Fastly, Inc. (FSLY) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This summary covers Fastly, Inc.'s unaudited financial results for the quarterly period ended June 30, 2026. Fastly operates an edge cloud platform designed to process, serve, and secure customer applications close to end users. The company reported revenue growth driven by increased usage from existing customers and expansion in Security and Compute solutions.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $183.3 million | $148.7 million | $356.3 million | $293.2 million |
| Gross Profit | $116.0 million | $81.1 million | $224.1 million | $157.9 million |
| Gross Margin | 63% | 55% | 63% | 54% |
| Net Loss | $(15.6) million | $(37.5) million | $(36.1) million | $(76.7) million |
| Operating Cash Flow (YTD) | $68.2 million (2026) vs $43.1 million (2025) | |||
| Cash & Marketable Securities | $337.5 million (as of June 30, 2026) | |||
| Long-Term Debt | $324.0 million (Net carrying value) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 23% year-over-year in Q2 2026. Security revenue grew 43% and "Other" (Compute/Observability) revenue grew 69%, while Network Services grew 17%.
- Margin Expansion: Gross margin improved by 8 percentage points to 63% in Q2 2026, driven by revenue growth and a decrease in cost of revenue. Cost of revenue decreased primarily due to a change in the useful life of servers (from 5 to 6 years) reducing depreciation, and fully amortized intangible assets.
- Profitability Improvement: Net loss narrowed significantly to $15.6 million in Q2 2026 compared to $37.5 million in Q2 2025. Operating loss decreased to $14.4 million from $36.9 million.
- Debt Repayment: The company repaid the remaining balance of its 2026 Convertible Senior Notes in full during the six months ended June 30, 2026. Outstanding debt now consists of 2028 Notes ($150M principal) and 2030 Notes ($180M principal).
- Stock-Based Compensation: Total stock-based compensation expense increased to $35.2 million in Q2 2026 from $26.3 million in Q2 2025, largely due to the 2026 Bonus Program and Executive PSUs.
Guidance, Outlook, and Risks
- Outlook: Management expects to continue investing in network infrastructure, R&D, and sales/marketing to support growth. The company anticipates operating expenses to increase as it expands. No specific numerical guidance for future quarters was provided in this text.
- Key Metrics: Large Customer Count increased to 624 (from 622 in 2025). Last-Twelve Months Net Retention Rate (LTM NRR) improved to 117.2% (from 104.4%).
- Legal Proceedings: The company is involved in a securities class action lawsuit (Ken Kula v. Fastly, Inc.) and multiple stockholder derivative actions. A hearing on the motion to dismiss the second amended complaint was vacated, and the company is awaiting a ruling. No accruals have been recorded as a loss is not currently deemed probable.
- Risks: Significant risks include customer concentration (one customer accounted for 11% of Q2 revenue), supply chain disruptions for server components, cybersecurity threats, and regulatory changes regarding AI and data privacy (e.g., EU AI Act).
Investor Verification Checklist
- Customer Concentration: Verify the stability of the top customer(s) representing 11% of Q2 revenue and 37% of revenue from the top 10 customers.
- Debt Conversion Risk: Review the terms of the 2030 Notes, which are convertible at the option of holders from July 1, 2026, through September 30, 2026, and assess potential dilution or cash settlement requirements.
- Accounting Policy Change: Confirm the impact of the server useful life extension (5 to 6 years) on future depreciation schedules and net loss calculations.
- Legal Exposure: Monitor the status of the pending securities class action and derivative lawsuits for potential settlement costs or adverse rulings.
- Stock-Based Compensation: Analyze the sustainability of the increased stock-based compensation expense ($70.2M YTD 2026) relative to cash flow and equity dilution.