Fastly stock was soaring on Thursday after the IT infrastructure provider demonstrated the boost it’s getting from artificial intelligence by posting blowout fourth-quarter earnings.
Shares jumped 72% to $16.04. The S&P 500 fell 1.6% as investors weighed up delayed January jobs data.
The move higher came as one analyst upgraded the shares, and another hiked his price target. Both see Fastly as a potential AI play.
The company’s cloud platform speeds up websites and applications by storing digital content on servers located close to users. So when large-language models like ChatGPT scour the internet for answers to users’ prompts, that boosts Fastly’s traffic.
“Fastly delivered a stellar quarter driven by rising contribution from agentic AI traffic,” William Blair analyst Jonathan Ho said, upgrading the stock to Outperform.
“The rationale for our upgrade is that we believe Fastly is likely to represent an underappreciated play on the growth in both LLM use and agentic AI,” he added.
D.A. Davidson analyst Rudy Kessinger maintained his rating of Hold, but raised his price target to $13 from $9.
He said AI traffic was a “tailwind” for shares but noted some concerns remain about Fastly’s reliance on a handful of large customers. That’s weighed on shares in the past, with investors worrying that the company’s bottom line could take a hit if its partners opt to slash spending.
For the fourth quarter, Fastly reported adjusted earnings of 12 cents a share, as revenue jumped 23% from a year ago to $172.6 million. Analysts were expecting earnings of 6 cents a share on revenue of $161.4 million, according to a FactSet poll.
The company’s guidance also looked strong. For the current quarter, Fastly expects adjusted earnings of 7 cents to 10 cents a share on revenue of $168 million to $174 million. Wall Street had forecast earnings of 6 cents a share on revenue of $166.6 million.
Fastly is probably best-known for a software bug in June 2021 that briefly made popular websites including Amazon.com, Reddit, and the New York Times inaccessible.
Shares reached an all-time closing high of $128.83 in October 2020, but took a battering following the outage and have never managed to claw back the losses.