Core Viewpoint - The current volatile stock market presents a prime opportunity for long-term investors to capitalize on significant price declines in major stock indexes [1][2]. Group 1: Investment Opportunities - Pfizer has been added to the portfolio with a cost basis of $23.47 per share, despite a significant drop in sales from COVID-19 products, indicating a buying opportunity due to investor shortsightedness [5][6][8]. - PubMatic has seen a doubling of investment with a cost basis of $9.29, benefiting from the shift of advertising dollars to digital platforms and strong cash flow generation [9][10][12]. - Sirius XM Holdings was purchased at $19.28 per share, leveraging its subscription-based revenue model which provides stability during economic downturns [13][15][16]. - Intel was added at $18.56, with expectations of a turnaround in its business despite being late to the AI market, supported by strong cash flow from CPU sales [18][20][21]. - BioMarin Pharmaceutical was acquired at $56.01, focusing on ultrarare diseases with high pricing power and projected sales growth from its drug Voxzogo [22][25]. - Fastly was added at $5.08, with a focus on the growing demand for cloud services and a strong revenue retention rate, indicating potential for future profitability [27][29][30].

Fastly (FSLY) FY Conference Summary Company Overview - Fastly has transitioned from a content delivery network (CDN) to an edge delivery platform, focusing on delivering high-quality user experiences for applications, websites, and streaming services [6][8] - The company emphasizes partnerships with customers to provide fast, safe, and engaging web experiences [6] Key Points Business Model and Strategy - Fastly's edge platform includes content delivery, edge security (DDoS, bot mitigation, web application firewall), edge compute, and observability [7] - The transition to a full edge platform has diversified Fastly's customer base beyond media and publishing to include high-tech, retail, e-commerce, hospitality, and healthcare [8] - The company reduced revenue concentration from 40% in top 10 accounts to 32%, indicating a successful diversification strategy [10] - Fastly achieved 17% growth outside the top 10 accounts last quarter, showcasing the effectiveness of its platform expansion [10] Financial Performance and Margins - A more diversified customer base is expected to lead to improved margin potential and customer retention [12] - The exit of competitors like Edgio, StackPath, and Lumen has created a favorable pricing environment for Fastly, enhancing gross margins and customer loyalty [14] - Fastly's security portfolio is anticipated to increase customer stickiness and improve gross margins as more customers adopt multiple products [28] Cybersecurity Developments - Fastly invested heavily in R&D for cybersecurity in 2024, launching new products such as bot mitigation and a turnkey DDoS solution [16][17] - The company aims to enhance its go-to-market strategy with strong leadership in sales and marketing focused on security [17] - Fastly's web application firewall, developed from an acquisition, offers high efficacy and automatic protection, reducing total cost of ownership for customers [20] AI and Edge Compute Opportunities - Fastly is exploring opportunities in AI, particularly in AI bot detection and providing infrastructure for training datasets [30][31] - The company launched an AI accelerator to lower costs and improve response times for AI applications [32] - Fastly's edge compute market is growing, with a reported 67% growth in serverless compute using WebAssembly technology [38] Market Trends and Customer Focus - There is a growing demand for high-performance solutions that enhance user experience, which aligns with Fastly's offerings [39] - Traditional enterprises are increasingly investing in sophisticated digital experiences, driving growth in Fastly's compute services [42] Additional Insights - Fastly's focus on delivering a complete edge solution positions it well against competitors who have exited the market due to high customer concentration and reliance on CDN revenue [14] - The company's strategy to integrate security with delivery services is expected to create a more defensible business model over time [26] - Fastly's ability to provide a seamless experience for dynamic content at the edge is crucial for attracting new customers and retaining existing ones [40]

