Key Takeaways:
- Security Expansion: 30% year-over-year growth in Q3, now representing 21% of total revenue,
- Price Projection: Based on current execution, FSLY stock could reach $13.25 by December 2029.
- Potential Gains: This target implies a total return of 43.5% from the current price of $9.23.
- Annual Return: Investors could see roughly 9.7% growth over the next 3.9 years.
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Fastly (FSLY) delivered its strongest quarter in recent memory, posting record results across all three product lines while achieving $18 million in free cash flow.
The edge computing platform provider reported revenue of $ 158.2 million in Q3 2025, up 15% from the prior quarter, marking the company’s third consecutive quarter of accelerating growth.
CEO Kip Compton is executing a transformation centered on security and platform expansion.
- The company’s security revenue hit a record $34 million in the quarter, driven by successful cross-selling with existing customers.
- This includes a major win: a top-10 strategic account now uses products across all three business lines.
- Fastly’s adjusted EBITDA margin reached $25.7 million in Q3, with management raising full-year guidance for revenue, profitability, and free cash flow.
- The company expects to generate $25-35 million in free cash flow for 2025, a $66 million improvement over the prior year.
Despite solid execution, Fastly stock trades at $9.23, offering upside for investors recognizing the company’s position in edge security and content delivery.
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What the Model Says for Fastly Stock
We analyzed Fastly’s evolution into a comprehensive edge platform, with accelerating security capabilities that complement its core delivery business.
The company is capturing opportunities as enterprises consolidate vendors and seek unified edge solutions.
Fastly’s platform now combines network services, security products, and compute capabilities to address the full spectrum of edge computing needs.
With a 106% net retention rate and improving cross-sell execution, the company is demonstrating its ability to expand within its customer base.
Recent wins showcase this dynamic: a major Latin American retailer consolidated onto Fastly for unified edge security and delivery, while an Asia-Pacific specialty retailer chose the platform for superior performance and in-region support.
These competitive displacements highlight Fastly’s differentiation in a crowded market.
Using a forecast of 9.7% annual revenue growth and a 4.0% net income margin, our model projects the stock price will rise to $10.44 in 1.9 years. This assumes a 69.3x price-to-earnings multiple.
That multiple may seem elevated, but it reflects Fastly’s transition from losses to profitability. The company delivered its first profitable year in 2025 after years of operating losses. As margins expand and the business scales, this P/E should compress to more reasonable levels while the absolute stock price appreciates.
The real value lies in sustaining security momentum while maintaining the core delivery business and expanding internationally, particularly in the Asia-Pacific region, where the company is investing in sales coverage.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for FSLY stock:
1. Revenue Growth: 7.9%
Fastly’s growth centers on security expansion and platform consolidation trends. The company achieved 30% growth in the security segment in Q3, with that segment now representing 21% of total revenue—up from a minimal contribution two years ago.
- Management expects this momentum to continue as sales teams drive cross-sell motions across the customer base.
- Network services revenue grew 11% year-over-year, marking three consecutive quarters of acceleration.
- This core business benefits from healthy traffic levels and successful upsells with existing customers.
- The company’s international expansion, especially in the Asia-Pacific region, provides additional runway, as Fastly remains under-indexed outside North America.
2. Operating margins: 4.0%
Fastly turned profitable in 2025 after posting a 4% operating loss margin in 2024.
- The company delivered a 2% operating margin at the midpoint of full-year guidance, demonstrating improved cost discipline.
- Gross margins reached 62.8% in Q3, benefiting from scale and network efficiency improvements.
- Management is implementing rigorous budgeting processes and focusing on return on investment for all spending.
With new CFO Rich Wong emphasizing profitable growth, the company should see continued margin expansion as revenue scales.
3. Exit P/E Multiple: 69.3x
The market currently values Fastly at 69.3x earnings, which we maintain as the exit multiple.
This seemingly high multiple reflects the company’s recent profitability inflection and small absolute earnings base.
As net income grows and margins expand, this multiple should compress even as the stock price appreciates.
The company’s competitive position in edge computing, successful security expansion, and improving unit economics support a premium valuation relative to commodity infrastructure providers.
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What Happens If Things Go Better or Worse?
Edge computing companies face competition from hyperscalers and technology transitions. Here’s how Fastly stock might perform under different scenarios through December 2029:
- Low Case: If revenue growth slows to 7.1% and net income margins compress to 3.7%, investors still see an 11.9% total return (2.9% annually).
- Mid Case: With 7.9% growth and 4.0% margins, we expect a total return of 43.5% (9.7% annually).
- High Case: If security momentum accelerates and Fastly maintains 4.2% margins while growing at 8.6%, returns could hit 79.5% total (16.1% annually).
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The range reflects execution of security cross-selling, sustained growth in network services, and successful international expansion.
In the low case, competitive pressures intensify, or security adoption slows.
In the high case, platform consolidation accelerates, and Fastly captures a disproportionate share in edge security while expanding margins faster than expected.
How Much Upside Does Fastly Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
