Fastly, Inc. (NYSE:FSLY) Class Action Lawsuit

A class action lawsuit has been filed against Fastly, Inc. (NYSE:FSLY) May 24, 2024. The plaintiffs (shareholders) alleged that they purchased FSLY shares at artificially high prices between February 15, 2024 and May 1, 2024 (the class period) and are now seeking compensation for their financial losses. Investors who purchased Fastly shares during this period can click here to learn how to join the lawsuit.

Fastly is a software-as-a-service (SaaS) provider. The company has developed an edge cloud network that enables developers to launch, secure, and deliver websites and applications with speed and scale. Fastly also offers Content Delivery Network (CDN) services that help companies deliver content to end users.

Fastly’s Misleading Claims

Plaintiffs allege that Fastly and two of its senior officers (the individual defendants) defrauded investors by repeatedly making false and misleading public statements about the company’s business practices and prospects during the period covered by the lawsuit.

According to the lawsuit, Fastly made high claims during the period covered by the lawsuit. For example, during its Q4 FY2023 earnings call, the company noted that customer retention rates were stable, with LTM NRR (last twelve-month net retention rate) at 113%. Meanwhile, Fastly’s customer count grew by 141 sequentially to 3,243 in Q4, compared to an increase of 181 customers in Q3 FY2023.

In addition, the CEO (individual defendant) stated that the growing customer base would increase the company’s revenues over the years. At the same time, these customers helped diversify revenues across verticals and increase profitability.

This is how the truth was revealed

The complaint alleges that defendants omitted to disclose factual information about Fastly’s sustained increased market share, revenue growth, and ability to meet 2024 revenue guidance in its SEC filings and related materials.

The news became clear on May 1, when the company’s Q1 FY2024 results revealed disappointing metrics in contrast to management’s commentary during the previous quarter’s press conference. The company’s revenue of $133.52 million missed the consensus by $0.35 million. Worse, Fastly drastically lowered its revenue guidance for the full fiscal year 2024. The revised revenue range fell to $555 million-$565 million from the previous guidance of $580 million-$590 million, and also missed analysts’ estimates of $584.62 million.

Following disappointing first-quarter results, research firm Bank of America lowered its rating on FSLY stock from Buy to Sell on May 2. The news caused Fastly shares to fall 32% on the same day.

Fastly shares have fallen more than 58% since the start of 2024, resulting in massive losses in shareholder profits.

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