Shares of tech firm Fastly were pounded in after-hours trading on Wednesday, October 14 after the company lowered third-quarter revenue guidance. This pushed the stock price down more than 25% to around $91.
It estimates revenue for the period ending September 30 to be between $70 million and $71 million, which is well below the company's initial forecast for revenue of $73.5 million to $75.5 million.
Fastly CEO Joshua Bixby assured investors that the company's underlying business remains healthy. "While our preliminary third-quarter results reflect the challenges of a usage-based model, we believe the fundamentals of Fastly's business remain strong, as does demand for our platform."
The company cited two reasons for its dismally predicted revenue. According to a press release, usage from Fastly's largest customer, which is ByteDance the owner of TikTok, didn't prosper as anticipated due to the “uncertain geopolitical environment.” Additionally, there are a few customers experiencing much lower levels of usage than anticipated late in the quarter.
In recent months, TikTok’s parent company, Beijing-based ByteDance, has become a target of U.S. President Donald Trump, who threatened to ban the short video sharing app from the country. In September, Trump announced he signed off on a deal “in concept” with Oracle and Walmart that would enable TikTok to continue operations in the U.S.
However, if Fastly’s revenue issues are largely caused by challenges with TikTok, that may mean Fastly’s recovery is around the corner.
Fastly's data delivery and edge computing services are essential to many of its clients, which puts the company on the same playing field as online communications giant, Twilio, and cloud systems monitoring expert Datadog.
Fastly’s stock prices dropping was a direct reaction to this news. Shares had risen more than 500% year to date, so expectations were naturally quite high. Though, analysts are saying that it's a good time to buy into the growth stock.