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FI

F5, INC. (FFIV)·Q3 2025 Earnings Summary

Executive Summary

  • Strong Q3: Revenue $780M (+12% YoY), Non-GAAP EPS $4.16 (+24% YoY) on 26% product growth; systems +39% and software +16%, with recurring revenue at 73% of total. Strength was driven by tech refresh, data center modernization, hybrid multicloud adoption, and early AI-related demand .
  • Beat vs consensus: Revenue beat by ~3.8% ($780.37M vs $751.97M*), and Non-GAAP EPS beat by ~19% ($4.16 vs $3.49*). Broad-based strength with Americas +13%, EMEA +6%, APAC +21% YoY .
  • Guidance raised: Q4 revenue guided to $780–$800M and Non-GAAP EPS $3.87–$3.99; FY25 growth raised to ~9% revenue (midpoint) and 14–15% Non-GAAP EPS (from 6.5–7.5% and 8–10%), with FY25 Non-GAAP GM 83–84% and Op margin ~35% maintained; tax rate lowered to 18.5–19.5% .
  • Stock reaction catalysts: Product outperformance (systems) and FY25 guidance raise; narrative shift to ADSP platform consolidation, early AI monetization (data delivery, runtime security, AI factory load balancing), and partnerships (NVIDIA, MinIO) supporting medium-term upside .

What Went Well and What Went Wrong

  • What Went Well

    • Systems outperformance: +39% YoY to $181M on tech refresh, data center modernization, resiliency needs (esp. FS), and AI readiness; management sees hardware up again next year (albeit moderating) .
    • Software resilience via renewals: Software +16% YoY to $208M; subscription +19% to $185M (89% of software), with healthy “renew and expand” motion and consumption growth .
    • Strategic platform traction: Management emphasized wins consolidating delivery and security across on‑prem/SaaS via ADSP; early AI use cases in data delivery, runtime security, and AI factory load balancing; notable partnerships with NVIDIA (BlueField‑3 DPUs) and MinIO .

  • What Went Wrong

    • Gross margin at low end of range: Mix headwind from strong systems and certain high‑performance/FIPS deals modestly pressured GM; mgmt guides improvement in Q4 .
    • New software projects slightly softer: Net-new software projects were down in Q3 as some deals shifted to hardware deployments given performance/resiliency preferences .
    • Federal timing and services lag: Fed softer in Q3 with some pushes/downsizing; services growth modest (+1% YoY) with lag vs product, though deferred revenue trends point to improving trajectory into FY26 .

Financial Results

Headline P&L and Margins (USD)

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue ($M)$766 $731 $780
GAAP EPS$2.82 $2.48 $3.25
Non-GAAP EPS$3.84 $3.42 $4.16
GAAP Gross Margin %81.7% 80.7% 81.0%
Non-GAAP Gross Margin %83.9% 83.1% 83.1%
GAAP Operating Margin %26.8% 21.7% 25.2%
Non-GAAP Operating Margin %37.4% 31.9% 34.3%

Revenue by Segment ($M)

SegmentQ1 FY25Q2 FY25Q3 FY25
Systems160 179 181
Software209 158 208
Global Services398 394 392
Total766 731 780

Q3 vs Wall Street Consensus (S&P Global)

MetricConsensus*Actual
Revenue ($M)751.97*780.37
Non-GAAP EPS3.49*4.16
EPS Estimates (count)11*—
Revenue Estimates (count)11*—

Values marked with * are from S&P Global.

Other Q3 KPIs

KPIQ3 FY25
Recurring revenue mix73%
Subscription software ($M)$185 (89% of software)
Perpetual software ($M)$23
Cash & investments ($B)~$1.44
Cash from operations ($M)$282 (record)
DSO (days)42
Deferred revenue ($B)$1.96 (+10% YoY)
Share repurchase ($M)$125 @ $256 avg; $1B auth. remaining
Employees~6,540
Non-GAAP tax rate14.4% (discrete benefit)

Non-GAAP excludes stock‑based comp, amortization of intangibles, facility exit costs, acquisition‑related charges, restructuring, and related tax effects .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 FY25N/A$780–$800 New
Non-GAAP EPSQ4 FY25N/A$3.87–$3.99 New
Revenue growthFY256.5%–7.5% ~9% (midpoint implied) Raised
Non-GAAP EPS growthFY258%–10% 14%–15% Raised
Non-GAAP Gross MarginFY2583%–84% 83%–84% Maintained
Non-GAAP Operating MarginFY25~35% ~35% Maintained
Non-GAAP Tax RateFY2520%–22% 18.5%–19.5% (one-time Q3 benefit) Lowered
Software revenue growthFY25N/A~10% New
Capital returnFY25At least 50% of FCF ≥50% of FCF Maintained

