Fastly, Inc. (FSLY Quick QuoteFSLY - Free Report) raised its 2026 outlook following the record third-quarter results, highlighting stronger customer spending, expanding platform adoption and improving profitability. Management emphasized that cross-selling and disciplined infrastructure investments are supporting growth.

The earnings call also addressed artificial intelligence opportunities, slowing growth outside major accounts and an upcoming sales leadership transition. Executives outlined plans to sustain momentum while broadening customer adoption.

Fastly Raises 2026 Outlook on Stronger Execution

Chief financial officer Richard Wong raised the 2026 revenue guidance to $744-$748 million, suggesting 20% growth at the midpoint.

The non-GAAP operating income guidance increased to $107-$111 million, while the adjusted earnings guidance reached 61-63 cents per share. The free cash flow expectations rose to $50-$60 million.

For the fourth quarter, management projected revenues of $198-$202 million and non-GAAP operating income of $30-$34 million. Wong cautioned that consumption-based customer activity could create quarterly variability.

FSLY Expects Deeper Platform Adoption to Drive Growth

CEO Kip Compton identified customer expansion and multi-product adoption as central growth drivers.

During the quarter, 74% of large customers adopted at least two product suites, while 34% used four or more. Trailing 12-month net retention reached 119%, marking six consecutive quarters of improvement.

However, revenues from Fastly's top 10 customers increased 46% compared with 8% growth among other customers. During questioning from D.A. Davidson, Wong acknowledged that sales efforts had concentrated heavily on major accounts. Management expects broader marketing and international investments to support other customer groups.

Fastly Expands AI Security & Edge Capabilities

Compton highlighted growing opportunities from AI agents interacting with enterprise applications, particularly around security and traffic governance.

Fastly launched AI Runtime Control, AI Firewall and expanded API security capabilities. A leading AI company also signed a seven-figure agreement to protect agentic traffic.

Responding to KeyBanc Capital Markets, Compton explained that AI traffic creates opportunities across delivery and security, although security currently offers greater potential. During questioning from Raymond James, he clarified that the new AI agreement required no dedicated GPU investment or additional customer-specific capital expenditure.

FSLY Strengthens Margins Through Infrastructure Efficiency

Wong reported a non-GAAP gross margin of 65.8%, matching company records and improving 300 basis points year over year.

The non-GAAP operating margin was 16.4% compared with 7.3% a year earlier. Third-quarter revenues of $190.2 million beat the Zacks Consensus Estimate of $188.3 million. The company incurred a loss of $0.04, narrower than the consensus estimate of a loss of $0.08.

Management attributed margin expansion to revenue scale, infrastructure efficiency and expense discipline. Infrastructure capital spending guidance declined to approximately 10% of annual revenues, reflecting earlier capacity investments and more efficient network expansion.

Fastly, Inc. Price, Consensus and EPS Surprise

Fastly, Inc. price-consensus-eps-surprise-chart | Fastly, Inc. Quote

Fastly Prepares for Sales Leadership Transition

Compton announced that president of Go-to-Market Scott Lovett plans to retire in 2027. An internal and external search will identify his successor.

During questioning from Oppenheimer, Compton emphasized continuity in the company's sales strategy, including security cross-selling, partnerships and international expansion.

An Evercore ISI analyst questioned potential disruption. Compton said that existing guidance incorporates management's assessment of the transition, while Wong emphasized the leadership team's depth.

FSLY Expands Partnerships & Refines Reporting

Compton highlighted Fastly's partnership with Comcast, integrating its platform into network infrastructure to improve delivery performance and support emerging applications.

Management also discussed international customer wins and additional channel partnerships designed to expand distribution.

Beginning in 2027, Fastly will replace separate network services, security and other revenue categories with consolidated revenue reporting and multi-product adoption metrics. Wong said that the changes align disclosures with the company's unified platform strategy.

Fastly Maintains Focus on Profitable Expansion

Management's overarching message centered on combining sustained revenue growth with expanding margins and disciplined capital investment.

Compton and Wong emphasized deeper customer relationships, AI security innovation and broader market penetration as priorities. The company remains focused on extending its growth beyond its largest accounts while maintaining operating leverage.

Here’s What FSLY's Zacks Rank & Style Scores Indicate

Fastly currently carries a Zacks Rank #2 (Buy), indicating favorable earnings estimate revision trends and positive near-term performance prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its Growth Score of A indicates strong growth characteristics, while its Momentum Score of B reflects favorable price momentum. The Value Score of D points to weaker valuation attractiveness, although the VGM Score of B reflects a favorable combined assessment.

The combination of a Zacks Rank #2 and favorable Growth, Momentum and VGM Score aligns with the Zacks framework for identifying potential outperformers. However, the Zacks Rank can change as analysts revise earnings estimates following the latest results.