Executive Summary
Rating: HOLD | FSLY
Fastly is a hold: the shares already discount a recovery in profitability, but the latest quarter showed that execution remains uneven. Revenue reached $173.0M in Q1 2026, up 19.8% year over year, yet EBITDA fell back to -$7.2M after turning positive at $5.9M in Q4 2025. The key strength is liquidity and cash generation, with a 3.0x current ratio, $106.0M of operating cash flow TTM, and $116.8M of levered free cash flow TTM. The main risk is that margin progress is not yet durable, and the Q1 2026 EBITDA reversal has no clear driver identified; investors should seek further disclosure.
Investment Rating
Rating: HOLD
Fastly trades at 4.8x EV/revenue and 45.4x forward P/E, while EV/EBITDA is -56.1x because TTM EBITDA remains negative. That valuation leaves limited room for another quarter of margin volatility. The stock can re-rate if the company sustains positive EBITDA and converts revenue growth into consistent earnings leverage, but the current setup still requires execution to improve materially.
Company Profile
Fastly provides an edge cloud platform that delivers, secures, and computes customer traffic at the internet edge. The company monetizes usage-based delivery, security, compute, and observability services. Its platform is sold to enterprises that need low-latency content delivery and programmable edge processing, and it competes on developer workflow, real-time traffic control, and integrated security functionality. Fastly’s common stock trades on the NYSE under the ticker FSLY.
Economic Moat
Fastly’s moat is rooted in product architecture rather than scale alone. The company’s edge platform combines WebAssembly-based compute, real-time traffic routing, and integrated security tools in a single API-driven workflow, which makes it harder to replace than a point solution. The advantage is reinforced by a distributed network of points of presence across major geographies, which supports low-latency delivery and customer-specific routing. The moat is real, but it is still contingent on continued product reliability and on retaining customers that can switch if service quality deteriorates.
Business Model
Fastly earns revenue from usage-based services tied to delivery, security, compute, and observability. That model benefits from customer expansion when traffic volumes rise and when clients adopt additional modules on the same platform. The company’s differentiation comes from combining content delivery and edge compute with security and observability, which increases the number of use cases per customer and raises switching friction. The business is therefore more about platform depth than one-off transactions.
Risk Factors
Platform outages and security failures are a high-severity risk because they can trigger SLA credits, customer churn, and remediation costs. Customer concentration is also a high-severity risk: the 10 largest customers generated 32.0% of revenue in TTM December 31, 2025, so a loss or slowdown at one large account can move results. Refinancing risk is medium severity: total debt was $397.7M at the most recent quarter, the current ratio was 3.0x, and the company still depends on continued cash conversion to preserve flexibility.
Management Discussion & Analysis
Management appears focused on balancing growth investment with operating discipline. The latest quarter suggests the company is still investing in product and go-to-market capacity, but the financial profile shows that those investments have not yet produced a stable margin inflection. Capital allocation remains centered on funding operations and maintaining liquidity rather than returning capital. The key signal from the recent period is that management is prioritizing scale and platform reliability, even though profitability remains inconsistent.
Recent Earnings
The most recent quarter showed continued top-line growth but weaker earnings momentum. Revenue increased to $173.0M in Q1 2026 from $144.0M in Q1 2025, a 19.8% year-over-year gain. EBITDA, however, moved from -$15.2M to -$7.2M over the same period and declined from $5.9M in Q4 2025, indicating that operating leverage is still fragile. The quarter supports the view that demand remains intact, but it does not yet prove that margin improvement is durable.