Earnings Call Themes & Trends

TopicQ1 FY25 (Q‑2)Q2 FY25 (Q‑1)Q3 FY25 (Current)Trend
ADSP platform consolidationIntroduced platform focus; hybrid multicloud simplification Continued positioning; guidance raised Multiple wins consolidating delivery/security across on‑prem/SaaS; single pane ops Strengthening
Hardware/systemsSystems +18% YoY; stable IT spending Systems +27% YoY Systems +39% YoY; secular drivers (hybrid, resiliency, AI readiness); up again next year, moderating Accelerating, then moderating
Software+22% YoY; strong Flat YoY; renewals visibility +16% YoY; renew/expand strong; new projects slightly softer; FY26 mid‑single digit growth then re‑accel FY27 Solid, mixed new vs renew
AI initiativesEarly AI opportunity flagged —AI for ADC and ADC for AI; NVIDIA DPU, MinIO; AI data delivery/runtime security/factory LB wins Building
MarginsHigh 83–84% non‑GAAP GM 83.1% non‑GAAP GM GM at low end (systems mix, FIPS deals); guide improvement in Q4 Temporary mix pressure
Federal——Softer; some push/downsizing; pipeline healthy Timing noise
Services—+3% YoY +1% YoY; lag vs product; deferred rev up supports better FY26 Improving into FY26
Macro/tariffsStable spending —No tariff/pull‑in effects observed Neutral

Management Commentary

  • “We delivered third quarter revenue of $780 million, representing 12% growth year over year, driven by 26% product revenue growth, which included 39% growth in systems revenue and 16% growth in software revenue.” — François Locoh‑Donou, CEO .
  • “Customers are modernizing their data centers, adopting hybrid multicloud architectures, and scaling to meet growing application performance and security needs, including those coming from AI adoption.” .
  • “Our subscription‑based software revenue grew 19% year over year to $185 million…Revenue from recurring sources contributed 73% of our Q3 revenue.” — Cooper Werner, CFO .
  • “Gross margins came in slightly below the low end…driven by some high‑performance systems use cases and FIPS compliance deals.” — CFO .
  • “We expect Q4 revenue in the range of $780 million to $800 million…Our Q4 guidance implies FY’25 revenue growth of approximately 9% and EPS growth of 14% to 15%.” — CFO .
  • Platform/AI: Detailed discussion of AI for ADC (AI Assistant, iRules generation) and ADC for AI (AI Gateway, SSL Orchestrator), with NVIDIA DPU and MinIO alliances supporting performance/security for AI workloads .

Q&A Highlights

  • Hardware sustainability and drivers: ~2/3 of systems tied to F5‑to‑F5 refresh; ~1/3 non‑refresh growing faster, driven by hybrid/multicloud, resiliency (esp. FI), and AI readiness/use cases; expect systems up in FY26 but moderating growth; no tariff or pull‑in evidence .
  • Software dynamics: Renew/expand motion strong with higher consumption; new projects slightly softer in Q3 as some deals favored hardware for performance/resiliency; FY26 software mid‑single digit growth then re‑acceleration in FY27 given renewal base math .
  • Gross margin: Low end of range due to systems mix and FIPS‑compliant deals; expecting improvement in Q4 .
  • Federal & services: Fed slightly softer due to government efficiency initiatives; services growth to improve given deferred revenue trends and product lag effect .
  • Competitive/pricing: Ongoing competitive displacements; F5 price increases phased in since January with reasonable reception vs more aggressive peers .

Estimates Context

  • Q3 beats: Revenue $780.37M vs $751.97M*; Non-GAAP EPS $4.16 vs $3.49*. Both revenue and EPS materially beat consensus, with EPS outperforming by ~19% (mix‑driven systems strength and operating leverage) .
  • Q4 view vs consensus: Guidance implies revenue ~$780–$800M and Non-GAAP EPS $3.87–$3.99 vs consensus $795.48M* and $3.97* respectively — broadly in line on revenue and EPS (midpoints slightly below consensus), with mgmt citing continued tech refresh, modernization and ADSP adoption .
  • FY25: Raised to ~9% revenue growth and 14–15% EPS growth, above prior guidance; tax rate reduced to 18.5–19.5% benefiting FY25 EPS .
    Values marked with * are from S&P Global.

Key Takeaways for Investors

  • Product‑led upside: Systems growth (+39% YoY) powered the beat; non‑refresh systems driven by hybrid/multicloud resiliency and AI readiness looks more durable than a one‑time refresh cycle .
  • Software visibility intact: Renew/expand engine remains healthy; near‑term mix can tilt to hardware on performance needs, but software still ~10% FY25 growth with mid‑single digit FY26 then re‑accel in FY27 given renewal base math .
  • Margins manageable: GM mix headwinds likely transient; Q4 guide implies improvement while maintaining FY25 non‑GAAP GM 83–84% and Op margin ~35% .
  • Capital returns: Robust FCF ($282M Q3 CFO) supports buybacks (≥50% of FCF) with $1B authorization remaining; cash/investments ~$1.44B provide flexibility .
  • AI optionality: Early but tangible AI wins (data delivery, runtime security, AI factory LB), NVIDIA DPU integration, MinIO partnership — potential medium‑term catalysts as inference scales .
  • Services inflection: Deferred revenue up 10% YoY and short‑term deferred up 5% YoY indicate improving services growth into FY26 as maintenance lags product .
  • Risk checks: Federal timing lumpiness; service provider vertical remains project‑driven; watch hardware‑mix effects on GM and any shift in deployment preferences between hardware and software .

Additional Relevant Press Releases (Q3 FY25)

  • AI Assistant with iRules code generation to reduce XOps complexity .
  • AI Gateway data leakage detection/prevention; SSL Orchestrator visibility to address Shadow AI .
  • MinIO expanded partnership for high‑performance AI data pipelines and AI factories .
  • Post‑Quantum Cryptography solutions integrated into ADSP to future‑proof encryption .