Financial Data and Key Metrics Changes - F5 reported a total revenue growth of 12% year-over-year, reaching $780 million in Q3 2025, with product revenue growing by 26%, marking the strongest growth in 14 years [6][25] - The company achieved a GAAP net income of $190 million, or $3.25 per share, and a non-GAAP net income of $243 million, or $4.16 per share, reflecting a 24% growth in EPS year-over-year [30][34] - Cash flow from operations reached a record $282 million in Q3, with total cash and investments at approximately $1.44 billion [30][31] Business Line Data and Key Metrics Changes - Global services revenue grew by 1% to $392 million, while product revenue increased by 26% to $389 million [25] - Software revenue grew by 16% year-over-year to $208 million, with subscription-based software revenue increasing by 19% to $185 million, representing 89% of total software revenue [26] - Systems revenue totaled $181 million, up 39% year-over-year, driven by tech refresh and data center modernization [26] Market Data and Key Metrics Changes - Revenue from the Americas grew by 13%, accounting for 55% of total revenue, while EMEA and APAC regions grew by 6% and 21%, representing 26% and 19% of revenue, respectively [27] - Enterprise customers represented 70% of Q3 product bookings, while government and service providers each accounted for 15% [27] Company Strategy and Development Direction - F5 is focusing on modernizing data centers and adopting hybrid multi-cloud architectures, which are driving demand for both hardware and software solutions [6][9] - The company is leveraging its unique application delivery and security platform to simplify operations and enhance security for customers, particularly in AI workloads [9][10] - F5 anticipates continued strong demand in Q4, with revenue guidance between $780 million and $800 million, implying approximately 9% growth for FY 2025 [8][34] Management's Comments on Operating Environment and Future Outlook - Management highlighted the ongoing structural shift in data center modernization and the increasing complexity of managing applications and APIs as key challenges for IT teams [9][10] - The company expects to see durable growth in hardware driven by tech refresh, hybrid cloud investments, and AI readiness [46][48] - Management expressed confidence in the long-term potential of their application delivery and security platform, particularly in supporting AI-driven applications [19][20] Other Important Information - F5's GAAP gross margin was 81%, with non-GAAP gross margin at 83.1%, reflecting strong operating discipline [28] - The company repurchased $125 million worth of shares in Q3, with $1 billion remaining on its authorized stock repurchase program [31] Q&A Session Summary Question: Can you discuss the strength in hardware and its sustainability? - Management noted a 39% year-over-year growth in hardware, driven by tech refresh and secular trends in hybrid cloud and AI readiness, with expectations for continued growth but at a more modest rate next year [42][48] Question: What is the outlook for software renewals and new deal activity? - Management indicated a healthy renewal base and strong expansion in software, with increased consumption driving higher contract values at renewal [50][52] Question: Why did gross margins come in at the lower end despite revenue upside? - The lower gross margins were attributed to high-performance use cases with compliance demands and the strength in the systems business, which has a lower margin than software [56][57] Question: What is the status of the NVIDIA DPU product and AI gateway platform? - The NVIDIA DPU solution is generally available, with positive early feedback from customers, while the AI gateway platform is in the early stages with several proof of concepts underway [81][87] Question: How is the federal business performing? - The federal business is on plan, with a healthy pipeline despite some softness in Q3 due to project delays related to government efficiency initiatives [90][91]

Financial Data and Key Metrics Changes - The company reported quarterly revenue of $639 million, exceeding the guided range of $620 million to $630 million, representing a year-over-year growth rate of 22% [13] - Annual Recurring Revenue (ARR) at the end of Q3 was $2.14 billion, reflecting an 18% year-over-year growth [6][13] - Non-GAAP gross margin in Q3 was 88.2%, and non-GAAP operating margin was 21.5%, higher than the guided range of 17% to 18% [14] - Non-GAAP net income in Q3 was $125 million, translating to a fully diluted EPS of $0.42 per share [15] - Free cash flow in Q3 was $203 million, representing a free cash flow margin of 32% [16] Business Line Data and Key Metrics Changes - The company experienced strong new logo growth across all customer segments, with significant wins in the EMEA region and North America [7][9] - The net dollar-based retention rate (NRR) at the end of Q3 was 110%, remaining flat quarter-over-quarter [14] - Average contract duration increased to 3.1 years, slightly higher than expectations [14] Market Data and Key Metrics Changes - The company noted a dynamic macroeconomic