All right, that was some great music. Welcome, everyone. I'm Vern Essi, the VP of Investor Relations here at Fastly. I want to thank you all for joining us today, those of you live here in the New York Stock Exchange, and those of us joining via webcast virtually. Thanks a lot for your interest. I think all of you know, or some of you at least know, it's been a long time in the making, getting to this point. I also want to thank you for your patience. It's been quite a journey. The team here at Fastly pulled together. We put together some fabulous content. We can't wait to share it with all of you, and we're really excited.
One thing I wanna say, though, is we do have a really good day ahead of us, and I wanna leave some good thoughts for all of you on what you can learn. We wanna leave you with a good understanding of our mission, our differentiation, our growth strategy, and an understanding of our financial model, and how we're gonna drive favorable returns to our shareholders. The real thing we wanna leave you with is why we are the premier investment in the edge cloud. I also wanna let you know, on a personal note, having been on the sell side with some of you, rubbing elbows, and certainly in spirit with most of you in equity research, some of you on the buy side, we're pretty humbled, actually very humbled, by the level of work you're all putting into your jobs.
We get great questions. We get a lot of interest in our financial models. People are really crazy, digging into our tech stack. Todd, our CEO, is a little new at this. He's like, "Vern, these guys, wow, they're just like high bandwidth. They're really engaged." Just wanna say thank you. We like the passion, take pride in it, and we're with you. What Investor Day and investor deck wouldn't be complete without a safe harbor statement? As most of you know the drill here, please refer to our prior filings and recent filings for risk factors. Unless otherwise stated, all of the financials we're gonna express today or communicate with you are on a non-GAAP basis. We're gonna have GAAP to non-GAAP reconciliations in our deck towards the end in Appendix.
Housekeeping note on that, the deck should drop live around 4:00 P.M. Eastern when we wrap. Let me turn to the agenda. Today you're gonna hear from our executive staff. We'll start with, obviously, our CEO Todd, talking about our strategy and positioning. We're then gonna go to our founder, Artur Bergman. He's gonna talk about our differentiated architecture and a little bit of history about Fastly. We're gonna go into Lakshmi Sharma and Laura Thomson to talk about our durable innovation engine, both the product strategy as well as how we're unifying our platform for growth. We're gonna take a break for about 15 minutes for Q&A. We're gonna get back on, and we'll have Brett and Kim Ogletree talk about our go-to-market strategy. Brett, more on the sales and marketing side, Kim in customer success.
Nick Rockwell is gonna take the stage and talk about how we're scaling our operations, and most importantly, how we're driving cost effectiveness in our network. Of course, Ron's gonna close it out to talk about our growth drivers and our financial model. Some of you already know we're gonna be ringing the bell here at the NYSE after the close. Really excited about that. When this commences, for those of you virtually, we're gonna cut out, and then we'll go to a live feed. For those of you here, we welcome you to join us downstairs to ring the bell, and of course, we're having a reception afterwards. Really, once again, thank you all for being here. Really looking forward to it. With that, turn it over to our CEO, Todd Nightingale.
Thank you, sir. Thank you. Thank you so much for being here. We're honored. This is amazing. I've never been in this building before. It has a hallowed kind of feel. It's amazing. Anyway, thank you so much. Welcome to everyone who's joining us remotely. We really appreciate your time today. My name is Todd Nightingale. I'm the CEO of Fastly, I've been at Fastly for about nine months. I've spent my whole career, I spent the last 20 years building internet technology and connectivity technology. I'm so excited to be at Fastly because I believe the next decade is really gonna be about the building of the user experience, about the applications and the websites, the streaming services that we all depend on every day. That's exactly what Fastly does.
At Fastly, we make the internet a better place where all experiences are fast, safe, and engaging. It's the user experience that matters. It's why I think that Fastly is such an amazing place to be. It's such an amazing company to pay attention to, and it's why I'm so excited that you're all here today. Over the last four years, I think we all got a remarkable tutorial in how important that digital experience is. We used to think a lot about how e-commerce sites and particular tech companies were defined by the user experience that they delivered, the digital experience they delivered. The pandemic taught us the digital experience that organizations deliver doesn't just determine their customer sat. It can determine the success and failure of every organization, every school, and business, and government around the world.
The digital experience is what matters, and that is our mission. That is what we focus on, delivering the end-user experience, partnering with our customers so that every experience that they deliver, every product that they ship, is fast, safe, and engaging. That's how we see our market. We focus on this user experience, and that is the only outcome that we deliver. It's how we partner with our customers, and it defines our go-to-market in so many ways. We approach platform engineering teams, development teams, who are building those digital experiences, websites, apps, streaming services, whatever it may be. That is the only focus that our go-to-market has.
Our technology, the innovation, the intellectual property that's been built out over the last decade at Fastly and the network itself, the deployment, the POPs, have all been built out to build a best-in-class edge cloud that's capable of delivering a truly differentiated end-user experience. In a lot of ways, I think about that concept of the edge cloud, as the biggest transition that's happening in this market right now. When Fastly was founded, there's no doubt it was a CDN company, a content delivery company, focused on that network service market, that CDN market. That was fine because that's what was really needed at that time. The needs of application builders, of platform engineering teams, have changed, and what they need to deliver that important, truly differentiated user experience has shifted.
Today, Fastly operates not just in the content delivery or network service space, we also operate in the Security market. Not all of Security, but Web Application and API security, because that's what application builders and web builders need. We operate in the edge compute space, which is, in so many ways, a real evolution of truly dynamic, truly real-time CDN, and we're looking to expand even more than that into edge Observability, and of course, what comes next. These different markets, I think, less and less are operating separately and independently, and more and more are consolidating into one edge cloud space. Just as we saw in the centralized cloud, in the IaaS space, I think we're seeing the exact same thing in the edge cloud.
The completeness of your platform, the differentiation of your platform, it will be measured on this idea of the utility function, is what kind of user experience can you deliver? The market is really consolidating into one unified edge cloud market. We're not shy about it. Our goal is to be the market leader in the edge cloud. Across all of those modules, across all of those product lines in the edge cloud space, when customers are looking to deliver the best possible digital experience, they choose Fastly. That's the market we're in. That is the market we want to lead. This intersection, it's incredibly important for us. It's the intersection between user experience and edge cloud. We are not in the business of finding any application for the edge cloud. There's lots of technology that deploys best at the edge.
SASE, for example, deploys best at the edge. SASE providers, that kind of Security technology, it can and should be deployed in some kind of edge cloud fashion. I'd be happy to partner with those companies to deploy on Fastly, we aren't going to build out that type of technology because it doesn't serve that end-user experience for web developers, for platform engineering teams. In other words, we focus on this go-to-market synergy. Our sales team approaches this persona. The TAM is more than large enough for Fastly, we are going to stay maniacally focused on it. We do not blur the lines between the edge cloud and other offerings like the central cloud. We consider that sort of technology synergy. We have an enormous heritage of edge cloud performant technology, that is so key.
It's only in this intersection of edge cloud and user experience or technology synergy and go-to-market synergy in which we invest. That focus, in so many ways, has been the pivot that's mattered at Fastly over the last nine months, and I believe this focus is going to drive us to market leadership in the edge cloud space. This is an important point, this idea of partnering with central cloud providers. Our customer, the user experience builders, platform engineers, development teams, they need centralized cloud technology. They need massive development APIs, huge Compute and storage resources, and those are best served by central cloud providers. We do not compete with them. We partner very closely with these organizations in order to build the best possible total solution for our customers. We believe deeply in a multi-cloud architecture.
That is absolutely key to where we're all going. By partnering with them, we can offer a better, more complete offering to the customer, and we can do it efficiently. We do not have to spend enormous resources trying to compete in a space that we don't have the right to win. Our platform is key. Our deployment, in so many ways, delivers that type of differentiation that's so important. We're super proud of the Fastly network, and it is incredibly differentiated. We can deliver 30 milliseconds of latency or better in 53 countries around the world, the most important markets around the world, and that number makes a huge difference. These POPs are chosen to be highly connected. We're not focused on the number of POPs that we have around the world.
We're focused only on the user experience. How fast, how safe, how engaging can we deliver that? How low latency, how close to the user we can get. If we could do it in fewer POPs, we would. That would be more efficient. This delivers a real result that matters, and the result is in speed. Our co ntent delivery network competes with tons and tons of other providers around the world, and we're very proud of the latency we deliver, the user experience we deliver, because we know that responsiveness matters. In e-commerce sites like this, our e-commerce customers measure cart conversion very directly with how quickly. They correlate that very closely with how quickly their pages load. Not just time to paint, you can see w hen the Fastly CDN is delivering 82% of the content, our competitors are in the teens or even less.
It's not just time to paint, it's time to interactivity. We measure from the eyeballs in. It's that user experience that matters. We don't count POPs. We don't look at, we don't look at how, you know, how many machines we have. We only track the user experience, and that differentiation is enormously important. For a long time, this differentiation was largely measured on e-commerce. That's no longer true. We're seeing it in hospitality and healthcare. We're seeing organizations across countless verticals who are focused on the user experience because they know that that user experience matters. Focusing on the performance of our platform.
Every time our platform gets more efficient, we're able to drive a better user experience for our customers and lower that latency, especially on our content delivery network. It also makes our business more efficient. As our network gets more efficient, we're able to deliver more traffic with fewer machines and drive up gross margins. This is a great example. It shows 2022 versus 2023 traffic on a single machine. We chose to show Q1, not just because that's the last complete quarter. As you can tell, the Super Bowl happens in Q1, that is an important moment in time. At Fastly, we say, "Well, the Super Bowl is our Super Bowl." That traffic spike is key in how we build out our network. It's also key in showing the efficiency of that network.
You can see just year-over-year, a single machine was able to serve 46% more traffic, not because we replaced the hardware or upgraded the servers or anything like that, because with the software-defined infrastructure, we're able to make our machines more performant, make our network more performant over time, without the deployment of additional capital, but instead, the deployment of intellectual property. You're gonna hear a lot more about this from Nick, a little bit later on. This is incredibly key, not just to building a differentiated network, but to maintain that differentiation in our performance for years to come. It shows up. It shows up in third-party measurement. This is a great example of it.
In order to deliver really, really, truly best-in-class performance, you need a low error rate, you need high bandwidth, and most importantly, low latency, and we're proud of it. We're proud of those numbers. It's also important to note, though, we track this against every possible offering. All the offerings aren't the same. central cloud solutions have offerings in this space. We really believe that those companies are places we're gonna partner in the building of these applications. We see point solutions, competition that has one or maybe two of the edge cloud modules that are designed to build out user experience, but not a complete offering. We occasionally see them in the market, but it's actually pretty rare. Of course, we have our direct competitors as well. We're glad to have direct competitors.
I don't want to be in a market by myself. I think it demonstrates how attractive this market is, how fast it's growing, how important it will be in the long term. In order to maintain this kind of differentiation, what's key for us is to continue to evolve the Fastly platform. The Fastly platform is really built for extensibility. This is an area where we have a huge amount of transformation. In order to deliver a best-in-class user experience, we know that we have to deliver best-in-class developer experience and customer experience for our users. We partnered with them, we'll be able to deliver best-in-class end-user experience. In order to do that, we need to provide the most complete solution so that Fastly can really become a strategic partner with those development teams. That means Content delivery, and Security, Compute, Observability, and far more.
Content delivery has always been our core at Fastly, but more and more, the Security module, S ecurity product line, is our growth product line. We built that solution through an acquisition of Signal Sciences, with really best-in-class Next-Gen WAF technology, Next-Gen Web Application Firewall technology. That's really the crown jewel of any edge cloud solution, Web Application and API security solution. That growth has been seen in our business. We're working hard to really completely bring that Signal Sciences technology into one unified platform. In so many ways, it's really demonstrating the extensibility of this platform and the leverage that we can build by using one unified platform, not just in the developer experience, but in the way our network is deployed as well. All of our modules, all of our product lines, they run on one network, on one set of infrastructure.
Every server in the Fastly infrastructure runs all of the modules. Our customers never have to choose what network to be on, what infrastructure to build, or which modules to use. It's one extensible, software-defined infrastructure. You're gonna hear more about that in the afternoon, but it's incredibly important because we can build so much more leverage. Every module we build is more efficient than the last. The platform supports an enormous amount of TAM, far more than I think Fastly really needs. Content delivery or the network service, TAM, obviously, we approach all of this TAM. It's huge, it's growing, and to be honest, we love to see that. This is an area where we think we have the best-in-class solution. We love to compete in that space. Edge Cloud Security, Web Application Security is a market that is super attractive to us.
