F5, INC. (FFIV)·Q1 2025 Earnings Summary

Executive Summary

• Revenue grew 11% year over year to $766M; non-GAAP EPS was $3.84, a beat of $0.43 above the top end of prior EPS guidance, driven by strong software renewals and systems strength .
• Software revenue rose 22% to $209M and systems revenue rose 18% to $160M; global services grew 3% to $398M, reflecting balanced execution across the portfolio .
• FY25 outlook was raised: revenue growth to 6–7% (from 4–5%) and non-GAAP EPS growth to 6.5–8.5% (from 5–7%), signaling confidence in the pipeline and expansion trends; Q2 revenue guided to $705–$725M with non-GAAP EPS of $3.02–$3.14 amid seasonal margin troughs .
• Management highlighted accelerating AI and hybrid multicloud opportunities, record competitive displacement, and technology refresh tailwinds; modest demand pull-in from mid-single-digit price increases also occurred .

What Went Well and What Went Wrong

• What Went Well

  • “Another record quarter” with total revenue +11% YoY and notable product strength: software +22% and systems +18%, underscoring demand in hybrid multicloud and AI-related workloads .
  • Strong non-GAAP operating leverage: non-GAAP operating margin expanded to 37.4% (+189 bps YoY), aided by robust renewals and disciplined OpEx .
  • Record competitive displacement and consolidation wins across finance, utilities, retail, and insurance, demonstrating portfolio breadth (BIG-IP, NGINX, Distributed Cloud) .

• What Went Wrong

  • Seasonal headwinds: Q2 expected to be the seasonal low for gross and operating margins due to payroll tax resets and a large customer event, tempering near-term EPS despite solid fundamentals .
  • Continued churn in the legacy Bot Defense point solution (prior trend) necessitating transition to platform bundles to stabilize SaaS ARR mix (context from prior quarter trends) .
  • Modest systems order pull-in ahead of Jan 1 price increases suggests some demand timing effects rather than pure run-rate strength .

Financial Results

Headline metrics – sequential comparison

YoY comparison

Segment mix

KPIs and cash/working capital

Regional mix (Q1 2025): Americas 56% (+15% YoY), EMEA 27% (+6% YoY), APAC 17% (+6% YoY) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “F5’s alignment with significant secular trends… led to another record quarter” and “new opportunities emerge in two main areas: hybrid multicloud and AI” .
• “We stand alone with the only complete hybrid multicloud portfolio for application security and delivery… partner with a CIO or CISO to secure and deliver all of their applications and APIs across hybrid, multi-cloud environment” .
• “Our unique ability to rapidly and securely move the large amounts of enterprise data necessary for AI inferencing and retrieval augmented generation positions F5 as a crucial player” .
• “Record number of competitive displacement” with examples in retail, insurance, and utilities .
• “We expect that within 3 years, 80% of applications and processes will be infused with AI,” and outlined three AI opportunity areas (data delivery, secure inferencing, AI factory load balancing) .

Q&A Highlights

• Hardware trajectory: Management expects double-digit hardware growth in FY25, citing strong refresh pipeline and competitive takeouts; supply chain capacity is solid .
• AI opportunity sizing: Near-term revenue tied to data movement and secure inferencing (RAG); AI factory load balancing with NVIDIA is longer-term (FY26+) with go-to-market work ahead .
• Software dynamics: Strong expansion at renewal drove upside; guidance prudently assumes deceleration from Q1’s exceptional expansion rates; perpetual revenue seasonally strong in fiscal Q1 (service provider CapEx timing) .
• Distributed Cloud momentum: >1,000 customers, ~2/3 existing and ~1/3 net new; >20% of top 1,000 customers now using DCS .
• Pricing and demand timing: Mid-single-digit increases led to modest systems order pull-in; management characterized it as non-material to headline growth .
• Federal demand: Q1 federal business “pretty solid” with a healthy pipeline despite administrative uncertainty .
• CDN via Lilac: CDN capability embedded to bundle with security in DCS; not aiming to be a standalone CDN competitor .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 FY25 EPS and revenue was unavailable at time of analysis due to data access limits; management reported non-GAAP EPS of $3.84 vs prior guidance range $3.29–$3.41, a beat of $0.43 over the top end .
• We will update consensus comparisons once S&P Global estimates can be retrieved. Values retrieved from S&P Global would be marked with an asterisk and “Values retrieved from S&P Global.”

Key Takeaways for Investors

• Strong execution and portfolio breadth drove an 11% YoY revenue increase and margin expansion; momentum spans software renewals and systems refresh, supporting raised FY25 guidance .
• AI is becoming a tangible demand driver for F5’s data delivery, WAAP security for inferencing, and emerging AI factory load balancing; expect near-term contributions from data movement/security and longer-term from factory traffic management .
• Technology refresh and competitive displacement are likely to sustain systems growth through FY25 (double-digit expected), aided by end-of-support cycles and hybrid multicloud adoption .
• Watch Q2 seasonal margin trough (payroll tax resets and event costs); despite lower margins, revenue is guided to ~5% YoY growth at midpoint with EPS $3.02–$3.14 .
• Distributed Cloud milestones (>1,000 customers; >20% of top customers adopting) strengthen cross-sell and platform consolidation narrative; platform bundling should offset legacy Bot Defense churn over time .
• Modest demand pull-in from price increases suggests timing effects rather than structural; underlying expansion and refresh drivers appear durable .
• Capital returns remain robust (64% of Q1 FCF to buybacks; $1.3B authorization remaining), underpinning EPS growth and downside support .