Here's what I did about Fastly

Here’s what I did about Fastly. I’m sure that plenty of you will disagree with me, and I acknowledge that I may be dead wrong, but here’s what I did, and why!

Please remember that I’m not a techie. I’m just going on common sense, and here were my reasons: I still think that the key thing is that Fastly added 7 enterprise customers last quarter and Cloudflare added 80 in the same quarter. That tells the whole story. Simple and easy beats “better tech” but complicated and harder to implement. Fastly’s bump in growth to 62% last quarter came just from increased usage by their existing customers, due to the sudden work from home (WFH). They even told us that usage wouldn’t be growing like that in this quarter but we thought they were sandbagging. We were wrong!

Their customers are all the big, technically sophisticated companies that have a lot of developers on staff (who can figure out the unusual computer language that Fastly chose to use), but they don’t seem to be able to sign up the rest of the world, which is not technologically prepared for complicated, and which Cloudflare is gobbling up. And Cloudflare has a two year headstart on the compute at the edge, while Fastly is still in beta, and Cloudflare seems to be barreling into other new areas as well.

I sold my entire Fastly position and put most of it into Cloudflare, which was down 7% to 10% for NO REASON at all. Their revenue isn’t based on usage. They maintained 48% growth last quarter, the same as what they had the quarter before, when Fastly was at 38%, before their artificial usage bump to 62% last quarter, and now it looks like Fastly is going back to their normal 40% growth this quarter (70 million over 50 million is 40%). I also put part of the money into Docusign.

Please remember that I may be totally wrong about all of this!!!




A couple of you reached out on FSLY yesterday. I just received two more messages alerting me that Saul posted his thoughts and asking for mine.

First, here’s the TL;DR version (go ahead, it’s worth it):

If anyone prefers the nitty gritty, the first draft of my recap is below:

FSLY – Oh, Fastly. :slightly_frowning_face:

Fastly started October in fine fashion but ended on a more disappointing note. The month began with a nice little boost after FSLY closed the Signal Sciences acquisition (…). The momentum continued when it seemed to draw additional attention for its recent Google Cloud collaboration. The official partnership was announced September 10, but the market seemed more excited about an October tweet and company web post with a few more details ( The stock quickly spiked almost 40% over two weeks before plummeting back to Earth on 10/14. The impetus was a pre-announcement that Q3 revenue would fall short of FSLY’s previous guide (…). The new range was $70-$71M from $73.5-$75.5M. Management also withdrew prior guidance for the year. Two customer-specific factors were noted:

• Due to the impacts of the uncertain geopolitical environment, usage of Fastly’s platform by its previously disclosed largest customer did not meet expectations, resulting in a corresponding significant reduction in revenue from this customer.

• During the latter part of the third quarter, a few customers had lower usage than Fastly had estimated.

The first point suggests management had limited feel for its TikTok business, which is totally understandable given the recent machinations between TikTok and the US government. The second suggests it also lacked insight into some of its other business, which is much more concerning. That is not a good look, and to be blunt is inexcusable given they already knew about the TikTok uncertainty. I understand usage-based pricing might be harder to estimate, but that hasn’t stopped Twilio or others from beating or even raising guidance as they go.

And there’s the rub. The need for these high growth companies to successfully play the beat-and-raise game is one of the worst kept secrets on Wall Street. Management botching this so quickly after its surprising Q2 is a significant misstep. In less than a quarter FSLY rebranded itself from a 60%+ grower with interesting tailwinds and an intriguing new product to a likely low-40’s grower which might have seen a one-time blip and now had uncertainty surrounding management’s grasp of the business. Those might be subtle differences, but in my opinion Fastly’s story had changed enough to mean something. Apparently, that something was a ~30% haircut afterhours.

I initially considered trimming before ultimately choosing to exit completely while the smoke cleared. Fastly’s surprising Q2 had earned the stock a top-tier multiple. This equally surprising miss not only vaporized that premium but instantly switched FSLY’s general vibe from one of positivity to uncertainty. Guiding down prior to earnings is simply not what top-notch growth companies do. This was a significant gaffe by rookie CEO Joshua Bixby, and my conviction level dropped accordingly. First, it was hard to think I would be wowed when Fastly reported on 10/28. Second, I deduced any future guides would likely be extra prudent (and therefore less attractive) since management would have no interest in screwing things up again. Putting it all together, I decided to book my gains at ~$90 and reassess after management had the chance to explain itself.


  • No regrets at all after sleeping on it.

  • I’ll tack on more comments after earnings but doubt it will be exciting enough to get me back in.

