F5 NASDAQ: FFIV reported third-quarter fiscal 2026 revenue of $865 million, up 11% from a year earlier and above the high end of its guidance, as product revenue rose 19% and demand remained strong for application delivery, security and AI-related infrastructure.
Chairman, President and CEO François Locoh-Donou said the company has now posted eight consecutive quarters of double-digit product growth. He attributed the performance to hybrid multi-cloud adoption, an expanding application-layer threat landscape and growing AI inference workloads.
“Q3 was another outstanding quarter,” Locoh-Donou said, adding that customers are seeking to simplify and secure application delivery across on-premises, cloud and edge environments.
Revenue and Earnings Results
Product revenue totaled $463 million in the quarter, while services revenue was $402 million, up 3% year over year. Systems revenue increased 32% to $240 million, while software revenue grew 7% to $223 million. Subscription-based software revenue rose 9% to $201 million and represented 90% of total software revenue.
Recurring revenue sources accounted for 69% of total quarterly revenue. By geography, revenue in the Americas increased 11% and represented 55% of total revenue. EMEA revenue grew 27%, representing 30% of the total, while APAC revenue declined 11% against what Chief Financial Officer Cooper Werner described as a strong year-earlier comparison.
Enterprise customers accounted for 71% of product bookings, government customers represented 19%, including 7% from U.S. federal customers, and service providers accounted for 11%.
- GAAP net income was $208 million, or $3.62 per share.
- Non-GAAP net income was $272 million, or $4.73 per share, up 14% from the prior-year period.
- GAAP operating margin was 24.7%, while non-GAAP operating margin was 35%.
- GAAP gross margin was 82.2%, and non-GAAP gross margin was 84.2%.
- Cash flow from operations totaled $316 million and free cash flow was $281 million.
F5 ended the quarter with $1.63 billion in cash and investments and $2.19 billion in deferred revenue, up 12% year over year. The company repurchased $100 million of shares at an average price of $299 per share and had $422 million remaining under its authorization at quarter-end.
AI, Security and Systems Demand
Locoh-Donou said the company’s direct AI-use-case customer count increased 50% during the quarter. F5 identifies three direct AI opportunities: data delivery, runtime security and AI factory load balancing. He said the number of AI security customers doubled in the quarter.
The CEO cited customer deployments involving AI data pipelines, protection for AI applications and models, and traffic management for sovereign AI factories. He also said AI-driven traffic is contributing indirectly to demand for the company’s application delivery controller systems, including higher-capacity hardware.
F5 said 15% of its Distributed Cloud web application firewall customers have adopted its AI-powered WAF capability since its second-quarter launch. Of those adopters, 75% are using the capability in blocking mode rather than monitoring mode, according to Locoh-Donou.
The company also moved to a monthly cadence for hardened software releases, from a prior quarterly cadence, and introduced fleet-management capabilities in F5 Insight intended to help customers assess software versions, security posture and update readiness across BIG-IP deployments.
During the question-and-answer session, Werner said the company’s stronger near-term gross-margin outlook reflected increased adoption of higher-performance appliances and lower-than-expected component costs from certain suppliers. However, he said F5 was not changing its fiscal 2027 gross-margin outlook because pricing for memory and storage components remains dynamic.
Updated Outlook
For the fourth quarter, F5 expects revenue of $870 million to $890 million, representing just under 9% year-over-year growth at the midpoint. The company projected non-GAAP gross margin of 83% to 84%, non-GAAP operating expenses of $430 million to $442 million, and non-GAAP earnings per share of $4.14 to $4.26.
Based on its third-quarter performance and fourth-quarter outlook, F5 raised its full-year fiscal 2026 revenue-growth expectation to approximately 9% to 10%, from a prior outlook of 7% to 8%.
- Full-year non-GAAP gross margin is expected to be 83.5% to 84%.
- Full-year non-GAAP operating margin is expected to be 34.5% to 35.5%.
- Full-year non-GAAP EPS is expected to be $17.21 to $17.33, up from prior guidance of $16.25 to $16.55.
- F5 expects mid-single-digit software revenue growth, double-digit systems revenue growth and low-single-digit services revenue growth for fiscal 2026.
Werner said the company expects full-year share repurchases to equal at least 50% of free cash flow. Looking beyond the current fiscal year, management said it sees continued demand from infrastructure refresh activity, data-center modernization, digital sovereignty initiatives, competitive displacements, platform consolidation and AI-related workloads.
About F5 (NASDAQ:FFIV)
F5 Inc NASDAQ: FFIV specializes in application services and delivery networking, helping organizations ensure the availability, performance and security of their applications. The company's core offerings include advanced load balancing, traffic management and application security solutions designed to optimize user experiences and protect against threats such as distributed denial-of-service (DDoS) attacks and web application exploits.
At the heart of F5's product portfolio is the BIG-IP platform, which provides a suite of software modules for local and global traffic management, secure web application firewalling and DNS service delivery.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider F5, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and F5 wasn't on the list.
While F5 currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
The AI boom is creating opportunities across semiconductors, cloud computing, enterprise software, infrastructure, cybersecurity, and automation.
Inside this report, you’ll find 10 companies positioned to benefit as artificial intelligence moves from hype to real-world deployment and becomes a core growth driver for corporate America.
Get This Free Report
