Fastly at 45th Annual William Blair Growth Stock Conference: Strategic Expansion

On Wednesday, 04 June 2025, Fastly Inc. (NYSE:FSLY) presented at the 45th Annual William Blair Growth Stock Conference, outlining strategic initiatives that underscore its evolution from a content delivery network to a comprehensive edge delivery platform. The company highlighted its diversification efforts, particularly in cybersecurity and edge computing, and expressed optimism about achieving double-digit growth despite some challenges in customer concentration.

Key Takeaways

• Fastly is transitioning from a CDN to a robust edge delivery platform, emphasizing edge technology and cybersecurity.
• The company reported a decrease in revenue concentration from its top 10 accounts, dropping from 40% to 32%.
• Fastly anticipates double-digit growth driven by platform diversification and a favorable pricing environment.
• AI initiatives are a focal point, with Fastly launching an AI accelerator and object storage functionality.
• CapEx is expected to decrease in the long term, enhancing financial stability.

Financial Results

• Customer Concentration: Fastly successfully reduced revenue concentration from its top 10 accounts from 40% to 32% by the end of 2023.
• Growth Outside Top 10: The company reported a 17% growth in revenue from customers outside the top 10.
• Gross Margin Drivers: Gross margins are bolstered by a diverse customer base and increased adoption of multiple products.
• CapEx Spend: Current CapEx is 8-10% of revenue, projected to decrease to 6-8% in the medium to long term.
• Edge Compute Growth: Fastly noted a 67% growth in edge compute this quarter.

Operational Updates

• Portfolio Expansion: Fastly launched a bot mitigation product and a turnkey DDoS solution, enhancing its cybersecurity offerings.
• Go-to-Market Shift: The company is shifting its strategy to focus on cross-selling and portfolio expansion, supported by new sales and marketing leadership.
• Cybersecurity Investment: Significant R&D investment is planned for 2024 to expand Fastly’s cybersecurity capabilities.
• AI Initiatives: Fastly introduced object storage functionality and an AI accelerator to support AI use cases.
• Infrastructure Efficiency: The company maintains a software-defined infrastructure for flexible deployment of new features.

Future Outlook

• Growth Confidence: Fastly is confident in achieving double-digit growth, aided by platform diversification and competitor exits.
• Margin Improvement: The company expects improved gross margins through increased cross-selling of security products and higher customer retention.
• Edge Compute Adoption: Fastly anticipates continued high growth in edge compute, driven by AI use cases.
• AI Investment: Fastly plans to evolve its infrastructure to support AI within the existing CapEx envelope.
• Customer Focus: The company emphasizes enhancing user experience and ensuring fast, safe, and engaging digital experiences.

Q&A Highlights

• AI Accelerator Competitors: Fastly’s AI accelerator, launched in Q4, competes with emerging AI proxy solutions, focusing on user acceleration and total cost of ownership.
• Multi-Context Protocols (MCP): While there is no opportunity with large cloud providers, Fastly sees potential if customers run their own models on their infrastructure.

For further details, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Unidentified speaker: It is. It’s a big table.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Hello, everyone, and you for joining us for our Growth Stock Conference and today’s session with Fastly. My name is Jonathan Ho, and I’m the cybersecurity analyst for William Blair Company. Our speakers today are Todd Nightingale, who’s the CEO of Fastly, and Ron Kisling, who’s the CFO. Before we begin, I’m required to inform you that a complete list of research disclosures is available at our website at www.williamblair.com. With that, I’ll hand it over to Todd to do a brief overview of the company, and from there, we’ll go into Fireside chat.

So, Todd? Great. Thank you so much.

Todd Nightingale, CEO, Fastly: I’m not meant to stand up there and do this.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: You can you can sit.

Todd Nightingale, CEO, Fastly: Thank you. Great. Appreciate everybody’s time here, and, thanks for the, focus on Fastly. Fastly was, born as a content delivery company, but over the past, few years, really has evolved into an edge delivery platform, and that edge platform is capable of, really delivering best in class user experience. We partner with, our customer base who is building apps and websites and streaming services to deliver the fastest, safest, and most engaging web web experiences possible, and it’s that partnership with our customer base that delivers that outcome of fast, safe, and engaging experiences on the web.