Financial Analysis
Growth
FSLY — Financial Growth (Quarterly, USD Mil)
Source: Yahoo Finance — Quarterly Financial Statements
| Metric | 2025-03-31 | 2025-06-30 | 2025-09-30 | 2025-12-31 | 2026-03-31 |
|---|---|---|---|---|---|
| REVENUE (USD Mil) | 144.474 | 148.709 | 158.223 | 172.612 | 173.021 |
| EBIT (USD Mil) | -35.284 | -33.820 | -25.763 | -11.623 | -21.348 |
| EBITDA (USD Mil) | -15.217 | -13.980 | -5.365 | 5.924 | -7.179 |
| NET INCOME (USD Mil) | -39.148 | -37.541 | -29.483 | -15.505 | -20.524 |
| DILUTED EPS | -0.270 | -0.260 | -0.200 | -0.100 | -0.130 |
Revenue rose sequentially from $144.0M in Q1 2025 to $148.7M in Q2 2025, $158.2M in Q3 2025, $172.6M in Q4 2025, and $173.0M in Q1 2026. The year-over-year growth rate in Q1 2026 was 19.8%, which is solid for a company of this size. EBITDA moved from -$15.2M in Q1 2025 to -$13.9M in Q2 2025, -$5.4M in Q3 2025, $5.9M in Q4 2025, and back to -$7.2M in Q1 2026. That Q1 2026 swing in EBITDA has no clear driver identified.
Profitability
FSLY — Profitability (TTM)
Source: Yahoo Finance — Trailing Twelve Months (TTM)
| Metric | TTM |
|---|---|
| Operating Margin (TTM) | -0.138 |
| Net Margin (TTM) | -0.158 |
| Return on Assets (TTM) | -0.044 |
| Return on Equity (TTM) | -0.107 |
TTM operating margin was -13.8%, net margin was -15.8%, return on assets was -4.4%, and return on equity was -10.7%. These figures show that Fastly is still operating below breakeven on an accounting basis, despite revenue growth and positive cash generation. The key issue is not demand, but conversion: the company has not yet translated scale into sustained profitability.
Valuation
FSLY — Valuation Multiples
Source: Yahoo Finance
| Metric | Value |
|---|---|
| Market Cap (USD Mil) | 2,806.045 |
| Enterprise Value (USD Mil) | 3,100.227 |
| Trailing P/E | — |
| Forward P/E | 45.445 |
| Price/Sales (TTM) | 4.300 |
| Price/Book (mrq) | 2.869 |
| EV/Revenue | 4.751 |
| EV/EBITDA | -56.116 |
| Beta (5Y Monthly) | 0.349 |
Fastly’s market cap is $2,806.0M and enterprise value is $3,100.2M. The stock trades at 4.3x price/sales TTM, 4.8x EV/revenue, 2.9x price/book, and 45.4x forward P/E. EV/EBITDA is -56.1x because TTM EBITDA is negative, so revenue-based valuation remains the more relevant anchor. Beta is 0.3, which suggests lower market sensitivity than many software peers, but the valuation still assumes a path to sustained margin improvement.
Leverage
FSLY — Leverage & Coverage (Quarterly)
Source: Yahoo Finance — Quarterly Financial Statements
| Metric | Value |
|---|---|
| Total Debt/Equity % (mrq) | 40.705 |
| Current Ratio (mrq) | 2.999 |
| Total Debt (mrq, USD Mil) | 397.746 |
| Operating Cash Flow (TTM, USD Mil) | 106.022 |
| Levered Free Cash Flow (TTM, USD Mil) | 116.782 |
Fastly’s balance sheet is manageable but not loose. Total debt/equity was 40.7% at the most recent quarter, the current ratio was 3.0x, and total debt was $397.7M. Operating cash flow TTM was $106.0M and levered free cash flow TTM was $116.8M, which supports liquidity and reduces near-term funding pressure. The leverage profile is therefore serviceable, but continued cash generation remains important to maintain flexibility.
Comparable Analysis
On growth, Fastly’s 19.8% revenue growth TTM trails TWLO at 20.0%, NET at 33.5%, DDOG at 32.2%, FFIV at 11.0%, and DOCN at 22.4%. On profitability, Fastly’s -13.8% operating margin and -15.8% net margin are below TWLO, DDOG, FFIV, and DOCN, and only NET is similarly negative on operating margin. On leverage, Fastly’s 40.7% debt/equity is above TWLO at 13.7%, FFIV at 7.1%, and DDOG at 32.2%, but below NET at 230.9% and DOCN at 169.9%. On valuation, Fastly’s 4.8x EV/revenue and 4.3x price/sales are below NET, DDOG, and DOCN, but the company still screens as a mid-teens growth software name with weaker profitability than the better-capitalized peers.
