Fastly Slows Down In Second Quarter


Fastly reported earnings on August 3, 2022, and results were lukewarm. Total revenue for the year will come in at $415M to $425M, up from $354M in 2021.

Fastly had 2,894 customers for the quarter, compared to 2,880 in Q1. That equates to 14 new customers for Q2, a significant reduction from the 76 new customers added in Q1. Fastly is showing signs of struggle in this tough economy.

Also, Todd Nightingales, the new CEO, is starting on September 1, 2022. He has a lot on his plate, and the Fastly business model requires radical transformation. For inspiration, he only needs to look at Bob Lyons, the CEO of Edgio, who transformed Limelight with a few master strokes.

Fastly Q2-2022 earnings highlights:

  • Todd Nightingales is the new CEO as of September 1, 2022
  • Quarterly revenue grew to $102.5M, 21% y-o-y
  • $767M in cash equivalent
  • Q3 Expected Revenue: $102M to $105M
  • 2022 Expected Revenue: $415M to $425M
  • Average enterprise customers spend $730,000 annually, a 1% y-o-y growth
  • The customer count was 2,894, and 471 were enterprise
  • Added 14 customers in Q2 and 12 in Q1
  • There was a higher churn among smaller customers, likely impacted by the economy.
  • Added 100,000 developers to the platform
  • A new architecture will result in server efficiency
  • The newly acquired Glitch developer platform has 1.8M developers
  • New products Origin Inspector and Domain Inspector are now available
  • Signal Sciences is now generally available.
  • Signal Sciences was 13% of revenue, which equates to ~$13M, 56% y-o-y growth.
  • The top 10 customers represent 34% of the total revenue
  • The gross margin was 50.4% in Q2 compared to 52.6% in Q2

Lackluster Activity

Although Fastly is at a standstill regarding new product rollouts and acquisitions, its competition has been busy developing products and buying companies.

In the delivery market, Fastly is #3 behind Akamai and Edgio. In edge computing, they are #3 behind Akamai and Fastly. Since they don’t publish revenue by product, there is no way of knowing how much compute income they generate.

Regarding acquisitions and new product rollouts, they have none for the year. Glitch doesn’t count because that was buying developers, not revenue. Signal Sciences counted.

In 2019, Fastly introduced Lucet, a WebAssembly compiler, marking a significant milestone for the company and its foray into edge computing, two years after Cloudflare introduced Workers. Fast forward three years later, and nada.

Since then, Fastly has not introduced any products to support its edge platform, no object store, no key-value store, no database, etc. During this time, Cloudflare introduced a plethora of all three types of storage.

In summary, Fastly needs to reinvent itself quickly before it gets further left behind by the competition.

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