FSLY: Early Security Momentum Will Struggle To Offset CDN Pricing Pressure

Analysts have nudged their price target on Fastly higher by approximately 15 percent to the equivalent of about $7 per share, citing improving revenue growth expectations, slightly lower perceived risk, and early but promising traction in higher value security offerings, despite ongoing pricing pressure in the core CDN business.

Analyst Commentary

Bearish analysts acknowledge Fastly's recent progress in security and operational execution but remain cautious on the durability of these improvements. They argue that the current valuation already reflects a meaningful portion of the upside from early security traction, leaving limited room for error if growth moderates or margin expansion stalls.

Several see the recent quarters' acceleration in security revenue as encouraging yet still too nascent to offset structural pressures in the legacy CDN business. With high teens year over year price declines persisting in core CDN services, analysts warn that overall revenue growth could remain volatile and sensitive to competitive dynamics.

Sentiment remains guarded as the market waits for clearer evidence that Fastly can sustain higher value, security led growth while stabilizing its traditional network business. Until there is a more consistent track record of execution, many expect the stock to trade in a more constrained valuation range, reflecting ongoing uncertainty around long term growth and profitability.

Bearish Takeaways

• Bearish analysts view recent security revenue acceleration as early stage, arguing that it must persist over multiple quarters before warranting a re rating in valuation multiples.
• Ongoing high teens pricing declines in the core CDN business are seen as a structural headwind, limiting overall top line growth and pressuring long term margin assumptions.
• There is concern that the current share price already discounts much of the near term operational improvement, leaving downside risk if execution stumbles or growth decelerates.
• Many remain hesitant to move to a more constructive stance until Fastly demonstrates a consistent track record of converting security momentum into durable, company wide growth.

What's in the News

• Fastly, Inc. will transfer its primary listing from the New York Stock Exchange to the Nasdaq Global Select Market, effective December 9, 2025 (Key Developments).
• Fastly has been added as a constituent to the NASDAQ Composite Index, increasing its visibility among index and passive investors (Key Developments).
• The company launched the Fastly Certified Services Partner Program, a new certification track aimed at enabling partners to implement and manage Fastly's advanced security solutions, expanding its security focused go to market reach (Key Developments).
• Fastly issued fourth quarter 2025 revenue guidance of $159 million to $163 million and full year 2025 revenue guidance of $610 million to $614 million, with the company indicating expectations for continued top line growth (Key Developments).

Valuation Changes

• Fair Value Estimate has risen from 6.0 to 7.0, reflecting a modest upward reassessment of intrinsic equity value.
• The Discount Rate edged down slightly from 9.90 percent to about 9.80 percent, implying a marginally lower perceived risk profile.
• Revenue Growth Assumptions increased from roughly 5.7 percent to about 7.3 percent, signaling higher expectations for top line expansion.
• The Net Profit Margin Outlook is effectively unchanged, ticking down only marginally from about 7.0 percent to just under 7.0 percent, indicating a stable profitability view.
• The Future P/E Multiple was raised from about 28.7x to roughly 31.3x, suggesting a modestly higher valuation multiple on forward earnings.