We're seeing high growth in that space, and to be honest, we have a lot of room to grow here. We ourselves are completing our portfolio here. Obviously, we have amazing Next-Gen WAF technology. We just launched the beta of our bot mitigation technology, which is incredibly important to our customers, and we are bringing the DDoS technology that we've used for years on top of content delivery to the market as part of our Security solution as well. We'll have the Compute space, not the entire Compute market. Obviously, we don't compete there. We partner with centralized cloud providers, but edge Compute, and this is an area where there's tons of investment around the world right now, and it's something that's so close to our DNA at Fastly.
We've always had the most dynamic, most real-time CDN, and now we're able to run fully bespoke workloads on our platform at the edge and drive the most personalization, the best content recommendation engines with the lowest latency in the world. I think Observability is a great example of the extensibility of our platform. Module that our customers have been asking for for years. Doesn't compete with the full stack Observability, with the FSO solutions, but instead, it leverages the edge as a vantage point and drives edge Observability signals into a full stack Observability solution, like a Datadog or a New Relic. The Security space is really important to us, and you're going to hear a lot about it today, because oops, in a lot of ways, it is our growth engine.
We think of Content delivery as our core and Security as our growth, and Compute and Observability as the incubation right now. Security, we know, is top of mind for every single user, and we're really excited to compete in this space. Next-Gen WAF is best-in-class solution. We love that. It's brought an enormous number of customers to our platform. We have the opportunity to expand. We've had enormous recognition from Gartner in this space, and that has helped us not just prove that point, but really land Fastly as a Web Application Security. i'm super excited about the bot launch that's underway. Our beta customers are super excited about it. It's part of almost every customer conversation I have, which shocks me.
I thought of bot, again, as an e-commerce solution, but it turns out there are customers in all kinds of verticals trying to understand how they manage bots in their infrastructure, making sure all of their product is sold to their customers and not their resellers. In order to get to where we're going at Fastly, we know we have to transform. In order to realize our aspiration of market leadership in the edge cloud space, what got us here will not get us there. We are deeply focused on transforming around these principles. First, being One Fastly. If we provide one unified user experience and developer experience, we'll serve our customers better. One unified employee experience, we will build the best team in the world.
Platform unification is really core to this principle and driving the complete unification of our system, including the Signal Sciences acquisition, so that we can run a incredibly smooth, low-friction land and expand in our go-to-market teams to drive more efficiency, not just in our engineering, but in our go-to-market team as well. We're focusing deeply on building to scale with initiatives like our new partner program. It's designed to access the expertise of systems integrators around the world to be able to bring new users to Fastly in an accelerated way, to find ways to reach markets we've never been able to before. We've had enormous early success there. I'm super excited about it. You're going to hear more about that later today.
Simplifying everything, and one way we've done that is by launching an entire new packaging for our products that allows our customers to buy entire product lines, all inclusive of all the functionality they'll need, with a single SKU. Allows them to have predictable billing. It allows our teams to price and discount through the channel or direct in the seamless possible way, in the simplest possible motion, both for our customers and our own teams. Simplifying everything is something that is near and dear to my heart. I think in order to scale, in order to really live this dream of One Fastly, drive towards market leadership, we have to transform. You're gonna see that from us for years. This is not gonna be a moment in time.
One of the ways that we're simplifying our own operation is really bringing senior staff together into three functional groups. Our go-to-market team with Sales, Marketing, Customer Success, our Engineering and Product team, that includes Product Management, Service Delivery, and Engineering, and of course, our Operations team with People, Finance, IT, HR, et cetera. These three teams are the people that you're gonna hear about today, the people you're gonna hear from today. These three functional groups are able to operate more quickly, more independently, to serve our customers better and to serve our teams better, and it's truly key to our success. If you leave here today with one thing, let it be this: Our North Star is to partner with our customers to deliver the best possible end-user experience, and we are maniacally focused on that.
We have a differentiated, highly performant, software-driven platform, which is extensible for years and years of adding product lines and driving innovation, but also it's purposefully designed as an edge cloud to deliver best-in-class user experiences to our customer. I believe this market is ripe. This is the right time to be in this space. User experience has never been more important. Engineers, platform teams, developers, have never cared about it more, and that this team, this platform, this technology, is in the right place to succeed and deliver the best possible result to our shareholders. In order to drive all of this, in order to achieve this kind of success, we'll have to stay focused.
Focused on our customers, focused on the user experience, and of course, focused on our mission to make the internet a better place where all experiences are fast, safe, and engaging. Thank you all so much for being here today. I can't tell you how excited I am. This feels like a rolling out of the new Fastly. I love it. It warms my heart. With that, I'd love to welcome to the stage our founder, our Chief Architect, Artur Bergman. Thank you.
Thank you, Todd. Hello, everyone. Good to see you. Some of you I've met in the past, some of you first time, it feels good to be here. It's about four years since I was last in this room. All those years were pretty tough for travel, happy to be here. In general, been very happy to be on the road, meeting our customers and prospects and getting the energy back, feeling it from our customers. I'm Artur Bergman, Founder, Chief Architect. Fastly is now 12 years old. We were founded on this idea that the internet was changing and that people wanted to build applications that were fast, secure, reliable all around the world.
That was just not what the existing providers provided, and still mostly is not what they provide. The edge had turned into kind of a fossilized place where you had to use it, but it was never part of your solution. It was never part of a business solution. It was never a part where you could innovate. If you were an engineer, you would go like, "Hey, I think the edge is a great place to solve this." Then you would go to the existing vendors, and the answer would always be, "No, you can't do that." You had a lot of people basically reaching a conclusion that this is just a dead area.
I think we've shown with our customers that if you embrace the edge and you allow your engineers, your developers, your product people to innovate there, it can have amazing results for your business. Compute was always part of the plan from day one, but I don't think anyone would have given us funding in 2011 if we said, "Hey, we wanna build this edge compute network." Everyone would be like: What's that? Who's gonna use it? We needed a really big, solid network so that people could then run Compute on it. We built the CDN first, then we expanded into Compute and Security.
Todd mentioned this. Some of the founding principles around scrappiness, I love when Todd uses the word scrappy, was that we needed the platform to be very efficient, and we did that using software. We're a software company. We solve problems using software. Our entire stack is kind of based on that, right? We have our custom storage, we have custom networking, we have our own SDN stack, we have our own global controlling stack. That gives us the benefit to be able to run a lot of traffic on a fairly small network. It also exposes a lot of power to our customers.
If you're stuck in a kind of a hardware appliance model or hybrid, there are a bunch of things you can't just expose out to your customers, and you can't have a lot of the real-time functionality that our customers rely on. This is how scrappy it was when we started. Some of you might have seen this picture, but the first Fastly POP was built before Fastly was started with me flying with servers as checked luggage. We picked servers that weighed 70 pounds, so we were just under the airline's 72-pound limit. If you have status, you don't pay for it, so it was free to fly with them. That was the cheapest way to send out servers because someone had to go out and install them anyway. We've grown a lot since then.
This is a picture of a Fastly POP today, and they are kind of unique in the sense that the only thing in our POPs are servers and switches and nothing else. There's no other networking gear, there's no specialized hardware. It's all controlled using software. We have published a paper on part of this called Faild. I know other companies out there have tried to mimic this. I have never seen anyone else succeed with the total integration we have. Nick Rockwell will talk a little bit about this later on the efficiency side, but one example of what this provides for us is a tool called Autopilot. Because the servers participate in the network, we don't have routers, we have very fine-grained control of where we send traffic. That's one example.
We kind of lost our focus over the last couple of years. We didn't innovate in the space that we are basing in. Kind of saw that in our gross margin, diverging from our historical trend of improving. We started building infrastructure in a more enterprise way, which doesn't scale in the way I want to scale. In the beginning of 2022, we really refocused on this. I got involved very specifically in going back to our roots. Where software solves problems. Hardware is not a solution to anything, software is. Also to start innovating and actually deliver things that our customers have been asking for, that our customers want. Part of that was the software architecture, and the other part was innovation efficiency. Lakshmi will talk later about.
Lakshmi and Laura will talk later about the innovation velocity and how we focus there, how we're using our own Compute platform to increase the velocity. Nick will talk about the efficiency gains derived from the software architecture. It's a software architecture that we keep on investing in and keep on making more efficient. One of the metrics that I tracked from beginning of Fastly is the revenue per server. In the slides afterwards, there will actually be a revenue number, but the second line there is about $100,000 of revenue, and this is the trailing 12 month. You just take that revenue, you divide it by server, and you kind of see how much revenue we get per server.
This number from very early on in Fastly, we always targeted about 100,000. As you can see, that's kind of where we kept, and there is some seasonality in there, but starting in Q3, Q4 2020, this number started declining, and the efficiency of our servers declined with it, which is a large. Nick will go into detail how that affected our gross margin. Starting in 2022, we can see the trend line changing. My goal is to get it back up to where it's supposed to be. This drives the two of the drivers in gross margin, right, which is depreciation, but also colo.
The more revenue we get per server, the less colo we need. Those two things are kind of one third, I think. I don't actually remember what they are right now. It keeps changing. Bandwidth is separate. Nick will talk about that as well. On the innovation side, I want to talk about Fastly Anywhere, which is a project that I've been involved in. We kind of pre-announced it at Altitude last year in November. The idea is relatively simple. It's a lot of work behind the scenes. We have defined the edge as the closest you can get to your user while being inside your compliance scope. Of course, different customers have different definition of what compliance scope is.
If we really want to be a provider for their edge, we have to be where their edge is. Fastly Anywhere is this idea or product where you can take Fastly in a box. You can deploy your own Fastly POP, scale down, scaled up on the infrastructure that you want. It could be Kubernetes, it could be VMs, and it could be on a cloud provider, or it could be on-prem. I know we're talking to some hospitality providers that have, you know, app-driven experiences. Their most deluxe properties are in the places with the worst internet, and therefore, they have the worst user performance or user experience.
They don't want to maintain two different stacks, so they want the same code that powers your experience wherever you are in the world, to also accelerate it when you are on property. That is, stores, just another example. Another use case we're working with a customer on is something I call the cloud sandwich architecture, which is like when you have a request coming in from the end user to Fastly, and it goes to a cloud provider. Because they are using APIs, it goes back out to the, to us, and then back into the cloud provider, and then back out again, and sometimes quite a few times, which is a latency hit and a pretty significant egress charge to the cloud provider.
With Fastly Anywhere, we have customers looking at running their own Fastly POP inside their cloud provider to avoid that kind of egress costs and latency, while still being able to use all the advanced Fastly features, real-time config, purges, et cetera. I'm really excited about this project and product. It's been great working with Todd for the last nine months. It's been an unbelievable focus on simplification of one platform, one Fastly, focus on the customer, and it's been really rewarding for me to see, to work in that environment. You know, I'm really happy that he's here. As a founder, it's nice to see that what you built is in good hands and great hands. I love the simplicity message.
Like, it's, we need to make our platform really simple for people to use. With that, thank you so much for coming. And I want to introduce Lakshmi, who will talk about our speed of innovation. Thank you.
Thank you, Artur, and hi, everyone. I'm Lakshmi Sharma with Fastly.
As you heard from Todd, that we as an organization are formed in three functional groups. For the best and the most Sorry, that happens. It's off? Okay. Works?
Okay. Technical glitch, that's fine. As you heard from Todd, that we as an organization are organized in three functional groups, and I represent product and services. As part of product and services, there are three groups: product, engineering, and client services. Our goal is to deliver One Fastly experience to our customers, partners, and teams. As a product leader, I always like to start with: What is the problem we are solving, and who are we solving for? We know that businesses that are on internet today, basically, most of the businesses, they need either a website or a web application, or they need a website mobile application to interact with their users, and they need to deliver fast, safe, and engaging experiences on those modes of interactions with their users.
The developers who are building those applications, they have choices to make. They need to make trade-offs between fast, safe, and engaging tools because the solutions out there forces them to choose between those options. Fastly has a solution for that. Fastly's platform almost eliminates the trade-offs between fast, safe, and engaging. It does so by delivering applications closer to the users, really fast, and securing them with highest accuracy, and giving flexibility and tools and capabilities for developers so that they can deliver personalized experiences for our customers and users. Let's take a look at our platform. Fastly's platform is unique. I mean it. We have a fully programmable, homogeneous architecture across all our POPs. What does that mean for customers? That means that customers can deliver same experience for all the applications they build on Fastly to all their users all the time.
Same experience. Our high performance allows customers to deliver fast experiences to their end users. For example, using our instant purging, our customers can deliver changes to their content, dynamic content all the time, but instantly to every user, everywhere. We hear from customers that prior to using Fastly, the accuracy that they needed and the for protecting their Web Application and APIs, they needed a multiple vendor solution, and also they needed to add more security people with security expertise that we all know how difficult it is to get those expertise today. After using Fastly, they could consolidate those solutions and then still get higher accuracy than what they used to get before.
