F5's Q2 2025 Earnings Call: Unraveling Contradictions in Software Growth, AI Impact, and Market Demand

Software growth drivers and renewal focus, perpetual software decline and revenue outlook, AI as a growth driver, hardware demand and macroeconomic impact, software growth expectations are the key contradictions discussed in F5's latest 2025Q2 earnings call.



Strong Revenue and Earnings Growth:
- F5 reported a 7% total revenue growth in Q2, with a significant 12% product revenue growth, and Q2 non-GAAP EPS of $3.42, representing 18% year-over-year growth.
- This growth was driven by technology refresh momentum, expansion, and customers leveraging F5 to modernize data centers and prepare for AI.

Hardware Demand and Refresh Cycle:
- Systems revenue grew by 27% year-over-year, with a strong performance in customer demand across verticals and geographies.
- The driver of this growth included widespread refresh activity and upcoming end-of-life dates for VIPRION and iSeries families, representing over 50% of the installed base.

Innovation and AI Integration:
- F5 introduced the Application Delivery and Security Platform (ADSP), converging high-performance load balancing and traffic management with advanced app and API security capabilities.
- The company's growing role in AI is driven by supporting AI workloads, including data delivery and security for AI models and factories.

Software Growth Anticipated:
- Software revenue was flat, but F5 expects software revenue growth in the second half of the year driven by a substantial subscription renewal base in Q3.
- The company has strong visibility into this renewal opportunity, with continued expansion at renewal across the portfolio, contributing to the overall growth.