Raymond James moved to a more bullish stance on Fastly, upgrading the content delivery and edge computing provider from "Market Perform" to "Outperform" and establishing a $23 price objective. That target implies about 18% upside relative to Fastly's most recent close of $19.50.
The brokerage attributed the change in rating to several interrelated factors: clearer operational execution, a rise in traffic related to artificial intelligence and inference workloads, and increasing traction in Fastly's security business.
Analysts at Raymond James said demand is growing for sophisticated content delivery and security services as enterprises reconsider do-it-yourself content delivery network approaches in the face of rising AI-driven traffic volumes. The firm noted that Fastly's network architecture and edge computing capabilities are positioned to help the company capture incremental market share as these trends continue.
On investor sentiment, Raymond James suggested that concerns following Fastly's first-quarter 2026 results were in part a response to an overextended rally in the prior quarter and a misunderstanding of whether recent operational improvements are sustainable. The brokerage argued that the recent gains reflect structural operational changes rather than a transient boost tied solely to AI-driven demand.
Fastly's security unit was singled out as a primary growth engine. Raymond James projects year-over-year revenue growth for the security segment in a range of 25% to 30% for the current year, supported by active cross-selling and higher adoption rates for API security products. Management has reported stronger engagement in larger multi-product deals and renewals, and Raymond James believes Fastly is winning share in those areas versus competitors, including Akamai Technologies.
Reflecting this view, Raymond James lifted its revenue estimates for Fastly to $719 million for 2026 and $799 million for 2027, and it made modest upward revisions to its earnings forecasts. The firm further pointed to improving financial flexibility, positive free cash flow generation, and disciplined infrastructure investments as reasons to adopt a more constructive posture toward the stock.
Summary
Raymond James upgraded Fastly to Outperform and set a $23 price target, citing operational improvements, rising AI-related traffic, and momentum in the security business. The brokerage raised 2026 and 2027 revenue estimates to $719 million and $799 million, respectively, and noted improving cash flow and disciplined capital allocation.
Key points
- Rating upgrade to Outperform and $23 price target, implying roughly 18% upside from the recent $19.50 close.
- Security segment projected to grow 25% to 30% year over year this year, driven by cross-selling and API security adoption; gains in larger multi-product deals and renewals noted.
- Revenue estimates raised to $719 million for 2026 and $799 million for 2027; improving free cash flow and disciplined infrastructure investments cited as supportive.
Market and sector impacts
- Technology infrastructure and edge computing providers as the primary sector affected by shifts to managed CDN and edge solutions.
- Cybersecurity and API security markets where Fastly's security segment is gaining traction.
Risks and uncertainties
- Investor sentiment risk stemming from a prior overextended rally and possible misinterpretation of the sustainability of recent performance improvements - impacts equity investors in the company.
- Competitive pressure from established peers, including Akamai Technologies, as Fastly seeks share in larger multi-product deals and renewals - relevant for technology infrastructure and security markets.
- Perception risk that recent gains are a temporary AI-driven boost rather than the result of structural operational change; this perception could influence market valuation.