Fastly's CTO Sales: A Tactical Buy or Sell Signal?

The recent sale by Fastly's Chief Technology Officer, Artur Bergman, is a routine event, not a warning sign. On December 29, 2025, Bergman sold 40,000 shares of Fastly common stock in an open-market transaction. The sale, valued at approximately $409,200, was executed at a weighted average price of $10.23 per share. This transaction is part of a pre-arranged trading plan, as Bergman's sale was conducted under a Rule 10b5-1 trading plan adopted on June 3, 2025.

The scale of this sale is notable but consistent with Bergman's established pattern. It represents twice his typical 20,000-share sale, a higher-volume transaction that aligns with several similar dispositions executed as his direct ownership base has gradually shrunk over the past year. The sale reduced his direct ownership by 1.44%, bringing his direct stake down to 2,730,579 shares. However, his total economic exposure remains substantial, with combined direct and indirect holdings exceeding 7.18 million shares.

For investors, the key takeaway is the context. This is a scheduled, pre-planned sale designed to avoid any appearance of trading on non-public information. It occurs as the company's stock has been on an upswing, reaching a 52-week high in early December. The sale is a routine step in a long-term capital allocation plan, not a signal of fundamental concern. The significant remaining stake, both direct and indirect, indicates Bergman's continued alignment with the company's long-term trajectory.

The Business: Recent Strength and Ongoing Challenges

The business shows a clear split between recent operational strength and persistent fundamental weakness. On the top line, the company is executing well. Revenue grew 15.3% year-over-year last quarter to $158.2 million, beating estimates by 4.7%. This beat was broad-based, with non-GAAP profit also significantly exceeding expectations. The operating leverage is improving, as the operating margin narrowed to -18.2% from -29.6% a year ago, indicating losses are shrinking. A key health metric, the Net Revenue Retention rate of 106%, shows existing customers are spending more, a positive sign of stickiness.

Yet the intrinsic value story remains clouded by a deep profitability gap. The company remains unprofitable, posting a negative net margin of 23.49%. This disconnect between revenue growth and earnings is the core challenge. The path to a durable, compounding business requires this margin to turn positive and widen. The recent improvement in operating losses is a step, but it is a long way from the sustained profitability needed to justify a premium valuation.

This brings us to the stock's current price, which has become a key consideration. After a 49.85% rally over the past 120 days, the shares now trade at a price-to-sales ratio of 2.57. This elevated multiple prices in the recent momentum and the improving operating leverage, but it leaves little room for error. The market is clearly rewarding the growth beat and margin improvement, but it is also demanding flawless execution on the path to profitability. For a value investor, the current setup is one of high expectations. The intrinsic value drivers-revenue growth and improving margins-are present, but the stock's price already reflects a significant portion of that story. Any stumble in the next quarter's guidance or a delay in the margin expansion could quickly reverse the recent gains.

Valuation and the Near-Term Catalyst

The stock's valuation tells a story of high growth expectations priced in, but with no current earnings to support them. Fastly trades at a forward P/E of -9.9 and a price-to-sales ratio of 2.57. The negative P/E is a direct reflection of the company's current net loss, while the P/S ratio indicates the market is paying a premium for each dollar of sales. This setup is typical for a growth company in transition, where investors are betting on future profitability rather than present results.

The key near-term catalyst is clear: the company must demonstrate it can sustain revenue growth above 15% while steadily improving its operating margin. The latest quarter showed a positive step, with revenue growing 15.3% year-over-year and management guiding for another 14.5% increase next quarter. More importantly, the company is showing margin improvement, with its operating margin narrowing to -18.2% from -29.6% a year ago. The path to profitability hinges on this dual engine of growth and efficiency. If the company can maintain this trajectory, it could justify its valuation multiple.

The primary risk that could amplify volatility is customer concentration. Approximately 35% of revenue comes from the top ten customers. This reliance creates a vulnerability; the loss or contraction of a major client could disproportionately impact quarterly results and investor sentiment. This risk is compounded by the company's consumption-based revenue model and exposure to startups, which can be more sensitive to economic cycles. While the company is diversifying, with 17% growth in revenue from non-top 10 customers last quarter, the top-tier clients remain a significant anchor.

The bottom line is a stock priced for continued execution. The valuation embeds the expectation of sustained growth and margin expansion. The catalyst is the company's ability to deliver on that promise quarter after quarter. The risk is that customer concentration and economic sensitivity could cause the growth story to stumble, making the current price a precarious bet on flawless performance.

The Verdict: A Hold with a Focus on Q4

The recent 5.7% pop in Fastly's stock on December 8 was a routine market reaction, not a fundamental shift. The move was driven by broader positive sentiment and a series of strategic developments, including a new security certification program, a planned listing shift to Nasdaq, and an upscaled convertible note offering. While these are operational steps, they do not alter the core investment thesis. The stock's price action since then, including a 10% decline in early December, shows how quickly such routine catalysts can be discounted.

The near-term catalyst is the upcoming fourth-quarter earnings report. The stock's next significant move will hinge on management's guidance. Last quarter, a beat and a raised revenue forecast for Q4 drove a 15% premarket pop. Investors will be watching for a similar signal of continued growth and margin improvement. The company's gross margin remains strong at 55%, but the path to sustained profitability is the real question.

Given the elevated valuation and the lack of net profitability, a hold is the appropriate stance. The stock trades at a premium to its historical range, and the recent volatility underscores the uncertainty. A buy would require either a significant price correction to provide a wider margin of safety or a clear, credible path to sustained profitability that the current guidance does not yet deliver. Until then, the stock's journey will be dictated by quarterly execution, not long-term compounding.