Industry Overview - The artificial intelligence (AI) investment trend in the United States remains strong, with significant capital expenditure planned for AI infrastructure development, amounting to $325 billion by 2025, reflecting a 46% year-over-year increase in spending on the AI ecosystem [1][2] Company Insights Innodata Inc. (INOD) - Innodata is positioned as a key player in the AI sector by providing essential data for training advanced language models, with a long-term growth outlook supported by increasing demand for data services [6][10] - The company has launched a Generative AI Test & Evaluation Platform, enhancing its AI service offerings, and is expected to benefit from the growing need for data engineering in large language model development [8][9] - Innodata's expected revenue growth rate is 40.3%, while earnings are projected to decline by 19.1% for the current year [11] Fastly Inc. (FSLY) - Fastly offers infrastructure software for cloud computing and has introduced the Fastly AI Accelerator, which optimizes generative AI applications for developers [12][13] - The company operates an edge cloud platform that enhances application performance, requiring minimal code changes for developers [13] - Fastly's expected revenue growth rate is 8.7%, with earnings growth projected at 16.7% for 2025, and earnings estimates have improved by 10% over the last 30 days [14] AeroVironment Inc. (AVAV) - AeroVironment specializes in robotic systems and services for government and commercial clients, integrating AI and computer vision into its products [15][16] - The company provides a range of unmanned systems and related services, primarily to the U.S. Department of Defense and allied governments [16][17] - AeroVironment's expected revenue growth rate is 26.1%, with earnings growth projected at 33.6% for the current year [18]

Core Insights - Cerby has announced a $40 million Series B funding round led by DTCP, with participation from existing investors including Okta Ventures, Salesforce Ventures, and Two Sigma Ventures [1][9] - The company aims to expand its identity security automation platform in response to increasing demand for solutions that secure disconnected applications [4][5] Company Overview - Cerby is the first platform to automate the full identity lifecycle for disconnected applications, covering aspects from credentials and authentication to lifecycle management and privileged access [3] - The platform integrates with existing Enterprise Password Management (EPM), Identity and Access Management (IAM), Identity Governance and Administration (IGA), and Privileged Access Management (PAM) systems, providing centralized access controls and automating manual security tasks [8] Market Demand - The proliferation of SaaS, cloud, mobile, and on-premise applications has significantly expanded the enterprise attack surface, increasing the need for scalable and advanced identity security solutions [2] - Cerby is focusing on growth in key markets such as Germany, France, the UK, and strategic regions in the Middle East, where regulatory pressures and enterprise complexity are driving demand for its solutions [5] Growth Metrics - Since its Series A funding round less than 20 months ago, Cerby has increased its Annual Recurring Revenue (ARR) by 10 times and expanded its customer base by 5 times, now automating identity workflows across more than 2,000 applications and supporting over 100 organizations globally [6]

Market Overview - The AI-driven bull run of 2023 and 2024 faced significant challenges in 2025 due to overstretched valuations, stock inflation, weak economic data, geopolitical conflicts, and concerns over the Trump administration's trade policies, impacting confidence in equities [1] - The technology sector, particularly AI-focused stocks, has been the most affected, but current low valuations present investment opportunities [2] Recommended AI Stocks - Five Internet-based AI stocks with favorable Zacks Rank recommended for purchase on the dip include Arista Networks Inc. (ANET), Fastly Inc. (FSLY), Five9 Inc. (FIVN), HubSpot Inc. (HUBS), and Twilio Inc. (TWLO), all carrying a Zacks Rank 2 (Buy) [3] Arista Networks Inc. (ANET) - Arista Networks is positioned well with a robust network architecture for cloud and AI networking, focusing on proactive products, zero-touch automation, and predictive operations [6] - The company’s AI suite enhances job monitoring and performance issue resolution, with expected revenue and earnings growth rates of 18.7% and 12.8% for the current year, respectively [8] - ANET is currently trading at a 31.6% discount from its 52-week high price [8] Fastly Inc. (FSLY) - Fastly provides cloud computing infrastructure and recently launched Fastly AI Accelerator, optimizing generative AI applications [10][11] - The company has expected revenue and earnings growth rates of 8.7% and 16.7% for 2025, respectively, and is trading at a 40.5% discount from its 52-week high price [12] Five9 Inc. (FIVN) - Five9 offers intelligent cloud software for contact centers, benefiting from the growing adoption of AI tools [13][15] - The expected revenue and earnings growth rates for the current year are 9.6% and 11.7%, respectively, with a 47.6% discount from its 52-week high price [16] HubSpot Inc. (HUBS) - HubSpot provides a cloud-based CRM platform and is experiencing steady adoption from enterprise customers, driven by its AI features [17][18] - The expected revenue and earnings growth rates for the current year are 15.4% and 14.9%, respectively, with a 30.2% discount from its 52-week high price [19] Twilio Inc. (TWLO) - Twilio focuses on generative AI offerings and has launched Customer AI technology to enhance customer engagement [20][21] - The expected revenue and earnings growth rates for the current year are 7.8% and 22.6%, respectively, with a 25.3% discount from its 52-week high price [24]