  • I am fully aware of recency bias (…), but my hesitation when I had similar feelings after AYX’s rough quarter cost me money. Will another shoe drop with FSLY? I have no idea. I just know I am not comfortable sticking around to find out.

  • I have no reason to hang on to FSLY when there is a perfectly acceptable 100%+ grower sitting at the top of my watch list (hello, Peloton!). Having such an obvious alternative is another reason why I decided to sell rather than trim. I haven’t bought PTON yet but anticipate starting a position in the not too distant future.


I feel uneasy since yesterday when fastly news came out, until I read Saul’s post today. Can’t agree more, now made up my mind to exit and switch ship to NET

Hi Everyone,

I’m new to the board and haven’t wanted to put together a post until I could add value to the discussion.

I started active investing in September and while attempting to complete my own due diligence, FSLY was the one stock on the board back in September that felt off to me. I didn’t love the TikTok play in general but the thing that stood out to me was the lawsuit filed against them on behalf of investors (From May 6 - August 5) for misleading statements regarding their guidance. Yesterday’s press release was opaque as well, so I feel that their management now has a trend for less than transparent information. Like most folks, I saw that NET was trading lower out of “sympathy” of the FSLY news so I decided to route my bi-weekly contribution to buy up more shares. Knowing that 14% of internet traffic goes through NET servers, I agree with Saul’s assessment that NET looks more stable and that today presented a good buying opportunity.



Guiding down prior to earnings is simply not what top-notch growth companies do.

Hi Stocknovice,

From the press release, they were required to disclose.


Guiding down prior to earnings is simply not what top-notch growth companies do.

Hi Stocknovice,

From the press release, they were required to disclose.

Point well taken and fully conceded. Here’s my correction:

Disclosing an upcoming revenue miss prior to earnings is simply not what top-notch growth companies do.

In the big picture, management’s misjudgment of its future business is the issue at hand even if it had been allowed to wait all the way until the earnings release to give us the bad news.


Excellent discussion here, and I agree with Stocknovice and Saul. The main concern for me (besides the obvious revenue issues) is how management handled this.

The communications around this were not good, and the fact that FSLY misjudged its future business even though they surely know the whole analyst/guidance game is a concern.

It’s very possible that FSLY recovers and does extremely well after this (even in the short term). But IMHO we’ve got too many other good companies/alternatives available to wait around and see.

I exited my very small FSLY position today <1% (it was only there as a placeholder for more research).

And yes, Stocknovice - you should definitely look into PTON more. I researched it in early September and added throughout September and early this month.


HiHi, a list of what a Fund bought or sold is just a junk post and will be deleted. Please don’t post things like that.

PS You said “Ark just bought 3 million shares today.”

That’s wrong!!! They bought a tenth of what you stated (FASTLY INC 304,300). That’s three hundred thousand shares, not three million. It makes up less than 1% of the fund and you don’t know if they are investing in it, or hoping to sell it at a small profit in a week. It’s a waste of space on our board.



I appreciate this discussion and thank you Saul and others who have shared not only your thoughts but what you did as a result.

So their guidance is off…

Saul made a great point about the # of enterprise clients they picked up compared to NET…

But I can’t help looking at the history with AYX and LVGO. The former with a lower guidance report got smashed only to make great progress in rising back up in relatively short period.

And LVGO knocked to the ground on acquisition news, again to rise back up.

Offringa at SSI, Muji and many others who understand the tech side have been very clear believers in Fastly and it’s tech advantage and power.

Has that really changed significantly? Is the market over reacting? Or is there simply better and stronger companies to move money into?

Appreciate your thoughts on this.


Offringa at SSI, Muji and many others who understand the tech side have been very clear believers in Fastly and it’s tech advantage and power.

Has that really changed significantly? Is the market over reacting? Or is there simply better and stronger companies to move money into?

I also closed my full Fastly position despite closing at a profit and having been bullish for some time. In addition to what others have mentioned, I follow the mantra “When in doubt, get the hell out.” IMHO, there are too many quality investments to be losing sleep over one. I still think there is a good chance Fastly will do everything I previously thought it would, but my conviction has been sufficiently tested through downward revisions, unimpressive enterprise customer gains, and how management has handled these recent changes.

With strong players like ZM and CRWD, I would rather just allocate that money to these higher conviction positions or others than to worry about if Fastly will regain its prior traction.


But I can’t help looking at the history with AYX and LVGO.

