Core Insights - F5 Networks reported quarterly earnings of $4.39 per share, exceeding the Zacks Consensus Estimate of $3.96 per share, and showing an increase from $3.67 per share a year ago, resulting in an earnings surprise of +10.86% [1] - The company achieved revenues of $810.09 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.22% and up from $746.67 million year-over-year [2] - F5 shares have increased approximately 18.6% year-to-date, outperforming the S&P 500's gain of 15.5% [3] Earnings Outlook - The future performance of F5's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook, which includes current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is $4.02 on revenues of $789.35 million, and for the current fiscal year, it is $16.00 on revenues of $3.19 billion [7] Industry Context - The Internet - Software industry, to which F5 belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Alight, Inc., another company in the same industry, is expected to report quarterly earnings of $0.13 per share, reflecting a year-over-year increase of +44.4%, with revenues anticipated to be $535.63 million, down 3.5% from the previous year [9][10]

Core Point - The cyber attack reported in October may lead some customers to delay or cancel deals, according to Chief Executive François Locoh-Donou [1] Company Impact - The cyber attack could negatively affect customer confidence, resulting in potential deal delays or cancellations [1]

Financial Data and Key Metrics Changes - The company achieved over $3 billion in revenue and $1 billion in operating profit for fiscal year 2025, with revenue growth of 10% and earnings per share growth of 18% [5] - Gross margins improved to 83.6%, up 80 basis points from FY 2024, and operating margins increased to 35.2%, up 160 basis points from FY 2024 [5] - Free cash flow reached a record $906 million, representing a 19% increase compared to FY 2024 [5][13] Business Line Data and Key Metrics Changes - Q4 revenue grew 8% to $810 million, with global services revenue at $396 million (up 2% year-over-year) and product revenue at $414 million (up 16% year-over-year) [10] - Systems revenue increased by 42% year-over-year to $186 million, driven by tech refresh and data center modernization [10] - Software revenue totaled $229 million, showing slight growth against a strong Q4 of FY 2024, with perpetual license software up 25% year-over-year [10][11] Market Data and Key Metrics Changes - Revenue from the Americas grew 7% year-over-year, representing 57% of total revenue, while EMEA and APAC grew 7% and 19%, representing 26% and 17% of revenue, respectively [11] - Enterprise customers accounted for 73% of Q4 product bookings, with government customers at 19% and service providers at 8% [11] Company Strategy and Development Direction - The company is focusing on incident response and enhancing security measures following a recent security incident, with significant investments planned in cybersecurity [6][8] - The strategic emphasis is on hybrid multi-cloud adoption and AI infrastructure demand, positioning the company to address complex customer challenges [21][22] - The company aims to leverage its Application Delivery and Security Platform (ADSP) to unify traffic management and security across hybrid and multi-cloud environments [21] Management's Comments on Operating Environment and Future Outlook - Management anticipates mid-single-digit revenue growth for FY 2026, with potential near-term disruptions due to the recent security incident [16][17] - The company expects FY 2026 gross margins to be in the range of 83%-83.5% and non-GAAP operating margins between 33.5%-34.5% [18][19] - Management remains optimistic about long-term growth drivers, including hybrid multi-cloud adoption and AI readiness [16][21] Other Important Information - The company has seen a significant increase in customers leveraging its XOps capabilities, growing from 20 to nearly 900 customers [22] - The total security revenue for FY 2025 grew 6% to approximately $1.2 billion, representing 39% of total revenue [15] Q&A Session Summary Question: What form of conservatism has been put into estimates? - Management noted that customer resources are focused on upgrading environments, which may delay new project considerations [38] Question: How to size the potential impact from the security breach? - Management took a granular approach to profile revenue streams, identifying which could be more impacted and which would be resilient [46] Question: What percentage of revenue comes from F5 BIG-IP? - F5 BIG-IP is the highest revenue product, but specific revenue contributions are not disclosed [56] Question: Are there additional costs as a result of the data breach? - There are costs related to incident remediation, which may be covered by cyber insurance or accounted for as one-time expenses [57]

