Fastly, Inc ((FSLY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Fastly’s recent earnings call presented a nuanced outlook, showcasing a mix of achievements and challenges. While the company celebrated record revenue and an upswing in cash flow, it also acknowledged obstacles in the form of operating losses and a declining gross margin. The call highlighted Fastly’s efforts in diversifying revenue streams and pushing forward with product innovations, though uncertainties surrounding key clients like TikTok loom as potential risks.
Record Fourth Quarter Revenue
Fastly reported a record revenue of $140.6 million for the fourth quarter, surpassing its guidance range of $136 million to $140 million. This achievement marked a 2% growth both year-over-year and quarter-over-quarter, reflecting the company’s ongoing efforts to strengthen its financial performance.
Revenue Diversification
The company made strides in diversifying its revenue sources, as indicated by a drop in the revenue concentration from the top 10 customers, decreasing from 33% in Q3 to 32% in Q4, and down from 40% at the end of 2023. Meanwhile, revenue from customers outside the top 10 grew by 16% year-over-year in Q4, highlighting Fastly’s successful expansion efforts.
Enterprise Customer Growth
Fastly experienced a growth in its enterprise customer base, increasing by 3% year-over-year and quarter-over-quarter, reaching a total of 596 enterprise clients. This growth underscores Fastly’s appeal to larger organizations and its ability to attract and retain significant clients.
Improved Cash Flow
The company reported a substantial improvement in cash flow, with cash from operations rising from $400,000 in 2023 to $16 million in 2024. This improvement reflects Fastly’s ongoing efforts to optimize its financial health and reduce cash flow burn, which decreased from $59 million in 2023 to $36 million in 2024.
New Product Launches
Fastly introduced several new products, such as the AI Accelerator and Fastly’s Object Storage. These innovations are designed to enhance performance and lower costs for customers, demonstrating Fastly’s commitment to staying at the forefront of technology and meeting evolving customer needs.
Operating Loss
Despite positive developments, Fastly reported an operating loss of $4.2 million in Q4, which was within the guidance range but nonetheless indicative of ongoing financial challenges that the company needs to address.
Decline in Gross Margin
The company’s gross margin dropped to 56.5% in Q4, down from 59.2% in the same quarter of the previous year. This decline was attributed to increased bandwidth costs and a higher mix of international traffic, suggesting areas where cost management needs to be improved.
Challenges with Largest Customers
The decline in the concentration of the top 10 customers was partially due to revenue declines from some of Fastly’s largest clients in previous quarters, illustrating the volatility and risks associated with large customer dependencies.
TikTok Revenue Concerns
Fastly’s guidance for 2025 excludes revenue from U.S. traffic with TikTok due to legislative uncertainties, which impacts revenue visibility. This exclusion points to the challenges Fastly faces in maintaining stable revenue streams amid geopolitical and regulatory changes.
Forward-Looking Guidance
Looking ahead, Fastly has set a 7% annual revenue growth target for 2025, aiming for revenues between $575 million to $585 million. The company is focusing on expanding its geographic presence, particularly in Latin America, India, and the APAC region, as well as enhancing its security offerings. Fastly plans to refine its sales strategies and compensation structures to drive new logo acquisition and cross-selling opportunities, while continuing to grow its enterprise customer base.
In conclusion, Fastly’s earnings call painted a mixed picture of its current standing and future prospects. While the company achieved record revenue and improved cash flow, challenges such as operating losses and gross margin declines remain. Fastly’s efforts in revenue diversification and product innovation are promising, but uncertainties, especially around key customers like TikTok, pose ongoing risks. The company’s forward-looking guidance reflects a strategic focus on growth, both in terms of revenue and geographic expansion.
