What happened

Shares of edge computing specialist Fastly (FSLY 4.43%) have skyrocketed this year. The stock soared 92.6% in the first half of the year alone, according to data provided by S&P Global Market Intelligence. And thanks to a strong July so far, the stock has now more than doubled this year, rising about 110% year to date.

While broader-market momentum in tech stocks has undoubtedly been a key driver for the growth stock's gains, Fastly's business momentum under recently appointed CEO Todd Nightingale has helped, too. 

So what

Highlighting how momentum in tech has been a tailwind for Fastly, consider that the tech-heavy Nasdaq Composite is up 33% as investors' appetite for technology stocks seems insatiable. This, of course, follows a sharp decline in the Nasdaq last year. The beginning of a rebound in the Nasdaq this year has been helped by an artificial intelligence (AI) frenzy. Investors are betting that demand for more artificial intelligence will lead to higher sales at tech companies (like Fastly), providing computing power or other services used by AI.

On a company-specific level, Fastly has been delivering revenue above its guidance ranges in recent quarters. In addition, its net loss per share trended in the right direction on a year-over-year basis during Q1. First-quarter net loss per share of $44.7 million was substantially narrower than a loss of $64.3 million in the year-ago quarter. 

Improving profitability has been a key focus since Fastly's new CEO took the reins last September. "We're digging deep into all of our got-to-market dynamics," said Fastly's vice president of engineering and infrastructure Nick Rockwell at the company's Investor Day presentation in June. Those efforts include trying to better understand things like the customer journey, Fastly's marketing funnel, customer patterns and trends, "profitability at the product ... [and] customer level," and more. Doing this "just frankly saves us money," he added.

Rockwell elaborated:

As we dug deeper into the business and simplified our process, we've also been able to take out a bunch of [software-as-a-service] systems that weren't generating enough value for us. That saved us some millions of dollars, and it's also simplified our systems, which is maybe the big win there. ... And that's money that we can take to fuel growth and drive a better outcome on the bottom line.

Now what

Looking ahead, management expects another year of strong top-line growth. The company guided for 2023 revenue to be between $495 million and $505 million. The midpoint of this guidance implies nearly 16% year-over-year growth. This means management anticipates growth accelerating from the 15% growth it posted in Q1.

Strong growth and high demand for tech stocks have been key drivers behind Fastly stock's big run-up.