Key Takeaways
- Shares of Fastly tumbled 37% to $19.94 following Q1 earnings that exceeded analyst projections but failed to meet inflated investor expectations.
- The company posted adjusted earnings of $0.13 per share versus the $0.09 consensus, while revenue climbed 20% year-over-year to $173.02 million, surpassing the $171.8 million estimate.
- Security segment revenue—a proxy for AI-related traffic—reached $38.8 million, representing 47% year-over-year growth but barely exceeding the $34.9 million projection.
- Management increased full-year 2026 revenue guidance to a range of $710M–$725M, with adjusted EPS now expected between $0.27 and $0.33 per share.
- Piper Sandler analysts reduced their price target from $30 to $27 while maintaining a Neutral stance, expressing concern that the company’s growth trajectory may have reached its apex.
Fastly (FSLY) delivered first-quarter fiscal 2026 results Wednesday evening that topped Wall Street’s expectations across key metrics — yet the stock’s response was anything but celebratory.
Heading into the earnings release, shares had rocketed more than 210% year-to-date. Such explosive gains created extraordinarily high expectations that the company ultimately failed to satisfy.
Adjusted earnings reached $0.13 per share for the quarter, a significant improvement from the $0.05 per share loss recorded in the prior-year period and comfortably ahead of the Street’s $0.09 projection. Total revenue expanded 20% from the previous year to $173.02 million, eclipsing the $171.8 million consensus figure.
On the surface, these results appeared robust. However, market participants had zeroed in on a different metric entirely.
The critical figure under scrutiny was security revenue — the business line where AI-generated traffic materializes in Fastly’s financial statements. This segment delivered $38.8 million, marking 47% year-over-year expansion, yet barely exceeded the $34.9 million analyst projection.
For a stock valued on the premise of explosive AI-powered expansion, a slim beat simply didn’t cut it.
FSLY shares collapsed 37% to $19.94 in Thursday’s trading session.
Evercore ISI analyst Peter Levine noted the selloff intensified due to weaker-than-anticipated network services performance and underwhelming compute revenue, compounding the issue of already sky-high investor expectations entering the quarterly report.
Digging Into the Financial Performance
Fastly’s large customer base expanded to 634 accounts during Q1, representing 39% growth compared to the same quarter last year. Additionally, the company is negotiating more substantial minimum commitment agreements, suggesting improvement in contract terms and customer relationships.
Looking ahead to the second quarter, Fastly projected revenue between $170 million and $176 million, paired with earnings per share of $0.05 to $0.08 — both figures exceeding Wall Street’s previous expectations of $169.8 million in revenue and $0.04 per share.
The company also elevated its full-year 2026 outlook. Fastly now anticipates revenue ranging from $710 million to $725 million, revised upward from the prior $700 million to $720 million guidance. Adjusted earnings per share estimates were lifted to $0.27–$0.33 from the previous $0.23–$0.29 range.
Current Wall Street consensus sits at $0.28 earnings per share on $712 million in revenue for fiscal 2026 — Fastly’s updated guidance encompasses these figures comfortably.
Wall Street’s Take
Piper Sandler trimmed its price objective on FSLY from $30 down to $27 while reaffirming a Neutral investment rating. The firm highlighted that Fastly’s traditional content delivery operations experienced weaker sequential volume trends than anticipated, with more challenging pricing dynamics expected throughout the remainder of the year.
Piper Sandler also raised a strategic concern: growth momentum may have crested, especially considering FSLY currently commands a premium valuation on an enterprise value-to-revenue-to-growth basis relative to comparable companies.
Company executives emphasized accelerating AI-related usage on their Compute@Edge platform and highlighted successful bundling strategies with their Security offering across the customer base.
Fastly has announced plans to host an analyst day scheduled for September 23, 2026.