Group 1 - The current market environment is characterized by high volatility, creating a strong incentive for investors to actively manage their portfolios [1] - To outperform the stock markets, investors should consider overlooked stocks, especially in the small and mid-cap sectors [1] Group 2 - Gary Alexander has extensive experience in covering technology companies and advising startups, contributing to his insights on industry trends [2] - He has been a contributor to Seeking Alpha since 2017 and his work is featured in popular trading apps like Robinhood [2]

Core Insights - Fastly reported revenue of $144.47 million for Q1 2025, marking an 8.2% year-over-year increase and a 4.47% surprise over the Zacks Consensus Estimate of $138.29 million [1] - The company posted an EPS of -$0.05, consistent with the previous year, and exceeded the consensus EPS estimate of -$0.06 by 16.67% [1] Financial Performance - Fastly's shares have returned +16.6% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The company currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3] Customer Metrics - Fastly's enterprise customer count stands at 595, slightly below the average estimate of 600 from two analysts [4] - The total customer count is 3,072, which is lower than the estimated 3,140 by two analysts [4] - The last 12-month net retention rate (LTM NRR) is 100%, compared to the average estimate of 101.2% from two analysts [4]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $144.5 million, exceeding the guidance range of $136 million to $140 million, with an 8% year-over-year growth compared to 2% in Q4 2024 [8][23] - Operating loss was $5.8 million, better than the guidance range of $11 million to $7 million [12][27] - Gross margin for the quarter was 57.3%, slightly above projections but down from 59.6% in Q1 2024 [11][26] - Positive free cash flow of $8 million was generated, marking the first positive cash flow in eight quarters [13][29] Business Line Data and Key Metrics Changes - Network services revenue was $113.2 million, growing 7% year-over-year [23][24] - Security revenue also grew 7% year-over-year to $26.4 million, while other products, primarily compute, contributed $4.8 million, growing 64% year-over-year [24][20] - The enterprise customer count increased by 3% year-over-year, with average enterprise customer spend growing 4% quarter-over-quarter to $907,000 [10][9] Market Data and Key Metrics Changes - Revenue outside the top 10 customers grew 17% year-over-year, indicating revenue diversification [11][10] - The trailing twelve-month net retention rate was 100%, down from 102% in the prior quarter [25] Company Strategy and Development Direction - The company is focused on go-to-market transformation, emphasizing customer acquisition and cross-selling opportunities [9][14] - A new segmented go-to-market strategy has been implemented to enhance customer engagement and drive revenue growth [13][15] - The security portfolio has been expanded, with a focus on cross-selling security products to existing customers [19][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth despite macro uncertainties, expecting to achieve operating profit in the second half of 2025 [21][35] - The company is taking a cautious approach to guidance, particularly regarding potential impacts from TikTok's U.S. operations [31][32] - Management noted that they have not seen significant changes in buyer behavior or demand patterns, maintaining a conservative outlook for the rest of the year [45][46] Other Important Information - The company plans to attend several conferences in Q2 2025 to enhance visibility and investor relations [7] - The adjusted EBITDA for Q1 2025 was $7.8 million, an increase from $4.9 million in Q1 2024 [28] Q&A Session Summary Question: What is driving incremental customer demand in network services? - Management highlighted strong customer acquisition in strategic verticals and improved execution from the sales team [38] Question: What percentage of customers are using WAF, and what is the adoption rate for DDoS and bot mitigation? - Management indicated that almost half of customers use multiple product