Customer gets rich telemetry from Fastly's instant and real-time logging, as well as historic logging and tracing, that deliver rich and engaging experiences to the applications that they build and deliver. What is our product strategy? I talked about platform. Product strategy is user experience. User experience is our North Star, but user experience cannot be delivered without delivering a fantastic customer experience. For customer experience, we need to work on developer experience, that we partner with our customers Who drive a great user experience for their end users. User experience for our customers' users. We leverage Fastly's platform across all our product line to give a unified experience, regardless of what product line we bring to the market, existing or new. That gives a simple way of accessing web application, websites, and mobile application.
We all know that simplicity is the key when you're in the internet world. We drive that. Let us talk briefly about the product strategy for each of the product lines. I'll start with our core product line, network services. This market for network services is going to grow to $21.4 billion by 2025. Yes, we know, and you all know, that network services has been our core growth engine for years. We are still investing more because the TAM is so high. We have such a big opportunity to get the share out of that market. Our customers don't just use it for CDN. You heard from Todd. They use us for priva cy. Google and Apple, they use our privacy products to deliver consumer privacy through private browsing experiences for their end users.
Continuing on to the privacy roadmap, we will be bringing compliance region for customers who are sensitive to data privacy. More to come. Let me talk about our next product line, growth product line, Security. In Security, we play in Web Application and API security suite, WAAP suite. It includes Web Application Firewall, DDoS, bot protection, and API protection, and it needs a platform Security that we keep, you know, continue to add technology for Security into. We believe that we have made investments in platform, and we have made investment through acquisition of Signal Sciences that gives us the capability to go really fast and get the market share into the Security market as well. Four years ago, we invested and launched DDoS protection into our platform, not as an external product.
Two years ago, we acquired Signal Sciences, and then we brought in the best Web Application Firewall into the market, and then we integrated that into our Edge platform. That helped us deliver bot protection very recently. We launched bot protection into beta recently. Combining this Edge platform capability from Fastly, which has DDoS, has API protection, has been using internally, and then, like, we are able to launch this Web Application Firewall. We will continue to churn the platform to deliver more and more security really fast. As we continue to expand our Security portfolio, we are pleased with the results that our customers bring to us. A major global e-commerce platform has migrated their entire delivery and Security services onto us, just with one set of suites.
They were able to consolidate multiple solutions with one Fastly solution. Also during this migration, which only took a couple of weeks, we were able to train their DevOps team so that we can get them ready for the future, programmable future and extensibility for the future. Let's talk about our first incubation product line, Compute. The edge compute market is expected to grow to $3.4 billion in 2025, and Fastly is a pioneer in edge computing. You have heard already from Artur and Todd, and we are very excited to see this broader attraction adoption by the market. Like, and it's so humbling for somebody like me to be part of that journey. Very humbling to see that what Artur brought, like as an idea, is getting like, you know, the market traction, like, across the board.
Our customers have been using Compute for a variety of innovative ideas and use cases. A leading DevOps platform company is using Fastly's Compute serverless platform to deliver their services and CI/CD capabilities every day around the world. They have been able to do this with half or more than half of the time that they could do with, you know, their previous options. There is more coming. We have launched JavaScript, and Go, and Ruby on our platform before. We'll continue to bring more languages and frameworks so that the developers across a variety of organizations and variety of industries are able to deliver stronger experiences and build, like, broader set of applications onto our platform. Finally, Observability is another incubation product line. The edge portion of Observability market is going to be $2.1 billion.
Edge portion only is going to be $2.1 billion by 2025. We just launched Observability. We have just started to touch, like, such a big market. So much to do. We have seen strong interest from customers already, and a global e-commerce platform company has used Fastly's Origin Inspector to improve the uptime for their platform, so that they can deliver great experiences to their end users. I know AI has been top of mind for the industry, and so it is for us. We have been using AI in our platform for years. We have used it for Security. We have used it for optimization of network. What is most exciting to me as a product leader is that our customers are bringing AI use cases, driven workloads to our Compute Platform. Workloads are the key for Compute Platform.
We have customers using data models for edge platform, for smart image resizing and image classification. We have some customers using it for inferences at edge. We have also some customers using it for text and sentiment analysis. A lot of customers using it for a variety of use cases already. That, to me, as a leader, product leader, and the innovation of the Compute Platform is the key. That's where the growth is, workloads. We believe that more and more customers will continue to bring more innovative use cases and drive the usage. Though I've been describing like few use cases, only a few examples of how customers are using our product lines, there is so much more we have launched.
If you look at the, you know, the top half of the slide, these are all the products and features we have released this year. There is more to come, which you see at the bottom. We are not just releasing products and features. That's amazing. You know, it helps our sales teams, but most exciting is that how are we making it easy for our customers to try and buy? Then how easy we are making our sales team to be able to sell. Reducing the friction for our sellers to scale the GDM. Our simplified packaging, which was recently launched, is the way to make it simple for our customers to buy and use.
Some of the key differentiation that comes in, this brings in the predictability of the use, predictability of the cost, so that customers have tighter control on the budget that they have. We have also made it easy for customers to remember the unit of the bill. The unit of the bill is request. Request is what we all talk about in the internet, right? Request is a unified metric for all our product lines, existing or new. You know, the procurement leader that you're working with, that makes it easy for them to remember. We have unified the metric, we have simplified the pricing, and we have unified, like, across all our products, and that makes it very easy for our sellers to sell.
In addition to making it easy to buy, we are also making it easy for our developers, the developers of our customers that I talked about. Customer experience is driven by the developers who are building those applications. We are making it easy for developers to build on our platform. We have recently revamped our developers portal so that developers have more use cases and more toolings and samples from the problems that developers and our customers have solved. That has increased the usage of our developer portal. Since the acquisition of Glitch, we have added 500K developers to Glitch community. That is like 2.4 million developers. We have been coaching all of them with the help of our developer relations team on how to use our Compute platform.
Fast Forward, our program supporting open source and nonprofit developer initiatives is not only showing good citizenship, that we are. Good citizenship is very important for the software to grow, but also has created a second order of developer community for us to learn from. With all this visibility into developer and the ecosystem, we are not only getting insights for today, but we are also learning what do we do better for tomorrow for those developers helping our customers? It helps our roadmap big time. With that, thank you so much, and over to Laura Thomson. Thank you.
Hello, everyone. I'm Laura Thomson. I'm the Senior Vice President of Engineering here at Fastly, and I'm really excited to be here with you today. I'm looking forward to this. Lakshmi mentioned our durable innovation engine, and I'm going to tell you a little bit more about what that is and why it's important, and generally speaking, just about how our strategy and execution all support the innovation cycle. I want to go back a couple of years. When I started working at Fastly, which was the week of lockdown, the very beginning of the pandemic, people used to think that we were a single product company, right? Sometimes people would say it's a point solution, and that's kind of bananas. It wasn't true even then, but it's definitely not true now.
We did have a lot of work to do in that area, though, our mission since day one has always been to provide our customers' users with an experience that is fast, safe, and engaging. Let me tell you how. To achieve these goals, we had to build a complete programmable edge cloud platform. There's three things that are really important about this. The platform is fully configurable via APIs or via the Fastly app, provides real-time into visibility into everything that's going on, and global scale. The part we had to build out was, in fact, our durable innovation engine. This is to lay the groundwork for the growth of the business that we have now. You hear a lot of talk about second product syndrome, the innovator's dilemma, crossing the chasm, whatever we're calling it this month, right?
That jump from selling one product into having a whole line of products or a platform is actually really hard. As you all know, a number of companies have failed at that hurdle. There wouldn't be so many business books about it otherwise, right? We have now climbed that hurdle, and I'm going to tell you a little bit about the secret sauce that we use to get there. I want to talk about our innovation environment. Everything in the way our environment is set up, encourages innovation and allows our teams to thrive in this incubator. We have a set of tools that make it faster and easier to add new product lines. When we set out to build new product, we can build it. We say we build Fastly with Fastly.
We build on top of our scalable edge infrastructure with all of the operational rigor, and resilience that has provided for the last however many years. The other thing that's sort of new here is that we have this core set of platform services, and they provide a unified platform internally so that when you are shipping a new product, you don't have to reinvent all the wheels, right? All of your UX, billing, telemetry, whatever it is you need, is all right there, like a set of LEGO, and you can just plug in and go. This reduces friction, reduces time to market. Sometimes we say in engineering, time to first dollar, which is something we're all very enthusiastic about, and that's kind of key to efficiency.
The other thing to note here is that when we're building, we say, future-inspired and future-proofed by the very brilliant minds in our CTO organization. They develop horizon two and three products and graduate them. That's the important thing, and I can't overstate how important that is because that's the hard part. The Compute product, which is a remarkable technology, was created in the CTO organization and graduated out into the engineering teams. These features up here form the incubator in which our products can thrive. They are critical to maintaining our innovation velocity. I also want to emphasize that innovation happens at all levels, right? It is not just, you know, incremental iterations in the engineering teams or big, hairy, audacious ideas that come from the CTO organization. Innovation can come from anywhere in the company, and we have a process for this.
If you have a fantastic idea for a product, you write a proposal, we all look at it, and if we, you know, if leadership agrees, it's great, then it enters the product development pipeline. This is actually how we came up with our Observability product line. Okay. Lakshmi also mentioned this transformational program of Platform Unification. This is a key program for us. I want to tell you what that is, why it matters, and why we're working on it. Platform Unification is about unifying the end-to-end Fastly customer journey. The outcome here is a shared framework for building new products, right? One way to enable a product, one way to measure a product, one way to ship a product, one way to integrate a new product with our enterprise sales motion.
All of this is to elevate the experience of our customers so that they can provide their users with the best experience. There are also some go-to-market advantages here. Platform unification gives us this seamless brand experience, right? Everywhere you are interacting with Fastly, you know you're interacting with Fastly. There's that same look and feel everywhere. We have a single user identity and access management system so that you can manage it across all of the Fastly products. The third one, perhaps the most important, is that we have a common platform to launch and cross-sell. This one is actually, I really want to focus on this one. This is strategic, right? Because it accelerates our time to market and enables that land and expand motion, right? Really gives us the fuel for our durable innovation engine.
I'm really proud of these numbers, so you should look at them. I want to draw a through line from platform unification to our durable innovation engine. We invested in building our edge cloud platform, and this also gave us a sort of a lot of leverage in terms of the platform, what we could do with it. The strategy of platform leverage enabled increased innovation velocity. If you look back to this time last year, we shipped a certain number of products and features, and this year we shipped double the number. Sometimes when people look at things like that, they think, "Well, how did they do that? Like, was that an overnight success?" As you probably know, the secret to all overnight successes is they don't exist.
There's usually a lot of hard work, and there's a lot of duck feet paddling under the surface that finally ends up with success. What did we do to get here? One of the things that we did was we looked at the great companies, especially sort of the large, successful cloud companies, and we saw that, you know, many of them made long-term investments in their platform and engine, right? You know, I think we all looked at these companies for years and thought, "When will they be profitable?" We saw, you know, investment, investment. They're big investments, and when they pay off, the payoff is huge. We also, here at Fastly, made a long-term investment in our platform, that we could help our customers deliver the best experience to their users.
What I want to tell you, and I think what this graph shows, and all of the graphs that you see today, is that we've passed that inflection point, and we're now at this hockey stick point. Nick is going to talk more about infrastructure investment, and the leverage that we have there. One thing, I don't want to forget this. This is kind of the original value proposition of Fastly, right? The unified Fastly platform gives us core product differentiation. We call this One Fastly Network, right? Every POP runs every Fastly product. That's one Fastly, one platform, one infrastructure. This is important because when we have a customer, customers don't have to choose. They can have it all.
All of our products then provide, because they're all on this one global network, best-in-class reliability, single identity, and a single compliance effort across the board. This also means that any kind of efficiencies that we get, so for example, in platform unification, that program is more efficient. When we find infrastructure efficiencies, which Nick will talk abo ut this afternoon, we get them across the whole network, so that kind of amplifies the effect. One other thing to point out to you guys is that having a single, scalable, efficient platform enables us to drive the cost of engineering down as a percentage of revenue over time. Our unified platform supports our durable innovation engine and enables us to provide the best-in-class user experience of an internet that is fast, safe, and engaging. Thank you for your time and attention.
I am now going to hand over to Vern, who will manage the Q&A.
All right. Thank you, Laura. Yeah, step here. You're supposed to stand right there. All right. Thank you, everybody. Now it's time for our Q&A session. For those of you listening online, please feel free to submit some questions while we get the stage set up. We're going to have runners here in-house if there's any questions. Excuse me. A bit tighter than I thought. We all set? Ready.
First question.
All right, Jonathan, take it away.
Is it on?
We have technical difficulties here, I think. We'll repeat the question.
Yeah.
Yeah, we can repeat the question.
Mm-hmm.
Well, thank you all.
Microphone's still on.
I got it. I got it.
You got it? I'm holding it behind you right now, so.
