FSLY

It has been about a month since the last earnings report for Fastly (FSLY). Shares have lost about 6.9% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Fastly due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts. Fastly reported second-quarter 2026 adjusted earnings of 15 cents per share versus a loss of 3 cents a year ago. The figure topped the Zacks Consensus Estimate by 114.29%.Revenues rose 23.3% year over year to $183.32 million and surpassed the consensus mark by 5.34%. Strength across Network Services, Security and Compute supported the upside, while the last-12-month net retention rate climbed to 117%. Network Services revenues increased 17% year over year to $133.9 million, accounting for 73% of total revenues. Management attributed the performance to higher traffic among its largest customers, along with a smaller contribution from live sporting events.Fastly also said it is gaining share where performance is critical. The company highlighted major global sporting events that generated record traffic and cited customer wins tied to resilience, flexibility and consolidated edge services. Security revenues advanced 43% year over year to $41.7 million and represented 23% of revenues, up from 20% a year earlier. Management said DDoS protection and bot management grew at triple-digit rates, while its next-generation web application firewall continued to gain traction.Other revenues, which include Compute and Observability, climbed 69% to $7.7 million. Compute demand benefited from customers building low-latency applications and managing artificial intelligence (AI)-related traffic, supporting a combined Security and Other annual revenue run rate of nearly $200 million. Management said customers are adopting more products on Fastly’s unified platform, strengthening cross-sell and upsell activity. The company highlighted triple-digit growth in DDoS protection and bot management, while its web application firewall continued to gain traction.AI-generated and agentic traffic also remained a demand catalyst. Fastly noted that machine traffic requires real-time decisions around authorization, caching, throttling and blocking, supporting adoption across Security, Compute and Network Services.The company expanded its product reach through a partnership with Skyfire, designed to verify AI-agent identities and enable transactions at the edge. It also released a C++ software development kit for Fastly Compute to support low-latency AI, gaming and other workloads.Fastly also highlighted its collaboration with LALIGA on an AI-driven system that detects and stops pirated streams in real time. The project illustrates how the company is pairing content delivery with security and edge-compute capabilities. The last-12-month net retention rate improved from 113% in the first quarter and 104% in the year-ago quarter. The increase reflected broader product adoption and higher usage across a range of customers as Fastly expanded cross-selling and upselling efforts.Large customer count was 624 at the end of the quarter. Average annualized spend per large customer was $1.11 million, reflecting broader use of the platform across delivery, security and emerging edge-compute workloads. The top 10 customers represented 37% of revenues. Revenues from this group grew 48% year over year, while revenues from customers outside the top 10 increased 12%. Remaining performance obligations climbed 38% to $341 million, with the current portion rising 44%. Non-GAAP gross margin expanded 680 basis points year over year to a record 65.8%. Management attributed the improvement to higher revenues relative to infrastructure costs and continued cost discipline.Non-GAAP operating expenses were $93.7 million. Non-GAAP operating income totaled $27 million compared with an operating loss of $4.6 million a year ago. Adjusted EBITDA increased to $38.1 million from $8.9 million, while adjusted EBITDA margin reached 21%. As of June 30, 2026, cash, cash equivalents, marketable securities and investments totaled approximately $337 million, up $7 million from March 31, 2026. Fastly ended the quarter with a positive net cash balance of $14 million.Net cash provided by operating activities was $39.3 million, compared with $25.8 million a year earlier. Free cash flow totaled $3.6 million versus $10.9 million in the prior-year quarter, as infrastructure capital expenditures represented approximately 17% of revenues. For the third quarter of fiscal 2026, FSLY expects revenues to be in the range of $184-$190 million and non-GAAP earnings of 11-13 cents per share. The company projects non-GAAP operating income of $20-$24 million.Fastly raised its 2026 revenue guidance to $732-$746 million and non-GAAP earnings outlook to 50-54 cents per share. Non-GAAP operating income is expected between $88 million and $96 million, reflecting an operating margin of approximately 12% at the midpoint.Management views AI-driven demand as a tailwind across the business. AI tool usage is contributing to traffic growth among some of Fastly’s fastest-growing customers, with the impact most pronounced in Security and Compute and also evident in Network Services. It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 45.33% due to these changes. At this time, Fastly has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for value investors. Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Fastly has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months. Fastly belongs to the Zacks Internet - Software industry. Another stock from the same industry, CCC Intelligent Solutions Holdings Inc. (CCC), has gained 11.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026. CCC Intelligent Solutions reported revenues of $285.93 million in the last reported quarter, representing a year-over-year change of +9.8%. EPS of $0.10 for the same period compares with $0.09 a year ago. CCC Intelligent Solutions is expected to post earnings of $0.11 per share for the current quarter, representing a year-over-year change of +22.2%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged. CCC Intelligent Solutions has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastly, Inc. (FSLY) : Free Stock Analysis Report CCC Intelligent Solutions Holdings Inc. (CCC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Fastly’s Q2 results for 2026 reflected a period of robust growth and operational improvement, though the market responded negatively. Management attributed the quarter’s performance to an expanding security business, increased adoption of its unified platform, and a notable rise in AI-driven and machine-generated traffic. CEO Charles Compton emphasized the significance of Fastly’s unified approach, stating the company’s “platform strategy is foundational to our success,” while also highlighting strong customer wins and deepening relationships with top clients. CFO Richard H. Wong pointed to ongoing operational discipline and efficiency gains as factors supporting record gross margins and the company’s sixth consecutive quarter of positive free cash flow. Is now the time to buy FSLY? Find out in our full research report (it’s free). Revenue: $183.3 million vs analyst estimates of $174 million (23.3% year-on-year growth, 5.3% beat) Adjusted EPS: $0.15 vs analyst estimates of $0.07 (significant beat) Adjusted EBITDA: $38.12 million vs analyst estimates of $26.45 million (20.8% margin, 44.1% beat) The company lifted its revenue guidance for the full year to $739 million at the midpoint from $717.5 million, a 3% increase Management raised its full-year Adjusted EPS guidance to $0.52 at the midpoint, a 73.3% increase Operating Margin: -7.9%, up from -24.8% in the same quarter last year Net Revenue Retention Rate: 117% Market Capitalization: $4.58 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Jackson Ader (KeyBanc Capital Markets) asked about the impact of AI-driven traffic and potential share gains in network services. CEO Charles Compton responded that AI is driving demand across products, with Fastly gaining share where performance matters most, but does not break out agentic traffic specifically. Frank Louthan (Raymond James) inquired about the nature of AI-related workflows and the drivers behind security growth. CFO Richard H. Wong explained that increased traffic complexity and new security features are boosting adoption, while Compton emphasized customers consolidating security on Fastly for effectiveness and resilience. Peter Levine (Evercore) questioned the process of co-innovation and customer input into product development. Compton described joint projects with customers addressing issues like piracy and AI traffic, noting these collaborations often yield new marketable products. Rudy Kessinger (D.A. Davidson) highlighted growing revenue concentration among top customers and asked about expectations for the rest of the year. Compton acknowledged the concentration and said efforts are ongoing to diversify, while Wong suggested top customer share could remain elevated. Fatima Boolani (Citi) asked about the pricing environment and the sustainability of the net retention rate. Wong reported stable, rational pricing with minor erosion due to volume discounts, and noted the net retention rate may face tougher comparisons in upcoming quarters. Over the coming quarters, the StockStory team will be monitoring (1) the pace of new customer acquisition and cross-sell of security and compute products, (2) ongoing diversification efforts to reduce reliance on top customers, and (3) the impact of AI-driven and automated traffic on overall usage and product uptake. We are also keeping an eye on Fastly’s ability to sustain margin improvements as infrastructure investments and hiring ramp up. Fastly currently trades at $28.83, up from $26.03 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members). ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time. Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.

Fastly (FSLY) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company. The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this cloud software developer, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. For Fastly, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: The earnings estimate of $0.12 per share for the current quarter represents a change of +71.4% from the number reported a year ago. Over the last 30 days, four estimates have moved higher for Fastly compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 45.33%. For the full year, the company is expected to earn $0.53 per share, representing a year-over-year change of +307.7%. The revisions trend for the current year also appears quite promising for Fastly, with six estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 41.46%. Thanks to promising estimate revisions, Fastly currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. While strong estimate revisions for Fastly have attracted decent investments and pushed the stock 42.7% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastly, Inc. (FSLY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 4:30 p.m. ET Investor Relations - Vernon Essi Jr. Chief Executive Officer - Charles Compton Chief Financial Officer - Richard H. Wong Operator: Good afternoon. My name is Corey, I will be your conference operator today. At this time, I would like to welcome everyone to the Fastly Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 again. Please be advised today's conference is being recorded. I would now like to turn the conference over to Vernon Essi, Investor Relations at Fastly. Please go ahead. Vernon Essi Jr.: Thank you, and welcome, everyone, to our second quarter 26 earnings conference call. We have Fastly's CEO, Charles Compton, and CFO, Richard H. Wong with us today. The webcast of this call can be accessed through our website fastly.com, and will be archived for 1 quarter. A copy of today's earnings press release related financial tables, and supplement, all of which are furnished in our 8-K filing today, can be found in the investor relations portion of Fastly's website. Along with the investor presentation. During this call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, product and services sales and growth, strategy, long term growth, overall future prospects. These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied during the call. For further information regarding risk factors for our business, please refer to our filings with the SEC. Including our most recent annual report filed on Form 10 k quarterly reports on Form 10-Q filed with the SEC and our second quarter 26 earnings press release and supplement for a discussion of the factors that could cause our results to differ. Please refer, in particular, to the sections entitled risk factors. We encourage you to read these documents. