Will Fastly's FY 2025 10-K confirm full remediation of the material weakness in revenue process controls?

The central tension is timing. New CFO started August 2025, giving approximately 5 months (Aug-Dec) of operating effectiveness. Deloitte typically requires 2+ quarters of effective operation, and 5 months is borderline at 1.5-2 quarters. The RPO recast in Q3 2025 is potentially damaging -- it occurred during the remediation period and involved revenue-adjacent calculations. Deloitte could interpret this as evidence that controls were still ineffective during the remediation window. The manual process complexity also makes quick fixes harder. Companies with material weaknesses in revenue controls typically take 12-18 months to remediate.

Base rate for material weakness remediation within one fiscal year is approximately 40-60%, but revenue process control weaknesses are among the more complex to remediate. The Q3 RPO recast demonstrates ongoing process issues in revenue measurement even during remediation. However, hiring both a new CFO AND a new CAO shows serious intent, and the no-misstatement finding means Deloitte needs to see redesigned controls operating effectively rather than corrections to financials. This makes the auditor path slightly easier. The personnel root cause is more addressable than a systems root cause.

Deloitte needs to see: (a) redesigned controls addressing the root cause, (b) implementation of those controls, (c) sufficient operating history to test effectiveness. The personnel root cause is being addressed with CFO and CAO hires. Some auditors have cleared weaknesses with 4-5 months of testing data when the weakness was personnel-related. However, the RPO recast creates an awkward counterpoint -- if Deloitte was testing remediated controls and a revenue-adjacent error occurred in Q3, they may need to restart the clock. The manual process issue is structural and may require system automation that takes longer than 5 months.

The timeline is tight but not impossible. New CFO August 2025, new CAO hired, five months of operating effectiveness. The RPO recast in Q3 2025 is the biggest red flag -- it happened during the remediation period and involves revenue processes. Deloitte will scrutinize this heavily. Most companies with revenue control material weaknesses take more than one year to fully remediate. The manual process complexity adds another structural layer. Real remediation efforts are underway but the evidence suggests they need more time.

Two factors dominate. First, timing: CFO started August 2025, meaning controls were being redesigned in Q3 and tested effective through Q4 -- only 5 months. Second, the RPO recast in Q3 is a tangible data point showing revenue measurement errors during the remediation period. Even though RPO is not revenue itself, the resolution criteria asks about revenue process controls broadly, and RPO calculation errors fall within that scope. Deloitte has a conservative institutional incentive -- issuing a clean opinion too early exposes them to liability. More likely than not, the material weakness persists another year.

For YES, Deloitte would need to be satisfied that: (1) the personnel issue is resolved (CFO + CAO hired -- yes), (2) redesigned controls exist (likely, given leadership focus), (3) controls operated effectively for a sufficient period (borderline at 5 months), (4) the RPO recast doesn't invalidate the remediation narrative (uncertain). Factor 3 is borderline and factor 4 adds meaningful risk. However, companies sometimes remediate faster than the typical timeline suggests when the root cause is clearly identified and directly addressed. The personnel root cause is one of the more straightforward types to fix.

Material weakness disclosed in FY 2024. New leadership hired mid-2025. RPO error in Q3 2025 during remediation period. Five months of remediation time is tight by industry standards. Most material weaknesses in revenue controls persist for more than one year. The remediation efforts are genuine but likely insufficient in the available timeframe.

Timing is the binding constraint. August 2025 CFO start gives approximately 5 months testing period. RPO recast in Q3 complicates the narrative and may be treated as evidence of continued deficiency. Deloitte is institutionally conservative on material weakness remediation timelines. Manual processes described as 'complex set of procedures' are structurally difficult to fix quickly.

Root cause was personnel turnover, which is being directly addressed with CFO and CAO hires. No financial misstatement occurred, which simplifies the remediation path. If Deloitte views 5 months as sufficient and treats RPO recast as separate from the material weakness scope, remediation is possible. But the weight of evidence suggests the probability is below one-third.