F5 Surges on Robust Financial Results and AI-Driven Growth Momentum

F5 (NASDAQ:FFIV) stock surged 7% on Thursday after its financial results showed significant growth in its systems revenue segment, up 39% driven by tech refresh, data center modernizations, AI-readiness, and competitive takeouts. RBC Capital Markets analysts highlighted the company's momentum in AI-readiness.

F5 Networks Inc (NASDAQ:FFIV) reported robust third-quarter (Q3) fiscal year 2025 results on July 30, with revenue growth accelerating and the company raising its full-year outlook. The application delivery and security specialist saw broad-based growth across its product portfolio, with particularly strong performance in its systems business. Total revenue for Q3FY25 was $780 million, representing a 12% year-over-year (YoY) increase, driven by robust product revenue growth of 26%, with software revenue up 16% and systems revenue surging 39% [1].

The company’s non-GAAP operating margin improved by 80 basis points YoY to 34.3%, while non-GAAP earnings per share (EPS) grew 24% to $4.16. François Locoh-Donou, President and CEO, attributed the strong performance to growing demand for F5’s application delivery and security platform (ADSP) across various customer segments. "We are seeing increasing adoption of our platform as organizations navigate the complexity of multicloud environments and seek to secure their applications against evolving threats," Locoh-Donou stated during the presentation [1].

F5’s revenue mix continues to evolve, with software and systems both showing strong growth while global services revenue increased modestly by 1% YoY. The company’s software business is increasingly subscription-based, with 89% of Q3FY25 software revenue ($185 million out of $208 million) coming from subscriptions. Recurring revenue, which includes subscriptions, SaaS, managed services, and maintenance, now represents 73% of total revenue ($572 million in Q3FY25), highlighting F5’s successful business model transition [1].

F5 maintained strong profitability with a non-GAAP gross margin of 83.1% and improved its non-GAAP operating margin to 34.3%, up 80 basis points YoY. This operational efficiency translated into strong earnings growth, with non-GAAP net income increasing to $243 million and EPS growing 24% YoY to $4.16. The company generated robust cash flow from operations of $282 million in Q3FY25, up significantly from $159 million in Q3FY24. F5 ended the quarter with $1,442 million in cash and investments, compared to $943 million a year earlier [1].

Based on the strong Q3 performance and positive demand trends, F5 raised its full-year fiscal 2025 outlook. The company now expects approximately 9% total revenue growth for FY25, up from its previous guidance of 6.5% to 7.5%. Non-GAAP EPS growth is now projected at 14% to 15%, compared to the earlier forecast of 8% to 10%. For the fourth quarter of fiscal 2025, F5 expects revenue between $780 million and $800 million, with non-GAAP EPS ranging from $3.87 to $3.99 [1].

F5’s stock closed at $299.24 on July 30, 2025, and was trading slightly lower at $298.00 in after-hours trading following the earnings release, despite the strong results and raised guidance. RBC Capital Markets analysts highlighted the company's momentum in AI-readiness, noting that the strong performance in the systems segment was driven by tech refresh, data center modernizations, AI-readiness, and competitive takeouts [2].

References:
[1] https://www.investing.com/news/company-news/f5-networks-q3fy25-slides-revenue-jumps-12-raises-fullyear-guidance-93CH-4161425
[2] https://za.investing.com/news/company-news/f5-networks-q3fy25-slides-revenue-jumps-12-raises-fullyear-guidance-93CH-3812289