10-K: Fastly Reports Strong Revenue Growth, Narrows Losses in 2025

Fastly, Inc. reported a 15% increase in revenue to $624.0 million and significantly reduced its net loss to $121.7 million for the fiscal year ended December 31, 2025, while also remediating a material weakness in internal controls.

Summary

• Revenue increased by 15% to $624.0 million for the year ended December 31, 2025, up from $543.7 million in 2024.
• Net loss improved to $121.7 million in 2025, compared to a net loss of $158.1 million in 2024.
• Gross profit rose by 20% to $356.2 million, with gross margin expanding to 57% in 2025 from 54% in 2024.
• Last-Twelve Months Net Retention Rate (LTM NRR) significantly increased to 110.1% in 2025 from 102.3% in 2024, indicating strong customer expansion.
• Remaining Performance Obligations (RPO) grew by 44.8% to $353.8 million as of December 31, 2025, up from $244.4 million in 2024.
• Total customer count increased to 3,092 in 2025 from 3,061 in 2024, with enterprise customers growing to 628 from 596.
• Security revenue saw a 21% increase to $125.1 million, and 'Other' revenue (Compute and Observability) surged by 64% to $21.2 million.
• The company successfully remediated a previously identified material weakness in its internal control over financial reporting as of December 31, 2025.
• Issued $180.0 million in 0% convertible senior unsecured notes due 2030 and repurchased $150.0 million of 2026 Notes.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, driven by strong revenue growth, improved profitability metrics, and the successful remediation of internal control weaknesses. The strategic focus on AI and customer expansion are strong tailwinds, though continued operating losses and market competition warrant ongoing monitoring.

Positives

• Strong revenue growth of 15% year-over-year, reaching $624.0 million.
• Significant improvement in net loss, reducing it by $36.4 million from the prior year.
• Gross margin expanded by 3 percentage points to 57%, indicating improved operational efficiency.
• Last-Twelve Months Net Retention Rate (LTM NRR) increased substantially to 110.1%, demonstrating strong customer retention and expansion of usage.
• Remaining Performance Obligations (RPO) grew by nearly 45%, signaling future committed revenue.
• Robust growth in Security revenue (21%) and 'Other' revenue (64%), highlighting diversification beyond core Network Services.
• Successful remediation of the material weakness in internal control over financial reporting, enhancing financial reporting reliability.
• Strategic focus on AI-driven traffic and workloads, positioning the platform for future growth in an evolving market.

Negatives

• Continued operating losses, with a net loss of $121.7 million for the year.
• Annual Revenue Retention Rate (ARR) slightly decreased to 98.7% from 99.0%.
• Interest income decreased by 17% due to lower interest rates on cash equivalents and marketable securities.
• Interest expense increased significantly by 362% to $12.7 million, primarily due to coupon interest on the 2028 Notes.
• The company remains dependent on a limited number of customers, with the top 10 customers generating 32% of revenue.
• Ongoing class-action lawsuits and stockholder derivative actions pose potential financial and reputational risks.

