Financial Data and Key Metrics Changes - The company reported a revenue growth of 7% to $822 million, with product revenue at $410 million (up 11% year-over-year) and services revenue at $412 million (up 4% year-over-year) [20][21] - Systems revenue reached $218 million, a significant increase of 37% compared to Q1 FY25, driven by hybrid multi-cloud adoption and AI demand [21] - GAAP net income for the quarter was $180 million, or $3.10 per share, while non-GAAP net income was $259 million, or $4.45 per share, reflecting a 16% EPS growth from the previous year [23] Business Line Data and Key Metrics Changes - Product revenue growth was primarily driven by systems revenue, which saw a 37% increase, while software revenue decreased by 8% year-over-year [21] - Subscription-based software revenue grew by 1% year-over-year, totaling $164 million, while perpetual licensed software revenue decreased to $27 million [21] Market Data and Key Metrics Changes - Revenue from the Americas grew by 2% year-over-year, representing 53% of total revenue, while EMEA experienced exceptional growth of 24%, accounting for 31% of revenue [22] - APAC region revenue declined by 1%, representing 16% of total revenue [22] Company Strategy and Development Direction - The company is focused on three key areas: investing in security operations, enhancing product security, and supporting the broader security community [7] - The strategic emphasis is on hybrid multi-cloud adoption, enterprise AI, and converged platforms, which are seen as critical drivers for future growth [8][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of demand driven by hybrid multi-cloud adoption and AI investments, despite previous uncertainties due to a security incident [5][6] - The company raised its FY 2026 revenue growth outlook to 5%-6%, up from a prior range of 0%-4%, indicating strong pipeline creation and close rates [24][25] Other Important Information - The company generated $159 million in cash flow from operations in Q1, with cash and investments totaling approximately $1.22 billion at quarter end [23] - Deferred revenue increased to $2.1 billion, up 6% from the previous year [24] Q&A Session Summary Question: AI adoption trends among enterprise customers - Management noted that enterprises are shifting from training AI models to deploying them in production, which requires enhanced data pipelines and security measures [32][34] Question: Software and hardware performance outlook - Management acknowledged a tough year-over-year comparison for software but expressed confidence in mid-single-digit growth for the software business moving forward [44][45] Question: Impact of security incident on customer relationships - Management confirmed no evidence of customer breaches due to the security incident and highlighted a successful response that minimized disruption [65][66] Question: Revenue contribution from AI projects - Management indicated that AI-related revenue is growing but has not been broken out specifically, with current contributions in the double-digit million range per quarter [76][77]

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth in Q1 FY 2026, reaching $822 million, with product revenue growing by 11% and services revenue increasing by 4% year-over-year [5][20]. - Systems revenue totaled $218 million, up 37% year-over-year, driven by strong demand related to hybrid multi-cloud adoption and AI [21]. - GAAP net income for the quarter was $180 million, or $3.10 per share, while non-GAAP net income was $259 million, or $4.45 per share, reflecting a 16% EPS growth from the previous year [23]. Business Line Data and Key Metrics Changes - Product revenue accounted for 50% of total revenue, with services revenue also making up 50% [20]. - Software revenue was $192 million, down 8% year-over-year, while subscription-based software revenue totaled $164 million, up 1% year-over-year [21]. - Recurring revenue contributed 69% of total revenue, consisting of subscription-based revenue and maintenance services [21]. Market Data and Key Metrics Changes - Revenue from the Americas grew 2% year-over-year, representing 53% of total revenue, while EMEA delivered exceptional 24% growth, accounting for 31% of revenue [22]. - APAC revenue declined by 1%, representing 16% of total revenue [22]. - Enterprise customers represented 64% of Q1's product bookings, with government customers at 23% and service providers at 13% [22]. Company Strategy and Development Direction - The company is focused on three key areas: investing in security operations, enhancing product security, and supporting the broader security community [7]. - The strategy emphasizes hybrid multi-cloud adoption, enterprise AI, and converged platforms as primary growth drivers [8][29]. - The company aims to lead in hybrid multi-cloud solutions, providing complete delivery and security for applications across various environments [9]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of demand driven by hybrid multi-cloud adoption, AI investments, and regulatory requirements for resilience and digital sovereignty [5][29]. - The company raised its FY 2026 revenue growth outlook to 5%-6%, up from the previous 0%-4% forecast, indicating strong pipeline creation and close rates [24]. - Management noted minimal demand disruption from a recent security incident, highlighting effective customer support and engagement [6][67]. Other Important Information - The company repurchased $300 million worth of shares in Q1, with plans to continue share repurchases at least 50% of free cash flow for the year [24][26]. - Cash and investments totaled approximately $1.22 billion at the end of the quarter, with deferred revenue at $2.1 billion, up 6% year-over-year [23][24]. Q&A Session Summary Question: AI Adoption Trends - Management noted that enterprises are early in the AI adoption cycle, shifting from training to production, which requires enhanced data pipelines and security [31][34]. - The company saw a significant increase in AI-related customer acquisitions, with nearly as many new AI customers in Q1 as in all of FY 2025 [35]. Question: Software and Hardware Performance - Management acknowledged a tough year-over-year comparison for software revenue but expressed confidence in mid-single-digit growth for the remainder of the year [42][45]. - On hardware, management highlighted strong demand driven by hybrid multi-cloud architectures and regulatory requirements for resilience [46][48]. Question: Supply Chain and Memory Costs - Management discussed proactive measures taken to manage supply chain risks and rising memory costs, ensuring adequate supply and monitoring price increases closely [59][60]. Question: Security Incident Impact - Management confirmed no evidence of customer breaches due to the security incident and reported minimal disruption in demand, with a successful response to customer needs [66][67]. Question: AI Revenue Contribution - Management refrained from breaking out specific AI revenues but indicated a healthy increase in AI-related revenue, projecting significant growth potential in the future [76][78].

