Content delivery company Fastly (NYSE: FSLY) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 12.3% year on year to $148.7 million. Guidance for next quarter’s revenue was optimistic at $151 million at the midpoint, 2.5% above analysts’ estimates. Its non-GAAP loss of $0.03 per share was $0.02 above analysts’ consensus estimates.

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"Fastly’s second quarter performance resulted in another record revenue quarter, outperforming both our revenue and operating loss guidance. We are raising our financial guidance for 2025 and now expect to generate positive free cash flow for the year,” said Kip Compton, CEO of Fastly.

Company Overview

Founded in 2011, Fastly (NYSE: FSLY) provides content delivery and edge cloud computing services, enabling enterprises and developers to deliver fast, secure, and scalable digital content and experiences.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, Fastly grew its sales at a 13.6% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.

This quarter, Fastly reported year-on-year revenue growth of 12.3%, and its $148.7 million of revenue exceeded Wall Street’s estimates by 2.7%. Company management is currently guiding for a 10.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

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Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Fastly’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 103% in Q2. This means Fastly would’ve grown its revenue by 2.8% even if it didn’t win any new customers over the last 12 months.

Fastly has an adequate net retention rate, showing us that it generally keeps customers but lags behind the best SaaS businesses, which routinely post net retention rates of 120%+.

Key Takeaways from Fastly’s Q2 Results

We were impressed by Fastly’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 7.5% to $7 immediately after reporting.

Fastly may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.