FFIV Beats Q3 Earnings Estimates on Systems Strength, Raises View

FFIV's Q3 Segment Revenue Details

Product revenues, representing 54% of total revenues, increased 19% year over year to $463 million. Systems revenues jumped 32% to $240 million as customers invested in higher-performance infrastructure, expanded data-center capacity and modernized environments for resiliency, digital sovereignty and AI workloads.

Software revenues rose 7% to $223 million. Subscription-based software revenues increased 9% to $201 million and represented 90% of software revenues. Perpetual license revenues declined 4% to $22 million. Services revenues, accounting for 46% of total revenues, grew 3% to $402 million.

F5 Benefits From Hybrid Multicloud Demand

Management highlighted expansion opportunities tied to hybrid multicloud adoption, including competitive displacements, platform consolidation and data-center buildouts. An energy and utilities provider expanded its BIG-IP footprint after moving workloads from an unstable cloud environment back to on-premises infrastructure.

F5 also secured a competitive win at a Fortune 100 technology provider seeking to strengthen delivery and security for a storage service spanning 45 data centers. The customer selected BIG-IP to support the availability, resilience and security requirements of AI and data-intensive workloads.

F5 Maintains Solid Margins and Cash Flow

Non-GAAP gross margin expanded 110 basis points year over year to 84.2%, while non-GAAP operating margin increased 70 basis points to 35%.

In the third quarter of fiscal 2026, FFIV generated $316 million in operating cash flow and $281 million in free cash flow.

Cash and investments totaled $1.63 billion, up from $1.44 billion in the previous quarter. The company repurchased $100 million of shares and had $422 million remaining under its authorization.

FFIV Raises Fiscal 2026 Outlook

F5 expects fourth-quarter fiscal 2026 revenues between $870 million and $890 million, implying growth of nearly 9% at the midpoint. Non-GAAP earnings are projected in the range of $4.14-$4.26 per share. Non-GAAP gross margin is expected between 83% and 84%, reflecting a favorable mix of higher-performance systems and lower component-cost increases than initially anticipated.

The Zacks Consensus Estimate for fourth-quarter fiscal 2026 revenues and earnings is currently pegged at $854.33 million and $4.12 per share, respectively.

For fiscal 2026, management raised its revenue growth forecast to approximately 9-10% from 7-8%. The company continues to expect mid-single-digit software growth, double-digit systems growth and low-single-digit services growth. Non-GAAP earnings guidance was increased to $17.21-$17.33 per share from $16.25-$16.55.

The Zacks Consensus Estimate for fiscal 2026 revenues and earnings is currently pegged at $3.32 billion and $16.45 per share, respectively.

FFIV’s Zacks Rank and Stocks to Consider

Currently, F5 carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI, Applied Materials AMAT and Cisco Systems CSCO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Analog Devices have rallied 37.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 59.4% year over year.

Shares of Applied Materials have skyrocketed 101.1% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 4 cents over the past 30 days, indicating a rise of 28.9% year over year.

Cisco Systems shares have surged 48.7% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, indicating an increase of 12.3% year over year.

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This article originally published on Zacks Investment Research (zacks.com).

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