Cloudflare vs. Fastly: Which Stock Has the Edge on CDN Space?

Cloudflare (NET) and Fastly (FSLY) are competing in the rapidly expanding Content Delivery Network (CDN) market, with Cloudflare pursuing global expansion and Fastly focusing on high-performance, programmable solutions. Despite NET's 69.5% YTD stock surge versus FSLY's 26% decline, Fastly trades at a substantially lower forward sales multiple (1.67x vs. NET's 28.19x). While Cloudflare anticipates strong revenue growth, its profitability is constrained by competitive pressures and investments, whereas Fastly, despite projecting a 2025 loss, is seen as having robust bottom-line growth expectations. The analysis ultimately favors Fastly due to its valuation, efficiency, and configurability, reflected in its Zacks Rank #3 (Hold) compared to Cloudflare's #5 (Strong Sell).

Analysis

Cloudflare (NET) and Fastly (FSLY) are key competitors in the content delivery network (CDN) market, which is projected to grow at a significant 18.04% CAGR between 2025 and 2034. Despite this shared tailwind, the companies present a stark contrast in performance and valuation. Cloudflare has seen its stock surge 69.5% year-to-date and trades at a premium forward sales multiple of 28.19x. This is supported by a strong revenue growth forecast of 25.4% for 2025, but its profitability is a key concern, with projected earnings growth of only 5.33% due to margin contraction from intense competition and heavy sales and marketing investments. Conversely, Fastly's stock has declined 26% year-to-date and trades at a deeply discounted 1.67x forward sales multiple. While the company is expected to post a loss of 9 cents per share in 2025, this represents a 25% year-over-year improvement, signaling a positive trajectory for its bottom line. The analysis suggests Fastly's focus on high-performance, configurable solutions and efficiency provides a distinct value proposition, which, combined with its low valuation and improving profitability outlook, earns it a Zacks Rank #3 (Hold) versus Cloudflare's #5 (Strong Sell).

Key Decisions for Investors

• Investors should weigh Cloudflare's high-growth but richly valued profile against Fastly's turnaround narrative, which offers a significant valuation discount but carries execution risk.
• Given Cloudflare's 28.19x forward sales multiple and modest 5.33% projected earnings growth, positions should be monitored for valuation risk, as margin pressure from competition and spending could challenge its premium.
• Fastly's 26% year-to-date stock decline and low 1.67x sales multiple may present a compelling entry point for value-oriented investors, contingent on the company achieving its projected 25% bottom-line improvement.
• The extreme divergence in valuation and analyst ratings (NET: Strong Sell, FSLY: Hold) could support a pair trade strategy, going long FSLY and short NET, to capitalize on a potential valuation reversion while maintaining exposure to the growing CDN sector.