Fastly, Inc. 10-K

Item 1. Business Overview Organizations around the world are more dependent on the quality of digital experiences they provide than ever before. At Fastly, we deliver an edge cloud platform capable of delivering fast, safe, and engaging digital experiences. By focusing holistically on the edge cloud from developer inspiration to end-user experience, we have the opportunity to differentiate with our global footprint, dynamic infrastructure, and security solution. Performance, security, and building the most engaging applications are paramount to driving mission success for Fastly’s customers. The edge cloud is a category of Infrastructure as a Service (“IaaS”) that enables developers to build, secure, and deliver digital experiences, at the edge of the Internet. This service represents the convergence of the Content Delivery Network (“CDN”) with functionality that has been traditionally delivered by hardware-centric appliances such as Application Delivery Controllers (“ADC”), Web Application Firewalls (“WAF”), Bot Detection, Distributed Denial of Service (“DDoS”), and observability solutions. It also includes the emergence of a new, but growing, edge computing market which aims to move compute power and logic as close to the end user as possible. When milliseconds matter, processing at the edge is an ideal way to handle highly dynamic and time-sensitive data. This has led to its acceptance and adoption by organizations who monetize or grow their user base with every millisecond saved. Organizations that want to improve their user experience, whether it’s faster loading websites or reduced shopping cart abandonment, can benefit from processing at the edge. The edge cloud complements data center, central cloud, and hybrid solutions. Organizations must keep up with complex and ever-evolving end-user requirements. We help them surpass their end users’ expectations by powering fast, safe, and engaging digital experiences. We built a powerful edge cloud platform, designed from the ground up to be programmable and support agile software development. We believe that our platform gives our customers a significant competitive advantage, whether they were born into the digital age or are just embarking on their digital transformation journey. Developers on the Fastly platform have a high degree of flexibility with granular control and real-time visibility, where they can write and deploy code in a serverless environment and push application logic to the edge. Our infrastructure is built for the software-defined future. Our network is powerful, efficient, and flexible, designed to enable us to rapidly scale to meet the needs of the most demanding customers. Our approach to scalable, secure reliability integrates security into multiple layers of development: architecture, engineering, and operations. That's why we invest in building security into the fabric of our platform, alongside performance. We provide developers and security operations teams with a fast and safe environment to create, build, and run modern applications. We serve established enterprises, mid-market companies, and technology-savvy organizations. Our customers represent a diverse set of organizations across many industries with one thing in common: they care about delivering best-in-class digital experiences. With our edge cloud platform, our customers are disrupting existing industries and creating new ones. For example, several of our customers have reinvented digital publishing by connecting readers through subscription models to indispensable content. Fastly’s ability to dynamically manage content in real time enables readers to have instant access to the most up to date information. Our customers’ ecommerce solutions use Fastly's edge compute functionality to deliver very low- latency customer experiences, including providing better recommendations to their shoppers, converting more shopping carts into sales and executing fast and secure financial transactions. Content streaming organizations leverage Fastly's platform to deliver content to users around the world and those that livestream gain easy access to enormous edge compute resources for even greater reliability. The range of applications that developers build with our edge cloud platform continues to expand rapidly. Our mission is to make the Internet a better place where all experiences are fast, safe, and engaging. We want all developers to have the ability to deliver the next transformative digital experience on a global scale. And because big ideas often start small, we love it when developers experiment and iterate on our platform, coming up with exciting new ways to solve today’s complex problems. For the fiscal years ended December 31, 2023, 2022 and 2021, our revenue was $506.0 million, $432.7 million, and $354.3 million, respectively. We continue to invest in our business and had a net loss of $133.1 million, $190.8 million and $222.7 million for the fiscal years ended December 31, 2023, 2022 and 2021, respectively. 7 We measure the revenue growth from existing customers attributable to increased usage of our platform and features, and purchase of additional products and services with our Dollar-Based Net Expansion Rate ("DBNER"), Net Retention Rate ("NRR") and Last-Twelve Months Net Retention Rate ("LTM NRR") metrics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics" for further discussion of DBNER, NRR and LTM NRR. Products & Services Programmable Edge Platform Fastly’s programmable edge platform was built to support modern digital experiences. We sit between our customers’ end users and their origin–whether that’s in the cloud, on premise or a hybrid environment–and power online experiences that are fast, safe, and engaging. Fastly was founded in an era where legacy CDNs were failing to keep up with the explosive growth of user-generated content and demands for faster, more personalized websites and apps. Legacy CDNs could not cache highly dynamic content at the edge–they had to continuously go back to origin to fetch this content, driving up egress costs. Deploying changes meant, at best, hours-long waits for configurations to propagate. At worst, it meant being forced to engage professional services at a cost of hundreds of dollars an hour. Legacy CDNs also failed to provide real-time visibility. Traffic logs were provided in batch format, meaning the data could be anywhere from 15 minutes to several hours old, making it impossible to monitor performance and get instant feedback. With a view to addressing these challenges, we have taken a fundamentally different approach to architecting our platform. • Powerful POPs. We have architected our Points of Presence (“POPs”) using robust customized servers with incredible processing density. As a result, our POPs require minimal footprint and yield colocation cost savings compared to traditional POP architectures. We have