F5(US:FFIV)2025-10-27 21:30Financial 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]