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Investing.com - Craig-Hallum upgraded Fastly Inc . (NYSE:FSLY) from Hold to Buy on Thursday, setting a price target of $10.00 as the content delivery network provider shows signs of financial improvement. Currently trading at $7.73, InvestingPro analysis suggests the stock is slightly undervalued, with a market capitalization of $1.1 billion.
The upgrade follows Fastly’s recent quarterly performance that demonstrated acceleration in both security and delivery growth, alongside a continued rebound for its Top Ten customers. The company posted its strongest enterprise customer additions since Q4 2022, with billings doubling year-over-year. Recent data from InvestingPro shows revenue growth of 7.43% over the last twelve months, with a healthy gross margin of 53.89%.
Craig-Hallum attributed Fastly’s success to improved market dynamics, better go-to-market execution, and enhanced platform integration between Security, Compute, and Delivery services. Gross margins improved 166 basis points sequentially, with guidance suggesting another 50 basis point improvement next quarter.
The firm highlighted Fastly’s progress toward generating positive free cash flow (FCF) for the first time in company history, following a $10 million upward revision to its FY 2025 FCF guidance. This marks a significant turnaround from the negative $36 million FCF reported in its most profitable year to date.
With growth reaccelerating to 12% for the quarter, Craig-Hallum sees potential for upward revisions to estimates, despite guidance pointing to 10% growth in the second half and consensus expectations of 7% growth in 2026.
In other recent news, Fastly Inc. reported its first-quarter results, which exceeded consensus expectations, driven by significant contributions from its top 10 customers. These customers accounted for approximately 70% of the quarter-over-quarter revenue growth. Despite the positive results, DA Davidson adjusted its price target for Fastly to $6.50, down from $7.50, while maintaining a neutral stance, citing concerns over a mere 7% year-over-year security growth and a decline in long-term net revenue retention to 100%. The company, however, raised its full-year 2025 guidance following a $6.5 million revenue beat and additional revenue from U.S. TikTok through June 19th.
In leadership changes, Fastly appointed Kip Compton as its new CEO, succeeding Todd Nightingale, who will remain as an advisor until June 2025. Additionally, Fastly named Richard Wong as the new Chief Financial Officer, effective August 2025, and expanded its executive team with Albert Thong as Chief Marketing Officer and Tara Seracka as Chief Legal Officer. Piper Sandler maintained a neutral rating on Fastly stock, noting the CEO transition and Todd Nightingale’s move to Arista Networks (NYSE:ANET). These developments reflect Fastly’s ongoing efforts to strengthen its leadership and navigate the competitive tech industry.
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