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth in Q1 FY 2026, totaling $822 million, with product revenue growing by 11% and services revenue growing by 4% year-over-year [19][20] - Systems revenue reached $218 million, up 37% year-over-year, driven by strong demand related to hybrid multi-cloud adoption and AI [20] - GAAP net income for the quarter was $180 million, or $3.10 per share, while non-GAAP net income was $259 million, or $4.45 per share, reflecting a 16% EPS growth from the previous year [22] Business Line Data and Key Metrics Changes - Product revenue accounted for 50% of total revenue, with systems revenue showing significant growth at 37% [19][20] - Software revenue was $192 million, down 8% year-over-year, attributed to a strong comparison from the previous year [20] - Subscription-based software revenue totaled $164 million, up 1% year-over-year, while perpetual licensed software revenue was $27 million, down year-over-year [20] Market Data and Key Metrics Changes - Revenue from the Americas grew 2% year-over-year, representing 53% of total revenue, while EMEA delivered exceptional growth of 24%, accounting for 31% of revenue [21] - APAC region saw a decline of 1%, representing 16% of total revenue [21] - Enterprise customers represented 64% of Q1's product bookings, with government customers at 23% and service providers at 13% [21] Company Strategy and Development Direction - The company is focused on three key areas: investing in security operations, enhancing product security, and supporting the broader security community [5] - The strategy emphasizes hybrid multi-cloud adoption, enterprise AI, and the need for converged platforms, which are seen as significant growth drivers [6][18] - The company aims to lead in hybrid multi-cloud solutions, leveraging its capabilities to provide complete delivery and security for applications [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of demand driven by hybrid multi-cloud adoption and AI investments, despite uncertainties from a recent security incident [4][18] - The outlook for FY 2026 has been raised, expecting revenue growth of 5%-6%, up from a prior outlook of 0%-4% [23] - Management highlighted the importance of regulatory drivers and the acceleration of AI as catalysts for future growth [46][47] Other Important Information - The company generated $159 million in cash flow from operations in Q1, with cash and investments totaling approximately $1.22 billion at quarter end [22][23] - Deferred revenue increased to $2.1 billion, up 6% from the previous year [23] - The company repurchased $300 million worth of shares in Q1, with plans to continue share repurchases at least 50% of free cash flow for the year [23] Q&A Session Summary Question: AI adoption trends among enterprise customers - Management noted that the company is early in the AI adoption cycle, with a significant shift from training to production of AI applications, leading to increased demand for infrastructure [30][31] Question: Software and hardware performance outlook - Management acknowledged tough year-over-year comparisons for software but expressed confidence in mid-single-digit growth for the software business moving forward [41][42] Question: Impact of security incident on customer relationships - Management confirmed no evidence of customer breaches due to the security incident and reported minimal disruption in demand, with a successful response to customer needs [63][64]

Summary of F5 Conference Call Company Overview - **Company**: F5 (NasdaqGS: FFIV) - **Industry**: Technology, specifically focused on application delivery and security Key Points and Arguments 1. **Evolution from Hardware to Software**: F5 has transitioned from being perceived as a hardware company to a multi-product software-oriented company, offering technology in hardware, software, and software as a service (SaaS) formats [2][11][15] 2. **Application Delivery and Security Platform**: F5 has developed a unified platform that integrates hardware, software, and SaaS to secure and deliver applications and APIs across various environments, which is a significant differentiation from competitors [16][17] 3. **Hybrid and Multi-Cloud Trends**: There is a growing trend among enterprises to adopt hybrid and multi-cloud architectures, driven by factors such as cost optimization, regulation, and the need for data sovereignty. F5 is positioned to address the complexity that arises from these environments [20][49] 4. **AI Integration**: The demands of AI require fine-grained processing and security of traffic, which aligns with F5's capabilities developed over the past 20 years. F5 is seeing new use cases in AI, such as data delivery and AI security [26][29] 5. **Customer Behavior Shifts**: There is a noticeable shift in customer behavior, with non-AI native companies beginning to adopt AI technologies, indicating a broader market trend towards AI integration [31][34] 6. **Strong Financial Performance**: F5 reported nearly 10% overall revenue