ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Annual Report on Form 10-K. Our fiscal year ends on December 31.
As used herein, “Fastly,” “we,” “our,” “the Company” and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise.
Overview
Organizations around the world are more dependent on the quality of digital experiences they provide than ever before. As the internet approaches an inflection point where automated, artificial intelligence (“AI”)-driven traffic increases demands on infrastructure, Fastly is the essential platform to deliver resilient, highly performant, always-on software and services at global scale.
The edge cloud is a category of Infrastructure as a Service (“IaaS”) that enables software engineers to build, secure, and deliver digital experiences at the edge of the Internet. Our platform represents the convergence of the Content Delivery Network (“CDN”) with functionality that has traditionally been delivered by hardware-centric appliances such as Application Delivery Controllers (“ADC”), Web Application Firewalls (“WAF”), API Management, Bot Detection, Distributed Denial of Service (“DDoS”), Web Application and API Protection (“WAAP”), and infrastructure protection.
Processing at the edge is an ideal way to handle highly dynamic and time-sensitive data, especially when performance matters. Organizations of all sizes, including Fortune 500 companies that run 24/7 operations, leverage our edge cloud platform for a diverse range of critical functions that benefit from processing at the edge, including enhancing user experience, scaling agentic AI workloads, and powering core commerce capabilities to drive conversion and customer success. The edge cloud complements data center, central cloud, and hybrid solutions, and is critical for responsive, safe, and secure AI-centric experiences.
Fastly focuses holistically on the edge cloud from developer creation to end-user experience, with our global footprint and integrated security core to our platform. Our platform is poised to capitalize on the rise of agentic AI, where autonomous agent consumption is driving the bulk of internet traffic. Fastly is uniquely positioned – and has laid the groundwork – to lead the intelligence fabric that helps enterprises adapt to this shift. We are capturing this opportunity by supporting edge workloads and AI traffic management, allowing organizations to optimize AI-driven services alongside human interactions. We play a unique role in helping enterprises optimize and accelerate interactions with authorized AI agents and blocking abuse, powering their differentiation and AI-fueled innovation.
Organizations must keep up with a complex and ever-evolving landscape. We’ve built a powerful unified edge platform designed from the ground up to be programmable and support agile software development, and we continuously drive innovation to meet the ever changing needs of our customers. We believe that our platform gives our customers a significant competitive advantage – whether they were born into the AI-centric digital age or are just embarking on their transformation journey.
We focus our direct selling efforts on expanding our customers’ use of our platform, which includes companies that are exhibiting significant growth. We engage with and support these customers with our field sales representatives, account managers, and technical account managers who focus on customer satisfaction and drive expansion of their usage of our platform and products. These teams work with technical and business leaders to help our customers’ end users receive the best possible digital experience, while also lowering our customers’ total cost of ownership. These direct selling efforts are reflected by the revenue generated by our enterprise customers. Our Last-Twelve Months Net Retention Rate (“LTM NRR”) metric also measures the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services. For additional details on our key metrics, refer to the “Key Business Metrics” section.
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We generate substantially all of our revenue from charging our customers based on their usage of our platform, and we generate a substantial majority of our revenue from customers that have negotiated contracts with us. Customers typically choose to utilize our platform for Network Services, for which we charge fees based on their committed or actual use of our platform, as measured in gigabytes and requests. Many of our customers generate billings in excess of their minimum commitment. We also generate revenue from Security and Other product lines, including Compute and Observability, as well as professional and other services, such as implementation, account management and enhanced customer support. We charge a flat one-time or recurring monthly fee depending on the additional products and services selected. Typically, the term of our contracts with customers is 12 months and includes a minimum monthly billing commitment in exchange for more favorable pricing terms. In addition, customers can sign up online by providing their credit card information and agreeing to a minimum monthly fee.
The majority of our revenue is usage based and changes in usage by our largest customers can create volatility in our revenue. The length of our sales cycles, from initial evaluation to payment, can range from several months to well over a year and can vary substantially from customer to customer. Similarly, the onboarding and ramping process with new as well as existing enterprise customers with new business can take several months and can be subject to delays for unanticipated reasons. The timing of new revenue from our sales efforts and changes in usage by our largest customers can make revenue difficult to predict.
For the years ended December 31, 2025 and 2024, our revenue was $624.0 million and $543.7 million, respectively, an increase of 15%. We incurred a net loss of $121.7 million and $158.1 million in the years ended December 31, 2025 and 2024, respectively.
Our 10 largest customers generated an aggregate of 32% and 33% of our revenue in the trailing 12 months ended December 31, 2025 and 2024, respectively.
No single customer accounted for more than 10% of revenue for the years ended December 31, 2025 and 2024. Affiliated customers that are business units of a single company generated an aggregate of 10% of the Company’s revenue for the year ended December 31, 2025. No affiliated customers that are business units of a single company generated more than 10% of revenue for the year ended December 31, 2024.
Factors Affecting Our Performance
We are focused on continuing to attract new customers and expanding our relationship with existing customers by enhancing our product experience, investing in technology, and leveraging our partner ecosystem. Our customer base ranges from emerging companies to large enterprises undergoing digital transformation across diverse industries and verticals. Utilizing our direct sales force, we have multiple selling points within organizations to acquire new customers and increase usage from our existing customers. We will continue to increase our discretionary marketing spend, including account-based, targeted demand generation and brand spend, to drive the effectiveness of our sales teams. As a result, we expect our total operating expenses to increase as we continue to expand. A key component of our cost-efficient customer acquisition strategy is developer outreach, as developers often advocate for the adoption and promotion of our platform within their organizations and across the broader developer community. We will also continue to build out a single, unified platform, simplify customer onboarding and service usage, and simplify our pricing and packaging. This will require us to dedicate significant resources to further develop the market for our platform and differentiate our platform from competitive products and services. We will also need to expand, retain, and motivate our sales and marketing personnel in order to target our sales efforts at larger enterprises and senior management of these potential customers.
We emphasize retaining our customers and expanding their usage of our platform and adoption of our other products. Customers often begin with smaller deployments of one of our products and then expand their usage over time. Our platform includes a variety of offerings across Network Services, Security, and Other product lines, including Compute and Observability. As our customers mature, we assist them in expanding their use of our platform, including the use of additional offerings beyond content delivery or security. In addition, given that customer acquisition costs are incurred largely for acquiring and initial onboarding, we may gain operating leverage to the extent that existing customers expand their use of our platform and products. Our ability to retain customers and expand their usage could be impaired for a variety of reasons, including a customer moving to another provider or reducing usage within the term of their contract. Even if our customers expand their usage of our platform, we cannot guarantee that they will maintain those usage levels for any meaningful period of time or that they will renew their commitments.
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We intend to continue expanding our efforts to attract customers outside of the United States by augmenting our sales teams and strategically increasing our presence in the number of markets in select international locations. Our international expansion, including our global sales efforts, continues to add increased complexity and cost to our business. This requires us to continue to expand our sales and marketing capabilities outside of the United States, increase the number of markets we have a presence in around the world to support our customers, and manage the administrative aspects of a global organization, each of which place a strain on our business and culture. In addition, our bandwidth costs are higher in markets outside of the United States and Europe, which may impact our gross margins.
Many jurisdictions have enacted laws on data localization and cross-border data transfers, and the evolving enforcement and interpretation of such laws has created uncertainty regarding data stored abroad and transferred across borders, which could impact customer growth and acquisition for customers and potential customers conducting business in Europe and elsewhere outside of the United States. In addition, we cannot be certain what actions the United States or another country’s government may take with respect to certain of our customers that may adversely affect our ability to do business with our customers that operate in China, target China as a market or that have strong business ties to China, and any such governmental action could have a negative impact on our business. In April 2024, under the prior administration, a bill was signed into law that would effectively ban TikTok in the United States if ByteDance, its China-based parent company, does not sell its stake in TikTok within a set time frame. Following a series of executive orders in 2025 that suspended enforcement of this law, on January 22, 2026, ByteDance announced the establishment of TikTok USDS Joint Venture LLC in compliance with the law to secure United States user data, apps, and the algorithm through data privacy and cybersecurity measures. TikTok was one of our largest customers for the year ended December 31, 2025 and remains a customer of ours. We do not know how the restructuring may impact our traffic levels. For additional details, refer to the section titled “Risk Factors.”
We are closely monitoring various global conflicts and developments, including, but not limited to, the conflict between Russia and Ukraine, as well as the hostilities in the Middle East, and their global impacts. While the conflicts are still evolving and the outcomes remain highly uncertain, we do not believe the Russia-Ukraine, Israel-Hamas, or other conflicts will have a material impact on our business and results of operations. We do not have Points of Presence (“POPs”) in Russia, Ukraine, or Israel. However, some threat actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. If such conflicts continue or worsen, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted.
