Shares of Fastly Inc. fell more than 25% on Wednesday after business hours, after the software company said its biggest client, TikTok's parent company, Bytedance Inc., had not used its produced as much as expected amid a threat of ban in the United States.
Quickly
FSLY,
-4.38%
revealed in a press release that it now expects third-quarter revenue of $ 70-71 million, after previously guiding sales of $ 73.5 million. from $ 75.5 million. The company also said it should no longer rely on its full-year forecast and that a new forecast will be released when the company fully reports its results on October 28.
The company said its largest customer was not using its products, which charge per use, as much as expected "due to the impacts of the uncertain geopolitical environment." Although Fastly did not disclose the name of this client in the press release, Fastly admitted in filings with the Securities and Exchange Commission and elsewhere that its largest client is Bytedance.
“The current global environment has, in some ways, fueled our business, but has also created areas of uncertainty,” Chief Executive Officer Joshua Bixby said in a statement. “While our preliminary third quarter results reflect the challenges of a usage-based model, we believe Fastly's business fundamentals remain strong, as does demand for our platform.”
President Donald Trump has attempted to ban TikTok from operating in the United States unless China-based Bytedance transfers ownership to a US entity. Although there was an agreement to create a new entity in the United States with the help of Oracle Corp.
ORCL,
-0.01%
and Walmart Inc.
WMT,
-1.56%,
this ruling appears to be on hold as TikTok fights ban through the US court system, where a judge has lifted the ban at the end of last month.
The stock quickly closed 4.4% to $ 123.19 on Wednesday, then fell below $ 90 per share after hours after the announcement. The San Francisco-based software company went public in May 2019 for $ 16 a share.