Summary
Fastly's second quarter of fiscal 2024 showed a split between improving gross margins and a widening bottom-line loss. Revenue rose 7.8% year over year to $132.4 million. Gross profit increased 13.5% to $72.9 million. Gross margin improved to 55.1%, up 2.8 percentage points. Operating loss narrowed to $46.7 million from a loss in the prior-year quarter. Net loss widened to $43.7 million, and diluted EPS was -$0.32, a wider loss per share than the prior-year quarter. The prior-year quarter included a debt extinguishment gain that did not repeat. For the first half of fiscal 2024, revenue was $265.9 million, up 10.6% year over year. Gross profit was $146.1 million, up 17.4%. Operating loss narrowed to $93.0 million. Net loss widened to $87.2 million, and diluted EPS was -$0.64, a wider loss per share than the prior-year period.
Operating cash flow turned negative. Current quarter operating cash flow was -$4.9 million, down from positive operating cash flow in the prior-year quarter. Capital expenditures were $1.8 million, down 60.5%. Free cash flow was -$18.5 million, compared with $7.8 million in the prior-year quarter. Deferred revenue was $37.1 million, up 5.3%. RPO was $223.1 million, down 3.4%. Operating margin was -35.3%, up 5.3 percentage points. Non-GAAP gross margin was 58.5%. Non-GAAP operating loss was $12.7 million. Non-GAAP net loss was $9.3 million, and non-GAAP net loss per share was -$0.07. For the first half of fiscal 2024, operating cash flow was $6.2 million, down 61.7% year over year. Capital expenditures were $3.4 million, down 57.7%. Gross margin was 55.0%, up 3.2 percentage points. Operating margin was -35.0%, up 5.4 percentage points.
Operational metrics were mixed. Enterprise customer count was 601, up 24 from the first quarter of 2024. Total customer count was 3,295, up 5. LTM NRR decreased to 110% from 114% in the first quarter. Product package deals doubled compared to the first quarter. New deal registrations grew 33% quarter over quarter. Security revenue grew 13% year over year, while Network Services revenue grew 6%. Other revenue grew 57%. The company released a beta version of Fastly AI Accelerator and enhanced its Managed Security Service with Bot Management and a 30-minute time-to-notify SLA. Scott R. Lovett joined Fastly as Chief Revenue Officer.
Guidance points to continued pressure. For the third quarter of 2024, Fastly guided non-GAAP operating loss to $12.0 million to $8.0 million and non-GAAP net loss per share to $0.08 to $0.03. For the full year 2024, non-GAAP operating loss guidance is $33.0 million to $27.0 million and non-GAAP net loss per share is $0.16 to $0.11. Management said it is seeing demand challenges with some of its largest customers and is taking measures to align its cost structure. The 10 largest customers generated 37% of revenue in the trailing 12 months ended June 30, 2024. Affiliated customers in streaming entertainment generated 11% of revenue. One of the largest customers operates in and has strong business ties to China. The company also disclosed a goodwill impairment assessment triggered by a sustained decrease in stock price and market capitalization; it concluded fair value substantially exceeded carrying value, but future impairment is possible. LTM NRR declined to 110%, and RPO fell 3.4%, which may pressure future revenue.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $132.4M | $133.5M | -0.9% | $122.8M | +7.8% |
| Gross profit | $72.9M | $73.2M | -0.5% | $64.2M | +13.5% |
| Gross margin | 55.1% | 54.9% | +0.2 pp | 52.3% | +2.8 pp |
| Research & development | $35.1M | $38.2M | -8.2% | $37.4M | -6.2% |
| Sales & marketing | $53.0M | $49.6M | +6.8% | $47.8M | +10.8% |
| General & administrative | $28.4M | $31.6M | -10.1% | $28.8M | -1.4% |
| Total operating expenses | $119.6M | $119.5M | +0.1% | $114.0M | +4.9% |
| Operating income (loss) | -$46.7M | -$46.3M | -1.0% | -$49.8M | +6.2% |
| Operating margin | -35.3% | -34.6% | -0.7 pp | -40.6% | +5.3 pp |
| Net income (loss) | -$43.7M | -$43.4M | -0.7% | -$10.7M | -308.5% |
| Net margin | -33.0% | -32.5% | -0.5 pp | -8.7% | -24.3 pp |
| Diluted EPS | -$0.32 | -$0.32 | ±$0.00 | -$0.08 | -$0.24 |
| Customers | 3,072 | 3,100 | -0.9% | — | — |
Risks
A substantial portion of revenue comes from a limited number of customers and industries. The 10 largest customers generated 37% of revenue in the trailing 12 months ended June 30, 2024, and affiliated streaming entertainment customers generated 12%. One of the largest customers during the three and six months ended June 30, 2024 operates in and has strong business ties to China, exposing revenue to trade tensions or regulatory actions.
In May 2024, the company and certain officers were named in a putative securities class action, and substantially similar stockholder derivative complaints were filed in June and July 2024. Defending these matters is costly and could divert management attention or result in substantial damages.
Net loss widened to $43.7 million for the quarter ended June 30, 2024 from $10.7 million in the prior-year quarter, and to $87.2 million for the six months ended June 30, 2024 from $55.4 million in the prior-year period. Operating cash flow decreased to negative $4.9 million for the quarter from $25.0 million in the prior-year quarter, and to $6.2 million for the six months from $16.1 million in the prior-year period.
The company added goodwill impairment as a critical accounting estimate after identifying triggering events in Q2 2024, including a sustained decrease in stock price and market capitalization. Although the estimated fair value of the reporting unit still substantially exceeded carrying value as of June 30, 2024, a prolonged decline in stock price or adverse changes in projected earnings and cash flows could require an impairment in future periods.
The company marked as a substantive risk its ability to accurately forecast revenue and manage expenditures. It cannot accurately predict customers' usage or renewal rates given the diversity of its customer base, and it has experienced longer payment cycles in collecting accounts receivable from certain customers.
The company relies on a limited number of suppliers for server components and must forecast server needs in advance. Component delays, shortages, or price increases could interrupt server construction, and excess server capacity has led to write-offs, including $4.3 million of computer and networking equipment write-off charges in the year ended December 31, 2023.
Evolving data localization and cross-border data transfer laws create uncertainty for customers conducting business in Europe and elsewhere outside the United States, which could impact customer growth and acquisition. The company also cannot be certain what actions the U.S. or another government may take regarding customers that operate in China or have strong business ties to China.
The company faces significant competition for sales personnel with the required skills and technical knowledge. Its ability to achieve significant revenue growth depends on recruiting, training, and retaining sufficient sales personnel, and new hires may take significant time to reach full productivity.
SaaS KPIs
All quarters →Free Cash Flow
Total Customer Count
Enterprise Customer Revenue %
Enterprise Customer Count
LTM Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q2 FY2024 (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.