Risks

• Platform failures (defects, interruptions, outages, delays) could lead to customer loss, service claims, or increased costs.
• Inability to attract new enterprise customers or expand usage by existing ones could harm business growth.
• Potential loss or significant reduction in usage by major customers, including TikTok due to regulatory actions, would reduce revenue.
• Component delays, shortages, or price increases could interrupt server/POP construction and impact customer usage needs.
• History of operating losses makes it difficult to evaluate current business and prospects, increasing investment risk.
• Compromised IT systems or data (cyber-attacks, ransomware, supply-chain attacks, AI-facilitated attacks) could lead to regulatory actions, litigation, fines, and reputational harm.
• Failure to efficiently develop and sell new products or respond to rapidly changing technology, industry standards, and customer needs could make products less competitive.
• Inaccurate revenue forecasting or failure to manage expenditures could adversely affect operating results.
• Intense competition from legacy CDNs, security vendors, cloud providers, and on-premise appliance vendors.
• Failure to maintain and enhance the brand could impair customer base expansion.
• Compliance with stringent and evolving U.S. and foreign laws related to privacy, data security, and AI could impose additional costs and liabilities.
• Difficulties in identifying and integrating acquisitions, strategic investments, partnerships, or alliances could disrupt business and dilute stockholder value.
• Failure to attract and retain qualified personnel, especially highly skilled technical talent and senior management, could prevent business strategy execution.
• Ongoing class-action lawsuits and other litigation matters are expensive, time-consuming, and could result in substantial monetary damages.
• Inability to scale the business quickly enough to meet growing customer needs could impair system performance and reduce customer satisfaction.
• Insufficient transmission bandwidth and colocation space could result in platform disruptions and revenue loss.
• Inherent liability risks due to the nature of security solutions, as no product provides absolute protection against all cyber-attacks.
• Dedication to values (e.g., not serving hate speech) may negatively influence financial results if it leads to customer removal or negative publicity.
• Dependence on partner relationships for growth, with risks if partners are ineffective or their values do not align.
• Operating in an emerging and evolving market (edge computing, AI solutions) with uncertainty over market size and adoption rate.
• Fluctuations in financial results and key metrics, making it difficult to project future results and potentially causing stock price volatility.
• Challenges with pricing models, including potential need to reduce prices or develop new models.
• Long and unpredictable sales and onboarding cycles, leading to delays in revenue generation.
• Reliance on third-party providers (e.g., AWS, GCP, Azure) who may offer competing products or become unwilling to do business.
• Exposure to risks associated with credit card and other online payment processing methods, including fraudulent use.
• Failure to maintain compatibility with third-party applications used by customers.
• Service level commitments under customer agreements could lead to service credits or contract terminations if not met.
• Scrutiny relating to environmental, social, and governance (ESG) factors may impose additional costs and risks.
• Current and future indebtedness could restrict operations and ability to respond to business changes.
• Seasonality in business operations, particularly in the fourth quarter, may cause fluctuations in sales and operating results.
• International expansion creates operational challenges, including varying seasonality, currency exchange risks, longer payment cycles, regulatory limitations, and reduced intellectual property protection.
• Incorrect estimates or judgments relating to critical accounting estimates could adversely affect results of operations.
• Adverse tax laws or regulations, or changes in effective tax rate or tax liability, could harm business.
• Limitations on the ability to use net operating losses (NOLs) to offset future taxable income.
• Governmental export and import controls could impair ability to compete internationally or subject to liability.
• Unfavorable conditions in the industry or global economy, rising inflation, or reductions in information technology spending could harm business.
• Intellectual property disputes, including those related to AI, could lead to costly litigation or significant liability.
• Use of open source software may restrict platform functionality or require source code release.
• Provisions in various agreements potentially expose the company to substantial liability for intellectual property infringement and data protection.

Future Outlook

Fastly anticipates continued growth by enhancing its product experience, investing in technology and infrastructure, attracting new business, growing partnerships, and expanding into additional vertical markets. The company expects total operating expenses to increase due to discretionary marketing spend and sales team expansion. Fastly is strategically positioned to capitalize on the rise of agentic AI, supporting edge workloads and AI traffic management, and plans to continue investing in its network infrastructure and R&D to introduce new products and features. The company expects to increase wallet-share from existing customers and expand internationally, while also managing the complexities and costs associated with global operations and evolving data residency laws.

Management Comments

• Our platform is poised to capitalize on the rise of agentic AI, where autonomous agent consumption is driving the bulk of internet traffic.
• Fastly is uniquely positioned – and has laid the groundwork – to lead the intelligence fabric that helps enterprises adapt to this shift.
• We are capturing this opportunity by supporting edge workloads and AI traffic management, allowing organizations to optimize AI-driven services alongside human interactions.
• We play a unique role in helping enterprises optimize and accelerate interactions with authorized AI agents and blocking abuse, powering their differentiation and AI-fueled innovation.
• We believe that our platform gives our customers a significant competitive advantage – whether they were born into the AI-centric digital age or are just embarking on their transformation journey.
• We focus our direct selling efforts on expanding our customers’ use of our platform, which includes companies that are exhibiting significant growth.
• We will continue to increase our discretionary marketing spend, including account-based, targeted demand generation and brand spend, to drive the effectiveness of our sales teams.
• We believe that investment in research and development will contribute to our long-term growth but may also negatively impact our short-term profitability.

Industry Context

StockSavvy.ai notes that Fastly operates in the highly competitive and rapidly evolving edge cloud, CDN, and cloud security markets. The company's strategic emphasis on AI-driven traffic management and edge computing aligns with broader industry trends towards decentralized processing and the increasing demands of AI workloads. While Fastly differentiates itself with a programmable, unified edge platform, it faces significant competition from established players like Akamai and Cloudflare, as well as major public cloud providers such as AWS, Google Cloud Platform, and Microsoft Azure, which possess greater financial and technical resources. The focus on developer-friendly tools and integrated security solutions positions Fastly to capture market share by addressing the complex needs of modern, cloud-native applications and AI-centric experiences.

