# Fastly hits profitability inflection in Q2

> Edge cloud platform company beats earnings and raises guidance, but customer concentration and capex spending raise questions.
- Title: Fastly hits profitability inflection in Q2 | Shortify
- Summary: Edge cloud platform company beats earnings and raises guidance, but customer concentration and capex spending raise questions. Fastly achieved sustainable…
- Keywords: fastly, fsly, earnings, cloud computing, edge cloud, profitability, q2 2026, security segment, customer concentration, free cash flow, nasdaq, hits
- Source: Alphastreet - Earnings Decoded. Market Intelligence Delivered — https://news.alphastreet.com/should-you-be-bullish-on-fastly-fsly
- Author: Newsdesk
- Published: 2026-09-21T16:51:32+00:00
- Read time: 2 min
- Topics: fastly, fsly, earnings, cloud computing, edge cloud, profitability, q2 2026, security segment, customer concentration, free cash flow, nasdaq
## Fastly posts record Q2 revenue
The edge cloud company generated $183.3 million in Q2 2026 revenue, up 23% year-over-year and beating analyst expectations. The beat signals strengthening demand across its platform offerings.

> record second-quarter revenue of $183.3 million, representing 23% year-over-year growth, which exceeded analyst consensus expectations
## Gross margins expand dramatically
Cost of revenue stayed flat at $67.4 million despite a $34.6 million revenue increase, lifting gross profit by 43% and expanding gross margin by 8.8 percentage points. Non-GAAP gross margin hit a record 65.8%.

> Non-GAAP gross margin reached a record 65.8%
## Security segment accelerates growth
Security revenue jumped 43% year-over-year to $41.7 million, now representing 23% of total revenue. This nearly 2.5x faster growth than Network Services validates the diversification strategy.

> Security revenue accelerated to $41.7 million (up 43% year-over-year, 23% of total revenue)
## Customer expansion metrics strengthen
Net retention rate reached 117% in Q2, up from 113% in Q1 and the highest in over three years. Remaining performance obligations jumped 38% year-over-year to $341 million, providing visibility into future revenue.

> Last-12-month net retention rate (LTM NRR) reached 117% in Q2 2026, up from 113% in Q1 2026
## Profitability inflection confirmed
GAAP net loss narrowed 58% to $15.6 million from $37.5 million year-over-year. Non-GAAP operating income reached $27.0 million and non-GAAP EPS hit $0.15, beating consensus by $0.08.

> non-GAAP EPS of $0.15 beating consensus by $0.08
## Free cash flow declines despite gains
Operating cash flow improved 52% to $39.3 million, but free cash flow fell 67% to $3.6 million due to elevated capital expenditures. The company is investing heavily in infrastructure to support future growth.

> free cash flow declined to $3.6 million from $10.9 million in Q2 2025, a 67% decrease
## Customer concentration risk rising
Top-ten customers now account for 37% of Q2 revenue, up from 31% one year earlier. Any material spending change from a large customer could cause outsized revenue volatility.

> The top-ten customers accounted for 37% of Q2 2026 revenue, up from 31% one year earlier
## Stock surges but valuation limited
Fastly stock jumped 21% to $28 on August 10, five days after earnings. The next-12-month price-to-sales multiple sits at 5.64x, above its recent mean but below April's 7.14x high. Street consensus suggests limited upside.

> The stock surged 21% to $28 on August 10, 2026
## Key takeaway

Fastly achieved sustainable profitability with record margins and strong revenue growth, but investors should watch whether the company can maintain cost discipline while scaling higher-margin security services.