Fastly, Inc. (FSLY) has carved out a distinct niche in the rapidly expanding content delivery network (CDN) and edge computing markets. Under the leadership of CEO Kip Compton, the company has emphasized high-performance programmable edge services and robust security offerings. Despite delivering a record first quarter in 2026, the market reaction was notably unforgiving, highlighting the tension between solid execution and elevated investor expectations. This analysis unpacks Fastly’s recent financial performance, competitive positioning, and valuation, while providing actionable ratings for Fastly and its key peers.

Record Revenues Mask Underlying Pressures

Fastly entered 2026 with strong momentum, reporting a record $173 million in revenue for the first quarter, representing a 20% year-over-year increase. This top-line performance comfortably exceeded the consensus estimate of $170.26 million. The company’s adjusted earnings per share (EPS) of $0.13 also handily beat expectations of $0.08, demonstrating meaningful progress toward sustainable profitability.

The composition of this growth reveals the shifting dynamics of Fastly’s business model. Security revenues surged by an impressive 47% year-over-year to $38.8 million, now accounting for 22% of total revenues. Meanwhile, the core Network Services division, which remains the largest segment, grew at a more modest 11% to reach $126.2 million. The emerging compute products category saw a 67% surge, albeit from a smaller base, reaching $8 million. This diversification away from pure CDN delivery toward higher-margin security and compute services represents a strategic imperative for the company’s long-term viability.

Despite these strong figures, including an expansion in the adjusted gross margin to 65.1% from 57.3% a year prior, the stock plunged 22% following the earnings release. The market’s reaction stemmed primarily from forward-looking guidance. Management projected second-quarter revenues between $170 million and $176 million, implying a sequential decline from the first quarter and a deceleration to approximately 16% year-over-year growth at the midpoint. Full-year 2026 guidance of $710 million to $725 million points to a 15% annual increase. This cooling growth trajectory disappointed investors who had bid the stock up nearly 19% in the days leading into the earnings report.

Q1 2026 Key Financial Metrics

Metric	Q1 2026	Q1 2025
Total Revenue	$173.0M	$144.5M
Revenue Growth (YoY)	20%	—
Adjusted EPS	$0.13	—
Adjusted Gross Margin	65.1%	57.3%
Security Revenue	$38.8M (↑47%)	$26.4M
Network Services Revenue	$126.2M (↑11%)	$113.7M
RPO (Remaining Performance Obligations)	$369M (↑63%)	$226M
Net Retention Rate (LTM)	113%	100%

The Competitive Edge: Navigating a Crowded Market

The edge computing and CDN markets are intensely competitive, characterized by massive scale requirements and rapid technological evolution. Fastly commands roughly 6% of the CDN market, competing against formidable incumbents and hyperscalers. The global CDN market was valued at approximately $31.5 billion in 2025 and is projected to grow at a compound annual growth rate of nearly 20% through the end of the decade, providing a substantial tailwind for all participants.

Cloudflare, Inc. (NET) remains the dominant pure-play competitor, holding approximately 40% of the CDN market share. Cloudflare’s scale and aggressive expansion into AI-driven workloads and zero-trust security have fueled remarkable growth. In the first quarter of 2026, Cloudflare reported revenues of $639.8 million, up 34% year-over-year, driven by a 38% increase in large customer revenues. Management described AI as the “biggest tailwind” in the company’s history, and the ability to capitalize on agentic AI workloads presents a significant competitive hurdle for smaller players like Fastly.

Akamai Technologies, Inc. (AKAM), the legacy giant in the space, continues to leverage its vast enterprise footprint. Akamai generated $1.07 billion in first-quarter revenue, representing 6% year-over-year growth. While its overall growth rate is slower than its peers, Akamai is aggressively pivoting toward cloud infrastructure and security, with its cloud infrastructure services revenue jumping 40% year-over-year. The recent signing of a landmark $1.8 billion cloud infrastructure deal underscores Akamai’s enduring enterprise relevance and its successful transformation beyond traditional CDN services.

