As of February 16, 2026, the financial markets are witnessing one of the most dramatic mid-cap turnarounds in recent memory. Fastly, Inc. (NYSE: FSLY) has surged nearly 100% in the first two weeks of the month, reclaiming its status as a high-growth darling after years of underperformance. Once written off as a "broken" growth story following the post-pandemic tech crash, Fastly has reinvented itself as the essential plumbing for the "Agentic AI" era.

This meteoric rise follows a blockbuster Q4 2025 earnings report that silenced skeptics by delivering the company’s first full year of non-GAAP profitability and unveiling a revolutionary "AI Accelerator" product. For investors, the question is no longer whether Fastly can survive, but how far its edge cloud dominance can extend in a world where millisecond latency is the difference between a functional AI agent and a failed one.

Historical Background

Fastly was founded in 2011 by Artur Bergman, a developer who sought to build a content delivery network (CDN) that behaved like software rather than static hardware. Built on the open-source web accelerator Varnish, Fastly’s platform allowed developers to write and push custom code to the "edge"—servers located physically closer to end-users—instantly.

The company went public in 2019 at $16 per share and became a household name during the 2020 pandemic as global internet traffic exploded. However, its reputation took a hit in June 2021 when a single customer configuration error triggered a massive global outage, downing major sites like Reddit, Amazon, and the New York Times. This event, followed by a broader cooling of the tech sector, saw the stock lose over 90% of its value from its 2021 highs. Between 2022 and 2024, Fastly underwent a period of painful "structural cleanup," focusing on operational efficiency over raw growth.

Business Model

Fastly operates an edge cloud platform that provides three primary services: delivery (CDN), security, and compute. Unlike many SaaS companies that charge per seat, Fastly utilizes a usage-based revenue model. Customers are billed based on the amount of data transferred (GB) and the number of requests processed.

The business model has shifted significantly over the last 24 months. While core delivery once accounted for nearly 90% of revenue, the company has successfully pivoted toward a "Land and Expand" strategy. By acquiring Signal Sciences in 2020, Fastly built a robust security segment (Web Application Firewalls) that now commands higher margins and stickier enterprise contracts. As of early 2026, Fastly's focus is on upselling its Compute@Edge services, transforming it from a simple "pass-through" pipe for data into a powerful distributed computer.

Stock Performance Overview

The performance of Fastly, Inc. (NYSE: FSLY) has been a roller coaster for long-term holders:

• 1-Year Performance: Up approximately 140%. The stock spent much of 2025 consolidating between $10 and $14 before the current February 2026 breakout.
• 5-Year Performance: Down roughly 60%. Despite the recent 100% monthly gain, the stock is still working to recover the massive losses sustained after its early 2021 peak of $120+.
• 10-Year Performance: N/A (IPO was 2019). Since its IPO at $16, the stock has essentially "round-tripped," recently crossing back above its initial listing price with significant momentum.

The February 2026 spike, which saw the stock move from $12.50 to nearly $25.00 in ten trading sessions, represents the highest volume of buying activity in the company's history.

Financial Performance

The catalyst for the current rally was the Q4 2025 financial results. For the first time, Fastly proved it could scale profitably:

• Revenue: Reached $624 million for FY 2025, a 15% increase YoY, with guidance for 2026 suggesting a re-acceleration to 20%+ growth.
• Gross Margins: Expanded to a record 64% in Q4 2025, up from the mid-50s in 2023. This expansion is driven by the shift toward high-margin security and AI services.
• Profitability: Fastly achieved its first full year of non-GAAP net income ($19.7 million) and, more importantly, generated $45.8 million in positive free cash flow.
• Customer Metrics: The company ended 2025 with 628 enterprise customers, with an average spend of nearly $900,000 per year. The Net Retention Rate (NRR) climbed to 110%, a sign that existing customers are increasing their usage of the Compute@Edge platform.

Leadership and Management

Fastly’s recent success is largely attributed to a strategic leadership transition. In June 2025, Todd Nightingale, who steered the company through its operational turnaround, stepped down. He was succeeded by Charles "Kip" Compton, the former Chief Product Officer.

Compton, a veteran of Cisco, has shifted the company’s focus from "saving money" back to "shipping products." His mandate is clearly focused on the "AI-at-the-edge" roadmap. Under Compton, the company has simplified its sales cycles and integrated its security and delivery teams, resulting in faster deal closures. The board remains stable, with founder Artur Bergman continuing to serve as Chief Architect, ensuring the company’s technical soul remains intact.

Products, Services, and Innovations

The crown jewel of Fastly’s current portfolio is Compute@Edge, built on WebAssembly (Wasm). Unlike competing solutions that use slower containers or JavaScript, Wasm allows code to execute with "near-zero" cold starts (under 35 microseconds).