environment affecting deal cycles, particularly in the federal business sector [25][30] - The company is optimistic about opportunities in the federal business, focusing on modernization and total cost of ownership (TCO) improvements [25] Company Strategy and Development Direction - The company aims to become the leading platform for running applications and managing data anywhere, focusing on hybrid multi-cloud capabilities and partnerships [12] - Recent product announcements include support for Google Cloud and enhancements to the Nutanix Cloud Platform, indicating a commitment to innovation [11] - The company is expanding its partner ecosystem, particularly with Dell and Cisco, to drive new logo growth and market penetration [62] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic uncertainties but expressed confidence in continued demand for their solutions [30][88] - The company expects to maintain strong performance in Q4, with guidance for revenue between $635 million and $645 million [17][18] - Management highlighted the importance of investing in sales, marketing, and R&D to capture market opportunities [19] Other Important Information - The company repurchased $38 million worth of common stock during Q3 [17] - The updated guidance for fiscal year 2025 includes revenue of $2.52 billion to $2.53 billion, representing a year-over-year growth of approximately 17.5% [18] Q&A Session Summary Question: Can you walk us through the linearity seen throughout the quarter? - Management noted that while linearity can vary, they have not seen significant changes in deal cycles, although some variability exists in the federal business [29][30] Question: What is the delta between NCIC and the core standard NCI license? - The NCIC offering includes the platform minus the storage, and early customer feedback has been positive [36][39] Question: What is driving the increase in operating margin guidance? - The increase is attributed to timing of hiring and expected investments in sales and marketing, with a focus on sustainable growth [41][44] Question: Can you explain the difference between ARR and revenue growth rates? - Revenue is a flow metric while ARR is a stock metric, and various factors such as contract duration can affect their relative growth rates [50][52] Question: How is the company performing against VMware in terms of share gains? - The company is seeing strong traction with new customers, particularly those adopting their hypervisor, indicating competitive wins against VMware [74][76] Question: What is the outlook for partnerships with Dell and Cisco? - The company continues to expand its partner ecosystem, with Cisco contributing steadily to new logo growth and Dell's PowerFlex solution just entering the market [62][108]

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% [6][29] - Non-GAAP EPS for Q2 was $3.42, reflecting an 18% increase year-over-year, exceeding guidance by $0.28 [6][37] - GAAP gross margin was 80.7%, while non-GAAP gross margin improved to 83.1%, up 98 basis points year-over-year [34][35] 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 [30][32] - Global services revenue increased by 3% to $394 million, representing 54% of total revenue [29][30] Market Data and Key Metrics Changes - Revenue from The Americas grew by 3%, accounting for 54% of total revenue, while EMEA saw a 20% growth, representing 29% of revenue [33] - APAC revenue also grew by 3%, making up 17% of total revenue [33] 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 [44] - The introduction of the F5 Application Delivery and Security Platform (ADSP) aims to consolidate delivery and security functionalities into a single platform [8][10] - The company is leveraging AI technologies to enhance customer experiences and drive business growth, with a focus on AI for application delivery and security [12][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q3 pipeline, expecting revenue between $740 million and $760 million, implying an 8% growth at the midpoint [7][40] - The FY 2025 revenue growth guidance was raised to 6.5% to 7.5%, reflecting strong first-half performance and current business dynamics [7][42] - Management noted that there are no immediate signs of demand erosion despite macroeconomic uncertainties [70][72] 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 [37][38] - The company repurchased $125 million worth of shares during the quarter, equivalent to 57% of its free cash flow [38][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 double-digit growth [48][50] Question: Hardware revenue drivers and refresh cycle - Management confirmed that hardware growth was driven by a refresh cycle and ongoing investments in hybrid multi-cloud architectures [53][56] Question: Competitive displacement opportunities - Management indicated that significant opportunities remain in displacing competitors and consolidating functionalities within existing accounts [61][64] Question: Federal government business performance - Management reported that the federal business performed in line with expectations, but there are concerns about potential disruptions in the second half [100][102]