Fastly growth accelerates but relies heavily on top customers
- Q2 2026 revenue grew 23% year over year to $183.3 million, aided by live events.
- Security revenue grew 43% year over year to $41.7 million, reaching 23% of total revenue.
- Top 10 customers represented 37% of revenue and drove 87% of the quarter over quarter growth.
- Gross margins reached a record 65.8%, though hardware costs and memory pricing remain a concern.
- Trailing 12-month net retention rate expanded to 117%.
Top-line acceleration with concentration questions
Fastly is showing undeniable top-line momentum. Q2 2026 revenue rose 23% year over year to $183.3 million. Gross margins expanded to a record 65.8%, and the trailing 12-month net retention rate hit 117%. The bull case is clear: Fastly is proving it can capture high-margin Security and Compute workloads, which now represent over a quarter of the business, while displacing legacy vendors.
However, the composition of that growth introduces new bear case arguments. Nearly half of the Q2 revenue outperformance was driven by episodic events like the World Cup. If that traffic fades in the second half of the year, growth could slow. More concerning is the increasing reliance on a few large buyers.
The top 10 customers now make up 37% of revenue and grew 48% year over year in Q2. Meanwhile, growth from the rest of the customer base decelerated to 12%. This creates a high-wire act for the company. Fastly needs its smaller and mid-sized customers to re-accelerate to prove its platform has broad appeal.
Over the next year, investors will watch whether the new go-to-market leadership can broaden the growth base. If Fastly can maintain 65% gross margins and convert one-time live-event traffic into structural baselines, the turnaround story holds. If episodic traffic drops off and hardware costs stay high, the demanding valuation will be hard to support.
Usage fees on the internet edge
Fastly sells a software-driven edge network. It moves and protects customer traffic from servers closer to the end user, instead of forcing every request back to a faraway data center. Customers pay mainly based on usage across delivery, security, compute, and observability services.
When customer traffic rises, Fastly earns more. That works well if the extra traffic carries strong margins. The strategy focuses heavily on capturing high-volume AI traffic. Fastly is building products to act as the intelligence layer for AI bots and agents, hoping to monetize this massive new source of internet volume.
The central risk to this model is customer concentration. In Q2 2026, the top 10 customers drove an outsized portion of growth and represented 37% of total revenue. Usage-based revenue can fall quickly if a large customer optimizes traffic, negotiates a lower rate, or moves workloads to a competitor.
From CDN roots to edge security
Delivery and Network Services
This is the core content delivery network business. It caches and speeds up websites, apps, and media traffic.
Security
This includes web application firewalls, bot mitigation, and ContentGuard. It grew 43% year over year in Q2 2026 and is the clearest growth engine.
Compute
Compute lets developers run code closer to users. It helped drive Other revenue up 69% year over year in Q2 2026.
Observability
These tools help customers see how their apps and traffic are performing. They support the wider platform by making Fastly easier to manage.
AI Accelerator
This product acts as an AI proxy for apps using large language models, using semantic caching to cut costs and speed up responses.
Q2 mix: growing security share
Fastly does not report formal operating segments, so this mix uses Q2 2026 revenue categories. The top 10 customers were 37% of revenue in Q2 2026.
What could break the momentum
Large customers cut usage
High impact · High oddsThe top 10 customers represented 37% of revenue in Q2 2026, up from 34% in Q1. They accounted for 87% of the quarter over quarter revenue growth. If one or two of these accounts optimize their usage, overall growth will plummet.
Episodic event traffic fades
Medium impact · High oddsManagement noted that nearly half of the Q2 outperformance came from episodic events like the World Cup. As these events conclude, Fastly must replace that usage with core baseline traffic.
AI traffic costs more than it pays
High impact · Medium oddsFastly wants to be the intelligence layer for AI-driven traffic. That only works if it can charge more than it costs to serve the traffic, especially given severe memory component price increases.
Non-top 10 growth stalls
Medium impact · Medium oddsRevenue from customers outside the top 10 grew just 12% year over year in Q2 2026, a deceleration from Q1. Broad-based adoption is necessary for a durable turnaround.
In one breath
What does Fastly actually do?
Fastly runs an edge cloud network. It helps websites, apps, APIs, and media load faster and stay safer by handling traffic closer to users.
Why does AI matter for Fastly?
AI agents and apps create massive internet traffic and bot activity. Fastly is building products to help customers control and speed up that traffic at the edge.
What is the main thing to watch next?
Watch whether Fastly can maintain its 20% plus revenue growth as summer live events end, and whether growth outside its top 10 customers re-accelerates.
