Fastly
FSLY
$23.86
-2.89%
Fastly, Inc. operates an edge cloud platform that combines content delivery, edge computing, and security services, including web and API protection, DDoS mitigation, and real-time data processing at the network edge for enterprise customers worldwide. The company is a niche challenger in the CDN and edge computing market, competing against far larger players like Akamai, Cloudflare, and Amazon CloudFront, and differentiates itself through a programmable edge architecture and a security portfolio that now represents a meaningful slice of revenue. The current investor narrative is a tug-of-war between a genuine operational turnaround — highlighted by record Q1 2026 revenue of $173 million and a February 2026 rally on 'earnings turnaround and expanding AI edge strategy' headlines — and persistent skepticism about decelerating growth in the core network services business, which triggered a sharp post-earnings selloff on May 7, 2026. Bulls point to AI-driven edge workloads and improving gross margins as a path to durable profitability, while bears emphasize that the stock's 166% one-year surge has run well ahead of fundamentals, with the company still unprofitable and dependent on a single large customer cohort.…
FSLY
Fastly
$23.86
Related headlines
Investment Opinion: Should I buy FSLY Today?
The synthesized recommendation is Hold, with a neutral stance reflecting the balance between genuine operational improvement and a valuation that already prices in much of the turnaround. The analyst consensus rating is 'none' (no clear buy/sell consensus), and the average target price of $27.00 implies only +13.2% upside from the current $23.86, which is modest relative to the stock's -51.6% max drawdown risk. The core thesis is that Fastly is a credible turnaround story with improving margins and positive free cash flow, but the stock's 166% one-year surge has run ahead of fundamentals, leaving limited room for further multiple expansion without a clear acceleration in revenue growth.
Supporting evidence for the Hold rating includes four consecutive quarters of narrowing net losses (from -$39.15M in Q1 2025 to -$20.52M in Q1 2026), gross margin expansion to 62.52% from 53.16% a year ago, positive free cash flow of $3.61 million in Q1 2026, and a solid balance sheet with a current ratio of 2.61 and debt-to-equity of 0.46. Revenue grew 19.76% year-over-year to a record $173.02 million, and the PEG ratio of 0.45 suggests the stock is inexpensive relative to growth if that growth is sustainable. However, the forward PE of 40.69x is rich for a company still unprofitable, and the PS ratio of 2.40x, while below historical levels, is justified by negative net margins of -19.50% and subscale competitive positioning.
The biggest risks that could invalidate the Hold thesis are a continued deceleration in Network Services growth (73% of revenue), failure to monetize AI edge workloads, and a broader market rotation away from unprofitable software names. This Hold would upgrade to Buy if revenue growth reaccelerates above 25% YoY and the company achieves sustained positive net income, or if the stock pulls back to the analyst low target of $20.00 while fundamentals continue to improve. It would downgrade to Sell if revenue growth decelerates below 15% or if gross margins fall back below 60%. Relative to its history and peers, the stock appears fairly valued to slightly overvalued, with the market already pricing in a successful turnaround.
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FSLY 12-Month Price Forecast
Fastly presents a balanced risk/reward profile with genuine operational improvements offset by a valuation that already reflects much of the turnaround. The company has made clear progress on margins and cash flow, but the core network services business remains the swing factor, and its near-flat sequential growth is a concern. The neutral stance reflects the lack of a clear catalyst to drive the stock above the analyst average target of $27.00 without a reacceleration in revenue growth or a clear path to sustained profitability. I would upgrade to bullish if Q2 2026 results show revenue growth above 22% YoY and positive net income, or if the stock pulls back to the $20.00 level while fundamentals continue to improve. I would downgrade to bearish if revenue growth decelerates below 15% or if gross margins fall back below 60%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Fastly's 12-month outlook, with a consensus price target around $27.00 and implied upside of +13.2% versus the current price.
Average Target
$27.00
0 analysts
Implied Upside
+13.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$20 - $32
Analyst target range
Ten analysts cover Fastly, and the consensus is decidedly neutral — the recommendation field shows 'none' (no clear buy/sell consensus), and the institutional ratings data reveals a wall of Neutral/Sector Perform ratings from RBC Capital, Piper Sandler, Citigroup, and DA Davidson, with only Keybanc maintaining an Overweight. The average target price is $27.00, implying +13.2% upside from the current $23.86, which is a modest but positive signal. Notably, no firm has upgraded or downgraded in the visible ratings history (all actions match their previous ratings), suggesting analysts are in a holding pattern awaiting clearer evidence on whether the AI edge strategy can reaccelerate growth.
