GICS Sector : Technology
Fastly, 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.
Fastly reported a record revenue of $173 million in Q4 2025, representing a 23% annual growth, exceeding the top end of their guidance. This marks the company's fourth consecutive quarter of revenue acceleration. The strong performance was driven by exceptional execution, with Network Services growing 19% year-over-year and Security revenue growing 32% year-over-year. The company's gross margin reached a record high of 64%, driven by strong incremental flow-through. Fastly reported a net profit of $20.1 million or $0.12 per diluted share in Q4, compared to a net loss of $2.4 million or $0.02 per diluted share in Q4 2024.
Publication Date: Mar -09
The company's full-year 2025 net profit was $19.7 million or $0.13 per diluted share. Cash flow from operations was positive $22.4 million in the fourth quarter, and free cash flow was positive $8.6 million, representing a $16.5 million increase from Q4 2024. For full year 2025, cash flow from operations was $94.4 million, and free cash flow was positive $45.8 million.
Fastly provided guidance for 2026, with revenue growth expected to be 18% in the first quarter and 14% for the full year. The company expects non-GAAP operating profit to be $50-60 million, reflecting an operating margin of 8% at the midpoint. Non-GAAP net earnings per diluted share is expected to be $0.23-0.29, and free cash flow is expected to be $40-50 million. As Kip Compton, CEO, highlighted, the company is confident in its ability to drive growth through its go-to-market transformation.
The company is seeing growth in AI-related traffic, with increased activity in areas such as machine-to-machine traffic and AI workloads on its platform. It's also seeing opportunities in AI-specific offers, such as AI bot mitigation. Fastly's network services strength and security portfolio are also driving growth, with traffic growth driven by various factors.
Given the current valuation multiples, with a P/S Ratio of 4.9 and EV/EBITDA of not available but a negative -233.8, it's clear that the market has high expectations for Fastly's growth. The actual EPS of $0.12 beat estimates of $0.06, indicating a positive surprise. Analysts estimate next year's revenue growth at 11.3%, which is lower than the company's guidance of 14%. The P/E Ratio is -24.88, indicating that the company's profitability is still a concern. However, the company's efforts to drive growth through its go-to-market transformation and its focus on building sustainable, profitable growth are positive signs.
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Fastly's Cloud Platform growth is driven by increasing adoption of edge computing, rising demand for real-time analytics, and growing need for security and scalability in digital experiences. Additionally, the shift to cloud-native architectures, expansion into new markets, and strategic partnerships are contributing to the 11% growth.
Fastly's CDN is a highly scalable and secure platform that accelerates the delivery of static and dynamic content, reducing latency and improving user experience.
Fastly's Edge Computing platform enables developers to run custom code at the edge, reducing latency and improving performance for applications that require real-time processing.
Fastly's Image Optimization solution uses AI-powered compression and caching to reduce image file sizes, improving page load times and user experience.
Fastly's Security solutions provide protection against DDoS attacks, SSL/TLS encryption, and web application firewalls to safeguard online applications.
Fastly's Load Balancing solution distributes traffic across multiple servers, ensuring high availability and scalability for online applications.
Fastly's Media Shield is a cloud-based media delivery platform that accelerates the delivery of video and audio content.
Fastly's content delivery network (CDN) and edge computing services are highly specialized, making it difficult for substitutes to emerge.
While Fastly's customers have some bargaining power due to the availability of alternative CDNs, the company's strong brand and high-quality services mitigate this power.
Fastly's suppliers, such as data center providers and network infrastructure vendors, have limited bargaining power due to the company's scale and negotiating power.
While new entrants can potentially disrupt the CDN market, Fastly's established brand, strong customer base, and high barriers to entry make it challenging for new competitors to gain traction.
The CDN market is highly competitive, with established players like Akamai, Cloudflare, and Verizon Digital Media Services competing fiercely for market share.
| Value | |
|---|---|
| Debt Weight | 28.12% |
| Debt Cost | 3.95% |
| Equity Weight | 71.88% |
| Equity Cost | 9.95% |
| WACC | 8.26% |
| Leverage | 39.13% |
Value: 3.9
Growth: 5.7
Quality: 7.2
Yield: 0.0
Momentum: 8.0
Volatility: 4.3
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