Summary
Fastly reported record third quarter revenue of $127.8 million, up 17.8% from $108.5 million in the prior-year quarter. The growth came mostly from existing customers, with new customers contributing less than 10% of revenue. Year to date revenue reached $368.2 million, up 17.5% from $313.4 million. GAAP gross profit rose to $66.1 million from $52.7 million, and GAAP gross margin improved to 51.7% from 48.6%. Management credited network efficiency and lower bandwidth costs as a percentage of revenue, along with continued adoption of the edge platform.
The bottom line is still red, but the losses are shrinking. GAAP operating loss was $58.3 million, narrower than the $65.8 million loss a year earlier. GAAP net loss was $54.3 million versus $63.4 million, and diluted EPS was -$0.42 compared with -$0.52. Operating margin improved to -45.6% from -60.6%. On a non-GAAP basis, operating loss was $12.6 million and net loss was $8.0 million, or -$0.06 per share. Adjusted EBITDA turned positive at $650 thousand, a swing from the prior-year quarter. A $4.3 million impairment charge tied to excess computer and networking equipment weighed on GAAP results.
Cash generation improved sharply. Operating cash flow was -$8.4 million for the quarter, better than -$27.6 million a year earlier, and year to date operating cash flow was $7.7 million versus -$57.5 million. Capital expenditures fell to $0.3 million, down 87.6% from $2.6 million. Deferred revenue was $37.5 million, up 44.4%, and remaining performance obligations were $247.6 million, up 43.1% from $173.0 million. The forward-looking metrics were mixed. LTM net retention rate slipped to 114% from 116% in the second quarter, and the dollar-based net expansion rate fell to 120% from 123%. Total customer count was 3,102, up 30 sequentially, while enterprise customers dipped by 4 to 547. Average enterprise customer spend rose 5% quarter over quarter to $858 thousand.
Guidance points to continued top-line growth but no near-term profitability. For the fourth quarter, Fastly expects revenue of $137 million to $141 million and a non-GAAP operating loss of $10.0 million to $6.0 million. For the full fiscal year 2023, revenue guidance is $505 million to $509 million, with a non-GAAP operating loss of $44.0 million to $40.0 million. Fourth quarter non-GAAP net loss per share is guided to $0.05 to $0.01, and the full year figure to $0.23 to $0.19. The company flagged several risks. Customer concentration remains high, with the 10 largest customers generating 37% of trailing twelve-month revenue and one customer accounting for 12% of quarterly revenue. Management also cited competition for sales talent, data localization and cross-border transfer rules, higher international bandwidth costs, and the uncertain effects of the Russia-Ukraine and Israel-Hamas conflicts. Fastly ended the quarter with $460.6 million in cash, cash equivalents, marketable securities and restricted cash.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $127.8M | $122.8M | +4.1% | $108.5M | +17.8% |
| Gross profit | $66.1M | $64.2M | +2.9% | $52.7M | +25.5% |
| Gross margin | 51.7% | 52.3% | -0.6 pp | 48.5% | +3.2 pp |
| Research & development | $39.1M | $37.4M | +4.4% | $39.0M | +0.3% |
| Sales & marketing | $51.0M | $47.8M | +6.8% | $47.0M | +8.6% |
| General & administrative | $30.0M | $28.8M | +4.1% | $32.5M | -7.6% |
| Total operating expenses | $124.4M | $114.0M | +9.1% | $118.4M | +5.1% |
| Operating income (loss) | -$58.3M | -$49.8M | -17.1% | -$65.8M | +11.3% |
| Operating margin | -45.6% | -40.6% | -5.1 pp | -60.6% | +15.0 pp |
| Net income (loss) | -$54.3M | -$10.7M | -407.4% | -$63.4M | +14.4% |
| Net margin | -42.5% | -8.7% | -33.8 pp | -58.5% | +16.0 pp |
| Diluted EPS | -$0.42 | -$0.08 | -$0.34 | -$0.52 | +$0.10 |
Risks
The 10 largest customers generated 37% of revenue in the trailing 12 months ended September 30, 2023, and the 5 largest generated 28%. One single customer accounted for 12% of Q3 2023 revenue, and affiliated streaming entertainment customers generated an aggregate 14% of Q3 2023 revenue. Loss or reduced usage by these customers would lower revenue.
Growth depends on attracting enterprise customers and expanding existing usage, but enterprise sales involve longer sales cycles, competitive purchasing processes, and formal approvals. DBNER was 120.1% for the trailing 12 months ended September 30, 2023 versus 121.5% in 2022, and NRR was 110.3% versus 114.6%, indicating retention and expansion pressure.
Competition risk was marked as substantively changed. Competitors include Akamai, AWS, Cloudflare, F5, Thales, Google Cloud, Microsoft Azure, Edgio, and Radware. Pricing pressure and customers pursuing do-it-yourself CDNs or multi-vendor policies could reduce demand for Fastly's platform.
Component delays, shortages, or price increases could interrupt server construction and capacity expansion. In Q3 2023, Fastly recognized $4.3 million of impairment charges for excess computer and networking equipment, including $3.0 million related to property and equipment and $1.3 million related to advance payments.
Cybersecurity risk was marked as substantively changed. Fastly has experienced DDoS attacks of significant size and severity, phishing and social engineering schemes, and attacks from parties believed to be government-sponsored. Its multi-tenant architecture means an attack on one customer could affect other customers.
Failure to attract and retain qualified personnel, including senior management and key employees, could prevent execution of the business strategy. R&D expenses for Q3 2023 included a $2.4 million increase in executive transition costs.
The remaining $477.4 million of 0% convertible senior notes mature in March 2026. If the stock price is below the conversion price, holders may not convert and Fastly may need to repay cash, but it may not have enough available cash or be able to obtain financing, which could lead to default.
Data localization and cross-border data transfer laws create uncertainty for data stored abroad and transferred across borders, which could impact customer growth and acquisition for customers and potential customers conducting business in Europe and elsewhere outside the United States.
Stock price volatility risk was marked as substantively changed. From January 1, 2023 to November 1, 2023, the stock price ranged from $24.31 to $7.97 per share, and the trading price could experience further volatility and declines.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Total Customer Count
Non-GAAP Operating Loss
Remaining Performance Obligations (RPO)
Enterprise Customer Revenue %
Adjusted EBITDA
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 Q3 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 1, 2026.