Financial Data and Key Metrics Changes - The company reported exceptional fiscal year 2025 results, exceeding $3 billion in revenue and $1 billion in operating profit, with revenue growth of 10% and earnings per share growth of 18% [5] - Gross margins improved to 83.6%, up 80 basis points from FY24, and operating margins increased to 35.2%, up 160 basis points from FY24 [5] - Free cash flow reached a record $906 million, up 19% compared to FY24, resulting in a free cash flow margin of 29% [13] Business Line Data and Key Metrics Changes - Q4 revenue grew 8% to $810 million, with global services revenue at $396 million (up 2% year over year) and product revenue at $414 million (up 16% year over year) [10] - Systems revenue totaled $186 million, up 42% year over year, driven by tech refresh and data center modernization [10] - Software revenue was $229 million, slightly up against a strong Q4 of FY24, with perpetual license software up 25% year over year [10][11] Market Data and Key Metrics Changes - Revenue from the Americas grew 7% year over year, representing 57% of total revenue, while EMEA and APAC grew 7% and 19%, representing 26% and 17% of revenue, respectively [11] - Enterprise customers accounted for 73% of Q4 product bookings, with government customers at 19% and service providers at 8% [11] Company Strategy and Development Direction - The company is focusing on incident response and enhancing security posture following a recent security incident, with significant investments in security planned for the future [6][8] - The strategic direction emphasizes hybrid multi-cloud adoption and AI infrastructure demand, positioning the company to address complex challenges in application delivery and security [20] - The company aims to leverage its Application Delivery and Security Platform to simplify hybrid multi-cloud complexity and enhance operational efficiency [20] Management's Comments on Operating Environment and Future Outlook - Management anticipates some near-term disruption to sales cycles due to the recent security incident, with guidance for FY26 revenue growth in the range of 0 to 4% [17] - The company expects mid-single-digit revenue growth in FY26, driven by hybrid multi-cloud adoption and a strong systems refresh opportunity [16] - Management remains confident in the long-term growth potential, particularly in software and security revenue, despite short-term challenges [15][17] Other Important Information - The company has made significant investments in cybersecurity, doubling its investment over the last three years, and plans to continue this trend [53] - The total security revenue grew 6% to approximately $1.2 billion, representing 39% of total revenue [15] Q&A Session Summary Question: What form of conservatism have you put into the estimates? - Management noted that customer conservatism may lead to delays in purchasing decisions and additional approvals due to the recent security incident [35][36] Question: How much of fiscal 2025 growth was due to the product upgrade cycle? - Approximately two-thirds of the systems business growth in FY2025 was attributed to tech refresh, with the remainder from data center capacity expansion [38] Question: How do you size the potential impact from the security breach? - Management took a granular approach to profile revenue streams, identifying which would be more impacted and which would be resilient [44][46] Question: What percentage of revenue comes from F5 BIG-IP? - While specific revenue breakdowns are not provided, F5 BIG-IP is the highest revenue product for the company [53] Question: Are there additional costs as a result of the data breach? - There are costs related to incident remediation, which may be covered by cyber insurance or accounted for as one-time expenses [54]

