Fastly Inc (FSLY, Financial), a leader in global edge cloud platforms, reported its financial results for the second quarter ended June 30, 2024. The company operates a content delivery network (CDN) that focuses on housing servers in the most network-dense data centers, enabling edge computing and better service for dynamic content. Fastly gears its services towards large, sophisticated enterprises, with nearly three-fourths of its revenue generated in the United States in 2023.
Performance Overview
Fastly Inc (FSLY, Financial) reported total revenue of $132.4 million for Q2 2024, surpassing the analyst estimate of $131.57 million. This represents an 8% year-over-year growth compared to $122.8 million in Q2 2023. The company achieved a GAAP gross margin of 55.1%, up from 52.3% in the same period last year, and a non-GAAP gross margin of 58.5%, up from 56.6%.
Despite the revenue growth, Fastly faced challenges with demand from some of its largest customers. CEO Todd Nightingale commented,
“We continued to drive customer acquisition in the second quarter, achieving 4% sequential growth in Enterprise customer count. However, we are experiencing demand challenges with some of our largest customers, and we are taking measures to align our cost structure accordingly.”
Financial Achievements and Challenges
Fastly's financial achievements include a notable increase in network services revenue, which grew by 6% year-over-year to $104.2 million, and security revenue, which grew by 13% to $25.4 million. These achievements are crucial as they reflect the company's ability to enhance its service offerings and capture market share in the competitive software industry.
However, the company reported a GAAP operating loss of $46.7 million, slightly improved from a loss of $49.8 million in Q2 2023. The non-GAAP operating loss was $12.7 million, compared to $7.8 million in the same period last year. The GAAP net loss per share was $0.32, compared to $0.08 in Q2 2023, while the non-GAAP net loss per share was $0.07, compared to $0.04.
Key Metrics and Financial Statements
Fastly's enterprise customer count increased to 601 in Q2 2024, up from 577 in Q1 2024. The total customer count reached 3,295, up from 3,290 in the previous quarter. However, the last 12-month net retention rate (LTM NRR) decreased to 110% from 114% in Q1 2024, indicating some challenges in retaining and expanding revenue from existing customers.
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Revenue | $132.4 million | $122.8 million |
| GAAP Gross Margin | 55.1% | 52.3% |
| Non-GAAP Gross Margin | 58.5% | 56.6% |
| GAAP Operating Loss | $(46.7) million | $(49.8) million |
| Non-GAAP Operating Loss | $(12.7) million | $(7.8) million |
| GAAP Net Loss per Share | $(0.32) | $(0.08) |
| Non-GAAP Net Loss per Share | $(0.07) | $(0.04) |
Analysis and Outlook
Fastly's performance in Q2 2024 highlights both its growth potential and the challenges it faces. The company's ability to increase revenue and improve gross margins is a positive indicator of its operational efficiency and market demand for its services. However, the decline in the net retention rate and the ongoing demand challenges with large customers suggest that Fastly needs to address customer retention and expansion strategies more effectively.
Looking ahead, Fastly has provided guidance for Q3 2024 with expected revenue between $130.0 million and $134.0 million, and a non-GAAP net loss per share between $0.08 and $0.03. For the full year 2024, the company expects revenue between $530.0 million and $540.0 million, and a non-GAAP net loss per share between $0.16 and $0.11.
Investors and stakeholders will be closely monitoring Fastly's efforts to align its cost structure and invest in edge cloud innovation to drive future growth. For more detailed insights, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from Fastly Inc for further details.