The target range spans $20.00 to $32.00, a 60% spread that signals meaningful disagreement about the company's trajectory. The high target of $32.00 (roughly 34% above current price) implies multiple expansion and successful monetization of AI edge workloads, while the low target of $20.00 (about 16% below current price) prices in continued growth deceleration and margin pressure. The wide spread, combined with the stock's -51.6% max drawdown and the fact that the consensus target of $27.00 sits below the 52-week high of $34.82, suggests analysts see the recovery as real but capped — the market has already priced in much of the turnaround, leaving limited room for further multiple expansion without a genuine acceleration in revenue growth or a clear path to sustained profitability.
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Bulls vs Bears: FSLY Investment Factors
The bear case currently has stronger evidence because the stock's 166% one-year surge has outpaced fundamentals, and the May 7 selloff revealed that even record results cannot ease growth concerns in the core network services business. Bulls correctly point to improving gross margins (62.52%), narrowing losses (-$20.52M), and positive free cash flow ($3.61M), but these are early-stage improvements that have not yet translated into sustained profitability. The single most important tension is whether the AI edge strategy can reaccelerate revenue growth above 20% and diversify away from the legacy CDN business, which still represents 73% of revenue. If AI edge workloads fail to monetize at scale, the forward PE of 40.69x will compress sharply, and the stock could retest its 52-week low of $7.735. Conversely, if security and edge computing revenue accelerates, the current PS of 2.40x would look like a bargain relative to historical multiples.
Bullish
- Gross margin expanded 940 bps YoY: Q1 2026 gross margin reached 62.52%, up from 53.16% in Q1 2025 and 61.39% in Q4 2025, reflecting a richer mix toward higher-margin security and edge computing products. This margin expansion is the clearest evidence that Fastly's turnaround is operational, not just narrative, and it directly improves the path to breakeven.
- Net loss narrowed four straight quarters: Q1 2026 net loss of -$20.52 million (EPS -$0.13) improved from -$39.15 million in Q1 2025 and -$37.54 million in Q2 2025, with the loss shrinking sequentially for four consecutive quarters. EBITDA improved to -$2.42 million from -$15.22 million a year ago, putting the company within striking distance of positive EBITDA.
- Revenue growth reaccelerated to 19.76% YoY: Q1 2026 revenue of $173.02 million grew 19.76% year-over-year, up from $144.47 million in Q1 2025, and marked a record quarterly top line. The sequential progression from $148.71M (Q2 2025) to $173.02M (Q1 2026) shows consistent expansion despite the May selloff narrative.
- Positive FCF and solid balance sheet: Free cash flow turned positive at $3.61 million in Q1 2026 versus -$5.35 million in Q4 2024, with TTM FCF of $54.73 million and operating cash flow of $28.36 million. The current ratio of 2.61 and debt-to-equity of 0.46 provide ample liquidity and low leverage, reducing financial risk.
Bearish
- Growth deceleration triggered 38% selloff: Despite record Q1 2026 results, the stock plunged from $31.57 on May 6 to $19.50 on May 7, a 38% single-day drop, because investors focused on slowing growth in the core network services business. Network Services still represents 73% of revenue ($126.24 million), and its near-flat Q4-to-Q1 progression ($172.61M to $173.02M) signals stabilization rather than inflection.
- Still unprofitable with negative margins: Q1 2026 net income was -$20.52 million, with a net margin of -19.50% and operating margin of -18.88%. ROE of -13.09% and ROA of -3.46% confirm the company continues to destroy equity value, and the forward PE of 40.69x prices in a dramatic profitability swing that has not yet materialized.
- Valuation stretched on forward earnings: The forward PE of 40.69x is rich for a company growing revenue at ~20% and still unprofitable, leaving little margin for execution error. The EV/Sales of 5.78x and PCF of 15.83x are not cheap, and the stock's 166% one-year surge has run well ahead of fundamentals.