lines, with WAF adoption being lower, suggesting significant growth potential [40][41] Question: What drove the 64% growth in the compute and observability business? - The growth was primarily driven by demand for dynamic user experiences and innovative storage solutions [43] Question: What is the outlook for pricing stability in the market? - Management noted improvements in the pricing environment, expecting stabilization back to high teens percentage declines [61][64] Question: What are the drivers behind the sequential increase in RPO? - Strategic renewals, sales incentives, and the success of the packaging strategy contributed to the strong RPO growth [49][50] Question: How is the company addressing potential geopolitical risks with TikTok? - Management expressed optimism about the ongoing relationship with TikTok while remaining cautious about U.S. operations [58] Question: What is the expected growth rate for security products? - Management believes security growth can reach mid-teens rates, with significant potential for acceleration in bot and DDoS products [81]

Financial Data and Key Metrics Changes - Q1 2025 revenue was $144.5 million, exceeding guidance of $136 million to $140 million, representing an 8% year-over-year growth compared to 2% in Q4 2024 [6][7][24] - Gross margin for Q1 2025 was 57.3%, slightly above projections but down from 59.6% in Q1 2024 [10][27] - Operating loss was $5.8 million, better than the guidance range of $11 million to $7 million [11][28] - Positive free cash flow of $8 million was generated, marking the first positive cash flow in eight quarters [12][30] Business Line Data and Key Metrics Changes - Network services revenue was $113.2 million, growing 7% year-over-year [24] - Security revenue was $26.4 million, also growing 7% year-over-year [24] - Revenue from other products, primarily compute, grew 64% year-over-year, contributing $4.8 million [20][24] Market Data and Key Metrics Changes - Revenue outside the top 10 customers grew 17% year-over-year, indicating revenue diversification [10][24] - The top 10 customers represented 33% of revenue, down from 38% in Q1 2024 [9][10] - The trailing twelve-month net retention rate was 100%, down from 102% in the prior quarter [26] Company Strategy and Development Direction - The company is focusing on a go-to-market transformation, enhancing customer acquisition and cross-selling efforts [7][12] - Emphasis on diversifying revenue sources and reducing reliance on top customers is evident, with a strategy to grow enterprise customer mix [10][12] - The security portfolio has been expanded, with three core offerings now available, aiming for increased penetration in existing customer accounts [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2025, expecting to achieve operating profit [21][37] - Despite macro uncertainties, no significant changes in buyer behavior or demand patterns have been observed [21][49] - The company raised its 2025 revenue guidance to $585 million to $595 million, reflecting a 9% annual growth at the midpoint [36] Other Important Information - The company is attending several conferences in Q2 2025 to enhance visibility and investor relations [5] - The impact of TikTok's U.S. operations on revenue has been cautiously managed, with guidance excluding potential revenue from TikTok after June 19 [33][34] Q&A Session Summary Question: What is driving incremental customer demand in network services? - Management noted strong customer acquisition in strategic verticals and enhanced sales execution under new leadership [39][40] Question: What percentage of customers are using WAF, and what is the adoption rate for DDoS and bot mitigation? - Approximately half of customers use multiple product lines, with WAF adoption being lower, indicating significant growth potential [43][44] Question: What drove the 64% growth in compute and observability? - The growth was primarily driven by demand for dynamic user experiences and innovative storage solutions [46][47] Question: What is the outlook for pricing stability in the market? - Management indicated a return to a more favorable pricing environment, expecting stabilization in pricing dynamics [64][65] Question: What are the drivers behind the sequential increase in RPO? - Strategic renewals, sales incentives, and the success of the packaging strategy contributed to the record RPO growth [52][53] Question: How is the company addressing potential geopolitical risks with TikTok? - Management expressed optimism about maintaining a strong relationship with TikTok and leveraging opportunities across the portfolio [60][61] Question: What is the expected EBITDA outlook for the year? - Management expects to see positive EBITDA for the year, particularly in the second half [78] Question: Why is security growth currently slow? - Management believes there is significant potential for growth in the security segment, particularly with new product offerings [82][83]

