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FSLY's Q3 earnings beat estimates by 41.67%, while revenues climbed 20.2% year over year to $190.2 million.
Security revenues surged 32% to $44.7 million, while NRR reached 119%, its highest since 2022.
Fastly raised its 2026 revenue outlook to $744-$748 million and free cash flow to $50-$60 million.
Fastly (FSLY - Free Report) reported third-quarter 2026 non-GAAP earnings of 17 cents per share, surpassing the Zacks Consensus Estimate by 41.67%. The company reported earnings of 7 cents per share in the year-ago quarter.
Revenues increased 20.2% year over year to $190.2 million, beating the consensus mark by 1.02%. Growth was driven by stronger traffic from large customers, security product adoption and successful cross-selling. The last 12-month net retention rate (NRR) reached 119%, its highest level since 2022.
Security revenues jumped 32% year over year to $44.7 million, accounting for approximately 24% of total revenues. Sequential security revenue growth exceeded 7% in every quarter of 2026.
Network Services revenues increased 16% year over year to $138 million, benefiting from stronger customer traffic and continued demand for content delivery and application performance solutions.
Other revenues, comprising Compute and Observability solutions, surged 37% year over year to $7.4 million.
Fastly’s Customer Expansion Supports Growth
Large customer count reached 634, while NRR improved from 117% in the previous quarter and 106% in the year-ago quarter. This marked the sixth consecutive quarter of NRR expansion, reflecting stronger customer spending and broader platform adoption.
Among large customers, 74% adopted at least two product suites, up 7 percentage points year over year. Adoption of four or more suites reached 34%, increasing 15 percentage points. Fastly’s top 10 customers contributed 39% of total revenues and registered 46% year-over-year growth. Revenues from customers outside the top 10 increased 8%, highlighting an opportunity to broaden growth across the customer base.
Fastly Expands AI Security and Edge Capabilities
Fastly expanded its AI portfolio with AI Runtime Control, AI Firewall and enhanced API Security capabilities. These products help enterprises manage AI agent interactions, protect applications and control access to digital infrastructure.
A leading AI company signed a seven-figure agreement to secure and scale agentic traffic. Fastly highlighted growing opportunities in AI security, particularly bot management and protection against emerging threats. Bot and DDoS solutions delivered triple-digit growth during the quarter.
Fastly also partnered with Comcast to integrate its delivery, security and compute capabilities into Comcast’s network. The collaboration targets lower latency, improved streaming performance and support for emerging AI applications. Customer wins across media, retail and digital marketplaces further demonstrated demand for its unified platform.
FSLY’s Margins Expand on Operating Leverage
Non-GAAP gross margin expanded 300 basis points year over year to 65.8%, matching record levels. Higher revenue scale and efficient software-defined infrastructure supported profitability.
Adjusted EBITDA increased to $43.5 million from $25.7 million, representing approximately 23% of revenues compared with 16% in the year-ago quarter.
Non-GAAP operating expenses totaled approximately $94 million, reflecting disciplined spending and a $1.5 million nonrecurring tax benefit.
Non-GAAP operating income surged to $31.2 million from $11.6 million a year ago. Operating margin expanded to 16.4% from 7.3%.
FSLY’s Cash Flow and Balance Sheet Details
Operating cash flow increased to $40 million from $28.9 million in the year-ago quarter. Free cash flow reached $25.2 million, up from $18.1 million, marking the seventh consecutive quarter of positive free cash flow.
Fastly exited the quarter with approximately $365 million in cash, cash equivalents, marketable securities and investments. The company's positive net cash balance reached $41 million.
Remaining performance obligations increased 24% year over year to $334 million, with the current portion growing 31%.
Fastly Raises 2026 Outlook After Strong Q3
For the fourth quarter of 2026, Fastly expects revenues between $198 million and $202 million, representing approximately 16% year-over-year growth at the midpoint.
Non-GAAP operating income is projected between $30 million and $34 million, while earnings are expected at 16-18 cents per share.
For 2026, Fastly raised revenue guidance to $744-$748 million, implying approximately 20% annual growth at the midpoint. Non-GAAP operating income guidance increased to $107-$111 million, while earnings are projected at 61-63 cents per share.
The company also raised its 2026 free cash flow outlook to $50-$60 million and lowered infrastructure capital expenditure expectations to approximately 10% of revenues from the previous 10-12% range. Fastly expects infrastructure efficiency and continued platform adoption to support profitability while maintaining investments in AI capabilities and international expansion.
Forgent Power, Telos and NVIDIA are expected to report their quarterly results on Nov. 12, 9 and 17, respectively. Forgent Power shares have dropped 22.6% year to date (YTD). Telos shares have declined 0.8% YTD, while NVIDIA shares have climbed 7.3% YTD.
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Fastly Q3 Earnings Beat Estimates, Revenues Increase Y/Y
Key Takeaways
Fastly (FSLY - Free Report) reported third-quarter 2026 non-GAAP earnings of 17 cents per share, surpassing the Zacks Consensus Estimate by 41.67%. The company reported earnings of 7 cents per share in the year-ago quarter.
