Fastly (FSLY -5.23%), a leading provider of edge cloud platforms, revealed its third-quarter earnings for 2024 on November 6, 2024. The company delivered robust results, achieving record non-GAAP income and exceeding its revenue guidance. Revenue stood at $137.2 million, surpassing management's expectations of $130.0 to $134.0 million. Non-GAAP net income per share was $0.02, a remarkable improvement over the expected loss of $0.08 to $0.03 per share. While results exceeded expectations, challenges remain with declining revenue from key customers.
| Metric | Q3 2024 Result | Management's Expectation | Q3 2023 Result | % Change Year-over-Year |
|---|---|---|---|---|
| Revenue (in millions) | $137.2 | $130.0 - $134.0 | $128.3 | 7% |
| Non-GAAP Net Income per Share | $0.02 | ($0.08) - ($0.03) | ($0.04) | N/A |
| Non-GAAP Operating Loss (in millions) | $(0.52) | ($12.0) - ($8.0) | $(7.8) | N/A |
Source: Expectations based on management's guidance, as provided in 2024-08-07 earnings report.
Fastly: Business Overview and Strategic Focuses
Fastly, a pioneer in edge computing, offers an innovative platform combining a Content Delivery Network (CDN) with cutting-edge edge computing solutions. This enables high-speed data processing and low-latency services critical for industries like e-commerce and content streaming. Its real-time programmability and strategic Points of Presence (POPs) provide significant competitive advantages. Recently, Fastly has focused on enhancing its edge cloud services with innovations in network and security solutions to meet the evolving digital expectations.
Investments in security technology, like their updated Web Application Firewall (WAF), have strengthened Fastly's position in addressing cybersecurity threats. This focus aligns with its strategic emphasis on maintaining robust, secure digital experiences for customers. The company's investment strategy prioritizes expanding its technological reach, capturing new market segments, and improving operational efficiency.
Quarterly Highlights and Financial Metrics
In the third quarter of 2024, Fastly exceeded its revenue expectations, achieving a $137.2 million result over the projected $130.0 - $134.0 million range. This represents a 7% year-over-year growth. Security revenues grew notably by 12% to $26.2 million. Notably, the company achieved a record non-GAAP income of $0.02 per share.
The company showed efficient cost management, reducing its non-GAAP operating loss to $0.52 million, a considerable improvement from the predicted $8.0 to $12.0 million loss range. Improvements in non-GAAP gross margin, climbing to 57.7% from 55.9% a year ago, reflect these efficiencies.
Despite these positive financial metrics, Fastly faces a significant challenge with its customer base. Revenue derived from its top ten customers declined from 40% to 33% year-over-year. Additionally, revenue from this group reduced by 11% over the same period, indicating a pressing issue of customer retention that warrants attention.
Looking Ahead: Financial Outlook and Key Priorities
Fastly has set its sight on continued financial improvement for the final quarter of 2024. The company projects revenue between $136.0 million and $140.0 million and anticipates a potential swing from a non-GAAP net loss per share to a positive $0.02. This projection reflects an upward revision from its previous full-year revenue guidance of $530.0 million to $540.0 million, now expecting $539.0 million to $543.0 million.
Management's outlook emphasizes broadening its customer base beyond its top consumers, investing in innovative edge services, and bolstering security offerings. Investors should look toward Fastly's ability to capture new markets and stabilize its revenue base as critical factors for its future success. Retaining high-value customers and expanding its technological reach while maintaining operational efficiency will highlight the company’s path forward in the competitive landscape of digital platforms.
