What F5 (FFIV) Said on Its Q4 Earnings Call

Key Points

• F5 delivered a strong fourth quarter: Revenue rose 13% year over year to $917 million, above guidance, driven by 23% product-revenue growth. Full-year revenue increased 11% to $3.4 billion, with non-GAAP operating margin of 33.7%.
• AI and security demand accelerated: Direct AI-use-case bookings exceeded $100 million, nearly tripling year over year, while security revenue reached approximately $1.3 billion. F5 also reported rising adoption of its AI-powered web application firewall and growing demand for platform consolidation.
• F5 expects continued growth in fiscal 2027: The company forecast revenue growth of 8% to 9%, solid double-digit software growth and non-GAAP EPS of $18.00 to $18.30. The board authorized an additional $1.5 billion in share repurchases, bringing total available capacity to $1.8 billion.

F5 NASDAQ: FFIV reported fourth-quarter fiscal 2026 revenue of $917 million, up 13% from a year earlier and above the high end of its guidance range, as product revenue increased 23%. The company said it has now recorded nine consecutive quarters of double-digit product revenue growth.

For the full fiscal year, F5 reported revenue of $3.4 billion, an 11% increase, including 19% growth in product revenue. Chairman, President and CEO François Locoh-Donou said demand was supported by hybrid multi-cloud adoption, a growing cybersecurity threat environment and increased enterprise spending on AI inference.

Quarterly Results and Regional Performance

Fourth-quarter product revenue was $510 million, while services revenue was $408 million, rising 3% year over year. Systems revenue increased 29% to $239 million, and software revenue rose 19% to $271 million. Subscription-based software represented 85% of quarterly software revenue, or $229 million.

Revenue from recurring sources accounted for 68% of total quarterly revenue. By region, Americas revenue increased 5% and represented 53% of the total, while EMEA revenue grew 31% and accounted for 30%. APAC revenue rose 14% and represented 17% of revenue.

Enterprise customers generated 69% of fourth-quarter product bookings, followed by government customers at 18%, including 6% from U.S. federal customers, and service providers at 13%.

• GAAP net income was $186 million, or $3.23 per share.
• Non-GAAP net income was $255 million, or $4.42 per share.
• GAAP operating margin was 23.1%, while non-GAAP operating margin was 33.7%.
• Operating cash flow totaled $118 million and free cash flow was $91 million.
• Cash and investments totaled $1.62 billion at quarter-end.

Executive Vice President and CFO Cooper Werner said cash flow reflected inventory builds and supplier prepayments intended to secure supply for fiscal 2027 systems demand. Capital expenditures were $27 million, primarily for global point-of-presence infrastructure supporting Distributed Cloud services.

F5 repurchased $100 million of stock during the quarter at an average price of $422 per share, bringing fiscal-year repurchases to $600 million. The company ended the year with approximately 6,650 employees.

Security, Platform Consolidation and AI Demand

Locoh-Donou said customers are increasingly consolidating fragmented application delivery and security tools into platforms able to apply policies across on-premises, colocation and cloud environments. He said 29% of F5’s top 1,000 customers now use three or more F5 product families, compared with 22% in 2025.

The CEO highlighted demand for the company’s AI-powered web application firewall, saying more than 300 customers had deployed the capability since its March launch. More than 75% of those deployments were operating in blocking mode, according to the company.

F5’s Distributed Cloud telemetry recorded an 84% year-over-year increase in WAF requests and a 103% increase in API security events during the fourth quarter. Locoh-Donou said customers are seeking real-time protection as vulnerability discovery and exploitation cycles accelerate.

For the year, F5 said total security revenue rose 10% to about $1.3 billion. Product security revenue increased 15% to $746 million.

Direct AI-use-case bookings exceeded $100 million during fiscal 2026, up nearly 300% year over year, according to Locoh-Donou. The company said active customers for its direct AI use cases grew fourfold to more than 200. Those use cases include AI data delivery, AI runtime security and AI factory load balancing.

F5 said customers deployed 29.2 terabits of F5-powered AI data-delivery capacity in the fourth quarter, up nearly 250% from the prior-year period. Locoh-Donou also cited deployments of F5 AI Guardrails and BIG-IP Next for Kubernetes in sovereign AI infrastructure projects.

During the question-and-answer session, Locoh-Donou said F5 estimates its AI-related addressable market could grow to about $11 billion by 2030, including approximately $9 billion for AI security and $1 billion each for AI data delivery and AI factory load balancing.

Software Trends and Fiscal 2027 Outlook

For fiscal 2026, software revenue increased 8% to $870 million. Term-based subscriptions increased 14% to $578 million, while perpetual software licenses declined 8% to $111 million. SaaS and managed services revenue rose 3% to $182 million.

F5 said it completed a planned transition away from certain legacy offerings during the year. Total SaaS and managed services annual recurring revenue reached $211 million, up 14%, while core SaaS and managed services ARR grew 24%.

Werner said the company expects fiscal 2027 revenue growth of 8% to 9%, supported by continued systems refresh activity, competitive takeouts, digital-sovereignty projects, AI-related capacity expansion and software subscription growth.

• F5 expects upper-single-digit systems revenue growth for fiscal 2027, with stronger growth in the first half as the systems refresh cycle progresses.
• The company expects solid double-digit software growth, weighted toward the second half due to the timing of term renewals.
• Services revenue is expected to grow at a low- to mid-single-digit rate.
• Non-GAAP gross margin is projected at 80.5% to 82.5%.
• Non-GAAP operating margin is projected at 33% to 35%.
• Non-GAAP earnings per share are expected to range from $18.00 to $18.30.

For the first fiscal quarter, F5 forecast revenue of $875 million to $895 million and non-GAAP earnings of $4.25 to $4.37 per share. The company expects first-quarter non-GAAP gross margin of approximately 81.5% to 82.5% and non-GAAP operating expenses of $420 million to $432 million.

Werner said F5 expects to continue increasing inventory, especially in the first half of fiscal 2027, to support delivery capacity and longer-term appliance demand. The board also authorized an additional $1.5 billion for share repurchases, bringing total remaining and newly authorized repurchase capacity to $1.8 billion at the end of the fourth quarter.

About F5 (NASDAQ:FFIV)

F5, Inc NASDAQ: FFIV provides application delivery, security and traffic management solutions for enterprises, service providers and public-sector organizations. Its offerings are designed to help customers secure, optimize and manage applications and application programming interfaces (APIs) across data centers, private and public clouds, and edge environments.

The company's portfolio includes BIG-IP software and appliances, NGINX application delivery and web server technologies, and F5 Distributed Cloud services.

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