FSLY Q2 2026 - Preliminary Earnings Alert

Event: Quartr Q2 2026 event Retrieved: 2026-08-05T21:18:00Z Comparison mode: maximal Scorecard contract: v1 Source status: release=available | financials=earnings release only | transcript=live (call in progress, 2026-08-05 20:30Z)

Consensus scorecard

Reported results and guidance

Guidance (the release states the full-year outlook was raised; prior ranges are not restated in this document):

• Scorecard recap: revenue of $183.3m beat consensus by 5.4% and non-GAAP diluted EPS of $0.15 beat the $0.0659 estimate by 127.6%.
• CEO Kip Compton attributed the quarter to "strong execution" and said the platform strategy gave the company confidence to raise the full-year outlook.
• Security revenue of $41.7m grew 43% and Other (Compute and Observability) of $7.7m grew 69%, both well ahead of Network Services at 17%.
• Beginning with the quarter ended 31 March 2026 the company excludes stock-based-compensation-related employer payroll taxes from its non-GAAP measures and did not recast prior periods, which the company describes as immaterial.
• Product and partnership items named for the quarter: a LALIGA anti-piracy collaboration, a Skyfire partnership for AI-agent commerce at the edge, a C++ SDK for Fastly Compute, and research on AI traffic growing 6.5x faster than human traffic this year.

Key bullish aspects

• Both scorecard metrics beat, and the EPS beat is large in absolute terms: $0.15 non-GAAP diluted against a $0.0659 estimate, more than double consensus.
• Revenue growth of 23.3% is a sharp acceleration for a business that grew 21.5% over the six months and that the provider's own history shows growing in the mid-single digits as recently as fiscal 2024.
• Gross margin expanded 8.8 points on a GAAP basis and 6.8 points on a non-GAAP basis while cost of revenue was flat in dollars at $67.4m against $67.6m, so all of the incremental revenue fell through to gross profit.
• Non-GAAP operating income of $27.0m reversed a $(4.6)m loss a year ago, and non-GAAP net income of $26.2m reversed a $(5.0)m loss.
• The GAAP loss from operations narrowed 60.9% to $(14.4)m even as stock-based compensation rose 33.6%, so the underlying operating leverage is larger than the GAAP line alone shows.
• Remaining performance obligations of $341m rose 38% year over year, growing faster than revenue, which points to committed future revenue rather than spot usage.
• LTM net retention of 117% is the highest in over three years and improved four points from 113% in Q1 2026, so expansion within the existing base is accelerating rather than plateauing.
• Security revenue at $41.7m grew 43% and is now 22.7% of total revenue; the faster-growing, typically higher-margin mix is compounding against the slower Network Services line.
• Operating cash flow rose 52.3% to $39.3m from $25.8m.
• Research and development spending was flat in dollars at $42.1m while revenue rose 23.3%, and non-GAAP R&D actually fell to $29.1m from $30.5m.
• The company raised its full-year outlook, and the FY 2026 revenue guide of $732m-$746m against $356.3m booked in the first half implies $375.7m-$389.7m in the second half, above the first-half run rate.

Key bearish aspects

• Free cash flow fell 67.0% to $3.6m from $10.9m even though operating cash flow rose 52.3%, so capital spending consumed nearly all of the operating cash generated this quarter.
• Customer concentration worsened materially: the top ten customers were 37% of revenue against 31% a year ago, so the revenue acceleration is coming with more single-customer exposure.
• The company is still lossmaking on a GAAP basis, with a $(15.6)m net loss this quarter and $(36.1)m over six months.
• The gap between the GAAP and non-GAAP results is almost entirely stock-based compensation and related payroll taxes of $35.2m, which is 19.2% of revenue this quarter, up from 17.7% a year ago.
• The non-GAAP diluted share count of 180,304k is 22,708k above the GAAP basic and diluted count of 157,596k, so the headline non-GAAP EPS is struck on a share base 14.4% larger than the GAAP denominator.
• General and administrative expense rose 29.8% to $31.6m, faster than revenue, driven by stock-based compensation in that line rising to $10.2m from $3.8m.
• The Q3 revenue guide of $184.0m-$190.0m brackets a midpoint of $187.0m against $183.3m this quarter, roughly 2.0% sequential growth, well below the 23.3% year-over-year rate just reported.
• The Q3 non-GAAP EPS guide of $0.11-$0.13 is below the $0.15 just delivered, so the company is not guiding this quarter's profitability to hold.
• Interest income fell 7.8% to $2.8m while interest expense rose 5.8% to $3.3m, flipping net interest to a small expense.
• The non-GAAP definition changed this year to also exclude stock-based-compensation payroll taxes, and prior periods were not recast, so the year-over-year non-GAAP comparisons are not on an identical basis.

