。
It looks like she's going to fail.
Literal
She [topic-は] fail [looks like-しそうだ].
失敗しそうだ uses the appearance ~そう attached to the masu-stem of 失敗する — it looks like failure is imminent based on observable evidence. This is the appearance/likelihood そう, distinct from hearsay そうだ. The sentence is a prediction based on what the speaker can see of her current situation or performance.