Summary
Fastly's fiscal 2024 third quarter, ended September 30, 2024, delivered revenue of $137.2 million, up 7% from $127.8 million in the prior-year quarter. Year-to-date revenue reached $403.1 million, up 9% from $368.2 million. Gross profit rose to $74.7 million from $66.1 million a year earlier, and GAAP gross margin climbed to 54.5% from 51.7%. Management credited revenue growth outpacing the cost of supporting the network for the margin gain. The company still lost money on a GAAP basis, but the losses narrowed sharply.
GAAP operating loss was $40.6 million, improved from $58.3 million in the prior-year quarter. GAAP net loss was $38.0 million versus $54.3 million, and diluted EPS was -$0.27 compared with -$0.42. Restructuring charges of $9.7 million, tied to a workforce reduction, weighed on the GAAP results. On a non-GAAP basis, Fastly reported record net income of $2.4 million and record adjusted EBITDA of $13.3 million. The year-to-date picture is less flattering. Net loss of $125.2 million widened from $109.7 million, and diluted EPS of -$0.91 compared with -$0.86, largely because the prior-year period carried a $36.8 million net gain on extinguishment of debt.
Product mix continued to shift. Network services revenue was $107.4 million, up 5%, and other revenue, which includes Compute and Observability, was $3.6 million, up 85%. Customer concentration fell: the top ten customers accounted for 33% of revenue versus 40% a year earlier. Revenue from those top ten customers declined 11% year over year, while revenue outside the top ten grew 20%. Enterprise customer count was 576, down 25 from the second quarter, even as total customer count rose 343 to 3,638. Last-twelve-month net retention rate slipped to 105% from 110% in the second quarter.
Cash generation improved. Operating cash flow was $5.0 million for the quarter versus a use of $8.4 million a year earlier, and $11.2 million year to date versus $7.7 million. Capital expenditures were $2.0 million, up from $0.3 million. Free cash flow, a non-GAAP measure, was negative $7.1 million compared with negative $19.7 million in the prior-year quarter. Cash, cash equivalents, marketable securities and restricted cash totaled $308.2 million as of September 30, 2024.
Guidance points to a softer fourth quarter. For Q4 2024, Fastly guided to a non-GAAP operating loss of $5.0 million to $1.0 million, and non-GAAP net loss per share of $0.02 to net income of $0.02. For the full fiscal year 2024, the company guided to a non-GAAP operating loss of $28.0 million to $24.0 million, and non-GAAP net loss per share of $0.12 to $0.08.
Two balance-sheet and backlog signals deserve attention. Deferred revenue was $32.5 million, down 13.2% from the prior-year quarter. Remaining performance obligations were $235.4 million, down 4.9% year over year, though up 6% from $223 million in the second quarter. Management also flagged risks around customer concentration, noting that one of its largest customers operates in and has strong business ties to China, plus data localization and cross-border transfer rules that could affect growth. Goodwill stood at $670.4 million, and the company said a sustained decline in its stock price or market capitalization could force an impairment in future periods.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $137.2M | $132.4M | +3.7% | $127.8M | +7.3% |
| Gross profit | $74.7M | $72.9M | +2.5% | $66.1M | +13.1% |
| Gross margin | 54.5% | 55.1% | -0.6 pp | 51.7% | +2.8 pp |
| Research & development | $31.9M | $35.1M | -9.2% | $39.1M | -18.4% |
| Sales & marketing | $46.0M | $53.0M | -13.2% | $51.0M | -9.9% |
| General & administrative | $27.2M | $28.4M | -4.4% | $30.0M | -9.4% |
| Total operating expenses | $115.3M | $119.6M | -3.6% | $124.4M | -7.3% |
| Operating income (loss) | -$40.6M | -$46.7M | +13.1% | -$58.3M | +30.4% |
| Operating margin | -29.6% | -35.3% | +5.7 pp | -45.6% | +16.1 pp |
| Net income (loss) | -$38.0M | -$43.7M | +13.1% | -$54.3M | +30.0% |
| Net margin | -27.7% | -33.0% | +5.3 pp | -42.5% | +14.8 pp |
| Diluted EPS | -$0.27 | -$0.32 | +$0.05 | -$0.42 | +$0.15 |
| Customers | 3,102 | 3,072 | +1.0% | — | — |
Risks
The 10 largest customers generated 35% of revenue in the trailing 12 months ended September 30, 2024, down from 37% in the prior-year period, and affiliated streaming entertainment customers generated 11% in both periods. One of the largest customers during the three and nine months ended September 30, 2024 operates in and has strong business ties to China, exposing revenue to trade or regulatory actions.
Last-Twelve Months Net Retention Rate declined to 105.3% for the trailing twelve months ended September 30, 2024 from 113.6% for the prior-year period. Most customer contracts are only one year in duration and many customers lack long-term financial commitments, so usage can be reallocated or reduced without penalty.
Enterprise sales require longer cycles, competitive purchasing processes, and more formal approvals, which increases the time and resources needed to add new customers. MD&A states revenue from new customers contributed less than 10% of revenue, making growth dependent on expanding existing enterprise usage.
A putative securities class action was filed on May 24, 2024, and an amended complaint was filed on November 1, 2024; substantially similar stockholder derivative actions have been filed and stayed. Defending these matters is costly and could result in substantial damages or management distraction.
Fastly has experienced DDoS attacks of significant size and severity, phishing and social engineering schemes, and attacks from parties believed to be government-sponsored. Because customers share a multi-tenant architecture, a cyber-attack on one customer could negatively affect other customers and strain the network.
Fastly faces competition from Akamai, AWS, Cloudflare, F5, Thales, Google Cloud, Microsoft Azure, and others, some of which can bundle competing services at lower prices or for no additional cost. Customers may also pursue do-it-yourself CDNs or multi-vendor policies, reducing reliance on Fastly.
During the three and nine months ended September 30, 2024, Fastly initiated a restructuring plan to reduce expenses and incurred $9.7 million of charges primarily for employee severance and termination benefits, with no restructuring activities in 2023. The plan may disrupt operations and affect talent retention.
MD&A discloses that a sustained decrease in stock price and market capitalization was a triggering event, and as of June 30, 2024 the estimated fair value of the single reporting unit substantially exceeded carrying value. If the stock trades below book value for an extended period or business conditions worsen, Fastly may recognize goodwill impairment in future periods.
The remaining $346.5 million principal amount of 0% convertible senior notes matures on March 15, 2026, and if the stock price is below the conversion price holders may require cash repayment. Failure to repurchase or pay cash upon conversion could cause a default, and conversion could dilute stockholders.
Fastly relies on a limited number of suppliers for server components, and component delays, shortages, or price increases could interrupt server construction and capacity expansion. In the year ended December 31, 2023, it recognized $4.3 million of computer and networking equipment write-off charges, and excess capacity could require further write-downs.
One of Fastly's largest customers during the three and nine months ended September 30, 2024 operates in and has strong business ties to China, and U.S.-China trade negotiations or regulations could negatively impact that customer's traffic. Data localization and cross-border transfer laws also create uncertainty for customers doing business in Europe and elsewhere.
Fastly's usage-based model and diverse customer base make it difficult to accurately predict usage or renewal rates, and the risk factor was marked as substantively changed. Failure to forecast revenue or manage expenditures could cause results to differ materially from forecasts and disappoint investors.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Total Customer Count
Remaining Performance Obligations (RPO)
Enterprise Customer Count
LTM Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q3 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.