Fastly (FSLY -21.40%) stock is sinking rapidly in Thursday's trading. The edge-computing specialist's share price was down 22.1% as of noon ET despite the S&P 500 index being up 0.5% and the Nasdaq Composite being up 0.8% at the same time. The stock had been down as much as 25.9% earlier in the session.
Fastly reported its fourth-quarter results yesterday, posting sales that beat the market's expectations and earnings that fell short of Wall Street's target. But while the company posted a revenue beat in Q4, its forward guidance has investors feeling bearish.
Fastly recorded a non-GAAP (adjusted) loss per share of $0.03 on revenue of $140.57 million in the fourth quarter. For comparison, the average Wall Street estimate had called for the business to post a break-even quarter on sales of $138.63 million.
Fastly's revenue increased 2% year over year in Q4 -- marking an all-time high for the period. The company said that it was continuing to make progress with its customer diversification efforts, and its top 10 largest customers accounted for 32% in the quarter -- down from 33% in Q3 and 40% in Q4 2023. The company also closed out the quarter with 596 enterprise customers, representing a 3% year-over-year increase.
But despite movement on the diversification front and better-than-expected sales in the period, margins missed expectations. The shortfall may be raising concerns about the company's competitive positioning and pricing power.
For the first quarter, Fastly is guiding for a loss per share of $0.09 to $0.05 on sales of $136 million to $140 million. Meanwhile, the average analyst estimate had called for the business to post a loss per share of $0.01 on sales of $137.14 million.
Looking ahead to the full-year period, Fastly is guiding for sales to come in between $575 million and $585 million. If the business hits the midpoint of that target, it would mean delivering annual sales growth of roughly 6.7%. Meanwhile, the company is forecasting an adjusted loss per share between $0.15 and $0.09. For comparison, the company posted an adjusted loss per share of $0.12 last year.
With sales growth projected to be in the mid-single-digit range and expectations for a loss that's roughly in line with last year's, investors are losing confidence in Fastly's growth story. The edge-computing specialist will likely need to deliver better margins in conjunction with reaccelerated sales growth if it hopes to shift the sentiment surrounding its stock.
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