8-K: Fastly Reports Record Fourth Quarter Revenue, But Losses Persist

Fastly announces record fourth quarter revenue of $140.6 million, but continues to report net losses for the quarter and full year 2024.

Summary

• Fastly, Inc. announced its financial results for the fourth quarter and full year ended December 31, 2024.
• The company reported record fourth quarter revenue of $140.6 million, a 2% year-over-year increase.
• Full year 2024 revenue reached $543.7 million, representing a 7% year-over-year growth.
• GAAP gross margin for the fourth quarter was 53.4%, while non-GAAP gross margin was 56.5%.
• For the full year, GAAP gross margin was 54.4% and non-GAAP gross margin was 57.8%.
• The company's GAAP net loss for the fourth quarter was $32.9 million, compared to a loss of $23.4 million in the same period of 2023.
• The GAAP net loss for the full year was $158.1 million, compared to $133.1 million in the previous year.
• The number of enterprise customers increased to 596 in the fourth quarter, up from 576 in the third quarter.
• The last twelve-month net retention rate (LTM NRR) decreased to 102% in the fourth quarter from 105% in the third quarter.
• Remaining performance obligations (RPO) were $244 million, up 4% from $235 million in the third quarter.
• Annual revenue retention rate (ARR) was 99.0% in 2024, decreasing from 99.2% in 2023.
• Fastly expects Q1 2025 revenue between $136.0 million and $140.0 million and full year 2025 revenue between $575.0 million and $585.0 million.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive; while revenue growth is positive, continued losses and decreasing retention rates temper the overall outlook.

Positives

• Fastly achieved record fourth quarter revenue of $140.6 million.
• Full year revenue increased by 7% year-over-year to $543.7 million.
• Enterprise customer count grew to 596 in the fourth quarter.
• The company successfully refinanced a portion of its convertible debt.
• Fastly was recognized as a Leader in the IDC MarketScape for Edge Delivery Services.
• Customer packages experienced significant growth, especially those involving new logos.
• New products like DDoS Protection, AI Accelerator, and Object Storage were launched.
• Remaining performance obligations (RPO) increased to $244 million, up 4% from $235 million in the third quarter.

Negatives

• GAAP net loss for the fourth quarter was $32.9 million, higher than the $23.4 million loss in the same period of 2023.
• GAAP net loss for the full year was $158.1 million, compared to $133.1 million in fiscal 2023.
• LTM Net Retention Rate (NRR) decreased to 102% in the fourth quarter from 105% in the third quarter.
• Annual revenue retention rate (ARR) decreased slightly from 99.2% in 2023 to 99.0% in 2024.
• Top ten customers accounted for 32% of revenue in the fourth quarter compared to 40% in the fourth quarter of 2023.

Risks

• The company continues to experience net losses, raising concerns about its path to profitability.
• Decreasing net and annual revenue retention rates indicate potential challenges in retaining and expanding existing customer relationships.
• Reliance on top customers is decreasing, but still represents a significant portion of revenue, creating a concentration risk.
• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.

Future Outlook

Fastly anticipates total revenue between $136.0 million and $140.0 million for Q1 2025, and between $575.0 million and $585.0 million for the full year 2025; they also anticipate non-GAAP operating losses and net losses per share for both periods.

Management Comments

• We are pleased to report record fourth quarter revenue, exceeding the high-end of our guidance range, said Todd Nightingale, CEO of Fastly.
• Our platform strategy is delivering an accelerated innovation velocity and faster time to value for anyone building web experiences, continued Nightingale.
• We enter 2025 with a strengthened balance sheet, a motivated go-to-market team, and intense focus on efficient customer acquisition and long-term revenue growth.

Industry Context

Fastly operates in the competitive edge cloud platform market, facing rivals like Akamai, Cloudflare, and Amazon CloudFront; the company's focus on security and edge compute solutions aligns with industry trends, but profitability remains a key challenge.

Comparison to Industry Standards

• Cloudflare, a major competitor, has shown higher revenue growth rates, but also faces profitability challenges.
• Akamai, an established player, has a more diversified product portfolio and a stronger focus on security solutions.
• Fastly's net retention rate of 102% is lower than some industry peers, indicating potential challenges in customer expansion.
• The edge computing market is rapidly evolving, with companies like Amazon Web Services (AWS) and Microsoft Azure also expanding their presence.

Stakeholder Impact

• Shareholders may be concerned about the continued net losses and decreasing retention rates.
• Employees may be motivated by the company's focus on innovation and growth, but concerned about profitability.
• Customers may benefit from new product offerings and improved platform capabilities.
• Creditors may be reassured by the company's strengthened balance sheet, but concerned about its ability to achieve profitability.

Next Steps

• Fastly will host an investor conference call to discuss the results.
• The company will focus on efficient customer acquisition and long-term revenue growth in 2025.
• Fastly will continue to innovate and enhance its platform strategy.

Key Dates