located these POPs near major cloud providers and peered with Internet exchange points around the world, so that we can deliver content as close to end users as possible. Because our POPs are powerful and well-connected to the Internet, we are able to operate fewer of them and still achieve optimal performance relative to traditional POPs. • Software-defined network. We have built a smarter network using fast switches and routing intelligence at the server layer. This has allowed us to provide real-time responses by ensuring our customers’ traffic is routed in the most optimal manner on our network. • Network Resilience . Our network is built to withstand common performance degradation or connectivity issues with internet transit providers. With fast path failover we automatically detect and re-route underperforming edge connections at the transport layer. Precision Path detects underperforming origin connections and automatically reroutes the connection to the best alternative in real-time. AutoPilot is an automated egress traffic engineering solution which enables us to reliably deliver high traffic events without manual intervention. • Fully programmable. In keeping with our belief that companies should be able to control everything through software, we have built a fully programmable platform. Using Varnish Configuration Language (“VCL”) as a domain-specific language, and flexible application programming interfaces (“APIs”), we give customers comprehensive control over how their content is cached and how we respond to end user requests. Our customers are able to make their own configuration changes versu s waiting on a professional services engagement. This translates into faster end-user experiences and cost savings. • DevOps-friendly. We have made it easy for our customers to integrate Fastly into their existing DevOps toolchains and workflows. We have enabled deep integration through rich APIs that let teams build with Terraform, or integrate with Amazon S3, Google Cloud Storage, Splunk, Drupal and many more popular platforms. Combined with our configurability and visibility, this empowered developers to make Fastly part of their continuous integration and continuous deployment (“CI/CD”) processes. As a result, our customers have been able to enhance end user experiences by speeding up software and feature releases, without their CDN getting in the way. For example, we have seen customers release new code to production multiple times a day instead of once a month. 8 All of our product lines have been built on top of this single, programmable platform, and therefore they all benefit from the same granular control, real-time visibility, and immediate scalability. As developers gained awareness of the power of our programmable platform, they have tapped into it to build complex performance-based use cases on top of it, from paywall authentication at the edge to A/B testing and edge redirects. From this trend, we realized that there was a need for a more general compute environment versus one that was primarily designed for caching and content delivery. To address this need, we built a powerful compute environment on top of our programmable platform. We give customers access to our serverless compute environment through our compute offering, Fastly Compute. App developers can use this offering to build high performance, personalized apps on our programmable edge without the complexity of managing the underlying infrastructure. We knew our customers would need this environment to be scalable, fast and secure so we chose its building blocks carefully: • WebAssembly (“WASM”) . We chose WASM , an extremely powerful open source technology that allows developers to run complex code on our platform. Apps can be compiled to WASM (using native machine code for better performance) and replicated to all our edge POPs. • Isolation technology. With security top of mind, we created a unique isolation technology. This gives us the ability to create and destroy an isolated sandbox for each user request that comes through, enabling code to be run in a safe, fast execution environment at scale. • WASM compiler and runtime. To make this code run even faster, we built our own WASM compiler and runtime. Through our observability offerings, we also provide real-time insights to inform continuous performance improvements and facilitate faster debugging during development. S ee Compute and Observability sections below for more details. Network Services Fastly is an extension of our customers’ infrastructure. Our Network Services are designed to speed up and optimize the delivery of web and application traffic while ensuring developers and engineers do not lose visibility or control. Whether customers are looking to deliver engaging web and streaming experiences to their users, move apps to the cloud or scale their DevOps practices, our Network Services provide the speed, security and flexibility needed. 9 Content Delivery Network • Dynamic Site Acceleration. Speeds up requests and responses between cache nodes in our POPs and customers’ origin servers to serve their dynamic web and mobile content faster. • Origin Shield. Allows us to designate a specific POP to serve as a shield for a customer’s origin servers. When web content is refreshed and multiple end users request the new content simultaneously, a deluge of requests can hit a customer’s origin server. This can result in poor web or application performance. With Origin Shield, we collapse all these content requests into a single request and hold it in queue at the Origin Shield POP. That allows us to retrieve the new content from the customer’s origin server only once, and then serve it to all end users who requested it. This approach reduces costs for our customers, while improving performance for their end users. • Instant Purge . Allows customers to clear the cached copy of their content globally in milliseconds, not seconds. We allow customers to send a command to our platform that invalidates an old version of their content throughout our global edge infrastructure. This causes a new version of content to be retrieved from the application server the next time it is requested. This feature enables our customers to serve highly dynamic content at the edge more quickly and allows for delightful application experiences. Rapidly changing content like shopping cart items, flight search results, sports scores, or current weather conditions in any given location can all be served faster from the network edge. • Surrogate Keys. Allows customers to fine-tune purging by tagging related objects across their site with a key name and description, then purging by that key. They can purge their entire site of a given object or set of objects at once, without impacting performance. For example, they could purge any images and content related to discontinued sale items, discounted products, or outdated news