Is Fastly a Good Stock to Buy? Analyzing the Fundamentals

Fastly, Inc. (NYSE: FSLY) operates as a publicly traded company in the edge cloud platform sector. This article provides an objective overview for investors evaluating Fastly stock, covering its core business, financial performance, growth prospects, industry standing, and valuation approaches. The analysis aims to help readers understand Fastly’s market position and investment potential.

Fastly’s Core Business and Market

Fastly provides an edge cloud platform enabling businesses and developers to deliver digital content and applications with enhanced speed and security. Its primary services include a Content Delivery Network (CDN) and an edge computing platform. These services utilize Fastly’s infrastructure, known as Points of Presence (POPs), strategically located closer to end-users globally. This architecture intercepts web traffic to optimize delivery, reduce latency, and ensure faster loading times.

The market Fastly operates within is driven by the increasing global demand for seamless digital experiences, especially with the proliferation of streaming content and online applications. Fastly’s unique value proposition lies in its fully programmable platform, which allows customers to customize functionalities through APIs and a real-time architecture. This programmability distinguishes it from many traditional CDNs, offering flexibility for complex, high-traffic environments. Fastly also offers security solutions, including Web Application Firewalls (WAF), DDoS protection, and bot management, further enhancing its service offerings.

Fastly monetizes its platform primarily through usage-based pricing models, charging customers based on bandwidth consumption and request volume. This pay-as-you-go approach allows businesses to scale expenditures with actual usage, accommodating clients from startups to large enterprises. Fastly’s edge cloud capabilities extend beyond basic content delivery to processing and securing applications closer to the user. This blend of CDN and edge computing addresses the need for rapid content delivery and real-time data processing.

Analyzing Fastly’s Financial Health

In the second quarter of fiscal year 2025, Fastly reported total revenue of $148.7 million, marking 12% year-over-year growth. For the full fiscal year 2024, the company’s total revenue reached $543.7 million, a 7% increase compared to the prior year. Over the last three years, Fastly has grown sales at an average annual rate of 13.6%, though analysts anticipate a deceleration to around 6.5% over the next 12 months.

Regarding profitability, Fastly has maintained a gross margin that indicates its efficiency in converting revenue into gross profit after accounting for the cost of goods sold. Fastly’s GAAP gross margin for fiscal year 2024 was 54.4%, an improvement from 52.6% in fiscal year 2023. The non-GAAP gross margin for the same period was 57.8%. In the second quarter of 2025, the GAAP gross margin was 54.5%, with a non-GAAP gross margin of 59.0%.

Fastly’s operating expenses are categorized into research and development (R&D), sales and marketing (S&M), and general and administrative (G&A). These are significant for a growth-oriented technology company investing in product innovation and market expansion. In the second quarter of 2025, R&D expenses were $42.2 million, and sales and marketing expenses were $79.7 million. These investments contribute to the company’s current unprofitability.

Fastly has consistently reported net losses, common for growth companies prioritizing market share and product development. For fiscal year 2024, Fastly reported a GAAP net loss of $158.1 million, an increase from $133.1 million in fiscal year 2023. The GAAP net loss for the second quarter of 2025 was $37.5 million, a slight improvement from $43.7 million in the same quarter of 2024.

Despite net losses, analyzing cash flow provides a different perspective on the company’s financial health and liquidity. Fastly reported positive free cash flow of $10.9 million in the second quarter of 2025, a notable improvement from a negative free cash flow in the prior year. For the full fiscal year 2024, free cash flow was negative $26.54 million, while operating cash flow was positive $10.68 million. Positive operating cash flow indicates the company’s core operations are generating cash. Fastly expects to generate positive free cash flow for the full year 2025, which would represent a significant milestone.

Fastly’s Growth Prospects and Industry Position

Fastly’s growth prospects are tied to digital economy trends, including increasing demand for faster digital experiences in streaming, e-commerce, and real-time applications. This drives the need for sophisticated content delivery and edge computing solutions. Fastly benefits from the broader adoption of edge computing, which pushes data processing closer to the user, reducing latency and improving application performance.

Specific avenues for Fastly’s growth include expanding its customer base beyond its largest clients and introducing new product offerings. The company is actively pursuing a go-to-market transformation to accelerate customer acquisition and enhance cross-sell opportunities. This includes a focus on self-service solutions and packaging strategies that combine various services, leading to increased product package deals. Fastly’s continued investment in security products like advanced DDoS protection and AI Bot Management also aims to drive incremental revenue growth.

The competitive landscape for Fastly includes both traditional Content Delivery Network (CDN) providers and larger cloud infrastructure players. Companies such as Akamai Technologies and Cloudflare are direct competitors, alongside major cloud providers like Amazon Web Services (AWS) that offer similar services. Fastly differentiates itself through its highly programmable platform and focus on developer empowerment, which allows for greater customization and control over content delivery and application logic at the edge.

Fastly has also shown success in diversifying its revenue, with revenue from customers outside its top ten growing at a faster rate than overall revenue. This indicates a reduced reliance on a few large customers, contributing to a more stable revenue base. The company’s net revenue retention rate, which measures spending from existing customers, has shown improvement, reaching 104% in Q2 2025, indicating that existing customers are increasing their usage. These factors, combined with market share gains in its CDN business, suggest a strengthening competitive position.

Valuing Fastly Stock

Valuing a growth stock like Fastly, which may not yet be consistently profitable, often involves different metrics than those used for mature companies. Price-to-Sales (P/S) ratio and Enterprise Value-to-Sales (EV/Sales) ratio are commonly employed. The P/S ratio compares a company’s market capitalization to its total revenue, indicating how much investors pay for each dollar of sales. The EV/Sales ratio considers the company’s total enterprise value, including debt and subtracting cash, relative to its sales, offering a more comprehensive valuation view.

Contextualizing Fastly’s valuation requires comparing its current multiples to its historical averages, its growth rates, and the valuations of its industry peers. High growth rates typically command higher valuation multiples, as investors are willing to pay a premium for future revenue expansion. Analysts often maintain a “Hold” consensus rating for Fastly, with a range of price targets that suggest potential upside. For instance, the average analyst price target for Fastly has been around $8.44, with a range from $7.00 to $12.00.

Fastly’s improving fundamentals, such as accelerating revenue growth and enhanced net revenue retention rates, can make its valuation compelling for some investors. However, the company’s continued unprofitability, as forecasted by analysts for the next few years, also factors into the investment consideration. Investors use information on Fastly’s business model, financial health, and growth prospects to form their own informed opinion on the stock’s value and future potential.