In order to do so, we focus on delivering best in class edge technology. That includes content delivery, the highest performing, content delivery, service in the world, edge security, including DDoS, bot mitigation, and, web application firewall, services, edge compute, part of our emerging platform allowing bespoke serverless compute at the edge, which allows for the best personalization on the web, and, of course, observability. Increasingly, our customer base is focused on building the most reliable, sites in the world and building an observability feature set capable of giving them the visibility they need to do that is really part and parcel to this. This transition from a point, product, in the CDN space to a full edge platform, has had a host of really, significant improvements to the Fastly business model. It’s helped us diversify our customer base.

We are now engaged at far more accounts in a far more diversified set of enterprise verticals, not just media and publishing, but increasingly high-tech, retail, ecommerce, hospitality, healthcare, etcetera. It’s also helped us diversify our revenue into these other spaces so that we’re not as dependent on the CDN space, and it’s helped us drive profitability, across the board. We’ll talk more about how those numbers are are shaping up here in, as we see it through the rest of this year and and beyond. But overall, this platform strategy, has has let us, really double down on the value proposition that made Fastly compelling and important from the beginning, which was performance and programmability, which is really the value proposition for the end user and the and the customer, and really expand the platform, value proposition which allows us to drive larger wallet share at our customers and reach new customers, in new verticals.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. Thanks for that that overview. You know, maybe just to kind of kick things off a little bit, I think you you talked a little bit about diversification of your customer base, and, you know, the company has done a fantastic job of being able to move away from some customer concentration challenges in a relatively short amount of time. Can you help us maybe understand some of the actions that you’ve taken and how you were able to achieve this?

Todd Nightingale, CEO, Fastly: Yeah. Had 40% revenue concentration in our top 10 accounts at the end of twenty three, and, we saw that drop all the way to 32% with really a change in the buying motion in large media streaming account at the beginning of last year. That whole transition, we were able to post positive growth every single quarter. And, obviously, that was a very rapid shift in that customer concentration, but we were able to post healthy growth outside that top 10 pretty reliably. In fact, last quarter, we posted 17% growth outside the top 10, and that’s really been based on this, you know, port this this platform expansion being, I think, a really stronger and stronger solution for enterprise application development team, platform engineering teams that are looking for one complete edge solution for both secure most importantly, for security and delivery.

And it’s also it’s, I think, built a strong foundation upon which as we start to see the recovery in those large media accounts, we can, really build, you know, some very strong growth results for next year.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. Excellent. And and, Ron, with, you know, maybe less customer concentration, what could this mean for Fastly’s margin potential and, you know, potential for retention improvement over time? Yeah.

Todd Nightingale, CEO, Fastly: I mean,

Unidentified speaker: I think one of the things you see sort of outside by having a robust set of customers in that space is more predictability, seen as a more reliable space. There’s a little less volatility particularly than any one customer can have. We also see really good ramp from customers when we sign them up over time. So as we accelerate the number of new customers into that category, it can be a big contributor to growth. And then I think when you look across margin, I think what really drives our margins is a healthy mix of customers, a broad set of enterprise customers and then and we’ll talk about this I think in a minute, but also more attach in terms of customers who use more of our products are all things that can drive improvements in our gross margin and increase stickiness of those customers.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. Excellent. You know, when we look at the potential for the company to return to double digit growth after maybe a challenging period, over the past few years, you know, we’ve seen the exit of Edgeo, StackPath, and Lumin. You know, these are big competitors or small competitors that have exited the market. What underpins your confidence that you’ll be able to see these trends improve or maybe reverse over time?

Todd Nightingale, CEO, Fastly: StackPath and Lumen have been relatively small, Edgio did carry quite a bit of traffic, quite a a decent amount of revenue. I think the biggest difference with the exit with those exits in the space is the is the pricing environment. I think what what drove their exit, was that they just had very high customer concentration and they had really a single almost all their revenue coming in through that content delivery, through that content delivery space. For us, with the diversification of our business on the portfolio side and the customer side, we have a stronger foundation. And now with their exits, a pricing environment that I think is advantageous and and will be for a few years, which will help us drive gross margins, it’ll help us drive customer retention and loyalty, and give us that opportunity to expand in every single account to a much broader, you know, feature set and and and wallet share.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. I mean, if we if we dig into this notion of the portfolio concept a little bit more, you know, one of the more exciting things is the developments in cybersecurity around your business. Can you talk a little bit about, you know, how this has been a critical pivot point and, you know, maybe what excites you about the company’s opportunity to build out that portfolio, and to see that mature over the past few quarters?

