F5, Inc. (FFIV) Earnings & Analysis

Latest quarter

F5 reported Q3 FY2026 revenue of $865.1 million, up 10.9% from Q3 FY2025. Revenue exceeded the consensus of $832.1 million by 3.96%, while adjusted EPS, as the consensus counts it, was $4.73 versus the consensus of $3.98, an 18.8% difference.

The company reported diluted EPS of $3.62, up 11.4% from $3.25 a year earlier. F5’s filing said product revenue increased 19.0%, led by systems and software revenue, while service revenue increased 2.7% as maintenance-contract sales rose. Gross margin was 82.2%, compared with 81.0% a year earlier, while operating margin was 24.7%, compared with 25.2%. Free cash flow was $280.6 million, up 12.5% from $249.5 million. Q3 revenue was above F5’s $820.0 million to $840.0 million guidance range.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

François Locoh-Donou said demand reflected customers’ hybrid multicloud deployments, expanding application-security needs and AI-related workloads. He said F5’s cumulative customer count for direct AI use cases grew 50% in Q3, and described demand across AI data delivery, runtime security and AI factory load balancing.

Locoh-Donou said customers were putting more emphasis on runtime protection because AI can shorten the interval between vulnerability discovery and exploitation. He said 15% of Distributed Cloud WAF customers had adopted the company’s AI-powered capability since its Q2 launch, and that 75% of adopters were using it in blocking mode. He also said F5 was investing in innovation and go-to-market capacity.

Cooper Werner said Q4 demand was expected to be supported by hybrid multicloud adoption, the expanding threat landscape and AI inference. He attributed the improved Q4 non-GAAP gross-margin outlook to adoption of higher-performance systems and lower component-cost increases than earlier estimates. Werner said F5 was not revising its FY2027 gross-margin guidance because pricing for memory and storage components remained dynamic.

Analysts asked whether AI customer growth corresponded with AI revenue growth. Locoh-Donou said F5 would not update its previously disclosed $50 million AI revenue mark every quarter, though he said AI security customers grew 100% during Q3. He also said hardware expansion was being supported by AI traffic, customer refresh activity, digital sovereignty and competitive displacement.

On software, Werner said the pipeline looked good and that F5 expected its SaaS and managed-services business to become a growth driver in FY2027 after a transition involving legacy offerings. He said the company had visibility into customer utilization across software opportunities, while Locoh-Donou said FY2026 software growth was expected to remain in the mid-single digits because of the renewal cohort.

Guidance

F5 raised its FY2026 revenue-growth outlook to approximately 9% to 10% from 7% to 8%, and raised FY2026 non-GAAP EPS to $17.21 to $17.33 from $16.25 to $16.55. The company raised its FY2026 non-GAAP gross-margin outlook to 83.5% to 84% from 82.5% to 83.5%, its non-GAAP operating-margin outlook to 34.5% to 35.5% from 34% to 35%, and updated its non-GAAP effective tax-rate outlook to 18% to 19% from 20% to 21%.