Fastly (FSLY) CEO on Earnings, AI Bots & Cyber Threats Affecting Digital Traffic

SPEAKER_1 (0:00)

Because we are happy to be joined now by Kip Compton, CEO at Fastly, which is a Global Edge Cloud Compute Platform. Welcome to the show. We're so glad you are here. So, big Investor Day.

Tell us some of the takeaways from Investor Day.

Kip Compton (0:17)

No, thanks, Nicole. We had a great Investor Day, actually, here at NASDAQ earlier this week, and had an opportunity to talk about how our Global Edge Cloud is helping people stay safe and deliver compelling experiences.

If you've ever shopped online or streamed a video or downloaded a file, companies like Fastly will probably help make that happen for you, even if you haven't heard of us before. We had a chance to talk with investors about our growth. We've grown 20 percent year over year for the last three quarters, as well as our record gross margins and profitability, as we're seeing more and more traffic coming through our network.

SPEAKER_1 (0:54)

So more and more, everything on AI means more and more of Fastly, it seems.

So let's talk about some of the new products, because you are getting some traction on some of the new products. How do they work? Why are they now in demand?

Kip Compton (1:11)

No, it's great. We also announced this week several new products in our Fastly for AI category including our AI Firewall, our AI Runtime Control, and our API Schema Enforcement, which is very important as you have AI agents creating software to make sure that people understand what's going on there. You're right, the volume is incredible.

We now have over half the traffic on our network is machine traffic and the AI traffic is growing six and a half times faster than human traffic. So customers need help managing that traffic, discerning valid traffic from invalid traffic. There's good AI that is trying to help users navigate their site. There's bad AI that maybe is trying to do something bad to their site and that's one of the ways Fastly helps our customers.

SPEAKER_1 (1:57)

I was actually looking through some of the notes and I saw some of the products, the AI Firewall, the runtime control, the API security capabilities and then it went on to how more automation and more AI and AI agents and more bot activity. That doesn't sound good at all. That is exactly where your edge computing comes in, right?

Kip Compton (2:20)

That's exactly right. When you are dealing with bots, I mean, a great example actually is one of our customers is a sports retailer. When new sneakers drop, you have legitimate fans who want to buy the sneakers, but you also have people who have automated bots trying to buy up the sneaker so that they can sell them at higher prices, and that's not what the retailer or the sneaker companies want to do.

So Fastly's bot protection and AI bot protection products intercept requests at the edge before they ever even make it back to that store and are able to discern if that is a bot that should be blocked or if it's the kind of bot that should be allowed through. And the volume on those products is unbelievable. We're seeing triple digit growth last quarter in both our bot mitigation products as well as our DDoS products.

SPEAKER_1 (3:09)

That's a great real life example that you have. A lot of kids here in New York City, my own too, buy and sell sneakers and they wait to get the hot drop. And so I understand exactly what you're talking about. And when I think about the connectivity that happens and the speed also, it was also saying if you're using ChatGPT, it boosts Fastly's traffic and that getting it all closer to where we are to explain what that means.

Kip Compton (3:38)

Yeah, sure. It's a great question.

The edge is an important place in the network. And one way to think about it is your traditional clouds, like AWS, are somewhat centralized. Think of it as like a centralized warehouse. The edge is closer to you, kind of like a local store. And what that means is that we can deliver things more quickly. It's less latency to connect to, and it's got higher bandwidth. So for lots of things, including, for example, live sports streaming, file downloads, the extra bandwidth there really matters. And then performance, anything that's very performance-sensitive, works very, very well at the edge. And so we power quite a few experiences across the Internet behind the scenes.

SPEAKER_1 (4:23)

And I think about the big picture, too. What were your thoughts here as you're working on a platform and your thoughts on some of the AI fears? Because we know that to build out takes time.