Fastly’s Agentic AI Inflection: Why the Edge Cloud Pioneer Soared After Q4 2025 Earnings
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On February 12, 2026, the world of edge computing changed. Fastly, Inc. (NYSE: FSLY) used to face doubt and volatility. Now, its stock is moving fast. During trading that day, shares rose between 44% and almost 90%. This historic surge happened after the company shared its financial results for the fourth quarter and the full year of 2025. The numbers shattered what Wall Street expected.
The headline numbers were strong. The company announced record revenue and its first profitable year. But investors cared most about Fastly becoming the main infrastructure layer for “Agentic AI.” Autonomous software agents are starting to take over internet traffic. Fastly has successfully moved from a basic content delivery network, or CDN, to a specialized platform that helps this AI-driven web run better.
The Financial Turning Point
The rally started with a strong earnings report that signaled a real turnaround. For the fourth quarter of 2025, Fastly announced record revenue of $172.6 million. This is a 23% increase from the year before. It also comfortably beat the guidance range of 159 to 163 million.
The bigger surprise was the profit. Fastly achieved its first full year of non-GAAP profitability. It earned a net income of $19.7 million for 2025. The year before, it lost $12.1 million. In the fourth quarter alone, net income reached $20.1 million, or $0.12 per share. This was double the analyst prediction of $0.06.
Operational discipline helped these numbers. Gross margins grew by 650 basis points to reach a record 64%. This proved the company could grow sales without raising costs at the same rate. Fastly also reported positive free cash flow for the fourth quarter in a row, bringing in $8.6 million.
Looking to 2026, management expects revenue between $700 million and $720 million. This is much higher than the Wall Street consensus of $667.8 million. This outlook showed that the recent performance was the start of a steady growth path.
Agentic AI and New Technology
While the financials provided a solid floor, the story about “Agentic AI” drove the excitement. Traditional chatbots wait for humans to ask questions. Agentic AI uses autonomous agents to browse the web and do tasks without supervision.
Fastly CEO Kip Compton described this shift as a massive help for the business. He stated that as the internet moves into the age of agentic AI, the edge will play a pivotal role. He noted that AI agents generate significantly more traffic than humans because they often check multiple websites to synthesize information for a single query.
Fastly has built three specific offerings for this new market:
AI Accelerator: This uses “semantic caching” to help Large Language Model performance. Instead of sending every query to expensive central servers like OpenAI or Azure, Fastly saves the meaning of the query at the edge. If a user asks a similar question, Fastly answers from the cache. This cuts latency by up to 9x and significantly lowers inference costs.
AI Bot Management: As scrapers fill the web, businesses need to separate “good” bots from “bad” ones. Fastly allows customers to block content thieves while helping authorized AI agents access data. This ensures they stay relevant in search results without slowing down the site.
Compute@Edge: This serverless environment uses WebAssembly, or Wasm. It allows developers to run complex logic near the user. The architecture offers near-zero cold start times, which is ideal for real-time AI applications.
After these updates, analysts at William Blair upgraded the stock to “Outperform.” They cited the rising contribution from agentic AI traffic as a key driver that is still in its infancy.
What the Earnings Call Revealed
The earnings call highlighted several strategic shifts that improved investor confidence.
CFO Richard Wong noted that pricing has stabilized. In the past, the CDN market suffered from price erosion of about 15% annually. In the fourth quarter, this erosion contracted to the “mid-single digits.” This suggests customers value performance and security over raw price.
Remaining Performance Obligations, or RPO, jumped 55% from last year to $353.8 million. This metric tracks future committed revenue. Management focused on locking large enterprise customers into longer contracts instead of volatile usage-based billing. This gives better visibility into 2026 revenue.
Fastly is also winning bigger clients. Revenue from its top 10 customers grew 30% year-over-year. The transcript highlighted wins against legacy competitors, including a Fortune 500 restaurant chain and a major home retailer. These companies switched to Fastly for better performance and security.
Competition and Market Value
Fastly operates in a tough market filled with legacy giants and cloud challengers.
Cloudflare (NET): This is the primary modern rival. Cloudflare has a larger market cap and a broader portfolio. However, Fastly focuses on developer-centric programmability and superior performance for complex needs.
Akamai (AKAM): The legacy incumbent has massive scale. While Akamai leads in traditional media delivery, it is viewed as slower to innovate in the programmable edge space.
Hyperscalers (AWS, Google, Azure): These giants offer their own CDNs like CloudFront. Fastly competes by offering a “cloud-neutral” edge that sits in front of these providers to prevent vendor lock-in.
Edgio: This competitor filed for bankruptcy. Management noted they are seeing traffic gains as customers migrate away from the distressed Edgio platform.
The report also showed a gap in valuation. Even after the surge, Fastly trades at roughly 2.3x to 3.5x sales. Cloudflare trades at about 12x to 25x sales. This suggests that if Fastly continues to succeed with AI, the stock has room to rate higher.
Looking at the Future
Despite the massive one-day rally, several factors suggest Fastly may have further upside.
First is a valuation catch-up. Fastly has historically traded at a distressed level due to fears about profits. With profitability achieved and growth at 23%, the market may begin to value it like a high-growth SaaS company.
Second, the shift to Agentic AI is just beginning. As more apps use autonomous agents, machine-to-machine traffic will explode. Fastly’s architecture handles this high-frequency traffic well. If it becomes the “toll booth” for AI agents, the revenue potential is vast.
Third, short covering played a role. Before the earnings, short interest was high at about 10% of the float. The price jump likely triggered a short squeeze, forcing bears to buy back stock.
However, risks remain. Fastly plans to increase infrastructure CapEx to 10-12% of revenue in 2026. This is partly due to rising memory costs. There are also geopolitical risks regarding ByteDance and TikTok, though this exposure is now less than 10% of revenue.
The breakout after February 12, 2026, is not just a reaction to a good quarter. It is a recognition of a transformation. By achieving profitability and connecting its future to Agentic AI, Fastly has evolved from a niche CDN into a critical pillar of the next-generation internet. With a lower valuation than its peers and a new market to serve, the edge cloud pioneer appears positioned for a sustained recovery.
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