Fastly entered this earnings day on a strong short run, with the stock up over the past week and month, then hit a wall. The share price fell about 13% to US$22.68 as investors reacted fast to the headline numbers.

The shock is that this edge cloud stock just printed what looks like a clean profitability step change. Revenue for Q2 came in at US$183.3m and Fastly delivered a net income of US$26.2m alongside record gross and operating margins. The market is treating that as a blip. The results read more like an inflection.

Is Fastly suddenly pricing in a lasting turnaround, or are investors paying too much for a stock that still reports losses and trades above the provided DCF value? Compare the current share price to the detailed assumptions in our valuation analysis for Fastly

Q2 2026 Earnings Summary

• Revenue (Q2 2026 vs Q2 2025): US$183.3m vs. US$148.7m (up about 23% year on year)
• Net Income / Loss (Q2 2026 vs Q2 2025, excl. extra items): loss of US$15.6m vs. loss of US$37.5m (loss narrowed year on year)
• Basic EPS (Q2 2026 vs Q2 2025): loss of US$0.10 per share vs. loss of US$0.26 per share (per share loss narrowed year on year)
• Gross Margin (Q2 2026 vs Q2 2025): 65.8% with the prior year level not specified (described as a record margin driven by mix and efficiency)

Prefer clear visual charts instead of another wall of earnings tables and commentary? See Fastly's full financial picture with an at-a-glance view of its recent profitability shift in the interactive company report for Fastly.

Fastly bull case leans on security and AI traction

Bulls argue Fastly can turn AI driven traffic and higher margin security and compute into a durable edge platform story. Q2 offers some proof points. Security reached US$41.7m and 23% of revenue with 43% year on year growth, which supports the idea that security is becoming a meaningful second engine alongside core delivery. Other products, largely compute, grew 69% year on year, which lines up with the thesis that AI and agentic workloads are starting to show up in spend. TTM net retention of 117%, up from 104% a year ago, suggests customers are expanding usage rather than treating Fastly as a one off tool. A record 65.8% gross margin and a 14.7% operating margin, plus six quarters of positive free cash flow, indicate the platform model is beginning to scale economically as well as technically.

Bear case focuses on volatility, concentration and expectations reset

The bear side claims Fastly is over reliant on episodic volume, concentrated customers and an AI story that could outrun actual usage. Q2 partly validates that concern. Management credits several live event spikes for the quarter, which means revenue quality is not purely run rate. The top 10 customers contributed 37% of revenue and one related group made up 11%. That keeps concentration risk front and center. Guidance also signals some moderation. Q3 revenue is guided to US$184m to US$190m, slower than the Q2 growth rate, and operating margin is guided below the Q2 level as OpEx growth resumes. The share price drop of about 13% on the print suggests investors are questioning how repeatable this mix of AI driven and event driven traffic really is, even with raised full year guidance.

Compare this internal progress with external expectations to see whether Wall Street thinks Fastly's margin shift and AI narrative justify the current reset in the stock price. Track where analysts stand today with the consensus price target analysis for Fastly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.