TLDR
- Shares of Fastly plummeted 37% to $19.94 following Q1 results that failed to satisfy investors, even though the company exceeded consensus estimates.
- The company posted Q1 EPS of $0.13, surpassing the anticipated $0.09; total revenue climbed 20% to $173.02 million versus the $171.8 million estimate.
- The security segment, which reflects AI-driven traffic, generated $38.8 million — a 47% year-over-year increase but barely exceeding the $34.9 million projection.
- The company increased its fiscal 2026 revenue forecast to a range of $710M–$725M and boosted profit projections to $0.27–$0.33 per share.
- Analysts at Piper Sandler reduced their price objective to $27 from $30 while keeping a Neutral stance, expressing worries about potential peak growth.
When Fastly (FSLY) unveiled its Q1 2026 financial results following Wednesday’s market close, the numbers looked impressive on paper — yet Wall Street responded with a harsh verdict.
Shares had skyrocketed more than 210% year-to-date before the earnings release. Such an explosive rally creates sky-high expectations, and Fastly’s results fell short of satisfying them.
The company delivered Q1 earnings of $0.13 per share, a significant improvement from the $0.05 loss recorded in the same period last year and comfortably ahead of Wall Street’s $0.09 projection. Total revenue increased 20% from the prior year to $173.02 million, exceeding the consensus estimate of $171.8 million.
On the surface, these results appeared robust. However, market participants were zeroing in on a different metric altogether.
Investors were fixated on security revenue — the business line where AI-generated traffic materializes in Fastly’s financial statements. This segment produced $38.8 million, representing a 47% year-over-year gain, yet it barely exceeded the analyst projection of $34.9 million.
For a company trading at valuations that reflect explosive AI-driven expansion, a narrow beat simply wasn’t compelling enough.
FSLY shares collapsed 37% to $19.94 during Thursday’s trading session.
Evercore ISI analyst Peter Levine noted that the sharp decline was “exacerbated” by network services revenue falling short of expectations and weaker compute sales, compounded by the already inflated investor sentiment leading into the announcement.
Breaking Down the Financial Performance
Fastly reported that its large customer base expanded to 634 accounts in Q1, reflecting a 39% increase compared to the previous year. Additionally, the company is successfully negotiating larger minimum commitments from clients, suggesting enhanced contract quality and stability.
Looking ahead to Q2, Fastly projected revenue between $170 million and $176 million, accompanied by EPS guidance of $0.05 to $0.08 — both figures exceeding Wall Street’s previous expectations of $169.8 million in revenue and $0.04 in earnings per share.
The company also elevated its full-year 2026 projections. Fastly now anticipates revenue in the range of $710 million to $725 million, an increase from the prior guidance of $700 million to $720 million. The earnings per share outlook was similarly raised to $0.27–$0.33, up from the previous $0.23–$0.29 range.
Current analyst consensus estimates call for $0.28 EPS on $712 million in revenue for the full year — Fastly’s updated guidance encompasses these figures on both metrics.
Wall Street’s Assessment
Piper Sandler adjusted its price target for FSLY downward to $27 from $30 while maintaining a Neutral rating. The firm highlighted that Fastly’s core content delivery business experienced lower sequential volumes than anticipated, and noted that more challenging pricing comparisons are expected throughout the remainder of the year.
Piper Sandler also raised a more significant strategic concern: that the company’s growth trajectory may have reached its zenith, especially considering that FSLY commands a premium valuation on an EV/revenue-to-growth basis relative to industry competitors.
Company leadership emphasized that its Compute@Edge platform is experiencing heightened AI-related usage, and reported strong momentum in cross-selling its Security offerings to existing customers.
Fastly has announced plans to host an analyst day on September 23, 2026.
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