Fastly Earnings: Ongoing Demand Weakness and Another Guidance Cut Is Worrying

Fastly's second-quarter results fell neatly into the guidance it had given, but management materially reduced its full-year guidance for the second straight quarter, and it is continuing to see demand problems from its biggest customers. Management's concern about the revenue trend led it to implement a restructuring to take costs out of its business. It feels like the company is in crisis, and we question whether it can make these moves to preserve near-term results without dampening the long-term growth outlook that was imperative to justify the firm's valuation. We're not implying these are the wrong moves; we suspect they're absolutely necessary. However, we think Fastly will have difficulty returning to the high teens growth trajectory it had been on. We're reducing our fair value estimate to $5 from $10, and we see Very High uncertainty in this stock.