Edge cloud platform Fastly (NASDAQ: FSLY) reported Q2 CY2026 results beating Wall Street’s revenue expectations, with sales up 23.3% year on year to $183.3 million. On top of that, next quarter’s revenue guidance ($187 million at the midpoint) was surprisingly good and 3.9% above what analysts were expecting. Its non-GAAP profit of $0.15 per share was significantly above analysts’ consensus estimates.
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Fastly (FSLY) Q2 CY2026 Highlights:
- Revenue: $183.3 million vs analyst estimates of $174 million (23.3% year-on-year growth, 5.3% beat)
- Adjusted EPS: $0.15 vs analyst estimates of $0.07 (significant beat)
- Adjusted EBITDA: $38.12 million vs analyst estimates of $26.45 million (20.8% margin, 44.1% beat)
- The company lifted its revenue guidance for the full year to $739 million at the midpoint from $717.5 million, a 3% increase
- Management raised its full-year Adjusted EPS guidance to $0.52 at the midpoint, a 73.3% increase
- Operating Margin: -7.9%, up from -24.8% in the same quarter last year
- Free Cash Flow Margin: 1.9%, similar to the previous quarter
- Net Revenue Retention Rate: 117%
- Market Capitalization: $3.90 billion
Company Overview
Taking its name from the core advantage it delivers to customers, Fastly (NASDAQ: FSLY) operates an edge cloud platform that processes, secures, and delivers web content as close to end users as possible, enabling faster digital experiences.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Fastly grew its sales at a 16.3% compounded annual growth rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the software sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Fastly’s recent performance shows its demand has slowed as its annualized revenue growth of 13.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Fastly reported robust year-on-year revenue growth of 23.3%, and its $183.3 million of revenue topped Wall Street estimates by 5.3%. Company management is currently guiding for a 18.2% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 10% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Fastly has shown weak cash profitability relative to peers over the last year, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 5%, below what we’d expect for a software business.
Fastly’s free cash flow clocked in at $3.57 million in Q2, equivalent to a 1.9% margin. The company’s cash profitability regressed as it was 5.4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict Fastly’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 5% for the last 12 months will increase to 9.4%, giving it more flexibility for investments, share buybacks, and dividends.
Key Takeaways from Fastly’s Q2 Results
We were impressed by Fastly’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $26.07 immediately following the results.
Fastly may have had a good quarter, but does that mean you should invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
