The population in most major cities has steadily increased over the years, eating up a vast majority of the available wireless bandwidth for commercial devices. As technological advances such as 5G and autonomous vehicles flourish, the information they send and receive will need to be hosted closer to the people using it to ensure better, more efficient performance. Content delivery network Fastly (FSLY -2.38%) could take advantage of both trends over the next decade.

A man uses a cell phone while holding documents.

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Capitalizing on remote work posture

A network that doesn't use a CDN hosts information physically on banks of servers located multiple "hops" from the user attempting to access it. A CDN moves that information to servers closer to users, at the "edge" of the network. With fewer potential points of failure in between, CDNs give users quicker, more reliable access to the information they seek. 

Fastly's technologies allow customers to reduce the cost of both bandwidth and storage while keeping all that data secure. They also work with the customer's current hardware, saving customers from buying costly new network equipment. This strategy has seen serious success over the past couple of years.

Fastly has been capitalizing on the trend of moving information to the edge. Witness its escalating revenue growth over the last three years: 37.8%, 38.67%, and 45.10%, respectively . At least part of that growth stems from happy customers.

Customer spending can be monitored through dollar-based net expansion. This metric measures how much customers are spending in comparison to a previous period. For example, net expansion of 105% means customers spent 5% more than the previous period. Fastly's dollar-based net expansion rate over the previously mentioned three-year span has remained over 130% each year, with the last year totaling 143%  . And since Fastly charges customers by how much bandwidth they use, these rising figures prove that customers are continually using Fastly's services more.

The company has quite the collection of name-brand clients, including Airbnb (ABNB -0.25%) and Spotify (SPOT -2.20%). The customer review and satisfaction company G2 has given Fastly multiple awards over the years as well, including Best Relationship, Best Support, and Easiest To Do Business With, all accompanied by an industry-beating average review score .

These numbers are even more impressive when you note that Fastly's revenue for 2020 excluded social media site TikTok, previously Fastly's largest customer at 6% of total sales. Political backlash from the Trump Administration forced TikTok to abandon Fastly's CDN in the USA -- meaning Fastly sustained huge leaps in revenue growth and dollar-based net expansion rate even without its largest source of income.

Looking toward the future 

Fastly has taken advantage of the worldwide pandemic that forced employees across the globe to telework. Millions of people began conducting daily activities such as working, shopping, and visiting friends from the comfort of a couch. The pandemic forced us to use more technology over the past year, including video meetings, teleconferencing, and web surfing. That has allowed Fastly to gain name recognition and immense growth. Some investors may be worried that with the easing of COVID restrictions and return to office work, companies may require less usage from a CDN. This could potentially happen in the near term, but Fastly has much more potential over the next decade than simply being used for remote work.

The stock is down about 50% from its high point, a tumble related less to the stock's performance than to a combination of fear factors. First, the decline began with investors' fears about Fastly losing TikTok's business, which we already established didn't slow the revenue growth for Fastly. Second, investors feared that the company grew too big, too fast -- and given its shares' surge from $10 to $130 in less than a year, they were smart to be cautious. But Fastly's current price around $67 a share looks like a more appealing entry point.

Although Fastly is an attractive option, competitors do exist. The main two are Cloudflare (NET -2.84%) and Akamai (AKAM -0.23%), each with its own market approach for customers. Cloudflare  is a newer growth stock that prices out packages based on set pricing instead of bandwidth usage. Akamai is a more established CDN with a bandwidth pricing model similar to Fastly.

To compete with these and other competitors, Fastly will have to continue growing both its customer base and dollar-based net expansion rate. With its seriously high customer satisfaction reviews, Fastly has the potential to complete this task.

The past year has been a wild ride for Fastly shares, but investors should expect volatility in high-growth companies this size. Instead, focus on the future of technologies such as 5G and autonomous vehicles. Fastly has already established itself as a player in the edge computing industry, and even with competition, the growth of technology over the next decade all signals significant growth in its future.