Financial Data and Key Metrics Changes - F5 reported exceptional fiscal year 2025 results, exceeding $3 billion in revenue and $1 billion in operating profit, with revenue growth of 10% and earnings per share growth of 18% [4] - Gross margins improved to 83.6%, up 80 basis points from FY24, and operating margins increased to 35.2%, up 160 basis points from FY24 [4] - Free cash flow reached a record $906 million, up 19% compared to FY24, resulting in a free cash flow margin of 29% [13] Business Line Data and Key Metrics Changes - Q4 revenue grew 8% to $810 million, with global services revenue at $396 million (up 2% year-over-year) and product revenue at $414 million (up 16% year-over-year) [10] - Systems revenue totaled $186 million, up 42% year-over-year, driven by tech refresh and data center modernization [10] - Software revenue was $229 million, slightly up against a strong Q4 of FY24, with perpetual license software up 25% year-over-year [11] Market Data and Key Metrics Changes - Revenue from the Americas grew 7% year-over-year, representing 57% of total revenue, while EMEA and APAC grew 7% and 19%, representing 26% and 17% of revenue, respectively [11] - Enterprise customers accounted for 73% of Q4 product bookings, with government customers at 19% and service providers at 8% [11] Company Strategy and Development Direction - F5's immediate focus is on incident response and enhancing security posture following a security incident, with significant investments in cybersecurity planned for the future [5][7] - The company aims to leverage hybrid multi-cloud adoption and AI-driven infrastructure demand as key growth drivers, with a commitment to innovation in its Application Delivery and Security Platform [21][22] - F5 is transitioning legacy offerings to F5 Distributed Cloud Services, expecting to complete this transition in the first half of FY26 [15] Management's Comments on Operating Environment and Future Outlook - Management anticipates some near-term disruption to sales cycles due to the security incident, with guidance for FY26 revenue growth in the range of 0 to 4% [18] - The company expects to see a return to growth in revenue from SaaS and managed services, driven by the completion of legacy transitions and ongoing demand for hybrid multi-cloud solutions [17] - Management expressed confidence in the long-term growth potential, citing strong demand drivers and a robust pipeline [17] Other Important Information - F5's total security revenue grew 6% to approximately $1.2 billion, representing 39% of total revenue [16] - The company has seen significant growth in AI-related use cases, securing wins with over 30 customers for AI data delivery, runtime security, and factory load balancing [26][27] Q&A Session Summary Question: What form of conservatism has been put into estimates? - Management indicated that customer conservatism may manifest as delays in purchasing decisions and resource allocation towards upgrading environments due to the security incident [36][38] Question: How much of fiscal 2025 growth was due to the product upgrade cycle? - Approximately two-thirds of the systems business growth in FY2025 was attributed to tech refresh, with the remainder from data center capacity expansion [40] Question: How is the potential impact from the security breach sized? - Management took a granular approach to profile revenue streams, identifying which could be more impacted and which would be resilient, with a focus on recurring revenue streams [44][46] Question: What percentage of revenue comes from F5 BIG-IP? - While specific revenue breakdowns are not provided, F5 BIG-IP is noted as the highest revenue product [54] Question: What are the implications of the government shutdown on U.S. Federal business? - Guidance assumes some level of disruption in the federal segment, particularly in Q1, due to project delays related to the government shutdown [78]

