Financial Data and Key Metrics Changes - The company reported record revenue of $173 million in Q4 2025, representing a 23% year-over-year growth, the highest in over three years, and exceeding guidance [7][17] - Annual revenue for 2025 was $624 million, reflecting a 15% increase over 2024, also above the original guidance range [17][18] - Gross margin reached a record high of 64% in Q4, up from 57.5% in Q4 2024, driven by higher revenue and a balanced traffic mix [22][23] - Operating income for Q4 was $21.2 million, with a net profit of $20.1 million, compared to a net loss of $2.4 million in Q4 2024 [24][26] Business Line Data and Key Metrics Changes - Network services revenue grew 19% year-over-year to $130.8 million, attributed to strong traffic levels and successful upsell motions [18][19] - Security revenue increased 32% year-over-year to $35.4 million, now comprising 21% of total revenue, driven by an expanded security portfolio [18][19] - Other products revenue surged 78% year-over-year to $6.4 million, primarily from compute product sales [18] Market Data and Key Metrics Changes - The top 10 customers accounted for 34% of revenue in Q4, up from 32% in the previous quarter, while revenue from customers outside the top 10 grew 20% year-over-year [19] - The trailing twelve-month net retention rate improved to 110%, up from 106% in the prior quarter, indicating strong revenue growth from larger customers [20] Company Strategy and Development Direction - The company aims to accelerate growth and drive profitability through disciplined execution and a focus on security and resilience [6][9] - Investment in security products and features is a priority, with new launches enhancing customer engagement and driving cross-sell opportunities [9][10] - The company is positioning itself to capitalize on the growing demand for AI-related services, with a focus on managing AI traffic and providing security solutions [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outpace market growth, despite macroeconomic and geopolitical uncertainties [15][51] - The guidance for Q1 2026 anticipates revenue growth of 18% and for the full year 2026, revenue is expected to be in the range of $700 million to $720 million, reflecting a 14% growth [33][34] - Management highlighted the importance of maintaining a disciplined approach to pricing and customer commitments to mitigate revenue volatility [44][51] Other Important Information - The company ended Q4 with a record RPO of $353.8 million, growing 55% year-over-year, indicating strong future revenue visibility [21] - Cash flow from operations was positive $22.4 million in Q4, with free cash flow of $8.6 million, a significant improvement from the previous year [26][27] - The company plans to increase infrastructure capital expenditures to 10%-12% of revenue in 2026, reflecting growth objectives and capacity upgrades [30][31] Q&A Session Summary Question: Can you expand on AI traffic and its impact? - Management noted an increase in traffic related to AI agents, with more requests processed through the Fastly network, indicating a positive trend for the business [37][39] Question: What drove the widening performance gap compared to peers? - Management attributed the performance edge to architectural improvements and a focus on resiliency, which attracted more customer traffic [40] Question: What gives confidence in the increased guidance? - Confidence stems from established customer relationships, RPO growth, and overall market trends, despite caution regarding geopolitical dynamics [50][52] Question: How is the mix of traffic evolving? - Management indicated a shift towards more strategic relationships with customers, leading to increased consumption of multiple services [54] Question: What are the durable inputs to traffic growth? - Management highlighted mid-20s traffic growth across various types, with improved pricing discipline leading to reduced price erosion [71][74]

Financial Data and Key Metrics Changes - The company reported record revenue of $173 million in Q4 2025, representing a 23% year-over-year growth, the highest in over three years, and exceeding guidance [7][17] - Gross margins reached a record high of 64%, up from 57.5% in Q4 2024, driven by higher revenue and a balanced traffic mix [22][23] - Operating income was $21.2 million in Q4, with a net profit of $20.1 million, compared to a net loss of $2.4 million in Q4 2024 [24][26] - Free cash flow for Q4 was positive $8.6 million, a significant improvement from negative $7.9 million in Q4 2024 [26][27] Business Line Data and Key Metrics Changes - Network services revenue grew 19% year-over-year to $130.8 million, driven by strong traffic levels and upsell success [18][19] - Security revenue accelerated to 32% year-over-year growth, reaching $35.4 million, comprising 21% of total revenue [18][19] - Other products revenue increased by 78% year-over-year, primarily due to sales of compute products [18] Market Data and Key Metrics Changes - The company’s top 10 customers represented 34% of revenue, an increase from 32% in the prior quarter, while revenue from customers outside the top 10 grew 20% year-over-year [19] - The trailing 12-month net retention rate improved to 110%, up from 106% in the prior quarter [20] Company Strategy and Development Direction - The company is focused on accelerating growth and driving profitability