What Fastly (FSLY) Said on Its Q3 Earnings Call

Key Points

• Fastly posted record Q3 revenue of $190.2 million, up 20% year over year, and adjusted operating income of $31.2 million, both above the high end of its forecasts. Free cash flow was $25 million, marking a seventh consecutive positive quarter.
• Growth was led by Fastly’s top 10 customers, whose revenue rose 46% and accounted for 39% of total revenue; sales from other customers grew 8%. Security revenue increased 32% to $44.7 million, and net retention improved to 119%.
• Fastly raised its full-year revenue outlook to $744 million–$748 million and its free cash flow forecast to $50 million–$60 million. It also cited new AI-related business and product opportunities, including a seven-figure commitment from an AI company.

Fastly NASDAQ: FSLY reported record third-quarter revenue of $190.2 million and raised its full-year outlook, as increased traffic from large customers and security product sales helped drive a fourth consecutive quarter of revenue growth of at least 20%.

Revenue rose 20% from a year earlier and exceeded the high end of the company’s $184 million to $190 million guidance range. Adjusted operating income climbed to $31.2 million, above Fastly’s forecast of $20 million to $24 million. Unless otherwise noted, profitability figures discussed on the call were non-GAAP.

Chief Financial Officer Rich Wong said the revenue upside came from better-than-expected traffic at some larger customers and continued success with security products. Fastly also reported $25 million in free cash flow, its seventh consecutive quarter of positive free cash flow.

Growth led by largest customers

Fastly’s top 10 customers generated 39% of third-quarter revenue, up from 37% in the previous quarter. Revenue from that group grew 46% year over year, while revenue from customers outside the top 10 grew 8%.

Asked about the slower growth outside the top tier, Wong said Fastly had focused heavily on its largest customers. “We probably over-focused a little bit on the top 10, or even top 50,” he said, adding that building the brand and selling more broadly takes time.

Chief Executive Officer Kip Compton said investments in marketing, international expansion and partnerships also would take time to produce results. Fastly had 634 large customers in the quarter, defined as customers generating more than $100,000 in annualized revenue.

The company’s trailing 12-month net retention rate rose to 119%, from 117% in the prior quarter and 106% a year earlier. Wong said larger customers’ increased platform use contributed to the improvement, while also describing retention as strong across both top and non-top customers.

Security revenue rose 32% to $44.7 million, or 24% of total revenue. Network services revenue increased 16% to $138 million, and other products revenue rose 37% to $7.4 million. Compton said Bot Management and DDoS products each again posted triple-digit growth.

Platform adoption and AI opportunities

Fastly said 74% of its large customers used at least two product suites, while 34% used four or more, up from 30% in the second quarter. Beginning in 2027, the company plans to replace its three separate revenue lines with one consolidated revenue line and report multi-product adoption metrics.

Compton said a leading AI company signed a seven-figure commitment to secure and scale agentic traffic. He said the deal required no specific additional capital investment or GPUs, and that Fastly could accommodate the workload on its existing infrastructure.

AI agents can generate both delivery and security revenue, Compton said, though text-based agent traffic has a relatively modest impact on delivery revenue. He described more significant opportunities in products that help customers manage and protect against agent and bot traffic. Fastly also announced AI Runtime Control, AI Firewall and expanded API Security capabilities during the quarter.

Compton highlighted Fastly’s September deployment with Comcast, which places Fastly’s platform inside Comcast’s network. He said the arrangement brings services closer to end users and provides a foundation for latency-sensitive applications.

Outlook and leadership transition

For the fourth quarter, Fastly forecast revenue of $198 million to $202 million, representing 16% year-over-year growth at the midpoint. It expects adjusted operating profit of $30 million to $34 million and adjusted earnings of $0.16 to $0.18 per diluted share.

The company raised its full-year revenue forecast to $744 million to $748 million and its adjusted operating profit outlook to $107 million to $111 million. It also raised its free cash flow forecast to $50 million to $60 million and lowered its infrastructure capital spending expectation to approximately 10% of revenue, from a prior range of 10% to 12%.

Wong said the fourth-quarter forecast includes assumptions for the expected GTA VI release, including download and patch sizes and Fastly’s share of distribution. He cautioned that the event could be highly variable but said it was assumed to be larger than Fortnite had been in the company’s guidance.

Fastly also announced that Scott Lovett, president of go-to-market, plans to retire next year. Compton said Lovett will continue leading the organization during the transition, and the two will search for a new chief revenue officer among internal and external candidates. Fastly has not yet provided 2027 guidance.

About Fastly (NASDAQ:FSLY)

Fastly, Inc is a technology company that provides an edge cloud platform designed to help businesses deliver, secure, and optimize digital applications and content. Its platform processes data and applications closer to end users, supporting faster performance, improved reliability, and greater control over internet-based services.

Fastly's products and services include content delivery, application programming interface (API) acceleration, edge computing, application and API security, bot management, distributed denial-of-service protection, and observability tools.

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