Oct 16, 2026: Fastly falls with the software group
Fastly traded between $24.83 and $25.21 in light premarket trading, just below its $25.07 close. It opened at $24.83, touched its session high of $25.08 in the first minutes, and fell to $23.10 by 9:50am. It steadied around $23.00 to $23.60 until about 11am, then slid again, through $22.70 by 11:10am, and hit a session low of $22.32 just before 12:50pm. At 12:50pm it was $22.36, down 10.8%, on about 3.3 million shares.
What pushed it down:
- The whole software group sold off. At 12:50pm:
| Stock or fund | Oct 15 close | Oct 16, 12:50pm | Change |
|---|---|---|---|
| Twilio (TWLO) | $273.40 | $242.23 | -11.4% |
| Fastly (FSLY) | $25.07 | $22.36 | -10.8% |
| DigitalOcean (DOCN) | $109.47 | $97.86 | -10.6% |
| Okta (OKTA) | $208.52 | $188.62 | -9.5% |
| Cloudflare (NET) | $316.32 | $295.01 | -6.7% |
| iShares software ETF (IGV) | $109.60 | $104.47 | -4.7% |
| Akamai (AKAM) | $92.32 | $88.36 | -4.3% |
- AI financing doubts. 24/7 Wall St. reported at 11:57am that Palantir and ServiceNow each fell 5% "as investors question how trillion-dollar AI infrastructure spending gets financed," and that IGV fell about 4% against about 1% for the Nasdaq-100 fund QQQ. Yahoo Finance counted 41 of 45 stocks in its software basket falling, erasing about $130 billion of market value.
- No Fastly news. The last 8-K was filed Aug 17. The only filings since are insider Form 4 and Form 144 notices. Chief technology officer Artur Bergman sold 37,039 shares at an average of $26.81 on Oct 12 under a prearranged 10b5-1 plan, per MarketBeat, which does not explain a drop four days later.
After the drop, RSI(14) stood at 42, the shares sat 10.5% below their 50-day average and 7.8% above their 200-day average, volume by 12:50pm was about 3.3 million shares against a 20-day average of 8.4 million, and the stock was 35.8% below its 52-week high of $34.82.
Fastly fell about as much as DigitalOcean and Twilio, which points to the sector, not the company. It fell more than Cloudflare and Akamai, its two closest rivals, which fits a smaller, more volatile stock that had just run up.
The week: from upgrade to give-back
The selloff did not start today. On Oct 9 Oppenheimer analyst Param Singh raised Fastly to Outperform from Perform with a $35 target, citing "growing contract values" as customers add security products and early revenue from AI agent traffic, per TIKR. The stock closed up 15.9% at $29.30.
On Oct 14 it fell 7.7% to $25.00 as a scare over CoreWeave's debt spread to cloud stocks. DigitalOcean fell 14.8% that day and Akamai 8.2%. KoalaGains reported that the debt fears at a peer cloud provider "triggered a sector-wide decline." We covered that scare in our CoreWeave article.
From the Oct 9 close, Fastly is down 23.7%, against 27.4% for DigitalOcean, 18.2% for Cloudflare, 17.4% for Akamai and 7.3% for IGV.
The numbers behind the stock
The last full update came with second-quarter results on Aug 5:
| Measure | Q2 2026 | Q2 2025 |
|---|---|---|
| Revenue | $183.3 million | $148.7 million |
| Security revenue | $41.7 million, up 43% | |
| GAAP gross margin | 63.3% | 54.5% |
| Non-GAAP operating income | $27.0 million | -$4.6 million |
| Net retention (12 months) | 117% | |
| Remaining performance obligations | $341 million, up 38% | $247 million |
Fastly guided to third-quarter revenue of $184 million to $190 million and raised its 2026 range to $732 million to $746 million. At its September investor day it set a 2029 revenue target of $1.1 billion to $1.3 billion, per StockStory. The stock rose 13.7% on Sep 23 after that event, and fell 10% the next day.
Consensus third-quarter revenue of $187.8 million, near the middle of guidance, and a price target consensus of $28.33, with a low of $23 and a high of $35. The forward P/E is 34.8 and the price-to-sales ratio at 5.2. For how to read those two multiples, see forward vs trailing P/E and the price-to-sales ratio.
The case for the stock
- Growth sped up. Revenue growth reached 23% in the second quarter, and Oppenheimer expects high-teens to low-20s growth for the next few years.
- Security is the engine. Security revenue grew 43%, and Oppenheimer's checks found customers adding security products to larger contracts.
- Margins turned. Non-GAAP operating income went from a $4.6 million loss to a $27.0 million profit in a year, and GAAP gross margin rose almost nine points.
- Nothing broke today. The drop came without a filing, a guidance change or a downgrade.
The risks
- Valuation after a big run. The stock is up about 120% this year, and still trades near 35 times forward earnings. In a software selloff, that premium is what gets marked down first.
- Short interest. Short sellers held 14.2% of the float, which can make swings larger in both directions. Our guide to short interest and days to cover explains how to read that figure.
- Customer concentration. The top ten customers made up 37% of revenue in the second quarter, up from 31% a year earlier. A slowdown at one large customer would show up quickly.
- Still losing money on a GAAP basis. The second-quarter GAAP net loss was $15.6 million.
- Not every analyst agrees. BofA rates the stock Underperform with a $22 target and DA Davidson rates it Neutral with a $23 target, per StockStory.
What comes next
- Third-quarter results on Nov 4, after the close. Watch revenue against the $184 million to $190 million range, security growth, net retention against 117%, and whether the full-year range moves. Our guide to how guidance changes move stocks covers why the outlook often matters more than the quarter.
- The software group. Until the AI financing worry fades, Fastly is likely to trade with IGV, Cloudflare and DigitalOcean rather than on its own news.
- The pre-upgrade level. At $22.36 the stock sits 11.6% below its $25.29 close on Oct 8, before the Oppenheimer upgrade, and just under DA Davidson's $23 target.