FASTLY, INC. (FSLY): what the price requires

At today's price, FASTLY, INC. (FSLY) is priced for today's economics sustained for ~8.5 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/FSLY

Headline

FieldValue
TickerFSLY
CompanyFASTLY, INC.
Current price$20.24/sh
CompositionNetwork Services 77% / Security 20% / Other 3%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisrevenue-multiple
EV / sales paid6.2x
Steady-state operating margin assumed22.8%
Must persist for8.5y

The company earns no operating profit yet; the inversion runs on the revenue multiple and an assumed steady-state margin.

Solve inputs: computed at a 11.1% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

Reconcile: at the x-ray's 9.3% required return this reads ~5.3 years; the models below use their own rates.

How unusual the bet is: elevated (limited comparison data)

ReferenceValue
sustained it ~8.5 years at this level19%
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset3.36x2expensive
Earnings8.06x1expensive
Relative0.60x2justifies
Growth0.99x3justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.

Per-Model Detail (n=8)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$12.681.60xyesFCF base $0.1B, growth 18% (input: historical growth), terminal g 4.0%, WACC 8.3%, 6yr projection
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$33.990.60xyesP/S fallback (negative EPS): Sector P/S 8.0x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$6.363.18xyesBook value floor: BV/sh $6.36, ROE negative
Two-Stage Excess ReturnAsset$5.733.53xyesBook value with convergence: BV/sh $6.36, ROE converges to ke
Discounted Future Market CapGrowth$21.350.95xyesRev $0.7B, growth 18% (input: historical growth; tapered), Terminal P/S: 3.9x / 4.8x / 5.6x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth$20.430.99xyesMargin ramp: -16% → 22% over 7yr, rev growth 18% (input: historical growth; tapered)
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$2.518.06xyesFCF $58.9M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$33.990.60xyesRevenue $0.65B × sector P/S 8.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net cash$6.9m
Interest coverage-10.0x
Share count CAGR (dilution)6.4%
Burning cashno

Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.

Bullet Takeaways

Bull Case

The trajectory turned, and the shape of the turn matters. Fastly posted record first-quarter revenue of $173 million, up 20% year over year, with gross margin reaching a record 62.5% and non-GAAP gross margin 65.1%. For a company that spent years stuck near flat growth and persistent losses, a quarter that pairs reaccelerating revenue with expanding margin is the signal the bull case has been waiting for. Margin expansion in this business comes from filling existing network capacity with more traffic and from selling higher-value software on top of raw delivery, and both are happening.

The mix shift is the engine. Network Services, the core content-delivery business, grew a steady 11% to $126.2 million, but security revenue grew 47%, and the remaining performance obligations, the contracted future revenue not yet recognized, jumped 63% year over year to $369 million. Security and compute carry higher margins and stickier contracts than commodity bandwidth, so a company shifting its revenue toward them is improving the quality of every dollar. Last-twelve-month net retention rose to 113%, meaning existing customers spent 13% more than a year earlier, the land-and-expand motion working. The platform is increasingly positioned for AI workloads: the 10-K notes its "compute environment enables customers to run layers of intelligent logic, including AI, in front of their applications and services, all while maintaining performance, which puts Fastly in the path of a fast-growing category rather than just the slow-growing CDN business.

The financial inflection is showing up at the bottom line. Management raised full-year 2026 guidance to revenue of $710 million to $725 million, non-GAAP operating profit of $58 million to $68 million, and non-GAAP net earnings per share of $0.27 to $0.33. Guiding to positive operating profit and positive earnings per share is a different company than the cash-burning Fastly of recent years. Several valuation methods reflect this: applying a software-sector revenue multiple to the business points well above the current price, and the discounted cash-flow methods that credit the margin ramp land near it. The bull case is that the security and compute pivot turns a struggling CDN into a profitable edge-platform, and the early evidence is on the page.

Bear Case

What is baked into the price is a profitability that does not yet exist, and the most fragile assumption is the margin ramp. Fastly's current operating margin is around negative 16%. To justify $17.86 (June 27, 2026), the business has to climb to an operating margin in the low twenties and grow revenue in the mid-twenties for years. That is a long, uninterrupted improvement for a company that has repeatedly disappointed on exactly this metric. The growth-extrapolating methods reach the price; the methods that value the business as it stands today, on its book value or its current cash generation, land far below. The relative-multiple lens looks cheap only because it applies a generous software revenue multiple to a company whose margins do not yet resemble software.