Comparison to Industry Standards

• Fastly's LTM NRR of 110.1% indicates strong customer expansion, which is competitive within the SaaS and cloud infrastructure industry, where high retention rates are crucial for long-term value.
• The gross margin of 57% is generally in line with or slightly below some leading SaaS and cloud infrastructure providers, reflecting the significant infrastructure costs associated with operating a global edge network.
• Fastly's strategy of integrating CDN, WAF, API Management, Bot Detection, and DDoS into a unified edge platform differentiates it from point-solution competitors like Bunny CDN or CDN77, and aims to offer a more comprehensive solution than traditional hardware-centric appliances from vendors like F5 or Radware.
• The company's focus on WebAssembly (WASM) for edge computing positions it alongside innovators in serverless and edge-native application development, competing with similar offerings from Akamai and Cloudflare.
• While Fastly competes with the CDN and WAF capabilities of hyperscalers like Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure, its independent, developer-centric edge cloud approach aims to complement rather than directly replace these central cloud environments, offering specialized performance and security at the edge.

Management Changes

Corporate Governance

Legal Proceedings

• A putative securities class action lawsuit was filed on May 24, 2024, against Fastly and certain officers, alleging violations of Section 10(b) and 20(a) of the Exchange Act. An amended complaint was filed on November 1, 2024, and a second amended complaint on October 24, 2025. Defendants filed a motion to dismiss the second amended complaint on December 9, 2025, with a hearing scheduled for April 30, 2026.
• Multiple stockholder derivative actions were filed against certain officers and directors in June, July, August, and December 2024, based on similar allegations as the securities class action. These actions have been consolidated and stayed pending the resolution of the motion(s) to dismiss in the securities class action.
• No significant accruals for loss contingencies associated with these lawsuits have been recorded as of December 31, 2025, as an outcome resulting in a loss is not deemed probable.

Stakeholder Impact

• Shareholders: Potential for dilution from convertible notes, but also benefit from improved financial performance and strategic growth initiatives. Stock price volatility remains a risk.
• Employees: Continued investment in R&D and international expansion suggests growth opportunities, but competition for talent is intense. The company emphasizes a values-first culture and competitive compensation.
• Customers: Benefit from enhanced platform functionality, integrated security, and AI-ready solutions. Increased LTM NRR indicates high customer satisfaction and expanded usage. However, potential impact from TikTok's restructuring is a concern for a major customer.
• Creditors: The company's ability to service its debt depends on future performance and cash flow, with significant debt obligations from convertible notes. Compliance with credit agreement covenants is maintained.
• Suppliers: Component delays, shortages, and price increases could impact the supply chain for network equipment, affecting relationships and costs.

Next Steps

• Continue to expand existing product lines like Network Services and Security, and incubate newer products for future growth.
• Build out a single, unified platform to simplify customer onboarding and service usage.
• Expand into additional vertical markets to diversify customer base.
• Increase wallet-share over time for existing customers by building out new products and features.
• Grow the technical partner ecosystem to amplify reach and provide enhanced value.
• Attract new customers, particularly those with AI-driven workloads.
• Scale the network and augment sales teams for international expansion.
• Continue to invest in network infrastructure, R&D, and technology upgrades to enhance platform capabilities and performance.
• Monitor and adapt to evolving regulatory requirements related to privacy, data security, and AI.
• Address ongoing legal proceedings, with a hearing scheduled for April 30, 2026, on the motion to dismiss the second amended complaint in the securities class action.

Key Dates

Recommendation

Fastly's 2025 results show significant progress with strong revenue growth, improved gross margins, and a notable reduction in net loss. The substantial increase in LTM NRR and RPO indicates robust customer engagement and future revenue visibility. The successful remediation of the material weakness in internal controls is a critical positive for investor confidence and operational integrity. However, the company continues to operate at a net loss, faces intense competition, and has significant debt obligations. While the strategic focus on AI and international expansion offers long-term potential, the path to sustained profitability and the impact of ongoing litigation and geopolitical risks (like the TikTok situation) introduce uncertainty. A 'hold' recommendation is appropriate for seasoned investors, suggesting continued monitoring of execution on growth strategies, progress towards profitability, and resolution of legal and market challenges before considering a stronger position.

Keywords

Edge Cloud, CDN, Content Delivery Network, WAF, Web Application Firewall, API Security, DDoS Protection, AI Workloads, Serverless Compute, Observability, Cybersecurity, Cloud Computing, IaaS, Financial Results, SEC Filing, 10-K, Fastly