During Fastly's Q3 2024 Earnings Call held on November 6, the company highlighted significant progress and challenges. The call featured remarks from CEO Todd Nightingale and CFO Ron Kisling. The main points of discussion included Fastly's financial performance, strategic initiatives, and future outlooks. The company reported a revenue of $137.2 million, surpassing the high end of their guidance due to unexpected strength in large media customers and balanced growth outside the top 10 customer accounts. Notewise, Fastly achieved its best operating loss in over four years, reporting an operating loss of $520,000 due to higher revenue and gross margins, along with quicker-than-expected execution of restructuring efforts.
A key highlight was Fastly's achievement of a net profit of $2.4 million and positive adjusted EBITDA of $13.3 million, both of which are new records for the company. This improvement marks a significant milestone as Fastly continues to diversify its revenue. During Q3, 33% of revenue came from the top 10 customers, down from 40% in the previous year. Revenue outside these top customers grew by 20%, signaling positive momentum in Fastly’s strategy to reduce dependency on a few customers. This growth reflects Fastly’s focused investment in product development, customer success, and market initiatives.
In terms of strategic advancements, Fastly released a major expansion of its security portfolio, brought in new sales leadership, and shifted to a bespoke engagement model for large, multivendor customers. Notable developments include the launch of Fastly's adaptive DDoS protection and significant progress in the AI accelerator, which is anticipated to be available for purchase by the end of the year.
Fastly's efforts to grow its enterprise customer base saw a mixed outcome. While the total enterprise customer count increased by 10% compared to the previous quarter, the enterprise segment saw a slight decline as some customers fell below the $100,000 annual run rate. However, the company remains optimistic about its growth prospects, attributing them to its new go-to-market strategy led by CRO Scott Lovett and its packaging efforts which have led to a significant increase in customer acquisition.
The company is focused on expanding its presence in the security market, considering it a major growth vector moving forward. Fastly's Threat Insights report indicates that cyberattacks are increasingly targeting multiple customers, and Fastly's solutions, such as the newly launched bot mitigation service, aim to address these challenges effectively.
Looking ahead, Fastly has taken a cautious stance with its Q4 guidance due to anticipated losses in some major customer accounts and seasonal variability. The company forecasts Q4 revenue between $136 million to $140 million. Despite external pressures, Fastly remains optimistic about the future, particularly with regard to the significant opportunities it foresees in the security sector and potential market shifts in 2025.
CFO Ron Kisling reported that revenue from network services grew by 5% year over year, and security revenue increased by 12%. The company's RPO (Remaining Performance Obligations) stood at $235 million by the end of Q3, up from $223 million in the previous quarter. Fastly aims to continue improving operating efficiency and maintaining cost discipline, reflected in the recently executed restructuring. For the full year 2024, the company projects revenues of $539 million to $543 million. The earnings call concluded with a Q&A session, touching on competitive dynamics, growth in security offerings, and customer retention strategies.
