Fastly (FSLY) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $132.4 million, up 8% year-over-year and above guidance midpoint, with six-month revenue at $265.9 million, and operating loss of $12.6 million, favorable to guidance.

• Net loss widened to $43.7 million in Q2 2024 from $10.7 million in Q2 2023; six-month net loss was $87.2 million, up from $55.4 million.

• Growth was driven by a 13% year-over-year increase in revenue from customers outside the top 10, offsetting declines from large media accounts.

• The business is transitioning to reduce reliance on large media customers, focusing on customer acquisition, portfolio expansion, and innovation, with a restructuring underway to align costs and support future growth.

• Enterprise customer count grew to 601, generating 91% of total annualized revenue, with total customers at 3,295.

Financial highlights

• Network services revenue grew 6% year-over-year to $104.2 million; security revenue grew 13% to $25.4 million; other revenue (Compute/Observability) was $2.8 million, up 57% year-over-year.

• Gross margin improved to 55.1% GAAP (up from 52.3% a year ago), with non-GAAP gross margin at 58.5%.

• Adjusted EBITDA was $0.8 million, down from $5.2 million in Q2 2023.

• Net loss per share was $(0.32) in Q2 2024, compared to $(0.08) prior year.

• Free cash flow was negative $18.5 million, a sequential decrease from negative $2.2 million in Q1 and compared to positive $7.8 million in Q2 2023.

Outlook and guidance

• Q3 2024 revenue guidance: $130–$134 million (2–5% annual growth), with non-GAAP net loss per share: $(0.08)–$(0.03), and gross margin expected to decrease by ~150 basis points sequentially.

• Full-year 2024 revenue guidance: $530–$540 million (6% annual growth at midpoint), with non-GAAP net loss per share: $(0.16)–$(0.11), and gross margin improvement of ~100 basis points over 2023.

• Non-GAAP operating loss for 2024 expected at $33–$27 million, with free cash flow between -$20 million and -$10 million.

• Targeting operating income and free cash flow breakeven in 2025.

• Cash, cash equivalents, and marketable securities of $311.8 million as of June 30, 2024, expected to be sufficient for at least the next 12 months.