Summary
Fastly reported first quarter fiscal 2023 revenue of $117.6 million, up 14.8% from the prior-year quarter. GAAP gross profit rose 24.3% to $60.3 million, and GAAP gross margin improved to 51.3% from 47.3%. The company still recorded a GAAP operating loss of $47.3 million, narrower than the $63.0 million loss a year earlier. GAAP net loss narrowed to $44.7 million from $64.3 million, and diluted GAAP loss per share narrowed to $0.36 from $0.54. GAAP operating margin was negative 40.2%, up from negative 61.5%. Revenue growth came from further adoption of the edge platform and products.
Non-GAAP results showed less red ink. Non-GAAP gross profit was $65.4 million, non-GAAP gross margin was 55.6%, non-GAAP operating loss was $14.1 million, non-GAAP net loss was $10.8 million, and non-GAAP net loss per share was $0.09. Adjusted EBITDA was negative $1.9 million, compared with negative $7.8 million in the prior-year quarter. Operating cash flow was negative $8.9 million, an improvement from negative $13.2 million. Capital expenditures were $3.5 million, up from $2.4 million. Free cash flow was negative $25.2 million, compared with negative $26.5 million. Deferred revenue fell 12.7% to $26.8 million from $30.7 million. Remaining performance obligations rose 53.9% to $242.4 million from $157.5 million.
Key customer metrics softened. LTM net retention rate decreased to 116% from 119% in the fourth quarter of 2022, and dollar-based net expansion rate decreased to 121% from 123%. Total customer count was 3,100, up 38 from the fourth quarter of 2022, while enterprise customers were 540, up 7. Average enterprise customer spend was $795 thousand, down 3% quarter over quarter. Under the prior methodology, total customer count was 3,001 and enterprise customers were 514. The net retention rate for the last month of the period was 104.5%, compared with 114.0% a year earlier. The company updated its customer count methodology in the first quarter of 2023 and will report both new and prior methodologies through the end of fiscal year 2023. On the product side, Google selected Fastly's oblivious HTTP relay for its privacy sandbox initiative. Fastly's streaming bandwidth reached a record 81.9 Tbps during a Super Bowl livestream. The company introduced a new partner program with a tiered model and simplified pricing, and the program received CRN's 5-star rating. It launched a managed security service with 24/7 threat detection and response, Config Store, Brotli support, and WebSockets support. Customer wins included Sotheby's, Plaid, CareRev, and Fandom. As of March 31, 2023, Fastly's global network was located in 79 markets across 35 countries.
For the second quarter, management guided a non-GAAP operating loss of $18.0 million to $16.0 million and non-GAAP net loss per share of $0.11 to $0.09. For the full year 2023, it guided a non-GAAP operating loss of $53.0 million to $47.0 million and non-GAAP net loss per share of $0.27 to $0.21. Management also issued revenue guidance for the second quarter and the full year 2023. The main risks include customer concentration: the 10 largest customers generated 35% of revenue in the trailing 12 months ended March 31, 2023, and the 5 largest generated 26%. Affiliated streaming entertainment customers generated 11%. Management also flagged data localization and cross-border data transfer laws, competition for sales personnel, network provider fees that could pressure gross margins, and the Russia-Ukraine conflict. The company cited risks from cyber-attacks, software errors, hardware failures, and bandwidth availability. It maintains a full valuation allowance on U.S. federal and state net deferred tax assets and expects operating losses for the foreseeable future. It also noted potential interruptions from misconfigurations, natural disasters, and third-party errors. As of March 31, 2023, the company was in compliance with its credit agreement covenant.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $117.6M | $119.3M | -1.5% | $102.4M | +14.8% |
| Gross profit | $60.3M | $62.6M | -3.7% | $48.5M | +24.3% |
| Gross margin | 51.3% | 52.5% | -1.2 pp | 47.3% | +3.9 pp |
| Research & development | $37.4M | $37.2M | +0.6% | $40.4M | -7.4% |
| Sales & marketing | $44.3M | $44.6M | -0.8% | $41.5M | +6.7% |
| General & administrative | $25.8M | $29.2M | -11.6% | $29.6M | -12.6% |
| Total operating expenses | $107.5M | $111.0M | -3.2% | $111.5M | -3.5% |
| Operating income (loss) | -$47.3M | -$48.5M | +2.4% | -$63.0M | +25.0% |
| Operating margin | -40.2% | -40.6% | +0.4 pp | -61.5% | +21.3 pp |
| Net income (loss) | -$44.7M | -$46.7M | +4.2% | -$64.3M | +30.5% |
| Net margin | -38.0% | -39.1% | +1.1 pp | -62.8% | +24.8 pp |
| Diluted EPS | -$0.36 | -$0.38 | +$0.02 | -$0.54 | +$0.18 |
Risks
Fastly discloses past cyber-attacks from parties it believes are government-sponsored, increased-size DDoS attacks, and phishing/social-engineering schemes. The multi-tenant architecture means an attack on one customer could affect others, and war/conflict raises retaliatory cyber-attack risk.