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward-looking statements except as required by law. Also, during this call, we will discuss certain non GAAP financial measures and certain key performance indicators. Unless otherwise noted, all numbers we discuss today other than revenue will be on an adjusted non GAAP basis. We do not provide reconciliations of forward looking non GAAP measures because quantitative reconciling of information for these measures is unavailable without unreasonable effort. Reconciliations to the most directly comparable GAAP financial measures are provided in the earnings release and supplement in our Investor Relations website and filed with the SEC. These non GAAP measures are not intended to be a substitute for our GAAP results. Before we begin our prepared comments, please note that during the third quarter, we will be attending the KeyBanc Capital Markets Technology Leadership Forum in Park City on August 10th the Citi 26 Global TMT Conference on September 9 in New York, and the Piper Sandler Growth Frontiers Conference in Nashville on September 15th. And we will also be hosting our Investor Day on September 22nd at the NASDAQ market site in New York. Now I will turn the call over to Charles. Charles Compton: Good afternoon, everyone, and thank you for joining us today. Fastly delivered another exceptional quarter, demonstrating the success of our platform strategy efforts, as customers continue to adopt more products on our platform, we posted our fifth consecutive quarter of improving net retention rate and our 6th consecutive quarter of positive free cash flow. Revenue reached a record $183 million, up 23% year over year, exceeding the high end of our guidance. Gross margin hit a record 65.8%, and operating income came in at $27 million, both above the high end of our guidance range. These results marked the fourth consecutive quarter of operating profit capped by a record operating margin of 14.7%. Our Q2 results continue a clear trend. delivering growth and profitability together. These results reflect operational discipline and a continued investment in our highest value growth opportunities. Our trailing 12 month net retention rate rose again to 117%, the highest level in over 3 years, as customers look to our platform to support their infrastructure needs and standardize more of their stack on Fastly. Our platform strategy is foundational to our success. We build, sell, and operate a single unified platform which means better consistency and performance for our customers. And a more efficient network for us to run. It also means that when customers face a new threat, or business opportunity, they do not need to bolt on another tool. Fastly enables them to solve their problems on 1 flexible platform. This results in deeper customer relationships, greater wallet share, and a more durable revenue model over time. You can see that strategy working in the numbers. Security grew 43% year over year, driven by cross sell and upsell. The demand for edge threat defense intelligence, and governance is driving rapid adoption of our security products. Solutions like DDoS protection and bot management grew at triple digit rates year over year. Over time, we expect our differentiated security capabilities to represent a larger portion of the business. We integrate these newer features with our capabilities and industry leading Next-Gen WAF broadening the customer footprint and wallet share with Fastly. Our platform strategy in action. Leveraging targeted capabilities in 1 product category to deepen relationships and drive overall platform expansion across categories. We continue to see AI driven traffic as a tailwind, with our compute offering emerging as an expansion engine. As customers face increasing scale and complexity, they are buying more of our platform to handle these demands, weaving custom edge functions directly into their traffic flows alongside our industry leading Next-Gen WAF. Additionally, as machine traffic and automated agents grow, tools that distinguish wanted traffic from unwanted traffic become essential. These trends contributed to our security and other revenue growth of 46% year-over-year on a combined basis, now at nearly $200 million annual run rate. We continued to win our network services business, which posted strong 17% year-over-year growth. This is where customers choose Fastly when performance matters. This summer, our platform strength showed up on the biggest stage in the world. Major global sporting events pushed record breaking traffic through our infrastructure. Vastly delivered, reliably, at scale, and without missing a beat. But performance is only part of the story. The same platform that delivered that traffic also governed it, making real time stream by stream decisions about what should flow and what should not. LaLiga, Spain's top football league, is a good example. Illegal streaming costs its clubs an estimated $700 million a year. Working directly with LaLiga, we built an AI driven real time detection system that identifies and shuts down pirated streams as they happen in the moment, right in a request path. As the market evolves, the need is shifting from centralized AI platforms to real time edge decisions. This kind of value add for our customers alongside our market leading performance is why so many of the world's top brands rely on the Fastly platform to deliver their mission critical content. And you can see the power of our platform and other key customer wins this quarter. Let me share a few examples. A leading fintech platform serving more than 500 thousand businesses chose Fastly following a rigorous competitive evaluation. Last year, a number of catastrophic outages put their critical partnerships at risk. The deciding factors including increased security capabilities, platform flexibility, and resilience. A global education technology customer, a significant data breach affecting millions of user records when their prior WAF failed to adequately mitigate attacks. They chose Fastly's Next-Gen WAF, managed security service, and network services handle their application traffic without disrupting their large active user base. A leading UK health and beauty retailer expanded their use of Fastly's platform with a multiyear, multimillion dollar commitment. The customer replaced a long time incumbent security vendor, part of a broader platform modernization and consolidated all of their edge services on Fastly. And working through a managed service partner, Fastly now powers live and on demand streaming delivery for a national public broadcaster in Europe. I mentioned AI is a tailwind behind our fastest growing product a moment ago. But it is showing up well beyond that. How we think about our network, our compute platform, and where we are investing next. We shared in Q2 that AI generated traffic is growing at roughly 6.5x the rate of human traffic. Machines do not browse the way people do. They query, scrape, or act on someone else's behalf, and that makes every request more complicated. This means every request requires an immediate decision. Is this an authorized agent? Should it be cached, throttled, monetized, and or blocked? that is why we see our security and compute products accelerating right alongside this machine traffic. Fastly was built to be that trusted control plane for those decisions. In an AI powered world, our customers are moving from reactive blocking to active governance. Le Monde is a good example. They use ContentGuard, part of our bot management solution, to set the terms for how their content gets accessed. Turning what used to be a scraping problem into controlled, licensed, revenue generating relationships. A major auto shopping platform saw AI based traffic as both an existential challenge and an opportunity for their business. They added Fastly's bot management and DDoS protection to gain visibility and control over the automated traffic hitting their platform, giving them the governance capabilities they need to run their business. We also announced a partnership with Skyfire. Leveraging the structural shift towards authentic traffic at the edge Skyfire uses Fastly compute and integrates their verified agent identity and payment backed credentials directly into our platform. Transforming agent traffic from anonymous automation into accountable economic activity. I look forward to sharing more about the evolving needs of the market how our platform meets those needs and how that translates into momentum in our business strategy at our Investor Day in September. When I became CEO 14 months ago, I outlined our commitment to accelerating growth driving profitability, and delivering lasting value for our shareholders. Thanks to the trust of our customers, partners and the exceptional dedication of our team, we are delivering on those priorities as demonstrated by delivering the highest revenue growth quarter in almost 4 years. We remain focused on our customers and on disciplined execution. The results this quarter record margins alongside strong growth, show that discipline compounding. We have fine tuned our innovation engine and are co innovating with partners across the entire platform driving a new level of customer value and engagement. I am proud of this team and as optimistic as ever about the future of Fastly. And now I am going to hand it over to Richard to walk us through the numbers and quarter in detail. Richard? Richard H. Wong: Thank you, Charles, and thank you everyone for joining us today. This month is my 1 year anniversary since joining Fastly in August 2025. Reflecting upon my first year, I am very proud of the progress we have made as a company. 1 year ago, I chose to join Fastly because I was excited by our leading technology and superior performance. With the belief that we are positioned at the right place at the edge cloud at the right time as we see workloads shifting to the edge to complement central clouds. I also saw an opportunity to unlock value for our customers and shareholders by mobilizing the finance team to be true strategic partners to the business. There is no doubt that our position has improved over the last year as we continue to partner with our large customer base and expand our platform. I have deepened the executive strength of our finance team, bringing on a new head of strategic finance and a new chief accounting officer. They in turn have filled up their talent bench, resulting in many improvements to the business, from accelerated close times to providing greater financial and strategic insights to our business. These provide cross functional financial discipline and leverage to Fastly's performance, enabling investment and optimizing the return to our shareholders. This has been reflected in our results over the last year. We have reaccelerated growth to north of 20%, have generated $79 million in positive EBIT over the last 4 quarters, and have maintained 6 straight quarters of positive free cash flow. Now on to our Q2 results. I would like to remind you that unless otherwise stated, financial results in my discussion are non GAAP based. Revenue for the second quarter increased 23% year over year, to $183.3 million exceeding the high end of our guidance range $170 million to $176 million This result was a record high for Fastly and was driven by continued success in our go-to-market upsell and cross-sell motions, as we see customers adopt more products within our platform. In the second quarter, network services revenue of $103.9 million grew 17% year over year, an acceleration from the prior quarter. Security revenue was $41.7 million which represented growth of 43% year over year and 8% sequentially, Security now represents 23% of revenue compared to 20% in the year ago quarter. This increased mix supports our long term objective of building a diversified, higher value business. Our other products revenue of $7.7 million grew 69% year over year driven primarily by sales of our compute products supporting new customer requirements in AI, and related areas. Our revenue upside in the quarter was driven by increased traffic at our largest customers and to a lesser extent, a couple of live sporting events that were episodic in nature. In the second quarter, our Top 10 customers represented 37% of revenue, Revenues from our top 10 grew 48% year over year, Revenue from customers outside our top 10 grew 12% year over year. Also, no single entity accounted for 10% or more of revenue in the second quarter, A group of entities under common control of the single customer accounted for 11% of the company's revenue for the quarter. Our large customer count, which represents customers with more than $100 thousand in annualized revenue in the quarter, adding 24 customers. Our trailing 12 month net retention rate was 117%, up from 113% in the prior quarter and up from 104% in the year-ago quarter. The quarter over quarter and year over year increases were due to revenue increases across a broader range of customers as they expand their use of our platform. We exited the second quarter with RPO of $341 million growing 38% year over