Take a fresh look at your lifestyle.

TikTok reliance causes plunge in Fastly after stock’s Covid-era rally

0 6

[ad_1]

China’s flags are seen near a TikTok logo in this illustration picture taken July 16, 2020.

Florence Lo | Reuters

Fastly reported better-than-expected quarterly results Wednesday afternoon, but the stock is plunging on concern the company is overly reliant on China’s TikTok.

Joshua Bixby, Fastly’s CEO, said on his company’s earnings call that TikTok is its biggest customer, accounting for about 12% of revenue in the first six months of the year. 

President Donald Trump has said he will ban TikTok if its Chinese owner, ByteDance, doesn’t sell the video app to an American company by Sept. 15. Microsoft is trying to acquire TikTok’s business in the U.S. in a deal that could be worth up to $30 billion.

“Any ban of the TikTok app by the U.S. would create uncertainty around our ability to support this customer,” Bixby said on the call. “While we believe we are in a position to backfill the majority of this traffic in case they are no longer able to operate in the U.S., the loss of this customer’s traffic would have an impact on our business.”

Fastly’s technology helps consumers more rapidly view and retrieve digital content. The company competes with Akamai in the content delivery network (CDN) and, in addition to TikTok, serves customers like Slack and Spotify.

Fastly plunged 16% in after-hours trading on Wednesday after earnings. It’s trading more than 17% lower pre-market on Thursday. Prior to the latest disclosure, Fastly has been one of the standout tech performers of the pandemic, surging 364% this year as of Wednesday’s close, and 426% since the Nasdaq bottomed in March.

Even with high expectations, results didn’t disappoint. Fastly said second-quarter revenue jumped 62% from a year earlier to $74.7 million, topping analysts’ estimates for sales of $71.4 million. Adjusted earnings also beat expectations, and the company raised its full-year revenue forecast. 

“Our strong fundamentals drove continued customer expansion on our platform bolstered by elevated traffic levels across the internet as people continued to stay home,” the company said in its earnings statement.

Fastly said its customer count rose to 1,951 from 1,837, the largest quarterly growth since its IPO in mid-2019.

Based on investor reaction, however, all of the focus is on what happens with TikTok and the risks posed by a potential ban.

Bixby said that less than 50% of revenue from TikTok is in the U.S. On the call, an analyst asked if the company has baked any changed expectations for TikTok into its forecast.

“Nothing at this time,” said Adriel Lares, Fastly’s CFO. “We’re sort of assuming a little bit of a sort of the status quo at this moment.”

WATCH: TikTok price tag could reach $30 billion 

[ad_2]

Source link

Leave A Reply

Your email address will not be published.


Notice: ob_end_flush(): failed to send buffer of zlib output compression (0) in /home/realher1/public_html/wp-includes/functions.php on line 4669