Somebody asked me recently about what I thought of FSLY, and I summed up my points and thought it would be useful to share here as I essentially did a NET comparison.
Forgive the incomplete sentences
Re/FSLY question from Lee. It’s hard to look at FSLY without naturally drawing comparisons to cloudflare. As they are both CDNs trying to moving computing (applications) to the edge and off of servers. They are really the only two in this area, although there are lots of other CDNs (Akamai and Zscaler are big ones), neither of them are focusing on edge computing.
So, in a world of limited resources I choose to compare the two and invest in the better.
Leadership: Bixby preannounced a downside revenue number in his second quarter as CEO, was flippant in the reasoning, and Prince has consistently done what Wall Street expects, beat and raise.
Product: FSLY’s serverless offering is two years behind NETs, and still in beta. NET just announced 50,000 new developers wrote their first code on their edge network in Q4–doubling from Q3. NET is absolutely dominating in developer awareness. Both are optimized for cloud, but FSLY is not optimized for developer customization. Both secure workloads, but FSLY is perimeter security, NET is zero trust (secures traffic even when inside the “firewall”).
Market: FSLY targets large enterprise with big data demands–their offering is cost/performance superior for video, but not much else. NET initially targeted SMBs but is swiftly moving upmarket. NET increased large customers (>$100k ARR) by 13% sequentially last Q, and added 10,000 new paying customers in the quarter (10% seq growth). This customer growth is almost 100x FSLY new customers (Q3 115 new customers or so). 100x!! I get it’s smaller customer size, but for a new product/technology domain, I want the company that has developer mindshare.
Price model: FSLY usage based, NET subscription based. So, harder to gauge FSLY revenue growth.
Fastly also publishes a very misleading dollar-based net expansion rate mostly to grab headlines, (its like 147%) that excludes customers that churn. Seems kinda fishy. They do publish a comparable net retention rate (121%) that is slightly better than NETs (119%). Just dislike metrics that are misleading.
Valuation: only advantage FSLY really has. Similar growth next year, about 40% each, although I expect FSLY to actually decelerate faster given usage-based model (less WFH), and NET to maintain. So forward P/S of 30x FSLY and 45x NET.
So, lots in there. FSLY not bad generally; if I owned 50 stocks I’d probably own FSLY, but owning only eight stocks, no room for them.