Fastly surges over 72% as an 'underappreciated play' in AI
IT infrastructure provider Fastly (FSLY) bucked the trend of sinking tech stocks getting pummeled on Thursday and surged more than 72% after the company posted a huge earnings beat for the fourth quarter.
The San Francisco-based company, which provides an edge cloud platform known as a high-performance content delivery network (CDN), has gotten a boost through its growing AI adoption.
Fastly reported earnings of 12 cents a share, beating Wall Street's expectation of 6 cents a share. The company also reported revenue of $172.6 million for the quarter, easily topping the consensus estimate of $161.4 million.
Its full-year 2025 revenue came in at $624 million, representing 15% year-over-year growth.
The blow-out quarter led William Blair analyst Jonathan Ho to upgrade Fastly's stock to Outperform on Thursday.
“Fastly delivered a stellar quarter driven by rising contribution from agentic AI traffic,” he said. “The rationale for our upgrade is that we believe Fastly is likely to represent an underappreciated play on the growth in both LLM use and agentic AI.”
An edge cloud brings computing, storage, and networking resources closer to the data source - such as IoT devices or local servers - rather than relying solely on centralized, distant data centers.
Fastly's edge cloud platform helps speed up websites and other applications like large language models (LLMS) by storing digital content closer to the data source.
Fastly CEO Kip Compton said during the company's earnings call that as "the internet moves into the age of agentic AI, it's clear that the edge will play a pivotal role."
"Our infrastructure is designed to power this edge intelligence layer, optimizing authorized AI agents and blocking abuse," Compton said. "As one of the leading edge cloud providers, Fastly is well positioned to capitalize on this transition."
He added that the company sees "AI increasingly as a tailwind for our business with increasing agentic AI traffic, AI bot management opportunities, and AI workloads running on our platform."
LLMs are powering a traffic boost
In response to a question from an analyst on the call, Compton explained how the company's traffic benefits from LLMs like ChatGPT. He noted that "we're seeing an increase in traffic related to agents" because as AI agents scour the internet for answers to questions from users, "all of that traffic's processed through the Fastly network for our Fastly customers."
D.A. Davidson analyst Rudy Kessinger on Thursday maintained his Hold rating on Fastly, but raised his price target to $13 from $9, citing this AI traffic as a "tailwind" for the company. But Kessinger also expressed concern about Fastly's narrow customer base.
Wall Street has in the past raised concerns about Fastly relying on a small number of large customers for its business, as Barron's reported. Although Fastly seems to keep the names of most of its customers private, one of its largest known ones is ByteDance's TikTok.
The company's stock has tended to swing based on news regarding TikTok, which was facing a ban in the United States last year. However, the Chinese company finalized a restructuring of its business in January that will allow it to continue operating in the US.
Compton said on the earnings call that because of this resolution, Fastly's "guidance going forward will incorporate ByteDance revenue unless specified otherwise."
Fastly is expecting revenue in the range of $168 to $174 million in the first quarter, representing 18% annual growth at the midpoint.
“Our 2026 guidance reflects confidence that our business will outpace market growth while maintaining prudence on our longer-term visibility amid greater macroeconomic and geopolitical uncertainty,” Fastly CFO Rich Wong said during the earnings call.