- Extreme volatility and drawdown risk: The stock has a max drawdown of -51.6% and a 52-week range from $7.735 to $34.82, meaning it can halve in value even during a broader uptrend. The beta of 0.358 is deceptively low for a high-growth software name, reflecting idiosyncratic, news-driven trading rather than market sensitivity.
FSLY Technical Analysis
Fastly is in a powerful recovery uptrend, with the stock up 166.59% over the past year and 134.15% year-to-date, a massive outperformance versus the S&P 500's 15.01% one-year and 11.70% YTD gains. At the current price of $23.86, the stock sits at roughly 60% of its 52-week range (calculated as ($23.86 - $7.735) / ($34.82 - $7.735)), meaning it has retraced meaningfully from its highs but remains far above the lows — a positioning that suggests the market is still pricing in recovery momentum rather than treating the stock as a falling knife. The 52-week low of $7.735 underscores how violent the move has been, and the maximum drawdown of -51.6% confirms this remains a high-volatility name where position sizing matters enormously.
Short-term momentum is constructive but decelerating: the stock is up 0.85% over the past month and 33.30% over three months, yet down 5.32% over six months, revealing a sharp V-shaped recovery that stalled in the spring and has only recently re-accelerated. The one-month relative strength versus SPY is +1.81 percentage points, and the three-month relative strength is +31.30 points, but the six-month relative strength is -22.76 points — a clear divergence showing Fastly's outperformance is a recent phenomenon, not a sustained trend. The stock's beta of just 0.358 is strikingly low for a high-growth software name, implying it has historically moved only about 36% as much as the market, which may reflect idiosyncratic, news-driven trading rather than broad market sensitivity.
Key technical resistance sits at the 52-week high of $34.82, roughly 46% above the current price, while support is anchored at the 52-week low of $7.735, about 68% below. A breakout above $34.82 would signal that the AI edge narrative is being fully repriced into the stock, while a breakdown below the $20 psychological zone — which coincides with the analyst low target of $20.00 — would threaten the recovery structure. The short ratio of 3.15 days indicates moderate short interest that could fuel a squeeze on upside catalysts, but the -51.6% max drawdown is a stark reminder that this stock can halve in value even during a broader uptrend, making the low beta somewhat deceptive as a risk gauge.
Beta
0.36
0.36x market volatility
Max Drawdown
-51.6%
Largest decline past year
52-Week Range
$8-$35
Price range past year
Annual Return
+166.6%
Cumulative gain past year
| Period | FSLY Return | S&P 500 |
|---|---|---|
| 1m | +0.8% | -0.5% |
| 3m | +33.3% | +2.3% |
| 6m | -5.3% | +16.6% |
| 1y | +166.6% | +14.8% |
| ytd | +134.2% | +11.7% |
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FSLY Fundamental Analysis
Revenue is growing at a healthy clip but the trajectory is nuanced: Q1 2026 revenue of $173.02 million rose 19.76% year-over-year, accelerating from Q4 2025's $172.61 million and Q3 2025's $158.22 million, and up from $144.47 million in Q1 2025. The sequential trend shows steady expansion — $148.71M (Q2 2025) → $158.22M (Q3 2025) → $172.61M (Q4 2025) → $173.02M (Q1 2026) — but the near-flat Q4-to-Q1 progression suggests growth is stabilizing rather than inflecting, which is precisely the concern that drove the May 7 selloff. Segment data shows Network Services at $126.24 million (roughly 73% of revenue), Security at $38.76 million (about 22%), and Other at $8.02 million, meaning the legacy CDN business still dominates and its growth rate is the swing factor for the entire investment case.
Profitability remains elusive but is clearly improving: Q1 2026 net income was -$20.52 million (EPS of -$0.13), a dramatic narrowing from -$39.15 million in Q1 2025 and -$37.54 million in Q2 2025, with the loss shrinking for four consecutive quarters. Gross margin expanded to 62.52% in Q1 2026 from 61.39% in Q4 2025 and 53.16% in Q1 2025, a roughly 940 basis point year-over-year improvement that reflects better product mix and cost discipline. Operating margin is still negative at -13.81% (Q1 2026) versus -26.43% a year earlier, and EBITDA swung to -$2.42 million from -$15.22 million, so the company is approaching breakeven but has not yet crossed it — a critical distinction for a stock trading on turnaround expectations.
