7] Product Innovation and Strategy - Fastly is focusing on enhancing its security offerings and expanding programmable edge services, including AI Bot Management and DDoS protection [4][9] - The company has seen a 130% year-over-year increase in renewals involving multi-product packages, indicating successful account penetration [8] Future Guidance - Management raised its FY2025 revenue guidance to between $594 million and $602 million, implying around 9% growth at the midpoint [11] - For Q3 2025, projected total revenue is expected to range from $149.0 million to $153.0 million [11] - The company anticipates reaching operating profitability in the second half of FY2025, with a non-GAAP operating loss forecasted between $9 million and $3 million [11]