Fastly is worth $24 per share as the company transitions from a loss-making CDN to a profitable edge-compute platform, with high-margin AI traffic acting as a significant tailwind for 2026 and beyond.
Below is our estimate of current and future fair value, with detailed reasoning and assumptions. Fair value is a judgment, not a fact, and other analysts will likely land on different numbers. Use it as one data point in your research, and apply your own discretion in any investing decision.
We use a Forward P/E approach based on expected earnings for the next fiscal year (FY2027). This framework fits Fastly because the company has reached a critical inflection point of Non-GAAP profitability, making earnings a more reliable valuation signal than the revenue-only multiples used when the business was consistently losing money.
An estimated FY2027 Non-GAAP EPS of $0.40 multiplied by a 60x multiple results in a fair value of $24. A 60x multiple sits well above mature peers like Akamai (16x) but reflects Fastly’s superior earnings growth profile and early-stage exposure to high-margin AI traffic; it is consistent with high-growth infrastructure software peers when they first achieve consistent profitability. Our $0.40 EPS basis is a linear interpolation between management's 2026 guidance of $0.30 and the 2028 analyst consensus of $0.49.
A 5-year Discounted Cash Flow (DCF) cross-check produces a fair value of $22.50 — within 6% of our Forward P/E answer of $24, confirming the result. Using an 11.5% discount rate to account for the stock's higher volatility and assuming free cash flow margins expand from current low-single digits to 18% by year five, the model supports a mid-$20s valuation. The proximity of the two values suggests the market's current $19.82 price is slightly pessimistic regarding the speed of margin expansion from the new AI and Security products.
We are assuming Non-GAAP EPS grows to $0.40 by FY2027. This represents a 33% increase from the midpoint of current 2026 guidance, driven by the operational leverage inherent in the edge platform as traffic scales without a proportional increase in fixed headcount or hardware costs.
We are assuming high-margin Security and Compute segments reach 30% of total revenue by 2027. Currently, Security accounts for roughly 20% of revenue; management’s focus on cross-selling and the verified 6.5x growth in AI traffic support this higher-margin mix shift over the next 24 months.
We are assuming capital expenditures remain disciplined at approximately 10% of total revenue. Fastly has recently reached a free-cash-flow positive inflection point, and maintaining this spending ratio is critical to support capacity for AI workloads while still generating cash for shareholders.
The biggest risk is that commoditization of Content Delivery Network (CDN) services forces a pricing war that halts margin expansion. This would prevent the company from reaching its stated non-GAAP profitability targets, likely compressing the forward multiple from 60x to 35x and cutting roughly $10 off the per-share fair value. Watch GAAP gross margins for any dip below 55% as an early signal of pricing pressure.
Bear case ($17): Security segment revenue growth falls below 15% YoY for two consecutive quarters; or Non-GAAP operating margin expansion stalls below 8% for the full fiscal year 2026.
Bull case ($31): AI-driven traffic growth on the edge platform sustains above 50% through FY2027; or Management raises 2026 total revenue guidance above $750 million following the September Investor Day.
Clearthesis wrote this report from 44 sources, including SEC filings, analyst estimates, industry research, and recent news.
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© 2026 Clearthesis.ai · Report generated on July 28, 2026
This is an AI-generated analysis for informational purposes only and does not constitute financial advice. Data and analysis may not reflect recent developments if viewed significantly after the generation date. Always conduct your own due diligence before making any investment decisions.