year, The current portion of RPO was 79% of total RPO, and grew 44% year over year. Our improved RPO continues to benefit from improved go-to-market discipline with our customer onboarding, which resulted in larger upfront commitments. I will now turn to the rest of our financial results for the second quarter. Our gross margin was 65.8% in the second quarter, a record high for Fastly. Gross margin was 180 basis points above our guidance midpoint of 64%, and up 680 basis points from 59% in Q2 25. The upside in our gross margin was driven by higher revenue relative to our infrastructure costs. Combined with our continued financial discipline in our cost of revenue, we believe our gross margins are sustainable at these levels. This is further substantiated by our incremental gross margin through on a trailing 12 month basis, increasing to 96% in the second quarter, up from 47% a year ago. Operating expenses were $93.7 million in the second quarter coming in better than anticipated due to disciplined expense management and less than anticipated benefits and discretionary spend, as well as the timing of new hires being biased towards the third quarter which I will touch upon later in the call. We had operating income of $27 million in the second quarter, exceeding the high end of our operating income guidance range of $12 million to $16 million As mentioned, this upside was a combination of higher revenue and resulting gross margin flow through as well as less than anticipated operating expenses. This reflects inherent operating leverage in our business model. This is demonstrated by our operating margin expanding from -3% to +15% in the second quarter an expansion of approximately 1.8 thousand basis points year over year. This is underscored by our incremental operating margin flow through of 79%, of revenue on a trailing 12 month basis significantly above our long term target of 25% to 40%. In the second quarter, we reported a net profit of $26.2 million or $0.05 per diluted share compared to a net loss of $5 million or negative $0.03 per diluted share in Q2 25. Our adjusted EBITDA was $38.1 million or 21% of revenues, in the second quarter compared to $8.9 million or 6% of revenues in the second quarter of 25. Turning to the balance sheet, we ended the quarter with approximately $337 million in cash equivalents, marketable securities and investments, including those classified as long term, a sequential increase of $7 million over Q1 26. We also ended the quarter with a positive net cash balance of $14 million Our cash flow from operations was positive $39.3 million in the second quarter, compared to positive $25.8 million in Q2 25. Our free cash flow for the second quarter was $3.6 million representing our 6th consecutive quarter of positive free cash flow. Our infrastructure capital expenditures were approximately 17% of revenue in the second quarter. As we discussed in prior quarters, we front loaded our 2026 CapEx to ensure we had adequate equipment given supply chain constraints. We anticipate our CapEx spend will moderate in the back half of 26 as I will discuss in a moment. In summary, the first half of the year demonstrates that disciplined execution and platform adoption continue to strengthen our financial model give us higher conviction on our 2026 guidance. I will now discuss our outlook for the third quarter and full year 2026. I would like to remind everyone again that the following statements are based on current expectations as of today, and include forward-looking statements. Actual results may differ materially, and we undertake no obligation to update these forward looking statements in the future. Except as required by law. Our revenue model is primarily based on customer consumption, which can lead to variability in our quarterly results. Our revenue guidance reflects these dynamics in our business and is based on the visibility that we have today. As Charles discussed, our platform strategy is foundational to our success, enabling customers to solve their problems on 1 flexible platform. This results in deeper customer relationships, greater wallet share, and a more durable revenue model over time. The strategy is working, and providing a stronger assurance in our value proposition and growth opportunities with customers. In the third quarter, we expect revenue in the range of $184 million to $190 million representing 18% annual growth at the midpoint. We anticipate our gross margins for the third quarter will be 65% plus or minus 50 basis points. As a reminder, our gross margin performance is highly dependent upon incremental revenue increases or declines relative to infrastructure costs. For the third quarter, we expect a non GAAP operating profit of $20 million to $24 million reflecting an operating margin of 12% at midpoint. As I mentioned earlier, we expect headcount additions along with discretionary spend to bring OpEx back to normalized growth levels to the third and fourth quarters. We expect a non GAAP net earnings per diluted share of $0.11 to $0.13 For calendar year 2026, we are raising our revenue guidance to a range of $732 million to $746 million reflecting annual growth of 18% at the midpoint. We anticipate our 2026 gross margins will be 65% plus or minus 50 basis points. We are increasing our non GAAP operating profit expectations to a range of $88 million to $96 million reflecting an operating margin of 12% at the midpoint. And highlighting our improved profitability compared to 2025's operating margin of 4%. We expect our non GAAP net earnings per diluted share to be in the range of $0.50 to $0.54 We continue to closely monitor supply chain dynamics particularly regarding memory components and have taken strategic actions to mitigate potential impact. Our software defined infrastructure is continuously improving, typically with lower capital requirements for expansion than legacy competitors. We are also implementing server component upgrades in our fleet to efficiently expand our capacity. This structural efficiency underpins our expanding gross margins. Positioning us to stay ahead of global traffic trends while maintaining strict capital discipline. For 2026, we continue to anticipate our infrastructure capital spend will be in the range of 10% to 12% of revenue, compared to 5% in 2025, as we ramp up capacity to meet our growth objectives. As discussed, this 2026 spend is front loaded in the first half to ensure we have adequate equipment given recent supply chain constraints. We have a rigorous planning process to ensure that our capital investments align with demand. As a result, we will maintain our 2026 free cash flow guidance in the range of $40 million to $50 million To recap, we are seeing continued evidence that disciplined execution growing platform adoption, a richer mix of security and compute are translating into stronger financial performance. Our refined strategy to focus on the power of our platform is working, and we are evaluating ways to better align our financial disclosures to our success. I look forward to sharing more at our Investor Day in September. Before we open the line for questions, we would like to thank you for your interest and your support in Fastly. Operator? Operator: Thank you very much. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again. Please standby while we compile the Q&A roster. Our first question comes from the line of Jackson Ader of KeyBanc Capital Markets. Jackson, your line is open. Jackson Ader: Hey. This is Ader Daniels on for Jackson. Thanks for taking my question. On the network services jump in the corner, we would love to just dig a little deeper here. Q2 seasonally has not been the best quarter in the past for CDN revenues. You mentioned some increased traffic from the largest customers. Was there a positive impact from agentic traffic driving this outperformance? And then did you experience any share gains from competitors And just a follow-up. 1 moment, please. Charles Compton: Hey. Keep going, Charles. Sorry. I am sorry. We were interrupted there. In terms of agentic traffic, we do not necessarily break that out. However, we have seen signs of traffic driven by AI tool usage. Among some of our fastest growing accounts. And so we do believe that AI remains a tailwind for the business and is showing up most predominantly in security and compute, but also in network services. And then just wanted to follow-up on, your NRR expansion. I am sorry. Can we-- I think we might have a technical difficulty Did you hear the whole answer to that question? Maybe we could, yeah, start from the beginning. I think we had a lapse there. Operator: Thank you. Charles. Charles Compton: Alright. Can you hear us now? Alright. Yep. All good. Great. So I think there are 2 parts to the question. was whether or not we thought we are gaining share in the network services segment, and second was whether we were seeing, signs of AI or agentic traffic helping drive that growth. On the first question, yes, we do believe that we are gaining share, particularly as we like to say where performance matters. And I think there was some third party research that is come out in the last few months that agreed with that assessment. On the AI agentic question, we do not necessarily break that out as a distinct set of traffic. It drives demand in our existing products and across our platform. However, looking at the traffic patterns among our customers, we have identified a number of customers where AI tools and use of AI seem to be the catalyst behind traffic growth. So we continue to see AI agentic traffic as a tailwind for the business across our existing products. As well as products like bot management and DDoS that help mitigate that. As well as some additional products that we will announce in the coming months. Jackson Ader: Thanks, Charles. Good to hear both parts. I appreciate the repeat. And then just following up, on the NRR expansion, I know it is all up to 117%. You mentioned customers standardizing more of their full stack on Fastly. Could you unpack maybe a little more of what is driving the most expansion there? Is it security and compute cross sell into existing accounts? Better renewal pricing on CDN, or anything else maybe to highlight there? Thanks, guys. Richard H. Wong: Yeah. When we think about our products, Jackson, it is it is kind of a broad, you know, portfolio that cuts across multiple products in network services as well as multiple products in the security. I would say that the cross sells and upsells, tend to be you know, I think that know, we have had a WAF, the web application firewall, and that is been doing really well. Our WAF continues to, you know, gain share and continue to grow faster than the market. And so I think that is a pretty big driver. it is also the new products that we have launched You know, I think I would not say new, but newer. With the DDoS and bot management. I think those 2 are also picking up a lot of traction. And so I would say security is doing a lot. I think that, on the compute side, you know, there is some traction there, but it is still early days. I think Kim had mentioned on the call that we are doing a lot of co innovation with our customers on compute and compute at the edge. Thank you very much. Operator: Our next question comes from the line of Frank Louthan of Raymond James. Frank, your line is open. Frank Louthan: Great. Thank you. So as far as some of the AI related traffic, what is some of the nature of the workflows that you are having success there? And do you think you are taking share in that market? Or are you just seeing sort of an overall lift in demand And then similarly, for security, what are some of the things that are driving that success? In security? Thanks. Charles Compton: Hey, Frank. I do not know if I can comment on whether we are taking share or not specifically with respect to AI traffic. Because I think the data on the size of that market and the competition of it is somewhat thin. But we do see that traffic is growing in the markets that we participate in, and we certainly believe that we are taking share in those markets. In terms of workloads, there is really a variety of things across our platform. You know, we have seen some increase in traffic related to the use of AI tools for software development. We have also seen increase in our privacy suite of products related to agentic workloads. And so it is really across the board. So, of course, we have seen increasing adoption of bot and DDoS as our customers look to manage the agentic and bot traffic as well. So it is really across the board. I will let Richard comment on the second part of your question. Richard H. Wong: Yeah. I think the second part is, you know, what is driving security? I would say, you know, what is driving security really is just the you know, the complexity and the complications of traffic. As traffic gets harder and more complex, there are more and more threat actors that come along. We do