F5 Boosts FY25 Revenue Growth Forecast to 7.5%, Citing AI and Hybrid Multi-Cloud Demand

Insights from the Earnings Call: F5, Inc. (FFIV) Second Quarter of 2025

Management View

CEO Francois Locoh-Donou underscored the firm's robust second-quarter performance, pointing out a 7% rise in overall revenue, with product revenues climbing by 12%. The systems division saw a significant boost of 27%, whereas software earnings stayed consistent from the previous year. On a non-GAAP basis, the earnings per share climbed to $3.42, marking an 18% improvement over the same period last year.
The firm launched the F5 Application Delivery and Security Platform (ADSP), combining robust load balancing with sophisticated application and API protection functionalities. Designed to tackle intricate multi-cloud issues, this platform provides automated, AI-powered administration tools.
During F5’s AppWorld conference, they introduced major advancements such as AI-driven features, featuring an iRule Code Generator along with AI-powered helpers designed for use with NGINX One and BIG-IP systems, aimed at boosting operational productivity and transparency.
In the second quarter, the company achieved significant successes with key clients, such as agreements related to artificial intelligence technologies with both a major retailer based in North America and a service provider located within the Asia-Pacific zone. This highlights increasing demand for F5’s expertise in safeguarding and enhancing AI-driven tasks.
Chief Financial Officer Cooper Werner highlighted robust financial indicators, with $731 million in second-quarter revenue and $201 million in non-GAAP net income. He also pointed out growing trends in technological upgrades and market takeovers from competitors.

Outlook

F5 has increased its fiscal year 2025 revenue growth projection to 6.5%–7.5%, an improvement from the previous estimate of 6%–7%. The company attributes this upward revision to impressive performances in the first half and enduring demand trends.
The forecasted revenue for Q3 is between $740 million and $760 million, suggesting around an 8% increase mid-range. The anticipated non-GAAP earnings per share (EPS) for Q3 are predicted to fall within the $3.41 to $3.53 interval.
The forecast for FY 2025 non-GAAP earnings per share (EPS) growth was also upgraded to 8%–10%. This adjustment reflects higher anticipated revenues along with an additional tax benefit recognized during the second quarter.

Financial Results

The product revenue amounted to $337 million, primarily due to a 27% increase in system sales. The software revenue remained steady year over year at $158 million, with subscription-based software accounting for 87% of overall software earnings.
The revenue from global services amounted to $394 million, accounting for 54% of the overall income.
The regional performance featured a 20% increase in EMEA revenues along with a 3% rise in both the Americas and APAC regions.
The operational outcomes featured a non-GAAP gross margin of 83.1%, marking an increase of 98 basis points compared to the previous year, along with a non-GAAP operating margin of 31.9%.
The firm produced a historic $257 million in operational cash flow, amassing $1.27 billion in cash along with investment holdings by the end of the quarter.

Q&A

Tim Long from Barclays raised concerns about the software pipeline and potential macro risks. However, CFO Werner assured that they have clear insight into their renewal base and expanding trends. The growth is attributed to significant customer demand and successful renewals.
Ryan Koontz from Needham asked about potential areas where competitors might be displaced. The CEO, Locoh-Donou, mentioned initial success with acquiring new accounts and emphasized that integrating features into F5’s ADSP is speeding up this process.
Amit Daryanani from Evercore inquired about the sustainability of hardware growth. The CEO, Locoh-Donou, highlighted continuous upgrade cycles along with increasing data center capabilities, driven by hybrid multi-cloud frameworks and preparations for artificial intelligence technologies.
Michael Ng from Goldman Sachs asked for more information regarding the update cycle of current installations and how prices have been adjusted recently. The Chief Financial Officer, Werner, stated that more than fifty percent of the present user base will require an upgrade before 2026, which has been facilitated by new price changes.
Meta Marshall from Morgan Stanley inquired about the influence of distributed cloud services. The CEO, Locoh-Donou, responded that they have exceeded 1,000 customers, particularly noting strong uptake among premier clients.

Sentiment Analysis

The analysts seemed largely impartial with a slight lean towards positivity, concentrating on the renewal rates for software and whether hardware growth can be maintained sustainably. While they did mention worries regarding economic instability from broader market fluctuations, these concerns weren’t highlighted prominently.
During their scripted comments, management expressed assurance regarding software renewal clarity and chances for hardware upgrades. In the question-and-answer session, they maintained this confident stance, providing thorough answers to analysts' questions and emphasizing factors driving sustained expansion.
In comparison to the previous quarter, the sentiment stayed consistent, maintaining focus on hybrid multi-cloud strategies and AI-powered possibilities.

Quarter-over-Quarter Comparison

The forecasted revenue growth for fiscal year 2025 was raised from 6%-7% to 6.5%-7.5%. Similarly, the earnings per share (EPS) growth outlook has been upgraded from 6.5%-8.5% to 8%-10%.
In this quarter, the spotlight was on launching the ADSP and particular advancements related to artificial intelligence, which differs from the previous quarter’s concentration on adopting hybrid multi-cloud solutions and exploring early-stage AI possibilities.
In the first quarter, analysts redirected their attention somewhat towards assessing the longevity of software expansion and hardware upgrade patterns rather than concentrating primarily on overarching strategic placement.

Risks and Concerns

The management acknowledged economic uncertainties yet observed no considerable changes in how customers acted.
Experts expressed doubts about the continued viability of expansion speeds in both hardware and software sectors, with special attention to income derived from renewals in software.
Possible hazards encompass competitive pressures within the ADC marketplace as well as doubts about the pace of AI acceptance.

Final Takeaway

In F5, Inc.'s second-quarter performance, they showed impressive outcomes bolstered by significant hardware upgrades, increasing prospects related to artificial intelligence, and enhancements in their hybrid multi-cloud offerings. Their launch of the ADSP platform equips them effectively to cater to changing client demands regarding security and application distribution. Management has raised forecasts for fiscal year 2025 revenues and earnings per share, indicating their belief in ongoing market demand and broadening adoption patterns, specifically within software updates and competitive takeovers. Despite economic instabilities, investors ought to keep an eye on how adeptly these development plans are executed.

Review the complete earnings call transcript here.