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Fastly, Inc. (FSLY)·Q4 2024 Earnings Summary

Executive Summary

  • Fastly delivered record Q4 revenue of $140.6M, exceeding the high end of prior guidance; non-GAAP EPS was a loss of $0.03 and adjusted EBITDA was $9.7M, while GAAP gross margin compressed to 53.4% on higher bandwidth costs and a greater international traffic mix .
  • Segment mix: Network Services was flat YoY at $110.1M; Security grew 4% YoY to $26.9M (17% normalized excluding a prior-year true-up); Other grew 63% YoY to $3.6M, led by compute .
  • Revenue diversification continued: top 10 customers fell to 32% of revenue (from 40% a year ago); enterprise customers increased to 596; LTM NRR declined to 102%; RPO increased to $244M .
  • 2025 outlook introduced: Q1 revenue $136–$140M and FY revenue $575–$585M with non-GAAP operating loss narrowing; management excluded U.S. TikTok traffic beyond Q1 from guidance to be prudent, citing legislative uncertainty .
  • Potential stock reaction catalysts: upside to guidance driven by share gains from Edgio’s network shutdown (>10 new logos), continued revenue diversification, and new product momentum (AI Accelerator GA, Object Storage, DDoS Protection), offset by margin headwinds from international traffic mix and top-customer softness .

What Went Well and What Went Wrong

What Went Well

  • Record Q4 revenue beat the high end of guidance; CEO: “We are pleased to report record fourth quarter revenue, exceeding the high-end of our guidance range” .
  • Normalized security growth accelerated; CFO: “Excluding the $2.8M true-up from last year…security revenue would have grown 17%” .
  • Revenue diversification improved with top 10 concentration down to 32% and non-top-10 revenue up 16% YoY in Q4; CEO highlighted this shift and cross-sell opportunity into the broader base .

What Went Wrong

  • Gross margin compression YoY (53.4% GAAP, 56.5% non-GAAP) driven by increased bandwidth costs and a higher mix of traffic outside the U.S. and Europe .
  • LTM NRR declined to 102% (from 105% in Q3 and 113% a year ago), reflecting softness among a few largest customers; management expects flattish near-term, then expansion in 2H25 .
  • Enterprise customer count methodology change revealed a correction to total customer count (3,061) and pressure in mid-market spend; management is focusing on hunters, security specialization, and cross-sell to re-accelerate .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$132.371 $137.206 $140.579
GAAP EPS ($)$(0.32) $(0.27) $(0.23)
Non-GAAP EPS ($)$(0.07) $0.02 $(0.03)
GAAP Gross Margin (%)55.1% 54.5% 53.4%
Non-GAAP Gross Margin (%)58.5% 57.7% 56.5%
Adjusted EBITDA ($USD Millions)$0.770 $13.261 $9.747

Segment revenue breakdown:

Segment Revenue ($USD Millions)Q2 2024Q3 2024Q4 2024
Network Services$104.2 $107.4 $110.1
Security$25.4 $26.2 $26.9
Other (Compute & Observability)$2.8 $3.6 $3.6

Key performance indicators:

KPIQ2 2024Q3 2024Q4 2024
Enterprise Customer Count601 576 596
Top Ten Customer Revenue %34% 33% 32%
LTM Net Retention Rate (%)110% 105% 102%
RPO ($USD Millions)$223.1 $235.4 $244.4
Annual Revenue Retention (ARR) (%)——99.0%
Enterprise Revenue %91% 92% 93%
Avg Enterprise Spend ($USD Thousands)$804 $880 $873
Total Customer Count3,295 3,638 3,061 (methodology correction)

Vs. estimates:

MetricQ4 2024 ActualWall St. Consensus (S&P Global)Surprise
Revenue ($USD Millions)$140.579 Unavailable—
Non-GAAP EPS ($)$(0.03) Unavailable—

Note: S&P Global consensus was unavailable at time of request; estimates could not be retrieved due to API limits.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)Q4 2024$136–$140 $140.6 (actual) Beat high end
Total Revenue ($M)Q1 2025N/A$136–$140 Introduced
Total Revenue ($M)FY 2025N/A$575–$585 Introduced
Non-GAAP Operating Loss ($M)Q1 2025N/A$(11)–$(7) Introduced
Non-GAAP Net Loss per Share ($)Q1 2025N/A$(0.09)–$(0.05) Introduced
Non-GAAP Operating Loss ($M)FY 2025N/A$(15)–$(9) Introduced
Non-GAAP Net Loss per Share ($)FY 2025N/A$(0.15)–$(0.09) Introduced
Non-GAAP Gross MarginQ1 2025 vs Q4 202456.5% in Q4 +~30 bps sequential (excl. SBC amortization in internal-use software) Raised (methodology change)
Operating ExpensesQ1 2025—+$3–$5M sequential (payroll taxes ~+$5M; sales events) Higher sequential OpEx
Total Revenue ($M)FY 2024$539–$543 $543.676 (actual) Delivered at top end

