Executive Summary

Beat-and-raise quarter: Revenue $731.1M (+7% y/y) and non-GAAP EPS $3.42 both exceeded S&P Global consensus, with product strength led by systems (+27% y/y); FY25 revenue growth outlook raised to 6.5–7.5% and EPS growth to 8–10% . Q2 revenue beat vs. consensus $716.5M and EPS beat vs. $3.09* (see Estimates Context). Values retrieved from S&P Global.*
Mix and margins constructive: GAAP gross margin 80.7% and non-GAAP gross margin 83.1% (+100 bps y/y), while non-GAAP operating margin rose to 31.9% (+103 bps y/y) .
Systems cycle accelerating: Refresh, end-of-support (VIPRION Apr-26; iSeries Jan-27), data center modernization and AI workloads drove systems to $179M (+27% y/y); software was flat at $158M given the smallest renewal base of the year, with H2 weighted renewals expected to re-accelerate growth .
Q3 guide in line: Revenue $740–$760M (midpoint +8% y/y) and non-GAAP EPS $3.41–$3.53, supported by large subscription renewal base and sustained systems demand .
Cash generation and capital returns strong: Record Q2 operating cash flow $257M; repurchased $125M of stock (avg $259), with $1.2B remaining authorization .

What Went Well and What Went Wrong

What Went Well

Systems-driven outperformance: Systems revenue $179M (+27% y/y) on broad refresh activity, end-of-support tailwinds, modernization, AI-related demand, and competitive displacement .
Margin expansion and EPS beat: Non-GAAP gross margin 83.1% (+100 bps y/y), non-GAAP operating margin 31.9% (+103 bps y/y), non-GAAP EPS $3.42 (+18% y/y) above guidance top end by $0.28 .
Guidance raised and macro visibility: FY25 revenue growth lifted to 6.5–7.5% (prior 6–7%) and EPS growth to 8–10% (prior 6.5–8.5%), with no signs of near-term demand erosion and healthy Q3 pipeline . Quote: “We are not seeing any direct signs of near-term demand erosion” .

What Went Wrong

Software growth paused in Q2: Software revenue was flat y/y at $158M due to the smallest renewal base of the year; management reiterated H2 weighting of renewals for acceleration .
EBITDA vs. consensus softness: S&P Global standardized EBITDA missed consensus in Q2 and Q3 despite EPS beats, reflecting accounting mix and seasonality in renewal recognition (see Estimates Context). Values retrieved from S&P Global.*
Federal/government risk watch: While Q2 Fed performed in line or better, management noted potential budget-related timing effects in H2 (push-outs or pull-ins), albeit on prioritized security programs and small mix .

Financial Results

Headline P&L and Margins (GAAP and non-GAAP)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($M)	$747	$766	$731.1
GAAP Gross Margin	80.8%	81.7%	80.7%
Non-GAAP Gross Margin	83.0%	83.9%	83.1%
GAAP Operating Margin	25.6%	26.8%	21.7%
Non-GAAP Operating Margin	34.4%	37.4%	31.9%
GAAP EPS	$2.80	$2.82	$2.48
Non-GAAP EPS	$3.67	$3.84	$3.42

Segment and Revenue Mix

Revenue ($M)	Q4 2024	Q1 2025	Q2 2025
Systems	$130	$160	$179
Software	$228	$209	$158
Global Services	$388	$398	$394
Total Revenue	$747	$766	$731.1

KPIs and Cash/Capital Returns

KPI	Q4 2024	Q1 2025	Q2 2025
Recurring Revenue (% of total)	78%	72%	72%
DSO (days)	47	57	47
Deferred Revenue ($B)	~$1.8	~$1.95	~$1.92
Cash & Investments ($B)	~$1.08	~$1.16	~$1.27
Cash from Ops ($M)	$247	$203	$257
Share Repurchases	$100M @ $206 avg	$125M @ $255 avg	$125M @ $259 avg

Q2 2025 Actuals vs. S&P Global Consensus

Metric	Actual	Consensus	Surprise
Revenue ($M)	$731.1	$716.5*	+$14.6M / +2.0%
Non-GAAP EPS ($)	$3.42	$3.09*	+$0.33 / +10.7%
EBITDA ($M, S&P standard)	$181.4*	$253.7*	-$72.3M

Values retrieved from S&P Global.*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q3 FY25	—	$740–$760	New
Non-GAAP EPS ($)	Q3 FY25	—	$3.41–$3.53	New
Non-GAAP Gross Margin	Q3 FY25	—	~83–83.5%	New
Non-GAAP OpEx ($M)	Q3 FY25	—	$366–$378	New
Share-based Comp ($M)	Q3 FY25	—	~$57–$59	New
Revenue Growth (y/y)	FY25	6–7%	6.5–7.5%	Raised
Non-GAAP EPS Growth (y/y)	FY25	6.5–8.5%	8–10%	Raised
Non-GAAP Gross Margin	FY25	83–84%	83–84%	Maintained
Non-GAAP Operating Margin	FY25	~35%	~35%	Maintained
Non-GAAP Tax Rate	FY25	21–23%	20–22%	Lowered