Can you maybe give us a little bit of your perspective as CEO? You know, why did you make the decision to reorganize the teams, and what do you think of in terms of being able to simplify the internal structure?
Yeah. It's a great question. The internal structure of Fastly was, you know, not massively changed, but we had a couple of key, I think, kind of fundamental changes that helped us operate more efficiently. The first was the creation of senior staff, who will be speaking today. Senior staff doesn't represent my direct reports, either all of my direct reports or only my direct reports, but instead, it represents our decision-making body. It allows us to operate far more efficiently because this team can operate independently, especially within those functional groups, and operate without every decision coming up and down the org chart. The second thing was just pushing really hard on sort of breaking down functional silos.
Almost every company about this size, I think, operates functionally by functional department: marketing, sales, engineering, product management. By breaking senior staff into these subgroups, the sort of functional links that have to be super low friction, I think are built so much more quickly, and thereby we can just move more quickly. Every time a decision winds up on my desk. It's too slow. By thinking about it in terms of these three functional groups, by letting senior staff be the decision-making body in these three sub-organizations be able to operate independently, we're just able to move faster. It's just a lower friction play, and that's the reason we do it.
Hi, Madeline Brooks, Bank of America. Thanks for the presentations and for taking my question. Lakshmi, this one's for you. You know, when you're thinking about your new products across Security and edge Compute, exciting markets, but also will be crowded, how do you escape the risk of commoditization?
Risk of commoditization? The commoditization of our capabilities that we are offering, is that what you're-
Right.
Okay. I'll kind of maybe talk about like, how a product leader thinks. The way I think is, or every product leader in our organization think, is that you're leveraging your existing differentiation, right? The value that you add as like, on a platform, is by incrementally adding more value to what already exists. As long as we continue to do that, whether it is Compute or Security, so if the differentiation is that we are really fast, you know, and then we make it very easy to do what you're doing, there is a huge market for differentiation on top of what we're already doing. That's kind of the way I think for products. Does that help? Thank you.
Hey, guys, Jim Fish with Piper Sandler. Thanks for the time today. Two-part question. Obviously, there's a small competitor of yours out there today, also saying they're the fastest network out there. I'm sure you've probably seen that from them, but, you know, trying to understand, you know, what's the difference then in the data that says Fastly is the fastest in these 50 countries, versus them kind of saying, "We are the fastest in virtually every country." Really, the crux of my question here is: what is the key KPIs that your customers decide on, to make that decision of, like, is it just completely, it's got to be fast? Or can you walk us through those kind of key KPIs, and then just a quick follow-up after that?
Sure. I'll start, but Laura and Artur, I'm sure you have something to say. I saw that tweet today. It's lovely timing. Look, we rely on third-party data. We don't create our own methodology. The data on my slide is right off of third-party metrics that are available to everyone and very simple to run. It's trivial to confirm that data, and I urge you to. The real issue here is that, like, what matters is the user experience, is how that latency is realized by end users, and that's what we focus on. It's the end user experience.
Yeah.
The metrics that customers look at, like in video, you have, you know, buffering, video start time, video fail, live streaming. You also have like, time from live, right? Like, how much the delay is. In outside of, or, you know, commerce or content, you look at time to first paint, time to usable content, time to final paint, are the metrics that the customers look at. The most advanced customers, they actually look at like, conversion rates, right? Like, they just tie the performance metric into conversion rates. The TCP connect time is not what they look at. They look at the outcome.
Yep. To add to that, you know, I think any benchmark that comes from one specific vendor, you have to take it with a grain of salt, right? It's always better to look at public data. We've actually been through this previously, and our teams went through and did an analysis of the methodology that our competitor used and found that it's actually pretty flawed. We are very confident that we are fastest where the customers are, right, where the end users are, and that's what matters.
Got it. Then just on the subscription side, maybe this is for the next presentation, but what % of your customers are you kind of looking to target with those new subscription offerings as opposed to the traditional usage model that we're used to out of Fastly? Thanks, guys.
That's a great question, and I hope you ask it again in the second half. I'll give you my two cents on it. Our existing customers, that where most of our revenue comes today, large, sophisticated customers, I believe the utility motion is perfectly well suited for them, and that's great. It drives organic growth and upside for Fastly, it drives the motion that they want to use. I think largely the packages allow us to have an amazing upside when it comes to new customer acquisition, just lowering the friction to gain new customers who want to just sort of lower the risk. They want predictable billing. They want all-inclusive package. They don't want to order everything à la carte.
I think it'll help us get into the mid-market and lower the friction of the channel play. Largely targeted towards new customers. I'd probably think of it as like 80/20. 20% new... Existing, 80% new, if I had to get a swing. You should ask Brett in the next session.
This is Jonathan Ho from William Blair. Jus t wanted to, I guess, build on the discussion that you had on AI and maybe focus a little bit on the monetization opportunity that you see. How does this sort of work in terms of leveraging, you know, the edge compute for these AI use cases? What can it drive in terms of volume increases and, you know, ultimately, what does this mean in terms of the growth rates? Thank you.
That's really for you, Lakshmi, I will start. I think, you know, it's super interesting what's happening in the market right now. When we look at the AI space, you know, we think about, again, that partnership with central cloud providers. We expect models to be trained in central cloud. We're not a good platform for that, nor should we be. Inference models can be run at the edge. Where latency matters, they're gonna push that to the edge eventually. We want to be the best possible platform for those workloads to land.
Yep, Compute platform is for use cases that customers want to deliver. When I say like inference at edge or like customers using it for like, you know, smart image resizing, we went and learned from customers that they were already doing it, but we charge them as simple as possible. When it comes to pricing and packaging, we would really going to keep our pricing simple and as much as possible, still you know, unified on a unit, which is request. That's kind of where it is.
We'll drive the usage of the platform. We'll continue to work with customers and what is AI bringing. If in future, if we see more of those use cases, then we'll see, like, what value can we add. Driving through the platform, that's how it kind of is.
We do have a question online. It's on the WAAP side of things. Probably more of a Lakshmi question. What do you think is your competitive advantage in DDoS? We haven't heard you talk much about that in the past.
Do you want me to say?
DDoS, as I mentioned earlier, that we built DDoS for protecting our own infrastructure. As we were delivering, like CDN and load balancer, we were already, you know, behind the scene working, giving DDoS capabilities to our, you know, customers and their end users. As we started to kind of build, like, the full WAAP portfolio, our customers were asking like, "Can you give me a bullet where I can click and say, you also have DDoS?" It was more of like, it's the same platform, and we make it self-enable easy to get you DDoS. The most important feature that customer wanted was that: Can I get visibility into what you're, you know, protecting me from DDoS? You're protecting, that's awesome, but I want the visibility. Visibility is like the trust.
Same platform, you know, building on the same capability as the question was before, that's our differentiation. It's really building a stack on top of existing platform, making it easy to use and making it easy to buy. That's really our differentiation. Simple, easy.
Frank?
Great. Frank Louthan with Raymond James. Two questions. Artur, you mentioned the, you know, the revenue per server, and maybe this is jumping the gun to Ron's part of the presentation. Is it possible to disclose how many servers you have, or to be able to track that, or is that still the right metric? Secondly, on the, on the product side, innovating, developing, adding a lot of products, Where are you relative to your peers? Were you just that far below the market, or are you getting ahead of them? How do you know how many SKUs that you are correct, what you need?
I'll start. On the server count question, I think we do disclose that, but you should check with Ron and Vernon.
It's on an upcoming slide.
Yeah, it's on an upcoming slide. I think it's actually on our website, so it's not proprietary. I'm sure there's amazing math to do with that number, so.
Yeah.
Great, I'm glad you had it.
It's never easy.
Yeah. I do think, though, it's important. It's important, and Artur made the point the right way, to track internal KPIs like that, because even if you were able to generate, you know, the same gross margin, but with more servers, it's just complexity. It just won't scale. Revenue per server matters because the higher that figure is, the easier it is for us to scale smoothly and maintain a simple operation through $1 billion to $2 billion to $5 billion revenue. As far as the number of products and, number of SKUs, I think is not the right measure. You know, I like it when our customers are able to purchase amazing, faster technology with a very simple contract, fewer SKUs. That's what the packages are really about.
They can buy basically everything they need for content delivery with a single SKU, everything on the security side with a single SKU. DDoS, Bot mitigation, and Next-Gen WAF is a single security package sold in a SaaS model, regular billing, 1 SKU. That's a beautiful user experience, and I believe in that. But there's a ton of expansion for us here, and I think we have to be, you know, have to be humble. I also think it represents a lot of opportunity. We're at the beginning of the road in Compute, and Compute has, I think, a ton of storage options that are going to be monetized and productized as we go.
We just launched KV Store and Config Store, which are powerful options there, and there's tons more to do there, and I think you're gonna see innovation on the storag e side from us. Regulatory compliance and lots of different compliance, of course, you're gonna see additional expansion from us there, too. Observability is really early days and again, in a space where we're at the beginning. I think you'll see a lot of expansion there, too. Anything in our incubation area. The place where I think the number of SKUs, number of products is pretty mature, is certainly in content delivery. I feel like we have an incredibly mature product line.
If anything, I'd love to see, you know, our teams continue to drive simpler ways to purchase, but from a functionality point of view, it's the most feature-complete solution on the market, I love competing in that space. On Security, I think we're seeing it right now. There's some room for expansion, the kind of the key three modules in Security are gonna be Next-Gen WAF, DDoS, Bot Management. There's gonna be expansion there, I feel really comfortable with where we are.
All right. Thank you.
Sure.
Any other questions? We have another question online. It's on the platform side. C an you discuss reliability and avoiding outages, especially as you bring out new features to the platform?
Don't look at me.
All right, that's fair. We take this really seriously. I think you all remember that we had a significant outage coming up for a couple of years ago now, and that really, at the time. We've talked about this before, right?
Changed the way that we do everything, right? It really made us rethink our approach. It was a large initiative, took a long time, but I'm feeling really confident about the resilience of the platform now. Sleep a lot better at night these days.
Great.
Hey, great.
Mm-hmm.
Thanks, guys. Mark Zhang from Citi. Thanks for taking the question, having this semester today. Maybe just on your product and capability extensions and, you know, where you guys look, you know, from a, you know, forward basis, how do you guys maybe, you know, think about what goes into that innovation and incubation bucket? You guys mentioned obviously, Observability and, Security, but, you know, I think I maybe, correct me if I'm wrong, but SASE might not be in the playbook in the next few years, where we see one of your competitors or other competitors, you know, sort of going to SASE as their next step. Maybe any sense, you know, the thought process behind how to think about the next, you know, forays, you know, within pretty much a wide open, you know, marketplace.
Yeah, awesome question. I can't tell how much I love that question. Lakshmi and Artur, I'll ask you to add to this, but I think a key to the pivot we're making at Fastly is to drive deep focus, and the focus is on really that intersection, like, where do we have the right to win? Because the edge cloud, software-defined edge cloud infrastructure, what we're best at, is going to be the best solution. That's. We are only investing in technology that meets that criteria, and there's tons of opportunity there. That's an area where SASE would meet the criteria. Edge cloud. Should we deploy the edge cloud? 100%. We also look at the intersection of that with go-to-market synergy.
Our buyer is the development team and the platform engineering teams that are focused on building user experience. We only focus in that intersection between those two things. That's why we're not investing in SASE. It's why we're not competing with central cloud providers. It's that intersection that matters. You know, Lakshmi's team, Artur's team, and the CTO organization, they are constantly coming up with ideas on where to expand there.
Yeah, that's as Todd said, the SASE question is really interesting question. The way we look at, we are a programmable infrastructure company. We are an edge cloud company, and there is Everything for us is workloads. You know, that's the way we kind of think. Whether it is multi-cloud networking, whether it is application networking, application Security and Observability, data analytics, they're all workloads that run on an edge cloud. For us, SASE is also one of those workloads, you know? But we have prioritized other workloads to be made the best when it comes to user experience. Yeah, if at some point a SASE company wants to be, you know, needs a fast, safe, you know, infrastructure, they can easily run on our platform. Yeah, that's the kind of way we think about it.
We've got one more online, almost probably down to our last question. This is an interesting one. Future products, any hints?
Artur, I call you, man.
I mean, I talked about Fastly Anywhere, which is, I guess, a future platform for all the products. I mean, we talked about the inference at the edge. We are certainly looking at a kind of the application side of SASE, which is better protecting your application servers, trying to prevent things like Log4j, which exposed really bad security practices in the industry. Helping with cross-cloud security, right? Like right now, you have to implement your security posture in multiple cloud providers, or you do it on-prem and hairpin back, which is highly inefficient. Those are, those are areas. Then storage. We launched... Todd mentioned, like, we launched a global Key- Value Store. It's pretty awesome. It's, it's like magic.
