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Fastly (FSLY)
NYSE:FSLY

Fastly (FSLY) AI Stock Analysis

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Fastly

(NYSE:FSLY)

Rating:65Neutral
Price Target:
$8.00
▲(4.44%Upside)
Fastly's overall stock score is driven by strong technical momentum and positive earnings call results, highlighting successful revenue growth and diversification efforts. However, significant risks remain due to negative profitability and valuation concerns. The company's stable balance sheet and strategic focus on product expansion provide some counterbalance to these challenges.
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)

Fastly Business Overview & Revenue Model

Company DescriptionFastly, Inc. is a global edge cloud platform provider that delivers content delivery network (CDN) services, edge compute, and security solutions. The company operates in the technology sector, focusing on improving internet performance and providing real-time insights for businesses. Fastly's core products include its content delivery network, which accelerates the delivery of digital content, edge cloud services that enable developers to deploy and run applications closer to end users, and security solutions that protect against cyber threats.
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
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: 27.03%|
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
55
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
60
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
50
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.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
543.68M505.99M432.73M354.33M290.87M
Gross Profit
295.94M266.33M209.78M187.33M170.87M
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 SheetCash, Cash Equivalents and Short-Term Investments
295.88M322.72M517.97M527.86M194.18M
Total Assets
1.45B1.53B1.90B2.15B1.16B
Total Debt
404.66M433.32M833.54M1.05B90.53M
Net Debt
118.48M325.40M690.15M885.94M27.63M
Total Liabilities
486.11M545.70M940.96M1.14B158.09M
Stockholders Equity
965.25M979.49M955.16M1.01B1.00B
Cash FlowFree Cash Flow
-20.81M-31.91M-149.95M-88.87M-59.09M
Operating Cash Flow
16.41M362.00K-69.63M-38.48M-19.92M
Investing Cash Flow
178.90M294.94M235.75M-794.51M-276.68M
Financing Cash Flow
-17.10M-331.38M-189.15M936.55M274.40M

Fastly Technical Analysis

Technical Analysis Sentiment
Positive
Last Price7.66
Price Trends
50DMA
6.54
Positive
100DMA
7.43
Positive
200DMA
7.65
Positive
Market Momentum
MACD
0.25
Positive
RSI
59.52
Neutral
STOCH
69.19
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 7.66 is above the 20-day moving average (MA) of 7.65, above the 50-day MA of 6.54, and above the 200-day MA of 7.65, indicating a bullish trend. The MACD of 0.25 indicates Positive momentum. The RSI at 59.52 is Neutral, neither overbought nor oversold. The STOCH value of 69.19 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 1 New Risks
1.
Our business is exposed to risks associated with credit card and other online payment processing methods. Q4, 2024

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
81
Outperform
$1.09B8.9421.03%6.40%9.72%
72
Outperform
$747.11M46.514.29%-0.05%23.22%
71
Outperform
$1.22B80.776.26%7.71%
DSDSP
70
Outperform
$910.34M483.394.15%30.64%
65
Neutral
$1.11B-15.78%6.26%-9.54%
62
Neutral
$11.81B10.34-7.44%2.91%7.41%-7.93%
57
Neutral
$966.88M-93.00%-0.40%63.36%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
FSLY
Fastly
7.66
0.18
2.41%
YALA
Yalla Group
6.87
2.25
48.70%
DSP
Viant Technology
14.55
5.32
57.64%
VMEO
Vimeo
4.54
0.51
12.66%
BLND
Blend Labs
3.74
1.10
41.67%
VTEX
VTEX
6.68
0.02
0.30%
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.