F5 Networks rallies after beat and raise, setting the tone for a busy week of tech reports
2min read F5 Networks (FFIV) reported its Q3 earnings, exceeding analyst expectations with an EPS of $3.36, surpassing the consensus estimate of $2.97. The company also reported Q3 revenue of $695 million, beating the expected $686.06 million.
Shares of FFIV ripped higher on the news, rallying from $178 to $200 in after hours. The move will garner plenty of attention as we prepare for a slew of key tech earnings. The price action will raise the question on whether investors want to jump back into the space following a rotation trade into cyclicals.
Software revenue increased by 3% to $179 million, while systems revenue declined by 16% to $130 million. Global services revenue grew by 3% to $387 million. The company's GAAP gross profit was $559 million, representing a GAAP gross margin of 80.4%, slightly up from 79.8% in the year-ago period. Non-GAAP gross profit was $578 million, with a non-GAAP gross margin of 83.1%, compared to 82.5% last year.
F5's GAAP operating profit for Q3 was $163 million, representing a GAAP operating margin of 23.4%, a significant increase from 14.7% in the previous year. Non-GAAP operating profit remained stable at $233 million, with a non-GAAP operating margin of 33.4%, compared to 33.2% last year. The company's GAAP net income for Q3 was $144 million, or $2.44 per diluted share, up from $89 million, or $1.48 per diluted share, in the same quarter last year. Non-GAAP net income was $199 million, or $3.36 per diluted share, compared to $194 million, or $3.21 per diluted share, in Q3 fiscal year 2023.
Looking ahead, F5's guidance for Q4 projects EPS between $3.38 and $3.50, ahead of the consensus estimate of $3.33. The company also anticipates Q4 revenue in the range of $720 million to $740 million, compared to the consensus estimate of $717.39 million. F5 now expects fiscal year 2024 revenue to reach the top end of its prior expectations, approximately $2.8 billion, remaining roughly flat with the previous year. Following the report, shares of F5 surged by 15%.
F5's CEO, François Locoh-Donou, attributed the strong Q3 performance to robust software growth and the continued expansion of the company's global services offerings. He highlighted F5's role as a critical partner for large enterprises modernizing their IT infrastructures and driving IT cost savings. The company is focused on optimizing application security, delivery, management, and performance across hybrid, multicloud environments with enhanced automation and operational efficiencies. F5 is also collaborating with several large enterprise customers to prepare their IT infrastructure for leveraging AI at scale.
Overall, F5's Q3 performance demonstrates the company's resilience and strategic positioning in the market. The solid revenue and earnings results, coupled with a positive outlook for Q4 and the full fiscal year, reflect F5's ability to navigate challenging market conditions and capitalize on growth opportunities in software and services. Investors responded positively to the earnings report, driving a 15% increase in F5's share price, indicating strong market confidence in the company's future prospects.
