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Fastly Inc Class A FSLY Stock Quote

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Morningstar‘s Stock Analysis FSLY

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Excellent Q2 Sales at Fastly, but Costs Are Even Higher Than Expected; Second Half Should Improve

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

Fastly reported excellent sales growth in the second quarter, exceeding the high end of its guidance, and raised its full-year sales guidance by $10 million, to a range of $405 million-$415 million. However, margins continued to deteriorate, with the second-quarter gross margin nearly 15 percentage points below the highs hit in 2020. Fastly is now guiding to a non-GAAP operating loss as high as $78 million in 2022, up from a $60 million-$70 million loss previously. While the second-quarter operating loss was ugly, we think the stock selloff in the wake of the earnings release will prove to be unwarranted. The weakness is consistent with the first-half cost pressure the firm telegraphed—albeit to a greater degree—and we expect margins to improve significantly in the second half. Still, we’re reducing our fair value estimate to $20 per share from $25 to reflect the longer path toward profitability that we now project.

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Key Statistics FSLY

Company Profile FSLY

Business Description

Fastly operates a content delivery network, which is necessary for entities to provide faster and more reliable online content. Fastly’s strategy differs from traditional CDNs, which focused on locating servers in as many locations as possible to store copies of files that consumers most use. Fastly has far fewer sites than traditional CDNs, but it houses servers in the most network-dense data centers. Instead of simply storing static content, it allows its customers to program on its platform, enabling edge computing and better service of the more dynamic content that was traditionally not well served by CDNs. Fastly gears its service to the largest, most sophisticated enterprises rather than small companies and generated about two thirds of its revenue in the United States in 2020.

475 Brannan Street, Suite 300
San Francisco, CA, 94107
T +1 844 432-7859
Industry Software - Application
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Stock Type Distressed
Employees 976