Fastly (FSLY) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $137.2 million, up 7% year-over-year, driven by strong growth outside the top 10 customers and large media accounts.

• Achieved record non-GAAP net income of $2.4 million and adjusted EBITDA of $13.3 million, with GAAP net loss narrowing to $38.0 million from $54.3 million a year ago.

• Customer count rose to 3,638, up 10% quarter-over-quarter, with enterprise customers at 576, representing 92% of annualized revenue.

• Transformation and restructuring initiatives contributed to improved profitability and operational focus, resulting in $14 million OpEx savings for 2024.

• Security and compute offerings expanded, with new product launches in bot mitigation, adaptive DDoS protection, and AI Accelerator.

Financial highlights

• Q3 revenue was $137.2 million, up 7% year-over-year, with network services revenue at $107.4 million (+5%), security at $26.2 million (+12%), and compute/emerging products at $3.6 million (+85%).

• Gross margin improved to 57.7% non-GAAP and 54–54.5% GAAP, up from 51.7–52% a year ago.

• Operating expenses fell 5–7% year-over-year, aided by restructuring; Q3 included a $9.7 million restructuring charge.

• Free cash flow improved to negative $7.1 million, with cash from operations turning positive at $5 million for Q3 and $11.2 million for the nine months.

• Cash and equivalents stood at $217.5–$308.2 million as of September 30, 2024.

Outlook and guidance

• Q4 2024 revenue expected at $136–$140 million, with non-GAAP net income per share guidance of $(0.02)–$0.02.

• Full-year 2024 revenue guidance is $539–$543 million, with non-GAAP net income per share of $(0.12)–$(0.08) and gross margin improvement of ~70 bps over 2023.

• 2024 non-GAAP operating loss expected at $28–$24 million, and free cash flow at negative $40–$30 million.

• Gross margin for Q4 anticipated to decline by ~150 bps due to higher international traffic costs.

• Management expects continued investment in platform innovation, sales, and marketing to drive growth, with a focus on expanding enterprise customer relationships.