have some really good products leveraging our total network to really do amazing things with it. I think that, you know, we have a lot of different features that allow our customers to be able to either block the traffic or rate limited traffic. As well as kind of even, like, use AI to detect, you know, whether the traffic is good or bad. So I think I would say that AI is helping accelerate some of the security adoption, but I would also say just the prevalence of more threat actors out there. Charles Compton: Yeah and I will comment. I mean, I mentioned it in a couple of the customer examples in my prepared remarks, but you know, we are seeing customers looking to simplify and consolidate And in a lot of cases, they are very happy with the performance and the resilience that they get from Fastly. And they look at the effectiveness of our WAF products. And as I think you heard in my comments, so the number of cases we picked up significant business from customers who were not happy with the effectiveness of their existing security solutions and decided to consolidate on Fastly for the performance and resiliency and then the effectiveness of those security solutions. So that is certainly a trend as well. Thanks. Frank Louthan: And if we if we look at the breakdown of your Top 10 customers, is it generally representative of your breakdown between the network service and security? Or are they more over underweighted to those? Is there some opportunity there? Thanks. Richard H. Wong: Yeah. I mean, if you look at the top 10, I mean, 73% of our revenues today come from network services. And so I would say that it is pretty close to that. Maybe slightly a little bit higher, but it is a you know, it top 10 does buy multiple products. You know, I think we have mentioned in prior earnings calls. That we have done a good job landing, cross sell opportunities into security with some of our Top 10 customers as well. Thank you very much. Operator: Our next question comes from the line of Peter Levine of Evercore. Peter, your line is open. Analyst: Great. Thank you, gentlemen, for taking my call. Maybe I want to follow-up with the prior question that was asked, your commentary around co innovation, on the Edge or within the other revenue line item. But maybe can you give me walk us through like what does that entail? Like, what are customers coming to you and asking for? What does that co innovation look like? And, you know, when could we see products come to market? Charles Compton: Sure. I mean, I think that co innovation takes a lot of forms, and it is something that we have had as sort of the foundation of our product development process is working with some of our more innovative customers on their business problems and building sustainable solutions that we believe have the potential that then become market leading products. You know, I mentioned I think, a couple of examples during my prepared remarks. The Liga perhaps is a good example where we co innovated with them on a way of dealing with some pretty thorny piracy problems using AI technologies. And the tricky situations where pirates are going to great lengths, to hide their streams and deliver content illegally through our platform. And using some AI technologies, we were able to identify and stop those. And that antipiracy type technology, as you can imagine, is of great interest to many of our customers. We are also engaged in a number of co innovation projects with different customers around AI and agentic traffic. You know, we will say more about that in the coming months. But suffice to say that, you know, we really think that we are at our best when we are working shoulder to shoulder with our customers on business problems. And applying the capabilities of our platform to solve them and then taking those to market. Richard H. Wong: Yeah. The only thing I would add on that is that, you know, I think if you think about where we have won in the past we have always won where performance matters. You know, our technology, given where it is at, you know, we are a very good co innovation partner to these customers because these are the more complex technical customers who need you know, massive amounts of support and innovation with them. And so I think those are the opportunities that are really in the future. Thanks. Analyst: And maybe, Richard, a follow-up there is you think about some of your CDN competitors and the investments they are making, around their infrastructure, maybe help us understand, if we look out over the next 1, 2, 3 years, how do you envision the edge compute business? What does it look like And what how much of an investment do you guys need to put forth to kind of maybe keep up with some of this demand that potentially you see in the pipeline today? Charles Compton: Yeah. I will start and comment a little bit about on the trajectory of the compute business, and Richard can comment on how we are thinking about the investment needs there. You know, we are we are focused on a what I will call a true edge compute business. We are not building regional data centers or spending a lot of money on capital outside of our world class, you know, high performance global edge network. And we are really focused on the use cases where, being able to process that information or run that workload at the edge really makes a difference. So I think that is 1 of the things you see is maybe a difference between us and some of our competitors. We also run a single network. So Rich does not have in a spreadsheet a separate line for the capital for compute. We run everything on a consolidated platform, on a global basis. And that means that we are able to use compute resources For instance, it may not be fully utilized by network services or compute workloads or, excuse me, security workloads, to drive compute workloads. And so I think that is 1 of the reasons why we have been able to be a little bit more capital efficient. That said, we are committed to driving growth in the business. And, where we need to make investments, we will. And I think you saw, our CapEx, tick up this, quarter as we said it would. For our front loaded approach to capital this year. But we will make the investments we need to drive growth in the business. Operator: Thank you very much. Our next call comes from the line of James Fish of Piper Sandler. James, your line is open. James Fish: Hey, guys. James Fish getting in a question here, and in terms of, obviously, you guys, did a phenomenal job at the World Cup. I wish our US team would have done a little bit better. But, you know, can you walk us through what the impact of World Cup was to Q2 and on the Q3 guide, just kind of given its split as well as that. We had that seasonality shift of Prime Day into Q2 here. Just can you walk us through some of those events that you saw that really helped traffic? Richard H. Wong: Yes. James, thank you for asking that question. I would say that, for Q2, with our prepared remarks, we had $10 million upside to the guide, midpoint that we had. I think a little bit less than half was given to driven by the episodic nature of the business. Episodic meaning partly World Cup. We also had a few you know, another live event on the White House Lawn. We also had a few other customers have a 1 time activities. And so think of that as a little bit less than half as driving the episodic activity. I would say that, you know, our you strip that out and you say, look at the Q3 guide and the Q3 guide being up sequentially, and you let you take that into account, I think it is Back to kind of normal seasonality between Q2 and Q3. The only other thing to note is that when you look at World Cup, you know, 75% of the games happened in Q2. And only 25% will happen in Q3. And so that kinda goes into the forecast that we have. And then on a view viewership perspective, about 2 thirds of the games Are viewed in Q2 and about a third in Q3. Perfect. Thanks for that extra detail there, Richard. James Fish: And maybe just as we think about security penetration, you guys have done a good job here in terms of the packaging. But any update as to how we should think about penetration on security with more than 1 product as well as north of 2 products as it seems like you guys are benefiting off consolidation? Thanks, guys. Richard H. Wong: Thanks, James. Yeah. Mean, security is still, you know, you can tell with the numbers. it is you know, it is $42 million, you know, Q2 number. We still have rooms to grow, know, given that $42 million. I we will continue to be mark market share takers. You know, our WAF is you know, I think been updated over the last 2 years. And I think with the launch of, DDoS and bot management, I think that we are gonna continue to be big market share takers in security. You know, I think the multiproduct disclosure question is a interesting 1. And I think that, without saying too much, you know, stay tuned for our investor day coming up in September. Thank you very much. Operator: Our next question comes from the line of Paramveer Singh of Oppenheimer. Param, your line is open. Paramveer Singh: Yes. Hi. Thanks for taking my questions. So first, really good to see the strength in security. I wanted to understand how much of your installed base already uses your DDoS and bot management And, you know, if you could quantify that in terms of an innings and how much upside you see just from cross sell versus selling into new opportunities. Then I have a follow-up. Charles Compton: Great questions. DDoS and bot are newer products. For us. So I would say maybe second inning. In terms of the penetration there, we are seeing I think we I mentioned in my prepared remarks, we are seeing triple digit growth in those 2 products. So right now. So we are excited about the increasing penetration of those and our customers are finding them directly responsive to some of the AI traffic opportunities and challenges that they are finding. Paramveer Singh: that is great. Second question, you know, what I understand a way to think about agentic AI traffic. Richard, I mean, it benefits you across entire platform. there is compute. there is different security modules, including API Obviously, network traffic also benefits. There a way to quantify or think about how much upside we could see per unit traffic on agentic AI versus, let's say, you know, your traditional bot traffic or human traffic. Thank you. Charles Compton: Yeah. I mean, it is hard to say. I wish I had a quantitative answer for you there. You know, what we are seeing is probably a bigger impact in the compute and security businesses, the network services business at the moment. That is partially driven, I think, by the fact that the well, the request per second or volume of request can be extremely high. We talked about the growing 6.5x faster than human traffic. The bandwidth which network services tends to have as a billing component, it is a little bit lower than streaming events. And so we are seeing greater effects in security and compute although we are absolutely also seeing effects in network services. And, you know, just given the growth rate of that traffic, we believe that over time, it becomes significant for the business. Operator: Our next question comes from the line of Rudy Kessinger of D. A. Davidson. Rudy Kessinger: Hey, guys. Great. Thanks for taking my questions. The Top 10 customers is a percentage of revenue. Increased 3 points versus Q1. I know, obviously, some of the you know, World Cup live events contributed to that. But, you know, they were 87% of your quarter over quarter revenue growth. While at the same time, the growth in your all other customers' revenue decelerated about 6 points year-over-year versus Q1. So I guess I am interested on both fronts. Just as you look to the second half of the year, you know, what kind of concentration are you expecting from Top 10 customers in Q3 and Q4? And then on the flip side, the growth in all other customers are expecting that to bounce back up in the second half or what is your expectation there? Charles Compton: So it is a good observation. I mean, I think we clearly had we are really pleased with the growth overall. This quarter. With 23%, the fastest in 4 years, and we think that shows that the go to market transformation, that Scott Lovett and his team have been driving and that we have been talking about for a bunch of quarters now is making progress. That said, there is more work to be done there. We are not done with our go to market, and you saw us bring on for instance, the new chief marketing officer about a quarter ago, and Scott and his leadership team continue to make changes and improvements in various parts of the organization and the process and how we are structuring our go to market investments. And I think it is fair to say that, you know, we would like to see more new logos and, more growth outside of those top customers. To complement the robust growth that we are seeing with the top customers. Last