What happened

Shares of cloud-computing specialist Fastly (FSLY -0.70%) fell sharply on Thursday, declining 12.5% by the time the market closed. The stock was likely simply taking a natural pause after an astounding 115% run-up between Aug. 14 and Aug. 28.

Shares rose again on Friday, up more than 13% at 3:40 p.m.

Here's what investors should know about all this volatility.

So what

Since Fastly went public earlier this year, the stock has been on a roller-coaster ride. After gaining 50% on its first day of trading in May, it failed to gain more traction leading up to Fastly's inaugural quarterly update as a publicly traded business. After the report, shares initially pulled back.

A diagram of a cloud connected to three laptops

Image source: Getty Images.

But analyst upgrades for the tech stock following the Aug. 8 earnings release reversed the market sentiment, and shares proceeded to skyrocket. Following this 115% run-up, the stock was hit with a 12.5% decline on Thursday -- a natural cooling-off period for shares on such a torrid upward march. But shares are climbing higher again on Friday, rising about 8% as of 12:37 p.m. EDT.

There's an argument that much of the stock's wild volatility is the result of the dwindling supply of Fastly shares, as one investment firm -- Abdiel -- has been gobbling them up, reducing Fastly's total float by about 29%. Furthermore, after such big gains for the stock, some investors could be on edge due to fears it could come back down after a lock-up period for insiders expires in November.

Now what

Investors, of course, should remain focused on the company's fundamentals and the stock's valuation. Shares are significantly more expensive today than they were a few months ago. But Fastly is notably growing at a solid rate, with second-quarter revenue up 34% year over year. The company also boasts an impressive dollar-based net expansion rate of 132%, highlighting how existing customers are ramping up their spending with Fastly.