FSLY: Future Returns Will Depend On Proving Security Gains Amid CDN Pressure

Analysts have modestly trimmed their price target on Fastly to approximately $46.07 from about $48.63, citing the need for recent security segment momentum to prove durable amid ongoing pricing pressure in the core CDN business.

Analyst Commentary

Recent commentary highlights a balanced view on Fastly, with analysts recognizing progress in execution while remaining cautious on the durability of recent gains and the challenges in its legacy business.

Bullish Takeaways

• Bullish analysts point to the acceleration in security revenue over the past two quarters as evidence that Fastly is gaining traction in higher value, more defensible parts of its platform, which could support a premium valuation if sustained.
• Operational improvements, including more disciplined cost management and clearer product focus, are seen as early signs that management can execute more consistently, potentially narrowing the gap to higher quality infrastructure peers.
• The growing contribution from security is viewed as a pathway to diversify away from commoditized CDN pricing. If successful, this could stabilize gross margins and support a higher long term growth profile.
• Some bulls see the current, more modest price target as leaving room for upside if Fastly can demonstrate several consecutive quarters of stable to accelerating revenue growth from its newer offerings.

Bearish Takeaways

• Bearish analysts emphasize that the recent security momentum is still considered an early win, and they want to see multiple quarters of consistent growth before assigning a higher valuation multiple.
• Ongoing high teens year over year pricing pressure in the core CDN business is viewed as a structural headwind, limiting overall revenue growth and constraining Fastly’s ability to expand margins.
• Concerns remain that gains in security may not be sufficient to fully offset declines in legacy CDN revenue, raising questions about the durability of mid term growth targets.
• Until there is clear evidence of sustained execution across both security and CDN, more cautious analysts expect the stock to trade closer to a “wait and see” valuation, rather than reflecting a full turnaround scenario.

What's in the News

• Fastly plans to transfer its primary stock exchange listing from the New York Stock Exchange to the Nasdaq Global Select Market, effective December 09, 2025 (company announcement).
• The company launched the Fastly Certified Services Partner Program to train and certify partner security professionals in deploying and managing Fastly’s advanced security solutions, expanding go to market reach and implementation capacity (company announcement).
• Fastly issued revenue guidance for the fourth quarter of 2025 of $159 million to $163 million, and full year 2025 guidance of $610 million to $614 million (company guidance).

Valuation Changes

• Fair Value Estimate unchanged at 10.42, indicating no revision to the intrinsic value assessment.
• Discount Rate edged down slightly from 9.69% to 9.69%, implying a marginally lower required return.
• Revenue Growth effectively unchanged at 7.51%, suggesting a stable outlook for top line expansion.
• Net Profit Margin risen modestly from 6.61% to approximately 6.98%, reflecting a slightly more optimistic view on future profitability.
• Future P/E reduced from about 48.63x to 46.07x, indicating a modestly lower valuation multiple applied to forward earnings.