Fastly (FSLY) AI Stock Analysis

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Fastly

(NYSE:FSLY)

Rating:66Neutral

Price Target:

$9.00

▲(8.70%Upside)

Fastly's overall stock score reflects a mixed outlook. The company's positive earnings call and technical momentum are offset by valuation concerns and financial performance challenges. The most significant factors are the revenue growth and positive cash flow highlights from the earnings call, tempered by profitability and geopolitical risks.

Positive Factors

Customer Base

The customer base is diversifying, with non-top 10 customers growing and now accounting for a larger share of revenues, indicating broadening market appeal.

Product Diversification

Fastly is making solid progress in diversifying from the core delivery business into higher growth areas like security and emerging products, which saw significant growth.

Revenue Growth

Fastly reported solid results with revenue growth driven by traffic growth and market share gains in network services.

Negative Factors

Core Market Deceleration

The core market, which accounts for 78% of revenues, continues to decelerate, and there is skepticism about Fastly's ability to execute against the guidance.

Financial Challenges

The company has yet to achieve positive operating income and free cash flow, indicating financial challenges.

Growth Risks

The primary growth drivers for 2025 carry execution risk, particularly with GTM transitions and expansion into new markets like Asia.

Fastly (FSLY) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$1.11B

Dividend YieldN/A

Average Volume (3M)2.44M

Price to Earnings (P/E)―

Beta (1Y)2.11

Revenue Growth6.26%

EPS Growth-9.54%

CountryUS

Employees1,100

SectorTechnology

Sector Strength84

IndustrySoftware - Application

Share Statistics

EPS (TTM)-0.05

Shares Outstanding144,800,000

10 Day Avg. Volume1,539,963

30 Day Avg. Volume2,438,355

Financial Highlights & Ratios

PEG Ratio1.49

Price to Book (P/B)1.12

Price to Sales (P/S)0.00

P/FCF Ratio-79.49

Enterprise Value/Market Cap1.11

Enterprise Value/Revenue0.58

Enterprise Value/Gross Profit4.26

Enterprise Value/Ebitda-4.84

Forecast

1Y Price Target

$7.38

Price Target Upside-10.87% Downside

Rating ConsensusHold

Number of Analyst Covering10

Fastly Business Overview & Revenue Model

Company DescriptionFastly, Inc. operates an edge cloud platform for processing, serving, and securing its customer's applications in the United States, the Asia Pacific, Europe, and internationally. The edge cloud is a category of Infrastructure as a Service that enables developers to build, secure, and deliver digital experiences at the edge of the internet. It is a programmable platform designed for web and application delivery. The company offers Compute@Edge; developer hub that includes solution library patterns and recipes, API and language references, change logs, and Fastly Fiddle solutions; device detection and geolocation, edge dictionaries, edge access control lists, and edge authentication services; full site delivery services, such as dynamic site acceleration, origin shield, instant purge, surrogate keys, real-time logging and stats, cloud optimizer, programmatic control, edge databases, content compression, reliability, and modern protocols and performance services; and streaming solutions and services, including live streaming, media shield, and origin connect. It also provides edge security solutions, such as DDoS protection and cloud, edge web application firewall (WAF), transport layer security (TLS), platform TLS, and compliance services; unified web application and API protection solutions that includes runtime self-application protection, advanced rate limiting, API and ATO protection, account takeover protection, bot protection, and next generation WAF. In addition, the company offers edge applications, such as load balancers and image optimizers; video on demand; and managed edge delivery services. It serves customers operating in digital publishing, media and entertainment, technology, online retail, travel and hospitality, and financial services industries. The company was formerly known as SkyCache, Inc. and changed its name to Fastly, Inc. in May 2012. Fastly, Inc. was incorporated in 2011 and is headquartered in San Francisco, California.

How the Company Makes MoneyFastly makes money primarily through a usage-based model, where customers pay for the volume of data delivered through its content delivery network. The company charges based on the amount of data transferred and the number of requests processed. Additionally, Fastly generates revenue from its edge compute and security services, which are typically priced based on the level of usage and the specific features required by the customer. Fastly has partnered with various companies to expand its service offerings, and its earnings are influenced by its ability to attract and retain customers in an increasingly competitive market for cloud and CDN services.

