What happened
Shares of Fastly(NYSE: FSLY), a content delivery network company, were tumbling today after management reported second-quarter results that disappointed investors. Fastly beat analysts' top-line consensus estimate, but earnings fell short of Wall Street's expectations.
As a result, the tech stock fell by 9% as of 10:39 a.m. ET on Thursday.
So what
Second-quarter revenue was $102.5 million, which was an increase of 21% from the year-ago quarter and surpassed analysts' average estimate of $101.3 million.
In a press release, CEO Joshua Bixby said, "We are pleased to continue our revenue momentum into 2022, exceeding the top end of our guidance range and representing another record revenue quarter, further demonstrating Fastly's value with our existing and new customers."
But investors appeared to ignore the company's revenue gains and instead focused on Fastly's adjusted loss of $0.23 per share, which was down from a loss of $0.15 in the year-ago quarter and worse than Wall Street's consensus estimate of a loss of $0.17 per share for the quarter.
The company's operating expenses increased by nearly 13% from the year-ago quarter, which likely hurt Fastly's bottom line. Chief financial officer Ron Kisling addressed this issue on the company's call with analysts: "As we previously shared, our expenses in 2022 were weighted to the first half of the year. And with these adjustments, we expect second-half operating expenses to decline as compared to the first half."
Now what
Investors have little patience for high-growth technology stocks that aren't generating a profit right now, and Fastly's drop today reflects that sentiment.
With the company's losses widening and operating expenses climbing in the second quarter, some investors likely view Fastly's shares as too risky to hold on to as they brace for a potential economic slowdown.
That doesn't mean that Fastly can't be a good long-term investment, but the company will have to move further toward profitability if it wants to convince investors to hold on to its stock.
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Chris Neiger 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.