Please ensure Javascript is enabled for purposes of website accessibility

Fastly Earnings Incoming: What You Need to Know

By Daniel Sparks – Oct 14, 2021 at 7:06AM

Key Points

  • An outage negatively affected Fastly's second-quarter results.
  • Revenue growth slowed in Q2 but is expected to reaccelerate some in Q3.
  • Investors may be largely focused on management's view for the final quarter.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Can the company make a strong comeback following a challenging second quarter?

Fastly (FSLY 4.14%) recently set a date for its third-quarter earnings release. The company will report results for the period on Nov. 3. Following last quarter's worse-than-expected results that prompted shares to tumble, investors will be watching the edge computing company's update closely next month. Can Fastly make a comeback strong enough to excite investors? Or will the tech company once again fail to impress, making a tough year for Fastly shareholders even more challenging?

Ahead of the important quarterly update, here's some background on Fastly's recent challenges, as well as a preview of some of the metrics worth checking on when the print goes live.

Cloud on digital board.

Image source: Getty Images.

Fastly's outage

In Fastly's second quarter, revenue grew just 14% year over year. This was a significant slowdown from 35% growth in the prior quarter. Of course, there were good reasons for the slowdown. First of all, the company was up against a tough comparison in the year-ago period, when revenue soared 62% as internet usage increased due to lockdowns.

But the surprise element to the quarter came from an outage during the period that affected nearly all of the company's customers.

Despite the outage only lasting 49 minutes, it was a serious headache for the company, which provides a content delivery network that serves digital content across the web to end-users and operates applications at the edge.

"As a result, we saw traffic volumes decrease and issued credits to customers following the incident," said Fastly CEO Joshua Bixby in the company's second-quarter earnings release. In addition, the company said it expected the outage to negatively affect third-quarter revenue as management works with its customers "to bring back their traffic to normal levels."

Expect revenue growth to reaccelerate

Though Fastly did say in its second-quarter update that it expected its outage to adversely affect customer traffic in Q3, it's worth noting that management still guided for revenue growth to accelerate during the period. Fastly forecast third-quarter revenue to be between $82 million and $85 million, translating to 18% growth at the midpoint. 

Investors should note that this guidance includes revenue from the company's Oct. 1, 2020 acquisition of web application and API security specialist Signal Sciences. In the year-ago quarter, therefore, Fastly didn't own the company, so management's expected revenue growth rate isn't as good as it seems -- at least on an organic basis.

Can management revise its full-year guidance higher?

Investors are likely hoping the full-year revenue outlook management provided in its second-quarter update for $340 million to $350 million was conservative. It would be nice to see the company revise this target higher when it reports third-quarter results next month.

Investors can tune into Fastly's third-quarter results after market close on Wednesday, Nov. 3.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fastly. The Motley Fool has a disclosure policy.

Stocks Mentioned

Fastly Stock Quote
Fastly
FSLY
$10.06 (4.14%) $0.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.