Summary
Fastly reported first quarter fiscal 2022 revenue of $102.4 million, up 20.7% year over year and 5% sequentially. That is a record quarterly revenue figure for the company. GAAP gross profit rose 2.3% to $48.5 million. GAAP gross margin was 47.3%, down 8.5 percentage points. GAAP operating margin was -61.5%, down 2.7 percentage points. GAAP operating loss widened to $63.0 million. GAAP net loss widened to $64.3 million. GAAP diluted EPS was -$0.54. On a non-GAAP basis, gross profit was $53.9 million compared with $51.0 million. Non-GAAP gross margin was 52.6% compared with 60.1% in the prior-year quarter. Non-GAAP operating loss was $17.7 million compared with $12.9 million. Non-GAAP net loss was $18.0 million compared with $13.6 million. Non-GAAP diluted EPS was -$0.15 compared with -$0.12. Adjusted EBITDA was negative $7.8 million compared with negative $6.4 million.
Customer metrics showed mixed retention. Total customer count was 2,880, including 457 enterprise customers. Enterprise customers generated 89% of trailing 12-month revenue. The trailing 12-month net retention rate decreased to 115% from 118% in the fourth quarter of 2021. Dollar-Based Net Expansion Rate decreased to 118% from 121% in the fourth quarter of 2021. Average enterprise customer spend was $722K, up 3% quarter over quarter. The company added 422 customers and 62 enterprise customers from March 31, 2021. Product momentum included recognition as the only vendor named as Gartner Peer Insights Customers Choice for web application and API protection for four consecutive years. Fastly was recognized as a leader by IDC MarketScape in the Worldwide Commercial CDN 2022 Vendor Assessment. The company acquired Fanout to support real-time app development at the edge. It launched a new Observability dashboard and a Compute Edge Partner Ecosystem. It also deployed HTTP/3 and QUIC platform-wide. The board initiated a search for the next CEO, with current CEO Joshua Bixby to step down once a successor is appointed.
Guidance for the second quarter of 2022 and the full year 2022 covers revenue, non-GAAP operating loss and non-GAAP net loss per share. Management guided second quarter non-GAAP operating loss to $21.5 million to $18.5 million, and full year 2022 non-GAAP operating loss to $70.0 million to $60.0 million. Second quarter non-GAAP net loss per share guidance is $0.18 to $0.15, and full year 2022 non-GAAP net loss per share guidance is $0.60 to $0.50. Cash generation remained negative. Operating cash flow was negative $13.2 million. Capital expenditures were $2.4 million. Free cash flow was negative $19.4 million. Deferred revenue rose 57.5% to $30.7 million. Remaining performance obligations rose 12.4% to $157.5 million. The company's network spanned 198 terabit capacity across 75 markets and 34 countries as of March 31, 2022.
Costs and risks weighed on profitability. The gross margin decline reflected higher bandwidth, peering, and colocation costs as Fastly invests in infrastructure and capacity. The company's 10 largest customers generated 33% of revenue. Management cited risks including competition, COVID-19 uncertainty, data localization and cross-border data transfer rules, and the Russia-Ukraine conflict. The CEO transition adds another layer of uncertainty. Fastly continues to invest in its network and product roadmap, but the widening losses and negative operating cash flow show the cost of that expansion. The company expects to continue incurring operating losses for the foreseeable future.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $102.4M | $97.7M | +4.8% | $84.9M | +20.7% |
| Gross profit | $48.5M | $49.8M | -2.6% | $47.4M | +2.3% |
| Gross margin | 47.3% | 50.9% | -3.6 pp | 55.8% | -8.5 pp |
| Research & development | $40.4M | $35.0M | +15.5% | $29.0M | +39.5% |
| Sales & marketing | $41.5M | $42.2M | -1.6% | $34.9M | +18.9% |
| General & administrative | $29.6M | $29.3M | +0.9% | $33.5M | -11.7% |
| Total operating expenses | $111.5M | $106.4M | +4.7% | $97.3M | +14.5% |
| Operating income (loss) | -$63.0M | -$56.7M | -11.2% | -$50.0M | -26.1% |
| Operating margin | -61.5% | -58.0% | -3.6 pp | -58.9% | -2.7 pp |
| Net income (loss) | -$64.3M | -$57.5M | -11.7% | -$50.7M | -26.8% |
| Net margin | -62.8% | -58.9% | -3.9 pp | -59.7% | -3.0 pp |
| Diluted EPS | -$0.54 | -$0.50 | -$0.04 | — | — |
| Net retention rate | 115.0% | — | — | 137.0% | -22.0 pp |
Risks
Gross margin fell to 47.3% in FY2022 Q1 from 55.8% in FY2021 Q1, down 8.5 percentage points, as cost of revenue rose 44% on higher bandwidth, colocation, depreciation, and personnel costs. MD&A expects cost of revenue to continue increasing and may rise as a percentage of revenue.
