Fastly stock went parabolic this week, hitting its highest level since May 5 this year, and 78% from its lowest point in July. It has soared by 174% this year, outperforming the broader stock market as the Nasdaq 100 and S&P 500 have jumped by less than 20% this year. So, can the stock jump by 25% and retest the year-to-date high?
Fastly’s business is doing well, and AI will boost its performance
Fastly is a top technology company that provides several products and services, including CDNs, security, and edge computing solutions. Its solutions are used by top clients like JetBlue, Financial Times, USA Today, Carvana, Duolingo, and Squarespace.
Fastly’s business is seeing strong demand, with the platform handling over 5 trillion requests per day. This growth will likely continue doing well in the coming months as the need for web security jumps.
The company, which competes with Cloudflare (NET), serves 624 large customers, with the average annualized spend rising to over $1.1 million.
READ MORE: Fastly stock dubbed an ‘underappreciated AI play’ after blockbuster Q4 earnings
Its earnings report, released this week, showed that its revenue jumped by 23% in the second quarter to $183.3 million. This growth coincided with its gross margin increase, moving from 59% in Q2’25 to 63.3%, while its net loss improved to $15.6 million.
In a statement, management boosted its forward guidance, with the third-quarter revenue rising to between $184 million and $190 million, and the full-year figure rising between $732 million and $746 million. The upper limit of the forecast was higher than the expected $738 million. It was also higher than the highest analyst estimate of $744 million.
Unlike many companies in the software industry, there are signs that the company’s business will do well in the AI era. For one, with the number of AI agents rising, many website and app developers will need the services of CDN and security providers. This explains why other cybersecurity stocks like Palo Alto Networks and CrowdStrike have soared this year.
Still, one key risk facing Fastly is that it is highly overvalued, with its forward price-to-earnings ratio rising to 52. This multiple is much higher than the S&P 500 average of 20 and the technology sector median of 24. The same is true with the Rule-of-40 valuation estimate, which is below 20%.
Fastly stock technical analysis
FSLY stock chart | Source: TradingView
The daily chart shows that the FSLY stock formed a double-bottom pattern at $15.67 and a neckline at $22.1, its highest level on June 2nd. It has now moved above the neckline and retested it, which is usually a continuation sign.
The stock has now moved to the 23.6% Fibonacci Retracement level. It has also remained above the 50-day Exponential Moving Average (EMA), while the Average Directional Index (ADX) has risen to 25, its highest level since April 21.
Therefore, the stock may continue rising in the near term, with the next key target being the year-to-date high of $34.83, its highest level on April 7 this year. This price is about 25% above the current level.
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