through disciplined execution and a comprehensive suite of security products [6][9] - Investment in security and resilience is a priority, with new product launches enhancing customer engagement and driving multi-product adoption [10][11] - The company aims to capitalize on the increasing demand for AI-related services, positioning itself as a leader in edge intelligence [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth, projecting Q1 2026 revenue growth of 18% and full-year 2026 revenue of $700 million to $720 million, reflecting 14% growth [15][34] - The company acknowledged potential macroeconomic and geopolitical uncertainties but remains optimistic about its market position and growth trajectory [51][34] Other Important Information - The company ended Q4 with record remaining performance obligations (RPO) of $353.8 million, growing 55% year-over-year [21] - Cash capital expenditures were approximately 8% of revenue in Q4, below the expected range due to timing of expenditures [28][30] Q&A Session Summary Question: Insights on AI traffic and its impact - Management noted an increase in traffic related to AI, with more requests processed through the Fastly network, indicating a positive trend for the business [37][39] Question: Factors driving performance gap between Fastly and peers - Management highlighted a focus on resiliency and performance improvements as key factors attracting more traffic [40] Question: Confidence in revenue guidance - Management attributed confidence to established customer relationships, RPO growth, and overall market trends [50][52] Question: Coupling of network services and security growth - Management acknowledged some coupling between network services and security demand but emphasized the independent growth of the security portfolio [80] Question: CapEx increase due to component costs - Management indicated that the increase in CapEx is driven by both growth needs and rising component prices, particularly in memory [63]

Financial Data and Key Metrics Changes - Fastly reported record revenue of $173 million in Q4 2025, representing a 23% annual growth, the highest in over three years, and exceeding guidance [5][15] - The company achieved record gross margins of 64%, up from 57.5% in Q4 2024, driven by higher revenue and a balanced traffic mix [20][21] - Operating income reached $21.2 million in Q4, with a net profit of $20.1 million, compared to a net loss of $2.4 million in Q4 2024 [23][24] - Free cash flow for Q4 was positive $8.6 million, a significant improvement from negative $7.9 million in Q4 2024 [25][26] Business Line Data and Key Metrics Changes - Network services revenue grew 19% year-over-year to $130.8 million, driven by strong traffic levels and upsell success [16][17] - Security revenue accelerated to $35.4 million, growing 32% year-over-year, and comprised 21% of total revenue [16][17] - Other products revenue increased by 78% year-over-year, primarily due to sales of compute products [16] Market Data and Key Metrics Changes - The top 10 customers represented 34% of revenue, an increase from 32% in the prior quarter, while revenue from customers outside the top 10 grew 20% year-over-year [17] - The trailing twelve-month net retention rate improved to 110%, up from 106% in the prior quarter [18] Company Strategy and Development Direction - Fastly is focused on accelerating growth and driving profitability through disciplined execution and a comprehensive suite of security products [5][7] - The company is investing heavily in security and resilience, with new product launches aimed at enhancing customer engagement and driving multi-product adoption [8][9] - Fastly aims to capitalize on the growing demand for AI-related services, positioning itself as a leading edge cloud provider [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth, projecting Q1 2026 revenue growth of 18% and 14% for the full year [12][33] - The company acknowledged potential macroeconomic and geopolitical uncertainties but remains optimistic about its market position and growth trajectory [50][51] Other Important Information - Fastly ended Q4 with record remaining performance obligations (RPO) of $353.8 million, growing 55% year-over-year [19] - The company raised $180 million in 0% convertible notes to improve liquidity and support growth initiatives [24][25] Q&A Session Summary Question: Can you expand on AI traffic and its impact? - Fastly is seeing increased traffic related to AI agents, with more requests processed through its network, indicating a growing trend in AI workloads [35][36][38] Question: What drove the widening performance gap compared to peers? - Fastly has maintained a performance edge, with recent architectural improvements enhancing platform resiliency, attracting more customer traffic [39][40] Question: What gives confidence in the increased guidance? - Confidence stems from established customer relationships, RPO growth, and overall market trends, despite caution regarding geopolitical dynamics [48][49][51] Question: How is the CapEx increase affected by component costs? - The increase in CapEx is driven by both growth in demand and rising component prices, particularly in memory [60][61] Question: What are the durable inputs to traffic growth? - Traffic growth is broad-based across different types, with improved pricing discipline leading to reduced price erosion [69][72]