Fastly’s security-led turnaround and AI traffic opportunity are gaining traction, but a premium valuation, concentrated customers, and execution-dependent targets leave limited room for error.
Overview
Fastly operates a programmable edge cloud that delivers, secures, and processes enterprise digital traffic close to end users. Its usage-based subscriptions include minimum customer commitments, with incremental revenue as bandwidth, requests, compute, or security usage rises. The business is transitioning from a CDN-heavy mix toward higher-growth security and edge compute: Q2 2026 revenue was $183.3 million, up 23.3%, with Security up 43% and Compute/Observability up 69%; LTM NRR improved to 117%. Fastly’s developer-focused WebAssembly compute, sub-150-millisecond purges, and integrated security support differentiation, but its scale remains below Cloudflare, Akamai, and hyperscalers. Q2 results expanded non-GAAP gross margin to 65.8%, produced $27.0 million of non-GAAP operating income, and marked a sixth consecutive positive-FCF quarter. Management raised FY2026 revenue guidance to $732–$746 million and EPS to $0.50–$0.54, while targeting $1.1–$1.3 billion revenue and 20%–22% operating margin by 2029. **Security cross-selling and AI traffic governance are the principal catalysts.** At about $24.94, shares trade near 5.7x EV/sales and 48x FY2026 non-GAAP EPS, leaving limited execution tolerance; near-term confirmation is expected from Q3 results and retention trends.