We must continue to invest in our platform and network infrastructure to maintain our position in the market. We expect our revenue growth to be dependent on an expanding customer base and continued adoption of our edge cloud delivery, security, and other products and services. In anticipation of winning new customers and staying ahead of our customers’ needs, we plan to continue to invest in order to expand the scale and capacity of our software-defined modern network. This could result in increased network service provider fees, which could adversely affect our gross margins if we are unable to offset these costs with revenue from new customers and increase revenue from existing customers. Our customers require constant innovation within their own organizations and expect the same from us. Therefore, we will continue to invest in resources to enhance our development capabilities and introduce new products and features on our platform. We believe that investment in research and development will contribute to our long-term growth but may also negatively impact our short-term profitability. For the years ended December 31, 2025 and 2024, our research and development expenses as a percentage of revenue were 26% and 25%, respectively. Our research and development expenses in each period are impacted by the amount of software development costs that meet the criteria for capitalization. We may also seek to acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities.
Developers use our platform to build custom applications and require a state-of-the-art infrastructure to test and run these applications. We will continue to invest in our network infrastructure by strategically increasing our POPs. We also anticipate making investments in upgrading our technology and hardware to continue providing our customers a fast and secure platform. Our gross margins and operating results are impacted by these investments. As we continue to experience growth, we may face challenges managing adequate server capacity in our POPs due to potential component delays, shortages, price increases, hardware efficiencies gained through internal development, or any potential changes in server architecture, including due to technological advances or obsolescence. If we have server asset levels in excess of forecasted network capacity needs,
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we have in the past and may need to continue to write-down or write-off server assets. Conversely, if we underestimate network capacity needs, we may in future periods be unable to meet demand and be required to incur higher costs to secure necessary parts and components of our servers.
In addition, international trade disputes may further disrupt or delay our supply chain for these components or lead to pricing increases. For example, the United States has imposed or indicated an intention to impose tariffs on certain countries which may lead to retaliatory actions such as counter-tariffs and increase production costs and disruptions in our supply chain. The United States and other jurisdictions have also leveraged various trade and value chain requirements, including on environmental and social criteria, which may make sourcing more costly, require us to change suppliers, or otherwise adversely impact our operations. Further, it is possible that government policy changes, including policy changes made with little to no advance notice, and related uncertainty about policy changes could increase market volatility. If our supply of certain components is further disrupted or delayed, there can be no assurance that we will be able to obtain adequate replacements for the existing components or that supplies will be available on terms and prices that are favorable to us, if at all. In the event that there are errors in software, failures of hardware, damages to a facility or misconfigurations of any of our services, whether caused by our own error, security breaches, third-party error, or natural disasters, we could experience lengthy interruptions in our platform availability as well as delays and additional expenses in arranging new facilities and services. In addition, there can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands by our customers, particularly when we or our customers experience cyber-attacks. The bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including service outages, payment disputes, network providers going out of business, natural disasters, networks imposing traffic limits, or governments adopting regulations that impact network operations.
Key Business Metrics
We use the following key metrics presented in the table below to evaluate our business, measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. The calculation of these key metrics below may differ from other similarly titled metrics used by other companies, analysts, or investors.
As of December 31,
Total Customer Count (based on current quarter revenue) 3,092 3,061
Enterprise Customer Count (based on annualized revenue) 628 596
Annual Revenue Retention Rate 98.7 % 99.0 %
Last-twelve Months Net Retention Rate (“LTM NRR”) 110.1 % 102.3 %
Remaining Performance Obligations (“RPO”) (in millions) $ 353.8 $ 244.4
Total Customer Count
We believe that our total number of customers is an important indicator of the adoption of our platform. Our definition of a customer consists of identifiable operating entities with which we have a billing relationship in good standing and which we have recognized revenue from during the reporting period. An identifiable operating entity is defined as a company, a government entity, or a distinct business unit of a larger company that has a relationship with us through direct sales or through one of our reseller partners where charges are identified on an end-customer basis. We may treat separate subsidiaries, segments, divisions, or business units of a single organization that use our platform as unique customers where they have distinct account identifiers. In cases where charges are identified through a reseller partner rather than on an end-customer basis, we would count the reseller as a single customer in our customer count. Our customer groupings may be impacted by changes to our customers’ business, including any impact from acquisition activities, internal business reorganizations leading to operational and decision-making changes, and corporate structure changes such as subsidiary consolidation and reorganization that may arise in the future. During the fourth quarter of 2024, we identified an immaterial error in the historical calculation of our total customer count related to our online self-service customers. Revenue that would have been recorded for these customers was less than $0.1 million for the quarter ended December 31, 2024. Due to the immateriality, we have not revised prior periods.
In addition to our paying customers, we also have trial, developer, nonprofit and open source programs, and other non-paying accounts that are excluded from our customer count metric. We operate globally and as a result, the success of our ability to retain our customers is also affected by general economic and market conditions around the world. As of December 31, 2025 and 2024, we had 3,092 and 3,061 customers, respectively.
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Enterprise Customer Count
Historically our revenue has been driven primarily by a subset of our customers, our enterprise customers, who have leveraged our platform substantially from a usage standpoint. We believe that the recruitment and cultivation of enterprise customers is critical to our long-term success. Our enterprise customer count is defined as customers with annualized current quarter revenue in excess of $100,000. This is calculated by taking the revenue we recognized for each customer in the current quarter and multiplying it by four. As of December 31, 2025, we had 628 enterprise customers which generated 94% of the total annualized current quarter revenue for our total customers for the period ended December 31, 2025. As of December 31, 2024, we had 596 enterprise customers which generated 93% of the total annualized current quarter revenue for our total customers for the period ended December 31, 2024.
Annual Revenue Retention Rate (“ARR”)
We separately monitor customer retention and churn on an annual basis by measuring our annual revenue retention rate, which we calculate by first multiplying the final full month of revenue from a customer that terminated its contract with us (a “Churned Customer”) by the number of months remaining in the same calendar year to get our “Annual Revenue Churn”. The quotient of the Annual Revenue Churn from all of our Churned Customers divided by our annual revenue of the same calendar year is then subtracted from 100% to determine our annual revenue retention rate. We believe this calculation is helpful in that it is based on the amount of revenue that we would expect to have received in the remaining portion of a particular period had a customer not terminated its contract with us. It is not indicative of the actual revenue contribution from churned customers in past periods. By comparing this amount to actual revenue for the period, we are able to assess our ability to replace terminated revenue by generating revenue from new and continuing customers.
Our ARR rate is calculated by subtracting the quotient of the Annual Revenue Churn from all of our Churned Customers from which we recognized revenue during the last quarter of the prior year divided by our annual revenue of the same calendar year from 100%. For the years ended December 31, 2025 and 2024 the ARR was 98.7% and 99.0%, respectively.
Last-Twelve Months Net Retention Rate (“LTM NRR”)
Our ability to generate and increase our revenue is also dependent upon our ability to retain our existing customers. LTM NRR allows us to track customer retention which demonstrates the stickiness of our edge cloud platform.
Our LTM NRR removes some of the volatility that is inherent in a usage-based business model from the measurement of the NRR metric. We calculate LTM NRR by dividing the total customer revenue for the prior twelve-month period (“prior 12-month period”) ending at the beginning of the last twelve-month period (“LTM period”) minus revenue contraction due to billing decreases or customer churn, plus revenue expansion due to billing increases during the LTM period from the same customers by the total prior 12-month period revenue. For the trailing twelve months ended December 31, 2025 and 2024 our LTM NRR was 110.1% and 102.3%, respectively.
Remaining Performance Obligations (“RPO”)
RPO represent future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied. As of December 31, 2025, the aggregate amount of the transaction price in our contracts allocated to RPO that were unsatisfied or partially unsatisfied was $353.8 million.
Key Components of Statement of Operations
Revenue
We derive our revenue primarily from usage-based fees earned from customers using our platform. We also earn fixed-rate recurring revenue from security and other products and services.
Our usage-based fees earned from customers using our platform are generally billed in arrears. Our security products are primarily annual subscriptions that are billed in advance. Many customers have tiered usage pricing which reflects discounted rates as usage increases. For most contracts, usage charges are determined on a monthly basis based on actual usage
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within the month and do not impact usage charges within any other month. Our larger customers often enter into contracts that contain minimum billing commitments and reflect discounted pricing associated with such usage levels.
We present our disaggregated revenue by three product lines: Network Services, Security, and Other. Network Services include solutions designed to improve performance of websites, apps, application programming interfaces (“APIs”), and digital media. Security includes products designed to protect websites, apps, APIs and users. Other includes Compute solutions that allow developers to build and deploy modern web applications on our edge cloud platform, and Observability solutions that provide real-time logs, data and metrics streamed from our edge platform for actionable insights.
We define United States revenue (“U.S. revenue”) as revenue from customers that have a billing address in the United States, and we define international revenue as revenue from customers that have a billing address outside of the United States.
Cost of Revenue and Gross Margin
Cost of revenue consists primarily of fees paid to network providers for bandwidth and to third-party network data centers for housing servers, also known as colocation costs. Cost of revenue also includes employee costs for network operation, build-out and support and services delivery, network storage costs, cost of managed services and software-as-a-service, depreciation of network equipment used to deliver services, and amortization of network-related internal-use software. Our arrangements with network service providers require us to pay fees based on bandwidth use, in some cases subject to minimum commitments, which may be underutilized. Over the long term we expect cost of revenue to decrease as a percentage of revenue as we continue to drive efficiencies in our operations. However, our cost of revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Our gross margin has been and will continue to be affected by a number of factors, including utilization of our network, the timing of our investments in the expansion of our network, which can increase depreciation and colocation costs in advance of expected demand, our ability to manage our network service providers and cloud infrastructure-related fees, the timing of amortization of capitalized software development costs, changes in personnel costs to provide customer support and operate the network, and customer pricing. Over the long term we expect gross margin to increase as we continue to drive efficiencies in our operations and increase our revenue. However, our gross margin may fluctuate from period to period.
