Key Takeaways
- Shares of Fastly plummeted 37% to $19.94 following Q1 earnings, even though the company exceeded both profit and revenue expectations.
- The company posted Q1 EPS of $0.13, surpassing the analyst consensus of $0.09, while revenue climbed 20% to $173.02 million versus the $171.8 million projection.
- The security segment, a proxy for AI-related traffic, generated $38.8 million — representing 47% annual growth but barely exceeding the $34.9 million estimate.
- Management elevated its full-year 2026 revenue forecast to a range of $710M–$725M and increased profit expectations to $0.27–$0.33 per share.
- Analysts at Piper Sandler reduced their price target from $30 to $27 while keeping a Neutral stance, expressing worries about potential peak growth.
Fastly (FSLY) delivered its Q1 2026 financial results following Wednesday’s market close, exceeding consensus expectations — yet Wall Street responded with disappointment.
Shares had rocketed more than 210% year-to-date before the earnings announcement. Such explosive momentum created lofty expectations that the company ultimately couldn’t satisfy.
The content delivery network provider reported quarterly earnings of $0.13 per share, a significant improvement from the $0.05 loss recorded in the same period last year, and comfortably above the Street’s $0.09 projection. Total revenue increased 20% from the prior year to reach $173.02 million, exceeding the analyst consensus of $171.8 million.
On the surface, these figures represented a respectable performance. However, market participants were zeroing in on a different metric.
Investors were particularly interested in security revenue — the business line that reflects AI-generated traffic flowing through Fastly’s infrastructure. This segment produced $38.8 million, marking 47% year-over-year expansion, yet landing only slightly above the $34.9 million analyst projection.
For a stock trading at valuations that assumed explosive AI-powered expansion, barely exceeding expectations proved insufficient.
FSLY shares collapsed 37% to $19.94 in Thursday’s trading session.
Evercore ISI analyst Peter Levine attributed the sharp decline to multiple factors, including network services revenue coming in below expectations and weaker compute sales, all compounded by the inflated investor anticipation preceding the report.
Breaking Down the Financial Results
Fastly’s roster of large customers reached 634 during Q1, representing 39% growth compared to the previous year. Additionally, the company is negotiating more substantial minimum commitments from these clients, suggesting enhanced contract value.
Looking toward Q2, Fastly projected revenue between $170 million and $176 million, with earnings per share ranging from $0.05 to $0.08 — both metrics exceeding prior Street expectations of $169.8 million in revenue and $0.04 EPS.
The company also improved its full-year 2026 outlook. Revenue expectations now span $710 million to $725 million, elevated from the previous $700 million to $720 million forecast. Earnings guidance was similarly lifted to $0.27–$0.33 per share, up from the earlier $0.23–$0.29 range.
Wall Street’s consensus projections for the full year stand at $0.28 EPS on $712 million in revenue — Fastly’s updated guidance encompasses both figures.
Wall Street’s Response
Piper Sandler adjusted its price objective for FSLY downward to $27 from $30, while maintaining its Neutral rating. The firm highlighted that Fastly’s traditional delivery business experienced sequential volume declines that fell short of projections, and noted that more challenging pricing comparisons await in upcoming quarters.
Piper Sandler also voiced a more significant concern: the possibility that the company’s growth trajectory has already reached its zenith, particularly considering FSLY’s premium valuation relative to competitors when examining EV/revenue-to-growth metrics.
Company executives emphasized that their Compute@Edge platform is experiencing heightened AI-related usage, and highlighted successful cross-selling momentum within the Security product line.
The company has announced an analyst day scheduled for September 23, 2026.
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