Summary
Fastly closed fiscal 2022 with fourth-quarter revenue of $119.3 million, up 22% from the prior-year quarter and up 10% sequentially. Full-year revenue was $432.7 million, up 22% from fiscal 2021. GAAP gross margin for the fourth quarter was 52.4%, up 1.5 percentage points from the prior-year quarter. For the full year, GAAP gross margin was 48.5%, down 4.4 percentage points from fiscal 2021. Non-GAAP gross margin was 57.0% in the fourth quarter, compared with 55.8% in the prior-year quarter, and 53.6% for the full year, compared with 57.7% in fiscal 2021. The fourth quarter showed margin improvement, but the full year carried heavier infrastructure and network costs.
The bottom line remains deeply negative. GAAP operating loss was $48.5 million in the fourth quarter, narrowed from the prior-year quarter. Full-year GAAP operating loss was $246.2 million, widened from fiscal 2021. GAAP net loss was $46.7 million in the fourth quarter, narrowed from the prior-year quarter. Full-year GAAP net loss was $190.8 million, narrowed from fiscal 2021. Diluted GAAP net loss per share was -$1.57 for the full year, improved from fiscal 2021. Non-GAAP operating loss was $12.0 million in the fourth quarter, compared with $11.7 million in the prior-year quarter, and $76.5 million for the full year, compared with $55.1 million in fiscal 2021. Non-GAAP net loss was $9.5 million in the fourth quarter, compared with $11.7 million in the prior-year quarter, and $72.3 million for the full year, compared with $55.9 million in fiscal 2021. Adjusted EBITDA was negative $0.1 million in the fourth quarter, compared with negative $2.6 million in the prior-year quarter, and negative $32.9 million for the full year, compared with negative $23.0 million in fiscal 2021. The large gap between GAAP and non-GAAP results reflects stock-based compensation and other adjustments.
Cash generation weakened. Operating cash flow was negative $12.1 million in the fourth quarter, down from the prior-year quarter. Full-year operating cash flow was negative $69.6 million, down from fiscal 2021. Capital expenditures were $8.5 million in the fourth quarter, up from the prior-year quarter. Full-year capital expenditures were $20.0 million, down from fiscal 2021. Free cash flow was negative $40.2 million in the fourth quarter, compared with negative $17.3 million in the prior-year quarter, and negative $172.0 million for the full year, compared with negative $99.8 million in fiscal 2021. Deferred revenue was $30.5 million at year end, up 5.7% from the prior-year quarter. Remaining performance obligations were $198.3 million, up 30.2% from the prior-year quarter. The RPO increase points to future committed work, but cash burn widened.
Customer metrics held up. Trailing 12-month net retention rate was 119% in the fourth quarter, up from 118% in the third quarter of 2022. Dollar-based net expansion rate was 123%, up from 122% in the third quarter. Total customer count was 2,958, up 33 from the third quarter. Enterprise customers totaled 493, up 11 from the third quarter. Average enterprise customer spend was $782 thousand, up 3% quarter over quarter. Annual revenue retention rate was 99.2% in 2022, flat to the 99.2% level in 2021. For the first quarter of 2023, Fastly guided revenue to $114 million to $117 million, non-GAAP operating loss to $18.0 million to $16.0 million, and non-GAAP net loss per share to $0.12 to $0.08. For the full year 2023, the company guided revenue to $495 million to $505 million, non-GAAP operating loss to $53.0 million to $47.0 million, and non-GAAP net loss per share to $0.27 to $0.21.
