High-flyer Fastly plunges 21% despite earnings beat after CEO reveals TikTok is its largest customer
- High-flying Fastly plunged as much as 21% on Thursday despite reporting second quarter earnings that beat estimates and raising guidance.
- Fastly has seen a surge in business amid the COVID-19 pandemic, and investors have taken notice, with its stock up more than 400% year-to-date.
- In an interview with Barron's, Fastly CEO Joshua Bixby disclosed that its largest source of revenue comes from TikTok, which made up 12% of its revenue for the first half of the year.
- Fastly's exposure to TikTok could be seen as a risk by investors as President Trump has called for the Chinese-based video sharing company to be banned in the US.
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Fastly, a cloud platform that helps speed up the delivery of digital content online, plunged as much as 21% on Thursday after reporting second quarter earnings that beat analyst estimates and raising its full-year guidance.
Fastly's results may have not been strong enough to impress investors, who have already bid up the company's shares 443% year-to-date as of Thursday's close.
Here are the key numbers:
Revenue: $74.7 million, versus analyst estimates of $71.5 million
Adjusted earnings per share: 2 cents, versus analyst estimates of -1 cents
Revenue grew 62% year-over-year, and the company raised its full-year revenue guidance by $10 million, from a range of $280 million to $290 million, to a range of $290 million to $300 million. That compares to analyst estimates of $285.7 million.
Additionally, Fastly said it now expects full-year earnings per share losses in a range of -1 cent to -6 cents, versus its previous expected loss of between -8 cents and -15 cents.
Fastly reported the largest quarterly growth for customer count since its initial public offering. The firm now has 1,951 customers, up from 1,837 in the prior quarter.
The revelation that Fastly's single largest customer is TikTok could also be weighing down shares. In an interview with Barron's, Fastly CEO Joshua Bixby revealed that the popular video sharing company made up 12% of its revenue in the first half of the year.
Fastly's relationship with TikTok has turned into a double-edged sword after the Trump administration signaled its intent to ban the China-based service that is popular with millions of Americans by September 15. TikTok can escape the ban if it is acquired by a US company.
Currently, Microsoft is in the lead to acquire TikTok before September 15, for upward of $30 billion, turning the software giant into a potential white knight for Fastly and its growth story.