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024Q4 2024 (Current)Trend
AI AcceleratorBeta launched; strong interest; plan GA in 2024 Added Gemini support; GA by year-end GA released; expanded LLM compatibility (ChatGPT, Gemini) Momentum building
Security Portfolio (WAF, Bot, DDoS)Bot mitigation released; cross-sell strategy DDoS GA; favorable bot response Security +4% YoY; 17% normalized growth; cross-sell focus Improving mix
Revenue ConcentrationTop 10 at 34%; declines at large customers Top 10 at 33%; outside top 10 +20% YoY Top 10 at 32%; outside top 10 +16% YoY Diversifying
International Mix & MarginsCapex rising to support global traffic; medium-term 6–8% capex target Anticipate Q4 GM down on international deployments GM down YoY; headwinds from international traffic mix Margin headwind
CapexGuide 9–10% of revenue for 2024 ~9% in Q3; FY ~9–10% Q4 cash capex ~9%; 2025 guide 9–10% Elevated near-term
TikTok Exposure——FY25 guide excludes U.S. TikTok traffic beyond Q1; <10% global rev; U.S. <2% Derisking
Edgio (edge network) shutdown——>10 new logos from former Edgio users; capacity planning for traffic backfill Share gains
Channel PartnersDeal registrations +33% QoQ; bookings +46% YTD Continued leverage Opportunity to drive acquisition via registrations Strengthening
Go-to-Market ChangesNew CRO; restructuring to fund GTM/security Hunters, specialization; enterprise mix Security specialization; APAC leader; hunters in place Execution focus

Management Commentary

  • CEO: “We are pleased to report record fourth quarter revenue, exceeding the high-end of our guidance range” .
  • CEO: “We enter 2025 with a strengthened balance sheet, a motivated go-to-market team, and intense focus on efficient customer acquisition and long-term revenue growth” .
  • CFO: “Network Services revenue was flat year-over-year…security revenue grew 4% year-over-year to $26.9 million…normalized…security revenue would have grown 17%” .
  • CFO: “Our top 10 customers comprised 32% of our total revenue…no customer accounted for more than 10% of revenue in the fourth quarter” .
  • CFO: “For the first quarter, we expect revenue in the range of $136 million to $140 million…non-GAAP operating loss of $11 million to $7 million…and…a non-GAAP loss of $0.09 to $0.05 per share” .

Q&A Highlights

  • APAC expansion: Minimal incremental capital; appoint a dedicated regional sales leader to drive local business .
  • Hunters and security specialization: Team largely in place via refocusing existing resources; building security expertise to accelerate cross-sell .
  • TikTok exposure: U.S. traffic still flowing as of the call; excluded from FY25 guidance beyond Q1 to be prudent; global ByteDance <10% of 2024 revenue; U.S. traffic <2% .
  • Edgio shutdown: >10 new logo wins; targeting traffic share gains and building capacity to backfill; pricing environment improving as competitors exit .
  • Margins and international push: International traffic growth a near-term drag; management expects improvement as volumes scale and rates/efficiencies improve .
  • Security growth: Aim to accelerate above mid-teens with complete portfolio and GTM focus in 2025 .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 revenue and EPS were unavailable at the time of request due to API limits; consequently surprises vs. estimates cannot be determined. Management’s reported results and guidance should be used for modeling updates .
  • Investors should adjust models for: normalized security growth (excluding prior-year true-ups), FY25 revenue midpoint of $580M, Q1 gross margin +~30 bps sequential (definition change), and higher Q1 OpEx by $3–$5M due to payroll taxes and sales events .

Key Takeaways for Investors

  • Q4 topline outperformed internal guidance; margin compression reflects mix and bandwidth costs—focus on operating discipline and GTM investments continues into 2025 .
  • Security momentum is stronger than GAAP growth implies; excluding the prior-year true-up, normalized growth was 17% and poised to accelerate with full portfolio and specialized sales execution .
  • Revenue diversification mitigates large-customer volatility: top 10 down to 32% of revenue; outside the top 10 grew double digits; expect concentration to remain low-to-mid 30% in 2025 .
  • Edgio exit drives share gains and new logos; Fastly is scaling capacity to capture traffic while managing capex and margin impacts—opportunity for medium-term share and margin improvement .
  • TikTok legislation risk is derisked in guidance; limited U.S. revenue exposure (<2%) reduces downside to 2025 forecasts .
  • Expect Q1 non-GAAP GM +~30 bps sequential from Q4 (methodology change), OpEx +$3–$5M sequential; FY25 operating loss narrows and free cash flow improves to $(20)–$(10)M (with potential leasing to move toward breakeven) .
  • Near-term trading: watch for security cross-sell traction, international traffic mix impacts on margins, and incremental share gains from competitor exits; medium-term thesis hinges on platform-led cross-sell (security/compute/observability) and sustained diversification .
All quantitative figures and statements are sourced from Fastly’s Q4 2024 Form 8-K press release and investor supplement, and the Q4 2024 earnings call transcript, with citations in-line.