Is Fastly Stock’s 5.21X P/S Still Worth it? Buy, Sell or Hold?

Fastly FSLY shares are overvalued, as suggested by a Value Score of F. The FSLY stock is trading at a forward 12-month price/sales (P/S) of 5.21X compared with the broader Zacks Computer and Technology sector’s 3.98X.

Fastly shares are trading at a premium compared with peers, including Akamai AKAM and Amazon AMZN. Shares of Akamai and Amazon are trading at a P/S multiple of 3.07 and 3.28, respectively.

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Is Fastly worth buying at current prices? Let’s dig deep to find out.

Fastly shares have risen 147.5% year to date (YTD), outperforming the broader Zacks Computer and Technology sector’s return of 7.6%. We believe the stock’s appreciation from this level is limited, given intensifying competition from the likes of Akamai, Amazon and Alphabet GOOGL. Year to date, Fastly has outperformed Akamai, Amazon and Alphabet, shares of which have returned 11.3%, 10.6% and 8.4%, respectively.

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Fastly’s 2026 revenue growth expectation of roughly 14% is lower than the company’s reported growth of 15% in 2025. The company expects revenues between $700 million and $720 million for 2026. The growth rate is expected to suffer from macroeconomic and geopolitical uncertainty, along with variability in customer usage and traffic. Stiff competition as well as pricing pressure is expected to hurt FSLY’s near-term prospects. 

Moreover, capital expenditure (Capex) step-up and component inflation compress investment flexibility for FSLY. The 2026 infrastructure capex guidance of 10-12% of revenue is front-loaded to secure capacity amid supply constraints. This is expected to hurt the gross margin expansion rate.

Fastly’s gross margin in 2026 is expected to be 63%, +/- 50 basis points (bps), indicating a 210 bps year-over-year expansion from 2025. Moreover, non-GAAP operating profit is expected between $50 million and $60 million with an operating margin of 8% at the mid-point, doubling over 2025’s operating margin of 4%. Non-GAAP earnings are expected between 23 cents and 29 cents per share for 2026.

Fastly expects first-quarter 2026 revenues between $168 million and $174 million, indicating 18% year-over-year growth at the mid-point. Gross margin is expected to be 64% (+/- 50 bps) and non-GAAP operating profit between $14 million and $18 million. Non-GAAP earnings are expected between 7 cents and 10 cents per share for the first quarter of 2026.

The Zacks Consensus Estimate for first-quarter 2026 earnings is pegged at 8 cents per share, unchanged over the past 30 days. Fastly reported a loss of 5 cents per share in the year-ago quarter. 

Fastly, Inc. price-consensus-chart | Fastly, Inc. Quote

The consensus mark for 2026 earnings is pegged at 28 cents per share, unchanged over the past 30 days, suggesting 115.4% growth from 2025’s reported figure.

Fastly benefits from a continuously improving software-defined infrastructure that requires lower capital than legacy providers. This improves gross margin and is helping FSLY stay ahead of global traffic trends while maintaining strict capital discipline. 

A strong clientele benefits Fastly’s prospects. At the end of the fourth quarter of 2025, the trailing 12-month net retention rate was 110%, up from 106% in the prior quarter and up from 102% in the year-ago quarter. Strong revenue contribution from larger customers drove the sequential and year-over-year growth, reflecting healthy business.

The company’s prospects are expected to benefit from growing agentic AI traffic, AI bot management opportunities and AI workloads running on the FSLY platform. The company’s AI bot mitigation solution is creating opportunities as FSLY helps customers manage crawlers and other AI bots. This will ensure Fastly customers secure their platform. New security solutions are expected to boost security revenues. The AI Assistant, which is now in beta, accelerates Fastly platform adoption by enterprise software engineering teams with step-by-step guidance and personalized recommendations.

Fastly’s expanding security portfolio and strong AI-driven growth are expected to improve its top-line growth over the long term. So, investors currently holding the stock should stay put.

However, Fastly’s near-term prospects are limited given stiff competition, traffic variability and upfront capex spending is expected to depress gross margin. 

Fastly currently has a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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