Research and Development
Research and development expenses consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include cloud infrastructure fees for development and testing, and an allocation of our general overhead expenses. We capitalize the portion of our software development costs that meet the criteria for capitalization.
We continue to focus our research and development efforts on adding new features and products including new use cases, improving the efficiency and performance of our network, and increasing the functionality of our existing products. Over the long term we expect our research and development expenses to decrease as a percentage of our revenue. However, our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel costs, including commissions for our sales employees, salaries, benefits, bonuses, and stock-based compensation. Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, bandwidth and co-location costs for free trial users, costs related to our customer events, including our customer conferences, professional services fees, amortization of our intangible assets, and an allocation of our general overhead expenses.
We focus our sales and marketing efforts on generating awareness of our platform and products, creating sales leads, and establishing and promoting our brand, both domestically and internationally. Over the long term, we expect our sales and marketing expenses to decrease as a percentage of our revenue. However, our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
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General and Administrative
General and administrative expenses consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our administrative support personnel. General and administrative expenses also include costs related to legal and other professional services fees, an allocation of our general overhead expenses, credit losses, and acquisition-related costs.
In the near term, we expect to continue to incur costs associated with supporting the growth of our business, including international expansion, but expect these costs to decrease as a percentage of our revenue over the long term as we continue to drive efficiencies in our operations. However, our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Impairment Expense
Our impairment expense relates to non-recurring charges for our long-lived assets.
Restructuring Charges
Our restructuring charges relate to a 2024 restructuring plan to reduce expenses including a reduction of the Company’s workforce. The charges incurred consist primarily of employee-related severance and termination benefits in connection with such 2024 workforce reduction.
Net Gain on Extinguishment of Debt
Our net gain on extinguishment of debt relates to the partial retirement of our outstanding senior convertible notes.
Other Income and Expenses
Our interest income consists primarily of interest earned on our cash, cash equivalents, and investments. Our interest expense consists primarily of the interest expense on our finance leases, amortization of discount, coupon interest expense, and debt issuance costs associated with our debt obligations. Our other expense, net, consists primarily of foreign currency transaction gains and losses.
Income Taxes
Our income tax expense (benefit) consists primarily of income taxes in certain foreign jurisdictions where we conduct business and state minimum income taxes in the United States. We currently maintain a full valuation allowance on our U.S. Federal and state net deferred tax assets. We expect to maintain this valuation allowance for the foreseeable future.
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Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Year ended December 31,
(in thousands)
Consolidated Statement of Operations:
Operating expenses:
Restructuring charges — 9,720
Net gain on extinguishment of debt 941 1,365
Net loss attributable to common stockholders $ (121,677) $ (158,058)
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The following tables set forth our results of operations for the period presented as a percentage of our revenue:
Year ended December 31,
Consolidated Statements of Operations, as a percentage of revenue:*
Cost of revenue 43 46
Operating expenses:
Research and development 26 25
Sales and marketing 32 36
General and administrative 18 21
Impairment expense — 1
Restructuring charges — 2
Total operating expenses 76 85
Loss from operations (19) (31)
Net gain on extinguishment of debt — —
Interest income 2 3
Interest expense (2) (1)
Other expense, net — —
Loss before income tax expense (19) (29)
Income tax expense — —
Net loss attributable to common stockholders (19) % (29) %
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* Columns may not add up to 100% due to rounding.
Revenue
Year ended December 31, Change
(in thousands)
Percentage of revenue:
Network Services 77 % 79 % (2) %
Other 3 % 2 % 1 %
Revenue was $624.0 million for the year ended December 31, 2025 compared to $543.7 million for the year ended December 31, 2024, an increase of $80.3 million, or 15%. Revenue growth was driven by a $66.4 million increase in revenue related to further adoption of our modern edge platform and products.
For the years ended December 31, 2025 and 2024, approximately 96% and 95% of our revenue was driven by usage on our platform, respectively. Revenue was primarily from existing customers, as revenue from new customers contributed less than 10% of our revenue. The proportion of the revenue contribution between new and existing customers is consistent with prior periods and typical customer behavior as customers tend to contribute more revenue over time as their use of the platform
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increases. The remainder of our revenue was generated by our other products and services, including support and professional services.
Network Services revenue was $477.8 million for the year ended December 31, 2025, compared to $427.7 million for the year ended December 31, 2024, an increase of $50.1 million, or 12%. The increase in Network Services revenue was primarily driven by growth in usage from existing customers. Security revenue was $125.1 million for the year ended December 31, 2025, compared to $103.0 million for the year ended December 31, 2024, an increase of $22.0 million, or 21%. The increase in Security revenue was primarily driven by an increase in Next-Gen WAF revenue, partially offset by a decrease in Fastly legacy WAF revenue. Other revenue was $21.2 million for the year ended December 31, 2025, compared to $12.9 million for the year ended December 31, 2024, an increase of $8.2 million, or 64%. The increase in Other revenue was primarily driven by further adoption of our Compute solutions.
Cost of Revenue
Year ended December 31, Change
(in thousands)
Cost of revenue was $267.8 million for the year ended December 31, 2025 compared to $247.7 million for the year ended December 31, 2024, an increase of $20.1 million, or 8%. The increase in cost of revenue is a result of an increase in bandwidth costs of $8.0 million, a $5.5 million increase in amortization of capitalized software and a $4.4 million increase in software costs. There was also a $3.9 million increase in colocation costs, a $1.7 million increase in depreciation expense as a result of increased investments in our platform, as well as a $1.5 million increase in stock-based compensation expenses. This increase was partially offset by a $2.5 million decrease in intangible asset amortization, a $1.3 million decrease in personnel-related costs, a decrease in repair and maintenance cost of $0.6 million, as well as a $0.5 million decrease in network costs.
Gross Profit and Gross Margin
Year ended December 31, Change
(in thousands)
Gross margin 57 % 54 % 3 %
Gross profit was $356.2 million for the year ended December 31, 2025 compared to $295.9 million for the year ended December 31, 2024, an increase of $60.3 million, or 20%. Gross margin was 57% for the year ended December 31, 2025 compared to 54% for the year ended December 31, 2024, an increase of 3%. The increase in gross margin was driven by revenue growth during the year ended December 31, 2025 outpacing the increases in the costs incurred to support the growth of our network.
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Operating Expenses
Year ended December 31, Change
(in thousands)
Percentage of revenue:
Research and development 26 % 25 % 1 %
Sales and marketing 32 % 36 % (4) %
General and administrative 18 % 21 % (3) %
Impairment expense — % 1 % (1) %
Restructuring charges — % 2 % (2) %
Research and Development
Research and development expenses were $162.7 million for the year ended December 31, 2025 compared to $138.0 million for the year ended December 31, 2024, an increase of $24.7 million, or 18%. This increase was primarily due to a $10.8 million increase in stock-based compensation expense, a $9.2 million decrease in capitalized software, an increase of $5.7 million of personnel-related costs, as well as a $1.0 million increase in software costs. This increase was partially offset by a $1.4 million decrease in travel and entertainment expense, as well as a $0.6 million decrease in corporate costs.
Sales and Marketing
Sales and marketing expenses were $201.4 million for the year ended December 31, 2025 compared to $198.6 million for the year ended December 31, 2024, an increase of $2.8 million, or 1%. This increase was primarily due to a $3.9 million increase in stock-based compensation expenses, a $0.7 million increase in marketing expenses, and a $0.5 million increase in third party commissions. The increase was partially offset by a $0.8 million decrease in personnel related costs including sales commissions, a $0.6 million decrease in software costs, as well as a $0.5 million decrease in corporate costs.
General and Administrative
General and administrative costs were $110.7 million for the year ended December 31, 2025 compared to $113.4 million for the year ended December 31, 2024, a decrease of $2.7 million, or 2%. The decrease was primarily due to a $6.9 million decrease in stock-based compensation expenses as well as a $1.4 million decrease in personnel related costs. This decrease was partially offset by a $2.8 million increase in professional service fees, a $1.3 million increase in corporate costs, as well as a $1.0 million increase in executive transition costs.
Impairment Expense
During the year ended December 31, 2025, we recognized an impairment charge of $0.4 million, which primarily consisted of the write-off of intangible assets no longer in use. During the year ended December 31, 2024, we recognized an impairment charge of $4.1 million related to property and equipment.
Restructuring Charges
During the year ended December 31, 2024, in an effort to streamline our organization, we initiated a restructuring plan to reduce expenses including a reduction of our workforce. In connection with this plan, we incurred charges of $9.7 million primarily consisting of employee-related severance and termination benefits. There were no restructuring activities in 2025.
