Fastly’s third quarter was marked by strong revenue growth and robust operating leverage, as the company’s cross-sell and upsell strategies translated to notable gains across its product lines. Management credited disciplined execution and targeted investments in security enhancements and platform capabilities as primary drivers. CEO Kip Compton highlighted the success of multiproduct wins with strategic accounts and the expansion of Fastly’s security offerings, stating that these moves provided “exceptional performance, security, and operational efficiency.” The quarter also benefited from early bookings linearity and a focus on cost management, resulting in improved profitability and free cash flow.
Is now the time to buy FSLY? Find out in our full research report (it’s free for active Edge members).
Fastly (FSLY) Q3 CY2025 Highlights:
- Revenue: $158.2 million vs analyst estimates of $151.1 million (15.3% year-on-year growth, 4.7% beat)
- Adjusted EPS: $0.07 vs analyst estimates of $0 (significant beat)
- Adjusted Operating Income: $11.61 million vs analyst estimates of $903,490 (7.3% margin, significant beat)
- Revenue Guidance for Q4 CY2025 is $161 million at the midpoint, above analyst estimates of $153.8 million
- Management raised its full-year Adjusted EPS guidance to $0.05 at the midpoint, a 171% increase
- Operating Margin: -18.2%, up from -29.6% in the same quarter last year
- Net Revenue Retention Rate: 106%, up from 104% in the previous quarter
- Market Capitalization: $1.79 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Fastly’s Q3 Earnings Call
- James Fish (Piper Sandler) asked about delivery business expansion versus security momentum. CFO Rich Wong explained that network services grew 11% year-over-year, attributing growth to both new and existing customers, while security revenue accelerated due to cross-sell.
- Frank Louthan (Raymond James) questioned whether any one-time items influenced the quarter and asked about delivery business seasonality. Wong clarified that strong booking linearity and cross-sell activity were key, with Q4 expected to follow typical seasonal trends.
- Jonathan Ho (William Blair) inquired about demand drivers for new security products. CEO Kip Compton cited broad adoption across the portfolio, especially bot management and API security, noting customer preference for combining multiple security solutions.
- Fatima Boolani (Citi), through a colleague, asked about the impact of international sales investments. Compton highlighted early traction in Asia Pacific and Europe, facilitated by new leadership and increased sales focus, with further upside anticipated.
- Daniel Hibshman (Craig Hallum) pressed on sequential revenue guidance and gross margin drivers. Wong attributed the lower-than-usual sequential Q4 increase to an unusually strong Q3 and detailed that margin improvements stem from traffic engineering and operational scale.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace of security product adoption and cross-sell momentum across Fastly’s customer base, (2) the impact of international sales expansion, particularly in Asia Pacific and Europe, on revenue mix, and (3) management’s ability to sustain margin improvements through operational efficiencies. Additionally, we will monitor the competitive landscape and customer consolidation trends as major factors influencing growth.
Fastly currently trades at $12.07, up from $8.07 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
Our Favorite Stocks Right Now
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