Note: Q3 prior guidance not provided; FY25 previous from Q1 call.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 & Q1’25)	Current Period (Q2’25)	Trend
AI/Technology Initiatives	AI data ingestion, WAAP for secure inferencing, NVIDIA collaboration on BIG‑IP Next for Kubernetes ; >50% of Distributed Cloud customers using AI assistant; early AI wins	ADSP enhancements, AI Gateway GA, MCP support for agentic workflows; new AI wins (APAC service provider, NA retailer)	Strengthening
Supply Chain	Improving ability to fulfill demand ; no constraints highlighted	Resilient and diversified; no material lead-time impacts	Stable/Positive
Tariffs/Macro	Macro stable in FY25 outlook	Tariff costs low single-digit $M in FY25, to be offset by efficiencies	Manageable
Product Performance	Q4 systems -3% y/y but improving demand; software +19%	Systems +27% y/y on refresh/AI; software flat with H2-weighted renewals	Systems accelerating; software H2 weighted
Regional Trends	Q4: Americas +9%, EMEA +4%, APAC -3%	Q2: Americas +3%, EMEA +20%, APAC +3%	EMEA rebound
Competitive Displacement	Taking share in ADC, record displacements	Displacements continue across portfolio	Positive
Federal/Gov	—	Q2 in line/better; H2 timing risk but prioritized security projects	Watch list
Software Renewal Cadence	Back-half weighted	Q3/Q4 substantial renewals; visibility “pretty good”	H2 strength expected

Management Commentary

Strategy and positioning: “We are enabling consistent policies, full visibility and AI‑driven insights all from a single platform that is flexible to deploy…to deliver and secure any app, any API, anywhere.”
ADSP and AI roadmap: Introduced the F5 Application Delivery and Security Platform (ADSP); announced broad cybersecurity enhancements; launched AI Gateway; adding MCP support to enable agentic workflows .
Demand signal: “We are not seeing any direct signs of near-term demand erosion,” with sustained Q3 pipeline and strong systems/software drivers .
AI revenue focus: Largest near-term AI use case is “data delivery for AI models” (BIG‑IP in front of data stores for training/inference); security and AI factory load balancing opportunities are earlier-stage .
Tariffs exposure: FY25 tariff costs in low single-digit millions; largely offset by manufacturing/support efficiencies .

Q&A Highlights

Software growth drivers and cadence: Growth is renewal-driven with strong expansion on multi-year subscriptions in H2; Q2 software flat due to smallest renewal base of the year .
Systems cycle strength: Ranked drivers—(1) tech refresh, (2) data center modernization/hybrid multicloud and AI prep, (3) competitive displacement, (4) direct AI use cases .
End-of-support tailwinds and pricing: VIPRION EoSS in Apr-26 and iSeries in Jan-27; price increases ~5% portfolio-wide (larger on rSeries) underpin pricing/mix .
Tariffs/supply chain: Minimal cost exposure; resilient, diversified supply chain; no material impact to lead times .
Federal outlook: Q2 in line/better; H2 may see timing effects, but security projects prioritized .

Estimates Context

Q2 2025 vs S&P Global consensus: Revenue $731.1M vs $716.5M* (beat); non-GAAP EPS $3.42 vs $3.09* (beat). EBITDA $181.4M* vs $253.7M* (miss), reflecting accounting mix and renewal seasonality. Values retrieved from S&P Global.*
Q3 2025 guidance vs consensus: Revenue guide midpoint $750M vs $752.0M* (in line); non-GAAP EPS midpoint ~$3.47 vs $3.49* (in line). Values retrieved from S&P Global.*

Key Takeaways for Investors

“Beat and raise” with systems-led upside: Strong systems refresh/modernization and share gains offset software’s seasonal pause; FY25 guide raised on H1 strength and H2 renewals .
H2 software acceleration likely: Large, visible renewal base and historically strong expansion provide a setup for re-acceleration in Q3–Q4 despite Q2 flat software .
AI narrative is tangible and expanding: Near-term revenue anchored in data delivery for AI; security (WAAP/AI Gateway) and AI factory load balancing are emerging vectors .
Margins remain a lever: Non-GAAP GM 83.1% and Opex discipline support ~35% FY25 non-GAAP operating margin target; tax rate cut to 20–22% boosts EPS flow-through .
Cash returns continue: Record Q2 cash from ops ($257M), ongoing buybacks (at least 50% of FCF) with $1.2B authorization remaining; supportive for TSR .
Watch items: Federal budget timing, EBITDA vs. S&P consensus optics, and intra-quarter renewal lumpiness; management sees no near-term demand erosion and limited tariff impact .

Additional source documents:

Q2 FY25 8-K and press release with full financials and guidance .
Q2 FY25 earnings call transcript (prepared remarks and Q&A) .
Prior quarters for trend: Q1 FY25 8-K and call ; Q4 FY24 call .

S&P Global consensus data are marked with an asterisk () and provided for context. Values retrieved from S&P Global.

F5, INC. (FFIV)·Q2 2025 Earnings Summary