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Net Gain on Extinguishment of Debt
Year ended December 31, Change
(in thousands)
Net gain on extinguishment of debt $ 941 $ 1,365 $ (424) (31) %
Net gain on extinguishment of debt was $0.9 million for the year ended December 31, 2025 compared to $1.4 million for the year ended December 31, 2024, a decrease of $0.4 million, or 31%. The decrease was primarily due to a lower aggregate principal amount of convertible notes retired in the year ended December 31, 2025.
Other Income and Expense
Interest Income
Year ended December 31, Change
(in thousands)
Interest income was $12.3 million for the year ended December 31, 2025 compared to $14.9 million for the year ended December 31, 2024, a decrease of $2.6 million, or 17%. This decrease was primarily due to lower interest income on our cash equivalents and marketable security investments as a result of decreased interest rates.
Interest Expense
Year ended December 31, Change
(in thousands)
Interest expense was $12.7 million for the year ended December 31, 2025 compared to $2.7 million for the year ended December 31, 2024, an increase of $10.0 million, or 362%. This increase was primarily due to the coupon interest on our 2028 Notes issued in December 2024.
Other Expense, net
Year ended December 31, Change
(in thousands)
Other expense, net was $0.7 million for the year ended December 31, 2025 compared to $1.0 million for the year ended December 31, 2024, a decrease of $0.3 million, or 30%. The decrease was mainly driven by our foreign currency transaction gains between the periods.
Income Taxes
Year ended December 31, Change
(in thousands)
Income tax expense was $2.5 million for the year ended December 31, 2025 compared to $2.6 million for the year ended December 31, 2024. The Company continues to maintain a full valuation allowance in the U.S. and the tax expense for the periods were primarily due to foreign tax expense.
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Liquidity and Capital Resources
As of December 31, 2025, we had cash, cash equivalents, and marketable securities totaling $361.8 million. Our cash, cash equivalents, and marketable securities primarily consisted of money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, certificates of deposit, and municipal bonds. As of December 31, 2025, we did not have any marketable securities classified as non-current.
To date, we have financed our operations primarily through equity issuances, payments received from customers, the net proceeds we received through sales of our debt securities, and proceeds from our convertible notes. Our principal uses of cash in the near term have primarily been around funding our operations, our capital expenditures, business acquisitions, and investments and fulfilling our debt and contractual commitments. We have also entered into longer term commitments to support our operations, including arrangements to directly lease and operate our infrastructure assets and colocation facilities. We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.
We believe that our cash and cash equivalents balances, available borrowing capacity under our credit facility, and the cash flows generated by our operations, net of the cash outflows used in our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. We have generated losses from operations in the past and may continue to incur operating losses for the foreseeable future due to the investments and strategic initiatives we intend to make to grow our business. Our uses of cash beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are uncertain. We may also use our cash to buy back any outstanding debt on our convertible notes or on any future equity issuances.
Senior Secured Credit Facilities Credit Agreement
In 2021, we entered into the Credit Agreement (as defined in Note 8 in our consolidated financial statements). As of December 31, 2025, we were in compliance with the covenants described in Note 8 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, and we expect to continue to be in compliance for at least the next 12 months. During the year ended December 31, 2025 and 2024, no amounts were drawn down on the Credit Agreement.
Convertible Senior Notes
In March 2021, we issued approximately $948.8 million aggregate principal amount of 0% convertible senior unsecured notes due in 2026 (the “2026 Notes”) in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.
On May 25, 2022, we entered into separate, privately negotiated transactions with certain holders of the 2026 Notes to repurchase (the “Repurchases”) $235.0 million aggregate principal amount of the 2026 Notes for an aggregate cash repurchase price of $176.4 million and aggregate transaction costs of $0.7 million.
During the year ended December 31, 2023, we entered into several separate privately negotiated transactions with certain holders of the 2026 Notes to repurchase $367.3 million aggregate principal amount of the 2026 Notes for an aggregate cash repurchase price of $309.1 million and aggregate transaction costs of $2.0 million.
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During the year ended December 31, 2024, we entered into separate, privately negotiated transactions with certain holders of the 2026 Notes to exchange $157.9 million aggregate principal amount of the 2026 Notes for $150.0 million aggregate principal amount of 7.75% convertible senior notes due 2028 (the “2028 Notes”) and aggregate transaction costs of $5.8 million.
On December 9, 2025, we entered into separate, privately negotiated transactions with certain holders of the 2026 Notes to repurchase $150.0 million aggregate principal amount of the 2026 Notes for an aggregate cash repurchase price of $148.9 million and aggregate transaction costs of $6.7 million. On December 17, 2025, we also issued $180.0 million aggregate principal amount of 0% convertible senior unsecured notes due in 2030 (the “2030 Notes”) in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act.
Capped Calls
In connection with the pricing of the issuance of the 2030 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “Capped Calls”). The Capped Calls resulted in a $18.2 million outflow of cash. Refer to Note 8 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
As of December 31, 2025 our material cash requirements include non-cancelable contractual obligations from the 2028 Notes, 2030 Notes, purchase commitments and lease obligations. Refer to Notes 5, 6, and 8 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding these material cash requirements.
In addition to the contractual obligations described above, as of December 31, 2025, we had a $7.7 million purchase commitment for equipment due within the next twelve months.
Cash Flows
The following table summarizes our cash flows for the period indicated:
Year ended December 31,
(in thousands)
Cash Flows from Operating Activities
For the year ended December 31, 2025, cash provided by operating activities consisted primarily of our net loss of $121.7 million, adjusted for non-cash items of $239.0 million, and net cash flows used in operating assets and liabilities of $22.9 million. The main drivers of the changes in operating assets and liabilities were $20.7 million of operating lease payments, an increase in other assets of $19.5 million related to deferred contract costs, a $18.0 million increase in other liabilities, a $6.2 million increase in accounts receivable, primarily due to an increase in revenue and the timing of cash receipts, a $4.5 million decrease in accounts payable due to timing of payments, and a decrease of $1.6 million in prepaid expenses and other current assets due to pre-payments for hosting services and software licenses.
For the year ended December 31, 2024, cash provided by operating activities consisted primarily of our net loss of $158.1 million, adjusted for non-cash items of $228.6 million, and net cash flows used in operating assets and liabilities of $54.1 million. The main drivers of the changes in operating assets and liabilities were $26.5 million of operating lease payments, an increase in other assets of $11.9 million related to deferred contract costs, an increase of $7.6 million in prepaid expenses and other current assets due to pre-payments for hosting services and software licenses, a $6.4 million decrease in other liabilities and a $2.9 million decrease in accrued expenses due to timing of payments.
For the year ended December 31, 2023, cash provided by operating activities consisted primarily of our net loss of $133.1 million, adjusted for non-cash items of $203.3 million, and net cash flows used in operating assets and liabilities of
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$69.9 million. The main drivers of the changes in operating assets and liabilities were an increase in accounts receivable of $32.9 million, primarily due to an increase in revenue and the timing of cash receipts, an increase in other assets of $23.1 million related to deferred contract costs as well as $22.1 million of operating lease payments. This was partially offset by decreases of $8.7 million in prepaid expenses.
Cash Flows from Investing Activities
For the year ended December 31, 2025, cash used in investing activities was $389.8 million in purchases of marketable securities, $17.7 million of additions to capitalized internal-use software, and $28.7 million of payments related to purchases of property and equipment to expand our network. This was offset by $223.1 million of maturities and sales of marketable securities.
For the year ended December 31, 2024, cash provided by investing activities was $178.9 million, primarily consisting of $371.2 million of maturities and sales of marketable securities. This was offset by $155.1 million in purchases of marketable securities, $26.1 million of additions to capitalized internal-use software, and $10.3 million of payments related to purchases of property and equipment to expand our network.
For the year ended December 31, 2023, cash provided by investing activities was $294.9 million, primarily consisting of $459.4 million of maturities and sales of marketable securities. This was offset by $132.2 million in purchases of marketable securities, $21.3 million of additions to capitalized internal-use software, and $11.0 million of payments related to purchases of property and equipment to expand our network.
Cash Flows from Financing Activities
For the year ended December 31, 2025, cash provided by financing activities was $12.8 million, primarily consisting of proceeds of $180.0 million from issuance of convertible notes, $7.0 million in proceeds from the employee stock purchase plan (“ESPP”), and $1.0 million in proceeds from stock option exercises by our employees and directors. This was partially offset by $148.9 million paid for debt extinguishment, $18.2 million for purchase of capped calls, $5.9 million payment of debt issuance costs, and $2.3 million of finance lease liabilities repayments.
For the year ended December 31, 2024, cash used in financing activities was $17.1 million, primarily consisting of $15.0 million of finance lease liabilities repayments, $5.7 million payment of debt issuance costs and $3.8 million in payments for deferred consideration for business acquisitions. This was partially offset by $6.2 million in proceeds from the employee stock purchase plan (“ESPP”) and $1.1 million in proceeds from stock option exercises by our employees and directors.
