Shares of Fastly (FSLY -3.31%) were falling again this week, according to data from S&P Global Market Intelligence. The edge computing company posted weak growth and more losses in the fourth quarter of 2023, leading to the stock falling by as much as 36% for the week. Compared to its all-time high set in 2021, Fastly shares are down 88%, meaning for every $100 investors used to buy shares at the top, they would have just $12 left today.
Growing revenue but no profits
In the fourth quarter, Fastly’s revenue grew again to $138 million, up from $119 million in the same period in 2022. For the full year, revenue grew from $433 million to $506 million. Looking to 2024, Fastly is expecting revenue to be in the range of $580 million to $590 million.
So, what’s the problem? Well, the company cannot seem to generate a profit. In 2022, it posted an operating loss of $246 million, then a loss of $198 million in 2023. It doesn’t guide for generally accepted accounting principles (GAAP) operating income, but in 2024, it is expecting its adjusted operating loss to be $20 million to $14 million. Even using this fake profitability metric, Fastly can’t get in the black and is likely set to lose more money for shareholders yet again in 2024.
At the end of the day, profits are what drive shareholder value and stock prices higher. Seeing that Fastly can’t seem to generate profits, it is no surprise to see shareholders sell off the stock aggressively this week.
Will the company ever generate a profit?
Fastly operates in a booming industry: edge computing. The growing demands of the internet, computational speeds, and artificial intelligence (AI) mean growing demand for edge computing services from companies like Fastly. Even with this massive industry tailwind, Fastly has never generated a profit over a 12-month period. This should be highly concerning for any current or prospective shareholders.
Whether it fits into any AI or cloud computing investing theme, Fastly has never proven it can operate its business sustainably. For that reason, there’s no reason to buy the dip on this stock after its latest earnings report.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fastly. The Motley Fool has a disclosure policy.
