Fastly (FSLY 3.23%), a provider of edge cloud and security solutions for digital businesses, posted its second-quarter 2025 earnings on August 6, 2025. Fastly reported record GAAP revenue of $148.7 million in Q2 2025, beating analyst estimates of $144.9 million. Non-GAAP net loss per share narrowed to ($0.03), outperforming the anticipated ($0.05) loss. Year over year, GAAP revenue rose 12%, while Free cash flow (non-GAAP) moved into positive territory at $10.9 million, reversing a negative figure from the year-ago period. Gross margins (GAAP and non-GAAP) saw a slight contraction, and bottom-line results improved, but Fastly still reported a GAAP operating loss. Overall, The quarter highlighted revenue growth and operational progress, mixed with ongoing pressures on profitability and margins.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $(0.03) | $(0.05) | $(0.06) | 50.0 % |
| Revenue (GAAP) | $148.7 million | N/A | $132.4 million | 12.3 % |
| Gross Margin (Non-GAAP) | 59.0 % | 59.4 % | (0.4) pp | |
| Operating Loss (Non-GAAP) | $(4.6 million) | $(11.5 million) | 60.0 % decrease | |
| Free Cash Flow | $10.9 million | $(18.5 million) | NM |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Fastly: What the Business Does and Key Success Factors
Fastly runs an edge cloud platform, which lets businesses deliver websites, apps, and digital content to users quickly and securely. At its core, the platform combines content delivery network (CDN) services, security products, and serverless computing, all designed with developers in mind. The company’s programmable features enable customers to cache content, deploy code at the network edge, and manage web traffic with real-time tools.
Recently, Fastly has focused on rolling out more robust security offerings and expanding its programmable edge services through products like Compute (for serverless edge computing) and Observability (for real-time insights). The company’s success depends on driving product innovation, retaining and expanding with enterprise customers, and deepening relationships through multi-product adoption. Financial discipline and operating efficiency also remain essential as it strives for profitability.
Quarter in Review: Financial and Operational Highlights
The quarter saw Fastly achieve record GAAP revenue of $148.7 million and outpace its guidance. GAAP revenue rose 12% year-over-year, driven mainly by network services (the division responsible for delivering website and app performance) and security offerings. Network services revenue reached $114.9 million, up 10%. while Security revenue rose 15% to $29.3 million. The company's “Other” segment, which features the Compute (serverless edge computing) and Observability (real-time network insights) products, surged 60% to $4.5 million (GAAP).
While revenue exceeded expectations, gross margins contracted slightly. The non-GAAP gross margin dipped to 59.0%, down 0.4 percentage points from a year ago, as industry pricing pressures continued to weigh on results. Operating loss on a non-GAAP basis narrowed to $4.6 million, a 60% improvement year over year. Adjusted EBITDA was $8.9 million. Free cash flow (non-GAAP) swung from a loss to a positive $10.9 million.
Customer trends show progress in diversification and retention. Revenue concentration from the top 10 customers dropped to 31%, compared to 34% a year ago, reducing dependency on a small group. Revenue from customers outside the top ten jumped 17%, compared to only 2% growth from the top ten. Fastly’s remaining performance obligations, a measure of contracted but not yet recognized revenue, hit a record $315 million, representing 41% growth year over year. Last twelve months net retention rate rose to 104%, up from 100% in the prior quarter.
The company also accelerated its go-to-market performance and product packaging efforts. Renewals involving multi-product packages more than doubled, rising over 130% year over year. These bundled deals encourage customers to use more of Fastly’s services and broaden account penetration.
Product innovation remained a priority. Fastly delivered enhancements to its security suite, launching AI Bot Management for automated bot control and new features for DDoS (distributed denial-of-service) protection. The company expanded IPv6 support in its delivery services, allowing broader adoption by modern internet applications. and introduced Compute for the Rust programming environment, furthering its developer-focused edge offerings. “Other” revenue, connected to these emerging capabilities, grew 60% year-over-year and now plays a more meaningful role in both revenue mix and strategic differentiation.
Security revenue grew 7% year-over-year in Q1 FY2025 and 15% in Q2 FY2025, continuing to show improvement after several quarters of sluggish growth. Although security revenue accelerated to 15% in Q2 FY2025, Fastly noted that many customers are only beginning to adopt its full security portfolio, leaving significant room for deeper penetration. The company explained that only a single-digit percentage of its customer base uses the DDoS and bot mitigation services, suggesting more runway ahead.
Looking Ahead: Guidance and Key Topics for Investors
Management raised its guidance for FY2025. It now expects full-year GAAP revenue of $594 to $602 million for FY2025, implying around 9% growth at the midpoint. For Q3 2025, projected total revenue is expected to range from $149.0 million to $153.0 million. On the bottom line, the company guided for a full-year non-GAAP net loss per share between ($0.10) and ($0.04) for FY2025 and also forecast positive free cash flow. Fastly expects to reach operating profitability in the second half of the year, with a non-GAAP operating loss of $9 million to $3 million for FY2025.
No dividend is currently paid by Fastly. In the near term, investors may want to watch revenue momentum in security and emerging products, gross margin stabilization, and ongoing customer diversification. Leadership changes at the CEO, CFO, and go-to-market levels present an additional area for monitoring, as does continued exposure to large customers and any impacts from changing U.S. policy on key accounts like TikTok. Management has excluded U.S. TikTok revenue beyond June 19 from its 2025 outlook as a precaution.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