For the year ended December 31, 2023, cash used in financing activities was $331.4 million, primarily consisting of $310.5 million used for the partial repurchase of our convertible debt, $27.2 million of finance lease liabilities repayments and $4.4 million in payments for deferred consideration for business acquisitions. This was partially offset by $8.6 million in proceeds from the employee stock purchase plan (“ESPP”) and $2.2 million in proceeds from stock option exercises by our employees and directors.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses, and related disclosures. Actual results and outcomes could differ significantly from our estimates, judgments, and assumptions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
Revenue Recognition
We recognize revenue in accordance with ASC 606, where revenue is recognized upon transfer of control of promised services to customers in an amount that reflects the consideration we expect to receive in exchange for those services. The processing and recording of certain revenue requires a manual process, which uses a set of procedures to generate complete and accurate data to record these revenue transactions. We enter into contracts that can include various combinations of services, each of which are distinct and accounted for as separate performance obligations.
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Recent Accounting Pronouncements
Please refer to Note 2—Summary of Significant Accounting Policies included in the Notes to consolidated financial statements.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily include interest rate and currency exchange risks as follows:
Interest Rate Risk
We had cash, cash equivalents, and marketable securities of $361.8 million, as of December 31, 2025 which primarily consisted of bank deposits, money market funds, investment-grade commercial paper and corporate notes and bonds. The cash and cash equivalents are held for working capital purposes. Our cash equivalents and our investment portfolio are subject to market risk due to fluctuations in interest rates. The primary objective of our investment activities is to preserve principal while generating income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during the period presented would not have had a material impact on our consolidated financial statements.
Currency Exchange Risks
The functional currency of our foreign subsidiaries is the U.S. dollar and our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates relative to the U.S. dollar. The majority of our revenue is denominated in U.S. dollars. Our expenses are generally denominated in the currencies of the countries in which our operations are located and are subject to fluctuations due to changes in their respective foreign currency exchange rates. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign exchange rates during the period presented would not have had a material impact on our consolidated financial statements.
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Item 8. Financial Statements and Supplementary Data
FASTLY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following financial statements are filed as part of this Annual Report on form 10-K:
Report of Independent Registered Public Accounting Firm(PCAOB ID No. 34)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Fastly, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Fastly, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2026, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue—Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description
Revenue is recognized upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. The processing and recording of certain revenue requires a manual process, and therefore the Company uses a complex set of procedures to generate complete and accurate data to record its revenue transactions.
We identified manually processed revenue as a critical audit matter as the manually processed revenue requires a complex set of manual procedures to generate complete and accurate data to process and record revenue. This required an increased extent of effort to audit these manually processed revenue transactions.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to manually processed revenue included the following, among others:
•We tested the effectiveness of controls over the recognition of manually processed revenue.
•We obtained an understanding of the nature of the manually processed revenue through inquiry with the Company personnel responsible for the invoice as well as review of the contract with the customer.
•For a sample of manually processed revenue transactions, we recalculated the manually processed revenue by comparing key attributes utilized in our recalculation to source information and documents, including usage, bandwidth, and other services provided. We compared our recalculation of manually processed revenue transactions to the Company’s recorded revenue and evaluated any differences.
/s/ Deloitte & Touche LLP
San Francisco, California
February 25, 2026
We have served as the Company’s auditor since 2015.
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FASTLY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
Current assets:
Prepaid expenses and other current assets 26,921 28,325
Operating lease right-of-use assets, net 52,067 50,433
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current 38,557 —
Finance lease liabilities, current — 2,328
Operating lease liabilities, non-current 43,921 39,561
Commitments and contingencies (Note 9)
Stockholders’ equity:
Accumulated other comprehensive loss (41) (100)
The accompanying notes are an integral part of the consolidated financial statements.
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FASTLY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year ended December 31,
Operating expenses:
Restructuring charges — 9,720 —
The accompanying notes are an integral part of the consolidated financial statements.
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FASTLY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Year ended December 31,
Other comprehensive income:
Foreign currency translation adjustment — — 565
Unrealized gain on investments in available-for-sale-securities 59 908 7,713
Total other comprehensive income $ 59 $ 908 $ 8,278
The accompanying notes are an integral part of the consolidated financial statements.
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FASTLY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Shares Amount
Vesting of restricted stock units 6,150 1 — — — 1
Shares issued under employee stock purchase program 1,022 — 8,692 — — 8,692
Other comprehensive income — — — 8,278 — 8,278
Vesting of restricted stock units 5,886 — — — — —
Shares issued under employee stock purchase program 1,027 — 6,714 — — 6,714
Other comprehensive income — — — 908 — 908
Vesting of restricted stock units 7,054 — — — — —
Shares issued under employee stock purchase program 1,058 — 6,703 — — 6,703
Purchases of capped calls — — (18,162) — — (18,162)
Other comprehensive income — — — 59 — 59
The accompanying notes are an integral part of the consolidated financial statements.
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FASTLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and issuance costs 906 1,377 2,476
Loss on disposals of property and equipment 186 540 505
Accretion of discounts on investments (4,703) (3,973) (646)
Impairment of operating lease right-of-use assets — 371 744
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 1,579 (7,627) 8,709
Cash flows from investing activities:
Advance payment for purchase of property and equipment — (790) —
Proceeds from sale of property and equipment 44 24 49
Cash flows from financing activities:
Proceeds from issuance of convertible notes 180,000 — —
Payments of issuance costs for convertible notes (5,924) (5,729) —
Payments for purchase of capped calls (18,162) — —
Payment of deferred consideration for business acquisitions — (3,771) (4,393)
Proceeds from exercise of vested stock options 1,044 1,115 2,169
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FASTLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued
(in thousands)
Year ended December 31,
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds received $ 1,337 $ 809 $ 331
Cash paid for finance lease interest $ 15 $ 378 $ 1,329
Noncash investing and financing activities:
Debt issued in exchange for extinguishment of existing notes $ — $ 155,730 $ —
Debt retired in exchange for issuance of new notes $ — $ (157,095) $ —
Restricted cash — — 150
The accompanying notes are an integral part of the consolidated financial statements.
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FASTLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Fastly, Inc. is an edge cloud platform that can process, serve, and secure its customers' applications as close to their end users as possible. The Company was incorporated in Delaware in 2011 and is headquartered in San Francisco, California.
As used herein, “Fastly,” “the Company,” “its” and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Certain changes to presentation have been made to conform the prior period presentation to the current period reporting. The Company has made certain presentation changes to separate out deferred revenue from other current liabilities on the consolidated balance sheets.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Significant estimates, judgments, and assumptions used in these financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, internal-use software development costs, the incremental borrowing rate related to the Company’s lease liabilities,fair value of assets acquired and liabilities assumed during business combinations, useful lives of acquired intangible assets and property and equipment, financial instruments, income tax reserves, and accounting for stock-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates are reflected in the consolidated financial statements in the period of change and prospectively from the date of the change in estimate.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable.
The Company’s cash, cash equivalents, and marketable securities primarily consisted of money market funds, investment-grade commercial paper, corporate notes and bonds, U.S. treasury securities, certificates of deposit, and municipal bonds. The primary focus of its investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy limits the amount of credit exposure with any one financial institution or commercial issuer. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents to the extent recorded in the balance sheets.
Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers to which the Company makes substantial sales. The Company’s customer base consists of a large number of geographically dispersed customers diversified across several industries. No single customer accounted for more than 10% of revenue for the years ended December 31, 2025, 2024 and 2023. No single customer accounted for more than 10% of the total accounts receivable balance as of December 31, 2025 or 2024. Affiliated customers that are business units of a single company generated an aggregate of 10% of the Company’s revenue for the year ended December 31, 2025. No affiliated customers that are business units of a single company generated more than 10% of revenue for the year ended December 31, 2024. Affiliated customers that are business units of a single company generated an aggregate of 12% of the Company’s revenue for the year ended December 31,
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2023. No affiliated customers that are business units of a single company accounted for more than 10% of the Company's accounts receivable balance as of December 31, 2025. Affiliated customers that are business units of a single company accounted for an aggregate of 11% of the Company’s accounts receivable balance as of December 31, 2024.
Cash, Cash Equivalents, and Marketable Securities
Cash and cash equivalents include cash held in banks, highly liquid money market funds, U.S. treasury securities, municipal securities, and commercial paper, all with original maturities of three months or less when acquired. The Company’s short-term and long-term marketable securities consists of fixed income U.S. and foreign government agency securities, corporate bonds, municipal securities, certificates of deposit, and commercial paper. Management determines the appropriate classification of the Company’s investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying remaining contractual maturity date.
The Company classifies its marketable securities as available-for-sale as it has the ability to sell the marketable securities prior to its maturity. The Company’s marketable securities are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity. Cash and cash equivalents are stated at cost, which approximate fair market value. Short-term and long-term marketable securities are classified as available-for-sale debt securities and are also carried at fair market value. When the available-for-sale debt securities are sold, cost is based on the specific identification method, and the realized gains and losses are included in other income (expense), net in the consolidated statements of operations.
All of the Company’s investments are subject to a periodic impairment review. The Company recognizes an impairment charge when the fair value of its investments decline below their respective cost basis. Factors considered in determining whether a credit impairment has occurred include whether the decline in fair value is due to credit related factors, the Company’s intent to sell the security, and whether or not the Company will be required to sell the security prior to the expected recovery of the investment’s amortized cost basis. No such impairment charges were recorded during the years ended December 31, 2025, 2024, and 2023.
