Fastly Inc. (FSLY) shares climbed sharply on Tuesday, gaining 15.17% to $31.66, as investor enthusiasm over artificial intelligence-driven cloud computing intensified ahead of the company's first-quarter earnings report, due after Wednesday's closing bell.
The rally was fueled by a broader AI infrastructure surge, sparked by DigitalOcean's impressive quarterly results. DigitalOcean reported a 22% increase in revenue to $258 million, with AI customer annual recurring revenue skyrocketing 221% to $170 million. CEO Paddy Srinivasan highlighted that "the inference and agentic era needs its own cloud," underscoring the growing demand for specialized cloud services tailored to AI workloads.
AI Cloud Momentum Lifts Sector
Fastly's gains were part of a wider upswing in edge computing and cloud infrastructure stocks. Cloudflare (NET) also advanced 8.7%, reflecting a market belief that AI demand is expanding beyond the largest tech players into broader infrastructure spending. Analysts see this as a positive signal for Fastly, which provides edge cloud services including content delivery, security, and edge compute.
Fastly's platform is designed to process data closer to end users, reducing latency and improving performance for applications ranging from streaming to AI inference. The company competes with Akamai and Cloudflare in legacy content delivery, API security, and serverless edge compute, though it notes that many rivals have greater financial and technical resources.
Q1 Earnings Expectations
Wall Street expects Fastly to post first-quarter revenue of $170.26 million and adjusted earnings of 8 cents per share. In February, the company guided revenue in the range of $168 million to $174 million, with non-GAAP earnings between 7 and 10 cents per share.
The company's fourth-quarter results exceeded expectations, with revenue of $172.6 million, up 23% year-over-year, and non-GAAP diluted earnings of 12 cents per share. CEO Kip Compton called it "an inflection in Fastly's growth," citing AI as "an increasing tailwind."
Key Metrics Under Scrutiny
Analysts are closely watching AI-related traffic numbers. After Fastly's fourth-quarter report, William Blair analyst Jonathan Ho described it as a "stellar quarter," driven by "agentic AI traffic"—traffic from software agents that operate with minimal human input.
However, Fastly shares have already surged more than 200% year-to-date, trading near their 52-week high. This leaves little room for error if results merely meet expectations. Additionally, the company's top 10 customers accounted for 34% of fourth-quarter revenue, a concentration that adds risk if any major client reduces usage.
Competitive Landscape and Guidance
Fastly faces stiff competition from better-capitalized rivals like Akamai and Cloudflare. The company's guidance for the current quarter will be just as critical as its earnings, as investors seek clarity on whether the AI tailwind can sustain growth amid competitive pressures.
The earnings call is scheduled for 1:30 p.m. Pacific time on Wednesday. Market participants will be listening for updates on AI traffic trends, customer concentration, and the company's outlook for the remainder of 2026.
