Fastly article on Seeking Alpha

First linked to by Starrob on the paid board. Here’s my commentary:

Fastly: Still More Potential Ahead…

First, revenue growth rates:
2019 Q1: 40%
2019 Q2: 34%
2019 Q3: 35%
2019 Q4: 44%
2020 Q1: 38%
2020 Q2: 62%
and, company mid-point guides for:
2020 Q3: 49%
2020 Q4: 42%

I don’t know the history of Fastly’s guidance, but with a new CEO recently in place, the trend might not matter. It’ll be interesting to see if the company “under promises/over delivers” or what.

Enterprise customers are 85% of Fastly’s business, and their spend has consistently increased:
CY 2017: $507k/customer
CY 2018: $536k/customer
CY 2019: $607k/customer

Fastly also provided a QoQ example for the last quarter:
2019 Q2: $557k/customer
2020 Q2: $716k/customer

As a result, Fastly’s DBNER (Dollar-Based Net Expansion Rate) was 137% in 2020 Q2, up from 133% in Q1.

The SA author, Michael Wiggins De Oliveira, then ranks a number of companies discussed here by their DBNER:

Twilio: 143$
Slack: 132%
Smartsheet: 132%
Fastly: >130%
DataDog: >130%
Zoom: >130%
Elastic: >130%
Alteryx: 128%
Cloudstrike: 124%
Okta: 121%
PagerDuty: 121% 120%
Pluralsight: 120%
MongoDB: 120%
Zscaler: 119%
Docusign: 119%
Anaplan: 117%
Cloudflare: 117%

He compares FSLY’s valuation to DDOG’s, with DDOG growing revenue at under 40% yet is still priced 34 times its 2021 revenue.
He also compares to NET (Cloudflare), and finds the two similarly valued.

Finally, he prefers Fastly over Cloudflare because Cloudflare is burning through significantly more free cash flow than Fastly, despite having more revenues to offset its losses with.

My own opinion is that Fastly has better technology than Cloudflare, which is saying a lot. I know better tech doesn’t always, or even mostly, translate into better business results, but with its new CEO I think Fastly has a good shot at leveraging its technology advantage into a business advantage, especially with the upcoming Compute@Edge, which surprisingly isn’t mentioned in the article at all.


Well if he compares with DDOG revenue at 40% growth…he compares wrong. DDOG reported 68% growth yoy last earnings call.


Well if he compares with DDOG revenue at 40% growth…he compares wrong. DDOG reported 68% growth yoy last earnings call.

I didn’t summarize accurately. Here’s what the author says:

What’s more, Datadog is expected to grow its revenues into 2021 at sub 40% revenue growth rates, even though it’s still priced 34 times its 2021 revenues.

So, he’s looking to future revenue growth, not past. I don’t know that he’s right.


I think both FSLY and NET are really well positioned and keep pushing further…

FSLY is better at SW driven, cutting edge tech… focused on performance delivered to top web companies…
NET is better at menu of tech delivered to broad base of customers and make it easy to use, including security…

They barely compete with each other or legacy CDNs or big cloud players… they are really blazing new trails in cloud compute (edge based) and growing a new market / revenue thats driven by digital transformation…