Posted on Wednesday, Aug 26th 2020
Edge cloud platform provider Fastly (NYSE: FSLY) recently reported its second quarter results that surpassed the market’s expectations. But the company continues to struggle with its stand on political advertising. As the US gets ready for the Presidential elections, the scrutiny on Fastly’s stance is increasing.
San Francisco-based Fastly was set up in 2011 by Artur Bergman to help improve customer digital experiences. Its edge cloud platform allows developers to create apps optimized for security, speed, and scale.
Fastly’s edge cloud operates as an Infrastructure as a Service (IaaS) offering that integrates the Content Delivery Network (CDN) with functionality that has traditionally been delivered by hardware-centric appliances such as Application Delivery Controllers (ADC), Web Application Firewalls (WAF), Bot Detection, and Distributed Denial of Service (DDoS) solutions.
Its platform consists of three key components: a programmable edge, a software-defined modern network, and a philosophy of customer empowerment. Its programmable edge provides developers with real-time visibility and control to allow them to write and deploy code to push application logic to the edge. Its software-defined modern network is powerful and flexible, allowing organizations to scale as needed. Finally, it leverages collaboration tools to empower customers to build seamlessly on its platform. Over 1,950 customers use Fastly’s platform to support the tens of thousands of websites used around the world.
Fastly operates on API model using RESTful API to provide developers with access to all the features available through its web interface.
Fastly recently announced its second quarter results. Revenues for the quarter grew 62% over the year to $75 million, far ahead of the market’s estimates of $17.29 billion. Adjusted EPS surpassed the expectations and came in at $0.02 against the market’s forecast of a loss of $0.01.
Fastly forecast its current quarter revenues to be $73.5-$75.5 million, against the market’s estimate of $72 million. It expects to end the year with revenues of $290-$300 million and a loss of $0.01 per share, against the market’s estimates of revenues of $287.24 million and a loss of $0.13 per share.
Fastly’s Growth Focus
Fastly recognizes the need for continued development of digital offerings, especially in the current times. To help developers build differentiation at the edge and rapidly adopt new architectures, it is continuing to invest in its network and offerings specifically Compute@Edge and security.
Compute@Edge is Fastly’s real-time serverless architecture for high-performance applications. During the quarter, it enhanced the offering with valuable new observability features, including logging tracing and granular real-time metrics for bringing observability to the forefront of the serverless computing environment. It realizes that transformation is driving more code and applications to the edge and is placing an added need for security of websites and applications. It is addressing these concerns by delivering new key security features including Fastly Flow Control that helps mitigate downtime caused by bots and scrapers.
To further assist its developers, Fastly launched an enhanced Developer Hub. Developer Hub is a dedicated site for developers to access product information, documents, support, and pre-built blocks of code.
Fastly’s TikTok Worries
Despite the recent moves, the market was not too pleased with Fastly. Its outlook for the current quarter, while higher than market expectations, translated to flat revenues over the year. TikTok is another point of concern for Fastly. Currently, TikTok is one of its biggest customers, accounting for 12% of its revenues. The recent news surrounding the possibility that the present government may ban the use of TikTok in the US will hurt Fastly significantly. Other news suggests that TikTok may get acquired by Microsoft. While there is no certainty of that happening,
analysts believe that if the acquisition were to happen, TikTok would most likely move to Microsoft’s edge offering instead of staying with Fastly. Either way, Fastly needs to look at diluting TikTok’s revenue contribution soon.
Its stock is trading at $90.38 with a market capitalization of $9.5 billion. It had climbed to a 52-week high of $117.79 in July. It hit a 52-week low of $10.63 in March this year when most stocks fell. Prior to going public last year, Fastly had raised $219 million in funding from investors including Sozo Ventures, DTCP, Swisscom Ventures, Amplify Partners, Sorenson Capital, Sapphire Ventures, Ridge Ventures, Oreilly AlphaTech Ventures, August Capital, and ICONIQ Capital. It listed in May last year when it raised $180 million at a valuation of $1.5 billion by pricing its stock at $16.
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