across their site all at once. • Programmatic Control. Provides direct programmatic control of edge delivery services to our customers via VCL, allowing them to precisely control what content is cached, for how long and when it should be refreshed. Combined with comprehensive APIs, VCL allows our customers to build, test and deploy custom logic, using their own development, test and deployment environment, for even the most complex digital experiences. • Content Compression. Compresses content with technologies like Gzip and Brotli, providing direct performance improvements and a more responsive web experience for end users. • Reliability Features . Support the availability of customer content with features including origin health checks, a ‘grace mode’ feature that will continue serving content even when customer origin(s) fail, Multipath TCP, and real time error dashboards and API feeds that are backed by a 100% uptime Service Level Agreement ( “ SLA”). • Fanout . Enables customers to push data in real time to many users, such as synchronous communication of messages in a chatroom, server updates to IoT devices and other types of data between devices. Realtime messaging is used in a wide range of data streaming applications, including IoT, live commenting, end user notifications, chat and more. • Domainr . Provides customers with a real-time and programmatic means for checking domain availability. A programmatic solution for verifying trust for domains is especially useful for platform customers. Using Domainr's APIs, customers can embed these functions directly into their workflows. • Modern protocols and performance. Helps our customers, and the Internet in general, receive the best possible performance regardless of user device, connectivity or location though supporting the development of next generation web technologies and protocols such as HTTP/3, QUIC, client hints and HTTP prioritization. 10 • Privacy . Fastly offers several privacy enablement capabilities. Our OHTTP Relay solution provides fast, reliable separation and isolation of end user data, while passing along non-identifying requests to the business server. Fastly’s OHTTP Relay is designed to enhance online privacy for users of several of the largest internet vendors. Fastly has worked with others to develop and standardize the technology behind Private Access Tokens. As an alternative to CAPTCHAs, Privacy Access Tokens provide better user privacy by helping ensure there is no leakage of non-essential data. Video / Streaming • Live Streaming. Delivers millions of concurrent high-quality live streams. It can deliver online content using major HTTP streaming formats while providing real-time feedback to optimize viewer experiences. In addition, we partner with multiple video platform vendors to improve the flexibility and scale of live-streaming workflows and reduce the total cost of ownership. • Video on Demand. Reduces the load on origin servers and accelerates time-to-first-frame by caching and rapidly delivering Video on Demand content. Our on-the-fly-packaging feature optimizes streaming media on demand and facilitates immediate playback, thus enhancing viewer experiences across regions, devices, and platforms. • Media Shield. Large streaming customers typically use multiple CDNs for media delivery for redundancy and protection. Our Media Shield product supports these efforts and can reduce the total cost of ownership while also regaining lost visibility and improving performance. By collapsing multiple origin requests for identical content across several CDNs, content can be streamed faster, more efficiently, and with a significantly smaller infrastructure burden. Load Balancing • Load Balancer. Manages HTTP/HTTPS requests to a customer’s origin using granular content-aware routing decisions. We allow customers to manage traffic across multiple IaaS providers, data centers, and hybrid clouds. We also provide improved performance and cost savings over ADCs, especially during a spike or surge in traffic. Image Optimization • Image Optimizer. We offer a real-time image manipulation and delivery service and store transformations at the edge. When an image is requested, we resize it, adjust quality, crop/trim, change orientations, convert formats, and more, all on demand. Transforming images at the edge eliminates latency and reduces traffic to a customer’s origin servers, allowing them to save on infrastructure and egress costs. TLS Encryption • Transport Layer Security (“TLS”). As part of our standard product, our platform terminates HTTPS connections at our network edge, offloading encrypted traffic from our customers’ web servers for better performance. We provide a number of different certificate procurement and hosting options. • Platform TLS. Our Platform TLS offering is designed to allow customers with multiple web properties to manage TLS certificates at scale, while enabling a fast, secure experience for their end-users. It supports delivery and management of hundreds of thousands of certificates, supported by our worldwide TLS termination and acceleration solution. • Certainly : In August 2023, we launched Certainly, our own publicly-trusted TLS Certification Authority (“CA”). Fastly customers can use a certificate issued by Certainly to secure any website or API endpoint served by our CDN. 11 Origin Connect • Origin Connect. Ideal for companies moving more than one gigabyte of data per second, such as media, video, and streaming companies, Origin Connect provides a direct private network connection between an organization’s origin server and an Origin Shield POP. It is an effective way to lower transit costs, reduce engineering complexity, and improve reliability for high-volume streaming content. Security Security is an essential part of every online business, and customers rely on Fastly to help rapidly secure their business-critical websites, apps, and APIs. Our modern approach to application security provides the accuracy, flexibility, and ease-of-use that our customers have come to know and expect. Fastly provides a range of security solutions for businesses that focus on protecting websites, apps, and APIs from various threats, including DDoS attacks, application layer attacks and abusive behavior from automated software. These solutions are designed to be real-time, scalable, and customizable, offering businesses the ability to tailor their security to their specific needs. With a focus on performance and flexibility, Fastly enables businesses to safeguard their digital experiences. Next-Gen WAF . Our next-generation Web Application Firewall (“WAF”) protects applications from malicious attacks that seek to compromise apps and APIs. Our solution requires no tuning, and is more accurate than the traditional rule or signature-based approaches. Our WAF can be installed in any infrastructure: cloud, container, on-premise data center or hybrid