Balance sheet health is solid: the current ratio stands at 2.61, debt-to-equity is a manageable 0.46, and free cash flow turned positive at $3.61 million in Q1 2026 versus -$5.35 million in Q4 2024, with TTM free cash flow of $54.73 million. Cash at the end of Q1 2026 was $146.67 million, down from $180.56 million in Q4 2025 largely due to $38.59 million of debt repayment, and operating cash flow was a healthy $28.36 million. However, ROE of -13.09% and ROA of -3.46% confirm the company is still destroying rather than creating equity value, and the reliance on stock-based compensation (which was $32.28 million in Q4 2025 alone) means reported cash generation overstates true economic profitability.
Quarterly Revenue
$173021000.0B
2026-03
Revenue YoY Growth
+19.8%
YoY Comparison
Gross Margin
62.5%
Latest Quarter
Free Cash Flow
$54730000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is FSLY Overvalued?
Because Fastly's trailing net income is negative (-$20.52 million in Q1 2026, EPS of -$0.08), the PE ratio is not meaningful — the trailing PE of -12.27 is a mathematical artifact of losses. I therefore lead with the PS ratio of 2.40x, which is the appropriate metric for an unprofitable but growing software company, and note the forward PE of 40.69x based on estimated EPS of $0.74, implying the market expects a dramatic swing to profitability within the next year. The gap between the negative trailing PE and the positive 40.69x forward PE is the entire bull case in one number: investors are paying today for earnings that do not yet exist, which leaves little margin for execution error.
On a relative basis, the PS ratio of 2.40x and EV/Sales of 5.78x look reasonable for a software company growing revenue at ~20%, and the PEG ratio of 0.45 suggests the stock is inexpensive relative to its growth rate if that growth is sustainable. However, the PB ratio of 1.61x and PCF ratio of 15.83x are less informative given negative earnings, and the EV/EBITDA of -188.27 is meaningless while EBITDA is negative. Compared to high-multiple edge computing peers that often trade at 8-15x sales, Fastly's 2.40x PS looks like a discount, but that discount is justified by its negative net margin of -19.50%, negative operating margin of -18.88%, and the fact that it is a subscale player competing against vastly larger, more profitable rivals.
Historically, Fastly's PS ratio has compressed dramatically: it was 25.79x in Q1 2026 (per historical ratios data, reflecting the pre-selloff price), 8.87x in Q4 2025, 8.00x in Q3 2025, and 6.28x in Q1 2025, versus the current 2.40x — meaning the stock now trades at a fraction of its own historical sales multiple. This compression reflects both the revenue base growing into the valuation and the market's reduced willingness to pay up for unprofitable growth, and it cuts both ways: either the stock is now genuinely cheap relative to its history, or the market is correctly repricing a business whose growth is structurally decelerating.
PE
-12.3x
Latest Quarter
vs. Historical
N/A
5-Year PE Range 17x~59x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
-188.3x
Enterprise Value Multiple
Investment Risk Disclosure
Fastly's financial risks are centered on its persistent unprofitability and reliance on a single large customer cohort. Q1 2026 net income was -$20.52 million with a net margin of -19.50%, and although the loss narrowed from -$39.15 million a year ago, the company has not yet crossed the breakeven threshold. Stock-based compensation of $32.28 million in Q4 2025 alone means reported cash generation overstates true economic profitability, and the forward PE of 40.69x assumes a dramatic swing to EPS of $0.74 that has not been demonstrated. Additionally, Network Services represents 73% of revenue ($126.24 million), so any deceleration in this legacy CDN business disproportionately impacts the entire investment case.
Market and competitive risks are significant given Fastly's subscale position against Akamai, Cloudflare, and Amazon CloudFront. The stock trades at a PS of 2.40x and EV/Sales of 5.78x, which looks reasonable versus high-multiple edge peers at 8-15x sales, but that discount is justified by negative operating margins and a history of PS compression from 25.79x in Q1 2026 to the current 2.40x. The beta of 0.358 suggests low market correlation, but the -51.6% max drawdown and 166% one-year surge indicate the stock is driven by idiosyncratic news flow, making it vulnerable to sentiment shifts. Recent news highlights that the May 7 selloff was triggered by growth concerns despite record results, and the April 15 plunge of 14% shows investors prioritizing near-term valuation over long-term AI potential.