growth, with significant contributions from both tech refresh initiatives and new use cases, indicating a robust business model [36][37] 7. **Response to Security Incident**: Following a security breach, F5 demonstrated transparency and effective communication with customers, which has been positively received. The company is focused on enhancing code integrity and leveraging AI tools for security improvements [39][42] 8. **Future Outlook**: F5 is optimistic about future growth driven by hybrid multi-cloud adoption and AI opportunities. The company aims to accelerate software growth and capitalize on the increasing complexity of customer environments [50][52] Additional Important Insights 1. **Data Center Modernization**: Companies are reinvesting in private data center capacity, driven by performance needs and the desire to manage data more effectively, particularly in the context of AI [20][21] 2. **Convergence of Delivery and Security**: F5 is focusing on the convergence of application delivery and security, which is becoming increasingly important in hybrid multi-cloud environments [54][55] 3. **Expansion of Security Services**: F5 is continuously adding security capabilities to its platform, including AI security and data loss protection, to enhance its offerings for applications and APIs [56] This summary encapsulates the key discussions and insights from the F5 conference call, highlighting the company's strategic direction, market positioning, and future growth opportunities.

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 reported a total revenue growth of 7% year-over-year, reaching $731 million, with product revenue growing by 12% [8][30] - Non-GAAP EPS for Q2 was $3.42, reflecting an 18% increase year-over-year, exceeding guidance by $0.28 [9][38] - The company raised its FY 2025 revenue growth guidance to a range of 6.5% to 7.5%, up from the previous range of 6% to 7% [10][43] Business Line Data and Key Metrics Changes - Systems revenue grew by 27% year-over-year, totaling $179 million, driven by hardware refresh activities [30][31] - Software revenue remained flat at $158 million, with subscription-based software revenue down 2% year-over-year [31][38] - Global services revenue increased by 3%, amounting to $394 million, contributing 54% of total revenue [30] Market Data and Key Metrics Changes - Revenue from the Americas grew by 3%, representing 54% of total revenue, while EMEA saw a 20% growth, accounting for 29% of revenue [35] - APAC revenue also grew by 3%, making up 17% of total revenue [35] - Enterprise customers represented 69% of product bookings, with government customers at 20% and service providers at 11% [35] Company Strategy and Development Direction - F5 is focusing on hybrid multi-cloud solutions to address customer challenges related to high costs, complexity, and cyber risks [11][45] - The introduction of the F5 Application Delivery and Security Platform (ADSP) aims to consolidate delivery and security functionalities into a single platform [12][66] - The company is leveraging AI technologies to enhance customer experiences and drive business growth, with innovations in both AI for ADC and ADC for AI [13][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for F5 solutions, particularly in data center modernization and AI preparation [10][41] - There are no immediate signs of demand erosion, despite macroeconomic uncertainties [41][72] - The company anticipates continued growth in both systems and software revenue, with expectations for double-digit growth in FY 2025 [43][44] Other Important Information - F5 generated a record $257 million in cash flow from operations in Q2, with cash and investments totaling approximately $1.27 billion [38][39] - The company repurchased $125 million worth of shares during the quarter, with $1.2 billion remaining on its authorized repurchase program [39] Q&A Session Summary Question: Software performance in Q2 and future growth - Management acknowledged underperformance in Q2 but highlighted a strong renewal pipeline for the second half, expecting growth to align with double-digit guidance [48][50] Question: Hardware revenue drivers and customer upgrades - Management noted that hardware growth was driven by a refresh cycle and ongoing investments in hybrid multi-cloud architectures, with expectations for continued momentum [54][56] Question: Competitive displacement opportunities - Management characterized the competitive displacement cycle as still in early stages, with significant opportunities ahead in both new accounts and consolidating existing functionalities [61][64] Question: AI use cases and growth potential - The largest current opportunity is in data delivery for AI models, with security and AI factory load balancing also seen as future growth areas [74][75] Question: Federal government performance and potential impacts - Management reported strong performance in the federal sector but noted potential nervousness among customers regarding future budget disruptions [100]