FSLY
AI traffic: cute idea, tough revenue model
Fastly got a fresh reality check on Thursday. DA Davidson’s Rudy Kessinger kept a Neutral rating on the stock and nudged his price target up from $21 to $23, but the message was basically: nice story, show me the money.
The debate is all about whether AI agents like Muse can flood Fastly’s network with enough traffic to matter. Fastly’s bread-and-butter CDN business still makes up about 73% of second-quarter revenue from CDN bytes, and Kessinger argued that even a big jump in AI-driven traffic may not be enough to materially boost growth in the near term.
Why the math matters
Here’s the punchline: the analyst’s back-of-the-envelope estimate says that even if Fastly handled a huge chunk of scaled Muse traffic, the opportunity might only amount to about 2% of consensus 2026 revenue. That’s not nothing, but it’s also not the kind of number that sends a stock to the moon.
He also flagged a sneaky twist: a lot of AI traffic may just replace human traffic instead of creating brand-new demand. Translation? The internet may get busier, but Fastly may not automatically get richer.
Security is the other card
There’s a silver lining. Fastly’s security products — like WAF, Bot Management, and DDoS protection — monetize requests rather than bytes, so AI usage could help there more than in CDN. The catch: management said it still hasn’t seen security customers renew early at higher request tiers because of AI.
That’s the classic Wall Street problem: big narrative, smaller actual invoice.
The stock reaction says it all
Fastly shares were down about 8.4% to $27.16 in Thursday trading after popping the day before on investor-day enthusiasm. BofA also stayed cautious, keeping an Underperform rating while raising its target to $22.
Big picture: investors love an AI story, but this one may need a few more receipts before it turns into a real growth engine.