environments or at the edge. Key features include: • Bot Management. Bad bots can perform content scraping, tie up system resources, perform account brute forcing and other harmful actions. Our solution monitors web application and API traffic for automated bot activity, allowing customers to automatically block malicious bot-generated web requests, while providing access for wanted or verified bots. • API Protection. Attackers often target sensitive APIs, attempting to validate stolen credit cards, perform ecommerce gift card fraud or obtain patient healthcare records. We help customers stop API abuse by enabling them to monitor for unexpected values and parameters submitted to API endpoints, and block unauthorized requests. • ATO Protection. Account takeover (“ATO”) occurs when attackers use authentication credentials to take over legitimate user accounts. Attackers test stolen credentials in an automated manner called “credential stuffing.” Our Account Takeover Protection empowers customers to automatically block and alert on credential stuffing attacks. Advanced Rate Limiting . Advanced Rate Limiting enables customers to stop malicious and anomalous high volume web requests and reduce resource consumption while allowing legitimate traffic through to application and API endpoints—doing so means companies can provide a superior customer experience that scales to meet increasing demand. DDoS. Our DDoS protection is an always-on service that provides immediate protection from network and application layer attacks, so web apps and APIs are always available and performant. Our high-bandwidth, globally distributed network is built to absorb DDoS attacks without impacting performance. Customers can respond to attacks in real time, filtering and rate limiting malicious requests at the network edge, before they reach the customers' origin. Compliance. We speed up the caching and delivery of sensitive content at the edge, helping customers meet data compliance and privacy regulations such as the Health Insurance Portability and Accountability Act (“HIPAA”), the European Union's General Data Protection Regulation (“EU GDPR”) and the United Kingdom’s GDPR (“U.K. GDPR”), in addition to industry standards such as PCI Data Security Standard and SOC. Fastly is also certified to the ISO/IEC 27001:2013 standard for its Information Security Management System. Our Assurance Services offering includes support for additional documentation and audit procedures for customers with these needs. 12 Compute Fastly Compute allows app developers to build high performance, personalized apps on Fastly's programmable edge without the cost and complexity of managing the underlying infrastructure. Like all our offerings, Compute is built to be secure, performant and scalable. Compute supports a multitude of use cases, including: • Enhancing Search Engine Optimization ranking by managing redirects at the edge to improve site performance and gain real-time visibility; • Lowering infrastructure costs and offering faster personalized experiences by generating unique user tokens for authentication; and • Enabling low latency ad personalization by allowing our customers to serve ads quickly from the edge based on user data. Key features of Compute include: • Serverless execution environment: Compute offers a fast, secure serverless code execution engine. It allows customers to deploy code across Fastly’s global edge cloud infrastructure, and execute the code close to the user for low latency. Compute also exposes the power of Fastly’s global infrastructure via a set of powerful developer API’s for fine grained programmatic control (e.g. Cache API’s). • Language support. Compute works with any WASM-supported languages, including JavaScript, Rust, Go, Ruby and more. Customers also have the ability to create their own language Software Development Kits. Support for languages that developers already know and want to code in is key for adoption and we will continue to add more over time. • Data . Compute has a number of features that makes it easier and faster to access data at the edge instead of having to go back to the central cloud. This helps developers innovate faster and unlocks more latency-sensitive use cases at the edge. ◦ KV Store. KV Store offers global, durable storage for compute functions at the edge. With fast reads and writes from both the edge or via API, customers can store, control, or cache their data to reduce origin dependency and unlock new use cases. ◦ Config Store. Developers want to iterate fast when developing applications. Config Store supports this by allowing them to store multiple common code configurations at the edge, which they can then deploy instantly, instead of having to push new code for every single configuration change. ◦ Secret Store: Secret Store is a secure and performant storage system for Compute customers' most sensitive data like API keys, passwords, certificates, and other credentials. It leverages the Hashicorp vault to centrally store, access, and manage secrets across Fastly's cloud infrastructure. • Visibility. In addition to real-time logs and metrics, which all our products benefit from, Compute also features log tailing and tracing to improve developer visibility. ◦ Log Tailing. We give customers visibility into log messages from their applications so they can quickly identify bugs all within their terminal of choice with Fastly Command Line Interface. This helps avoid difficult third party log management and debugging challenges. ◦ Tracing. For customers building apps with Compute, we tag individual end-user requests with unique identifiers and maintain request tracing parameters by tracking when users enter and exit our serverless platform. This feature allows developers to more easily track the performance of application functions post-deployment. 13 • Developer Experience. Our award-winning Developer Experience team and products exist to bring success to all developers from their first interaction with Fastly to serving billions of requests per second. The team works cross functionally to advocate for developers across Fastly’s product line, defining and teaching best practices that foster developer success. ◦ Developer Relations. The Developer Relations team guides developers through training materials, events, and tooling aimed at building a deep understanding of our products. By maintaining code samples published to Fastly Developer Hub and building testing tools like Fastly Fiddle, we engage developers with our products, such as Compute, that integrate directly into DevOps tools and internal developer platforms. We also facilitate testing on our platform with rapid global deploy times and live logs, in addition to debugging. • Glitch. In order to expand our product offerings to more developers, we acquired Glitch, Inc. (“Glitch”) in May of 2022. Glitch is a popular tool for web-based development with a