The 10 largest customers generated 35% of revenue in trailing 12 months ended March 31, 2023, up from 32% in the prior-year period, and the 5 largest generated 26% versus 22%. Affiliated streaming entertainment customers generated 11% in both periods, so loss or reduced usage by a major customer would lower revenue.
Net Retention Rate declined to 104.5% for the last month of the period ended March 31, 2023 from 114.0% a year earlier, while Dollar-Based Net Expansion Rate was 121.4% versus 117.9%. Most customers lack long-term commitments and can reduce usage or switch platforms without penalty.
The market is highly fragmented and competitive, with competitors including Akamai, AWS, Cloudflare, F5, Imperva, Google Cloud, and Microsoft Azure. Some competitors bundle services at lower prices, and customers may pursue do-it-yourself CDNs, which pressures pricing and demand.
If the edge cloud platform has defects, interruptions, or outages, Fastly could lose customers, face service-level agreement claims, and incur significant costs. The company has experienced system failures and has not developed redundancies for all aspects of its platform.
The 10-Q marks stock price volatility as a substantive change risk: during 2022 the stock traded as high as $36.61 and as low as $7.15, and from January 1, 2023 to May 2, 2023 it ranged from $18.08 to $7.97. The risk states the trading price may not recover to prior levels.
Enterprise sales and onboarding cycles can be long and unpredictable, ranging from several months to well over a year, and onboarding or traffic ramping can take several months. Delays between sales expense and revenue recognition can harm results.
Fastly relies on a limited number of suppliers for server components and has faced component delays, shortages, and price increases, including from COVID-19 disruptions and inflationary pressures. Disruption could limit capacity expansion or replacement of equipment.
The company uses usage-based pricing and recently rolled out single-price product packages, with no assurance customers will accept them. Larger organizations may demand substantial price concessions, and pricing changes could reduce revenue or gross margin.
Data localization and cross-border data transfer laws, especially in Europe and outside the United States, create uncertainty for customer data stored abroad. Evolving enforcement could impact customer growth and current customer usage.
The company faces significant competition for sales personnel with required technical skills, and its ability to grow revenue depends on recruiting, training, incentivizing, and retaining sufficient sales personnel. New hires require significant training and may take time to become productive.
The remaining $713.8 million principal amount of 0% convertible senior notes matures March 15, 2026, and holders may require repurchase on a fundamental change. If the stock price is below the conversion price, holders may not convert and Fastly may need cash it may not have.
MD&A and risk factors cite inflation, increased interest rates, banking instability, supply-chain disruptions, and the Russia-Ukraine conflict as factors that could cause global economic disruption. These conditions can affect customer budgets, usage, and stock price.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Total Customer Count
Non-GAAP Operating Loss
Enterprise Customer Revenue %
Enterprise Customer Count
Net Retention Rate (NRR)
Average Enterprise Customer Spend
Dollar-Based Net Expansion Rate (DBNER)
LTM Net Retention Rate (LTM NRR)
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q1 FY2023 (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 2, 2026.