Fastly (FSLY) Stock Declines 37% as AI Traffic Growth Disappoints

TLDR

• Shares of Fastly plunged 37% to $19.94 after first-quarter results left investors underwhelmed, even as the company outperformed consensus top-line and bottom-line headline forecasts.
• First-quarter earnings per share hit $0.13, surpassing the $0.09 projected figure; revenue climbed 20% to $173.02 million, outpacing the $171.8 million consensus estimate.
• Security revenue, the segment that accounts for AI-related traffic, reached $38.8 million — a 47% year-over-year jump, but only narrowly exceeding the $34.9 million analyst forecast.
• Fastly lifted its full-year 2026 revenue projection to between $710 million and $725 million, and increased its per-share profit guidance to the $0.27 to $0.33 range.
• Piper Sandler reduced its price target for Fastly stock to $27 from $30, while retaining its Neutral rating, on worries that the company’s growth may have hit its highest point.

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(SeaPRwire) –   Fastly (FSLY) released its first-quarter 2026 earnings results following Wednesday’s market close, outperforming headline forecasts — but investors were not convinced by the performance.

Fastly, Inc. (FSLY)

Prior to the earnings release, the stock had rallied more than 210% year-to-date. That steep pre-report gain created very high performance expectations, which Fastly failed to meet.

First-quarter earnings landed at $0.13 per share, a reversal from the $0.05 per share loss recorded in the same period last year, and above the $0.09 Wall Street consensus forecast. Revenue grew 20% from the prior year to $173.02 million, beating the $171.8 million consensus projection.

Fastly $FSLY stock is down by almost 30% in after hours following its earnings

https://t.co/u3Lso9HUEY pic.twitter.com/AlZUKIQRiV

— Evan (@StockMKTNewz) May 6, 2026

On most metrics, the quarter was a strong showing. But investors had their eye on a different data point.

The critical metric investors were waiting for was security revenue — the business segment that records AI-powered traffic on Fastly’s financial statements. That figure came in at $38.8 million, up 47% year-over-year, but only barely above the $34.9 million analyst forecast.

For a stock that is valued based on expectations of AI-driven expansion, a “narrow beat” was not sufficient to justify its valuation.

Shares of FSLY dropped 37% to $19.94 during Thursday’s trading session.

Evercore ISI analyst Peter Levine noted that the sell-off was made worse by weaker-than-projected network services revenue and lower compute sales, on top of the already high investor expectations ahead of the earnings release.

What the Figures Actually Showed

Fastly’s total number of large enterprise customers reached 634 in the first quarter, a 39% increase from the same period last year. The company is also locking in larger minimum spending commitments from clients, a sign that its contract terms are becoming more favorable.

For the second quarter, Fastly issued revenue guidance of $170 million to $176 million, alongside per-share earnings guidance of $0.05 to $0.08 — both figures coming in above Wall Street’s earlier projections of $169.8 million in revenue and $0.04 per share in earnings.

The company also lifted its full-year 2026 guidance. Fastly now projects full-year revenue will come in between $710 million and $725 million, an increase from its prior forecast range of $700 million to $720 million. Its per-share earnings guidance was also adjusted upward to $0.27 to $0.33, from the previous $0.23 to $0.29 range.

The current analyst consensus for full-year results is $0.28 per share in earnings on $712 million in revenue — and Fastly’s new guidance range covers that consensus figure on both the high and low end.

Responses From Analysts

Piper Sandler cut its price target for FSLY to $27 from the previous $30, while holding onto its Neutral rating. The firm noted that Fastly’s core delivery business posted smaller quarter-over-quarter volume gains than expected, and that more challenging pricing comparisons are on the horizon for the remainder of the year.

Piper Sandler also voiced a wider concern: that the company’s growth may have already reached its peak, especially since FSLY is trading at a valuation premium to its industry peers when measured on an EV/revenue-to-growth basis.

Company leadership highlighted that its Compute@Edge platform is recording rising levels of AI-related usage, and also noted solid cross-selling momentum for its Security product line.

Fastly has set its analyst day for September 23, 2026.