Key Takeaways
- Shares of Fastly plummeted 37% to $19.94 following Q1 earnings that failed to satisfy investors, even though the company exceeded both earnings and revenue projections.
- The company posted Q1 EPS of $0.13, surpassing analyst expectations of $0.09; revenue climbed 20% to reach $173.02 million, above the consensus estimate of $171.8 million.
- The security segment, which reflects AI-related traffic, generated $38.8 million in revenue — representing 47% year-over-year growth but barely exceeding the $34.9 million analyst forecast.
- The company increased its fiscal 2026 revenue guidance to a range of $710M–$725M and boosted profit projections to $0.27–$0.33 per share.
- Piper Sandler reduced its price objective to $27 from $30 while keeping a Neutral stance, expressing worries that the company’s expansion may have reached its zenith.
Fastly (FSLY) unveiled its Q1 2026 financial results following Wednesday’s market close, delivering numbers that exceeded Wall Street’s baseline expectations — yet the market responded with sharp selling pressure.
Shares had rocketed more than 210% year-to-date before the earnings announcement. Such a dramatic advance created extremely high expectations, and Fastly’s performance fell short of those elevated benchmarks.
The company delivered quarterly earnings of $0.13 per share, improving from a $0.05 per share loss in the same period last year and exceeding the $0.09 analyst consensus. Total revenue increased 20% year-over-year to $173.02 million, beating the Street’s $171.8 million projection.
On the surface, these results appeared strong. However, market participants were zeroing in on a different metric.
The critical figure investors scrutinized was security segment revenue — the area where AI-generated traffic is reflected in Fastly’s financial statements. This metric reached $38.8 million, representing 47% year-over-year expansion, yet it barely exceeded the $34.9 million analyst projection.
For a stock trading at valuations that anticipated explosive AI-driven expansion, a modest beat proved insufficient.
FSLY shares collapsed 37% to $19.94 during Thursday’s trading session.
Evercore ISI analyst Peter Levine noted the selloff was “exacerbated” by network services revenue coming in below expectations and weaker-than-anticipated compute sales, compounding the impact of sky-high investor expectations entering the quarterly report.
Breaking Down the Financial Performance
Fastly’s count of large customers reached 634 during Q1, representing 39% growth compared to the prior year. Additionally, the company is securing higher minimum commitment levels from clients, suggesting improved contract quality and visibility.
Looking ahead to Q2, Fastly projected revenue between $170 million and $176 million, with EPS ranging from $0.05 to $0.08 — both metrics exceeding Wall Street’s previous estimates of $169.8 million in revenue and $0.04 in earnings per share.
The company also elevated its full-year 2026 outlook. Fastly now anticipates revenue of $710 million to $725 million, up from its previous guidance of $700 million to $720 million. The EPS forecast was adjusted to $0.27–$0.33, compared to the prior range of $0.23–$0.29.
Wall Street’s consensus currently stands at $0.28 EPS on $712 million in revenue for the full year — Fastly’s updated guidance encompasses these estimates on both metrics.
Wall Street’s Response
Piper Sandler adjusted its price target on FSLY downward to $27 from $30, maintaining a Neutral rating. The firm highlighted that Fastly’s primary delivery business experienced sequential volume declines that were more pronounced than anticipated, and noted that more challenging pricing comparisons are on the horizon for the remainder of the year.
Piper Sandler also voiced a wider concern: that the company’s growth trajectory may have crested, especially considering that FSLY commands a premium valuation on an EV/revenue-to-growth basis relative to comparable companies.
Company leadership highlighted increasing AI-related usage on its Compute@Edge platform and emphasized successful cross-selling momentum for its Security offering.
Fastly has set September 23, 2026, as the date for its upcoming analyst day event.
