Fastly, the leader in edge cloud, fell 38% in a single day! The slowdown in growth overshadowed the performance exceeding expectations and was unable to escape the impact of "AI disrupting everything".

Focus on the US software company Fastly (FSLY.US) known for its edge cloud platform/content delivery network (CDN), which saw its stock price plummet by over 38% in Thursday's trading. While the company's first-quarter performance exceeded expectations, its performance outlook indicated a significant slowdown in growth for the full year, highlighting the continued impact of the "AI disrupts everything" logic brought on by leading AI companies such as Anthropic and OpenAI on the fundamental growth prospects of traditional software companies. In addition, compared to the market's extremely pessimistic pricing with a single-day stock price drop of over 38%, most Wall Street senior analysts hold a "neutral" or more positive investment stance towards Fastly's performance results and fundamental outlook. Fastly is an edge cloud platform/content delivery network (CDN)/network security company, but its core market focus is not as a traditional SaaS software vendor, but rather as a provider of "edge network infrastructure" close to end users: placing websites, apps, APIs, videos, live streams, software downloads, dynamic content, etc. on global edge nodes to accelerate delivery, while also providing security protection and edge computing capabilities. Fastly's official website states that its platform is used to build, protect, and deliver fast, secure, and scalable websites and applications. Fastly is comparable to companies like Cloudflare and Akamai, but Fastly emphasizes high performance, programmable edge cloud, developer control capabilities, and a security product portfolio. In the era of AI, it is positioning itself as the most core beneficiary of AI traffic, Agentic AI, API/bot-heavy traffic, inference acceleration, and edge caching. However, its revenue base still mainly comes from traditional network delivery services, and the "AI traffic narrative" has not yet created strong revenue and profits. Fastly's main business can be divided into three parts: Network Services/CDN, application delivery, video on demand, live streaming, media acceleration, API acceleration, etc., which are the main revenue sources; Security, including Web application firewall, bot management, API security, DDoS protection, etc.; Compute/edge computing and other businesses, allowing developers to run code, carry out real-time personalization, caching, low-latency applications, and AI-related workloads on Fastly's edge nodes. Fastly's latest financial report data shows a revenue of $173 million in Q1, a 20% increase year-on-year, higher than the market's expectations of around $171.8 million; adjusted diluted EPS was $0.13, also higher than the market's expectations of around $0.09, appearing to be a "double-exceeding expectations" in terms of revenue and profits. However, the company's full-year revenue guidance range is $710 million to $725 million, corresponding to a 15% increase; Q2 revenue guidance is $170 million to $176 million, corresponding to a 16% increase year-on-year. In other words, although the midpoints of these two performance outlook ranges are basically in line with market expectations, following the 20% growth in Q1, the management's guidance implies a slowdown in growth, directly impacting the market's expectations of a reacceleration driven by "AI traffic applications." Wall Street institutional investors are not punishing the company for "missing consensus guidance," but rather for the "lack of highlights in AI traffic and security businesses to prevent a slowdown in full-year performance" under the "AI disrupts everything" logic. AI can really "disrupt everything"! Fastly's reliance on the "AI traffic narrative" is no longer a panacea The AI agent tool launched by Anthropic in February this year can be said to be a major catalyst for the panic selling of software stocks. More accurately, it's not that Anthropic "alone disrupted the entire software stock market," but rather its Claude agent AI tool made the market suddenly realize that large model companies are completely overturning the enterprise application layer from being the "underlying model supplier," potentially eroding the profit pools of traditional software companies in areas such as law, sales, marketing, data analysis, and code. Fastly's single-day stock price drop of 38% can be seen as a reflection of the intensified differentiation of traditional software and internet infrastructure companies in the AI era and under the logic of "AI disrupts everything": companies that can convert AI-related demands into verifiable revenue acceleration continue to enjoy a valuation premium, while software companies that are unable to demonstrate that their core business can reaccelerate under the influence of AI, even if their financial reports exceed expectations, will still be reevaluated by the market based on the "growth peak" logic. Despite the growth slowdown looming, can exceeding financial reports save Fastly? As of Thursday's closing in the US stock market, Fastly's stock price plunged by 38.23% to $19.50. Analysts Param Singh and Jake Heimowitz from Oppenheimer stated in an investor report, "The company slightly raised its full-year revenue expectations (to a year-on-year growth of about 15%), but given the first-quarter revenue performance (20% year-on-year growth), this indicates that the full-year growth will gradually slow down." "The guidance includes double-digit traffic growth, but some of it is offset by mid-single-digit pricing headwinds, with delivery/network business expected to only grow by 9% to 10%." Oppenheimer maintains a "neutral" rating for the stock and waits to see strong revenue and profit realization associated with AI traffic from intelligent agents before turning bullish. The Piper Sandler analyst team led by James Fish said in a report, "The disappointing aspect for investors is the core delivery business, which saw transaction traffic lower than the expectations of most analysts, and pricing remains stable (but will face more challenging year-over-year comparisons as the year progresses)." Fish added, "We are encouraged by Fastly's ability to secure larger-scale minimum commitments, the positive competitive environment continues, and it may even enter the broader 'inference as a service' market, but we expect the stock to be weighed down by significant concerns about whether growth has peaked, especially compared to other growth assets that still trade at a premium based on enterprise value/core business revenue/growth." Piper Sandler reaffirmed its "neutral" rating and lowered its target price from $30 to $27. Meanwhile, RBC Capital Markets maintains its "sector perform" rating and lowered its target price from $20 to $18. In a report, the analyst team led by Rishi Jaluria from RBC stated, "Taking a step back, the first quarter performance was robust, and we are encouraged by the acceleration of the security business and the continued improvement in profitability." "However, before turning towards a more constructive bullish view, we continue to look for signs of stabilization in network services under the influence of AI traffic." Additionally, the well-known Wall Street investment firm KeyBanc Capital Markets remains positive about the stock, maintaining a "buy" rating and nearly doubling its target price from $14 to $27. This financial company is impressed by Fastly's growth in the security business segment. Analyst Jackson Ader from KeyBanc stated, "Security business revenue grew significantly by 47.0% to $38.8 million, exceeding our and market consensus expectations; management emphasized the breadth of its relatively new security product portfolio." "In addition to traditional WAF products, Fastly also saw strong growth momentum in Siasun Robot & Automation management, API security, and DDoS, which helps drive revenue expansion from new customers. As for other business types revenue, mainly consisting of its computing business, it also saw a significant increase of 67.0% to $8 million."