Edge cloud platform Fastly (NASDAQ:FSLY) reported Q3 2026 results beating Wall Street’s revenue expectations, with revenue up 20.2% year on year to $190.2 million. Guidance for next quarter’s revenue was better than expected at $200 million at the midpoint, 1.5% above analysts’ consensus estimates. Its non-GAAP profit of $0.17 per share was 43.4% above analysts’ consensus estimates.
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Fastly (FSLY) Q3 2026 highlights:
- Revenue $190.2 million vs S&P analysts’ consensus estimates of $187.9 million (20.2% year-on-year growth, 1.2% beat)
- Adjusted EPS $0.17 vs S&P analysts’ consensus estimates of $0.12 (43.4% beat)
- Adjusted EBITDA $43.54 million vs analysts’ consensus estimates of $35.05 million (22.9% margin, 24.2% beat)
- Revenue guidance $200 million at the midpoint for Q4 2026, above analysts’ consensus estimates of $197 million
- Adjusted EPS guidance Management raised its full-year adjusted EPS guidance to $0.62 at the midpoint, a 19.2% increase
- Operating margin -5.9%, up from -18.2% in the same quarter last year
- Free cash flow margin 13.2%, up from 1.9% in the previous quarter
- Net revenue retention rate 119%, up from 117% in the previous quarter
- Market capitalization $3.36 billion
“Our record third quarter results reflect strong execution as customers continued to adopt more of our products and deepen their use of our platform,” said Kip Compton, CEO of Fastly. “Delivering record revenue and free cash flow demonstrates our value proposition as we help customers achieve critical business outcomes and build for AI scale.”
Revenue growth
Reviewing a company’s long-term revenue performance reveals insights into its quality. Any business can deliver a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Fastly grew its revenue at a 16.2% compounded annual growth rate. Though this growth is acceptable on an absolute basis, revenue growth alone is not enough to assess a software company, given the sector’s significant earnings volatility. The bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, the five-year growth period starts around Covid, when revenue was depressed then rebounded.
Long-term growth matters the most, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Fastly’s annualized revenue growth of 15.3% over the last two years aligns with its five-year trend, suggesting its demand was stable.
This quarter, Fastly reported strong year-on-year revenue growth of 20.2%, and its $190.2 million in revenue topped Wall Street’s consensus estimates by 1.2%. Management is guiding for a 15.9% year-on-year increase in revenue next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14.9% over the next 12 months, according to S&P, similar to its two-year rate. This projection is underwhelming and indicates its newer products and services will not accelerate its top-line performance yet.
Customer retention
One of the key advantages of the software-as-a-service business model (and a reason these companies 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 customers from a year ago are spending in the current period, was 119% in Q3. This means Fastly would’ve grown its revenue by 19% even if it didn’t win any new customers over the last 12 months.
Fastly’s solid net revenue retention rate rose significantly from the previous quarter, indicating that customers are satisfied with its software and getting more value from it over time.
Key takeaways from Fastly’s Q3 results
Fastly’s EPS guidance for next quarter came in well above analysts’ consensus estimates, and adjusted operating income also beat Wall Street’s consensus by a wide margin, making this a solid quarter overall. Fastly also announced some key leadership changes. Shares plunged 13% to $18.53 immediately after the results.
To assess whether the stock is a buy, consider the bigger picture of valuation, business quality and the latest earnings. For more on those factors, read our full research report here (it’s free).