None of us can keep from doing this. However, it’s only half the equation. Where you redeploy the money is MUCH more important. I sold both the names above. I also dumped most of it into ZM, CRWD and TWLO. ZM alone made this the right decision, but all three have outperformed LVGO since then (I’m too lazy to run the numbers on AYX, but am 100% sure ZM has destroyed AYX as well).

GauchoChris explains it perfectly in our recent thread on OKTA:…

Don’t get hung up on what could have been, especially if what “is” might be even better. Context matters a ton in this case.


Fastly’s last conference call had the shortest prepared remarks sections I have ever seen for a public company. I believe it was roughly 7 minutes, before they started taking questions. Something felt off about that, in addition to adding only 3 net new enterprise customers.

I think Cloudflare may be winning customers from them based off pricing and other factors. Compare the conference call of Cloudflare which gave a ton of extensive detail on their business, both technical, financial, and sales side.

Also wondering why the usage based model is suddenly hurting Fastly when it’s helping Twilio still? Twilio had to make the opposite move of revising guidance up mid quarter.

It is also concerning that image compression on TikTok’s side can lower their bill that dramatically. I was under the impression they had purchased a suite of solutions, rather than most of the bill being tied to the size of the images they are serving out.

I’m also out of Fastly now.


To support what StockNovice just wrote, here are a couple of quotes from the Knowledgebase.

We all often worry when stocks we have sold go up. I try to ignore them and figure that once they are sold they don’t matter any more. Here’s a great quote from Huddaman: I don’t really need to be right for the stocks I sell, I just need to right about the stocks I own." Boy! Doesn’t that really say it all! It simply doesn’t matter what happens to a stock after you sell it. You can’t hold all the stocks in the market. Some stocks you don’t hold are going to go up. A lot! So what!!! The only thing that matters is what the stocks you are holding do!

You don’t have to be right about the stocks you sell, just the ones you hold in your portfolio.

It simply doesn’t matter what happens to a stock after you sell it. The only thing that matters is what happens to the stocks that you are holding. Think about that!



India banned TikTok on June 30. Fastly reported and gave guidance on August 5.

Obviously they should have expected the usage drop due to India.
What other geopolitical reason hurt them as so far the US ban did not happen?

I also close all my FSLY position on 10/16.

I was thinking about close my position on 10/15. I pondered whether the market is overreacting. I see a little pull back on 10/15, and I decide to sleep on it before I make a big decision.

Will I use a surprising bonus or margin to buy FSLY? No way. I will probably buy some other companies. There are plenty of better choices.

I want to share my reasoning.

I asked my self if I’m CEO/CFO, what the hell I want to announce such news three weeks before the next earnings call? What’s in for me?

Is there a legal requirement they MUST disclose it? I did not see it in the statement. If not, CEO/CFO chose to notify their investor before the earning call? This is super suspicious to me. A good CEO must know how to blend good and bad news to stabilize their stocks. Unless he believes there’s more bad news to come, or somehow investors will just be even more panic after they saw the detail of the financial statement, what’s in for you?

This information must be discussed extensively in their board meeting. Why the board wants the new CEO to disclose?

By the way, being a CEO is not easy. I checked Joshua Bixby linkedin, and he has never been a CEO in a public company. But he is a professional investor. In my career, I observed with a few (good) CEO in the public company, and they all know that managing the expectation of wall street is one of their key jobs. They have many weapons to use, for example, to increase sales commission, to add marking budget, etc. I bet he already tried everything, and he still missed the prediction.

COVID has existed for months, and at this moment, I just don’t have confidence in the new CEO, and I don’t know whether I can trust their prediction. Suppose their CFO tried to do the right thing like every CFO I know; CFO Is always conservative in their previous prediction unless CFO is overruled by CEO.

You either try to BS the street with a high goal, or you can’t even meet your conservative goal as a mint CEO for 9 months. Either way, I don’t have confidence in you. And remember they just signed a Google partnership, and they did not lose TikTok. Tiktok is not the only one who pays less than they expected.

As I trade with a margin account, there’s no need for me to risk on FSLY. I rather cut my margin balance and enjoy a peaceful holiday. I could be totally wrong where they bounce back. So what? If they took 3 months to get 30% appreciation, and I might get the same (or better)ROI in another company like ZOOM, PTON, etc.

Also, I am a little concerned about their billing models. It’s reasonable to bill based on usage, but if somehow your client’s usage fluctuates a lot or can easily reduce their spending on FSLY, that’s concerning.