Furthermore, hyperscalers like Amazon Web Services with Amazon CloudFront (which holds over 26% market share) exert continuous pricing pressure on pure-play CDN providers, forcing companies like Fastly to differentiate through specialized capabilities such as programmable edge logic, real-time log streaming, and superior performance metrics. Fastly claims that websites migrating from Akamai to its platform see their Largest Contentful Paint scores improve by 17% and Time to First Byte improve by 57%, but translating technical superiority into sustained market share gains remains the central challenge.

Valuation and Risk Assessment

Fastly’s financial health presents a mixed picture. The company holds $146.7 million in cash against $323.6 million in long-term debt, yielding a manageable debt-to-equity ratio of 33.1%. Total shareholder equity stands at $977.1 million, providing a reasonable cushion. However, Fastly remains unprofitable on a GAAP basis, reporting a GAAP net loss of $20.5 million in the first quarter, though this is a marked improvement from the $39.1 million loss in the prior year period. Non-GAAP net income reached $22.9 million, suggesting that the path to GAAP profitability is narrowing.

From a valuation perspective, Fastly trades at a price-to-sales (P/S) ratio of approximately 4.58x, which sits above the IT industry average of 2.29x and the peer group average of 2.51x. The enterprise value-to-revenue multiple stands at 4.87x. While the stock has delivered a 77.5% year-to-date return, it remains well below its pandemic-era highs, and the 52-week range of $6.29 to $34.82 illustrates the extreme volatility investors must stomach.

Key risks include ongoing customer concentration, where the loss of a major client could severely impact revenues, and intense pricing pressure in the commoditized segments of the CDN market. Additionally, a high short interest of nearly 16% of the float indicates significant market skepticism regarding the company’s ability to achieve sustained profitability and accelerate growth. Insider selling activity has also drawn attention from retail investors, raising questions about management’s confidence in the current valuation.

Investment Verdicts and Price Targets

Based on the analysis of current market dynamics, financial performance, and valuation metrics, Equities Orbis provides the following ratings and twelve-month price targets for all companies discussed in this report.

Company	Ticker	Rating	Current Price	Price Target
Fastly, Inc.	FSLY	HOLD	~$18.00	$24.00
Cloudflare, Inc.	NET	BUY	~$250.00	$285.00
Akamai Technologies	AKAM	BUY	~$149.00	$175.00

Fastly (FSLY) — HOLD, Price Target $24.00: While Fastly shows strong growth in security and compute services, decelerating core CDN growth and continued GAAP unprofitability warrant caution at current levels. The premium valuation relative to peers requires flawless execution. The $24 target reflects a modest premium based on continued margin expansion, successful upselling of security products, and the record remaining performance obligations that provide revenue visibility. However, the risk-reward balance does not favor aggressive accumulation at this juncture.

Cloudflare (NET) — BUY, Price Target $285.00: Cloudflare’s dominant market position, exceptional 34% revenue growth, and successful monetization of AI-driven workloads justify a premium valuation. The company’s expanding enterprise footprint, zero-trust security adoption, and positioning as the infrastructure layer for agentic AI provide a clear runway for sustained outperformance. While the stock is not inexpensive, the growth trajectory and market opportunity support further appreciation.

Akamai Technologies (AKAM) — BUY, Price Target $175.00: Akamai offers a compelling value proposition as it successfully transitions its massive enterprise base toward high-growth cloud compute and security services. The recent $1.8 billion infrastructure deal highlights its enterprise stickiness, and the 40% growth in cloud infrastructure revenues demonstrates that the transformation is gaining real traction. At current valuations, Akamai represents an attractive blend of value and growth with lower downside risk than its smaller competitors.

Disclaimer: Stock prices and market data are as of June 2026. This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Investors should conduct their own due diligence before making investment decisions.