In early 2026, the company launched the AI Accelerator. This product addresses a major bottleneck in generative AI: the cost and latency of Large Language Model (LLM) queries. The AI Accelerator uses "semantic caching" to store the meaning of previous AI queries at the edge. If a new user asks a question similar to a previous one, Fastly serves the answer directly from its edge servers, avoiding the need to ping a central data center. This reduces AI operational costs for customers by up to 90%, making Fastly an indispensable partner for companies deploying AI agents.

Competitive Landscape

Fastly competes in a crowded "Edge Cloud" market:

• Cloudflare (NYSE: NET): The dominant rival. Cloudflare has a broader user base and more features for small-to-medium businesses. However, Fastly is often preferred by large enterprises for its "programmability" and superior performance in high-stakes environments like streaming and fintech.
• Akamai (NASDAQ: AKAM): The legacy incumbent. Akamai has a larger global footprint but is often viewed as slower and more expensive. Fastly has been successfully "poaching" Akamai’s developer-centric accounts.
• Hyperscalers (AWS, Google Cloud, Azure): While these giants have their own CDNs (e.g., CloudFront), they lack the specialized performance and neutral stance that an independent player like Fastly offers.

Industry and Market Trends

The "Edge" is no longer just about caching videos or images. In 2026, the primary driver is Agentic AI. As AI agents become autonomous—performing tasks like booking travel or managing supply chains—they require instant data processing and low-latency security.

Furthermore, the rise of 5G and 6G is creating more data at the periphery of the network. Traditional centralized data centers are too slow to handle this "explosion of the edge." Fastly sits at the intersection of these trends, benefiting from the move toward decentralized, real-time computing.

Risks and Challenges

Despite the recent euphoria, several risks remain:

• Execution Risk: New CEO Kip Compton is still early in his tenure. Maintaining the balance between innovation and the fiscal discipline established by his predecessor is a delicate act.
• Valuation: After a 100% gain, FSLY is no longer a "value" play. Its Forward Price-to-Sales multiple has expanded significantly, leaving little room for error in upcoming quarters.
• Stock-Based Compensation (SBC): While the company is profitable on a non-GAAP basis, it still relies heavily on SBC ($117M in 2025), which continues to dilute shareholders.
• Commoditization: Core CDN delivery remains a price-sensitive market. If security and compute growth stall, the company could be dragged back into low-margin "bandwidth wars."

Opportunities and Catalysts

• M&A Potential: Fastly has long been a rumored acquisition target for giants looking to bolster their edge capabilities. Potential suitors include Oracle (NYSE: ORCL), which needs an edge play to compete with AWS, or Cisco (NASDAQ: CSCO), given the existing ties to Fastly's leadership.
• Sovereign Clouds: As European and Asian nations tighten data residency laws, Fastly’s ability to process data locally at the edge (rather than sending it to a US data center) makes it a preferred partner for global compliance.
• The "Machine Traffic" Boom: As AI-to-AI communication grows, the volume of API calls at the edge is expected to grow 10x faster than human-generated web traffic.

Investor Sentiment and Analyst Coverage

Wall Street has turned decidedly bullish in February 2026. Following the Q4 report, several Tier-1 banks, including Citi and William Blair, upgraded the stock to "Strong Buy" with price targets suggesting further 20-30% upside.

Institutional ownership has also seen a shift. Several major hedge funds that exited in 2022-2023 were reported to have built new positions in late 2025, anticipating the AI Accelerator launch. Retail sentiment on platforms like X and Reddit is currently at "extreme greed" levels, contributing to the high-velocity price action.

Regulatory, Policy, and Geopolitical Factors

The regulatory environment is becoming a tailwind for Fastly. The EU AI Act and similar global frameworks emphasize data privacy and "explainability." Fastly’s security suite, which filters and sanitizes data at the edge before it ever reaches a central server, helps companies comply with these strict data-in-transit regulations.

Geopolitically, Fastly’s distributed nature makes it more resilient to localized internet "splinternets." However, any significant escalation in trade tensions affecting the supply of high-end networking chips (like those from Nvidia or Broadcom) could impact Fastly’s ability to expand its server capacity in 2026 and 2027.

Conclusion

Fastly, Inc. (NYSE: FSLY) has completed a remarkable evolution. By moving beyond its roots as a simple content delivery service and embracing a future defined by AI-integrated edge computing, the company has secured its place in the modern tech stack.

While the 100% gain in February 2026 is a "catch-up" move for a stock that was arguably undervalued, investors must now weigh the company’s fundamental progress against its newfound premium valuation. Fastly has proven it can make money; now it must prove it can lead the next generation of the internet. For the cautious investor, the focus should remain on the "AI Accelerator" adoption rates and the company’s progress toward GAAP profitability throughout the remainder of 2026.

This content is intended for informational purposes only and is not financial advice.