What is COVID is over? It sounds like their revenue will reduce proportionally if internet traffic is shrinking. True, some % of people may cut their PTON subscription when COVID is over, but PTON can use COVID to build a moat (network effect and a big community). FSLY’s tailwind seems to be heavily based on internet traffic and they did not get (many) more customers during COVID. If so COVID will just be a short-term boost to their revenue and their moat remain the same (which is still decent).

Anyway, they have a new CEO who has never been CEO in a public company before; the company had quite a few surprises in the last six months; I see no velocity increase on building moat (like getting new customers) because of COVID.

Bye FSLY. I wish you the best. (I’m moving the FSLY investment to DOCU and PTON)


Good morning,
I am new to this type of investing. I joined this board about a month back and started following the approach in the newbie section.

FSLY was one of the first companies I researched, about 6 wks back. I noticed the low enterprise customer count, 304, and growth QoQ 297 > 304 in the Q2 report.
I overcame the concern with avg spend for enterprise customers at 716 k, up from 642k prior Q.
I could not find the definition of enterprise customer in the Qtrly report. I just assumed(mistake) it must be >500k, a large enough # that’d justify the low growth. Only yesterday I found out it is >100k.

As Saul says, this is an important data point against FSLY. They have difficulty selling to their target audience, enterprise customers. Their solution is geared towards large clients.

Second issue. As I mentioned in another post, looks like FSLY’s largest client had turned off their largest customer base(India) by Q2 earnings call. And US user base was at risk. I am guessing revenue loss or risk was ~7% of total revenue, ~5M. Some of this could be offset by TikTok’s growth in other geos. But it is extremely hard for a small company like FSLY to replace that revenue quickly.

So, on Aug 5 Q2 call, five weeks into Q3, management should have had a very good grasp of the situation. With little run way left, they made a Hail Mary pass, and were not forthcoming to shareholders and employees.
IMO, this is lack of sales and overall management depth. They will learn on the job. There will be room for errors.

As we see, market is priced for perfection and beyond for growth stocks. Any mistake and you are gonna be penalized, heavily and swiftly.

I had a full position, sold for a small profit and split the proceeds to ROKU, PTON, DOCU & SNOW.

  • F8


First, I wanted to thank you personally for your transparency in how you handle situations like the one we are in with FSLY. I ended up selling FSLY and reallocating most of the funds to NET. I was wondering if we could potentially hear from @CMF_muji on the subject of FSLY since I haven’t seen him post about it yet. It’s always good to get the tech perspective on FSLY, and whether there is concern over FSLY’s drop in usage due to TiK Toks compression algorithms. Is this something that is easy to achieve for other FSLY customers? Also, can Oracle somehow phase FSLY out of Tik Tok’s operation with something in-house? The more I talk my way thru this problem, it seems like FSLY’s customer concentration is the issue (one of Saul’s investment criteria from the knowledge base), and I’m more worried about Tik Tok than FSLY. I stand by my decision to sell, but @cmf_muji, what say you?


I can appreciate the comments in this thread (thank you Saul for sharing your perspective as it really helps round out my thinking when considering what I might do here). BUT I have a mildly contrarian opinion to add. I AM on the fence about taking some action, but here is how I’m thinking about this:

  • They had to disclose. I won’t knock them for transparency. This would be so much worse had they sat on it and waited for earnings to report a miss on the day.

  • The TikTok action doesn’t concern me any more than it did last month. The company comes with some customer concentration risk. I will determine if this bothers me when the new quarter is reported. If they aren’t growing enough to cover over some of this risk then that will be a big deal to me as the real risk increases if this is true.

  • The price action doesn’t concern per se. It went up, it went down. Maybe it is “oversold” or simply new expectations have been baked in. In any case if I thought the company was changing for the worse I WOULD sell regardless of price. I’m not convinced yet that that is true and the price drop DOES affect my portfolio positioning, and therefore risk tolerance, which brings me to my next point…

  • Within my portfolio, FSLY has organically reduced its allocation. It is now 6th out of 8 at around 10%. NET on the other hand is 2nd at 15.8%, also organically as these two started out at the same % about 4-6 weeks ago after a rebalance for personal and unimportant reasons. At this point I’m in wait and see mode. I might decide to move a little over to Peleton, but so little time has passed and this is a taxable account and I don’t want to enter churn-territory either. So back to sitting on my hands.

I’m prepared to be wrong (I like stating that over and over as a reminder to myself). I still love Fastly’s business and technical approach to their niche. The comments of customers like Shopify about how they work closely together stands out in my memory. I don’t see anything fundamentally different or wrong today…yet. Just a couple more weeks to wait for a lot of real data to make a more informed call.