Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—N.D. Cal.: One statement survives dismissal in Fastly case on second try, (Aug 12, 2026)

By Rebecca E. Hoffman, J.D.

Plaintiffs’ modification of certain allegations to reflect a reduction in Fastly’s platform usage from “Key Customers,” as opposed to enterprise customers, affected the court’s analysis of several statements.

A shareholder class action alleging that Fastly, Inc., an edge cloud platform company, and its CEO and CFO, made false and misleading statements and omissions that overstated its financial position, can proceed as to one statement, a federal judge decided, granting leave for the plaintiffs to replead as to four statements, while closing the door on seven others (In re Fastly, Inc. Securities Litigation, No. 4:24-cv-03170 (N.D. Cal. Aug. 10, 2026)).

The plaintiffs must file their third amended complaint within 30 days of this order, including a redline comparison with the second amended complaint, the judge ruled.

The court explained that Fastly makes most of its money from its customers’ use of the platform, and that its largest customers are its revenue’s primary driver. Therefore, if any of these customers reduce their usage or drop the platform, it hugely impacts Fastly’s bottom line.

From November 2023 to August 2024, the plaintiffs said, the defendants “made 14 statements that misled investors about how macroeconomic trends and uncertainties were affecting” the company. Because of this, the plaintiffs alleged, Fastly’s stock was artificially inflated during that period, and then dropped when the truth came to light.

The original complaint, which was dismissed in part with leave to amend in September 2025, referred to “enterprise customers,” but the amended complaint at issue here changed certain allegations from declines in usage among enterprise customers to declines among “Key Customers”—its top 10 customers by revenue including TikTok and Apple.

Surviving statement. Statement 2, the statement for which the court denied the defendants’ motion to dismiss, was made during a conference call on November 15, 2023. Fastly’s then-CEO addressed a question on “‘what we are seeing from the macro’” by saying: “‘My competitors are seeing these effects, some slowing in growth, and [] we’re not seeing that.’” The plaintiffs alleged that slowing growth was in fact occurring, given that usage and revenue from its Key Customers was declining due to macroeconomic conditions.

The defendants argued that the plaintiffs’ “modified allegations” in the second amended complaint do not raise a sufficient inference that the statement was misleading when made, but the court sided with the plaintiffs. For example, the plaintiffs alleged that a confidential witness heard the CEO say, at a meeting before the conference call, that the company’s revenue had decreased due to less usage and thus less revenue from the Key Customers.

This and other similar allegations were sufficient to raise an inference that the CEO knew revenue was sliding in Q4 2023 because of declining usage, and by leaving out those details when he made the statement, “he created the impression of a state of affairs that differed in a material way from the one that actually existed,” the court said. The plaintiffs adequately pleaded scienter and loss causation as to Statement 2 as well.

‘Key’ not always key. On the other hand, there were allegedly misleading statements that were dismissed as a result of the plaintiffs’ changes to the allegations so that they referred to “Key Customers” instead of enterprise customers.

For example, Statement 13, from Fastly’s Q1 2024 report, indicated that the company should increase the usage of enterprise customers to avoid revenue losses. In its prior order, the court held that the plaintiffs failed to show that the statement was false or misleading, in that they did not allege that the defendants were aware at that time of declining enterprise customer usage. Here, the court agreed with the defendants that the plaintiffs’ changed allegations now refer to Key Customers and thus do not address enterprise customers’ usage in Q1 2024.

Two of the statements were dismissed for failure to plead loss causation, but the plaintiffs may amend as to one of them.

The case is No. 4:24-cv-03170.

Judge: Tigar, J.

Attorneys: Jennifer Pafiti (Pomerantz LLP) for Ken Kula. Daniel Robert Gherardi (Latham & Watkins LLP) for Fastly, Inc.

Companies: Fastly, Inc.

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