total lifetime user count of over 2.6M registered developers as of December, 2023. We are now working on integrating Compute with Glitch’s easy-to-use interface, so Glitch’s community of developers can seamlessly deploy code to Fastly’s serverless compute environment. • Open Source Support. Our Fast Forward program is designed to empower and support developers, open source projects, and nonprofits that share our vision of an internet that is free, open, and safe for all. Any eligible open source project can apply to receive free Fastly products. Observability For customers, the ability to continuously monitor the status of their website, product, or service is essential. Across all our Network Services, Compute and Security product lines, we provide customers with real-time insights for better decision making. DevOps and engineers can quickly identify potential issues, investigate anomalies, improve performance, and uptime and iterate faster on new releases. • Real-time Logging. To help tune the performance of Fastly services, we support real-time log streaming of customer data that passes through Fastly. We support a number of protocols that allow our customers to stream logs to a variety of locations, including third-party services, for storage and analysis. • Live Event Monitoring. With real-time monitoring, streaming delivery, request collapsing, capacity planning, and flexible deployment, Fastly Live Event Monitoring gives customers insights into their live streaming performance and the ability to troubleshoot immediately–all while reducing costs. • Logging Insights. Logging Insights provides actionable intelligence that can be used to diagnose and troubleshoot issues for optimal performance and user experience. Our expert consultants implement a guided customization of preconfigured dashboards tailored to a customer’s specific goals. • Metrics. We offer customers a variety of ways to report on the performance and activity of their services. Our metrics, APIs and dashboards provide real-time, per-second visibility and historical reporting. • Origin Inspector. Customers can simplify their data pipeline and easily monitor every origin response, byte, status code, and more without needing a third party data collector. They can report on egress data within the Fastly web interface with interactive dashboards. Customers can also verify the success of their Fastly services, especially with shielding or multi-CDN environments. • Domain Inspector. Customers can easily monitor traffic for a single fully qualified domain name or multiple domains within a Fastly service. They can account for every domain request, byte, and status code or quickly determine edge or origin issues with our combined edge and aggregated origin metrics, all without needing to send log data to a third-party data collector. • Edge Observer : Provides per-second visibility and historical reporting on the performance and activity of multiple Fastly services in a single pane of glass. Metrics and logs along with every part of the request path are available for consumption in real-time without adding latency. 14 Services Professional Services. Fastly offers the following professional services: • Network Services. Distributed systems can be complex, but regardless of a customer’s skill level, Fastly technical experts are available to guide and optimize the customer's cloud strategy. We offer various levels of engagements, from a light helping hand, to acting as an extension of developer teams, with global support and flexible professional services hours. • Managed Security Service. The Fastly Managed Security Service is a full-service offering for our Next-Gen WAF, DDoS and Edge Rate Limiting customers who require comprehensive monitoring over their environments. • Response Security Service. Fastly’s Response Security Service provides Next-Gen WAF customers with priority, direct access to Fastly’s Customer Security Operations Center 24/7/365 along with regular configuration maintenance and an industry-leading response SLA. Managed CDN. Fastly’s Managed CDN provides maximum control and flexibility. We deploy our edge cloud network on dedicated POPs within a customer’s private network at locations of their choosing. Our service can be used exclusively, or as part of a hybrid, multi-CDN strategy. Support Plans. Fastly offers three levels of support plans and available technical support add-ons with dedicated technical specialists and account managers that provide extended security expertise. • Standard . The Standard support plan gives every Fastly customer immediate access to our Community Forum and extensive documentation. Customer support is available via email during business hours. • Gold . The Gold support plan offers enhanced product support, priority routing for support cases, and expedited 24/7 incident response times. • Enterprise . Enterprise level support equips customers with 24/7 online support for incidents and general inquiries, 15-minute escalation response times, phone support, access to a private Slack channel, and a team of technical experts to help optimize a customer’s Fastly service, including compliance support. Our Growth Strategy Our growth strategy focuses on making our edge cloud platform accessible to a broader base of customers through enhancing our product experience, investments in technology, and vertical expansion. Key elements of our growth strategy include the following: • Product strategy. Built upon a strategy of durable innovation, our programmable edge cloud platform creates a consistent and predictable pipeline of innovation. We plan to expand existing product lines like Network Services and Security, and expect to further incubate newer product lines like Compute and Observability for future growth. With the goal of making it easier for customers to do business with us, we will continue to build out a single, unified platform where they can access and manage all their Fastly services in one place. We will simplify customer onboarding and service usage, through easy access to self-training information from within the Fastly app, and more code samples and support. In 2023, we simplified our pricing and packaging in order to make it easier for customers to buy and renew our services. We launched our Next-Gen WAF in Q1 of 2022. This enables us to protect customers’ applications and APIs on premise, in the cloud and on the edge. We plan to continue to invest in application security with the goal of making it easier for developers to seamlessly protect their apps and APIs wherever they are without impacting performance. 