Fastly stock plunged Thursday after the company lowered its 2024 revenue outlook amid pricing pressure for its top customers.
Fastly late Wednesday reported first quarter revenue and earnings slightly above consensus estimates. But shares plunged on management's outlook.
Bank of America downgraded Fastly stock to underperform from buy.
"Decelerating growth in Fastly's largest customers, share loss in delivery, and limited visibility in the second half cause us to question a rebound in 2024," said BofA analyst Madeline Brooks in a report. "While we continue to like Fastly's positioning in the edge compute market, we see it as a 2025 opportunity instead of a near-term growth driver."
San Francisco-based Fastly competes in the content delivery network (CDN) market vs. Akamai Technologies and Cloudflare. Fastly's network increases the speed of e-commerce transactions, business software downloads and video streaming to mobile devices.
On the stock market today, Fastly stock plunged 34.5% to 8.47 in middday trading. Akamai stock dipped 2.5% to 98.43. Cloudflare stock fell a fraction to 87.85.
For the March quarter, Fastly reported a 5-cent loss on revenue of $133.5 million, up 14%.
Meanwhile, analysts had predicted a 6-cent loss on revenue of $133.1 million. In the year earlier period, Fastly had a 9-cent loss on revenue of $117.6 million.
Fastly Stock Guidance Lowered On Pricing Pressure
For 2024, Fastly lowered its revenue outlook to $560 million (11% growth) at the midpoint of guidance from $585 million (16% growth).
William Blair analyst Jonathan Ho said in a report: "The company lowered full-year 2024 guidance to reflect new pricing pressure from its top 10 to 15 customers. The pricing pressure came late in the quarter as renewals resulted in lower-than-anticipated pricing and volume increases."
At Raymond James, analyst Frank Louthan said in a report: "Management saw a shift in the market since Feb., with material shifts in revenue and volume intentions at some of their largest accounts. We believe this is another large reset for the business and will take significant time to recover."
Heading into the Fastly earnings report, shares were down 27% in 2024.
Meanwhile, Cloudflare earnings are due after the market close on Thursday. Further, Akamai reports earnings on May 9.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