I like products or features that feel like magic to developers, where magic is, you know, you don't understand how it works, but it does. You know, the first feature we really had was the instant purge, which is you can get rid of content in 150 milliseconds around the world. To this date, like, when developers try it for the first time, it feels like magic. They're like: "How does that happen?" The KV Store is similar, like, you write to it in Sydney, and you read from it in Berlin, and it...
Or Frankfurt, the data is just there, and you're like: "How does that work?" There is more work to be done in the edge data space, especially to help our customers build distributed applications without having to employ distributed systems engineers, which are some of the hardest and most expensive engineers to hire, and they are typically concentrated in a few companies. I think that we launched the Edge Rate Limiting, which is one set of kind of edge data that has become very popular. There's a lot there.
Then, on the Observability side, allowing people to collect metrics, arbitrary metrics, business metrics, around the end user transactions and aggregate them and then feed them onwards, is another area that we are releasing products in.
Yeah, Sam? Okay, this concludes the Q&A session. We're gonna turn into the second half, and we're gonna bring now the go-to-market team out here to present. Just a couple of seconds here. We'll set the stage back up and get rolling.
Awesome.
Thank you.
Thank you.
Thank you
Today, we're going to focus on go-to-market, really focused on customer acquisition, retention, and expansion. The go-to-market function is made up of sales, marketing, and customer success, focused on new logo acquisition and customer expansion. We have an amazing business. When we land a customer, we do a phenomenal job of expanding that customer. Sales is focused primarily on new customer acquisition, and we work very closely with the customer success team on customer expansion. Marketing drives brand recognition and demand generation to fill the top of the funnel with qualified leads for our sellers. Customer success drives customer satisfaction and wallet share growth, leveraging the relationships with customers and driving cross-sell leads to our sellers in the field. The segmentation and coverage model that we've implemented is designed for efficiency and scale.
We've had a balanced investment in resource allocation, with each territory, where we have an account executive that leads the territory. We have supporting resources with sales development reps, sales engineers, channel managers, account managers, and then marketing support as well. We've deployed these territories in alignment with the market opportunity to drive our land and expand motion. Enterprise, as our definition, is named prospects and customers that are $1 billion in revenue or greater, and $100K of Fastly ARR is the target transaction size and above. Mid-market is named prospects and customers, $50 million-$1 billion in revenue, and $25K-$100K in Fastly ARR.
Our small to medium business segment is less than $50 million in revenue and less than $25K ARR, and we're in the process of building out an inside sales organization that will be leveraging inbound leads for our SMB teams. We have multiple routes to market, direct global partners and regional partners and hyperscalers. Today, we work with GCP and AWS, and then systems integrators as well. Our strategic team covers the top 100 prospects and customers in North America, and our media and entertainment team is a dedicated vertical team in North America and in four countries globally, and covers all segments in that market. We're focused on five key initiatives to help drive our new logo acquisition engine. First, we've designed our sales incentives plans to focus our AEs and the supporting resources on new logo acquisition.
We recently launched, as you heard earlier, simplified pricing and packaging to make it easier for our customers to buy and easier for our sellers to sell. You heard from Lakshmi about the three pillars of product and services strategy, is to strengthen the platform for optimizing the sales experience. We're doing that by leveraging a unified platform to do platform-wide demos, as opposed to point product demonstrations. We're doubling down on our partner activation strategy. We are super excited about this. The core CDN market traditionally has been very much a direct sales motion, we have an opportunity to unlock a massive market opportunity for our partner ecosystem. We recently launched our new CRN 5-star rated partner program that gives our partners the ability to sell all Fastly products.
In addition, we launched our partner portal, which gives our partners access to Fastly collateral, training, and also an automated deal registration process. Lastly, we're going to focus in on verticals where we have unique value and extreme differentiation. There's still a significant amount of expansion opportunity for us in the media and entertainment vertical, both domestically and globally. E-commerce, travel, and hospitality is a sweet spot for us because performance matters and customer engagement drives business. The high-tech vertical, where we are delivering high-value privacy solutions, as you heard, with Apple and Google and other high-tech firms as well. Our partners have been telling us that having the ability to sell the product portfolio is very compelling, and the new pricing and packaging is tailor-made for our partner ecosystem and for our hyperscaler partners. The early results in the new partner program are promising.
We've had a significant uptick in deal registrations. Year to date, we're up 128% at 107 deal reges. Year to date, 33 partners globally engaged, that's up 27% year-on-year, and a very promising 99% of the deals are new logos, and that's up 29% year-on-year. We're just getting started here, team. We have a great opportunity to really disrupt the industry, leveraging a partner ecosystem globally. From a vertical perspective, we see the need for fast, safe, and engaging experiences all around us, a wide range of industries and use cases. As businesses seek to achieve the outcome, workloads are moving to the edge. In many cases, these are difficult, if not impossible, without edge, and specifically without Fastly's capabilities. Moving to the edge allows customers to have higher development velocity.
Results in a faster, more responsive, more protected site wit hout sacrificing personalization and end user experiences. Fastly is uniquely positioned to unlock significant business value and we've recently landed some great new logos in all four of these verticals. Marketing is focused on bold messaging to elevate the brand and stake our claim as being the fastest, most secure, most engaging edge cloud platform in the industry, while delivering the best-in-class customer experience. Our brand is also validated by industry analysts, such as Gartner, Peer Insights, and Forrester, and customer testimonials such as Abercrombie & Fitch, Google, and Frontier Airlines, confirming our position in the marketplace. Top of the funnel demand generation via industry and regional events, account-based marketing targeting buyers of Fastly solutions, and content marketing focused on targeted verticals.
That leads to inbound leads, where we're expanding our full funnel digital marketing to deliver leads, set meetings, and create opportunities. We're doing outbound prospecting, focusing field and inside sales on creating demand, targeted at prospects and specific buyers. Cross-sell and upsell by enabling easier purchasing and selling it via a single platform. That simplified pricing and packaging makes it easy for us to cross-sell and upsell our customer base. Simplifying the customer experience with no-touch demos and online trials, expanding our reach through joint partner marketing programs and events, increasing our market coverage, leveraging relationships that our partners have to improve deal velocity via deal registration. Putting it all together, running an efficient and scalable go-to-market requires a close partnership between marketing, sales, and customer success.
Marketing is creating that recognizable brand, generating demand for our sales teams by leveraging analyst relations and creating relevant content to differentiate our technology and create value for Fastly buyers. Sales is focused on qualifying that demand, driving new logo acquisition, selling across all markets, segments, and verticals, and leveraging our partnerships for market expansion and expanding our presence internationally. Our customer success team is an advocate for our customers, leverage customer relationships to prevent customers from churning, expanding our customers, and renewing our contracts. Thank you very much, and with that, I'm gonna turn it over to Kim Ogletree. She'll go into more about customer success. Thank you.
All right. Customers are the center of our universe at Fastly. I believe we support them better than anyone in our industry. I'm Kim Ogletree. I'm very excited to talk to you today about Customer Success. Why do we have a Customer Success team? Our mission is to drive customer satisfaction and grow wallet share. We aim to ensure every interaction results in an amazing user experience. We want to be the easiest platform to adopt and guide our customers through that at every step. Every one of us who touches the customer knows that our goal is to ensure that our customers never feel alone. We build sticky relationships that result in more wallet share, because customers feel secure with Fastly. That's why we're here. Right.
I want to take a look at the land and expand motion, talk a little bit about how we partner with our customers throughout the journey. Beginning with the onboard. We have a professional services organization that ensures we set our accounts up for success right out of the gate. This is a highly capable team that handles everything from the basic onboard to the most advanced website configurations. This account team is also formed at this stage, where our customers can become familiar with their support resources. From discovery, we work to understand the customer's priorities and cultivate relationships. Every customer is different, so building strong relationships is where we shine at Fastly, because it's genuine, and our customers know that. Explore is where we work to increase adoption by learning about the customer's real challenges that they face.
When we recommend something, they know that we're not pushing an upsell, but we're actually working to make their lives easier. That kind of trust only comes from genuine relationships. Advocate is where we have our executive sponsorship program, where we pair our executives with the customer's executives to ensure that we're building relationships at all levels within the account. Finally, Expand is where we pull it all together in an account map that consolidates the insights that we have for the customer with their priorities and their business challenges. Because having a documented account strategy allows us to deliver consistently, and our account managers are measured on revenue and the outcomes matter. So this is a cycle that never stops with our customers. We continue this throughout the entire life cycle of the customer.
A great example of the land and expand motion working as designed, is a recent example where, we have a very large customer in the fintech space, where we've listened to their needs, when we launched our managed Security offering, they wanted to beta this product. Within a beta that lasted only a few months, we constantly mitigated attacks for this customer, 14 of which were so large that it saved them over $8 million, that's based on data that they provided to us after the readout. This is a great example of where we add real value for our customers. All right, the core of our customer success engine is the account manager. This is a role that's so important to drive customer engagement and account expansion.
Within the account management team, we have a distinct support model for each segment, as Brett had outlined. We've got our mid-market, enterprise, and our strategic customers. For example, we have a customer insights panel, where we solicit feedback from our strategic accounts for many of our strategic customers, where they're able to provide feedback both on our product line as well as on our support offering. I spoke briefly about our executive sponsorship program. This is our opportunity to really strengthen the relationship with the customer in a much more strategic way than the account team could do on their own. At Fastly, we all have a role to play with our customers, regardless of the title.
It's just in our DNA, it's how we were founded. I'm so glad, because in my role, it makes it a lot easier that I don't have to constantly convince our teams how important our customers are. We've established voice of the customer product, a product use case process, where all of our customer-facing teams are able to provide use case opportunities and submit them on behalf of our customers to ensure that we're constantly advocating for our customers. This process works really well. Last quarter, two-thirds of the product roadmap was derived directly through this process. Within support, every customer matters. Although we do have a higher touch model for our top two segments, we have exceptional response and resolution times for all of our customer segments. We're talking minutes, not hours.
Our customers know that in their moment of need, all they have to do is slap us, we're going to be on the line with them right away, that creates a meaningful difference for the customer experience. I believe the reason for that is because we hire, at the very front line, folks who are capable of debugging code, and reading code, and again, that makes a huge difference to the customer experience. Our offerings are not only appreciated by our customers, but they're also recognized by industry analysts. Our Compute offering was rated a leader in the Forrester New Wave for edge development platforms. Fastly was also named a leader in the IDC MarketScape for worldwide CDN, our Next-Gen WAF was awarded Customer's Choice for Web app and API Protection five years in a row.
All right, let's look at the results. Employee engagement is critical. On a 10-point scale, our customer success teams consistently rate above an 8, which is far above the industry benchmark. Employee engagement matters, and it matters because you can't deliver these kinds of results without extremely engaged employees. We've created a culture where they're plugged in, and our teams have a voice into the process. We ask them quarterly how we're doing to support them, and we action those insights on a regular basis. We also track resolution. Every time a customer reaches out to us, we ask them how we did, and 98% of those responses are favorable. That's a real number. None of our top competitors have published CSAT performance this strong. Finally, 99% revenue retention. Our customers are sticky.
Once they really experience how Fastly is different, from our best-in-class support to our power of our platform, our customers don't leave. We are really proud of these results and the user experiences that we've created for our customers and for our customers' end users. Thank you. Okay, I'm going to hand it over to the one and only Nick Rockwell.
Thank you, Kim. Hi. My name is Nick Rockwell. I'm the EVP of Strategy and Operations for Fastly. My role is to ensure that as we bring more of the internet's best onto our edge cloud, that we scale our critical business infrastructure to support that growth. I want to start by making one point. We're getting to scale on the network. We are enjoying the economies of scale. We're using all the leverage that we've accumulated with our vendors, and we're fighting for every dollar. The main thing is that we're innovators, and the way that we really scale is we constantly find a better way. That's true, that's true of the way we build the network, it's true of how we build our products, and it's also true of how we build the company.
For us, it's all the same work to make all digital experiences faster, safer, and more engaging, that we can drive successful outcomes for our customers and for our shareholders. That's what we're all about. Let's get into it. We've achieved scale on our network. In the three and a half years that I've been at Fastly, we've grown traffic by volume through the network by 350%. Let me take you back to Super Bowl 2020. That was right around the time that I started. It was an exciting night, big night. Of course, we had record traffic that night. The peak we hit that night is now 30% below the lowest traffic that we see on a typical Tuesday.
You know, it's our 4 A.M. Eastern Time trough. That's a lot of growth, you know, over those years. At the same time, roughly that same period, really more over the last 12 months, we've improved utilization on the network, you know, the efficiency with which we fill the network, by 30%. We've been able to do that through a combination of things, improving how we measure and understand the capacity and utilization of the network, but also through being very careful about how, where, and especially when we add capacity to the network. We've also benefited from, as we've grown bigger, our seasonality becoming a little more stable.
