Why Is F5 (FFIV) Down 10.3% Since Last Earnings Report?

Core Viewpoint - F5 Networks reported better-than-expected fourth-quarter results for fiscal 2025, but the stock has underperformed the S&P 500, raising questions about future performance leading up to the next earnings release [1][2]. Financial Performance - F5 reported non-GAAP EPS of $4.39 for Q4, exceeding the Zacks Consensus Estimate by 10.86% and management's guidance of $3.87-$3.99, marking a 19.6% year-over-year increase [3]. - Revenues for Q4 reached $810 million, surpassing the consensus mark by 2.22% and increasing 8% year-over-year, also exceeding management's guidance of $780-$800 million [4]. - Product revenues, accounting for 51.1% of total revenues, grew 15.6% year-over-year to $414.1 million, outperforming estimates of $397.9 million [5]. - Systems revenues surged 42% year-over-year to $186 million, representing approximately 45% of total Product revenues, driven by demand for infrastructure upgrades [6]. - Software revenues increased slightly by 0.3% year-over-year to $229 million, falling short of estimates of $234.5 million [7]. - Global Services revenues grew 2% year-over-year to $396 million, slightly above estimates of $393.4 million [7]. - Non-GAAP gross profit rose 10.3% year-over-year to $683 million, with a gross margin of 84.3%, up 130 basis points from the previous year [8]. - Non-GAAP operating income increased 16.5% to $299.4 million, with an operating margin improvement of 260 basis points to 37% [8]. Balance Sheet and Cash Flow - F5 ended the September quarter with cash and short-term investments of $1.36 billion, down from $1.44 billion in the previous quarter [9]. - The company generated an operating cash flow of $208 million for the quarter and $950 million for the full fiscal 2025 [9]. - F5 repurchased shares worth $125 million in Q4 and $502 million during the first nine months of fiscal 2025 [9]. Guidance - For Q1 of fiscal 2026, F5 expects revenues between $730 million and $780 million, with a projected non-GAAP EPS range of $3.35-$3.85 [10]. - Fiscal 2026 revenues are anticipated to grow in the mid-single-digit range, with non-GAAP EPS projected between $14.50 and $15.50 [10]. Market Sentiment - There has been a downward trend in estimates, with the consensus estimate shifting down by 13.23% [11]. - F5 currently holds a Growth Score of A but has a C for Momentum and an F for Value, placing it in the bottom 20% for the value investment strategy [12]. - The overall VGM Score for F5 is D, indicating a below-average return expectation in the coming months, reflected in a Zacks Rank of 5 (Strong Sell) [13].