Fastly, Inc.FSLY
Fastly, Inc. Income Taxes Disclosure
Income Taxes
*Jurisdiction below the threshold for the period presented.
Loss before income taxes includes the following components:
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| United States | $ | (126,278) | $ | (161,398) | $ | (137,240) | ||||||||||||||
| Foreign | 7,089 | 5,944 | 3,931 | |||||||||||||||||
| Loss before income taxes | $ | (119,189) | $ | (155,454) | $ | (133,309) | ||||||||||||||
The income tax expense (benefit) consists of the following:
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Current tax provision (benefit): | ||||||||||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||||||||||
State | 35 | 200 | 57 | |||||||||||||||||
Foreign | 1,020 | 611 | 622 | |||||||||||||||||
Deferred tax expense (benefit): | ||||||||||||||||||||
Federal | — | — | — | |||||||||||||||||
State | — | — | — | |||||||||||||||||
Foreign | 1,433 | 1,793 | (900) | |||||||||||||||||
| Total tax expense (benefit) | $ | 2,488 | $ | 2,604 | $ | (221) | ||||||||||||||
The Company recorded tax expense of $2.5 million and $2.6 million for the years ended December 31, 2025 and 2024, respectively, and recorded tax benefit of $0.2 million for the year ended December 31, 2023. The Company’s income tax expense (benefit) is primarily due to income taxes from certain foreign jurisdictions where the Company conducts business and state minimum income taxes in the United States.
The Company adopted ASU 2023-09 "Income Taxes (Topic 740): Improvements To Income Tax Disclosures" on a retrospective basis effective December 31, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to the Company's actual global effective amount and rate for the years ended December 31, 2025, 2024, and 2023:
| Year ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Amount (in thousands) | Percent | Amount (in thousands) | Percent | Amount (in thousands) | Percent | |||||||||||||||||||||||||||||||||
US federal statutory tax rate | $ | (25,030) | 21.0 | % | $ | (32,645) | 21.0 | % | $ | (27,995) | 21.0 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect* | (543) | 0.5 | % | (519) | 0.3 | % | (985) | 0.7 | % | |||||||||||||||||||||||||||||
Foreign tax effects: | ||||||||||||||||||||||||||||||||||||||
United Kingdom: | ||||||||||||||||||||||||||||||||||||||
| Change in valuation allowance | — | — | % | — | — | % | (2,080) | 1.6 | % | |||||||||||||||||||||||||||||
Other | 685 | (0.6) | % | 1,160 | (0.7) | % | 197 | (0.1) | % | |||||||||||||||||||||||||||||
Other foreign jurisdictions | 280 | (0.2) | % | 125 | (0.1) | % | 504 | (0.4) | % | |||||||||||||||||||||||||||||
Effect of changes in tax laws or rates enacted in the current period | ||||||||||||||||||||||||||||||||||||||
Effect of cross-border tax laws | 678 | (0.6) | % | 52 | (0.1) | % | — | — | % | |||||||||||||||||||||||||||||
Tax credits: | ||||||||||||||||||||||||||||||||||||||
| Research and development credits | (4,985) | 4.2 | % | (8,671) | 5.6 | % | (18,444) | 13.8 | % | |||||||||||||||||||||||||||||
Changes in valuation allowances | 19,627 | (16.5) | % | 26,675 | (17.2) | % | 33,410 | (25.1) | % | |||||||||||||||||||||||||||||
Nontaxable or nondeductible items: | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation awards | 7,582 | (6.4) | % | 10,492 | (6.7) | % | 4,824 | (3.6) | % | |||||||||||||||||||||||||||||
| Disallowed executive compensation | 1,784 | (1.5) | % | 2,483 | (1.6) | % | 3,922 | (2.9) | % | |||||||||||||||||||||||||||||
Other | 586 | (0.5) | % | 695 | (0.4) | % | 517 | (0.4) | % | |||||||||||||||||||||||||||||
Changes in unrecognized tax benefits | 1,824 | (1.5) | % | 2,757 | (1.8) | % | 5,909 | (4.4) | % | |||||||||||||||||||||||||||||
Total | $ | 2,488 | (2.1) | % | $ | 2,604 | (1.7) | % | $ | (221) | 0.2 | % | ||||||||||||||||||||||||||
*State taxes in California made up the majority (greater than 50%) of the tax effect in this category
The Company’s deferred tax assets and liabilities were as follows:
| Year ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in thousands) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating losses | $ | 198,780 | $ | 183,824 | ||||||||||
| Lease liability | 18,255 | 17,329 | ||||||||||||
| Research and development credits | 52,060 | 46,759 | ||||||||||||
| Capitalized research and development | 50,707 | 62,615 | ||||||||||||
| Stock-based compensation | 13,995 | 6,924 | ||||||||||||
| Deferred revenue | 7,618 | 5,158 | ||||||||||||
| Reserves and accruals | 5,325 | 4,885 | ||||||||||||
| Other | 4,826 | 4,582 | ||||||||||||
| Deferred tax assets | 351,566 | 332,076 | ||||||||||||
Deferred tax liabilities: | ||||||||||||||
| Intangible asset amortization | (6,320) | (10,995) | ||||||||||||
| Right-of-use asset | (13,814) | (13,377) | ||||||||||||
| State taxes | (16,066) | (14,844) | ||||||||||||
| Prepaid commissions | (11,473) | (13,306) | ||||||||||||
| Other | (17) | (1) | ||||||||||||
| Deferred tax liabilities | (47,690) | (52,523) | ||||||||||||
Valuation allowance | (303,285) | (279,204) | ||||||||||||
| Net deferred tax (liabilities) assets | $ | 591 | $ | 349 | ||||||||||
As of December 31, 2025 and 2024, the Company had NOL carryforwards for U.S. federal income tax purposes of approximately $698.2 million and $635.9 million, respectively; and for state income tax purposes of approximately $647.1 million and $621.0 million, respectively. The federal NOL carryforwards, if not utilized, will begin to expire in 2034. The state NOL carryforward, if not utilized, will begin to expire on various dates starting in 2028. The Company also has federal and California research and development credit carryforwards totaling $55.7 million and $16.8 million as of December 31, 2025, respectively. The federal research and development credit carryforwards will begin to expire in 2027, unless previously utilized. The California research credits do not expire.
