FSLY Q3 Deep Dive: Security Growth and Cross-Sell Drive Upbeat Outlook

Edge cloud platform Fastly (NYSE:FSLY) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 15.3% year on year to $158.2 million. On top of that, next quarter’s revenue guidance ($161 million at the midpoint) was surprisingly good and 4.7% above what analysts were expecting. Its non-GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.

Is now the time to buy FSLY? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Fastly’s third quarter was marked by strong revenue growth and robust operating leverage, as the company’s cross-sell and upsell strategies translated to notable gains across its product lines. Management credited disciplined execution and targeted investments in security enhancements and platform capabilities as primary drivers. CEO Kip Compton highlighted the success of multiproduct wins with strategic accounts and the expansion of Fastly’s security offerings, stating that these moves provided “exceptional performance, security, and operational efficiency.” The quarter also benefited from early bookings linearity and a focus on cost management, resulting in improved profitability and free cash flow.

Looking ahead, Fastly’s raised guidance reflects confidence in continued momentum from platform expansion, particularly in Edge security and international markets. Management underscored that investments in sales coverage and go-to-market transformation, especially in Asia Pacific, are beginning to yield results. CFO Rich Wong emphasized a rigorous budgeting process and greater discipline around the return on investment for growth initiatives. Compton noted, “We are focused on new customer acquisition and significant cross-sell and upsell opportunities,” as the company aims to drive further operating leverage and sustainable profitability into next year.

Key Insights from Management’s Remarks

Management attributed revenue acceleration to a combination of cross-sell wins, network services expansion, and a notable step-up in security revenue, all supported by operational improvements and platform innovation.

• Security product momentum: Fastly’s security portfolio, including next-generation web application firewall (WAF) and new API discovery features, saw substantial adoption. Security revenue grew 30% year-over-year and now represents 21% of total revenue, driven by both new customer wins and deeper cross-sell into top accounts.
• Platform cross-sell success: The company highlighted a major multiproduct deal with a top 10 customer, where the account consolidated delivery, security, and compute services onto the Fastly platform. This consolidation demonstrates tangible customer value and supports ongoing upsell.
• International expansion progress: Investments in sales leadership and coverage in Asia Pacific and Europe began to pay off, with early wins in both regions. Management cited these markets as underpenetrated and a key area for further growth, facilitated by localized support and expanded go-to-market effort.
• Network services and traffic engineering: Fastly’s network services revenue rose 11% year-over-year, aided by improved traffic patterns and engineering investments that increased network efficiency. This contributed to higher gross margins and operational leverage.
• Go-to-market transformation: Recent organizational changes, including the appointment of a new sales leader for Asia Pacific and a new Chief Accounting Officer, have strengthened Fastly’s ability to scale and execute efficiently, supporting both top-line growth and disciplined spending.

Drivers of Future Performance

Fastly expects continued growth to be fueled by security product expansion, international sales investments, and improved operational efficiency, though management remains mindful of competitive risks and shifting customer demand.

• Security and platform innovation: Management believes that enhancements to Fastly’s security offerings, such as API resiliency and deception capabilities, will drive further adoption and revenue growth. The expanded security portfolio is expected to continue attracting both new and existing customers seeking to consolidate vendors.
• International go-to-market investments: Increased sales coverage and leadership hires in Asia Pacific and Europe are seen as critical to capturing growth in these regions. While early results are promising, management noted these investments are expected to generate more material returns as coverage matures.
• Operational discipline and efficiency: Ongoing efforts to optimize network operations and rigorously manage costs are expected to support margin improvement. Management cautioned that while these actions have driven recent profitability, variability in customer consumption and competitive dynamics could affect future financial outcomes.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the pace of security product adoption and cross-sell momentum across Fastly’s customer base, (2) the impact of international sales expansion, particularly in Asia Pacific and Europe, on revenue mix, and (3) management’s ability to sustain margin improvements through operational efficiencies. Additionally, we will monitor the competitive landscape and customer consolidation trends as major factors influencing growth.

Fastly currently trades at $9.33, up from $8.07 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.