Fastly, Inc. (FSLY) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Fastly, Inc. operates an edge cloud platform designed to process, serve, and secure customer applications globally. The company focuses on Network Services, Security, and Other (Compute and Observability) product lines. As of April 24, 2026, there were 156.5 million shares of Class A common stock outstanding.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $173.0 million | $144.5 million |
| Gross Profit | $108.2 million | $76.8 million |
| Gross Margin | 63% | 53% |
| Net Loss | $(20.5) million | $(39.1) million |
| Net Loss Per Share (Basic/Diluted) | $(0.13) | $(0.27) |
| Operating Cash Flow | $28.9 million | $17.3 million |
| Cash, Cash Equivalents & Marketable Securities | $330.5 million | $286.2 million (Dec 31, 2025) |
| Total Debt (Convertible Notes) | $330.0 million (Principal) | $368.6 million (Principal) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 20% year-over-year, driven by growth in Network Services (11%), Security (47%), and Other (67%) segments.
- Margin Expansion: Gross margin improved by 10 percentage points to 63%, primarily due to revenue growth outpacing cost increases and a $6.0 million decrease in depreciation and amortization.
- Cost of Revenue: Decreased 4% to $64.8 million, offset by increases in colocation and personnel costs.
- Operating Expenses: Total operating expenses rose 15% to $132.1 million, with General and Administrative expenses increasing 24% largely due to stock-based compensation.
- Debt Repayment: The company repaid the remaining balance of its 2026 Convertible Senior Notes in full during the quarter. Outstanding debt now consists of 2028 Notes ($150M) and 2030 Notes ($180M).
- Accounting Change: Effective January 1, 2026, the useful life of servers was increased from five to six years, reducing depreciation expense and net loss by $3.3 million for the quarter.
Guidance, Outlook, and Risks
- Outlook: Management expects continued investment in network infrastructure and R&D to support AI-driven traffic and edge workloads. The company anticipates operating expenses will increase as it expands sales and marketing capabilities.
- Key Metrics: Large Customer Count increased to 634 (from 595 in Q1 2025). Last-Twelve Months Net Retention Rate (LTM NRR) improved to 113.0% (from 100.0%).
- Remaining Performance Obligations (RPO): Total RPO was $368.7 million as of March 31, 2026, with approximately 75% expected to be recognized over the next 12 months.
- Risks & Contingencies:
- Legal Proceedings: The company is involved in a securities class action lawsuit (Kula v. Fastly) 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.
- Customer Concentration: The 10 largest customers generated 32% of revenue for the trailing 12 months. TikTok remains a major customer, though its restructuring under U.S. law creates uncertainty regarding future traffic levels.
- Supply Chain: Risks related to component shortages, price increases, and geopolitical conflicts affecting server construction and network expansion.
Investor Verification Checklist
- Verify the impact of the TikTok USDS Joint Venture restructuring on future traffic volumes and revenue stability.
- Monitor the status of the pending securities class action lawsuit and potential financial exposure.
- Assess the sustainability of the 63% gross margin given the one-time accounting change regarding server useful life.
- Review the conversion terms of the 2030 Notes, which became convertible at the option of holders starting April 1, 2026, and the potential for dilution or cash settlement.
- Track the company's ability to maintain the consolidated adjusted quick ratio covenant (minimum 1.25 to 1.00) under its Credit Agreement.