Accounts Receivable, net
Accounts receivable are recorded and carried at the original invoiced amount, net of an allowance for any potential credit losses. The allowance for credit losses is determined based upon the assessment of various factors, such as historical experience, credit quality of its customers, age of the accounts receivable balances, geographic related risks, economic conditions, and other factors that may affect a customer’s ability to pay. The Company records these charges as a component of general and administrative expenses in the consolidated statements of operations in the period in which the change occurs. The Company does not have any off-balance sheet credit exposure related to its customers.
Incremental Costs to Obtain a Contract with a Customer
The Company capitalizes incremental costs associated with obtaining customer contracts, specifically certain commission payments. The Company pays commissions based on contract value upon signing an arrangement with a new customer and upon upgrades of existing contracts with customers only if the upgrades result in an incremental increase in contract value. These costs are deferred on the consolidated balance sheets and amortized over the expected period of benefit on a straight-line basis. The Company also pays commissions on an ongoing basis based upon revenue recognized. In these cases, no incremental costs are deferred, as the commissions are earned and expensed in the same period for which the associated revenue is recognized. Based on the nature of the Company’s technology and services, and the duration of its relationships with its customers, the expected period of benefit is determined to be five years. Management periodically reviews the carrying amount of deferred commission costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. Amortization is included in sales and marketing expense in the consolidated statements of operations. Deferred commission are included in other assets on the consolidated balance sheets.
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Fair Value of Financial Instruments
The Company’s available-for-sale securities are recorded at fair value. The Company’s cash and cash equivalents are recorded at cost, which approximates fair value. Additionally, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term nature. For disclosure purposes, the Company measures the fair value of its outstanding senior convertible notes using a market approach based on actual bids and offers in an over-the-counter market, or Level 2 inputs, on the last trading day of the period.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. The estimated useful life of each asset category is as follows:
Computer and networking equipment 3 to 5 years
Leasehold improvements Shorter of lease term or 5 years
Furniture and fixtures 3 years
Office equipment 3 years
Internal-use software 3 to 5 years
The Company periodically reviews the estimated useful lives of property and equipment and any changes to the estimated useful lives are recorded prospectively from the date of the change.
Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of operations. Repairs and maintenance costs are expensed as incurred.
Internal-Use Software Development Costs
Labor and related costs associated with internal-use software incurred during the application development stage are capitalized. Capitalization of costs begins when the preliminary project stage is completed, management has committed to funding the project, and it is probable that the project will be completed and the software will be used to perform the function intended. Capitalization ceases at the point when the project is fully tested, is substantially completed and is ready for its intended purpose. The capitalized amounts are included in property and equipment, net on the consolidated balance sheets. The Company amortizes such costs on a straight-line basis over the estimated useful life of the software, which is generally between three to five years. Completed internal-use software that is related to the Company’s network is amortized to cost of revenue over its estimated useful life. Costs incurred during the planning, training, and post-implementation stages of the software development life-cycle are expensed as incurred.
Goodwill, Intangible Assets and Other Long-Lived Assets
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and identifiable intangible assets acquired. The carrying amount of goodwill is reviewed for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has a single operating segment and reporting unit structure for all of the periods presented.
As part of the annual goodwill impairment test, the Company may first perform a qualitative assessment to determine whether further impairment testing is necessary. If, as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test will be required. If the Company has determined it necessary to perform a quantitative impairment assessment, the Company will compare the fair value of the reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the total amount of goodwill of the reporting unit. The Company did not recognize any goodwill impairment charges for any of the periods presented.
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Goodwill has historically been tested for impairment annually on October 31 or more frequently upon the occurrence of certain events or substantive changes in circumstances that indicate impairment is more likely than not. During the year ended December 31, 2025, the Company changed the date of its annual impairment test from October 31 to October 1 of each year. This change is preferable because it aligns the Company’s impairment testing procedures with its annual business planning and budgeting process and allows the Company to maximize time and resources required to perform the impairment analysis. The Company does not consider this change in impairment testing date to be a material change in the application of an accounting principle as it does not result in the delay, acceleration or avoidance of an impairment charge.
On October 1, 2025, the Company completed its annual goodwill impairment test associated with its single reporting unit and, based on the qualitative assessment, determined it was more likely than not that the fair value of the reporting unit exceeded its carrying value. The Company did not identify any events or changes in circumstances since the performance of its annual goodwill impairment test that would require the Company to perform another goodwill impairment test during the fiscal year.
The Company’s definite lived intangible assets are carried at cost, net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives. The Company estimates the useful life by estimating the expected period of economic benefit.
The useful lives of the intangible assets are as follows:
Customer relationships 3 to 8 years
Developed technology 4 to 5 years
Trade names 3 to 4 years
Internet protocol addresses 10 years
Long-lived assets, including property and equipment, definite lived intangible assets, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances, such as service discontinuance, technological obsolescence, significant decreases in market capitalization, facility closures, or work-force reductions indicate that the carrying amount of the long-lived asset or asset group may not be recoverable. When such events occur, the Company compares the carrying amount of the asset or asset group to the undiscounted expected future cash flows related to the asset or asset group. If this comparison indicates that an impairment is present, the amount of impairment is calculate as the difference between the carrying amount and the fair value of the asset or asset group. In addition to the recoverability assessment, the Company periodically reviews the remaining estimated useful lives of long-lived assets. If the estimated useful life assumption for any asset is changed due to new information, the remaining unamortized balance would be depreciated or amortized over the revised estimated useful life, on a prospective basis. Refer to Note 5 — Balance Sheet Information and Note 6 — Leases for discussion of impairment of property and equipment and impairment of operating lease right-of-use asset, respectively.
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Leases
The Company leases office space and data centers (“colocation leases”) under non-cancelable operating leases with various expiration dates. The Company also leases server equipment under non-cancelable finance leases with various expiration dates. The Company determines if an arrangement contains a lease at inception.
Operating lease right-of-use assets and lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in the Company’s operating leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments. The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments. Operating lease right-of-use assets also include any prepaid lease payments and exclude lease incentives.
Operating lease expense is recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property. The lease terms may include options to extend or terminate the lease. The Company generally uses the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that the option will be exercised. The lease agreements may contain variable costs such as common area maintenance, operating expenses or other costs. Variable lease costs are expensed as incurred on the consolidated statements of operations. The Company’s lease agreements generally do not contain any residual value guarantees or restrictive covenants.
Certain of our operating leases contain both lease and non-lease components. Non-lease components for our office spaces include fixed payments for maintenance, utilities, real estate taxes, and management fees. Non-lease components for colocation leases include fixed payments for utilities and other operating costs. For both office spaces and colocation leases, the Company combines fixed lease and non-lease components and account for them as a single lease component.
The Company leases networking equipment from a third party through equipment finance leases. These leases include a bargain purchase option, resulting in a full transfer of ownership at the completion of the lease term.
Operating leases are reflected in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on the consolidated balance sheets. Finance leases are included in property and equipment, net, finance lease liabilities, and finance lease liabilities, non-current on the consolidated balance sheets.
Convertible Debt
The Company evaluated the terms of its debt in line with ASC 470-20, as amended by Accounting Standards Update (“ASU”) 2020-06, and concluded that the instrument does not require separation and that there were no other derivatives that required separation. The Company has combined these features with the host contract and accounted for the convertible debt as a single liability in long-term debt on the consolidated balance sheets. The carrying amount of the liability is either based on fair value or the gross proceeds, net of the unamortized transaction costs incurred related to the issuance of the convertible debt instrument, and any partial repurchases made. The debt discount from the net unamortized transaction cost is amortized to interest expense over the term of the convertible debt instrument using the effective interest rate method.
Revenue Recognition
The Company primarily derives revenue from the sale of services to customers executing contracts in which the standard contract term is one year, although terms may vary by contract. Most of the Company’s contracts are non-cancelable over the contractual term. The majority of the Company’s usage-based contracts commit the customer to a minimum monthly level of usage and specify the rate at which the customer must pay for actual usage above the monthly minimum. The Company also offers subscriptions to access security services at a fixed rate. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
In accordance with Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services. To achieve the core principle of this standard, the Company applies the following five steps:
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(1) Identify the contract with a customer
The Company considers the terms and conditions of contracts with customers and its customary business practices in identifying contracts under ASC 606. The Company determines it has a contract with a customer when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, it has been determined that the customer has the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.
(2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from the Company or from third parties, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. The Company’s contracts with customers often include promises to transfer multiple services to a customer. Determining whether services are considered distinct performance obligations that should be accounted for separately versus together may require judgment. Performance obligations generally represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Company.
(3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company is expected to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The transaction price in a contract for usage-based services is typically equal to the minimum commit price in the contract plus any variable amounts of usage above the minimum commitment, less any discounts provided. The transaction price in a contract that does not contain usage-based services is equal to the total contract value.
(4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). For contracts with multiple performance obligations that are delivered over different time periods, the Company allocates the contract transaction price to each performance obligation using the estimated SSP of each distinct good or service in the contract. Judgment is required to determine the SSP for each distinct performance obligation. The Company analyzes separate sales of its services or the discounted list price per management’s approved price list as a basis for estimating the SSP of these services. In instances where SSP is not directly observable, such as when the Company does not sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of those services by customers and circumstances. In these instances, the Company may use information, such as geographic region and distribution channel, in determining the SSP.