In past years, very typically, we would have hit a peak with the Super Bowl in February, and then we wouldn't see another peak until the fall. This year, we've already surpassed our Super Bowl peak, I think, three times, and, you know, we've broken that pattern. That really helps us drive utilization of the network. Overall, it's really working. This year, we expect to grow traffic on the network five times faster than we're growing the cost of the network. To get into some details, I wanna show you some trends. This is all internal operational data. Vern won't let me show you the Y-axis. Sorry about that. I don't actually see him, but I better not risk it. We're gonna talk about percentages. This graph shows a unit cost of our bandwidth.
It's the amount of money that we spend for every gigabyte of data that we push over the network. That's about a 35% reduction in the last year and a half. This is interesting. Down here, the blue line is our total spend on our bandwidth for North America and Europe. The green line is the rest of the world. You can see that North America and Europe, it's actually pretty flat. The growth in traffic is being basically offset by the reductions in unit cost. We are going up in the rest of the world. That's Asia, Latin America, Africa, Middle East, Australia, New Zealand. I actually view that as an opportunity.
What I see there is we haven't gotten to the same scale in every region of the world, but we're growing, and as we do, we have an opportunity to flatten that line out as well and improve our overall economics even more. You all know about peering for us, when we're able to peer with a network and we can offload traffic for free, and that helps save us a lot of money on transit. It's even better than that, though, because we also lower latency for our customers and drive better user experience for their customers. Peering is really great. It's amazing. It's a really powerful way for us to work on the business.
This shows about a 60% improvement in our peering offload over the last 4 and a half years. I see that trend continuing. Most of that has also been driven in North America and Europe. As we grow to scale in the rest of the world, scale really helps us peer. I think we'll be able to continue that growth trend for a good long time as well. As we get to larger scale, there are new tactics that become available to us that make sense. For example, as we get bigger, it makes sense for us to take the bits that we're moving between POPs and pull it off of transit and put it onto our own fiber.
This is a model that we built that shows that the cost that we pay for that traffic on our own fiber is about 58% less than it would be if we sent it over transit. We haven't started to do this yet, but we're starting right now, and you'll see us operationalize that tactic over the coming months. Leveraging all those economies of scale is really, really important, but it's not what makes Fastly special. What makes Fastly special is that we're innovators, and our biggest lever is to actually innovate, to drive more efficiency on the network. Most of you are aware that in the latter part of 2021 and in the first half of 2022, and Artur alluded to this, our gross margins declined sharply. There were a number of reasons for that.
There was very volatile, unpredictable demand in the beginning of the pandemic in the first year. It was a very challenging supply chain situation, where we saw lead times on key components of 18 months or more in many cases. I want to acknowledge, too, that we also lost focus. We lost focus on running the network lean, and I want to assure you, we've fully returned to Artur's founding philosophy of being scrappy and efficient in every detail of our operations. As Winston Churchill said, "Never let a good crisis go to waste," and we didn't let this crisis go to waste.
Laura and I kicked off a major engineering program to drive efficiency in the network in four ways: the efficiency of every cache, CPU efficiency on every cache, a utomated traffic engineering to get the most out of our peering offload and also to cost-optimize our transit spend, a new technology to route traffic and balance load across POPs, and also storage optimization. That effort has been wildly successful. You already heard from Todd that we've seen, on average, a 50% improvement in the throughput of each cache.
We've seen significant increase in our utilization of our peering links, and we're just getting the new routing technology out onto the fleet, but that's really important because it's gonna help us drive the utilization of the network up even further, and in particular, it helps us to defer builds out into the future as long as we possibly can. It's a big impact in that way. We've actually been so successful, we've created kind of a high-class problem for ourselves, which is that, for those of us managing the supply chain, we keep finding that the hardware that we already have out in the fleet is going further and further, and we continually have to adjust our supply chain to adapt to that new reality.
It's a good problem to have, but it is, it is tricky. The other thing I want to say is that on the Fastly network, efficiency and performance are two sides of the same coin. This new capacity that's being created when we drive efficiency on the network, we can also use that to drive performance on the network. These new tools allow us to really dial in that balance between performance and utilization on almost a POP-by-POP basis. That's a really, really powerful tool to ensure that we remain the best-performing edge cloud. Two important points I wanna make that really compound these gains. I want to remind you that because of our modern architecture, Fastly's cloud is one cloud. When we improve CPU efficiency, that's available across the whole product line.
It's available to delivery, to Security, to Compute, to Observability. When we improve Compute's dynamic memory sizing and reduce memory usage within the Compute product by 50%, that memory is now available also across the whole product line. By the way, as we expand the product line, we increase the diversity of our workloads, which helps us drive up utilization across the fleet. We make better use of all the underlying resources of the network, of the CPU, the Compute, storage, bandwidth. That's really powerful, too, that's a positive trend. The second point is that everything important on the network is software-defined. When we say we improved efficiency on CPU efficiency by 50%, we didn't deploy a bunch of new CPUs around the fleet with all the expense and difficulty and time that that takes. We changed software.
We deployed software across the network. That capacity is available everywhere. When we innovate with how we route traffic, we can do that because all of that is our code. Everything we do to manage the network is code that we write and we control. When we make improvements to the fine-grain decisions around cache invalidation, and we free up 17% of storage in one of our busiest POPs, we can do that because that's all our code. Being software-defined is a core characteristic of Fastly's modern architecture, and it's really, really powerful. In so many ways, we're in the optimization business, and scale is great for optimization. As we grow, you know, we see more data, and this is a very, very data-rich business, and that helps, and that data becomes more stable.
All of our patterns become more stable, our regional distribution, the flows through our different peering partners and transit partners, our diurnals become more stable. Everything about our business becomes a little bit more legible, a little more predictable, a little more stable. That scale-driven stability helps us model our demand better. The next big customer we bring on the network is, like, much less of a deviation from our normal network traffic. The next big event that we see, whether it's a flash sale from a retailer, you know, a monster sale, or the World Cup or the next big streaming show, it's much less of a deviation from our usual traffic pattern. It's much easier for us to forecast our demand and grow our capacity in a, in a rational and efficient way.
We've become much more data driven in how we manage the network, and that's a positive trend that's continuing in all the regions that we operate in. Actually, our growing data competency goes well beyond just the management of our network. I want to tell you a little bit about my journey at Fastly. I joined to run engineering a few years back and started working on infrastructure and the network. I'm now also turning my focus to helping us understand better the dynamics of the whole business and how we grow and operate the whole business. My goal is to bring the same rigor and innovation to bear that we do in our core engineering to that set of problems.
You know, we take our operational data that our network emits, and we merge it with the key metadata of our business, our customer hierarchy, product hierarchy, all of our entitlements information. We can dig really, really deeply into our adoption and consumption patterns and really understand what's happening. For example, Fastly has always enjoyed extremely strong net retention and expansion. We're digging deeper into why that is, how that really works, how does our adoption life cycle work? How can we extend it? What kinds of products work best for different kinds of customers? What combinations? What are our best cross-sell and upsell motions? All of these things we're getting very, very deep on.
We're digging deep into all of our go-to-market dynamics, into understanding our whole customer journey, into, you know, deeply understanding how our funnel works, instrumenting our pipeline for greater visibility there, understanding profitability at the product level, at the customer level, at the deal level, even down to the POP level. All of these things, we're digging very, very deep. Very excited about, you know, the potential of this, bringing this data-driven approach to every part of our business and what that can bring us. I like to say that we're bringing all of the optimization skills that we've honed in our software to bear directly on our business. Optimizing our business in this way just frankly, also saves us money.
As we've dug deeper into the business and simplified our process, we've also been able to take out a bunch of SaaS systems that weren't generating enough value for us. That saved us some millions of dollars, and it's also simplified our systems, which is maybe the big win there. That might be the most important thing. That's money that we can take to fuel growth and drive a better outcome on the bottom line. Simplifying everything. You heard from Lakshmi, how we're creating simplified packages to make it easier for our customers to adopt Fastly, to come onto the platform, but we're also simplifying the process for everything that we sell across all the product lines, what we sell directly, what we sell through the channel. We're looking at every step of that process.
We're making our process to generate a quote much simpler. We're making our approval processes much simpler. We're syncing all of our systems so that, you know, there's less manual steps, less rework, less error, less problems of that kind. All of this work makes us faster, it shortens our sales cycle times, keeps the sales team selling, and has a really powerful impact on the business, and I'm very excited about it. To sum it up, of all the work we do, nothing is more satisfying, to me anyway, than the work of driving our costs down, driving out waste, you know, making sure that we turn the crank of optimization every single day.
It's honestly, it's most exciting when, you know, when we do that through innovation, when we use innovation to teach the network, you know, to run smarter through software or when we're able to, like, radically simplify some part of our business or how we go to market. All this work creates new capacity to invest in the business, helps us chart the path to profitability, and helps us drive successful outcomes, again, for our customers and for our shareholders. This work, That's what gets me and my team excited, and it's just a part, but a really important part of what makes Fastly great. Thank you very much. Thanks for coming, this afternoon. Thanks for the time. The opening acts are over, I'd like to introduce the person you've all really come to see, Ron Kisling.
Thanks, Nick. I'm Ron Kisling, Fastly CFO, I'm really excited to share how our differentiated edge cloud platform, that we just spoke about, our go-to-market efforts, and our operational focus drive our financial model and leverage, particularly in our long-term model. You've heard how our unique edge cloud platform and product portfolio enable fast, safe, and engaging internet experiences, Brett and Kim shared how our go-to-market efforts will accelerate new customer acquisition and expand our share with new and existing customers. I want to be able to turn to how all of this drives our financial model, the revenue growth, our software-defined platform, and the leverage it and scale it provides, and our renewed focus on financial rigor and building to scale. You know, as Brett discussed, our revenue growth drivers start with customer acquisition. It's foundational to our growth strategy.
Nick discussed how we're able to drive significant increases to the efficiency of our platform, driving improving gross margins. The last driver is something that I personally and my team are really passionate about, it's financial rigor. We've begun to see the results of our cost management and our operating expenses this year from our efforts with regards to duplicate expenses, as well as improving our resource planning and overhead management. We've made really good progress in our efforts thus far, but there's still more work to do in this area. As we look at our revenue growth drivers, we consistently see healthy expansion in our revenues from our customers after onboarding Fastly. This is a motion we've seen from the beginning days.
You know, revenues in a customer in their second year increase an average of 225% over their first year, with continued growth into the third year, averaging 43%. Onboarding our platform, particularly by large enterprise customers, is a key driver in this expansion. We see additional drivers to this expansion and revenue acceleration over the first few years as we expand our share of our customers' traffic, expand into other businesses due to the high performance of our platform, particularly around our low latency, our cache management, and our reliability. This expansion is further driven by upselling or cross-selling across our product line, all of which run on our edge cloud platform, including our Security portfolio and Compute capabilities.
With the introduction of our simplified packaging, which will allow expansion into the mid-market, our platform unification efforts, that Lakshmi spoke about, and our efforts to streamline the onboarding efforts to our platform, there's opportunity to accelerate this expansion and drive our revenue growth. As I just shared, you know, one of the customer dynamics we've seen from the early days at Fastly have been consistently strong expansion motion, demonstrated by our last 12 months net revenue or net recurring revenue of 116% in our most recent quarter. The dollar growth in our quarter over prior quarter LTM revenue growth of 29%, and the revenue cohort analysis I just shared with you.
As Brett and Kim discussed, we're implementing a number of initiatives to drive an increase to that LTM net recurring revenue, to drive it to our goal of 120%. Our simplified pricing and packaging is key to this. It reduces friction in our sales cycle, assisting with the acceleration of new customer acquisition. Our launch later this year of Package DDoS and Bot Management, increase the opportunity for cross-sell, and the platform unification efforts make it easier for customers to purchase, implement, and deploy our products. Lastly, as our incubation products, Compute and Observability gain momentum, our customer upsell opportunities increase. Coupled with this LTM NRR expansion and growth, is our remaining performance obligations. Over the past year, we've grown our RPO by 54%.
We are focused on increasing the number of our customers that actually carry an underlying revenue commitment to drive this number. Our new simplified pricing and packaging is sold in a SaaS-like manner, which means it will add to our RPO. We're seeing benefit to our RPO as some of our larger customers consolidate their delivery vendors. I think an important benefit of this motion is as both of these goals bring increased revenue visibility to our primarily consumption-based business today. Turning to the benefits of our scalable Edge cloud platform, our platform architecture is a central driver to our financial model and the opportunities going forward. Nick described how our software-defined infrastructure can drive significant improvements in platform efficiency and ultimately our gross margin. As we've grown revenue, we've seen meaningful cost leverage.
