It has been about a month since the last earnings report for Fastly (FSLY Quick QuoteFSLY - Free Report) . Shares have lost about 6.9% in that time frame, underperforming the S&P 500.

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

Fastly Q2 Earnings Beat as Security Growth Spurs 2026 Outlook Hike

Fastly reported second-quarter 2026 adjusted earnings of 15 cents per share versus a loss of 3 cents a year ago. The figure topped the Zacks Consensus Estimate by 114.29%.

Revenues rose 23.3% year over year to $183.32 million and surpassed the consensus mark by 5.34%. Strength across Network Services, Security and Compute supported the upside, while the last-12-month net retention rate climbed to 117%.

FSLY's Platform Strategy Drives Broad Growth

Network Services revenues increased 17% year over year to $133.9 million, accounting for 73% of total revenues. Management attributed the performance to higher traffic among its largest customers, along with a smaller contribution from live sporting events.

Fastly also said it is gaining share where performance is critical. The company highlighted major global sporting events that generated record traffic and cited customer wins tied to resilience, flexibility and consolidated edge services.

Fastly's Security Momentum Lifts Revenue Mix

Security revenues advanced 43% year over year to $41.7 million and represented 23% of revenues, up from 20% a year earlier. Management said DDoS protection and bot management grew at triple-digit rates, while its next-generation web application firewall continued to gain traction.

Other revenues, which include Compute and Observability, climbed 69% to $7.7 million. Compute demand benefited from customers building low-latency applications and managing artificial intelligence (AI)-related traffic, supporting a combined Security and Other annual revenue run rate of nearly $200 million.

Fastly's Platform Strategy Gains Traction

Management said customers are adopting more products on Fastly’s unified platform, strengthening cross-sell and upsell activity. The company highlighted triple-digit growth in DDoS protection and bot management, while its web application firewall continued to gain traction.

AI-generated and agentic traffic also remained a demand catalyst. Fastly noted that machine traffic requires real-time decisions around authorization, caching, throttling and blocking, supporting adoption across Security, Compute and Network Services.

The company expanded its product reach through a partnership with Skyfire, designed to verify AI-agent identities and enable transactions at the edge. It also released a C++ software development kit for Fastly Compute to support low-latency AI, gaming and other workloads.

Fastly also highlighted its collaboration with LALIGA on an AI-driven system that detects and stops pirated streams in real time. The project illustrates how the company is pairing content delivery with security and edge-compute capabilities.

FSLY's Customer Metrics Show Deeper Adoption

The last-12-month net retention rate improved from 113% in the first quarter and 104% in the year-ago quarter. The increase reflected broader product adoption and higher usage across a range of customers as Fastly expanded cross-selling and upselling efforts.

Large customer count was 624 at the end of the quarter. Average annualized spend per large customer was $1.11 million, reflecting broader use of the platform across delivery, security and emerging edge-compute workloads. 

The top 10 customers represented 37% of revenues. Revenues from this group grew 48% year over year, while revenues from customers outside the top 10 increased 12%. Remaining performance obligations climbed 38% to $341 million, with the current portion rising 44%.

Fastly Expands Margins & Operating Leverage

Non-GAAP gross margin expanded 680 basis points year over year to a record 65.8%. Management attributed the improvement to higher revenues relative to infrastructure costs and continued cost discipline.

Non-GAAP operating expenses were $93.7 million. Non-GAAP operating income totaled $27 million compared with an operating loss of $4.6 million a year ago. Adjusted EBITDA increased to $38.1 million from $8.9 million, while adjusted EBITDA margin reached 21%.

FSLY’s Balance Sheet Details

As of June 30, 2026, cash, cash equivalents, marketable securities and investments totaled approximately $337 million, up $7 million from March 31, 2026. Fastly ended the quarter with a positive net cash balance of $14 million.

Net cash provided by operating activities was $39.3 million, compared with $25.8 million a year earlier. Free cash flow totaled $3.6 million versus $10.9 million in the prior-year quarter, as infrastructure capital expenditures represented approximately 17% of revenues.

FSLY Raises 2026 Outlook, Sees AI as Tailwind

For the third quarter of fiscal 2026, FSLY expects revenues to be in the range of $184-$190 million and non-GAAP earnings of 11-13 cents per share. The company projects non-GAAP operating income of $20-$24 million.

Fastly raised its 2026 revenue guidance to $732-$746 million and non-GAAP earnings outlook to 50-54 cents per share. Non-GAAP operating income is expected between $88 million and $96 million, reflecting an operating margin of approximately 12% at the midpoint.

Management views AI-driven demand as a tailwind across the business. AI tool usage is contributing to traffic growth among some of Fastly’s fastest-growing customers, with the impact most pronounced in Security and Compute and also evident in Network Services.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 45.33% due to these changes.

VGM Scores

At this time, Fastly has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for value investors.

Overall, the stock has an aggregate VGM Score of B. 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. It comes with little surprise Fastly has a Zacks Rank #2 (Buy). We expect an above average 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, CCC Intelligent Solutions Holdings Inc. (CCC Quick QuoteCCC - Free Report) , has gained 11.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

CCC Intelligent Solutions reported revenues of $285.93 million in the last reported quarter, representing a year-over-year change of +9.8%. EPS of $0.10 for the same period compares with $0.09 a year ago.

CCC Intelligent Solutions is expected to post earnings of $0.11 per share for the current quarter, representing a year-over-year change of +22.2%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

CCC Intelligent Solutions has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.