Thread by @investing_city

1/11

2 quotes from FSLY's Q2 earnings call:

"We are pleased with the number of new enterprise customers as well as customers who grew into the enterprise category. However, this strong growth was offset by some customers falling out of the category in COVID-impacted industries"

"Any ban of the TikTok app by the U.S. would create uncertainty around our ability to support this customer. While we believe we are in a position to backfill the MAJORITY of this traffic...the loss of this customer's traffic would have an impact on our business."

These two quotes relate to the reasons for cutting guidance:

Fastly may have backhauled the majority of lost traffic but clearly not all of it.

One question is: where did the TikTok traffic go?

I doubt it's from less TikTok usage. Where did TikTok route that traffic?

On the more concerning line, "a few customers had lower usage [than we expected]"...

Some enterprise customers got hit really hard. That's why Fastly only added 7 enterprise customers last quarter. The lowest YoY add since Q2 2018.

Hopefully that's the reason for softness.

That would be my guess but a lot of SaaS names are down AH because that sentence implies a slowing down towards the back end of the quarter.

Yet, a bunch of companies were seeing growth picking up at the beginning of the quarter.

So what's the truth?

Well, another usage-based company, Twilio, pre-announced strong earnings.

But was that because they are really killing it or did they want to boost the stock to make their Segment acquisition a little cheaper?

I don't know.

The new guidance seems like weird timing but I think they had to, in conjunction with the S-3 filing. I'm not completely sure on this.

This sentence is what I'm referring to.

Because let's say FSLY beat by $3 million. They'd be in the original guidance range.

And everyone would be scratching their heads.

So the beat will not be substantial. The quarter ended 9/30, they already know the number. That's why the range is so small (70-71).

Also, Q3 does not include anything from Signal Sciences. The acquisition closed 10/1 and Q3 ended 9/30.

Q4 will be interesting with some help from Signal Sciences. Maybe growth goes back up to 50% and everyone gets all excited again?

We'll see.

At this point, I'm rambling.

What we do know:

- some enterprise customers were already struggling
- Fastly knows the number, there won't be a big beat on $71 mil

What we don't know:

- where TikTok traffic went
- the breakdown of lost revenue from TikTok vs. other enterprises

Ok, I'm done. I promise 😅

Maybe it's just because India banned TikTok right before Q3 started?

This article speculates that India could account for 1/3rd of TikTok global users.

Could be the answer??
nytimes.com/2020/06/29/wor…