Fastly’s first quarter was marked by strong growth in security and compute product lines, with management attributing the performance to broad-based customer adoption and expansion of its platform. CEO Kip Compton highlighted that security revenue grew 47% year-over-year and now accounts for 22% of total revenue, citing particularly robust uptake of products like DDoS Protection, Bot Management, and API Discovery. Despite these positives, the market reacted sharply to the results, reflecting concerns over the sustainability of momentum in network services and the impact of competitive dynamics. Management emphasized seasonality and an unusually strong prior quarter, but did not indicate significant changes in pricing or contract structures.
Is now the time to buy FSLY? Find out in our full research report (it’s free for active Edge members).
Fastly (FSLY) Q1 CY2026 Highlights:
- Revenue: $173 million vs analyst estimates of $172 million (19.8% year-on-year growth, 0.6% beat)
- Adjusted EPS: $0.13 vs analyst estimates of $0.09 (50.2% beat)
- Adjusted Operating Income: $19.14 million vs analyst estimates of $16.33 million (11.1% margin, 17.2% beat)
- The company lifted its revenue guidance for the full year to $717.5 million at the midpoint from $710 million, a 1.1% increase
- Management raised its full-year Adjusted EPS guidance to $0.30 at the midpoint, a 15.4% increase
- Operating Margin: -13.8%, up from -26.4% in the same quarter last year
- Market Capitalization: $2.98 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Fastly’s Q1 Earnings Call
- Jackson Ader (KeyBanc Capital Markets): Questioned the slowdown in network services growth and the impact of agentic (AI-driven) internet traffic; CFO Richard Wong attributed it mainly to seasonality and highlighted ongoing security attach rates from AI workloads.
- Frank Louthan (Raymond James): Asked about the share of revenue under commitment and the opportunity for distributed GPU compute; Wong cited 75% of RPO as committed revenue and Compton emphasized Fastly’s network is well positioned for AI inference workloads rather than training.
- Charlie Zhou (Evercore): Inquired about the compute business trajectory and edge AI use cases; Wong pointed to co-innovation with customers and Compton highlighted growing demand for interoperability with large language models (LLMs).
- James Fish (Piper Sandler): Sought insights on competitive churn and the security value proposition amid market advancements like Anthropic’s Mythos; Compton argued that evolving AI threats are driving more customer interest in Fastly’s security solutions.
- Paramveer Singh (Oppenheimer): Asked about customer needs for agentic AI deployment and future pricing strategies; Compton said customer requirements are still evolving and most enterprises are early in agentic AI adoption, with pricing yet to be determined.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be watching (1) whether security and compute products maintain growth momentum amid growing AI-related workloads, (2) how infrastructure investments and supply chain challenges affect gross margins and free cash flow, and (3) the company’s ability to sustain international customer acquisition, particularly in Asia-Pacific. Execution on product innovation and early adoption of AI-driven edge solutions will also be important indicators.
Fastly currently trades at $18.94, down from $31.57 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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