Todd Nightingale, CEO, Fastly: Yeah. You know, in 2024, we invested a ton in r and d on the security side, and and the port I think the portfolio expand expansion shows that. We launched a bot mitigation product. We launched a DDoS solution that works out of the box, turnkey DDoS solution. We’ve expanded the, feature set within our web application firewall and and in in bot and DDoS as well.

That investment has all been driven on, you know, customer engagement and co development with our customers who are looking for their edge platform to deliver these solutions. We know that there’s customer demand and traction there. Having made that investment, we’re really shifting to the go to market. We’ve brought on, go to market leadership both on the sales and and marketing side with strong security background. They’ve brought in good good leadership under them.

We’ve sharpened up our, comp plans to be focused on this sign of cross sell and portfolio expansion, motion. There’s We can clearly see the demand in the market and right now are really focused on rising to that challenge. We feel really comfortable with the portfolio. We’ve had great, success on the early data on the newly launched products, both bot and and DDoS. And, I yeah.

Obviously, we’re investing and feel really confident about how the back half of the year in 2026 will look.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Yeah. Maybe maybe if we can dig in a little bit into, like, you know, the differentiation of these products and Sure. You know, how they sort of stand out in the market a little bit.

Todd Nightingale, CEO, Fastly: On the WAF side, this core intellectual property came from an acquisition of Signal Science, a few years ago and really delivers best in class efficacy on web application. This is tends to be the kind of flagship product in the web application and API protection space. Because of that high efficacy, the vast majority of our customers run-in a, fully reactive mode. The system automatically turns on the protections and blocks traffic. It doesn’t just raise alerts and thereby becomes wildly more valuable because the total cost of ownership drops and the actual security protection increases without requiring human verification and, human intervention or to actually put the, put the product in blocking mode.

On the DDoS side, for years, Fastly has provided best in class, like, sophisticated DDoS protection, but we have not always had a turnkey product. Our DDoS protection required highly sophisticated users who are highly engaged on our platform. Now we’re able to deliver that efficacy that that we’ve been known for at large sophisticated accounts to a far, far larger, customer base. And to be honest, it’s DDoS is a solution that should be delivered on the same platform as CDN, so there’s enormous attach value here. If you if you’re offering an edge DDoS protection service away in a different cloud from your CDN, you’re gonna be ping ponging your traffic between clouds, which is highly inefficient.

So the the attach is just incredibly incredibly, valuable. On the bot mitigation side, I really believe this is gonna be a question of speed of innovation. We launched the bot solution. We added, enhanced that solution significantly. And then, actually, in q one, we added, protection for AI scraping bot detection, and it’s a cat and mouse game.

This is a market where there is an adversary who’s constantly innovating in terms of how bots try to beat bot management and bot detection, and we’re getting with our kind of team and our focus in this space, we’re building more and more sophisticated solutions. It’s gonna be a game of speed of innovation for sure.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. Ron, how do we think about the business model for cybersecurity, and are these revenue streams potentially higher margin, more defensible over time? Talk to us about some of the advantages here.

Unidentified speaker: I think it’s really important in a couple of ways. One, I talked about earlier, more and more companies are buying platform. They want to buy delivery that has the security they need. And I think that’s why you’ve seen some of the full delivery providers exit the market. And so entering this year with a more complete security portfolio gives us an opportunity to increase our security revenue.

Importantly, couple of things. I think one, we find that customers who have more of our products are much stickier in terms of higher retention. And so as we sell more of the security portfolio, we create longer term customers. And then from a margin perspective, our security runs on the same platform that our delivery runs on and our compute. And so the more products we’re able to sell to our customers, the more we raise our gross margin.

Today, currently have just under half of our customers are running two of our products. The expansion of the security portfolio, if we can bring that number up and increase it to two or three, that is a significant, contributor to improving our gross margins.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. I don’t think we can have any of these fireside chats without a discussion on AI. AI

Todd Nightingale, CEO, Fastly: is shocking.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: So so there’s been a lot of talk about AI in the marketplace. You know, you touched on this a little bit, but there’s been, you know, all this controversy over, you know, the AI and whether they should have access to data, privacy, monetization. What does that opportunity look like for Fasti to participate in, and, you know, how does the AI revolution, maybe on the AgenTex side, you know, start to play a role as well?

