Fastly plummets 31% after revenue projections disappoint due to less business with TikTok

• Fastly plummeted 31% on Thursday after it reported preliminary third quarter earnings results that missed analyst estimates.
• Fastly said its largest customer, TikTok, did less business with it in the quarter, leading it to lower its third quarter revenue guidance.
• "Usage of Fastly's platform by its previously disclosed largest customer did not meet expectations, resulting in a corresponding significant reduction in revenue from this customer," the company said.
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Fastly, the cloud edge platform that helps improve the speed of websites and applications, plummeted as much as 31% on Thursday after it announced preliminary third quarter results that fell short of expectations.

Fastly said it expects third quarter revenue in a range of $70 million to $71 million, well below its previous guidance of $73.5 million to $75.5 million. Analysts expected Fastly to report third quarter revenue of $73.5 million.

Fastly chalked up the revenue miss to an uncertain geopolitical environment, likely related to the pending Trump administration ban of its largest customer, TikTok.

"Usage of Fastly's platform by its previously disclosed largest customer [TikTok] did not meet expectations, resulting in a corresponding significant reduction in revenue from this customer," Fastly said.

On top of that, during the latter part of the third quarter, "a few customers had lower usage than Fastly had estimated," the company said.

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"The current global environment has in some ways fueled our business, but has also created areas of uncertainty," Fastly CEO Joshua Bixby said.

The swift drop in shares of Fastly brought its stock price to levels not seen since late September.

Following the news, analysts at Stifel downgraded Fastly to hold from buy, and lowered its price target to $77 from $98, representing potential downside of 15% from current levels.

Stifel said it's "surprised usage has slowed so much," especially given that the TikTok app remains fully available in the US.

"What is even more concerning is that Fastly is seeing slowing usage at several other larger customers, and we are curious if this related more so to competition vis-a-vis macro," Stifel said.

Further, Stifel noted that Fastly will face tough comparables heading into the next few quarters.

Despite today's drop, shares of Fastly are still up 331% based on Thursday's opening price.

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