Fastly, Inc. (FSLY) stock intrinsic value fair value estimate & owner earnings analysis

Fastly runs an edge cloud platform: customers pay mostly on a usage basis to have their websites, apps and video delivered faster and protected. 2025 revenue was $624.0 million (Network Services $477.8 million, Security $125.1 million, Other including Compute and Observability $21.2 million), up 14.8% from $543.7 million. Our ten-year valuation looks at what the business earns for its owners after paying for everything, including the stock compensation that dilutes shareholders. On that measure Fastly has not yet earned anything for owners. Cash from operations turned positive, reaching $94.4 million in 2025 from $16.4 million in 2024 and $0.4 million in 2023. But the company paid $117.3 million of that year in stock compensation and spent about $46.4 million on equipment and capitalized software. Setting aside the part of capital spending that supports growth, and stripping out swings in working capital, owner earnings were a loss of about $79 million in 2025, or $0.54 per share. The stored series improves every year since 2021: -$1.84, -$1.81, -$1.06, -$0.79, -$0.54 per share. Two accounting judgements matter here. We treat stock compensation as a real cost, and we leave lease payments and capitalized sales commissions in the earnings figure, because the matching non-cash lease and commission expenses are added back in cash flow and removing only one side would overstate earnings. Growth-path check: the actual improvement in owner earnings in 2025 was $0.25 per share. The first half of 2026 does not show that pace continuing. Revenue rose 21.5% to $356.3 million and operating cash flow rose to $68.2 million from $43.1 million, but stock compensation rose to $70.2 million from $51.9 million and purchases of property and equipment rose to $52.6 million from $12.5 million (the filing describes network expansion). On the same basis, first-half 2026 owner earnings were no better than a year earlier and probably worse. We therefore do not credit the recent improvement as a trend. Base case: nothing that can be named and evidenced turns these owner earnings positive. Revenue has grown at uneven rates (about 4% in 2023, 7% in 2024, 15% in 2025), so it is not steady enough to credit, and lower stock compensation or better margins are hopes, not contracts. Base is therefore worth $0 per share. This is not a claim that the shares can be worth less than nothing; the loss is mostly stock compensation, which management controls, and we simply do not credit any value to a stream we cannot evidence. Bear case: Fastly's ten largest customers made up 32% of 2025 revenue, and the filing names TikTok as one of the largest and notes uncertainty over its restructuring. The company carries $150 million of 7.75% convertible notes due June 2028 and $180 million of 0% convertible notes due December 2030 (the remaining $38.6 million of 2026 notes was due in March 2026). With owner earnings negative, a loss of a large customer or of pricing would leave little for shareholders after the debt. Bear is $0 per share. Bull case: the levers that have worked since 2021 keep working. Stock compensation fell from about 40% of revenue in 2021 to about 19% in 2025, and operating cash flow moved from a $38.5 million outflow to a $94.4 million inflow. In the bull case revenue holds at about $624 million with no growth credited, owner earnings improve roughly $25 million a year from about -$79 million, reach break-even in year three, and settle near $62 million a year (about 10% of revenue) from year seven. That level is held for twenty years from today and then valued at nothing. Discounted at 6% on roughly 147 million shares this gives about $2.78 per share. What would make this wrong: if stock compensation is cut sharply or capital spending returns to about $30 million while revenue keeps growing double digits, the base case would be too low. If the first-half 2026 cost growth continues, the bull case is too high. Two items could not be fully reconciled: the filing discloses a $18.0 million rise in other liabilities in 2025 without a named cause, and we removed it as working capital rather than treat it as earnings. The margin-of-safety price of $1.00 assumes the business condition described has been met; until it is, no margin-of-safety price applies.