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Why Fastly Stock Surged Today

What happened

Shares of Fastly (NYSE: FSLY) jumped 9.6% on Monday, following news that TikTok owner ByteDance reached an agreement with Oracle (NYSE: ORCL) ahead of President Donald Trump's deadline.

So what

The Trump administration demanded that ByteDance sell its U.S.-based TikTok operations, or face a ban in the U.S. "I set a date of around Sept. 15, at which point it's going to be out of business in the United States," Trump said on Aug. 3.

The uncertainty surrounding TikTok's future has weighed on Fastly's stock price. The popular social video app is Fastly's largest customer.

Fastly stock rallied on Monday. Image source: Getty Images.

Investors breathed a sigh of relief on Monday after news broke that software giant Oracle had struck a deal to become ByteDance's U.S. technology partner. It should be noted, however, that the deal is reportedly not an outright sale of TikTok's U.S. business, and the agreement will need to be approved by regulators.

Now what

Microsoft (NASDAQ: MSFT) had been in talks with ByteDance for several weeks, and the tech titan was thought to be the frontrunner to acquire TikTok's U.S. assets. But if Oracle is the one that partners with TikTok, that could help to ensure that Fastly retains its business --Microsoft was more likely of the two to switch TikTok over to its own infrastructure.

Keeping TikTok as a customer would be a boon for Fastly. The rapidly expanding social media platform could help to turbocharge Fastly's growth in the years ahead.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fastly and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.


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