In This Article:
Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Fastly Inc (NYSE:FSLY) exceeded the upper ends of both revenue and operating loss guidance ranges for Q1 2025.
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The company raised its 2025 revenue guidance by $10 million and operating loss guidance by $0.03 million at their respective midpoints.
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Fastly Inc (NYSE:FSLY) generated $8 million in positive free cash flow, moving closer to break-even for the year.
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Revenue for Q1 2025 was $144.5 million, surpassing the high end of the $136 to $140 million guidance range, with an 8% year-over-year growth.
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The company saw a 64% year-over-year growth in revenue from emerging products, driven primarily by compute products.
Negative Points
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The trailing 12-month net retention rate declined to 100%, down from 102% in the prior quarter and 114% in the year-ago quarter.
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Gross margin for Q1 2025 was 57.3%, down 230 basis points from 59.6% in Q1 2024.
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Operating expenses were $88.7 million in Q1 2025, reflecting a 6% sequential growth due to seasonal payroll taxes.
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Security revenue growth was only 7% year-over-year, not yet reflecting the impact of last year's portfolio expansion.
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Concerns remain over potential geopolitical risks affecting TikTok's US operations, with Fastly Inc (NYSE:FSLY) excluding US TikTok revenue beyond June 19th from its guidance.
Q & A Highlights
Q: What are the drivers for the upside in the network side, and what is contributing to the incremental customer demand? A: The strong results are attributed to strategic customer acquisition in key verticals and enhanced cross-selling efforts under new leadership and incentive plans. Additionally, recovery in large media accounts contributed to better-than-expected results in the top customer cohort. (Respondent: CEO Todd Nightingale)
Q: Can you provide insights into the growth of the compute and observability business, which saw a 64% increase? A: The growth is primarily driven by compute, with strategic verticals focusing on dynamic user experiences using serverless edge compute. Innovations in storage and dynamic user experiences are also contributing to this growth. (Respondent: CEO Todd Nightingale)
Q: What is the outlook for the security segment, and how is the adoption of security products progressing? A: While almost half of customers use more than one product line, the penetration of security products like WAF is still in early stages, with single-digit penetration for newer offerings like bot mitigation. There is significant opportunity for growth, especially in the back half of the year. (Respondent: CEO Todd Nightingale)