Todd Nightingale, CEO, Fastly: Yeah. I mean, I think, there’s a there’s a lot of momentum here on thinking about how the training sets are built, and that’s something that’s near and dear to our customers on on both sides of the house. The AI bot detection is about detecting bots that are scraping data in order to train your competitors’, you know, models and and whatnot, competitive pricing or competitive, product messaging or whatever it might be. And we are, like, dedicated to building a safe, you know, Internet where people can, you know, present their data and with without having to worry about or without the ability to protect against being, you know, all of their data being scraped away by their competition. But on the other side, there’s a real opportunity here for us to serve those training datasets appropriately from people who want to sell them.

And in fact, we launched object storage functionality into our compute portfolio in q four, and we’ve already, seen a large strategic customer, come in and start distributing their training sets that they’re selling for AI training, through that platform and leveraging the performance of Fasti, which is incredibly important for this use case. They need to deploy these training sets to the, to the models at with extremely high bandwidth in order to keep, their customers’ models as they as they continue to upgrade from one gen one version of the model to the next to retrain, each step of the way. And, and they also need the control to be sure that folks are only using the dataset that they’ve paid for and licensed, etcetera. And that use case is, it’s a super powerful use case. It’s an important place that we can, play on the training side of the house.

On the the forward propagation side, on the actual use of these models, in q four, we also went, we also brought our AI accelerator to market, fully generally available across across across our platform, and that allows folks who are using LLMs to both lower their costs of, their AI costs in their central art and central clouds and GPU costs and also provide high, far faster response times to folks who are running LLMs like for customer service or customer engagement on on b to c sites. And, that’s that’s certainly an interesting interesting use case. It has the benefit that I think Fasta can deliver in terms of delivering better performance and, better TCO.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. Excellent. You know, how do you think about, you know, making more incremental investments here, in terms of computer infrastructure to prepare for things like inference based AI? Like, what does that look like, and and what does the opportunity set look like as this becomes more and more of a reality?

Todd Nightingale, CEO, Fastly: Yeah. As far as the the cap spend stuff, I’ll I’ll let Ron, add color there, but, you know, we are always evolving the infrastructure that we’re deploying and tracking the use cases that our, that our customers wanna deploy. But importantly, we have a fully software defined infrastructure. We don’t have a myriad of appliances and custom hardware in our cloud. It’s all of our POPs are built as simply as possible from a hardware perspective so that our software can be as flexible as possible.

And because of that, we found the ability to deploy these this feature set and functionality within our regular spend envelope, and I I do imagine that’ll, that will continue.

Unidentified speaker: Yeah. And I think if you look at that spend envelope, what we’ve said is generally, we’re very efficient in CapEx. We said it’d be somewhere between 810% of revenue, including capitalized internal software. So our external CapEx maybe is half of that. We do think in the medium to long term, maybe that number comes down to 6% to 8%, but within that 9% to 10%, I think that captures the ability to bring in any of the hardware that we would need, to support AI.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Excellent. Excellent. Yeah. In terms of the edge compute market, you know, when are we, you know, gonna see sort of broader adoption of edge compute? And particularly, you know, with your investments in WebAssembly, like, what does that market opportunity look like?

Todd Nightingale, CEO, Fastly: Yeah. Serverless compute, we we use, WASM, we call it WebAssembly, technology to deliver that. The more that people start to move really dynamic content and dynamic functionality onto the edge platform, the more that tends to accelerate. We saw pretty good growth this quarter in that, segment. I think it was 67%, but I don’t wanna get that number.

And, you know, I think we have an opportunity to drive that kind of very high growth rate for for quite a while because we’re seeing adoption on the AI use cases. We’re seeing more and more dynamic services being built on the platform, and as more folks are looking at Fastly beyond CDN, as they’re looking at Fastly as an edge platform, it becomes more and more attractive for their development team to leverage that type of service because they’re already looking beyond CDN, and so it’s really part of this platform story. There’s a buying, there there’s a buying motion here that once they’re adopted onto the platform beyond a single point product, that it’s easier to expand from one to the next. Makes a

Jonathan Ho, Cybersecurity Analyst, William Blair Company: ton of sense. And, I mean, we’ll open up the the questions for the audience in a little bit, so, go ahead and get prepared. But, you know, what what maybe has to happen to accelerate the adoption of that edge compute? Like, what are what are sort of the next steps or or what, you know, sort of killer applications maybe have to take place for that?

