It has been about a month since the last earnings report for F5 Networks (FFIV). Shares have added about 1.6% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is F5 due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
F5 Q3 Earnings and Revenues Surpass Expectations
F5 reported third-quarter non-GAAP earnings of $4.16 per share, which surpassed the Zacks Consensus Estimate by 19.2% and came ahead of management’s guidance of $3.41-$3.53 (midpoint of $3.47). The bottom line increased 23.8% year over year.
F5’s revenues of $780 million for the third quarter beat the consensus mark by 3.6%. The top line rose 12.2% on a year-over-year basis. Revenues also came ahead of management’s guidance of $740-$760 million (midpoint of $750 million).
FFIV’s Q3 2025 Details
Product revenues (49.8% of total revenues), which comprise the Software and Systems subdivisions, increased 26% year over year to $389 million. Our model estimates for the Product segment revenues were pegged at $346.7 million.
This growth was primarily driven by a robust 39% year-over-year jump in Systems revenues, which totaled $181 million. Systems accounted for approximately 46.5% of total Product revenues, showing continued momentum due to demand for infrastructure upgrades. Our model estimates for the Systems revenues were pegged at $144.7 million.
The Software sub-segment also contributed to the growth, with revenues rising 16% year over year to $208 million. Our model estimates for the Software revenues were pegged at $202 million.
Global Services revenues (50.2% of total revenues) grew 1% year over year to $392 million. Our model estimates for the Global Services segment revenues were pegged at $399.5 million.
F5’s Operating Details
Non-GAAP gross profit increased 12.3% year over year to $649 million. The non-GAAP gross margin for the quarter came in at 83.1%, flat on a year-over-year basis. On a year-over-year basis, non-GAAP gross margin expanded 270 basis points (bps) to 83.1%.
F5’s non-GAAP operating profit increased 14.6% year over year to $267 million, while the margin improved 90 bps to 34.3%. An increase in the non-GAAP operating margin was primarily driven by an improvement in the gross margin.
F5’s Balance Sheet & Cash Flow
F5 ended the June-ended quarter with cash and short-term investments of $1.44 billion, up from $1.26 billion in the previous quarter. The company generated an operating cash flow of $282 million during the quarter and $742 million in the first nine months of fiscal 2025.
In the fiscal third quarter, F5 repurchased shares worth $125 million. During the first nine months of fiscal 2025, the company repurchased shares worth $377 million.
F5 Raises Guidance for 2025
F5 anticipates that its fiscal 2025 revenues will grow in the range of approximately 9% at the midpoint compared with the previously projected revenue growth of 6.5-7.5%. Non-GAAP earnings per share are now projected to grow 14-15% compared with the earlier projected earnings growth of 8-10%.
For the fourth quarter of fiscal 2025, F5 expects revenues between $780 million and $800 million. The company projected a non-GAAP EPS in the range of $3.87-$3.99 for the fourth quarter of fiscal 2025.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, F5 has a average Growth Score of C, a score with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise F5 has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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F5, Inc. (FFIV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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