Growth
| Company | Revenue TTM (USD Mil) | Revenue Growth YoY % | EBITDA TTM (USD Mil) | Diluted EPS TTM |
|---|---|---|---|---|
| FSLY | 652.560 | 0.198 | -55.250 | -0.690 |
| TWLO | 5,301.660 | 0.200 | 439.800 | 0.660 |
| NET | 2,328.600 | 0.335 | -36.280 | -0.250 |
| DDOG | 3,672.030 | 0.322 | 34.640 | 0.390 |
| FFIV | 3,224.620 | 0.110 | 903.070 | 12.170 |
| DOCN | 948.630 | 0.224 | 298.220 | 2.290 |
Valuation
| Company | Trailing P/E | Forward P/E | EV/Revenue | EV/EBITDA | Price/Sales (TTM) | Price/Book (mrq) | Market Cap (USD Mil) | Enterprise Value (USD Mil) | Beta (5Y Monthly) |
|---|---|---|---|---|---|---|---|---|---|
| FSLY | — | 45.445 | 4.751 | -56.116 | 4.300 | 2.869 | 2,806.040 | 3,100.230 | 0.349 |
| TWLO | 297.947 | 29.793 | 5.843 | 70.441 | 5.629 | 3.843 | 29,845.570 | 30,979.890 | 1.380 |
| NET | — | 152.245 | 37.338 | -2,396.330 | 35.232 | 53.727 | 82,040.400 | 86,946.060 | 1.674 |
| DDOG | 569.885 | 78.091 | 21.513 | 2,280.530 | 21.545 | 19.830 | 79,113.940 | 78,995.290 | 1.553 |
| FFIV | 31.767 | 21.855 | 6.565 | 23.442 | 6.764 | 6.216 | 21,811.680 | 21,169.790 | 1.046 |
| DOCN | 68.659 | 89.476 | 19.436 | 61.827 | 17.298 | 18.485 | 16,409.180 | 18,437.640 | 1.570 |
Profitability
| Company | Operating Margin (TTM) | Net Margin (TTM) | Return on Assets (TTM) | Return on Equity (TTM) |
|---|---|---|---|---|
| FSLY | -0.138 | -0.158 | -0.044 | -0.107 |
| TWLO | 0.077 | 0.020 | 0.017 | 0.013 |
| NET | -0.097 | -0.037 | -0.027 | -0.059 |
| DDOG | 0.008 | 0.037 | -0.002 | 0.039 |
| FFIV | 0.220 | 0.220 | 0.082 | 0.203 |
| DOCN | 0.142 | 0.250 | 0.046 | 0.700 |
Leverage
| Company | Total Debt/Equity % (mrq) | Current Ratio (mrq) | Total Debt (mrq, USD Mil) | Operating Cash Flow TTM (USD Mil) | Free Cash Flow TTM (USD Mil) |
|---|---|---|---|---|---|
| FSLY | 40.705 | 2.999 | 397.750 | 106.020 | 116.780 |
| TWLO | 13.722 | 4.656 | 1,068.130 | 965.410 | 879.870 |
| NET | 230.859 | 1.956 | 3,524.540 | 615.660 | 755.000 |
| DDOG | 32.221 | 3.397 | 1,285.050 | 1,113.220 | 936.730 |
| FFIV | 7.120 | 1.611 | 259.860 | 1,015.410 | 759.180 |
| DOCN | 169.946 | 1.460 | 1,508.060 | 292.440 | 157.550 |
Returns
| Company | Return on Equity (TTM) | Return on Assets (TTM) |
|---|---|---|
| FSLY | -0.107 | -0.044 |
| TWLO | 0.013 | 0.017 |
| NET | -0.059 | -0.027 |
| DDOG | 0.039 | -0.002 |
| FFIV | 0.203 | 0.082 |
| DOCN | 0.700 | 0.046 |
Source: Yahoo Finance
Conclusion
Fastly offers a credible edge-computing platform, but the investment case still hinges on whether the company can turn revenue growth into stable EBITDA and net income. The latest quarter confirmed demand resilience, yet the EBITDA reversal from Q4 2025 to Q1 2026 shows that operating leverage is not settled. With 4.8x EV/revenue, 45.4x forward P/E, and negative TTM profitability, the stock is not expensive enough to ignore, but it is not cheap enough to absorb another execution miss.
Data sourced from Yahoo Finance. Not investment advice.
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