15 • Expansion into additional vertical markets. Our platform offers a broad range of capabilities. Our differentiated high performance and low-latency delivery network and edge compute platform, as well as enhanced security capabilities, allows us to serve the needs of our existing customers and continue to add customers from a diverse set of industries. • Expand existing customer relationships. Over time, our customers have expanded their use of our platform. In more technically savvy organizations, developers have championed our solution, paving the way for us to engage with business decision makers. For more traditional organizations, we are often brought in to initially help facilitate a move to the cloud and from there we extend our product to support many other use cases. We plan to continually increase wallet-share over time for existing customers as we build out new products and features, and as customers continue to fully recognize the value of our platform. • Grow our technology partner ecosystem. We operate between and complement the “big 3” origin cloud platforms, Amazon Web Services (“AWS”), Microsoft (Azure), and Google Cloud Platform, and a growing community of companies that provide big data, machine learning, and security solutions. In this sense, we act as the unifying layer for a growing number of cloud services. As customers consume more cloud and software as a service (“SaaS”) offerings, we can create additional value and grow with these partners. • International expansion. As our customer base grows, we plan to scale our network to bring edge computing closer to where our customers are. We believe significant opportunities exist for international growth. Partner Ecosystem We partner with a number of global channel partners who offer our performant and secure solutions on top of their own value-added services. We work with top cloud service providers to combine our complementary products and services to deliver even more value for our joint end users. We also partner with a number of third-party technologies to extend our capabilities across new markets and use-cases. Ultimately, partners help our customers by: • Providing a complete suite of value-added services and solutions • Offering flexible and efficient engagement models • Acting as a single point of contact; and • Extending geographic coverage and support Channel Partners. Our channel program provides partners with the flexibility to accommodate different go-to-market models and allows each partner to customize their offerings to provide their own differentiated value. The two primary channel partner types we work with are: • Referral partners: Recommend Fastly products to their customers for a commission and include partners like agencies and consultants; and • Reseller partners: Act as a reseller to offer additional value on top of Fastly’s products and services and include partners like value-added resellers, managed service providers, managed security service providers, system integrators, and more. Resellers work with Fastly’s sales and presales teams to scale sales cycle support. This helps expand our worldwide network of partners dedicated to protecting and delivering customers’ content. We have expanded the reach and breadth of these partners to include cross-selling delivery and security products. We have made significant investments in this area by adding additional channel sales and marketing resources, technical training and enablement, a new partner portal, enhanced pricing and packaging offerings, and an elevated partner program to offer partners even more benefits. Cloud Partners . We integrate with major cloud providers to enhance their services and create solutions that are powerful, scalable, and secure. We have exclusive Private Network Interconnects (PNIs) and peering arrangements with key cloud providers such as Google Cloud Platform, AWS, and others to eliminate or minimize egress fees, 16 enhance security, and improve overall performance. We are also available for purchase on the Google Cloud Marketplace and AWS Marketplace which can help eliminate the need for customers to have separate billing arrangements and makes Fastly services eligible for Google Cloud and AWS committed spends. We have strong go-to-market relationships with our cloud partners which allow us to access the benefits of their partner programs like joint business planning, co-selling, account support, added marketing funding, and more. Integration Partners. We integrate with a number of third party partners who offer complementary technology across a number of strategic use-cases and industries. These partners help expand our reach into new markets by offering customers a solution that seamlessly integrates with their existing technology stack making our technology even stickier. Here are some examples: • Security: Our Next-Gen WAF seamlessly integrates with third-party tools to help customers enhance their workflows, empower DevOps processes, increase their security visibility, and drive operational efficiencies. Examples include: VMware (Tanzu), Palo Alto Networks, Cisco, Datadog, Citrix, PagerDuty and more. In May 2023, we announced a partnership with A10. The Fastly Next-Gen WAF was integrated into the A10 ADC appliances and offered as an optional Application Security control for their customers. The A10-Fastly partnership gives us access to new customers, many of whom use their own data centers, have less of a public cloud footprint, and are located in different geographic areas than Fastly's traditional customer base. • Logging & Analytics: Our real-time logging feature integrates with more than 20 logging endpoint partners to allow customers to customize and visualize their edge data for better monitoring of performance and security anomalies. Examples include: DataDog, Looker (Google Cloud), SumoLogic, Logentries, Google Cloud Platform, Microsoft (Azure Blob Storage), and more. • Compute: We work with a growing ecosystem of partners who are tapping into our powerful Compute serverless technology to extend their solutions across a variety of different use-cases. • Media & Entertainment: We have partnerships across a number of technology providers in the media & entertainment industry to enhance our edge platform’s performance features, modern security offerings, and real-time metrics. Competition Our platform spans several markets from cloud computing and cloud security to CDNs. We segment the competitive landscape into six key categories: • Legacy CDNs like Akamai and Edgio; • Application and API security vendors like Akamai, AWS, Cloudflare, F5, and Thales (Imperva); • Point CDN players like Bunny CDN, CDNetworks, and CDN77; • CDN providers, which now offer serverless edge compute functionality like Akamai (Linode), and Cloudflare; • Cloud hosting providers (or public cloud providers) that have added CDN & WAF capabilities like AWS, Google Cloud Platform, and Microsoft (Azure); and • Traditional on-premise, data center appliance vendors for load balancing, WAF, and DDoS like F5, Thales (Imperva), NetScaler, and Radware. The principle competitive factors in our market include: • platform functionality, scalability, performance, ease of use, ease of integration