Content delivery company Fastly (NYSE: FSLY) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 8.2% year on year to $144.5 million. Its non-GAAP loss of $0.05 per share was $0.01 above analysts’ consensus estimates.
Is now the time to buy Fastly? Find out by accessing our full research report, it’s free.
Fastly (FSLY) Q1 CY2025 Highlights:
- Revenue: $144.5 million vs analyst estimates of $137.9 million (8.2% year-on-year growth, 4.8% beat)
- Adjusted EPS: -$0.05 vs analyst estimates of -$0.06 ($0.01 beat)
- Adjusted EBITDA: $7.81 million vs analyst estimates of $5.13 million (5.4% margin, 52.2% beat)
- Operating Margin: -26.4%, up from -34.6% in the same quarter last year
- Free Cash Flow was $8.21 million, up from -$7.91 million in the previous quarter
- Customers: 3,035
- Net Revenue Retention Rate: 100%, down from 104% in the previous quarter
- Market Capitalization: $843.5 million
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.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Fastly grew its sales at a 14.3% 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 8.2%, and its $144.5 million of revenue exceeded Wall Street’s estimates by 4.8%.
Looking ahead, sell-side analysts expect revenue to grow 5.8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will face some demand challenges.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI. Click here to access our free report one of our favorites growth stories.
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 Q1. This means Fastly would’ve grown its revenue by 2.7% even if it didn’t win any new customers over the last 12 months.
Despite falling over the last year, Fastly still 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 Q1 Results
We were impressed by how significantly Fastly blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 5.7% to $6.35 immediately after reporting.
Sure, Fastly had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