Financial Data and Key Metrics Changes - F5 achieved record revenue exceeding $3 billion and operating profit of $1 billion for the first time, with revenue growth of 10% and earnings per share growth of 18% [7][8] - Gross margins improved to 83.6%, up 80 basis points year-over-year, and operating margins increased to 35.2%, up 160 basis points year-over-year [8] - Free cash flow reached $906 million, up 19% compared to FY 2024, highlighting strong financial execution [20] Business Line Data and Key Metrics Changes - Q4 revenue grew 8% to $810 million, with product revenue at $414 million (up 16% year-over-year) and global services revenue at $396 million (up 2% year-over-year) [14] - Systems revenue increased by 42% to $186 million, driven by tech refresh and data center modernization [14] - Software revenue totaled $229 million, slightly up against a strong FY 2024, with perpetual license software up 25% year-over-year [15] Market Data and Key Metrics Changes - Revenue from the Americas grew 7% year-over-year, representing 57% of total revenue, while EMEA and APAC grew 7% and 19%, representing 26% and 17% of revenue, respectively [16] - Enterprise customers accounted for 73% of Q4 product bookings, with government customers at 19% and service providers at 8% [17] Company Strategy and Development Direction - F5's strategy focuses on enhancing security and supporting customers through incident response, with significant investments in cybersecurity [12][24] - The company aims to leverage hybrid multi-cloud adoption and AI infrastructure demand as key growth drivers moving forward [29][36] - F5 is committed to maintaining a strong operating margin while navigating potential near-term disruptions due to recent security incidents [25][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential near-term impacts on sales cycles due to customer focus on security upgrades, with guidance for FY 2026 revenue growth in the range of 0% to 4% [25][49] - The company remains optimistic about long-term growth driven by hybrid multi-cloud architectures and AI readiness [24][29] - Management emphasized the importance of customer relationships and transparency during the incident response process [13][64] Other Important Information - F5's total security revenue grew 6% to approximately $1.2 billion, representing 39% of total revenue [23] - The company plans to continue using at least 50% of free cash flow for share repurchases in FY 2026 [27] Q&A Session Summary Question: What form of conservatism have you put into the estimates? - Management indicated that resources have been focused on assisting customers with upgrades, which may temporarily disrupt normal sales cycles [50][51] Question: How do you size the potential impact from the security breach? - Management took a granular approach to profile revenue streams, assessing which could be more impacted and which would be resilient [60][62] Question: What percentage of revenue comes from BIG IP? - Management confirmed that BIG IP is the highest revenue product but does not break out specific contributions [72] Question: What drives software and system growth from here? - Management highlighted ongoing trends in multi-year software agreements and the transition to hybrid multi-cloud architectures as key growth drivers [86][88]

Financial Performance - F5's total revenue for FY25 reached $3088 million, a 10% increase year-over-year[12, 62] - Non-GAAP EPS grew by 18% year-over-year, reaching $15.81[15, 83] - Product revenue increased by 19% year-over-year[15] - Software revenue grew by 9% year-over-year[15, 65] - Systems revenue increased by 31% year-over-year[15, 62] - The company generated a record free cash flow of $906 million, representing a 19% increase year-over-year[15] Revenue Mix and Growth - In Q4FY25, total revenue reached $810 million, compared to $747 million in Q4FY24[12, 13] - Subscription software accounted for 87% of Q4FY25 total software revenue[25] - Recurring revenue (subscriptions, SaaS & managed services, and maintenance) constituted 72% of the total, amounting to $586 million in Q4FY25[29] Geographic and Customer Segment Performance - Americas contributed 57% of revenue in Q4FY25, with a 7% year-over-year growth[33] - EMEA accounted for 26% of revenue, also with a 7% year-over-year growth[33] - APAC represented 17% of revenue, showing a 19% year-over-year growth[33] Future Outlook - F5 anticipates total revenue growth of 0% to 4% for FY26[83] - The company projects non-GAAP EPS to be between $14.50 and $15.50 for FY26[83]

Core Viewpoint - F5 forecasts annual revenue below Wall Street estimates due to a recent systems breach that may impact demand for its services [1][4] Group 1: Revenue Forecast - F5 anticipates full-year revenue growth of 0% to 4%, which is below the average analyst estimate of a 4.8% increase [4] - The company forecasts first-quarter revenue between $730 million and $780 million, also below the estimate of $791 million [5] Group 2: Impact of Security Breach - The recent breach allowed hackers to have "long-term, persistent access" to certain company systems, including source code for a key cybersecurity service [2] - U.S. officials indicated that federal networks were targeted in the aftermath of the hack, prompting calls for immediate action [2] - F5 expects near-term disruption to sales cycles as customers assess and remediate their environments following the security incident [3] - The breach primarily affected BIG-IP customers, with some needing to upgrade to the latest releases [3] - A small subset of customers experienced limited data exfiltration, but initial feedback suggested the data was not sensitive [4]

Core Insights - F5, a cybersecurity firm, has projected first-quarter revenue to fall short of Wall Street expectations due to recent disruptions in sales cycles caused by a cybersecurity breach at the company [1] Group 1 - The company forecasts first-quarter revenue below Wall Street estimates [1] - The disruption in sales cycles is attributed to a recent cybersecurity breach [1]

