Is Now the Time to Buy Fastly Amid Market Volatility? Evaluating the Edge Cloud Innovator's Strategic Position

The edge cloud sector is at a pivotal inflection point. With global spending projected to surge to $100–125 billion by 2030, driven by 5G rollouts, AI workloads, and data sovereignty mandates, companies like Fastly (FSLY) are navigating a landscape of immense opportunity and mounting challenges. For investors, the question is clear: Is now the time to buy Fastly amid market volatility, or is the stock still too exposed to macroeconomic headwinds and competitive pressures?

The Edge Cloud's Tectonic Shift

Fastly's recent strategic moves suggest it is positioning itself as a leader in a rapidly evolving market. The company's edge cloud platform now spans 60+ global points of presence (POPs), delivering sub-50ms latency for latency-sensitive industries like e-commerce and gaming. This infrastructure, combined with a 64% year-over-year growth in compute revenue and a 7% rise in security revenue, underscores Fastly's ability to differentiate itself from hyperscalers like AWS and Akamai.

The appointment of Kip Compton as CEO in 2025 has further sharpened the company's focus. A 25-year cloud and networking veteran, Compton has accelerated product innovation, including the launch of the Next-Gen Web Application Firewall (WAF), which earned “Strong Performer” status from Forrester. His leadership has also prioritized customer diversification, reducing top-10 customer concentration from 38% in Q1 2024 to 33% in Q2 2025. Meanwhile, enterprise customer count grew to 595, up from 577 in the prior year, signaling progress in building a more resilient revenue base.

Financial Resilience Amid Volatility

Despite these strides, Fastly's financials remain a mixed bag. While Q2 2025 saw positive free cash flow of $8.2 million—up from negative $2.2 million in the same period in 2024—the company's non-GAAP gross margin dipped to 57.3% from 59.6% in Q1 2024. This decline reflects ongoing investments in infrastructure and product development, which are critical for long-term growth but pose short-term margin pressures.

The stock's underperformance is evident: FSLY has fallen 28.9% year-to-date, lagging behind the Zacks Internet Software industry's 14.1% gain. Analysts remain divided, with price targets ranging from $6.00 to $12.00. Yet, Fastly's forward 12-month P/S ratio of 1.58X is well below the industry average of 5.72X, suggesting it may be undervalued relative to peers.

Growth Catalysts and Risks

Fastly's path to profitability hinges on several key catalysts. First, the company is capitalizing on the AI boom by optimizing its edge platform for AI workloads. Its WebAssembly (WASM)-based compute infrastructure, already growing at over 50% annually, is well-suited for distributed AI training and inference. Second, cross-selling of bundled security and compute packages—up 80% YoY—has boosted customer lifetime value and reduced sales costs. Third, industry consolidation, such as the bankruptcy of competitor Edgio, could unlock $40 million in revenue from former Edgio customers.

However, risks linger. Fastly remains vulnerable to customer churn, with its 12-month net retention rate slipping to 100% in Q1 2025. Regulatory tailwinds, such as the exclusion of U.S. TikTok revenue from guidance due to geopolitical tensions, add uncertainty. Additionally, the company must refinance $340 million in convertible debt within nine months, a task that could strain liquidity if pricing remains volatile.

Investment Implications

For long-term investors, Fastly's strategic position in the edge cloud sector is compelling. The company's focus on security, compute, and developer tools aligns with secular trends, and its disciplined approach to cost management—evidenced by a $14 million reduction in operating expenses in H2 2024—positions it to navigate macroeconomic headwinds. However, the stock's current valuation reflects skepticism about its ability to sustain margin improvements and customer diversification.

Buy Case: Fastly's edge cloud platform is uniquely positioned to benefit from the AI and 5G-driven demand for low-latency, secure computing. With a 15% market share in the edge computing niche and a pipeline of AI-powered analytics and serverless compute capabilities, the company could unlock $200 million+ in incremental revenue by 2026. Investors willing to stomach short-term volatility may find value at current levels, particularly if the stock continues to trade at a discount to peers.

Sell Case: The stock's underperformance highlights persistent concerns about customer concentration, margin pressures, and competition from hyperscalers. Fastly's historical inconsistencies in execution—such as the LTM NRR drop to 100%—suggest it may struggle to maintain its trajectory without further innovation. Conservative investors may prefer to wait for clearer signs of sustained margin expansion and enterprise adoption.

Conclusion

Fastly is a company in transition. While it faces significant challenges, its strategic investments in edge security, compute, and AI infrastructure position it as a key player in a market set to grow by over 13% annually. For investors with a multi-year horizon, the stock offers an intriguing opportunity at a valuation that appears to discount both its progress and potential. However, the path to profitability will require continued execution, and the company's ability to navigate macroeconomic and regulatory risks will be critical.

In the end, the question of whether to buy Fastly now depends on one's risk tolerance and belief in the edge cloud's long-term promise. For those who see the company as a high-conviction bet on the next phase of the internet, the current volatility may represent a chance to enter at a favorable price.