and programmability, reliability, security availability, and cost effectiveness; 17 • global network coverage and availability; • ability to support modern application development processes and utilize new and proprietary technologies to offer services and features previously not available in the marketplace; • ability to identify new markets, applications, and technologies; • ability to attract and retain customers; • brand, reputation, and trustworthiness; • credibility with developers; • quality of customer support; • ability to recruit software engineers and sales and marketing personnel; • ability to protect intellectual property; and • ability to identify opportunities for acquisitions and strategic relationships and successfully execute on them. We believe we generally compete favorably with our competitors on the basis of these factors. Our edge cloud platform integrates many of the point products offered by our competitors which is a key differentiator. However, many of our competitors have substantially greater financial and technical resources in addition to larger sales and marketing budgets, broader market distribution, and more mature intellectual property portfolios. 18 Our Culture and Human Capital Resources Our Values Technology has the potential to make a radically positive impact on the world, and we aspire to improve human lives through our work. We were founded on strong ethical principles, and have intentionally grown values-first, scaling our workforce, services, customer portfolio, and investment partners purposefully. We are only as good as the company we keep, and this guides our hiring practices as well as the ethics we are committed to upholding as we scale. We believe that as a result of our values, we have been able to identify, attract, engage and retain great people. We want to serve the very best of the Internet. We choose to work with customers that we believe have integrity, are trustworthy, and do not promote violence or hate. Our eight core values define who we are and how we choose to grow, hire, train, work, communicate, make decisions, support each other, and serve our customers. Our Hiring Strategy We are dedicated to building a diverse workforce and leadership team that reflects our values and the unique needs of our global customer base. We strive to be a company full of talented, highly effective, kind, honest, passionate, and high-integrity people. We are dependent on our highly qualified employees and executives, and it is crucial that we continue to attract, engage and retain valuable employees. We believe in investing in our people and motivating talented individuals with a strong career path and competitive compensation program. Our U.S. support engineers are often hired from code schools, and many code school graduates transition from support into other organizations within the company, championing the customer voice and infusing our teams with a strong, service-focused mindset. Our engineering staff recruits world-class experts in every part of the technology stack that makes up the Internet, which inspires great developers to join us. Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives. We use a mix of competitive base salary, equity compensation awards, and other employee benefits. We are building a global, healthy, safe, and diverse workforce and an inclusive culture that empowers and supports our employees and customers. We onboard all new employees with training programs on our values, certain aspects of our business, and important policies, including our Safe, Welcoming, and Productive Work Environment Policy. Annually thereafter we provide employees with code of conduct and security awareness training, a learning reimbursement program and performance evaluations. Our employee engagement efforts currently include company-wide newsletters and all-hands meetings, through which we aim to keep our employees well-informed and increase transparency. We also use employee engagement surveys to collect employee feedback and assess the effectiveness of our culture, our strategy, and various health and well-being programs. 19 Employees As of December 31, 2023, we had a total of 1,207 employees worldwide and 250 employees located outside of the United States; 46% of our employees resided within 50 miles of a Fastly office and 54% of o ur employees worldwide were considered remote, which means they resided more than 50 miles from a Fastly office or in locations where we do not have a Fastly office presence. We will continue to search for the best possible talent for every role and cultivate best-in-class in-office and remote employee experiences. Our Organization Sales & Marketing By focusing our resources, expertise and talent we have the opportunity to drive growth for Fastly, gain market share in our total addressable market and become a place where team members can develop their skills and grow their careers. We are building a go-to-market engine that scales, becomes increasingly more efficient, and is nimble enough to continue to grow our business in four dimensions: • Customer logo acquisition • Expansion into additional vertical markets and within existing customers • Partner ecosystem leverage • International expansion Fastly’s marketing efforts have a significant impact on new logo acquisition and demand generation. We are focused on optimizing the return on our marketing investment to drive demand across our portfolio and regions. Our sales and marketing organizations work together closely to cultivate customer relationships with developers and business leaders at enterprises and technology-savvy organizations to drive revenue growth. We have geographically-based sales teams that continue to enhance our value-based selling methodology. Our land and expand sales strategy for enterprise customers has successfully demonstrated our platform’s capabilities, and our customer support enables broad adoption of our technology within an organization. Customer Support We have designed our products and platform to be self-service and require minimal customer support. Customers are automatically covered by our standard support plan as soon as they sign up with us. They can file a ticket with the support team, access documentation including online FAQs, API references, and configuration guidelines. Our support approach is unique as we have built it with developers in mind. Our first-line support employee typically has an engineering background and is highly technical. We also provide several options for premier, hands-on support from a team of highly-technical senior support engineers and technical account managers. They act as a single point of contact for our support, product, and engineering teams. Our support model is global, with 24/7 coverage and support offices located in North America, EMEA, and APAC. Research & Development Our research and development team members are