A month has gone by since the last earnings report for Fastly (FSLY Quick QuoteFSLY - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Fastly due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.

FSLY Q1 Earnings Beat Estimates on Security and Compute Growth

Fastly reported first-quarter 2026 non-GAAP earnings of 13 cents per share, beating the Zacks Consensus Estimate by 62.5%. The company reported a loss of 5 cents per share in the year-ago quarter.

Revenues were $173 million, up 19.8% year over year, and edged past the consensus mark by 0.76%. The quarterly results reflected strong execution across the platform, highlighted by accelerating security momentum and rising compute demand tied to increasingly complex edge workloads. Remaining performance obligations (RPO) ended the quarter at $369 million, up 63% year over year, pointing to improved upfront customer commitments.

FSLY Revenue Mix Highlights Platform Breadth

FSLY’s first-quarter growth leaned on continued share gains in core delivery, alongside faster expansion in newer products. Network Services revenues rose 11% year over year to $126.2 million, supported by performance-driven wins in use cases where speed and reliability matter.

Security remained the standout, growing 47% year over year to $38.8 million and reaching record levels in both dollars and mix. The “Other” category, which includes Compute and Observability, jumped 67% year over year to $8 million, reflecting a meaningful step-up in compute adoption versus the year-ago quarter.

Fastly Expands Customer Base and Commitments

Fastly ended the quarter with 634 large customers, defined as those producing more than $100,000 in annualized revenues in the quarter. Management noted it is placing greater emphasis on large customer acquisition as a more meaningful gauge of go-to-market progress. 

Retention also improved, with trailing 12-month net retention rising to 113% from 110% in the prior quarter. The company highlighted that retention gains are extending beyond the very largest accounts into a broader range of customers, aligning with a platform approach that supports upsell and cross-sell across network, security and compute.

FSLY Lifts Margins on Efficiency and Accounting Shift

Profitability improved sharply in the quarter as the company continued to emphasize traffic engineering and platform efficiency. Non-GAAP gross margin reached 65.1%, up from 57.3% reported in the year-ago quarter. 

Operating expenses increased 15% year over year to $132.1 million.

FSLY’s non-GAAP operating income came in at $19.1 million against an operating loss of $5.85 million.

Fastly Generates Cash Despite Higher Infrastructure Spend

FSLY ended the quarter with approximately $330 million in cash, cash equivalents and investments. Management highlighted a $31 million sequential decline in cash, primarily driven by the retirement of $39 million of long-term debt that came due in March 2026. 

Fastly produced $28.9 million of cash flow from operations in the reported quarter, up from $17.3 million in the year-ago period. 

Free cash flow was $4.1 million, though down from $8.2 million a year earlier as infrastructure spending increased year over year.

FSLY Raises 2026 Outlook, Sees AI as Tailwind

For the second quarter of 2026, FSLY guided revenues to $170-$176 million and non-GAAP earnings to 5-8 cents per share. 

The company also raised 2026 revenue guidance to $710-$725 million and expects non-GAAP earnings of 27-33 cents per share, reflecting improved profitability expectations as the business scales.  

Management framed AI-driven demand as a meaningful tailwind, citing stronger interest in security and compute as customers work to secure and scale automated and agent-driven traffic. 

Fastly is seeing agentic-related volume tailwinds in network services and more pronounced security attach as customers protect AI workloads. The company also noted that pricing dynamics in Network Services remain similar to recent quarters as customers unlock volume discounts under existing contracts.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Fastly has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Fastly has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Fastly belongs to the Zacks Internet - Software industry. Another stock from the same industry, DigitalOcean Holdings, Inc. (DOCN Quick QuoteDOCN - Free Report) , has gained 20% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026.

DigitalOcean reported revenues of $257.9 million in the last reported quarter, representing a year-over-year change of +22.4%. EPS of $0.44 for the same period compares with $0.56 a year ago.

DigitalOcean is expected to post earnings of $0.26 per share for the current quarter, representing a year-over-year change of -55.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for DigitalOcean. Also, the stock has a VGM Score of F.