Because the Company’s typical contracts represent distinct services delivered over time with the same pattern of transfer to the customer, usage-based consideration primarily related to actual consumption over the minimum commit levels is allocated to the period to which it relates. The amount of consideration recognized for usage above the minimum commit price is limited to the amount the Company expects to be entitled to receive in exchange for providing services. The Company has elected to apply the practical expedient for estimating and disclosing the variable consideration when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a performance obligation from its remaining performance obligations under these contracts. For contracts to which such practical expedient cannot be applied, consideration is estimated.
(5) Recognize revenue when or as performance obligations are satisfied
Revenue is recognized when control of the services is transferred to the customer, in an amount that reflects the consideration expected to be received in exchange for those services. The Company generates all its revenue from contracts with customers. The Company’s revenue is recognized over time, consistent with the pattern of benefit provided to the
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customer over the term of the agreement. Revenue on the Company’s subscription services are recognized ratably over their respective contractual term.
At times, customers may request changes that either amend, replace, or cancel existing contracts. Judgment is required to determine whether the specific facts and circumstances within the contracts should be accounted for as a separate contract or as a prospective modification.
In contracts where there are timing differences between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service, the Company has determined its contracts do not include a significant financing component. The Company has also elected the practical expedient to not measure financing components for any contract where the timing difference is less than one year.
Cost of Revenue
Cost of revenue consists primarily of fees paid to network providers for bandwidth and to third-party network data centers for housing servers, also known as colocation costs. Cost of revenue also includes employee costs for network operation, build-out and support and services delivery, network storage costs, cost of managed services and software-as-a-service, depreciation of network equipment used to deliver services, and amortization of network-related internal-use software. The Company enters into contracts for bandwidth with third-party network providers with terms of typically one year. These contracts generally commit the Company to pay minimum monthly fees plus additional fees for bandwidth usage above the committed level. The Company enters into contracts for colocation services with third-party providers with terms typically ranging from one to six years.
Research and Development Costs
Research and development costs consist of primarily payroll and related personnel costs for the design, development, testing, and enhancement of the Company’s edge cloud platform. Research and development expenses also include cloud infrastructure fees for development and testing. Costs incurred in the development of the Company’s edge cloud platform are expensed as incurred, excluding those expenses which meet the criteria for the capitalization of internal-use software.
Advertising Expense
The Company recognizes advertising expense as incurred. The Company recognized total advertising expense of approximately $5.1 million, $5.8 million and $4.6 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Accounting for Stock-Based Compensation
The Company recognizes stock-based compensation expense based on the grant-date fair value of the awards. The fair values of the restricted stock units (“RSUs”) and performance stock awards (“PSUs”) are based on the fair value of the Company’s stock price on the grant date. The fair values of stock options and employee stock purchase program (“ESPP”) are based on the Black-Scholes option-pricing model. The fair value of the market-based performance stock awards (“MPSUs”) and Relative Total Shareholder Return Award PSUs (“rTSR PSUs”) are measured using a Monte Carlo simulation valuation model.
The determination of the fair value of a stock-based award is affected by the deemed fair value of the underlying stock price on the grant date, as well as assumptions regarding a number of other complex and subjective variables, including expected term and stock price volatility of the awards.
Stock-based compensation expense for awards with service-based vesting only is recognized on a straight-line basis over the requisite service period of the awards, which is generally three or four years. In addition to service-based conditions, stock-based compensation expense for awards that have performance-based or market-based conditions are recognized over the requisite service period for each separately-vesting tranche as though each tranche of the award is its own separate grant, which results in an accelerated recognition of compensation cost. The Company accounts for forfeitures as they occur.
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Foreign Currency
The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income (expense), net in the consolidated statements of operations. The aggregate transaction gain or loss for the years ended December 31, 2025, 2024 and 2023 is included in the determination of net income for the period and was not material to the respective periods.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and consolidated statement of comprehensive loss. Accrued interest and penalties are included in accrued expenses on the consolidated balance sheet.
Net Loss Per Share Attributable to Common Stockholders
Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options, restricted stock units, restricted stock awards, shares issuable under its employee stock purchase plans and performance stock awards. The Company also applies the if-converted method for calculation of diluted earnings per share for its convertible debt instruments. As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.
Segment Information
The Company has one reportable and operating segment. Financial information about the Company’s operating segment and geographic areas is presented in Note 13 to these financial statements.
Recently Issued and Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The guidance is effective for the Company's annual
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periods beginning in 2025. The Company adopted the standard on December 31, 2025. For further information, refer to Note 12—Income Taxes, in these financial statements.
In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses,” which aims to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The guidance is effective for the Company's annual periods beginning in 2027 and interim periods beginning in the first quarter of fiscal year 2028. The Company is currently evaluating the impact of the new guidance.
In November 2024, the FASB issued ASU 2024-04 “Induced Conversions of Convertible Debt Instruments,” which amends ASC 470-202 to clarify the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The guidance is effective for the Company's annual periods beginning in 2026 and interim periods within those annual reporting periods. The Company did not early adopt and is currently evaluating the impact of the new guidance.
In September 2025, the FASB issued ASU 2025-06 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which aims to clarify and modernize the accounting for costs related to internal-use software. The guidance is effective for the Company's interim and annual periods beginning in 2028. The Company is currently evaluating the impact of the new guidance.
3. Revenue
Disaggregation of Revenue
Revenue by geography is based on the billing address of the customer. Aside from the United States, no other single country accounted for more than 10% of revenue for the years ended December 31, 2025, 2024 and 2023. The following table presents the Company’s net revenue by geographic region:
Year ended December 31,
(in thousands)
The Company reports its revenue by three product lines: Network Services, Security, and Other. Network Services include solutions designed to improve performance of websites, apps, application programming interfaces (“APIs”), and digital media. Security includes products designed to protect websites, apps, APIs and users. Other includes Compute solutions that allow developers to build and deploy modern web applications on Fastly's edge cloud platform and Observability solutions that provide real-time logs, data, and metrics streamed from Fastly's edge platform for actionable insights. The following table presents the Company’s revenue by product line:
Year ended December 31,
(in thousands)
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Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers. The Company’s payment terms and conditions vary by contract type, and generally range from 30 to 90 days.
Contract assets are recognized when a conditional right to consideration exists and transfer of control has occurred. The Company records a contract asset, or unbilled receivable, when revenue is recognized prior to invoicing. Contract assets are typically related to the Company's subscription services and cloud usage. Contract assets are included in accounts receivable, net on the Company's Consolidated Balance Sheets.
The Company records a contract liability, or deferred revenue, when a contract is billed to customers in advance of revenue being recognized. Deferred revenue primarily consists of the unearned portions of billings for the Company’s security subscription services and the unearned portion of committed edge cloud platform usage. Contract liabilities are included in deferred revenue for the current portion and other long term liabilities for the long-term portion on the Consolidated Balance Sheets.
The following table presents the Company’s contract assets and contract liabilities as of December 31, 2025 and 2024:
(in thousands)
The following table presents revenue recognized during the years ended December 31, 2025 and 2024 from amounts included in the contract liability at the beginning of the period:
Year ended December 31,
(in thousands)
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents deferred revenue and amounts that were and will be invoiced and recognized as revenue in future periods for non-cancelable subscription arrangements and usage commitments. The Company’s RPO excludes performance obligations from on-demand arrangements when there are no minimum purchase commitments associated with these arrangements.
As of December 31, 2025, the aggregate amount of the transaction price in our contracts allocated to remaining performance obligations that are unsatisfied or partially unsatisfied was $353.8 million. This amount includes future committed revenue for periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied. As of December 31, 2025, the Company expects to recognize approximately 70% of its remaining performance obligations over the next 12 months. The Company’s typical contractual term with its customers is one year, although terms may vary by contract.
Costs to Obtain a Contract
As of December 31, 2025 and December 31, 2024, the Company’s costs to obtain contracts were as follows:
(in thousands)
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During the years ended December 31, 2025, 2024 and 2023, the Company recognized $19.4 million, $18.6 million and $15.5 million of amortization related to deferred contract costs, respectively. These costs are recorded within sales and marketing expenses on the accompanying consolidated statements of operations.
4. Investments and Fair Value Measurements
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash held in banks, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There is a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3—Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation.
The Company measures its cash equivalents and marketable securities at fair value. The Company classifies its cash equivalents and marketable securities within Level 1 or Level 2 because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The Company classifies its investments, which are comprised of corporate notes and bonds, commercial paper, U.S. treasury securities, securities of deposit, and municipal securities within Level 2 of the fair value hierarchy because the fair value of these securities is priced by using inputs based on non-binding market consensus prices that are primarily corroborated by observable market data or quoted market prices for similar instruments. Financial assets and liabilities are measured and recorded at fair value on a recurring basis.
The following table summarizes the Company’s cash and marketable securities' amortized cost, unrealized gains (losses), and fair value by significant investment category reported as cash and cash equivalents or marketable securities as of December 31, 2025 and 2024.
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Reported as:
(in thousands)
Level 1:
Level 2:
Reported as:
(in thousands)
Level 1:
Level 2:
There were no transfers of assets and liabilities measured at fair value between Level 1 and Level 2, or between Level 2 and Level 3, during the years ended December 31, 2025 and 2024.