Revenue Growth - Fourth quarter revenue reached $810 million, an 8% increase year over year, driven by a 16% growth in product revenue and a 42% increase in systems revenue[3] - Fiscal year 2025 revenue totaled $3.09 billion, reflecting a 10% growth compared to $2.82 billion in fiscal year 2024[8] - F5's total net revenues for the three months ended September 30, 2025, were $810,090,000, representing a 8.5% increase from $746,674,000 in the same period of 2024[38] - Net revenues for Q3 2025 reached $810.09 million, a 8.5% increase from $746.67 million in Q3 2024[42] Profitability - GAAP net income for Q4 FY2025 was $190 million, or $3.26 per diluted share, compared to $165 million, or $2.80 per diluted share in Q4 FY2024[7] - Non-GAAP net income for FY2025 was $928 million, or $15.81 per diluted share, up from $794 million, or $13.37 per diluted share in FY2024[11] - Net income for the year ended September 30, 2025, was $692,380,000, up 22.2% from $566,778,000 in 2024[40] - Basic net income per share increased to $3.30 for the three months ended September 30, 2025, from $2.83 in the same period of 2024, reflecting a 16.6% growth[38] - GAAP net income for the quarter was $190.49 million, an increase from $165.30 million in Q3 2024[42] - Non-GAAP net income reached $256.64 million, up from $216.94 million year-over-year[42] - Diluted GAAP net income per share was $3.26, compared to $2.80 in the prior year[42] - Non-GAAP net income per share increased to $4.39 from $3.67 in Q3 2024[42] Operating Performance - GAAP gross profit for FY2025 was $2.51 billion, representing a GAAP gross margin of 81.4%, compared to 80.2% in FY2024[9] - Non-GAAP operating profit for FY2025 was $1.09 billion, with a non-GAAP operating margin of 35.2%, up from 33.6% in FY2024[10] - The gross profit for the three months ended September 30, 2025, was $666,209,000, compared to $602,954,000 for the same period in 2024, indicating a gross margin improvement[38] - GAAP gross profit was $666.21 million with a gross margin of 82.2%, compared to $602.95 million and 80.8% in the previous year[42] - Non-GAAP gross profit increased to $683.26 million, representing a gross margin of 84.3%, up from 83.0% in Q3 2024[42] - GAAP income from operations was $205.65 million, with an operating margin of 25.4%, slightly down from 25.6% in Q3 2024[42] - Non-GAAP income from operations rose to $299.37 million, achieving a 37.0% operating margin, compared to 34.4% in the same quarter last year[42] Future Guidance - The company anticipates total revenue growth of 0% to 4% for fiscal year 2026, with potential near-term disruptions in sales cycles due to a recent security incident[14] - For Q1 FY2026, revenue is guided to be between $730 million and $780 million, with non-GAAP earnings projected between $3.35 and $3.85 per diluted share[16] Cash and Assets - Cash and cash equivalents at the end of the period were $1,346,368,000, an increase from $1,078,340,000 at the beginning of the period[40] - Total assets as of September 30, 2025, were $6,319,492,000, compared to $5,613,004,000 as of September 30, 2024, marking a 12.5% increase[36] - F5's total current liabilities increased to $1,612,581,000 as of September 30, 2025, from $1,489,653,000 in 2024, representing an 8.2% rise[36] - The company incurred restructuring charges of $14,163,000 for the three months ended September 30, 2025, compared to no charges in the same period of 2024[38] - F5's cash provided by operating activities for the year ended September 30, 2025, was $949,666,000, an increase from $792,419,000 in 2024[40] - The company reported a deferred revenue of $1,213,226,000 for the three months ended September 30, 2025, up from $1,121,683,000 in the same period of 2024, indicating a 8.2% growth[36] Leadership Changes - F5's Board of Directors announced that CEO François Locoh-Donou will become Chairman of the Board effective March 2026[17] Security Measures - The company is committed to enhancing security measures across all business aspects following a recent security incident[3]