Fastly Key Performance Indicators (KPIs)

Any

Customer Count

Customer Count
Tracks the total number of customers, providing insight into market reach and growth potential as the company attracts new clients.

Chart InsightsFastly's customer count shows a notable decline at the end of 2024, but the recent earnings call reveals resilience with 19 new enterprise customers and a 4% increase in average enterprise spend. Despite geopolitical uncertainties affecting TikTok-related revenue, Fastly's diversification strategy is paying off, with revenue outside the top 10 customers growing 17% year-over-year. The company's focus on expanding its security portfolio and emerging products, along with improved cost controls, positions it well for anticipated 9% annual growth in 2025.

Data provided by:

Main Street Data

Fastly Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 37.31%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Neutral

The earnings call reflects positive achievements in revenue growth, customer acquisition, and product expansion, with successful cost control measures leading to positive cash flow. However, challenges such as the decline in net retention rate and slower-than-expected security revenue growth, coupled with geopolitical uncertainties around TikTok, temper the optimism.

Q1-2025 Updates

Positive Updates

Revenue and Operating Loss Guidance Exceeded

Fastly surpassed the upper ends of both revenue and operating loss guidance ranges, leading to an increase in 2025 revenue guidance by $10 million and operating loss guidance by $3 million at their respective midpoints.

Positive Free Cash Flow

Fastly generated $8 million in positive free cash flow, marking progress towards breakeven for the year.

Customer and Revenue Growth

Revenue was $144.5 million, an 8% year-over-year increase. Enterprise customer count grew by 3%, and average enterprise customer spend increased by 4% quarter-over-quarter.

Diversified Revenue and Market Share Gains

Revenue outside of the top 10 customers grew 17% year-over-year. The top 10 customers represented a decreased share of total revenue, reflecting diversification.

Security and Product Expansion

Enhanced security offerings and product portfolio expansion, including AI bot detection, with a focus on cross-selling security solutions to existing customers.

Significant Growth in Compute and Emerging Products

Revenue from emerging products grew 64% year-over-year, driven primarily by compute products.

Improved Gross Margin and Cost Control

Gross margin was 57.3%, slightly better than projections. Cost controls and efficiency improvements have been implemented.

Negative Updates

Decline in Net Retention Rate

The trailing 12-month net retention rate was 100%, down from 102% in the prior quarter and 114% in the year-ago quarter, due to revenue declines with a few of the largest customers.

Security Revenue Growth Lagging

Security revenue only grew 7% year-over-year, not reflecting the potential from last year's portfolio expansion.

Conservative Guidance Due to TikTok Uncertainty

Guidance excludes U.S. TikTok revenue after June 19 due to geopolitical uncertainties, impacting revenue projections.

Company Guidance

During the Fastly First Quarter 2025 Earnings Conference Call, the company announced impressive results, exceeding the upper ends of both revenue and operating loss guidance ranges. Fastly increased its 2025 revenue guidance by $10 million and operating loss guidance by $3 million at their respective midpoints. The company reported $144.5 million in revenue, surpassing the original guidance range of $136 to $140 million, marking an 8% year-over-year growth. Fastly's gross margin was 57.3%, slightly better than anticipated, and the operating loss was $6 million, better than the guidance range of $11 million to $7 million loss. The company generated $8 million in positive free cash flow, nearing breakeven for the year. Fastly's customer count stood at 3,035, with 595 enterprise customers, and they onboarded 19 new enterprise customers with over $100,000 in annual revenue. The average enterprise customer spend increased by 4% quarter-over-quarter to $907,000. The top 10 customers accounted for 33% of revenue, down from 38% in the first quarter of 2024, while revenue outside the top 10 grew by 17% year-over-year, indicating strong diversification. Fastly also highlighted significant progress in its security portfolio, with security revenue growing 7% year-over-year. Looking ahead, Fastly anticipates a 9% annual growth for 2025, raising their prior guidance, with a cautious approach due to macro uncertainties and excluding U.S. TikTok revenue beyond June 19 from their guidance.

Fastly Financial Statement Overview

Summary

Fastly demonstrates moderate revenue growth but faces significant profitability challenges with persistent operational losses and negative cash flows. The balance sheet remains robust with strong equity, yet returns on equity are negative, indicating the need for strategic improvements to enhance shareholder value. While debt levels are not overly burdensome, improving cash flow management is crucial for long-term financial stability.

