Fastly (NYSE:FSLY) reported record second-quarter revenue and improved profitability as customers expanded their use of its network, security and Compute products. The company also raised its full-year 2026 revenue and operating-profit outlook.
Revenue for the second quarter rose 23% year over year to $183.3 million, exceeding Fastly’s guidance range of $170 million to $176 million. Non-GAAP operating income was $27 million, above the company’s forecast of $12 million to $16 million, while non-GAAP operating margin reached 14.7%.
Security and Compute Growth
Fastly said security revenue increased 43% from a year earlier to $41.7 million, representing 23% of total revenue compared with 20% in the prior-year quarter. Network services revenue grew 17% to $133.9 million, while other products revenue increased 69% to $7.7 million, primarily driven by Compute sales related to AI and associated customer requirements.
Compton said Fastly’s security and other revenue combined grew 46% year over year and reached an annual run rate of nearly $200 million. DDoS Protection and Bot Management each recorded triple-digit year-over-year growth, according to the company.
The company cited AI-driven and agentic traffic as a tailwind across its business, particularly in security and Compute. Compton said AI-generated traffic is growing at roughly 6.5 times the rate of human traffic, increasing demand for tools that can determine whether requests should be authorized, cached, throttled, monetized or blocked.
During the question-and-answer session, Compton said the company does not separately disclose AI traffic volumes but has identified customers where AI tools appear to be driving traffic growth. He said AI and agentic traffic are producing a larger effect in security and Compute than in network services, in part because AI requests can have high request volumes but lower bandwidth needs than streaming events.
Chief Financial Officer Rich Wong said the company’s Next-Gen Web Application Firewall, along with DDoS and Bot Management offerings, were key contributors to security growth. He characterized DDoS and bot-management adoption as still being in the “second inning” and said those products offer substantial cross-selling opportunity.
Customer Expansion and Major Events
Fastly’s trailing 12-month net retention rate rose to 117%, compared with 113% in the first quarter and 104% a year earlier. The company said the increase reflected expansion across a broad range of customers using more of its platform.
Large customers, defined as those with more than $100,000 in annualized revenue, totaled 624 at quarter-end. Remaining performance obligations reached $341 million, up 38% from a year earlier, with the current portion of RPO growing 44%.
The company said the revenue outperformance was driven by increased traffic from its largest customers and, to a lesser extent, live sporting events and other one-time activities. Fastly’s top 10 customers accounted for 37% of second-quarter revenue and grew revenue 48% year over year. Revenue from customers outside the top 10 rose 12%.
Wong said less than half of the $10 million by which revenue exceeded the midpoint of guidance was attributable to episodic activity. He noted that 75% of World Cup games occurred in the second quarter, with the remaining 25% expected in the third quarter. Fastly also supported other live events, including an event held on the White House lawn.
Compton said Fastly believes it is gaining share in network services where performance matters, with customer wins often tied to platform reliability, resilience and security effectiveness rather than price discounting. He added that the company wants to generate more new customer wins and growth beyond its largest accounts, even as top customers continue to expand.
Margins, Cash Flow and Outlook
Fastly’s non-GAAP gross margin reached a record 65.8%, up from 59% a year earlier and above the company’s guidance midpoint of 64%. Wong said the improvement reflected higher revenue relative to infrastructure costs as well as expense discipline in cost of revenue. He said the company believes gross margins can be sustained around current levels.
Non-GAAP net income was $26.2 million, or $0.15 per diluted share, compared with a loss of $5 million, or $0.03 per share, in the year-earlier quarter. Adjusted EBITDA totaled $38.1 million, or 21% of revenue, compared with $8.9 million, or 6% of revenue, a year earlier.
Fastly ended the quarter with approximately $337 million in cash equivalents, marketable securities and investments, and a positive net cash balance of $14 million. Operating cash flow was $39.3 million, while free cash flow was $3.6 million, marking the company’s sixth consecutive quarter of positive free cash flow.
- Third-quarter revenue is projected at $184 million to $190 million.
- Third-quarter non-GAAP operating income is expected to be $20 million to $24 million.
- Full-year 2026 revenue guidance was raised to $732 million to $746 million.
- Full-year non-GAAP operating income guidance was increased to $88 million to $96 million.
- Fastly maintained its full-year free-cash-flow outlook of $40 million to $50 million.
For 2026, Fastly expects gross margin of approximately 65%, plus or minus 50 basis points. The company anticipates infrastructure capital spending of 10% to 12% of revenue, with spending weighted toward the first half as it added equipment amid supply-chain constraints. Wong said Fastly continues to monitor memory-component supply conditions and is using software-defined infrastructure and server upgrades to expand capacity efficiently.
Fastly plans to discuss its platform strategy, growth opportunities and financial disclosures further at its Investor Day on Sept. 22 in New York.
About Fastly (NYSE:FSLY)
Fastly, Inc operates an edge cloud platform designed to accelerate, secure and enable modern digital experiences. The company offers a suite of services including a content delivery network (CDN), edge compute, load balancing, web application firewall (WAF) and DDoS protection. Fastly’s real-time architecture allows customers to seamlessly deploy software logic at the network edge, reducing latency by bringing applications and content closer to end users.
Founded in 2011 by Artur Bergman, Fastly has evolved from a pure-play CDN provider into a comprehensive edge cloud platform.
