Fastly Stock Declines 27% YTD: Should You Buy, Sell or Hold?

Core Viewpoint - Fastly is experiencing significant challenges with revenue growth and customer retention, which raises concerns about its long-term stability, despite potential opportunities in the AI market through new product innovations [12]. Group 1: Stock Performance - Fastly's shares have declined 27.4% year to date, underperforming the broader Zacks Computer & Technology sector's decline of 8% and the Zacks Internet - Software industry's fall of 2.8% [1]. - In comparison, Digital Turbine's shares have surged 98.3%, while Inseego and Atlassian have seen declines of 5.4% and 10.2%, respectively [1]. Group 2: Revenue and Earnings - Fastly reported fourth-quarter 2024 revenues of $140.6 million, reflecting a 2% year-over-year growth, primarily due to stagnant network services revenues [2]. - For the first quarter of 2025, Fastly expects revenues between $136 million and $140 million, indicating a 3% year-over-year growth at the mid-point [5]. - The company anticipates revenues of $575 million to $585 million for 2025, suggesting a 7% year-over-year growth at the mid-point [6]. Group 3: Customer Retention Challenges - Fastly is facing significant customer retention challenges, with a net retention rate falling to 102% in the fourth quarter from 105% the previous quarter and 113% a year ago [4]. - The company lost 182 customers year over year and 577 in the last quarter, indicating ongoing retention issues and potential weaknesses in customer growth [4]. Group 4: Product Innovations - Fastly's fourth-quarter 2024 results highlight significant product innovations, including the AI Accelerator and advanced security solutions, which may enhance its competitive edge in edge computing [8]. - The AI Accelerator addresses performance and cost challenges in LLM and generative AI applications, supporting OpenAI's ChatGPT and Google Gemini, thereby creating revenue opportunities in the growing AI market [9]. - Fastly's new DDoS Protection service enhances its security portfolio by providing automated threat defense, which may drive customer adoption and retention [10]. - The introduction of Object Storage, an S3-compatible solution with zero egress fees, aims to reduce origin costs and enhance performance for data-intensive users, positioning Fastly for accelerated revenue growth [11].