Earlier today, Fastly announced earnings for the first time and the market reacted favorably, pushing up their stock price. Fastly joins Akamai and Limelight Networks as publicly-traded companies that compete in the market for application and content delivery, cloud security, and edge computing. In the next few weeks, Cloudflare will join the elite group of public companies.
- Limelight Networks
- Cloudflare – Coming
During every earnings call, financial analysts ask various questions about the state of the business. The questions asked of Fastly were the best so far because they asked about edge computing several times. Edge computing is the super hot trend transforming the CDN industry. In our market, edge computing is something very specific in capabilities, which we’ll discuss at a later time.
Every once in a while during an earnings call, you will hear an interesting nugget of insight that provides us a glimpse of the future. Not on this call. The most glaring takeaway – Fastly profited somewhat handsomely for streaming a large live event earlier in the year. In fact, if my ears don’t deceive me, it appears that Fastly built up capacity in Q4 2018 to support this event in February, which is likely the Super Bowl. For a Super Bowl like event, multi-CDN is the way to go.
Video streaming is the low hanging fruit for the CDN. It’s not sexy, being it a commodity, and only requires a lot of capacity, not much innovation is needed. Now edge computing, that’s another story. To our disappointment, analysts did not ask Fastly about their main competitor AWS and Fastly did not volunteer this information either. Perhaps Matthew Prince (Cloudflare CEO) will stir the pot and take aim at AWS during their first earnings call after they go public.
- Current headcount: 544
- Network: 64 PoPs and 52 Tbps of capacity
- Total # of customers: increased from 1,529 to 1,627 over the last year
- # of enterprise customers: increased from 190 to 262 over the last year
- Enterprise customers generate 86% of the revenue
- Average enterprise customer spends $556k / year up 4% from last year
According to Business Insider, their sources indicate a September IPO. However, a public S-1 has not been filed yet, so there is a chance it spills over into the following month/s. S-1’s are usually filed on Fridays so we’ll have to wait another day to see what happens.
Cloudflare has a $3.2B valuation. However, in today’s market, those valuations mean nada, figuring that Crowdstrike and Zscaler trounced their before-IPO valuations. For Cloudflare, anything less than a $10B valuation would be a disappointment. Of all the competitors in this industry, Cloudflare is the most difficult to categorize because its product line crosses over into many other industries. They’re kinda like a mini-AWS. Once Cloudflare publicizes their S-1, we write up an analysis on them.
Akamai and Limelight
Nothing exciting happening in this neck of the woods. Recently, Akamai reported Q2-2019 earnings and its Cloud Security Solutions segment grew 32% over the last year, coming in at $205M out of total earnings of $705M. As a result, their stock jumped into the $89-$90. Limelight didn’t fare so well. They reported earnings only July 18 and “missed analyst estimates across the board, reporting a steep decline in revenue”. As a result, their stock declined.
Fastly is just getting started. We can expect bigger and better things from them next year. Lucet, their edge computing product holds a lot of promise. Will it bring in hundreds of millions of dollars in the future? It can, but they need to add more features that compliments this product.
And Fastly has done a tremendous job in developing its technology stack and it ranks up there with a few others. They define it as a “single, software-defined, modern network……” which is just the opposite of Akamai. Akamai has many technology stacks, the result of many acquisitions.