Revenues increased 20.2% year over year to $190.2 million, beating the consensus mark by 1.02%. Growth was driven by stronger traffic from large customers, security product adoption and successful cross-selling. The last 12-month net retention rate (NRR) reached 119%, its highest level since 2022.
Fastly, Inc. Price, Consensus and EPS Surprise
Fastly, Inc. price-consensus-eps-surprise-chart | Fastly, Inc. Quote
FSLY’s Security Revenues Grow 32% Y/Y
Security revenues jumped 32% year over year to $44.7 million, accounting for approximately 24% of total revenues. Sequential security revenue growth exceeded 7% in every quarter of 2026.
Network Services revenues increased 16% year over year to $138 million, benefiting from stronger customer traffic and continued demand for content delivery and application performance solutions.
Other revenues, comprising Compute and Observability solutions, surged 37% year over year to $7.4 million.
Fastly’s Customer Expansion Supports Growth
Large customer count reached 634, while NRR improved from 117% in the previous quarter and 106% in the year-ago quarter. This marked the sixth consecutive quarter of NRR expansion, reflecting stronger customer spending and broader platform adoption.
Among large customers, 74% adopted at least two product suites, up 7 percentage points year over year. Adoption of four or more suites reached 34%, increasing 15 percentage points. Fastly’s top 10 customers contributed 39% of total revenues and registered 46% year-over-year growth. Revenues from customers outside the top 10 increased 8%, highlighting an opportunity to broaden growth across the customer base.
Fastly Expands AI Security and Edge Capabilities
Fastly expanded its AI portfolio with AI Runtime Control, AI Firewall and enhanced API Security capabilities. These products help enterprises manage AI agent interactions, protect applications and control access to digital infrastructure.
A leading AI company signed a seven-figure agreement to secure and scale agentic traffic. Fastly highlighted growing opportunities in AI security, particularly bot management and protection against emerging threats. Bot and DDoS solutions delivered triple-digit growth during the quarter.
Fastly also partnered with Comcast to integrate its delivery, security and compute capabilities into Comcast’s network. The collaboration targets lower latency, improved streaming performance and support for emerging AI applications. Customer wins across media, retail and digital marketplaces further demonstrated demand for its unified platform.
FSLY’s Margins Expand on Operating Leverage
Non-GAAP gross margin expanded 300 basis points year over year to 65.8%, matching record levels. Higher revenue scale and efficient software-defined infrastructure supported profitability.
Adjusted EBITDA increased to $43.5 million from $25.7 million, representing approximately 23% of revenues compared with 16% in the year-ago quarter.
Non-GAAP operating expenses totaled approximately $94 million, reflecting disciplined spending and a $1.5 million nonrecurring tax benefit.
Non-GAAP operating income surged to $31.2 million from $11.6 million a year ago. Operating margin expanded to 16.4% from 7.3%.
FSLY’s Cash Flow and Balance Sheet Details
Operating cash flow increased to $40 million from $28.9 million in the year-ago quarter. Free cash flow reached $25.2 million, up from $18.1 million, marking the seventh consecutive quarter of positive free cash flow.
Fastly exited the quarter with approximately $365 million in cash, cash equivalents, marketable securities and investments. The company's positive net cash balance reached $41 million.
Remaining performance obligations increased 24% year over year to $334 million, with the current portion growing 31%.
Fastly Raises 2026 Outlook After Strong Q3
For the fourth quarter of 2026, Fastly expects revenues between $198 million and $202 million, representing approximately 16% year-over-year growth at the midpoint.
Non-GAAP operating income is projected between $30 million and $34 million, while earnings are expected at 16-18 cents per share.
For 2026, Fastly raised revenue guidance to $744-$748 million, implying approximately 20% annual growth at the midpoint. Non-GAAP operating income guidance increased to $107-$111 million, while earnings are projected at 61-63 cents per share.
The company also raised its 2026 free cash flow outlook to $50-$60 million and lowered infrastructure capital expenditure expectations to approximately 10% of revenues from the previous 10-12% range. Fastly expects infrastructure efficiency and continued platform adoption to support profitability while maintaining investments in AI capabilities and international expansion.
Zacks Rank & Other Stocks to Consider
Fastly currently has a Zacks Rank #2 (Buy).
Forgent Power Solutions (FPS - Free Report) , Telos (TLS - Free Report) and NVIDIA (NVDA - Free Report) are some other top-ranked stocks in the broader Zacks Computer and Technology sector. While Forgent Power and Telos sport a Zacks Rank #1 (Strong Buy) each at present, NVIDIA carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Forgent Power, Telos and NVIDIA are expected to report their quarterly results on Nov. 12, 9 and 17, respectively. Forgent Power shares have dropped 22.6% year to date (YTD). Telos shares have declined 0.8% YTD, while NVIDIA shares have climbed 7.3% YTD.