Customer concentration is the specific risk that could break the ramp. The 10-K discloses plainly that "TikTok was one of our largest customers for the year ended December 31, 2025 and remains a customer of ours, and adds that it does "not know how the restructuring may impact our traffic levels. A single large customer in a usage-based business is a double-edged sword: it inflates revenue when traffic is high and removes a chunk of it overnight if the relationship changes. For a company whose entire valuation rests on a smooth path to profitability, a concentrated customer facing its own restructuring is a live threat to the very revenue the margin ramp depends on.

The competitive backdrop compounds it. Fastly competes against far larger players on multiple fronts. The 10-K names competition from "Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft (Azure), the hyperscalers that bundle content delivery and edge compute into their broader cloud offerings, alongside specialist security and delivery vendors. These competitors can subsidize edge services to retain cloud customers, pressuring Fastly's pricing precisely in the security and compute areas where it needs margin to expand. The structural truth is that Fastly is a small player executing a profitability turnaround in a market dominated by companies that can outspend it. The turnaround may well succeed, but the price already assumes it does, leaving little cushion if customer concentration, competition, or a growth stall interrupts the path.

Valuation

The price is a bet on a profitability transformation, and the methods split exactly along that fault line. The relative-multiple and forward-growth families reach $17.86, while the asset-based and earnings-power families sit below it. The software revenue-multiple lens, applied to trailing revenue, points well above the price, but that lens credits Fastly with software economics it has not yet earned. The discounted cash-flow methods that explicitly model a margin ramp land near the price. The asset methods, anchored on book value of about $6.36 per share with a negative current return on equity, and the capitalized-earnings methods, which value the thin current cash flow, land far lower.

The concrete statement of the bet is the margin path. Today the operating margin is roughly negative 16%, and the price requires it to reach the low twenties while revenue compounds in the mid-twenties. That is the inversion of the growth story into the demand it places on execution. The recent quarter gives the assumption some support: record gross margin, security growing 47%, and remaining performance obligations up 63% all point toward the higher-margin mix the ramp depends on. But the duration and consistency required are long, and the company's own history on this metric has been uneven. The honest framing for a software-as-a-service business is the revenue multiple, where Fastly trades below the sector, and that discount is the market pricing in the execution and concentration risk rather than a bargain.

Solvency is roughly neutral and not the deciding factor. Fastly carries about $324 million of mostly convertible debt against a similar amount of cash, leaving net cash near zero, and it is no longer burning cash at the prior rate as it approaches non-GAAP operating profitability. Share count has been growing around 6% a year, so dilution offsets some of the per-share progress. The decisive variable is execution: whether the security and compute mix lifts the operating margin as the price assumes, and whether the concentrated customer base holds while it does. The newly raised guidance to positive operating profit and positive earnings per share is the milestone that would validate the ramp.

Catalysts

Fastly reported record first-quarter 2026 results in May, with revenue of $173 million, up 20% year over year, a record gross margin of 62.5% and non-GAAP gross margin of 65.1%. Network Services revenue was $126.2 million, up 11%, while security revenue grew 47%. Remaining performance obligations reached a record $369 million, up 63% year over year, and last-twelve-month net retention improved to 113%.

Management raised full-year 2026 guidance to revenue of $710 million to $725 million, about 15% growth at the midpoint, with non-GAAP operating profit of $58 million to $68 million and non-GAAP net earnings per share of $0.27 to $0.33. The shift to guiding positive operating profit and earnings is the clearest marker of the turnaround, and the next earnings report will test whether the security and compute momentum sustains.

The key item to watch is customer concentration. The company has disclosed that TikTok was among its largest customers and that it cannot predict how a restructuring there might affect its traffic. Any change in that relationship would move usage-based revenue directly. Beyond that, the pace of security and compute growth relative to the slower core delivery business is what determines whether the margin ramp the valuation assumes continues to materialize.

Peer Cohorts (Per Segment, With Filing Citations)

Fastly (single operating segment) (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 results, May 2026 · 2026 guidance, May 2026 · Q1 2026 results release, May 2026

View the full interactive FSLY report on boothcheck