Release Date: April 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• F5 Inc (FFIV, Financial) reported a 7% total revenue growth in Q2, with product revenue growing by 12% and systems revenue by 27%.
• The company delivered a Q2 non-GAAP EPS of $3.42, representing an 18% year-over-year growth, exceeding the top end of their guidance range.
• F5 Inc (FFIV) raised its FY25 revenue growth guidance to a range of 6.5% to 7.5%, up from the prior range of 6% to 7%.
• The introduction of the F5 application delivery and security platform (ADSP) is a significant innovation, converging high-performance load balancing and traffic management with advanced app and API security capabilities.
• F5 Inc (FFIV) is seeing strong early interest in its AI gateway solution, which is designed to secure and manage enterprise AI, indicating potential future growth in AI-related revenues.

Negative Points

• Software revenue was flat compared to the year-ago quarter, with subscription-based software revenue down 2% year-over-year.
• The company faces macroeconomic uncertainties, which could impact future demand and growth projections.
• Despite strong hardware growth, there is a concern about potential deceleration in the second half of the year due to conservative guidance amidst macro volatility.
• The renewal cycle for software subscriptions is heavily weighted towards the second half of the fiscal year, which could lead to uneven revenue recognition.
• There is a potential risk of disruption in the U.S. federal government sector due to budget uncertainties, which could affect future revenues.

Q & A Highlights

Q: On the software side, there seemed to be a little underperformance in Q2. Could you give us some color on the subscription pipeline and any risks given the macro uncertainty? A: Cooper Werner, CFO: The growth is weighted to the second half of the year due to a substantial renewal opportunity. We expect roughly 2/3 of our software business to come from renewals, which are more weighted to the second half. We have good visibility into this renewal opportunity and expect double-digit growth for the year.

Q: How significant is the hardware refresh cycle, and how quickly do you expect it to move away from the aged base? A: Francois Locoh-Donou, CEO: Hardware was up 27% year-on-year, driven by strong momentum in the refresh cycle, which we expect to last well into 2026. Beyond refresh, we see tailwinds from data center modernization, AI preparation, and competitive displacement.

Q: Can you discuss the competitive displacement opportunity and how long you think this cycle can last? A: Francois Locoh-Donou, CEO: We are in the early innings of displacing competitors in ADC and consolidating functionality onto F5. We have won several hundred accounts, but the majority of the opportunity is still ahead of us. Our new application delivery and security platform will accelerate our ability to consolidate functionality.

Q: Why is there an assumption of deceleration in hardware growth in the second half of the year? A: Francois Locoh-Donou, CEO: We raised our total revenue guidance due to strong performance but remained conservative due to macro volatility. We are not seeing changes in customer demand patterns but are cautious about potential macroeconomic impacts later in the year.

Q: Regarding AI, which use case is the largest opportunity for F5, and where are you seeing better traction? A: Francois Locoh-Donou, CEO: The largest opportunity is in data delivery for AI models, where BIG-IP is used to move data securely and rapidly. Security for AI applications and AI factory load balancing are also opportunities, but they are in the early stages.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.