Fastly (FSLY) Earnings Preview: Can the CDN Leader Turn the Corner?

Fastly, Inc. (NASDAQ: FSLY) is set to report its Q1 2025 earnings on Wednesday, May 7, 2025, marking a pivotal moment for the content delivery network (CDN) provider. With the stock trading near historic lows and analysts maintaining a cautious stance, investors will scrutinize whether the company can meet lowered expectations while addressing persistent operational challenges. Here’s what to watch for.

Key Metrics Under the Microscope

Analysts anticipate a narrow loss of $0.06 per share, down from earlier projections, as Fastly continues to grapple with margin pressures. Revenue is expected to hit $138.39 million, representing a modest 3.65% year-over-year growth. This figure aligns with the company’s 2025 annual revenue guidance of $575 million to $585 million, which implies a need for consistent quarterly performance to avoid missing the full-year target.

Historical Performance and Stock Volatility

Fastly’s stock has been a rollercoaster for investors. A 20.85% drop followed its February 2025 earnings miss, underscoring the market’s sensitivity to any deviation from expectations. The current consensus price target of $8.28 reflects lingering doubts about its path to profitability.

What’s Driving the Narrative?

1. Client Diversification Gains Momentum

Fastly has reduced its reliance on top clients, with the top 10 now accounting for 32% of revenue in Q4 2024—down from 40% in 2023. This progress, paired with a 596-enterprise customer count, suggests resilience against major client losses, such as the impact from TikTok’s shift to AWS in 2023.

2. Margin Pressures and Cash Flow Improvements

Operating cash flow turned positive in 2024 at $16 million, a marked improvement from a $59 million cash burn in 2023. While this signals better cost management, the company still faces challenges in scaling margins amid intense CDN competition from hyperscalers like AWS and Cloudflare.

3. Innovation Bets: AI and Storage

New products like the AI Accelerator (designed for large language models) and Object Storage aim to drive growth in high-margin segments. However, these initiatives are still nascent, and execution risks remain.

Risks to Monitor

• Revenue Volatility: A miss on Q1 revenue could reignite concerns about customer retention and pricing power.
• Operating Losses: While cash flow improved, net losses persist. Analysts will watch for updated guidance on when profitability might materialize.
• Competitive Landscape: Hyperscalers are encroaching on Fastly’s core CDN business, which could cap growth unless innovation efforts pay off.

Conclusion: A Tightrope Walk for Fastly

Fastly’s Q1 results will serve as a litmus test for its turnaround story. Meeting the consensus EPS of -$0.06 and revenue of $138.39 million is critical to avoid another selloff. However, the real value lies in sustainable margin expansion and top-line acceleration beyond 2025.

With a price-to-sales ratio of 1.2x—well below peers like Cloudflare (CLOU) at 4.5x—Fastly’s stock offers a low valuation, but its path to profitability remains unproven. Investors should focus on whether management can:
1. Demonstrate consistent revenue growth aligned with annual guidance.
2. Provide clarity on margin improvements and cash flow sustainability.
3. Highlight traction from new products like AI Accelerator.

Until these milestones are achieved, Fastly’s stock is likely to remain volatile. A beat on earnings could spark a short-covering rally, but long-term success hinges on execution in a fiercely competitive market. For now, the Hold rating from analysts appears justified, with upside contingent on tangible progress in Q1 and beyond.