Todd Nightingale, CEO, Fastly: Yeah. I I would say, like, from us, I think, continued vigilance in being the highest performing solution in the market. We we pride ourselves on that, and this is kind of the most programmable way. Customers can actually deploy their own code into the Fastly platform and run it on every server around the world. It’s a very, very powerful solution, and performance tends to be the reason people do this.

You know, they traditionally have served static content from the edge and everything dynamic has had to go back to their core, their origin servers. By pushing it to the edge, we can radically, increase the performance and finally let them provide highly personalized service to all of us without having to compromise how performant that is. I think from the customer base, we’re really seeing this trend which is, you know, more and more verticals focusing on the digital experience that they are providing their customers. I was just talking about this earlier today. Every airline has a loyalty app that probably everyone in this room uses every day.

And how personalized that app is to you and how performant it is, how quickly you get the results to your searches and your ticket and pulling up your boarding pass, etcetera, it it matters deeply. And we’re seeing more and more traditional enterprises like that really investing in this space. We’ve seen a lot of success in, in in the airline space, for example, and there there’s a lot of verticals like that that are focusing deeply on building a sophisticated and differentiated digital experience, and it’s that transition that’s driving growth into our compute.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Yeah. Maybe one last one on my side. On that last point, you know, when we think about, you know, potentially the the applications becoming more sophisticated, you have AI coming on board. You know, does the world start to sort of start to move more and more into Fastly’s favor over more traditional, you know, delivery methods and edge compute? Can you talk to maybe, you know, what what has to happen there?

Todd Nightingale, CEO, Fastly: As people start to focus more deeply on how good the user experience is, I think that shifts to FastSafe’s favor. We we say we want make the Internet a better place where every experience is fast, safe, and engaging. Those websites and apps, streaming services, whatever, is being built, the outcome that matters is the user experience, how all of us experience that app, whether it’s video streaming or airline, or or ecommerce. And the more that teams realize the more that these buyers are focused on the fact that their the user experience they deliver, how responsive it is, how safe it is, how reliable it is, that that determines their bottom line, that it’s more directly tied to their profits and their outcomes, I think, the the better off the the more likely they are to choose Fastly and invest in the Fastly platform. Excellent.

Go ahead.

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Can you repeat the question?

Todd Nightingale, CEO, Fastly: Sure. We launched AI accelerator in q four last year. Who are we replacing in that space? Who is the incumbent? That’s the question.

This is an emerging space. The central cloud the the AI, clouds, the large the large incumbents in the space, Some of them even in their technical spec have a proxy, architecture that allows for this or supports this kind of motion. They all support it, but some of them even are specifically articulated. But there hasn’t been someone in this space. This space has only really existed for a couple of years, but our AI accelerator would compete against other solutions referring to themselves as like an AI proxy of which there’s just a couple starting to emerge.

There’s no incumbent in that space. We have focused our functionality on acceleration for the end user and TCO for the customer, but there are proxies that are, focused on tracking of developer adoption or platform, platform migration from one back end to the next, which is all feature set we’re considering adding. But it’s it’s an

Jonathan Ho, Cybersecurity Analyst, William Blair Company: Speaking of AI, is there an opportunity around MCP or multicontext protocols so the AIs will leverage services, you know, from each other? And I can imagine there’s a connectivity component there as well

Todd Nightingale, CEO, Fastly: or too early. It’s a it’s a good question. Those the large back end, like shared clouds, like the the OpenAI or the the Gemini, infrastructure is so well connected already. I think probably not an opportunity for us. But as people are running their own models on their own infrastructure in their colors, then I think we do have an opportunity, especially as they’re gonna need to distribute training sets, around the world.

They’re gonna wanna control how much egress they’re they’re really buying. Other

Jonathan Ho, Cybersecurity Analyst, William Blair Company: questions? Alright. I guess we’ll give you a few minutes back.

Todd Nightingale, CEO, Fastly: Thank you so much. I really appreciate everybody’s interest in Fasten. Thank you. Thank you. Thank you.

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