Income Statement

Neutral

Fastly's TTM (Trailing-Twelve-Months) revenue increased by 7.46% compared to the previous year, indicating moderate growth. However, the company reported a negative EBIT margin of -30.30% and a negative net profit margin of -29.07%, highlighting ongoing operational losses. The gross profit margin of 53.17% suggests efficiency in generating revenue, but the negative EBITDA margin of -17.84% points to challenges in achieving profitability.

Balance Sheet

Neutral

Fastly maintains a healthy equity ratio of 66.50%, reflecting a strong equity position relative to its assets. The debt-to-equity ratio is moderate at 0.42, suggesting manageable leverage. However, the company posted a negative return on equity of -16.38%, indicating insufficient returns to shareholders due to consistent losses.

Cash Flow

Neutral

Fastly experienced a positive operating cash flow to net income ratio of -0.10, indicating a slight improvement in cash generation relative to reported losses. The free cash flow to net income ratio remains negative. Free cash flow growth rate improved significantly from the previous year, but it remains negative at -73.71%, highlighting substantial cash outflows exceeding inflows.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
543.68M	505.99M	432.73M	354.33M	290.87M
	Gross Profit
295.94M	266.33M	209.78M	187.33M	170.87M
	EBIT
-167.91M	-198.03M	-246.20M	-219.02M	-107.21M
	EBITDA
-79.07M	-19.01M	-81.85M	-167.35M	-77.29M
	Net Income Common Stockholders
-158.06M	-133.09M	-190.77M	-222.70M	-95.93M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
295.88M	322.72M	517.97M	527.86M	194.18M
	Total Assets
1.45B	1.53B	1.90B	2.15B	1.16B
	Total Debt
404.66M	433.32M	833.54M	1.05B	90.53M
	Net Debt
118.48M	325.40M	690.15M	885.94M	27.63M
	Total Liabilities
486.11M	545.70M	940.96M	1.14B	158.09M
	Stockholders Equity
965.25M	979.49M	955.16M	1.01B	1.00B
Cash Flow		Free Cash Flow
-20.81M	-31.91M	-149.95M	-88.87M	-59.09M
	Operating Cash Flow
16.41M	362.00K	-69.63M	-38.48M	-19.92M
	Investing Cash Flow
178.90M	294.94M	235.75M	-794.51M	-276.68M
	Financing Cash Flow
-17.10M	-331.38M	-189.15M	936.55M	274.40M

Fastly Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.28

Price Trends

50DMA

6.57

Positive

100DMA

7.43

Positive

200DMA

7.66

Positive

Market Momentum

MACD

0.30

Negative

RSI

68.34

Neutral

STOCH

74.53

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FSLY, the sentiment is Positive. The current price of 8.28 is above the 20-day moving average (MA) of 7.68, above the 50-day MA of 6.57, and above the 200-day MA of 7.66, indicating a bullish trend. The MACD of 0.30 indicates Negative momentum. The RSI at 68.34 is Neutral, neither overbought nor oversold. The STOCH value of 74.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FSLY.

Fastly Risk Analysis

Fastly disclosed 74 risk factors in its most recent earnings report. Fastly reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Fastly Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
YALA	81 Outperform	$1.09B	8.94	21.03%	―	6.40%	9.72%
VMEO	72 Outperform	$747.11M	47.08	4.29%	―	-0.05%	23.22%
VTEX	71 Outperform	$1.22B	79.56	6.26%	―	7.71%	―
DSP	70 Outperform	$910.34M	470.76	4.15%	―	30.64%	―
FSLY	66 Neutral	$1.11B	―	-15.78%	―	6.26%	-9.54%
Sector *	62 Neutral	$11.80B	10.31	-7.45%	2.91%	7.43%	-7.78%
BLND	57 Neutral	$966.88M	―	-93.00%	―	-0.40%	63.36%

* Technology Sector Average

Performance Comparison

FSLY

Fastly

8.28

0.88

11.89%

YALA

Yalla Group

6.80

2.15

46.24%

DSP

Viant Technology

14.17

4.76

50.58%

VMEO

Vimeo

4.59

0.59

14.75%

BLND

Blend Labs

3.67

1.19

47.98%

VTEX

6.58

-0.04

-0.60%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.