The worst-case scenario involves a continued deceleration in Network Services growth, failure to monetize AI edge workloads, and a broader multiple compression in unprofitable software names. In this scenario, the stock could retest its 52-week low of $7.735, representing a -67.6% decline from the current price of $23.86. The analyst low target of $20.00 implies a more moderate -16.2% downside, but the historical max drawdown of -51.6% and the 52-week range show that a -50% to -68% decline is realistic in an adverse scenario. Investors could lose between 16% and 68% of their capital depending on the severity of the growth deceleration and the market's willingness to fund unprofitable growth.
FAQ
The most severe risk is financial: Fastly remains unprofitable with a net margin of -19.50% and a net loss of -$20.52 million in Q1 2026, and the forward PE of 40.69x assumes a profitability swing that may not materialize. The second risk is competitive: Network Services represents 73% of revenue ($126.24 million), and the company competes against far larger players like Akamai, Cloudflare, and Amazon CloudFront, which could pressure pricing and margins. The third risk is market-related: the stock has a max drawdown of -51.6% and a 52-week range from $7.735 to $34.82, meaning it can halve in value even during a broader uptrend, and the low beta of 0.358 is deceptively low for a high-growth software name. The fourth risk is company-specific: reliance on a single large customer cohort and the potential for stock-based compensation ($32.28 million in Q4 2025) to dilute shareholders and overstate cash generation.
The 12-month forecast has three scenarios: a bull case with 25% probability targeting $32.00 to $34.82, a base case with 50% probability targeting $24.00 to $27.00, and a bear case with 25% probability targeting $7.735 to $20.00. The base case is most likely, assuming revenue growth stabilizes around 18-20% YoY, gross margins hold above 62%, and net losses narrow further but do not reach sustained profitability. The key assumption behind the base case is that Network Services remains flat to slightly positive while security and AI edge revenue grows, keeping the stock range-bound around the analyst average target of $27.00. The bull case requires successful AI edge monetization and revenue growth above 25%, while the bear case involves negative Network Services growth and failure to achieve profitability.
FSLY appears fairly valued to slightly overvalued relative to its fundamentals and history. The PS ratio of 2.40x is below the historical Q1 2026 level of 25.79x and the Q4 2025 level of 8.87x, suggesting the stock is cheap relative to its own history. However, the forward PE of 40.69x is rich for a company growing revenue at ~20% and still unprofitable, and the EV/Sales of 5.78x is not a discount to peers when adjusted for negative margins. The PEG ratio of 0.45 suggests the stock is inexpensive relative to growth if that growth is sustainable, but the market is pricing in a dramatic swing to EPS of $0.74 that has not yet been demonstrated. Compared to high-multiple edge computing peers trading at 8-15x sales, Fastly's 2.40x PS looks like a discount, but that discount is justified by its negative net margin of -19.50% and subscale competitive positioning.
FSLY is a good buy only for risk-tolerant investors who believe in the AI edge computing narrative and can withstand significant volatility, given the stock's -51.6% max drawdown and 166% one-year surge. The analyst average target of $27.00 implies +13.2% upside, which is modest relative to the downside risk to the 52-week low of $7.735 (-67.6%). The company is still unprofitable with a net margin of -19.50%, and the forward PE of 40.69x leaves little margin for execution error. However, gross margins have expanded to 62.52%, free cash flow turned positive at $3.61 million, and the net loss has narrowed for four consecutive quarters, suggesting the turnaround is real. For investors with a long-term horizon and a high risk tolerance, a small position could be justified, but the current valuation does not offer a compelling margin of safety.
FSLY is more suitable for long-term investment than short-term trading, but only for risk-tolerant investors who can withstand significant volatility. The company is in a turnaround phase with improving gross margins (62.52%), narrowing net losses (-$20.52 million), and positive free cash flow ($3.61 million), but it has not yet achieved sustained profitability, and the forward PE of 40.69x requires patience. The beta of 0.358 suggests lower market correlation, but the -51.6% max drawdown and 166% one-year surge indicate the stock is driven by idiosyncratic news flow, making short-term trading highly risky. A minimum holding period of 2-3 years is suggested to allow the AI edge strategy to mature and for the company to demonstrate sustained profitability. The stock pays no dividend (payout ratio of 0), so returns depend entirely on capital appreciation.