thing I will say is you know, sometimes there is some confusion about the large customers and economics. I think our record gross margins this quarter shows that we are able to serve all of our customers very profitably. Operator: Rudy, I think the second part of your question was around, you know, where do we see it going in the second half of the year. Richard H. Wong: I would say that, you know, 37% in this current quarter, I think the impact that Joan and Scott have had, that transformation is still going on. And we do think that it take, you know, a little bit of time. I would not be surprised given the strength of our Top 10 customers and even the top 20 customers, who really love the performance that we have been giving them. I would not be surprised if the 37% kinda stays there or maybe picks up a point or 2. Rudy Kessinger: Okay. Got it. Super helpful. And then just on AI traffic, I mean, look. You guys are obviously tracking it. It said it is growing 6.5x faster than all other traffic. So, I mean, what percent of the traffic on your network today is coming from AI traffic? Charles Compton: Yeah. We do not have I mean, we track the growth of it. I do not have a breakout. That I can share with you at this time. We do believe it is relatively modest in a lot of parts of our business. But rapidly growing. Operator: Our next question comes from the line of Fatima Boolani of Citi. Fatima, your line is open. Fatima Boolani: Good afternoon. Thank you for taking my questions. Charles or Richard, jump ball for either 1 of you. You have talked about the pricing vector and the volume vector. In a pretty explicit detail for the last several quarters. So I was hoping to revisit what you are seeing from a traffic, so non AI traffic growth perspective, and also the realization from a pricing perspective. A lot of your peers have either dissipated and or are raising prices. So I wanted to understand, what your response to that, externality is. Are you raising prices as well? Has that been a contributing factor to the gross profit accretion? I would love to get maybe more of a granular update on how you are thinking about those 2 vectors and how to internalize that in that acceleration you saw in the network services business, understanding that about half of that was more episodic, but would love to get a little bit more detail on kind of the structural inputs there. And then I have a follow-up please. Richard H. Wong: Sure. So pricing in Q2, I would say it was very consistent with Q1 and even the prior year Q4. We are in a very kind of rational pricing environment with really rational players, you know, since the exits. Price erosion, I would say, would still be in the kind of the mid single digits consistent with last quarter. I think our traffic growth continues to be in the low, like, 20% range. Just wanna also remind you that, like, when we talk about price erosion, this is network services divided by the total traffic served. And what tends to happen with that is because it is an aggregate number, it is kind of like depends on the customer mix and how it is going. Know, the price erosion that you see is kind of based on a also volume discounts that we get as long as, you know, these customers continue to add volume to our network. They actually might hit next pricing tier discount that we give them. So even though we are saying there is a mid single digit price erosion, a lot of it is due to hitting the next volume tier. In terms of, like, what we are doing about pricing given, you know, what our competitors are doing or what Akamai had announced that they were doing, we feel like it is really important to continue to honor the commitments that we have. We have no plans to do kind of surcharge pricing on that. You know, when we look at renewals, and when the renewals come up, we do not make unilateral rules around it. We actually look at the customer the customer value that we provide to them as well as what they are buying from us, with the goal of really unlocking more value and getting you know, and doing that on the on the base case by case basis. So the conversations tend to be more about how we help our customers using the full suite of our products and less about, like, you know, you know, unilateral rules that we set around, you know, where the prices go. Fatima Boolani: Thank you. And just to follow-up on net retention rate. Obviously, strong in the quarter. I am curious to get your thoughts on the trends from here. Is this a high watermark? Can we push the envelope? And see a better yield on this continuing to expand, especially as you lapse them? Very strong revenue performance from last year and appreciating net retention rate metric is a trailing 12 plus month metric. So how should we think about the this watermark continuing to increase if at all. Thank you. Richard H. Wong: Yeah. Thank you for that. Yes. This is our fifth consecutive quarter of increasing. We are really proud of the progress that we have made here. I think Scott and the go to market transformation that Kim mentioned that Scott's doing in his organization has really helped. And it is helped not just with, you know, the metrics, but also the customer love that they are showing us. We do not necessarily guide where NRR is going to be. But I will say that our customers continue to grow with us. And we are really pleased with our improvement that we are seeing You are absolutely right to call out that coming up in Q4 it will be a harder comp. Given the strength of our Q4 25. And so definitely something to kinda factor in as you think about building your model out. But I would say that customers continue to grow with us because they are happy with what we are providing them. Operator: Thank you very much. As a reminder, to ask a question, please press star 1 on your phone. And you will be advised when your line is up. Our next question comes from Jeff Van Rhee of Craig-Hallum Capital Group. Jeff Van Rhee: Hey, guys. This is Daniel on for Jeff. Just 1 on the hiring that you mentioned, Richard, that it slipped from Q2 into Q3. And maybe some other expenses there. Maybe if you could just expand a little bit on what those functions, what those investments are that you are planning on making. Richard H. Wong: Yeah. The you know, from a hiring perspective, the areas that we have highlighted in the past on our earnings call have been around the APAC go to market. I think a year ago, we serving, you know, serving a lot of our APAC customers from Sanjit Francisco and London, you know, our office in London, and so the time zones were just way off. I think that we really want to improve that quality of the relationship with our customers and have more on the ground there. And so we announced that we hired Nikola who kinda leads up our APAC function. I think that we are also talking about, you know, more recent investments this year around our marketing efforts with Joan and bringing on CMO. With Joan and the CMO, I think the focus, on our go-to-market transformation has been how do we maximize the value we create for some of our largest customers. And what you are gonna see with the shift with Joan is, how do we continue to add more logos, and how do we continue to, like, go down, and create value for that next set of customers. And so I would say those are the 2 kind of big, you know, areas of investment that we are making. Jeff Van Rhee: And then that is helpful, Richard. And then Kim, on the top customers and some traffic share shifting toward you, just any thoughts on what is driving that You know, if to Fatima's question that has to do with pricing or any other factors that have to do with traffic shifting. This is specifically share gain. Thanks. Charles Compton: Yeah. Thanks for the question. I think there is a few things. The 2 that come up most frequently are reliability or resilience. We certainly have instance where we have picked up business because the incumbent solution had issues in terms of an outage or other reliability issues. The other area is performance. So we you know, consistently hear from our customers who are adding traffic that our performance is better than our competitors. I would say that with respect to pricing, obviously, that is a factor. You have to be market competitive in terms of pricing. But it is not generally the way that we are picking up traffic by discounting or lowering prices. We believe that the effectiveness of our security products and the performance and resilience of our overall platform is the dominant thing driving people to switch. Operator: Thank you. At this time, I am showing no further questions, and I would like to turn it back to Charles Compton for closing remarks. Charles Compton: Thank you for your questions and your interest in Fastly. Looking forward to seeing you at our investor day. On September 22 at the Nasdaq MarketSite in New York. I want to thank our Fastly employees for all their contributions our customers for their trust and partnership, and our investors for their continued support. Thank you. Operator: Thank you for your participation in today's conference. This does conclude our program. You may now disconnect. Before you buy stock in Fastly, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fastly wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $403,337!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,946!* That performance is why people listen. 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Fastly (FSLY) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Fastly, Inc.? Here are five stocks we like better. Record Q2 performance: Revenue rose 23% year over year to $183.3 million, ahead of guidance, while non-GAAP operating income reached $27 million and gross margin improved to a record 65.8%. Security and Compute led growth: Security revenue increased 43% to $41.7 million, while other products revenue surged 69%, fueled by Compute demand tied to AI and agentic traffic. Net retention improved to 117%, indicating broader customer expansion. Outlook raised: Fastly increased its 2026 revenue forecast to $732 million-$746 million and non-GAAP operating-income outlook to $88 million-$96 million, while maintaining its $40 million-$50 million free-cash-flow target. 3 Red-Hot Cloud Infrastructure Stocks Powering 2025 Growth Fastly (NYSE:FSLY) reported record second-quarter revenue and improved profitability as customers expanded their use of its network, security and Compute products. The company also raised its full-year 2026 revenue and operating-profit outlook. Revenue for the second quarter rose 23% year over year to $183.3 million, exceeding Fastly’s guidance range of $170 million to $176 million. Non-GAAP operating income was $27 million, above the company’s forecast of $12 million to $16 million, while non-GAAP operating margin reached 14.7%. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling 3 Beaten-Down Small Caps Building Momentum for a 2025 Rally “Fastly delivered another exceptional quarter, demonstrating the success of our platform strategy efforts,” CEO Kip Compton said. He said the company’s results reflected customers adopting more products on its unified platform, alongside operational discipline and investment in higher-value growth opportunities. Fastly said security revenue increased 43% from a year earlier to $41.7 million, representing 23% of total revenue compared with 20% in the prior-year quarter. Network services revenue grew 17% to $133.9 million, while other products revenue increased 69% to $7.7 million, primarily driven by Compute sales related to AI and associated customer requirements. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Akamai: AI Tailwinds Drive Edge Computing and Security Growth Compton said Fastly’s security and other revenue combined grew 46% year over year and reached an annual run rate of nearly $200 million. DDoS Protection and Bot Management each recorded triple-digit year-over-year growth, according to the company. The company cited AI-driven and agentic traffic as a tailwind across its business, particularly in security and Compute. Compton said AI-generated traffic is growing at roughly 6.5 times the rate of human traffic, increasing demand for tools that can determine whether requests should be authorized, cached, throttled, monetized or blocked. → No Hangover: Revisiting Microsoft One Week After Earnings During the question-and-answer session, Compton said the company does not separately disclose AI traffic volumes but has identified customers where AI tools appear to be driving traffic growth. He said AI and agentic traffic are producing a larger effect in security and Compute than in network services, in part because AI requests can have high request volumes but lower bandwidth needs than streaming events. Chief Financial Officer Rich Wong said the company’s Next-Gen Web Application Firewall, along with DDoS and Bot Management offerings, were key contributors to security growth. He characterized DDoS and bot-management adoption as still being in the “second inning” and said those products offer substantial cross-selling opportunity. Fastly’s trailing 12-month net retention rate rose to 117%, compared with 113% in the first quarter and 104% a year earlier. The company said the increase reflected expansion across a broad range of customers using more of its platform. Large customers, defined as those with more than $100,000 in annualized revenue, totaled 624 at quarter-end. Remaining performance obligations reached $341 million, up 38% from a year earlier, with the current portion of RPO growing 44%. The company said the revenue outperformance was driven by increased traffic from its largest customers and, to a lesser extent, live sporting events and other one-time activities. Fastly’s top 10 customers accounted for 37% of second-quarter revenue and grew revenue 48% year over year. Revenue from customers outside the top 10 rose 12%. Wong said less than half of the $10 million by which revenue exceeded the midpoint of guidance was attributable to episodic activity. He noted that 75% of World Cup games occurred in the second quarter, with the remaining 25% expected in the third quarter. Fastly also supported other live events, including an event held on the White House lawn. Compton said Fastly believes it is gaining share in network services where performance matters, with customer wins often tied to platform reliability, resilience and security effectiveness rather than price discounting. He added that the company wants to generate more new customer wins and growth beyond its largest accounts, even as top customers continue to expand. Fastly’s non-GAAP gross margin reached a record 65.8%, up from 59% a year earlier and above the company’s guidance midpoint of 64%. Wong said the improvement reflected higher revenue relative to infrastructure costs as well as expense discipline in cost of revenue. He said the company believes gross margins can be sustained around current levels. Non-GAAP net income was $26.2 million, or $0.15 per diluted share, compared with a loss of $5 million, or $0.03 per share, in the year-earlier quarter. Adjusted EBITDA totaled $38.1 million, or 21% of revenue, compared with $8.9 million, or 6% of revenue, a year earlier. Fastly ended the quarter with approximately $337 million in cash equivalents, marketable securities and investments, and a positive net cash balance of $14 million. Operating cash flow was $39.3 million, while free cash flow was $3.6 million, marking the company’s sixth consecutive quarter of positive free cash flow. Third-quarter revenue is projected at $184 million to $190 million. Third-quarter non-GAAP operating income is expected to be $20 million to $24 million. Full-year 2026 revenue guidance was raised to $732 million to $746 million. Full-year non-GAAP operating income guidance was increased to $88 million to $96 million. Fastly maintained its full-year free-cash-flow outlook of $40 million to $50 million. For 2026, Fastly expects gross margin of approximately 65%, plus or minus 50 basis points. The company anticipates infrastructure capital spending of 10% to 12% of revenue, with spending weighted toward the first half as it added equipment amid supply-chain constraints. Wong said Fastly continues to monitor memory-component supply conditions and is using software-defined infrastructure and server upgrades to expand capacity efficiently. Fastly plans to discuss its platform strategy, growth opportunities and financial disclosures further at its Investor Day on Sept. 22 in New York. Fastly, Inc operates an edge cloud platform designed to accelerate, secure and enable modern digital experiences. The company offers a suite of services including a content delivery network (CDN), edge compute, load balancing, web application firewall (WAF) and DDoS protection. Fastly's real-time architecture allows customers to seamlessly deploy software logic at the network edge, reducing latency by bringing applications and content closer to end users. Founded in 2011 by Artur Bergman, Fastly has evolved from a pure-play CDN provider into a comprehensive edge cloud platform. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Fastly Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved the highest revenue growth in nearly four years, driven by a platform strategy that encourages customers to standardize their full stack on Fastly's unified infrastructure. Security revenue grew 43% year-over-year, fueled by triple-digit growth in DDoS protection and bot management as customers migrate from reactive blocking to active governance. AI-generated traffic is growing at 6.5x the rate of human traffic, acting as a tailwind for compute and security offerings that handle complex, real-time edge decisions. Record gross margins of 65.8% were achieved through operational discipline and the inherent efficiency of a software-defined network that runs all services on a single platform. Management attributes market share gains in network services to superior performance and resilience, particularly during high-stakes global sporting events. The company is successfully transitioning from a pure CDN provider to a trusted control plane for edge threat defense, intelligence, and governance. Full-year 2026 revenue guidance was raised to $732 million to $746 million, reflecting high conviction in continued platform adoption and traffic growth. Gross margins are expected to remain sustainable at approximately 65%, supported by incremental gross margins that reached 96% on a trailing 12-month basis. Infrastructure CapEx is expected to moderate in the second half of 2026 after being front-loaded to mitigate potential supply chain constraints for memory components. Operating expenses are projected to return to normalized growth levels in Q3 and Q4 as the company completes planned hiring in marketing and APAC go-to-market functions. Management is focused on expanding the customer base beyond the Top 10 through a marketing transformation aimed at driving new logo acquisition. Top 10 customers represented 37% of revenue, with growth in this cohort (48%) significantly outperforming the rest of the customer base (12%). Q2 revenue included approximately $4 million to $5 million in episodic upside from live sporting events and one-time customer activities. Supply chain monitoring remains a priority, specifically regarding memory components, though software-defined infrastructure provides a structural efficiency advantage over legacy competitors. Net retention rate reached a three-year high of 117%, though management cautioned that Q4 will face a difficult year-over-year comparison. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed share gains in network services where performance is critical, supported by third-party research. AI and agentic traffic are driving demand across the platform, particularly in security and compute, as machines require more complex, immediate decisions per request. Fastly described the current pricing environment as 'rational' and stated they have no plans to implement unilateral price increases or surcharges like some competitors. Price erosion remains in the mid-single digits, primarily driven by customers hitting higher volume discount tiers rather than aggressive market discounting. Innovation is focused on 'true edge' workloads where real-time processing makes a difference, such as AI-driven anti-piracy systems for live sports. The company leverages a single network architecture, allowing them to use excess capacity for compute workloads without requiring separate, massive capital outlays for regional data centers. Management acknowledged that while Top 10 growth is robust, there is 'more work to be done' in driving growth and new logos outside the largest accounts. A new CMO was recently hired to shift marketing focus toward acquiring the 'next set' of customers to complement the success with enterprise giants.

Fastly FSLY reported second-quarter 2026 adjusted earnings of 15 cents per share versus a loss of 3 cents a year ago. The figure topped the Zacks Consensus Estimate by 114.29%.Revenues rose 23.3% year over year to $183.32 million and surpassed the consensus mark by 5.34%. Strength across Network Services, Security and Compute supported the upside, while the last-12-month net retention rate climbed to 117%. Network Services revenues increased 17% year over year to $133.9 million, accounting for 73% of total revenues. Management attributed the performance to higher traffic among its largest customers, along with a smaller contribution from live sporting events.Fastly also said it is gaining share where performance is critical. The company highlighted major global sporting events that generated record traffic and cited customer wins tied to resilience, flexibility and consolidated edge services. Fastly, Inc. price-consensus-eps-surprise-chart | Fastly, Inc. Quote Security revenues advanced 43% year over year to $41.7 million and represented 23% of revenues, up from 20% a year earlier. Management said DDoS protection and bot management grew at triple-digit rates, while its next-generation web application firewall continued to gain traction.Other revenues, which include Compute and Observability, climbed 69% to $7.7 million. Compute demand benefited from customers building low-latency applications and managing artificial intelligence (AI)-related traffic, supporting a combined Security and Other annual revenue run rate of nearly $200 million. Management said customers are adopting more products on Fastly’s unified platform, strengthening cross-sell and upsell activity. The company highlighted triple-digit growth in DDoS protection and bot management, while its web application firewall continued to gain traction.AI-generated and agentic traffic also remained a demand catalyst. Fastly noted that machine traffic requires real-time decisions around authorization, caching, throttling and blocking, supporting adoption across Security, Compute and Network Services.The company expanded its product reach through a partnership with Skyfire, designed to verify AI-agent identities and enable transactions at the edge. It also released a C++ software development kit for Fastly Compute to support low-latency AI, gaming and other workloads.Fastly also highlighted its collaboration with LALIGA on an AI-driven system that detects and stops pirated streams in real time. The project illustrates how the company is pairing content delivery with security and edge-compute capabilities. The last-12-month net retention rate improved from 113% in the first quarter and 104% in the year-ago quarter. The increase reflected broader product adoption and higher usage across a range of customers as Fastly expanded cross-selling and upselling efforts.Large customer count was 624 at the end of the quarter. Average annualized spend per large customer was $1.11 million, reflecting broader use of the platform across delivery, security and emerging edge-compute workloads. The top 10 customers represented 37% of revenues. Revenues from this group grew 48% year over year, while revenues from customers outside the top 10 increased 12%. Remaining performance obligations climbed 38% to $341 million, with the current portion rising 44%. Non-GAAP gross margin expanded 680 basis points year over year to a record 65.8%. Management attributed the improvement to higher revenues relative to infrastructure costs and continued cost discipline.Non-GAAP operating expenses were $93.7 million. Non-GAAP operating income totaled $27 million compared with an operating loss of $4.6 million a year ago. Adjusted EBITDA increased to $38.1 million from $8.9 million, while adjusted EBITDA margin reached 21%. As of June 30, 2026, cash, cash equivalents, marketable securities and investments totaled approximately $337 million, up $7 million from March 31, 2026. Fastly ended the quarter with a positive net cash balance of $14 million.Net cash provided by operating activities was $39.3 million, compared with $25.8 million a year earlier. Free cash flow totaled $3.6 million versus $10.9 million in the prior-year quarter, as infrastructure capital expenditures represented approximately 17% of revenues. For the third quarter of fiscal 2026, FSLY expects revenues to be in the range of $184-$190 million and non-GAAP earnings of 11-13 cents per share. The company projects non-GAAP operating income of $20-$24 million.Fastly raised its 2026 revenue guidance to $732-$746 million and non-GAAP earnings outlook to 50-54 cents per share. Non-GAAP operating income is expected between $88 million and $96 million, reflecting an operating margin of approximately 12% at the midpoint.Management views AI-driven demand as a tailwind across the business. AI tool usage is contributing to traffic growth among some of Fastly’s fastest-growing customers, with the impact most pronounced in Security and Compute and also evident in Network Services.The company expects growing machine and agent-driven traffic to increase demand for products such as bot management and DDoS protection. These offerings help customers distinguish authorized traffic from unwanted activity and govern automated requests in real time. Currently, Fastly carries a Zacks Rank #3 (Hold).Some top-ranked stocks in the broader Zacks Computer and Technology sector include Kimball Electronics KE, NVIDIA NVDA and Inuvo INUV. Each stock currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Shares of Kimball Electronics have declined 3.9% in the year-to-date period. KE is set to report the fourth quarter of fiscal 2026 results on Aug. 12.Shares of NVIDIA have increased 18% in the year-to-date period. NVDA is slated to report second-quarter 2026 results on Aug. 26.Inuvo shares have declined 56% in the year-to-date period. INUV is set to report first-quarter fiscal 2027 results on Aug. 11. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastly, Inc. (FSLY) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Inuvo, Inc (INUV) : Free Stock Analysis Report Kimball Electronics, Inc. (KE) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: Record $183.3 million, up 23% year-over-year, exceeding the high end of guidance. Network Services Revenue: $133.9 million, up 17% year-over-year. Security Revenue: $41.7 million, up 43% year-over-year, representing 23% of total revenue. Other Products Revenue: $7.7 million, up 69% year-over-year, driven by compute products. Gross Margin: Record 65.8%, up 680 basis points from 59% in Q2 2025. Operating Income: $27 million, exceeding guidance, with a record operating margin of 14.7%. Net Profit: $26.2 million, or $0.15 per diluted share, compared to a net loss of $5 million in Q2 2025. Adjusted EBITDA: $38.1 million, or 21% of revenue, up from $8.9 million in Q2 2025. Free Cash Flow: Positive $3.6 million, marking the sixth consecutive quarter of positive free cash flow. Net Retention Rate: Trailing 12-month rate of 117%, up from 113% in the prior quarter. Remaining Performance Obligations (RPO): $341 million, growing 38% year-over-year. Large Customer Count: 624 customers with more than $100,000 in annualized revenue. Warning! GuruFocus has detected 4 Warning Signs with COOK. Is FSLY fairly valued? Test your thesis with our free DCF calculator. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record revenue of $183 million, up 23% year-over-year, exceeding guidance. Fifth consecutive quarter of improving net retention rate, reaching 117%. Security revenue grew 43% year-over-year, with DDoS and bot management growing at triple-digit rates. Record gross margin of 65.8% and fourth consecutive quarter of operating profit. Sixth consecutive quarter of positive free cash flow, with strong cash position of $337 million. Revenue growth outside top 10 customers slowed to 12% year-over-year, indicating concentration risk. Top 10 customers now represent 37% of revenue, up from previous quarter, increasing customer concentration. Q3 revenue guidance implies a deceleration to 18% growth at midpoint, down from 23% in Q2. Operating expenses expected to rise in Q3 due to hiring and discretionary spend, pressuring margins. CapEx is front-loaded in 2026, with infrastructure spend expected to be 10-12% of revenue, up from 5% in 2025. Q: Can you unpack what is driving the expansion in net revenue retention (NRR), which rose to 117%? Is it Security and Compute cross-sells into existing accounts, or better renewal pricing on CDN? A: Rich Wong (CFO): The expansion is driven by a broad portfolio of products. The cross-sells and upsells are largely coming from our Web Application Firewall (WAF), which continues to gain share and grow faster than the market. Additionally, newer products like DDoS protection and bot management are picking up significant traction. While there is some traction on the Compute side, it is still early days, with a focus on co-innovation with customers on Compute@Edge. Q: What was the impact of episodic events like the World Cup on Q2 results, and how should we think about Q3 guidance given the seasonality shift? A: Rich Wong (CFO): We had a $10 million upside to the guide midpoint in Q2. A little less than half of that was driven by episodic activity, including the World Cup and another live event. If you strip that out, the Q3 guide, which is up sequentially, reflects a return to normal seasonality. It's important to note that 75% of the World Cup games and about 2/3 of the viewership occurred in Q2, with the remainder falling in Q3. Q: Regarding the Network Services jump in Q2, was there a positive impact from agentic traffic driving this outperformance, and are you gaining share from competitors? A: Kip Compton (CEO): We don't break out agentic traffic specifically, but we have seen signs of traffic driven by AI tool usage among some of our fastest-growing accounts. We do believe we are gaining share in Network Services, particularly where performance matters, and third-party research has agreed with that assessment. AI and agentic traffic remain a tailwind across our existing products, as well as for products like bot management and DDoS that help mitigate it. Q: Can you provide more detail on the nature of AI-related workloads you are seeing success with, and what is driving the success in Security? A: Kip Compton (CEO) & Rich Wong (CFO): The workloads are varied, including traffic related to AI tools for software development and increases in our privacy suite for agentic workloads. We are seeing increased adoption of bot and DDoS products as customers manage agentic traffic. For Security, the growth is driven by the increasing complexity of traffic and threat actors. AI is helping accelerate security adoption, but the prevalence of more threat actors is a primary driver. Customers are also looking to simplify and consolidate, often choosing Fastly after being unhappy with the effectiveness of incumbent security solutions. Q: What does the co-innovation with customers on the edge entail, and when could we see products come to market? A: Kip Compton (CEO): Co-innovation is foundational to our product development. We work with innovative customers on their business problems to build sustainable solutions that can become market-leading products. An example is our work with LALIGA on an AI-driven antipiracy system. We are also engaged in co-innovation projects around AI and agentic traffic, and we will share more in the coming months. We are at our best when working shoulder-to-shoulder with customers on business problems. Q: How should we think about the concentration of revenue from your top 10 customers in the second half, and will growth in the "all other customers" segment bounce back? A: Kip Compton (CEO) & Rich Wong (CFO): We are pleased with the 23% overall growth, which shows the go-to-market transformation is making progress, but there is more work to be done. We would like to see more new logos and growth outside the top customers. Given the strength of the top 10 and top 20 customers, we wouldn't be surprised if the 37% concentration stays there or ticks up a point or two in the near term. Q: Can you provide an update on pricing and volume trends, and how are you responding to competitors raising prices? A: Rich Wong (CFO): Pricing in Q2 was consistent with Q1, with a rational pricing environment. Price erosion remains in the mid-single digits, largely due to volume discounts as customers hit new tiers. Traffic growth continues in the low 20% range. We have no plans for surcharge pricing like some competitors. Instead, we look at renewals on a case-by-case basis, focusing on the value we provide and how we can help customers use the full suite of our products. Q: Is the 117% net retention rate a high watermark, or can we expect it to continue increasing? A: Rich Wong (CFO): This is our fifth consecutive quarter of increasing NRR, and we are proud of the progress. We don't guide on NRR, but customers continue to grow with us. It's important to note that Q4 will be a harder comp given the strength of Q4 2025, so that should be factored into models. Q: Can you expand on the hiring that slipped from Q2 into Q3 and the areas of investment? A: Rich Wong (CFO): The investments are focused on the APAC go-to-market, where we are adding more on-the-ground presence to improve customer relationships, and on marketing efforts with our new CMO. The focus is on maximizing value for our largest customers while also adding more logos and creating value for the next set of customers. Q: What is driving the traffic share gains with your top customers? Is it pricing or other factors? A: Kip Compton (CEO): The two most frequent factors are reliability and performance. We often pick up business when an incumbent has an outage or reliability issue, and customers consistently report our performance is better than competitors. While pricing must be market-competitive, we are not gaining traffic by discounting. The effectiveness of our security products and the performance and resiliency of our platform are the dominant drivers for customers switching. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Fastly (FSLY) came out with quarterly earnings of $0.15 per share, beating the Zacks Consensus Estimate of $0.07 per share. This compares to a loss of $0.03 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +114.29%. A quarter ago, it was expected that this cloud software developer would post earnings of $0.08 per share when it actually produced earnings of $0.13, delivering a surprise of +62.5%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Fastly, which belongs to the Zacks Internet - Software industry, posted revenues of $183.32 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.34%. This compares to year-ago revenues of $148.71 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Fastly shares have added about 145.1% since the beginning of the year versus the S&P 500's gain of 13%. While Fastly has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Fastly was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.06 on $180.75 million in revenues for the coming quarter and $0.32 on $718.62 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. MultiSensor AI Holdings, Inc. (MSAI), another stock in the same industry, has yet to report results for the quarter ended June 2026. This company is expected to post quarterly loss of $1.20 per share in its upcoming report, which represents a year-over-year change of +70%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. MultiSensor AI Holdings, Inc.'s revenues are expected to be $2.1 million, up 47.9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastly, Inc. (FSLY) : Free Stock Analysis Report MultiSensor AI Holdings, Inc. (MSAI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Record second quarter revenue of $183.3 million grew 23% year-over-year Record second quarter gross margin of 63.3% and record non-GAAP gross margin of 65.8% LTM NRR of 117% reaches highest level in over three years SAN FRANCISCO, August 05, 2026--(BUSINESS WIRE)--Fastly, Inc. (NASDAQ: FSLY), a leader in global edge cloud platforms, today announced financial results for its second quarter ended June 30, 2026. "Record second quarter results reflect strong execution and the deep trust customers place in our technology and our teams," said Kip Compton, CEO of Fastly. "Our platform strategy is driving business momentum, giving us the confidence to raise our full-year outlook." For a reconciliation of non-GAAP financial measures to their corresponding GAAP measures, please refer to the reconciliation table at the end of this press release. Second Quarter 2026 Financial Summary Total revenue of $183.3 million, representing 23% year-over-year growth. Network Services revenue of $133.9 million, representing 17% year-over-year growth. Security revenue of $41.7 million, representing 43% year-over-year growth. Other revenue of $7.7 million, representing 69% year-over-year growth. Network Services revenue includes solutions designed to improve performance of websites, apps, APIs, and digital media. Security revenue includes products designed to protect websites, apps, APIs, and users. Other revenue includes Compute and Observability solutions. Generated $39.3 million of operating cash flow compared to $25.8 million of operating cash flow in the second quarter of 2025. Generated $3.6 million of positive free cash flow compared to $10.9 million in the second quarter of 2025. GAAP gross margin of 63.3%, compared to 54.5% in the second quarter of 2025. Non-GAAP gross margin1 of 65.8%, compared to 59.0% in the second quarter of 2025. GAAP net loss of $15.6 million, compared to $37.5 million in the second quarter of 2025. Non-GAAP net income1 of $26.2 million, compared to non-GAAP net loss1 of $5.0 million in the second quarter of 2025. GAAP net loss per basic and diluted share of $0.10, compared to $0.26 in the second quarter of 2025. Non-GAAP net income per basic share1 of $0.17, compared to non-GAAP