responsible for the design, development, and reliability of all aspects of our edge cloud platform. Continuous improvement and innovation are core to our DNA, and these efforts are baked directly into our service life cycle. Scale, performance, security, and reliability are core functional requirements of everything we build into our platform to serve our customers. Our philosophy of customer empowerment guides our research processes. Our product managers regularly engage with customers and developers, DevOps and site reliability engineering communities, as well as our internal stakeholders and subject 20 matter experts, in order to understand customer needs. Our engineering team includes experts with deep experience who intimately understand customers’ technical challenges and build solutions accordingly. Throughout the strategic design and build phases of our product life cycle, our development organization works closely with our product, infrastructure, operations, and compliance teams to design, develop, test, and launch any given solution. We strive for a balance of rapid iteration without compromise on the core functional requirements that our customers expect: scale, performance, security, and reliability. As of December 31, 2023, we had 422 employees in our research and development group. Our research and development expenses were $152.2 million for the year ended December 31, 2023. Infrastructure Our infrastructure team is responsible for the design, deployment, and maintenance of the servers and network hardware that form the foundation of our mission critical edge cloud environment in 79 markets as of December 31, 2023. We invest in research into global Internet geography to identify optimal colocation site selection, network partner identification, and network-to-network interconnection opportunities. These activities allow us to connect in close proximity to core Internet backbones and Internet service providers, thereby enhancing network performance. We carefully evaluate and test hardware from leading server, network, and component manufacturers to assess their compliance with our workload performance, system efficiency, and mean time-to-repair standards. In our process, we evaluate commodity server and network platforms to avoid vendor lock-in, while optimizing the mix of components in an effort to improve efficiency and optimize our capital expenditures. We intend to grow the number of data center colocation sites as traffic on our network grows and as demands for new markets justify investment. Trust Our security, compliance and data governance teams, as well as other departments across the company, continually iterate on our trust programs to better meet growing customer needs, updated regulatory requirements, and the evolving security threat landscape. To help validate the controls that safeguard our platform and the data moving through it, we have expanded our portfolio of security and compliance-related assessments and certifications over time. Intellectual Property We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on a number of registered and unregistered trademarks to protect our brand. As of December 31, 2023, in the United States, we had 103 issued or allowed patents, which expire between August 2033 and February 2042, and 19 patent applications pending for examination. As of such date, we also had 24 issued patents and 10 patent applications pending for examination in foreign jurisdictions and one Patent Cooperation Treaty patent application pending for examination, all of which are related to U.S. patents and patent applications. In addition, as of December 31, 2023, we had 19 registered trademarks and one pending trademark in the United States. In addition, we seek to protect our intellectual property rights by requiring our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law. Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses, and other contractual protections, unauthorized parties may still copy or otherwise obtain and use our software and other technology. In addition, we intend to continue to expand our international operations, and effective intellectual property, copyright, trademark, and trade secret protection may be unavailable or limited in foreign countries. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Further, companies in the communications and technology industries own large numbers of patents, copyrights, and trademarks and frequently threaten litigation, or file suit based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and 21 expect to face in the future, allegations that we have infringed the intellectual property rights of third parties. From time to time, we also receive demands for indemnification from our customers under the terms of our contracts with them for infringement of a third-party’s intellectual property rights. Legal Proceedings From time to time, we have been and will continue to be subject to legal proceedings and claims, including proceedings and claims relating to employment, intellectual property, and commercial disputes. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material effect on our business, results of operations, financial condition, or cash flows. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners, and our customers by determining the scope, enforceability, and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Please refer to Note 10—Commitments and Contingencies for discussion around our legal proceedings. Regulatory We are subject to a number of U.S. federal and state and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy and data security, intellectual property, competition, consumer protection, critical infrastructure or other subjects. Many of the laws and regulations to which we are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolve rapidly, it is possible that we may not be, or may not have been, compliant with each such applicable law or regulation. For a description of the risks we face related to regulatory matters, refer to “Item 1A.—Risk Factors” in this Annual Report on Form 10-K. Corporate Information We were initially incorporated under the laws of the State of Delaware in March 2011 under the name SkyCache, Inc. We changed our name to Fastly, Inc. in May 2012. Our principal executive offices are located at 475 Brannan Street, Suite 300, San Francisco, California 94107. Our telephone number is 1-844-432-7859. Our website address is www.fastly.com. The information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Exchange Act. The SEC maintains a website at https://www.sec.gov that contains reports, and other information regarding us and other companies that file materials with the SEC electronically. Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically through our investor relations website at www.fastly.com/investors as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC. 22