Financial Performance - For the three months ended March 31, 2025, revenue was $144.5 million, an increase of 8% from $133.5 million in the same period of 2024[154]. - The company incurred a net loss of $39.1 million for the three months ended March 31, 2025, compared to a net loss of $43.4 million in the same period of 2024[154]. - Total revenue for the three months ended March 31, 2025, was $144.5 million, an increase of 8% from $133.5 million in the same period of 2024[200]. - Gross profit for the three months ended March 31, 2025, was $76.8 million, with a gross margin of 53%, down from 55% in the same period of 2024[197][199]. - The net loss attributable to common stockholders for the three months ended March 31, 2025, was $39.1 million, compared to a net loss of $43.4 million in 2024[197]. - Interest income fell to $3.0 million, a decrease of 23% from $3.8 million in Q1 2024, attributed to lower interest rates and investment balances[211]. - Interest expense surged to $3.2 million, an increase of 448% from $0.6 million in Q1 2024, primarily due to the coupon interest of the 2028 Notes issued in December 2024[212]. - As of March 31, 2025, the company had cash and cash equivalents totaling $307.3 million, indicating a strong liquidity position[215]. - Net cash provided by operating activities was $17.3 million for the three months ended March 31, 2025, compared to $11.1 million in Q1 2024[225]. Customer Metrics - The top 10 customers contributed 32% of total revenue for the trailing 12 months ended March 31, 2025, down from 38% in 2024[154]. - The total customer count decreased to 3,035 as of March 31, 2025, down from 3,290 in 2024, indicating a decline in customer adoption[175][177]. - The enterprise customer count increased to 595, contributing 93% of total annualized current quarter revenue, up from 577 customers contributing 91% in the previous year[178]. - The Last-Twelve Months Net Retention Rate (LTM NRR) was 100.0% for the trailing twelve months ended March 31, 2025, down from 114.0% in 2024, reflecting challenges in customer retention[179][180]. Revenue Breakdown - Network Services revenue was $113.3 million, a 7% increase from $106.0 million in the same period of 2024, driven by growth in usage from existing customers[200][202]. - Security revenue also increased by 7% to $26.4 million, compared to $24.6 million in the prior year[200]. - U.S. revenue reached $110.5 million, accounting for 77% of total revenue, a 12% increase from $98.5 million in Q1 2024, while international revenue decreased by 3% to $33.9 million[204]. Expenses and Investments - Research and development expenses as a percentage of revenue were 26% for the three months ended March 31, 2025, compared to 29% in the same period of 2024[171]. - Research and development expenses were $37.4 million, accounting for 26% of revenue, a decrease from 29% in the previous year[197][199]. - Cost of revenue rose to $67.7 million, an increase of $7.4 million or 12% compared to $60.3 million in Q1 2024, primarily due to higher bandwidth costs[205]. - Total operating expenses decreased by 4% to $114.98 million from $119.49 million in Q1 2024, with general and administrative expenses down 11%[207]. - The company expects to continue incurring operating losses in the foreseeable future due to ongoing investments and strategic initiatives[217]. Strategic Initiatives - The company plans to continue investing in its platform and network infrastructure to support revenue growth and customer needs[171]. - The company aims to expand its customer base across diverse industry verticals by enhancing product experience and leveraging its partner ecosystem[157]. - The company is focused on increasing its sales and marketing efforts globally, particularly targeting enterprise customers[168]. - The company intends to expand its international presence, which may increase complexity and costs[166]. - The company has acquired Glitch to enhance its product offerings and support developer project management[171]. Risk Factors - The company is closely monitoring geopolitical events that could impact its business, particularly concerning customers operating in regions affected by conflict[167]. - The company does not currently engage in hedging activities to reduce exposure to currency fluctuations, although it may consider this in the future[242]. - The company identified certain triggering events for goodwill impairment, including a decrease in stock price and market capitalization, but concluded that fair value exceeds carrying amount[237]. - A hypothetical 10% change in interest rates or foreign exchange rates would not have had a material impact on the company's financial statements[241][242].