There were no material realized gains or losses from sales of marketable securities that were reclassified out of accumulated other comprehensive loss into other expense, net as of December 31, 2025 and December 31, 2024. For the years ended December 31, 2025, 2024 and 2023, the Company did not record any impairment charges for its marketable debt securities in its consolidated statements of operations. No impairment loss has been recorded on the securities as the Company does not intend to sell any impaired securities, nor is it more likely than not that the Company would be required to sell impaired securities before recovery of amortized cost basis.
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5. Balance Sheet Information
Allowance for Credit Losses
The activity in the accounts receivable reserves is as follows:
As of December 31,
(in thousands)
Write-offs and adjustments (6,173) (2,634) —
Revenue Reserve
The activity in the revenue reserve is as follows:
As of December 31,
(in thousands)
Write-offs and adjustments (7,420) — —
Property and Equipment, Net
Property and equipment, net consisted of the following:
As of December 31,
(in thousands)
Accumulated depreciation and amortization (251,658) (193,410)
The Company did not recognize any material impairment charge during the year ended December 31, 2025,
During the year ended December 31, 2024, the Company recognized an impairment charge of $2.8 million related to equipment and an internal-use software project that the Company did not plan to continue with and therefore abandoned.
During the year ended December 31, 2023, the Company recognized an impairment charge of $4.3 million, of which $3.0 million related to property and equipment, net and $1.3 million related to advance payments for the purchase of property and equipment. The write-off was primarily related to excess computer and networking equipment including software the
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Company did not expect to use and therefore abandoned. Impairment charges are included within impairment expense in the consolidated statements of operations.
Depreciation on property and equipment for the years ended December 31, 2025, 2024 and 2023 was $61.0 million, $54.0 million, and $51.6 million, respectively. Included in these amounts was amortization expense for capitalized internal-use software costs of $22.6 million, $17.0 million and $14.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 and 2024, the unamortized balance of capitalized internal-use software costs on the Company’s consolidated balance sheets was approximately $81.4 million and $79.5 million, respectively.
Other Assets
Other assets consisted of the following:
As of December 31,
(in thousands)
Advance payment for purchase of property and equipment — 9,837
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
As of December 31,
(in thousands)
Accrued Expenses
Accrued expenses consisted of the following:
As of December 31,
(in thousands)
Accrued compensation and related benefits $ 46,611 $ 19,266
Accrued colocation and bandwidth costs 13,944 15,317
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Other Current Liabilities
Other current liabilities consisted of the following:
As of December 31,
(in thousands)
Accrued computer and networking equipment $ 413 $ 743
Other current liabilities 971 840
Total other current liabilities $ 7,499 $ 2,796
6. Leases
The Company has operating leases for corporate offices and data centers (“colocation” leases) and finance leases for networking equipment. The Company’s operating leases have remaining lease terms ranging from less than 1 year to 9 years, some of which include options to extend the leases. The Company also subleases a portion of its corporate office spaces. The Company’s subleases have remaining lease terms ranging from less than 1 year to 4 years. Sublease income was $0.8 million, $1.4 million, and $1.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The components of lease cost were as follows:
As of December 31,
(in thousands)
Operating lease cost:
Finance lease cost:
The short-term lease costs were not material for the years ended December 31, 2025, 2024 and 2023.
The Company did not recognize any material impairment charge on its operating lease right-of-use assets during the year ended December 31, 2025. During the year ended December 31, 2024, the Company recognized an impairment charge of $1.7 million related to right-of-use assets, of which $1.3 million was related to the Company exiting a certain office facility and is included within the impairment expense line in the Company's consolidated statements of operations. During the year ended December 31, 2023, the Company recognized impairment on its operating lease right-of-use assets of $0.7 million.
As of December 31,
(in thousands)
Weighted Average Remaining Lease term (in years):
Weighted Average Discount Rate:
Finance leases — % 4.67 % 4.67 %
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Future minimum lease payments under non-cancellable leases as of December 31, 2025 were as follows:
Operating Leases
(in thousands)
Year ending December 31,
Total future minimum lease payments $ 90,979
Less: imputed interest (13,526)
As of December 31, 2025, the Company has undiscounted commitments of $9.1 million for operating leases that have not yet commenced, and therefore are not included in the right-of-use asset or operating lease liability. These operating leases will commence in the first quarter of 2026 with lease terms ranging from 2 years to 5 years.
7. Goodwill and Intangible Assets
Goodwill
As of December 31, 2025 and 2024, the Company’s goodwill was $670.4 million. The Company did not record an impairment charge on goodwill for the fiscal years ended December 31, 2025, 2024 and 2023.
Intangible Assets, net
As of December 31, 2025 and December 31, 2024, the Company’s intangible assets consisted of the following:
(in thousands)
Intangible assets:
The Company’s customer relationships, developed technology, trade names and Internet protocol addresses represent intangible assets subject to amortization. Amortization expense was $16.8 million, $19.6 million and $20.4 million, for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company did not purchase any intangible assets during the years ended December 31, 2025, 2024 and 2023.
The Company recorded an impairment charge of $0.3 million for the year ended December 31, 2025 related to the write-off of intangible assets no longer in use. The Company did not record an impairment charge on its intangible assets for either of the years ended December 31, 2024 or 2023.
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The expected amortization expense of intangible assets subject to amortization as of December 31, 2025 is as follows:
(in thousands)
Year ending December 31,
8. Debt Instruments
Senior Secured Credit Facilities Credit Agreement
On February 16, 2021, the Company entered into a Senior Secured Credit Facilities Credit Agreement (as amended, restated, amended and restated, supplemented, restructured, or otherwise modified from time to time, the “Credit Agreement”) with the lenders from time to time party thereto (the “Lenders”) and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as a lender and as administrative agent and collateral agent for the Lenders. The Credit Agreement provides for a $60.0 million senior secured revolving facility, with a maturity date of the earlier of (i) April 30, 2027 and (ii) so long as any of our permitted convertible debt is outstanding after January 30, 2027 and if Net Liquidity is less than $200.0 million (or, if the amount of outstanding permitted convertible debt is less than $35.0 million, $120.0 million), such date. The Company recorded $0.6 million of debt issuance costs associated with the Credit Agreement in other assets on the Company’s consolidated balance sheet.
The revolving loans bear interest, at the Company’s election, at an annual rate based on the ABR (as defined in the Credit Agreement) plus 1.00% (such loans, the “ABR Loans”) or the Adjusted Term SOFR (as defined in the Credit Agreement) plus 2.00% (such loans, the “SOFR Loans”).
Interest payments on outstanding borrowings are due, with respect to SOFR Loans, on the last day of each interest period and with respect to ABR Loans, on the last calendar day of each month. The Credit Agreement has a commitment fee on the unused portion of the borrowing commitment, which is payable on the last day of each calendar quarter at a rate per annum of 0.20% to 0.25% depending on the average daily outstanding balance of all loans and letters of credit under the Credit Agreement. In addition, the Credit Agreement contains a financial covenant that requires the Company to maintain a consolidated adjusted quick ratio of at least 1.25 to 1:00 tested on a quarterly basis as well as a springing revenue growth covenant not to be less than 5% on a quarterly basis for certain periods if the Company’s consolidated adjusted quick ratio falls below 1.75 to 1:00 on the last day of any fiscal quarter. The Credit Agreement requires the Company to comply with various affirmative and negative covenants, and contains customary events of default.
As of December 31, 2025 and 2024, the Company and its subsidiaries were in compliance with all of the Credit Agreement’s covenants. During the years ended December 31, 2025 and 2024, no amounts were drawn down on the Company’s Credit Agreement. As of the years ended December 31, 2025 and 2024, no amounts were outstanding under the Credit Agreement.
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Convertible Senior Notes
On March 5, 2021, the Company issued approximately $948.8 million aggregate principal amount of 0% convertible senior notes due 2026 (the “2026 Notes”), including the exercise in full by the initial purchasers of their option to purchase up to an additional approximately $123.8 million principal amount of the 2026 Notes. The 2026 Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2026 Notes will mature on March 15, 2026, unless earlier converted, redeemed or repurchased. The net proceeds from the issuance of the 2026 Notes were approximately $930.0 million after deducting the initial purchasers’ discounts and transaction costs.
On May 25, 2022, the Company entered into separate, privately negotiated transactions with certain holders of the 2026 Notes to repurchase (the “Repurchases”) $235.0 million aggregate principal amount of the 2026 Notes for an aggregate cash repurchase price of $176.4 million and aggregate transaction costs of $0.7 million. The Repurchases were accounted for as a debt extinguishment that resulted in a net gain of $54.4 million, which was recorded as non-operating income on the Company's consolidated statement of operations for the year ended December 31, 2022.
During the year ended December 31, 2023, the Company entered into several separate privately negotiated transactions with certain holders of the 2026 Notes to repurchase $367.3 million aggregate principal amount of the 2026 Notes for an aggregate cash repurchase price of $309.1 million and aggregate transaction costs of $2.0 million. The Repurchases were accounted for as a debt extinguishment that resulted in a net gain of $52.4 million, which was recorded as non-operating income on the Company’s consolidated statement of operations for the year ended December 31, 2023.