Company Reports

We will discontinue analyst coverage of Fastly on or about Sept. 2. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Fastly posted impressive second-quarter results, with 12% revenue growth outpacing management's guidance and lending itself to a 50-basis-point improvement in adjusted gross margins compared with last year. Management slightly raised full-year guidance for both revenue and operating income.

On June 16, 2025, Fastly announced that Kip Compton, Fastly's current chief product officer, has been appointed CEO effective immediately. Compton will replace Todd Nightingale, whose departure comes as a surprise after serving at the helm since 2022.

Fastly operates one of the largest independent content delivery networks in the world. The firm has differentiated itself through its modern architecture and approach to content delivery. However, operating a CDN is very challenging, and we don’t expect Fastly to generate excessive profitability from this business relative to its peers.

Fastly reported 7% year-over-year revenue growth and a nearly $6 million operating loss in first-quarter 2025. Its top 10 customers accounted for 33% of revenue, down from 38% last quarter, while revenue outside its largest 10 customers grew 17%, as Fastly focuses on customer diversification.

After taking a fresh look at Fastly, we've increased our fair value estimate to $7 from $5 to account for an improved outlook on the firm's ability to scale its network infrastructure assets and drive profits. We maintain our no-moat rating, Standard Capital Allocation Rating, and Very High Uncertainty Rating.

Fastly operates one of the largest independent content delivery networks in the world. The firm has differentiated itself through its modern architecture and approach to content delivery. However, operating a CDN is very challenging, and we don’t expect Fastly to generate excessive profitability from this business relative to its peers.

Fastly continues to control expenses and move toward profitability, but fourth-quarter revenue grew only 2% year over year, to $140 million. After a 2024 marked by challenges and the slowest revenue growth—7.4%—in its history, 2025 guidance implied only about 7% sales growth again.

The majority of Fastly’s operations consist of running a content delivery network, which we don’t think is a very attractive business. The company has a more modern architecture than traditional CDNs, but we think any advantage would shine through an ability to offer its service with lower costs or superior edge computing capabilities, and Fastly has not shown it can take advantage of either.

In its third quarter, Fastly easily beat the dire guidance that management offered last quarter and appeared to make significant strides with customers outside of its 10 biggest, which continue to weigh on results. While the improvement is encouraging, our biggest concern with regard to future growth is Fastly’s overreliance on content delivery revenue, which we see as a largely commoditized product with deflationary pricing characteristics; hence our no-moat rating. We’re maintaining our $5 fair value estimate.

The majority of Fastly’s operations consist of running a content delivery network, which we don’t think is a very attractive business. The company has a more modern architecture than traditional CDNs, but we think any advantage would shine through an ability to offer its service with lower costs or superior edge computing capabilities, and Fastly has not shown it can take advantage of either.

Fastly's second-quarter results fell neatly into the guidance it had given, but management materially reduced its full-year guidance for the second straight quarter, and it is continuing to see demand problems from its biggest customers. Management's concern about the revenue trend led it to implement a restructuring to take costs out of its business. It feels like the company is in crisis, and we question whether it can make these moves to preserve near-term results without dampening the long-term growth outlook that was imperative to justify the firm's valuation. We're not implying these are the wrong moves; we suspect they're absolutely necessary. However, we think Fastly will have difficulty returning to the high teens growth trajectory it had been on. We're reducing our fair value estimate to $5 from $10, and we see Very High uncertainty in this stock.

Fastly has a new take on the now relatively antiquated model for running content delivery networks, or CDNs. We believe the more modern approach gives Fastly an opportunity to take share from legacy CDN providers with a lower-cost model, but it has recently struggled to execute on this vision.

Fastly has a new take on the now relatively antiquated model for running content delivery networks, or CDNs. We believe the more modern approach gives Fastly an opportunity to take share from legacy CDN providers with a lower-cost model, by way of a smaller geographic footprint.

Fastly’s first quarter was fine, but its bleak second-quarter outlook, big cut to full-year guidance, and the reasoning behind the weakness creates concern that Fastly is at a competitive disadvantage that will seriously weigh on performance. At the very least, we expect the firm’s long-term growth rate to come down materially. We are cutting our fair value estimate to $10 from $20 because of a three-point percentage cut to our average annual sales growth projections over the next 10 years and a slower ramp to profitability to reflect less projected operating leverage. Our Very High Uncertainty and no-moat ratings are unchanged, so we don’t see the stock as particularly attractive despite a 30% decline in after-hours trading.

No-moat Fastly reported fourth-quarter earnings on Feb. 14 that sent its stock down more than 20% in after-hours trading, but results were not too bad, and 2024 guidance puts the company on the improving trajectory that we’ve expected. While we think the market is overreacting to a slightly soft fourth quarter and first-quarter outlook, the stock had gotten ahead of itself, in our view. We’re maintaining our $20 fair value estimate, which leaves the stock only fairly valued after the selloff.

Fastly has a new take on the now relatively antiquated model for running content delivery networks, or CDNs. We believe the more modern approach can allow Fastly to continue taking share from legacy CDN providers with a lower-cost model, by way of a smaller geographic footprint.

No-moat Fastly continued to see momentum in its business in the third quarter, with the solid execution extending this year’s trend. Margins have improved dramatically but backtracked a bit this quarter. Usage costs that caused the hiccup should prove temporary, and we expect margin expansion to be back on track by 2024. The after-hours pop in the stock seems excessive, as results were at the top end of guidance and management essentially maintained full-year guidance while raising the midpoints. Nonetheless, the move does bring Fastly closer to where we believe it’s fairly valued after the recent selloff. We’re maintaining our $20 fair value estimate, as nothing in the quarter changes our outlook.

Fastly has a new take on the now relatively antiquated model for running content delivery networks, or CDNs. We believe the more modern approach can allow Fastly to continue taking share from legacy CDN providers with a lower-cost model, by way of a smaller geographic footprint.

Fastly continues to make fantastic progress on its margins after costs seemingly spiraled out of control last year. The firm’s second-quarter sales and operating loss both came in well ahead of previous guidance, leading the firm to raise its full-year outlook. The firm also generated positive free cash flow for the first time since the middle of 2020, when the pandemic was supercharging Fastly’s business. These types of results are already embedded in our forecast, and we are maintaining our $20 fair value estimate. We now think the stock is only mildly undervalued, as Fastly remains a Very High Uncertainty stock in our view.