Our cost of revenue has essentially been flat over the last four quarters, while revenues have increased from $103 million in the second quarter of 2022 to $118 million in the first quarter of 2023, an increase of 15%, allowing for significant leverage in our gross margin. On an incremental basis, it's up over 60% in the last nine months. Moreover, our gross margins have crossed into the high 50s% during the last two quarters. This incremental margin demonstrates the opportunity for continued improvement in our gross margins to within striking distance of 60% by the end of this year, and into the low to mid-60s% over the next two to three years, which I'll talk about more in our medium and long-term modeling.
Going forward, there's an opportunity to further increase our gross margin with tailwinds from balancing our mix across vertical segments, and importantly, increasing our product mix by cross-selling other products such as security and Compute, allowing us to sell and bill additional products running on the same bandwidth. Turning to the third driver of our financial model, the one I like, is operating expense rigor. You know, with a renewed focus on expense control over the last nine months, we've initiated a robust planning and expense management process to really drive aligned investment around our key initiatives. We've implemented processes to drive better visibility and discipline into our spending, and we've initiated work to optimize our business to drive scalability and cost savings.
As we've begun to optimize our business, we've been able to eliminate a number of SaaS systems that had built up over the years. Some of these systems brought duplicate functionality, others we've replaced with enterprise-wide applications for critical business processes that reduce the load on integration and security. We've bolstered our Security function to ensure spending is approved and investments are aligned to our investment areas. We've increased our negotiation rigor across our vendors, and have already seen multiple millions of dollars of savings from all of these efforts. The real gains are in reducing the friction in our business, simplifying the work of generating a quote, simplifying the work of working through the approval process for a quote, making our reporting reliable and automatic.
All of this work makes us faster, it shortens sales cycle, and allows the sales cycle and the sales team to focus on selling. Ultimately, all of these efforts are about driving efficiency across the enterprise, building the systems and processes that are hard to prioritize in the early stages of building a company, but at this stage, yield big outcomes. We're excited about this work and the impact it's having on the business. We love to drive simple and scalable solutions that reduce friction in the organization. These efforts have already improved the efficiency in our operating expenses as a % of revenue by 890 basis points in the last nine months. We've just begun much of this work and believe that there is much more opportunity here.
Together, as we look to our path to profitability, looking at our gross margin improvement and the benefits from our operating expense management, have driven a 1,420 basis point improvement in our operating margin over the past nine months. Our incremental gross margins, as I said earlier, point to further improvement in our gross margins. We plan to continue our expense management to drive leverage in our operating expenses, while continuing to invest in our platform solutions and in our go-to-market. As we've discussed, we do have seasonality in our business. We see peak traffic and revenue typically in the fourth quarter. As such, we see seasonality in our gross margins as well. We build for peak traffic. The timing of our operating expenses is impacted by the timing of sales and marketing events and product launches.
We will see quarterly volatility in our gross and operating margins quarter to quarter, but the overall trajectory will be toward operating margin expansion. For 2023, we are on track to reduce our operating losses from 18% of revenue in 2022 to 10% of revenue in 2023, at the midpoint of our guidance. As we will share in our longer-term plans, we expect this trajectory to continue. No discussion about operating margin would be complete without talking about cash flow. Turning to our cash flow, we see improvement in our free cash flow that is meaningfully favorable relative to the improvements we're seeing in gross margin.
While we saw a 1,420 basis point improvement in our operating margins from Q2 2022 to Q1 2023, we saw a 3,800 basis point improvement in our free cash flow as a percent of revenue over the same time period, driven by a meaningful reduction in the cash CapEx as a percent of revenue, decreasing from 14% of our revenue in 2021 to 7% of revenue in 2023, at the midpoint of our outlook. We believe that our 2023 cash CapEx, as a percent of revenue, represent a sustainable level of capital equipment investment in the near term and into the medium term.
The leverage and efficiency in our platform and gross margin improvement and reduced capital leverage and investment, when paired with the progress in managing our operating expenses, results in our free cash flow moving from -40% in 2022 to approximately 11% of revenue in 2023. This improvement in our operating margins and free cash flow is mirrored in our adjusted EBITDA, which is expected to improve from -8% of revenue in 2022 to approximately break even this year in 2023, demonstrating our progress toward profitability and to cash flow break even. I'll now turn to our longer-term outlook for cash flow and operating margins. Managing our balance sheet and achieving positive cash flow has been a priority since I joined Fastly.
As our confidence in our long-term business model and its trajectory has increased, we made the decision to opportunistically repurchase approximately $470 million of our convertible debt over the past 13 months at a discount for about $370 million in cash, in effect, adding $100 million to our balance sheet. Importantly, as I discussed, the leverage in our platform, the discipline and process we put in place around network investment and operating expenses, are driving meaningful progress in our path to profitability and positive cash flow.
As we look forward, our positive trajectory in reducing the capital intensity, the improvement in operating margins, as well as the maturity of our capital equipment leasing programs that we had in place in the past, in 2024, is expected to bring us to free cash flow break even in 2024, expanding to approximately 6% of revenue in 2026. Turning to the medium and longer term impact of our financial drivers on our operating model, there are a couple of high points to keep in mind before I get into the details. We continue to benefit from the scale and efficiency of our software-defined platform. In extending out our forecast and given the progress we've made, we believe that we can deliver approximately 80% incremental gross margin on a year-over-year basis going forward from 2022.
While we expect to be able to consistently deliver on these margins, and while we will continue to see seasonality in our margins and the quarterly volatility I spoke about earlier, the trend line should be consistent. Looking out at our incremental gross margins and incremental operating margins today, we can see the path to our operating model three years out. If you grow our revenue in line with the current year's outlook in the high teens, you reach $800 million-$900 million in revenue over this timeframe, over the next three years. In this same timeframe, our current incremental gross margins drive our gross margins to around 65%, with OpEx coming in just under 60%. With that, we achieve operating margins in the mid to high single digits.
We see efficiency in our spend improving across the company as we continue to invest in R&D and go-to-market, and leveraging our administrative costs to not only drive efficiency in our G&A spend, but in the processes that improve the financial efficiencies across the organization. We thought it would be useful for those modeling a little bit longer term to understand another milestone in our ongoing growth of what our operating model might look like as we sort of cross that billion-dollar level and continue to grow. Here, we believe we would generate roughly a 68%-70% gross margin, operating expenses coming in at around 55% of revenue, resulting in a 13%-15% operating margin.
I'm excited about the progress of our growth, the efforts that these financial drivers have in showing us a path to breakeven and cash flow generation, the differentiated platform that they're having on our financial execution. Thank you for your interest today. With that, I would like to turn it over to Vern.
Okay, that was an interesting stage change there. Now we're ready for our Q&A. We have a couple of live mics floating around on the floor, we'll take some questions from the virtual audience. That is a reminder, if you're on virtually, feel free to enter a question. We'll be happy to answer it. We got one over here, I think. Yeah.
Over here.
Oh, I'm sorry. Sorry, Rudy. Go ahead.
Rudy Kessinger, D.A. Davidson. In the 2026 targets, it looks like your Well, not guiding, but targeting 7% operating margins, 6% free cash flow margin. Should we expect those two to kind of track? I mean, that's pretty close. Should we expect those to track in line, I guess, exiting this year and beyond? Secondly, gross margin, 65% in 2026, should we expect kind of linear progression from where you're at this year on gross margins, or is that more kind of back-end loaded towards 2026? Is it more front-end loaded as you get some of these improvements from the new software? Just how should we think about how that should track over the next few years?
Yeah. I think as we move forward, that connection between sort of free cash flow and operating margin is probably gonna come more in alignment, particularly as we've reduced our capital expenditures, which have driven kind of an outsized impact on cash relative to our operating margins. Looking at our gross margins, I think between 2023 and 2026, while you will continue to see some seasonality, particularly as we build for the peaks, based on traffic, particularly when we also deploy sort of new sites. In terms of the overall trend, as we exit 2023, that progression should be somewhat linear, between 2024, 2025, and 2026.
Great. Thank you. Frank Louthan with Raymond James. Just to be clear, you said, EBITDA be approximately breakeven for 2023. Is that for the full year, or is that exiting the year, or how should we think about that?
That's for the full year, but as you look at how that progresses, you're going to see, you know, improvements in margin and adjusted EBITDA as you get to the end of the year, but that breakeven is for the full year.
Great. Wanted to touch base on some of the Salesforce changes you made earlier this year. How is that progressing, and how should we see that continue to improve as we go through the rest of the year?
Yeah, we've made some changes on the alignment in the organization. We did a restructure in North America that really gets our teams aligned with the p roper resourcing at the territory level. We're excited about that change. There was a little bit of disruption in the first half. We're starting to see that settle in. You know, all the initiatives we have around new logo acquisition are really starting to play out for our sales teams.
All right, thank you.
Hi, this is Jonathan Ho from William Blair. Just wanted to start with, you know, just trying to understand, you know, sort of the balance between growth and profitability, and, you know, your long-term model sort of assumes that you're going to be able to continue delivering both operating leverage and, you know, reacceleration and top-line growth. What maybe underpins your confidence that you're able to do both? You know, how should we think about maybe the macro assumptions that are there as well?
I'll start, but I know Ron will want to jump in. We've been able to kind of really pivot towards this sort of principle of financial rigor that Ron talked about, and what that means is we've been able to kind of correct the spend, especially on the G&A line, which you see, but across the board, and we haven't had to make some of those trade-offs. I hope to get to that point, and that's where we're striving to really drive financial rigor across the board, to get through all the low-hanging fruits. We are making those trade-offs between growth and profitability. We're in kind of a nice place.
We still have opportunity here to trim spend, both above and below the line, where we don't have to make those trade-offs. Like, low-hanging fruit, easy decisions to make. Not necessarily easy to execute, but easy decisions to make. Nick mentioned maybe one of the most powerful ones is just a bloat of SaaS systems, of enterprise-based SaaS systems that are both costing us money and slowing down the employee experience, right? Just taking a across-the-board approach to controlling costs without sacrificing growth, that's the swing we've taken. We're not done with that yet, and so I think that's part of what's giving us that lift without having to compromise growth as the plan goes.
The only thing I would just to elaborate a little bit on that, with a lot of those efforts in terms of just being a lot more efficient with our spend, we've been able to actually increase our actual investment. You know, add, you know, direct quota carriers, account executives in the sales team this year, while still driving efficiency in the organization. That's allowed us to increase investment and go to market. Some investment in our platform, this year, still drive growth. I think if you come back to, you know, our real strong historical sort of expansion metrics, which we believe, have an opportunity to be supported by the continued build-out of the portfolio as Compute matures in the market and we get more adoption, as well as the move into the mid-market.
Our additional matters will accelerate new customer acquisition and expansion. In the economy, we're really looking at kind of market share gains, which is not only gaining sort of new customers, in a broad market, but also that expansion motion where we gain share within our existing customer base, and we think that motion is intact and sustainable.
Hello, Yanni Samoilis from Baird. Thanks for taking the question. What are your assumptions for headcount growth into 2026, given the margin targets you've laid out there? Thanks.
Yeah. It's sort of implicit in that, while there's not an, you know, an explicit headcount, sort of metric that we would share, what I would say is that, broadly speaking, you know, that headcount investment, because we're going to drive efficiency across all other spend, is gonna move generally in line with kind of that increase in spending. You'd see acceleration in that and that investment to follow that pretty closely. That's our biggest line item.
Yeah. Just to add maybe a little piece of color there. There's two places where we are really looking to push hard on headcount expansion. That's direct quota carriers on the sales side and code-writing engineers. In those two places, you know, we're finding savings across the organization to fuel that growth, and those are really the levers that drive that expansion and new customer acquisition for us that matters. Kind of part of driving this financial rigor is making sure we're putting as many of our resources into those two buckets as possible.
Ron, for you, Jim Fish with Piper again. You kind of subtly hinted at it in the presentation around a goal of 120%+ NRR.
Mm-hmm.
What are you assuming for... my math is right, roughly 19% CAGR here over the next three years? Is it that 120? Because if so, it's like you're kind of implying new business is gonna be flat to down here. Is it that, you know, underneath, in order to actually grow roughly 19%, you're actually assuming only like in mid-teens, like what we've been doing? Along those lines, how much of that cross-sell success or expansion is dependent on cross-sell as opposed to upsell of traffic?
Yeah. I think two things. One is there certainly is, you know, the modeling was kind of based after that, you know, the current kind of growth rates, which is kind of that high teens %. I think when you look at NRR, the goal of getting there, you know, it occurs over time. We don't get there sort of next quarter, and so we ramp into that goal. I think if we are very successful in accelerating, you know, customer acquisitions and achieving the NRR goal, those actually would accelerate our growth rates further than what we've assumed, if both of those are very successful.
Jonathan?
Thanks, guys. Brett, I think this is more of a question for you. In terms of customer acquisition, how are you competing with the public cloud guys when it comes to their deep, you know, ability to offer kind of these enterprise price discount with some kind of commitments? Do you see that as a challenge, or is it kind of just proving the ROI to them using your service? Just wanted a little color on that.