net loss per basic share1 of $0.03 in the second quarter of 2025. Non-GAAP net income per diluted share1 of $0.15, compared to non-GAAP net loss per diluted share1 of $0.03 in the second quarter of 2025. Key Metrics Remaining Performance Obligations (RPO)2 were $341 million, up 38% from $247 million in the second quarter of 2025. Fastly's top ten customers accounted for 37% of revenue in the second quarter of 2026 compared to 31% in the second quarter of 2025. Last 12-month net retention rate (LTM NRR)3 increased to 117% in the second quarter from 113% in the first quarter of 2026. Second Quarter Business and Product Highlights Announced new research showing how rapidly growing AI traffic is reshaping the internet, growing 6.5x faster than human traffic this year, and why organizations need new strategies to manage machine traffic. Released a joint announcement with LALIGA on the collaboration of anti-piracy solutions that are designed to address illegal streaming of live sports and help rights holders prevent lost revenue. Announced a new partnership with Skyfire, enabling trusted commerce at the edge so enterprises can now securely identify, verify, and transact with AI agents in real time and at global scale, without re-architecting existing infrastructure. Released C++ SDK for Fastly Compute, enabling enterprises to secure, scale, and accelerate their C++ AI workloads, gaming features, and other low-latency applications. Third Quarter and Full Year 2026 Guidance A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future and cannot be reasonably determined or predicted at this time, although it is important to note that these factors could be material to Fastly’s future GAAP financial results. Conference Call Information Fastly will host an investor conference call to discuss its results at 1:30 p.m. PT / 4:30 p.m. ET on Wednesday, August 5, 2026. To access the conference call, please pre-register and dial-in using this link at least 15 minutes prior to the 1:30 p.m. PT start time. Registrants will receive an email confirmation with dial-in details. A live webcast of the event can be accessed using this link. A replay of the webcast will be available on https://investors.fastly.com starting approximately two hours after the event and archived on the site for one quarter. About Fastly, Inc. Fastly’s powerful and programmable edge cloud platform helps the world’s top brands deliver online experiences that are fast, safe, and engaging through edge compute, delivery, security, and observability offerings that improve site performance, enhance security, and empower innovation at global scale. Compared to other providers, Fastly’s powerful, high-performance, and modern platform architecture empowers developers to deliver secure websites and apps with rapid time-to-market and demonstrated, industry-leading cost savings. Organizations around the world trust Fastly to help them upgrade the internet experience, including Reddit, Universal Music Group, and SeatGeek. Learn more about Fastly at https://www.fastly.com, and follow us @fastly. Forward-Looking Statements This press release contains "forward-looking" statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements include, but are not limited to, statements regarding our future financial and operating performance and shareholder returns, including our outlook and guidance and ability to maintain and strengthen our liquidity position; our ability to acquire new customers, expand cross-sell opportunities, and grow market share; our ability to enrich our revenue mix with platform enhancements; the performance of our existing and new platform enhancements; our ability to accelerate global growth; our partnerships and collaborations; the performance, capabilities, and expectations regarding customer experiences with Fastly Compute, including its C++ SDK, Bot Management and DDoS Protection, and Next-Gen WAF; and Fastly's strategies, platform, and business plans. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Important factors that could cause our actual results to differ materially are detailed from time to time in the reports Fastly files with the Securities and Exchange Commission ("SEC"), including those more fully described in Fastly’s Annual Report on Form 10-K for the year ended December 31, 2025. Additional information will also be set forth in Fastly’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, and other filings and reports that Fastly may file from time to time with the SEC. Copies of reports filed with the SEC are posted on Fastly’s website and are available from Fastly without charge. Use of Non-GAAP Financial Measures To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses the following non-GAAP measures of financial performance: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP basic and diluted net income (loss) per common share, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, free cash flow and adjusted EBITDA. The presentation of this additional financial information is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In addition, these non-GAAP financial measures may be different from the non-GAAP financial measures used by other companies. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Management compensates for these limitations by reconciling these non-GAAP financial measures to the most comparable GAAP financial measures within our earnings releases. Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP basic and diluted net income (loss) per common share, non-GAAP research and development, non-GAAP sales and marketing, and non-GAAP general and administrative differ from GAAP in that they exclude stock-based compensation expense and related employer payroll taxes, amortization of capitalized stock-based compensation - cost of revenue, amortization of acquired intangible assets, executive transition costs, and amortization of debt discount and issuance costs. Adjusted EBITDA: excludes stock-based compensation expense and related employer payroll taxes, amortization of capitalized stock-based compensation - cost of revenue, gain on modification of lease, depreciation and other amortization expenses, amortization of acquired intangible assets, impairment expense, executive transition costs, interest income, interest expense, including amortization of debt discount and issuance costs, other expense (income), net, and income taxes. Amortization of Acquired Intangible Assets: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases and acquisitions. Management considers its operating results without this activity when evaluating its ongoing non-GAAP performance and its adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and acquisitions and may not be reflective of our core business, ongoing operating results, or future outlook. Amortization of Debt Discount and Issuance Costs: consists primarily of amortization expense related to our debt obligations. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. These are included in our total interest expense. Capital Expenditures: consists of cash used for purchases of property and equipment, net of proceeds from sale of property and equipment, capitalized internal-use software and payments on finance lease obligations, as reflected in our statement of cash flows. Depreciation and Other Amortization Expense: consists of non-cash charges that can be affected by the timing and magnitude of asset purchases. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of asset purchases and may not be reflective of our core business, ongoing operating results, or future outlook. Executive Transition Costs: consists of one-time cash charges recognized with respect to changes in our executive’s employment status. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results, or future outlook. Free Cash Flow: calculated as net cash used in operating activities less purchases of property and equipment, net of proceeds from sale of property and equipment, and capitalized internal-use software costs. Management specifically identifies adjusting items in the reconciliation of GAAP to non-GAAP financial measures. Management considers non-GAAP free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in Fastly's business and strengthening its balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. The presentation of non-GAAP free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity. Gain on Modification of Lease: consists of a one-time non-cash charge recognized with respect to the modification of our leases. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results, or future outlook. Impairment Expense: consists of charges related to our long-lived assets. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. Income Taxes: consists primarily of expenses recognized related to state and foreign income taxes. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. Interest Expense: consists primarily of interest expense related to our debt instruments, including amortization of debt discount and issuance costs. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. Interest Income: consists primarily of interest income related to our marketable securities. Management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. Other (Expense) Income, Net: consists primarily of foreign currency transaction gains and losses. Management considers its operating results without this activity when evaluating its ongoing adjusted EBITDA performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook. Stock-Based Compensation Expense and Related Employer Payroll Taxes: consists of expenses for stock options, restricted stock units, performance awards and other shares issued under our equity incentive plans or our Employee Stock Purchase Plan ("ESPP"), as applicable, and the related employer payroll taxes. Although stock-based compensation and its related employer payroll taxes are expenses for the Company, management considers its operating results without this activity when evaluating its ongoing non-GAAP net income (loss) performance and its adjusted EBITDA performance, primarily because they are expenses not believed by management to be reflective of our core business, ongoing operating results, or future outlook. In addition, the value of some stock-based instruments is determined using formulas that incorporate variables, such as market volatility, that are beyond our control. Amortization of Capitalized Stock-Based Compensation - Cost of Revenue: in order to reflect the performance of our core business, ongoing operating results, or future outlook, and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies, similar to stock-based compensation, management considers it appropriate to exclude amortization of capitalized stock-based compensation from our non-GAAP financial measures. Management believes these non-GAAP financial measures and adjusted EBITDA serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods and to those of peer companies, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current financial performance. In the financial tables below, the Company provides a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this press release. Key Metrics 1 Beginning with the quarter ended March 31, 2026, we are excluding stock-based compensation related employer payroll taxes from our non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP net income (loss) per common share — basic and non-GAAP net income (loss) per common share — diluted, because we consider our operating results without this activity when evaluating our ongoing non-GAAP net income (loss) performance and our adjusted EBITDA performance. We did not recast the presentation for all prior periods presented due to the immaterial amount of such payroll taxes. 2 Remaining Performance Obligations include future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied. During the third quarter of 2025, we identified an error in RPO calculations from certain contracts with a termination-for-convenience clause. We recast the presentation of RPO for all prior periods presented to reflect the correction of this error. 3 We calculate LTM Net Retention Rate by dividing the total customer revenue for the prior twelve-month period ("prior 12-month period") ending at the beginning of the last twelve-month period ("LTM period") minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. We believe the LTM Net Retention Rate is supplemental as it removes some of the volatility that is inherent in a usage-based business model. 4 Non-GAAP net income per share is calculated as Non-GAAP net income divided by weighted average diluted shares for 2026. 5 Assumes weighted average diluted shares outstanding of 181.4 million in Q3 2026 and 180.3 million for the full year 2026. View source version on businesswire.com: https://www.businesswire.com/news/home/20260805045298/en/ Contacts Investor Contact Vernon Essi, [email protected] Media Contact Stacey [email protected]