FSLY Q1 2026: Beat Everything, Down 38% — Here’s the Actual Story

The Numbers

• Revenue: $173.02M — beat consensus of $170.26M. Up 19.76% YoY.
• Adj EPS: $0.13 vs. $0.08 consensus — beat by 62%.
• Gross Margin: 62.52% — up from 53.16% a year ago. A 940 bps expansion in 12 months.
• Operating Loss: -$23.9M — vs. -$38.18M in Q1 2025. Narrowing fast.
• Net Loss: -$20.52M — vs. -$39.15M a year ago. Loss rate cut nearly in half YoY.
• Free Cash Flow: +$7.85M — positive for the second consecutive quarter.

Guidance

• Q2 Revenue: $170M–$176M (consensus: $169.77M) — slight beat at midpoint.
• Q2 Adj EPS: $0.05–$0.08 (consensus: $0.04) — beat.
• FY26 Revenue: $710M–$725M (consensus: $712.08M) — in line.
• FY26 Adj EPS: $0.27–$0.33 (consensus: $0.28) — in line.

Why Down 38% on a Beat?

This is the purest valuation reset you’ll see. The stock ran from $5.84 to $34.82 over the past year — nearly a 500% move — pricing in a full re-rating of Fastly from distressed CDN company to growth infrastructure platform. Heading into the print, analysts had a consensus “Hold” rating with an average price target of $19.43. The stock was trading at $31.57. Sixty percent above analyst fair value, with the market positioned for a blowout.

The results were genuinely good. But “genuinely good” at a $31 stock price doesn’t close the gap when: Q2 guidance implies flat sequential revenue ($173M Q1 → $173M midpoint for Q2), the FY guide is in-line rather than a raise that resets expectations upward, and every analyst covering the stock had already flagged the premium as stretched. The stock is now at $19.54 — almost exactly at the analyst consensus target of $19.43. The market repriced efficiently. The speculative premium evaporated in a single session.

What the Flat Q2 Guide Means

The most important number from this print isn’t the Q1 beat — it’s the Q2 guide. At a $173M midpoint for Q2, Fastly is guiding to flat sequential revenue after a strong Q1. For the full-year range of $710M–$725M to work, the back half needs to average $185M+ per quarter — a meaningful step-up from where the business is running today. That’s not impossible, but it’s back-end loaded, and back-end loaded guidance is exactly what a skeptical market sells first. The flat Q2 guide signaled that the acceleration isn’t happening yet, and the stock priced that in immediately.

What Actually Changed (The Bull Case)

Nothing fundamental broke. Fastly is running a real improvement story that deserves credit. Gross margins crossing 62% — up from 47% two years ago — signals a genuine product mix shift toward higher-value security and compute workloads versus commodity CDN traffic. FCF flipping positive two consecutive quarters is meaningful for a company that burned cash for years and raised dilutive equity to fund the burn. Revenue growth reaccelerating to ~20% YoY after bottoming near 2% in Q4 2024 shows the go-to-market changes are working. The business is smaller and less profitable than it was at peak hype in 2020, but it’s pointed in the right direction.

The Analyst Reset

• KeyBanc: Raised target to $27 from $14 — maintains Overweight/Buy.
• Piper Sandler: Raised target to $27 but cut from $30 — maintains Hold. A subtle downgrade in conviction.
• Evercore ISI: Initiated at Buy with a $32 target (pre-earnings, April 14) — still the most bullish post-print.
• RBC Capital: Hold, $20 target — essentially flat from current levels.

The spread tells the story: the bulls see $27–$32, the consensus is $20, and the stock just landed at $19.54. At these levels, the downside from the consensus is minimal. The question is whether the H2 acceleration materializes to justify the bull targets.

The Bottom Line

FSLY at $20 is a fundamentally different conversation than FSLY at $32. At $32, you were paying for the story and the momentum. At $20, you’re buying closer to fundamentals: a CDN and edge security business growing 20% YoY, expanding gross margins at nearly 1,000 bps per year, approaching FCF breakeven, and guiding to non-GAAP profitability for the full year. Forward PE on non-GAAP earnings is still elevated at ~68x, but the direction of travel is right and the valuation compression has already happened.

The crash is painful for anyone who bought the run from $6 to $34. For those watching from the sidelines, today’s gap-down resets the setup. The stock beat on every line. The guidance wasn’t a disaster — it was just in-line, and the market had priced in better. Watch Q2 results in August: if Fastly delivers the revenue acceleration the FY guide requires, the H2 narrative rebuilds from a much lower base. If the flat sequential trend continues into Q3, $20 becomes the ceiling, not the floor.