Fastly (FSLY 4.43%) is starting to look fast again regarding both financial results and business execution. The edge computing company posted better-than-expected top-line results and a narrower-than-anticipated adjusted loss per share as its year-over-year revenue growth rate accelerated significantly. Further, the quarter's performance prompted management to lift its financial outlook for the full year.
Speed seems to be the key.
"We continue to execute on our strategic initiatives to simplify our go-to-market, increase our innovation velocity, and drive a new operational rigor and cost control throughout our business," said Fastly CEO Todd Nightingale in the company's second-quarter earnings release. "All of this progress helps us drive our mission to make every user experience fast, safe, and engaging ... fueling growth and delivering a strong financial result."
Here's a closer look at the impressive quarter and management's enhanced outlook for the full year.
Accelerating growth
Fastly's second-quarter revenue rose 20% year over ear to $122.8 million. This is well above the guidance management provided for revenue for the period to be between $117 million and $120 million. In addition, the top line was ahead of analysts' average estimate of $118.9 million.
Highlighting how well the company is executing, Fastly's revenue growth rate for Q2 was easily ahead of the 15% growth achieved in Q1. Management said the quarter's results were helped by a trailing-12-month customer net retention rate of 116% and the addition of 11 enterprise customers. Further, average enterprise customer spend on its edge computing platform was $818,000, up from $795,000 in the first quarter of 2023.
Raising guidance
Looking to the full year of 2023, Fastly said it now anticipates full-year revenue coming in between $500 million and $510 million. Management previously targeted full-year revenue between $495 million and $505 million.
Perhaps even more impressive is the company's significant improvement in its outlook for its adjusted operating loss. Fastly said it now expects an adjusted operating loss between $49 million and $43 million, compared to its forecast earlier this year for an operating loss between $53 million and $47 million. Optimizing costs and improving efficiency has been a major operational focus for the company since Nightingale took the reigns last September.
Indeed, Fastly's vice president of engineering and infrastructure, Nick Rockwell, said at the company's Investor Day presentation in June that he's been laser-focused on "driving our costs down, driving out waste, [and turning] the crank of optimization every day." This optimization "creates new capacity to invest in the business, helps us chart the path to profitability and helps us drive successful outcomes again for our customers and for our shareholders," he added.
Looking to Q3, specifically, management guided for revenue to be between $125 million and $128 million. The midpoint of this range would translate to 16.5% growth. While this would mark a slowdown from Q2, it's possible that the company's guidance was conservative, as Fastly has been beating its quarterly revenue forecasts recently.
Importantly, management also expects further year-over-year improvement in its non-GAAP (generally accepted accounting principles) loss per share. Fastly guided for its third-quarter adjusted loss per share to be between $0.09 and $0.07. This would compare to an adjusted loss per share of $0.14 in the third quarter of 2022.