As of December 31, 2025, the Company has NOL carryforwards for United Kingdom purposes of approximately $15.2 million. The UK NOL carryforwards do not expire.
Based on all available evidence on a jurisdictional basis the Company believes that it is more likely than not that the Company’s U.S. deferred tax assets will not be utilized and have recorded a full valuation allowance against its U.S. net deferred tax assets. The Company assesses on a periodic basis the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical losses. The Company determined that it is more likely than not that the U.S. net deferred tax assets will not be fully realizable for the years ended December 31, 2025 and 2024.
The Company has a valuation allowance for U.S. deferred tax assets, including NOL carryforwards. The Company expects to maintain this valuation allowance for the foreseeable future.
Changes in the valuation allowance were as follows:
| As of December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Beginning balance | $ | 279,204 | $ | 245,476 | $ | 208,215 | ||||||||||||||
Additions charged to expenses | 24,081 | 33,728 | 37,261 | |||||||||||||||||
| Ending balance | $ | 303,285 | $ | 279,204 | $ | 245,476 | ||||||||||||||
Utilization of the NOL carryforwards may be subject to a substantial annual limitation due to the ownership change limitations under the Code and similar state provisions. Under Section 382 of the Code, a corporation that undergoes an “ownership change” may be subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. A detailed analysis was performed through December 31, 2021 for the Company to determine whether an ownership change under Section 382 of the Code has occurred, and ownership changes were identified in 2013 and 2020. A detailed analysis was completed through December 31, 2024 and no further ownership changes were identified. As a result of these analyses, the Company concluded that there is no longer any limitation on the utilization of such NOLs. A detailed analysis was performed for the period March 1, 2014 to October 1, 2020 for Signal Sciences to determine whether an ownership change under Section 382 of the Code has occurred and an ownership change was identified in 2020. As a result of this analysis, the Company concluded that there is no longer any limitation on its utilization of the NOLs of Signal Sciences.
No provision for U.S. income and foreign withholding taxes has been made for these permanently reinvested foreign earnings because it is management’s intention to permanently reinvest such undistributed earnings outside the United States.
A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Balance at beginning of year | $ | 26,003 | $ | 23,245 | |||||||
Increases related to prior year tax positions | 12 | — | |||||||||
Decreases related to prior year tax positions | — | (39) | |||||||||
Increases related to current year tax positions | 1,812 | 2,797 | |||||||||
Balance at end of year | $ | 27,827 | $ | 26,003 | |||||||
The Company has considered the amounts and probabilities of the outcomes that can be realized upon ultimate settlement with the tax authorities and determined unrecognized tax benefits primarily related to credits should be established as noted in the summary rollforward above. The unrecognized tax benefits, if recognized and in absence of full valuation allowance, would impact the income tax provision by $27.8 million and $26.0 million at December 31, 2025 and 2024, respectively.
Generally, in the U.S. federal and state taxing jurisdictions, tax periods in which certain loss and credit carryovers are generated remain open for audit until such time as the limitation period ends for the year in which such losses or credits are utilized.
The Company adopted ASU 2023-09 on a retrospective basis effective December 31, 2025 and have included the following tables as a result of the Company's adoption, which presents income taxes paid (net of refunds received) for the years ended December 31, 2025, 2024 and 2023:
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
State | $ | 55 | $ | 129 | $ | 41 | ||||||||||||||
| Foreign | 1,282 | 680 | 290 | |||||||||||||||||
Total | $ | 1,337 | $ | 809 | $ | 331 | ||||||||||||||
Income taxes paid (net of refunds) exceed 5% of total income taxes paid (net of refunds) in the following jurisdictions:
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
State | ||||||||||||||||||||
Texas | * | $ | 76 | $ | 41 | |||||||||||||||
Foreign | ||||||||||||||||||||
Australia | 303 | 87 | 132 | |||||||||||||||||
Canada | 143 | 156 | 107 | |||||||||||||||||
Germany | * | 103 | 85 | |||||||||||||||||
India | 283 | * | * | |||||||||||||||||
Japan | 248 | 153 | 66 | |||||||||||||||||
Netherlands | * | * | 38 | |||||||||||||||||
Spain | 101 | 76 | 74 | |||||||||||||||||
Sweden | 71 | 67 | 46 | |||||||||||||||||
UK | * | * | (261) | |||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 4, 2020 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.