Key uncertainties

• The release states the full-year outlook was raised but does not restate the prior guidance ranges, so the size of the raise cannot be determined from this document.
• The guidance table's column headers were not preserved in extraction; the first column is read here as Q3 2026 and the second as full year 2026 because the values are quarterly- and annual-scaled respectively and the section is titled "Third Quarter and Full Year 2026 Guidance".
• The release gives no reconciliation of forward non-GAAP guidance to GAAP, invoking the unreasonable-efforts exception, so the guided operating income and EPS cannot be tied to a GAAP forecast.
• Capital expenditures are not disclosed in the release narrative; they are inferred only from the $39.3m operating cash flow against $3.6m free cash flow, and the components (property and equipment, capitalized internal-use software, finance lease payments) are not broken out.
• Why the top ten customers rose to 37% of revenue is not explained; whether it reflects one large customer ramping or broad-based expansion at the top of the base is not determinable here.
• The 117% LTM net retention rate is compared to the prior quarter, not the prior year, so the year-over-year trajectory of retention is not stated.
• Security revenue growth of 43% is not decomposed between the Next-Gen WAF, Bot Management, and DDoS Protection products named in the forward-looking statements.
• The $3.878m six-month income tax benefit is not explained; the quarter itself carried a $0.252m expense, implying a benefit recognized in the first quarter that is not described.
• Remaining performance obligations were recast in Q3 2025 for an error involving termination-for-convenience clauses; the $247m prior-year figure is the recast number, and the release does not state the original.
• The condensed balance sheet and cash flow statement pages of this release were not read for this preliminary; cash, debt, and the composition of capital spending are not assessed.
• The 4:30 p.m. ET call was in progress when this report was written and the Quartr transcript is live rather than complete, so management's account of the guidance raise, customer concentration, and the free cash flow decline is not assessed at this stage.

Market context

• API Ninjas snapshot: FSLY $26.03 on NASDAQ, volume 14,458,585, quote timestamped 2026-08-05T21:14:29Z, retrieved 2026-08-05T21:16:00Z. The release was published after the U.S. close on 2026-08-05; this is a single quote of unstated session basis captured after the close, not a measured reaction to the release.

Source limitations

• Every actual above comes from the Quartr Q2 2026 earnings release document (3667707). Quartr standardized financials for this event are not yet populated, and the Form 10-Q (3667708) and slides (3969435) attached to this event were not read for this preliminary.
• API Ninjas supplied no actual or difference fields for this event, so each beat/miss is calculated locally as Quartr actual minus API Ninjas estimate. The API row carried no fiscal year or quarter, so the exact ticker-and-event-date match path was used.
• The EPS scorecard row uses non-GAAP diluted EPS of $0.15, the company's headline adjusted measure, per the configured EPS ladder. GAAP basic and diluted EPS was $(0.10).
• Year-over-year percentage changes and the margin-point and share-count differences are calculated from the release's own columns; the release prints the revenue growth rates and gross margins itself and they agree.
• Non-GAAP gross profit and margin, non-GAAP operating income, non-GAAP net income and per-share amounts, adjusted EBITDA and free cash flow are non-GAAP measures as defined by the company; the reconciliations shown in the release are the company's own.
• The condensed consolidated statements of operations in this release are unaudited.
• The revenue-line table reproduces the company's stated segment revenue and growth rates from the release narrative; the release does not print a reconciled segment table with prior-year dollar amounts.
• Operating cash flow, free cash flow, remaining performance obligations, net retention, and customer concentration are quoted from the release narrative and key-metrics footnotes.

Source links

• Quartr Q2 2026 earnings release
• Quartr release headline results page
• Quartr release key metrics and guidance page
• Quartr release statements of operations page
• Quartr release non-GAAP reconciliation page