FSLY · Fastly, Inc. · Stock research

Current Thesis

The narrative leg on offer is a margin inflection at a company the market still prices as a decelerating CDN. Q2 FY26, reported 2026-08-05, put revenue at $183.3M (+23% YoY, consensus $173.9M), adjusted EBITDA at $38.1M against $8.9M a year earlier, and record non-GAAP gross margin of 65.8%. Management raised the FY2026 revenue guide to $732–746M from $710–725M and nearly doubled the FY2026 adjusted EPS guide to $0.50–0.54 from $0.27–0.33. Coverage on 2026-08-05 (Benzinga, Seeking Alpha) described shares falling roughly 10% on that print. The setup is the distance between what the income statement did and what the tape did with it.

Bullish and bearish views on Fastly, Inc.

The model's bull view on Fastly, Inc. (FSLY), in brief: Revenue $183.3M in Q2 FY26, +23% YoY and a record quarter, versus the $173.9M Street estimate (reported 2026-08-05). The bear view: Two of those three revisions carry non-Buy ratings (RBC Sector Perform, Piper Sandler Neutral). Both cases follow in full.

Bull Case

• Revenue $183.3M in Q2 FY26, +23% YoY and a record quarter, versus the $173.9M Street estimate (reported 2026-08-05).
• Security revenue $41.7M, +43% YoY; Network Services $133.9M, +17%; Other $7.7M, +69%. The mix shift toward security is measurable in the segment lines, not asserted from strategy slides.
• Adjusted EBITDA $38.1M vs $8.9M in Q2 2025, a 21% margin — the largest single-quarter step in the profitability story to date.
• Remaining performance obligations $341M vs $247M in Q2 2025 (+38%), i.e. contracted-but-unrecognised revenue grew faster than reported revenue.
• LTM net revenue retention 117%, which the company described as the highest in over three years.
• Q3 FY26 guide of $184–190M revenue and $0.11–0.13 adjusted EPS sits above consensus of $179.8M and $0.06.
• Cash, equivalents, marketable securities and investments of roughly $337M at 2026-06-30, up $7M from 2026-03-31.
• Every broker that moved on 2026-08-06 raised its target: RBC to $28, Piper Sandler to $28, KeyBanc to $30 — all above the 2026-08-07 close of $22.96.

Bear Case

• Two of those three revisions carry non-Buy ratings (RBC Sector Perform, Piper Sandler Neutral). Estimates went up; stances did not.
• Top-ten customers were 37% of Q2 2026 revenue against 31% in Q2 2025. Concentration widened in the same quarter revenue accelerated, so a single traffic-optimisation decision at one account carries more of the guide than it did a year ago.
• Free cash flow was $3.6M versus $10.9M in the year-ago quarter, with infrastructure capex at roughly 17% of revenue. The EBITDA line moved far more than the cash line.
• The "Other" bucket, where compute and edge-AI workloads sit, is $7.7M on a $183.3M base. Growing 69%, still too small to carry the re-rating on its own.
• Post-print sell-side commentary summarised by Seeking Alpha on 2026-08-05 pointed at RPO and compute revenue. The headline RPO number was +38% YoY, so the objection concerns the trajectory inside the balance rather than its level — worth watching at the next print rather than dismissing.

• A universal automatic shelf registration (Form S-3ASR) appears in Fastly's EDGAR filings in August 2026, leaving standing issuance capacity into any strength.

Setup & Price Structure

Last completed daily close $22.96 (2026-08-07). The 52-week high is $33.50, leaving price 31.5% below it. RSI(14) at 60; three-month return +11.9%, which implies a starting level near $20.5 in early May — corroborated independently by the $20.74 weighted-average price on the CEO's mid-July plan sales. So the stock climbed into the print off a $20.50-ish shelf, surrendered part of that advance on 2026-08-05/06, and is currently holding above it. The three fresh targets sit 22–31% above the last close.

Life-cycle: MATURING. The fundamentals accelerated on 2026-08-05, but participation did not follow: a beat on revenue and EPS plus a raise on both the quarter and the year produced a decline, and the 2026-08-06 target increases arrived with two neutral-equivalent ratings attached. That is the signature of a story that still works while the marginal bid thins. It is not SATURATED — the stock is 31.5% under its 52-week high and there is no evidence of retail-sentiment clustering in the coverage. It is not ACCELERATING either, because the fresh headline was sold.

Crowding and positioning observables, stated as observables: three price-target revisions inside 24 hours of the print, all clustered in a $28–30 band; RSI 60 with price nearly a third below the annual high; insider sales in each of June, July and August 2026 under a pre-set plan; a universal shelf on file as of August 2026; and short-interest vendor data that disagrees materially (one source showing roughly 16% of shares outstanding short, another roughly 10% of float), which means the level should be treated as unverified until a FINRA settlement-date file confirms it.

Catalyst Calendar (next 30 days)

• 2026-08-08 → 2026-09-07: no company-scheduled event. The binary for this cycle resolved on 2026-08-05 and there is nothing dated to re-rate against inside the window.
• 2026-09-30: Q3 FY26 period close — the quarter measured against the $184–190M revenue guide.
• ~2026-11-04 (est.): Q3 FY26 print. First read on whether NRR holds at or above 117%, whether RPO extends past $341M, and whether the FY2026 $732–746M revenue guide survives contact with the second half.
• Ongoing, undated: further Form 4s under the CEO's 10b5-1 plan; any 424B takedown off the August 2026 shelf.

What Would Change Our Mind

The structure that matters is the pre-print base near $20.50 — the level the stock rallied from in May and the zone where mid-July plan sales printed at a $20.74 weighted average. Losing it would mean the 2026-08-05 beat-and-raise bought nothing durable. A weekly close below $20.50 is the gradeable break.

Three fundamental conditions would do the same work at the next print: FY2026 revenue guidance cut below the $732–746M range; top-ten customer concentration climbing above the 37% recorded in Q2 2026; or Security revenue growth decelerating from +43% toward the +17% pace of Network Services, which would collapse the mix-shift argument. A second beat-and-raise met with another decline would date the narrative as SATURATED rather than MATURING.

Conversely, a weekly close above $28 — the level where both RBC and Piper Sandler pinned their raised targets on 2026-08-06 — with those ratings still at Sector Perform and Neutral would say the re-rating is running ahead of the sell-side rather than waiting on it.

Correlation Notes

Direct comparables are Cloudflare (NET) and Akamai (AKAM): the same edge-delivery-to-security transition, the same debate about whether inference workloads land at the edge. Read-across is inferred, not measured here — no correlation coefficient is being claimed — but pricing commentary and traffic-growth disclosure from either name is the most likely source of a move in FSLY outside its own reporting dates. As a sub-$5B software name with an unresolved short-interest picture and a shelf on file, it also carries beta to small-cap risk appetite (IWM) and to the unprofitable-software complex generally, which historically trades against the front end of the rate curve. Segment-level exposure differs from the peers in one respect: at 73% of Q2 2026 revenue, Network Services still dominates, so a CDN price-per-gigabyte reset would hit FSLY harder than a security-weighted comparable.