Shares of Fastly surged 10.5% to $23.74 on September 9 after CFO Rich Wong delivered an upbeat presentation at Citi's Global TMT Conference in New York, painting a picture of a company that has crossed the profitability threshold and is riding new demand from artificial intelligence. The question now: does the market believe this is sustainable, or just conference-day enthusiasm?
Record Revenue and Margins Suggest the Turnaround Is Real
Fastly reported record Q2 revenue of $183.3 million, up 23% year-over-year, with security revenue surging 43% and a record non-GAAP gross margin of 65.8%.
Operating income hit $27 million, marking the fourth consecutive quarter of operating profit at a record 14.7% operating margin. A year ago, this company was losing money. The gross margin jump — from 59% in Q2 2025 to 65.8% — means Fastly keeps far more of every dollar it earns, directly improving its path to sustained profitability.
Customer Stickiness Is Improving After Years of Weakness
Fastly's trailing 12-month net retention rate — measuring how much existing customers spend compared to the prior year — rose to 117%, up from 113% last quarter and 104% a year ago. That's critical: it means customers are buying more products, not just renewing. Cross-selling its web application firewall and newer tools like DDoS protection and bot management are driving that expansion.
AI Traffic Is a Compelling Narrative, but Concentration Risk Lingers
Fastly's own research found AI traffic grew 6.5x faster than human traffic this year. More AI-generated web requests mean more demand for Fastly's network. However, Fastly's top 10 customers still account for 37% of revenue, with that cohort growing at 48% versus just 12% for everyone else — a lopsided dynamic that makes the business vulnerable if even one large account pulls back.
Insider Selling Complicates the Bull Case
CEO Kip Compton has sold 409,791 shares over the past year with zero purchases.
Sales were executed under pre-arranged trading plans , but the steady, aggressive pace — including ~55,000 shares sold in just the August 31–September 1 window — sits uncomfortably alongside a stock that trades at roughly 46x normalized earnings. Fastly raised its full-year revenue outlook to $732M–$746M , yet the premium baked into today's price leaves little room for a stumble.