Interestingly enough, we're on the marketplace for GCP and AWS, and we partner with them. They're driving, you know, a fair amount of new logo acquisition for us. As far as competing with them, you know, AWS shows up more than GCP does, candidly, we have a superior platform, and You know, we're not seeing a lot of competitive overlap there.
Okay, is it just kind of going, you know, talking to the customer, saying that this is the ROI you're gonna get from using our service and the latency and all the speeds you're getting versus their product here?
Correct. Yeah. Same, you know, selling against the competition that you would expect, whether it was AWS, GCP, or Akamai.
Sure. Thanks.
You know, to that point, though, our competition really tends to be, you know, Akamai, Cloudflare, some of the point solutions we talked about. The mid and spend commit on the big cloud marketplaces, it's actually telling for us. We're on those marketplaces. People can retire that spend commit by choosing Fastly, yeah, we're all for it. Sounds great.
Thank you.
Great, thanks. Just want to look at R&D and CapEx, and what is the right sort of long-term intensity for those, either as a % of revenue or absolute $, to make sure that you're a ppropriately investing in the business? Long term, where do you think channel sales can be as a % of overall sales?
Yes. I think looking at CapEx, I think the, for the foreseeable future, the sort of 6%-8% of revenue is a good metric, I think, to extent we continue to rely on efficiencies. I think there's opportunity there, but I think 6%-8% is a sustainable level of capital investment in the business. I think as the business scales, I think, you know, you could see R&D, you know, coming down into the high teens. You know, we're running a little over 20% right now. I think you could see that come down a few percentage points in that. I'd say, kind of, looking into that midterm model, of, you know, three years and then out to the billion-dollar level.
What about the partner question?
As far as the percentage of revenue?
Yeah.
You know, look, we're early days on our partner program. We do believe that there's a significant opportunity for us to really drive a new sales motion in a massive market that's never been tapped in by the channel partners. Not gonna comment on the exact %, but we have plenty of upside for our business going forward.
Is there a way for you to maybe break down for us the drivers of g rowth between, you know, sort of your core CDN opportunities, Security, new products? Is there a way to sort of maybe deconstruct that a little bit in terms of your top-line growth assumptions? Thanks.
You know, at a macro level, I think the way we kind of look at our business is we have our core business, which is primarily the delivery business, probably growing sort of in the, you know, single digits, high single digits. Then the Security, which is really the growth engine today, which is driving a lot of the growth. I think as we build that out, there's an opportunity for that growth rate to accelerate. Then you sort of look at what I would sort of characterize as our incubation products, which have very low revenue contributions today, you know, probably de minimis, that, you know, over time, as they become more meaningful, we see the adoption of Compute increase and becoming meaningful revenue. Those become adders to the growth drivers in the business.
You know, there's one more piece of color here. We don't talk about it too much, so I hope Vern doesn't get mad at me. In our core business, content delivery, you know, when we look at that split by verticals, and Brett talked about this vertical focus approach, you know, in media and entertainment, we've got amazing market share and, you know, real-time media, Fastly is still fit for purpose. I think the transition we're seeing in the market is, you know, hospitality and retail, not just e-commerce, you know, travel, all of this stuff, all of those verticals, we have relatively low share there. We can push the growth rates there much higher than in media and entertainment.
That diversification of the verticals in our business and this new vertical focus that Brett and the team are driving, has a real opportunity to drive, you know, that kind of growth portfolio level, you know, speed, even in the content delivery, non-media.
Yeah
... part of our business. Yeah.
I think those industries are really starting to see that the performance and experience at the edge is really important to those businesses, just like it was to commerce early on, which I think is driving interest as those companies moving to the edge, some of that being new customers versus customers who might be migrating from an existing player, which provides a quicker sales cycle and/or an implementation cycle.
Okay, we got. I'll just get to you in a second, Mark. We have a question on the virtual front. A little bit of a follow-on, I think, to maybe Jim's question, but what are the assumptions behind the $800 million-$900 million in revenue for 2026? This person's opinion is a little bit aggressive relative to consensus. Care to comment?
I think the assumptions that I sort of spoke about is that we really maintain the growth rates that we're sort of seeing this year, which is really in the high teens. If you look at kind of where the midpoint of our guidance is, you know, you sort of look at that growth rate, you get somewhere between that, you know, $800 million-$900 million. If it accelerates greater, we get to the 120%. We see the acceleration of new customer acquisitions. You can see a path to the higher end of that number. You know, current business levels, you know, take us kind of to the lower end of that range. That was really kind of the thinking behind the range.
Hey, guys, Mark Zhang from Citi. Maybe just to round out the revenue contribution side of the picture, any sense of in terms of geography, should we expect more growth coming from the international side? If so, should we expect more investments there, and how do you guys expect to tackle that geography? Second part of the question is just more on capital allocation. Good to see, I guess, on, you know, your free cash flow trajectory. Any sense of, you know, where capital will be allocated, anything on the leverage side you would like to address? Thanks.
Great. I'll take the international thing, and I'll ask Brett to help me with capital allocation.
Perfect.
I think the international space for us, and I hate to characterize our business as domestic, international. We're an international company. The U.S.-based business is a large share, and the international space, the non-U.S. business, is certainly a growth opportunity for us. It's growing faster than the rail business. That part, we have absolutely opportunity in geographic expansion. I'll tell you, there's so much opportunity in penetrating the mid-market, unlocking the channel. When it comes to regional expansion, we're looking at that, you know, very conservatively. Our business in Western Europe is great.
We have, you know, a very healthy business running in Japan and ANZ, and we're looking at other areas and being very kind of strategic in where we choose to invest. I think the higher leverage for us in the next 18 months at least, is channel activation, mid-market, and this new vertical focus that we're seeing in Brett's team, and that is the... That's really gonna be our focus in the midterm. Yeah. Anything you want to add?
I would just say, you know, we're gonna be selective on what markets we enter. We've got a very efficient model that we deployed for resources when we enter a new country, so we wanna make sure we're being good stewards of the company's money and managing our overall expense in the sales organization, but we'll be very selective. We'll make sure we're well prepared before we go into any new markets.
Then talking about capital allocation. I think at a high level, I would look at similar to how we've looked at it over the last year, which is, you know, looking at our balance sheet, we have a convertible debt out there, looking really to manage that, as well as manage our operations to drive, you know, the best possible cash position, to minimize whatever that net cash balance is, you know, as we get closer to the convertible debt coming due. What that means is, you know, we'll continue to look at where the debt's trading, and there might be opportunistic abilities over time. We'll continue to evaluate whether more repurchases make sense or not. We'll continue to focus on generating cash to reduce the amount of cash we need, we end up on the balance sheet.
I think if you look to, you know, related to sort of capital allocation, there's always the M&A question. I think we're really focused on executing the business today and the platform unification. If you look at the product portfolio that we spoke about, that Lakshmi spoke about today, we have the IP to be able to develop those, so there might be opportunity for small tuck-ins, but we don't see, you know, a major gap that is critical to be able to deliver, either on the platform leverage that Nick spoke about or the product portfolio piece that Lakshmi and Laura spoke about.
Your response, by the way, Ron, is prescient. We've got a question in from the virtual side. Can we expect more convert buybacks on that?
You know, we will do what we've done over the past, you know, 13 months, is we'll continue to look where the converts are trading. There's a strange phenomenon that when we go out and buy, it tends to raise the price, which is unfortunate, but, you know, we will continue to evaluate if the buyback makes sense based on current market rates and where the debt's trading and, you know, the interest that we can actually earn on our funds.
I'll say this on behalf of Ron, you know, the financial models, the financial rigor and the accuracy of the models have really increased our confidence in the projection, which is why we were able to go out, just a couple of months ago and make that purchase on the debt side. We're only gaining more confidence in those models, so I think we're gonna, like... You know, as our confidence increases, I think we're gonna be able to make the most strategic decisions when it comes to that. Yeah.
Absolutely.
Thanks for the question again. James Fish with Piper. maybe just on the product side, I know you guys are talking about unification here on the platform, but clearly we have, you know, the CDN piece, the Security piece, and Compute@Edge . Just trying to understand and kind of that three-plus year vision, where that Security penetration rate is today in terms of just customers using the Security products, where that could end up in kind of that model, as well as kind of that Compute@Edge piece?
Sure. Yeah, look, the platform unification story, it's key for us right now for exactly the point you bring up. Our cross sell, the penetration of our Security product line into our network service customer base is still super low. It's actually a little different region to region. We did a little better in the U.S. than Europe, and that is, like, that just is an enormous opportunity where we can sort of pave that road by running this platform unification play. We plan to be out in the market with a fully unified management suite, meaning no swivel chair between the technology at the end of the year.
I feel like there's a huge opportunity because just as you bring up, the penetration rate there in between the two product lines, it's not as good as it should be. It also is true, it goes the other way. We have a lot of security-only customers, especially in Next-Gen WAF, we have the opportunity to bring content delivery to them as well. Platform unification, it's about building better leverage in the engineering team. Largely, it's for driving a better user experience and a better land and expand experience for the sales team, personally.
Oh, Rishi.
Hey, thanks. Rishi Jaluria, RBC. Two questions. Firs t, just following up on the capital intensity question from earlier. Can you give us a sense for maybe how underutilized your infrastructure was before, that's allowing this lower capital intensity going forward? Maybe alongside that, how should we differentiate between where you're getting efficiencies out of on the software layer and how we should think about that, versus maybe running capacity a little hot, right? Trying to avoid that pitfall. Thanks.
I think that actually is a great question for Nick. I should tell you, when our hardware, when our capacity is running at a certain level, that's when we think about the utilization of that, we think about it as at, in that moment of time. We have the opportunity to push efficiency into it, into that through software. In doing so, effectively, we're able to run at 50% utilization for the same traffic that was 75% a year ago. That's the difference that matters, and I think, you know, that's the real focus on Nick's team. Help me out here.
I think you really said it, Todd. It isn't so much that we're running an idle network, it's that we've squeezed a ton more capacity out of the network that we had. I don't think we're done doing that. We will continue to do that as long as we can.
Question up front here.
Of the revenue today, how much of it is more sophisticated CDN versus things like delivering media, where the performance really matters, but it's more bulk traffic? How do you, does that matter for pricing over time? Yeah, I'm trying to get an understanding of how much intelligence you're delivering in addition to just traffic.
Sure. I mean, hard to quantify. I understand the challenge there. Look, when we look at our customer base, they're choosing Fastly because of the real-time nature of Fastly, how dynamic it is. Putting content on Fastly is super easy because the system organically decides, the algorithms behind the core product organically decide where your content gets distributed. An event like the Super Bowl, you know, every object is being cached, every single node throughout the network, and then organically, you know, automatically gets depopulated over time because it's not being used. That differentiation, that is sophisticated. It's why live media streaming is so powerful in Fastly, compared to any of the competition.
We don't really think about it in the, in the exact terms you're saying, because media, especially live media, it's extremely sophisticated functionality. Dropping the latency so that two people watching the same stream aren't watching it 15 seconds, 20 seconds apart, which is brutal. People care about that. Streamers care about that. We compete in an amazing way in that metric. I think we're gonna see it in Edge Compute.
I think over the next year or so, maybe two years, what you're gonna see is really advanced users of the Fastly system, are people who got really deep into the technology we call Varnish or VCL, and they built a lot of custom logic into CDN, and a lot of that, the next generation of that, is really in Edge Compute. While we don't really have great metrics for you today, I think you're gonna see the most sophisticated customers driving, you know, bespoke workloads for personalization, content delivery, real-time gaming at the edge, and a lot of that's gonna happen on Compute. Maybe in the next 18 months, those numbers are gonna become more and more, you know, visible to everyone.
Thanks.
Sure.
We have time for maybe one more question. Anyone? All right, well, this will conclude the Q&A portion. Just a reminder for those that are joining us via the webcast, w e're gonna cut out and then come back with a live feed of the NYSE bell ringing. For those in the room, we're gonna be ushered out of here shortly, after Todd's closing remarks, and go ring the bell, so to speak. Thank you.
Thank you. Thanks. Thank you. Okay. Look, we appreciate the time. I can't believe they're gonna let me ring the bell now. It's amazing. Look, we're touched more than anything by how much interest there's been. We have a full room here at the Stock Exchange. We have more than 500 participants virtually. I think it says a lot about how much interest there is in this space. I think all of you see what we see. The user experience, the digital experience, how people build these websites and apps, streaming services, et cetera, it's only gonna be a larger and larger part of the tech sector. The winner in this space, in the edge cloud space, is gonna matter in how the internet is built for the next 10 years.
We just want to say thank you. Thank you for your interest, your attention, amazing questions. Super excited to ring the New York Stock Exchange bell with all of you, and of course, we're excited to make the internet a better place where all experiences are fast, safe, and engaging. Thank you so much. Cheers.