Risks remain concentrated. The 10 largest customers generated 35% of trailing 12-month revenue, the 5 largest generated 26%, and affiliated streaming customers generated 11%. Usage-based revenue can swing with customer traffic, and long sales cycles make forecasting difficult. Data localization and cross-border transfer rules add uncertainty for international customers. The Russia-Ukraine conflict and related cyber-attacks could disrupt operations. Network provider fees and infrastructure investments may keep pressure on gross margins. Fastly also expects to keep incurring operating losses for the foreseeable future as it invests in growth.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $119.3M | $108.5M | +10.0% | $97.7M | +22.1% |
| Gross profit | $62.6M | $52.7M | +18.8% | $49.8M | +25.7% |
| Gross margin | 52.5% | 48.5% | +3.9 pp | 50.9% | +1.5 pp |
| Research & development | $37.2M | $39.0M | -4.5% | $35.0M | +6.3% |
| Sales & marketing | $44.6M | $47.0M | -5.1% | $42.2M | +5.9% |
| General & administrative | $29.2M | $32.5M | -10.0% | $29.3M | -0.2% |
| Total operating expenses | $111.0M | $118.4M | -6.2% | $106.4M | +4.3% |
| Operating income (loss) | -$48.5M | -$65.8M | +26.3% | -$56.7M | +14.5% |
| Operating margin | -40.6% | -60.6% | +20.0 pp | -58.0% | +17.4 pp |
| Net income (loss) | -$46.7M | -$63.4M | +26.4% | -$57.5M | +18.9% |
| Net margin | -39.1% | -58.5% | +19.4 pp | -58.9% | +19.8 pp |
| Diluted EPS | -$0.38 | -$0.52 | +$0.14 | -$0.50 | +$0.12 |
Risks
The 10 largest customers generated 35% of revenue in the trailing 12 months ended Dec 31, 2022, up from 33% in 2021, and the 5 largest generated 26%, up from 22%. Affiliated streaming entertainment customers generated 11% of revenue in both periods, so loss or reduced usage by major customers would lower revenue.
Most revenue is usage-based and most customers, including some of the largest, do not have long-term contractual financial commitments; most contracts are only one year in duration. MD&A states changes in usage by the largest customers can create revenue volatility and make revenue difficult to predict.
The market is highly fragmented and competitive, with Akamai, AWS, Cloudflare, F5, Imperva, and others offering competing edge, CDN, security, and cloud products. Some competitors can bundle competing services at lower or no additional cost, creating pricing pressure.
Fastly has experienced DDoS attacks of increased size and severity and phishing and social engineering schemes. Its multi-tenant architecture means an attack on one customer could affect other customers, and nation-state or retaliatory attacks during conflicts heighten the risk.
The platform is complex and has had defects, errors, and interruptions; not all aspects have redundancies. Outages can lead to service level agreement claims, customer loss, reduced usage, and revenue decreases.
The remaining $713.8 million principal of the 0% convertible notes matures on March 15, 2026. If the stock price is below the conversion price, holders likely will not convert and Fastly may need cash to repay, with potential dilution or default risk.
Operating cash flow was negative $69.6 million for FY2022 year to date compared to negative $38.5 million for FY2021 year to date, down $31.2 million or 80.9%. Continued operating losses and investments may require additional capital.
Enterprise sales involve longer cycles, competitive purchasing processes, and more formal approval requirements. MD&A says onboarding and ramping new and existing enterprise customers can take several months and be subject to delays, which can slow new customer additions.
Deteriorating general economic conditions, inflation, rising interest rates, supply chain disruptions, and the Russia-Ukraine conflict could reduce customer budgets and spending. MD&A says if the Russia-Ukraine conflict continues or worsens, business and results of operations could be materially impacted.
Fastly relies on a limited number of suppliers for server components and faces component delays, shortages, and price increases, including from inflationary pressures and COVID-19 disruptions. These issues could limit capacity expansion or replacement of equipment.
There is significant competition for sales personnel with the required skills, and revenue growth depends on recruiting, training, incentivizing, and retaining sufficient sales personnel. New hires may take significant time to reach full productivity.
Gross margin was 48.5% for FY2022 year to date compared to 52.9% for FY2021 year to date, down 4.4 percentage points, driven by higher bandwidth, colocation, hosting, and depreciation costs. If costs are not offset by revenue, margins may remain under pressure.
Data localization and cross-border data transfer laws create uncertainty for customers in Europe and elsewhere outside the United States. MD&A highlights this as a factor that could impact customer growth and acquisition.
Acquisitions such as Glitch and Signal Sciences involve integration risks, diversion of management attention, and potential dilutive issuances or debt. Failure to integrate effectively could harm business and results.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Total Customer Count
Non-GAAP Operating Loss
Adjusted EBITDA
Average Enterprise Customer Spend
LTM Net Retention Rate
GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from Fastly, Inc.'s SEC filings for Q4 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.