Fastly shares slumped Thursday after the company cut its 2024 revenue forecast amid pricing pressure for its top customers.
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Fast (FSLY) late Wednesday reported first-quarter revenue and profit that were slightly above consensus estimates. But shares plunged on management’s forecast.
Bank of America downgraded Fastly stock to “underperform” from “buy.”
“Slowing growth among Fastly’s largest customers, loss of delivery share and limited visibility in the second half of the year make us doubt a recovery in 2024,” BofA analyst Madeline Brooks said in a report. “While we continue to like Fastly’s positioning in the edge computing market, we see it as a 2025 opportunity rather than a near-term growth driver.”
San Francisco-based Fastly competes in the content delivery network (CDN) market. Smart technologies (AKAM) and Cloud flare (NETWORK). Fastly’s network increases the speed of e-commerce transactions, business software downloads and video streaming to mobile devices.
On today’s stock market, Fastly shares fell 38% to nearly 8% in early trading. Akamai shares fell 0.6% to 100.31. Cloudflare shares fell a fraction to 87.97.
For the March quarter, Fastly reported a loss of 5 cents on revenue of $133.5 million, up 14%.
Meanwhile, analysts had forecast a loss of 6 cents on revenue of $133.1 million. In the same period last year, Fastly reported a loss of 9 cents on revenue of $117.6 million.
Fastly stock forecast lowered due to price pressure
For 2024, Fastly lowered its revenue guidance from $585 million (16% growth) to $560 million (11% growth) at the midpoint of the forecast.
William Blair analyst Jonathan Ho said in a report: “The company lowered full-year 2024 guidance to reflect new pricing pressure from its top 10 to 15 customers. Pricing pressure came towards the end of the quarter as contract extensions resulted in lower than expected prices and the volume is increasing.”
At Raymond James, analyst Frank Louthan said in a report: “Since February, management has seen a shift in the market, with significant shifts in revenue and volume intentions from some of their largest customers. We believe this is another big reset for the company and will take a lot of time to recover.”
In Fastly’s earnings report, shares fell 27% in 2024.
Meanwhile, Cloudflare’s earnings are due after the market closes on Thursday. Additionally, Akamai reports earnings on May 9th.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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