Fastly Faces Customer Spending Challenges Amid Market Gains
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 06 2026
0mins
Source: Benzinga
Fastly Inc. shares rose by 8.15% and reached a 5-day high amid positive market conditions, with the Nasdaq-100 up 1.67% and the S&P 500 up 0.56%.
Despite the stock's rise, Fastly is facing challenges with customer spending, as indicated by its net revenue retention rate of 107%, which is below the industry benchmark of 110%. This suggests difficulties in increasing customer spending, compounded by high servicing costs reflected in its gross margin of 59.4% and a history of operating margin losses.
The implications of these challenges could affect Fastly's long-term growth potential, even as the stock performs well in the short term.
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Analyst Views on FSLY
Wall Street analysts forecast FSLY stock price to fall
10 Analyst Rating
2 Buy
7 Hold
1 Sell
Hold
Current: 16.940
Low
10.00
Averages
11.70
High
14.00
Current: 16.940
Low
10.00
Averages
11.70
High
14.00
About FSLY
Fastly, Inc. provides a programmable edge cloud platform that helps the world’s brands deliver online experiences through edge compute, delivery, security, and observability offerings, improving site performance, and enhancing security at a global scale. The Company enables developers to deliver secure Websites and apps. The edge cloud is a category of Infrastructure as a Service (IaaS) that enables developers to build, secure, and deliver digital experiences at the edge of the Internet. Its network services include content delivery network, video / streaming, load balancing, image optimization, and origin connect. Its object storage is an Amazon S3-compatible large object storage solution that works seamlessly with both its CDN and Compute services. Its security service includes Next-Gen WAF, bot management, DDoS protection, and others. The Company’s professional services include network services, managed security services, and response security services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Oshkosh Order Decline: Oshkosh (NYSE:OSK) has seen an average backlog drop of 4.7% over the past two years, suggesting a loss of orders amid increasing competition, and its gross margin of 16.3% reflects high production costs, leading to a 6.8% annual contraction in earnings per share, which puts pressure on stock prices.
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- Market Opportunity Analysis: Despite Wall Street's bullish outlook on these stocks, analysts point out significant fundamental issues with Arhaus, Oshkosh, and Fastly, suggesting that investors should exercise caution regarding their investment value and explore other potentially more rewarding opportunities.
See More
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- Inflation Impact: The April PPI report revealed accelerating inflation, pushing the 10-year Treasury yield to 4.49%, effectively eliminating hopes for rate cuts in 2026, which raised the discount rate applied to long-duration growth earnings and compressed business valuations.
- Software Sector Pressure: With software prices rising year-over-year, enterprise software spending may face pullbacks; while current revenues are supported, enterprise customers might delay new deployments or consolidate seats to protect their margins, increasing uncertainty in the industry.
- Market Overreaction: Despite the overall decline in tech stocks, with Asure Software, Flywire, and Procore Technologies falling 3.4%, 3.2%, and 3.8% respectively, the market's overreaction may present buying opportunities for investors seeking high-quality stocks.
- Procore Technologies Performance: Procore Technologies has dropped 33.8% year-to-date, currently trading at $46.38, which is 41.7% below its 52-week high of $79.60, indicating market concerns about its future growth, prompting investors to carefully assess its investment value.
See More
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- New Investment Position: Carlson Investments initiated a new position in Fastly by acquiring 213,025 shares in Q1 2026, with an estimated transaction value of $3.5 million, indicating a bullish outlook on Fastly's growth potential.
- Value Appreciation: By the end of the quarter, the value of Fastly's position had risen to $6.19 million, reflecting the stock price increase and demonstrating significant gains for Carlson Investments amid market fluctuations.
- Strong Performance: Fastly reported record revenue of $173 million in Q1, representing a 20% year-over-year growth, while its cybersecurity services also saw a remarkable 47% increase, showcasing the company's robust performance in the rapidly evolving cloud market.
- Market Outlook: Although Fastly's stock price reached a 52-week high of $34.82 in Q2, Carlson Investments' strategy suggests confidence in the company's long-term growth potential, prompting investors to consider waiting for a price dip before entering the market.
See More
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- Upgrade Announcement: Raymond James upgraded Fastly (FSLY) from Market Perform to Outperform, indicating analyst confidence in the company's operational turnaround, which is expected to drive further stock price appreciation.
- Stock Reaction: Following the upgrade, Fastly's shares rose 3.9% in early trading, reflecting market optimism regarding the company's growth potential, particularly amid increasing demand for network capabilities and security products.
- Traffic Growth: Analysts noted that the rise in AI-related traffic is likely to continue benefiting Fastly's delivery networks, especially as they offer more advanced solutions compared to traditional DIY content delivery networks, enhancing competitive positioning.
- Price Target Set: A price target of $23 was established for Fastly, indicating a positive outlook on its future performance, with expectations that the company will capitalize on the growing demand for its network services.
See More
Fastly Shares Plunge 38.23% Despite Record Q1 Results
- Significant Stock Decline: Fastly's stock plummeted 38.23% to $19.50 at Thursday's close, despite reporting record Q1 results and raising its 2026 sales guidance, as concerns about slowing core networking services growth persisted.
- Surge in Trading Volume: The trading volume reached 47.1 million shares, approximately 208% above its three-month average of 15.3 million shares, indicating strong investor reactions to the company's outlook, even as the broader market remained subdued.
- Sales Growth Slowdown: Although Fastly achieved a 20% sales increase in Q1 and exceeded Wall Street's adjusted EPS estimates, the market reacted negatively to the core networking services segment's only 11% revenue growth, leading to a sharp decline in stock price.
- Future Investment Outlook: Management anticipates that infrastructure capital expenditures will more than double as a percentage of revenue by 2026, and while the security and compute segments saw revenue growth of 67% and 47% respectively, market confidence in future growth remains low.
See More
Fastly Shares Plunge 38.23% Despite Record Q1 Results
- Significant Stock Drop: Fastly's shares closed at $19.50 on Thursday, plummeting 38.23%, as concerns over slowing core networking services growth overshadowed the company's record Q1 results and raised 2026 guidance.
- Surge in Trading Volume: The trading volume reached 47.1 million shares, approximately 208% above the three-month average of 15.3 million shares, indicating a strong market reaction despite the poor stock performance.
- Sales Growth and Profitability: Fastly achieved a 20% sales growth in Q1 and exceeded Wall Street's adjusted EPS estimates; however, the stock declined due to market fears of decelerating future sales growth, even though its core Network Services segment's revenue growth was still double the market rate.
- Strong Performance in New Business Units: Fastly's Security and Compute units delivered revenue growth of 67% and 47%, respectively, indicating that despite the overall slowdown, these emerging segments now account for roughly one-fourth of the company's sales, showcasing potential for future growth.
See More
