Fastly NYSE: FSLY reported a stronger-than-expected start to 2026, with first-quarter revenue rising 20% year over year to $173 million, near the high end of its guidance range, as growth in security and compute helped offset normal seasonal patterns in its network services business.
Chief Executive Kip Compton said the company’s “value proposition is resonating” with customers, pointing to accelerated security growth, increasing compute demand and ongoing gains in network services. Chief Financial Officer Richard Wong said the quarter marked a record high for revenue and reflected continued success in upsell and cross-sell efforts across Fastly’s expanded platform.
Security and Compute Lead Growth
Security revenue grew 47% year over year to $38.8 million and represented 22% of total revenue, both record levels for the company. Wong said it was Fastly’s fourth consecutive quarter of accelerating security revenue and reflected momentum beyond the company’s core web application firewall product.
Compton said that among security products sold to new customers during the quarter, nearly half were newer offerings, including DDoS protection, bot management, and API discovery and inventory. He said the broader portfolio is helping Fastly expand wallet share with existing customers while attracting new customers to the platform.
Revenue from “other” products, primarily compute, rose 67% year over year to $8 million. Wong said the category delivered its largest quarter-over-quarter dollar increase, rising $1.6 million sequentially, driven by customer requirements tied to AI and related workloads.
Compton said Fastly expects continued momentum in compute as customers pursue more demanding edge workloads and test high-value AI use cases. On a combined basis, security and other revenue grew 50% year over year, and Compton said the company expects those product lines to exceed a $200 million annual run-rate milestone by late 2026.
Network Services Continue to Grow, Despite Seasonal Comparison
Network services revenue increased 11% year over year to $126.2 million. Compton said the business grew at roughly double the market growth rate, driven by the platform’s performance, reliability and value.
During the question-and-answer portion of the call, KeyBanc Capital Markets analyst Jackson Ader asked about a slowdown in year-over-year network services growth. Wong said the prior quarter had been particularly strong because of a gaming download that outperformed expectations and seasonally strong e-commerce holiday traffic. He said the first-quarter change was not related to pricing but reflected typical seasonality after a record fourth quarter.
Wong said pricing erosion in network services remained in the mid-single digits, similar to the fourth quarter. He noted that the dynamic applies to network services and not to Fastly’s security or compute businesses. Compton said the company had not seen a material change in the pricing environment, though it is monitoring competitor price increases tied to component costs.
Customer Metrics and Profitability Improve
Fastly ended the quarter with 634 large customers, defined as customers with more than $100,000 in annualized revenue during the quarter. The company said it will no longer disclose total customer count going forward, because more than 90% of revenue historically has come from large customers.
Trailing 12-month net retention rose to 113%, up from 110% in the prior quarter and 100% a year earlier. Wong said the improvement reflected revenue increases across a broad range of customers and that net retention is extending beyond Fastly’s largest customers into mid-market accounts.
Remaining performance obligations reached a record $369 million, up 63% year over year. The current portion of RPO, representing the next 12 months, accounted for 75% of total RPO and grew 77% year over year.
Gross margin was 65.1%, a company record and 780 basis points higher than the year-ago quarter. Wong said the result included a 190-basis-point one-time benefit from a change in accounting policy related to server useful life, intended to align with industry standards.
Fastly reported non-GAAP operating income of $19.1 million, above its guidance range of $14 million to $18 million. Operating margin improved to 11% from negative 4% in the year-earlier period. Non-GAAP net income was $22.9 million, or $0.13 per diluted share, compared with a net loss of $6.6 million, or $0.05 per diluted share, in the prior-year quarter.
AI Framed as a Tailwind
Compton described the rise of autonomous agents as a long-term growth driver and said the edge has become important for scaling and securing AI across multi-cloud environments. He said Fastly is working with customers to secure and scale AI use cases and help manage automated traffic.
“AI bot management is an early example of this,” Compton said, adding that the strategy is building Fastly’s pipeline.
Fastly highlighted several product developments tied to security and AI-related traffic, including Content Guard, a new product designed to help publishers control access to their content and stop unauthorized AI agents without compromising performance for authorized traffic. Compton also pointed to expanded API discovery and inventory tools aimed at helping enterprises identify and secure shadow APIs, as well as a Fastly Agent Toolkit for AI coding agents.
In response to a question from D.A. Davidson analyst Rudy Kessinger about how much network traffic growth came from AI chatbots and agentic traffic, Compton said Fastly did not have a specific percentage to provide. He said the company has seen that traffic grow faster than human browsing traffic and become a greater share over time.
Fastly Raises Full-Year Outlook
For the second quarter, Fastly projected revenue of $170 million to $176 million, representing 16% annual growth at the midpoint. The company expects second-quarter gross margin of 64%, plus or minus 50 basis points, non-GAAP operating profit of $12 million to $16 million, and non-GAAP net earnings per diluted share of $0.05 to $0.08.
For full-year 2026, Fastly raised its revenue guidance to $710 million to $725 million, representing 15% growth at the midpoint. The company also increased its non-GAAP operating profit outlook to $58 million to $68 million and projected non-GAAP net earnings per diluted share of $0.27 to $0.33.
Wong said Fastly expects full-year gross margin of 64%, plus or minus 50 basis points. He said infrastructure capital spending is expected to be 10% to 12% of revenue in 2026, compared with 5% in 2025, as the company increases capacity to support growth. Fastly maintained its free cash flow guidance of $40 million to $50 million for the year.
The company ended the quarter with approximately $330 million in cash equivalents, marketable securities and investments. Wong said the company is “sufficiently” capitalized to fund its growth opportunities and capital spending plans.
About Fastly NYSE: FSLY
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.
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