For the three months ended March 31, 2022, top ten customers accounted for approximately 33.0% of revenue and top five for approximately 24.0%. Loss or reduced usage by a major customer, including after the June 8, 2021 outage, could lower revenue.
The June 8, 2021 global platform outage due to an undiscovered software bug caused customers, including some of the largest, to reduce or remove traffic and led to service level agreement claims; not all customer traffic has returned to pre-outage levels.
Risk factor marked as substantively changed: during 2021 Fastly experienced DDoS attacks of increased size and severity, and the December 2021 Log4j vulnerability affected systems worldwide. Multi-tenant architecture means an attack on one customer could affect others.
Component delays, shortages, or price increases could interrupt server construction. The ongoing COVID-19 pandemic and global microchip shortage have caused supply constraints and pricing increases for components used in Fastly's servers.
Risk factor marked as substantively changed: failure to attract and retain qualified personnel could prevent execution of business strategy. Fastly faces significant competition for sales personnel with required skills, and new hires may take significant time to reach full productivity.
DBNER for the trailing 12 months ended March 31, 2022 was 117.9%, down from 141.0% in the prior-year period, and LTM NRR was 115.0%, down from 135.0%. MD&A notes DBNER for individual cohorts is expected to decrease as customers mature.
Fastly has identified three material weaknesses in its internal control over financial reporting. If unable to remediate and maintain effective internal control, investors may lose confidence in the accuracy and completeness of financial reports.
MD&A says Fastly received a higher number of requests relating to EU privacy requirements, impacting sales negotiations, and potential customers declined to do business due to privacy concerns over transfers of personal information to the United States.
COVID-19 pandemic has adversely impacted and may continue to impact business, with customers decreasing or delaying technology spending, requesting pricing concessions, and supply chain delays. MD&A also monitors Russia-Ukraine conflict, which could cause greater global economic disruptions.
Fastly issued approximately $948.8 million aggregate principal amount of 0% convertible senior notes due 2026. Conversion may dilute stockholders, and servicing debt requires significant cash; if stock price is below conversion price at maturity, holders may not convert and Fastly must repay in cash.
The market for cloud computing platforms is highly fragmented and competitive, with legacy CDNs, small business-focused CDNs, cloud providers, and appliance vendors. Some competitors offer lower prices or bundle competing services, creating pricing pressure.
Sales to enterprise customers may involve longer sales cycles due to competitive purchasing processes and formal approvals. Most customer contracts are only one year in duration and most customers, including large ones, do not have long-term contractual financial commitments.
From January 1, 2022 to May 4, 2022, Fastly's stock price ranged from $36.61 to $13.01 per share. Following announcement of Q3 and Q4 2021 results, the trading price significantly decreased, and there is no assurance it will recover.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Total Customer Count
Non-GAAP Operating Loss
Net Retention Rate (NRR)
Average Enterprise Customer Spend
Annual Revenue Retention Rate (ARR)
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.