Skip to content
    FFIV
    Earnings call· Mar 2026(Q2 FY26)

    F5 Q2 FY26 earnings call FFIV

    Apr 28, 2026 Source

    Executive summary

    F5 Q2 FY26 — Strong Product Growth and Raised FY26 Outlook Driven by Hybrid Multicloud and AI

    F5 delivered a robust quarter, driven by accelerating hybrid multicloud adoption, an expanding threat landscape, and the inflection of AI inference, leading to strong product growth and record free cash flow. The company raised its full-year revenue and EPS outlook, anticipating continued demand from these secular trends and a strong refresh cycle, while navigating rising memory costs.

    Highlights

    5

    • Revenue grew 11% year-over-year to $812 million, exceeding expectations.

    • Product revenue increased 22% year-over-year to $411 million, marking the seventh consecutive quarter of double-digit product growth.

    • Systems revenue grew 26% over Q2 FY25 to $226 million, driven by a strong refresh cycle and new use cases.

    • Non-GAAP EPS grew 14% year-over-year to $3.90 per share, reflecting strong operating results.

    • Generated record free cash flow of $348 million, highlighting operating model strength.

    Concerns

    3

    • Services revenue grew only 2% year-over-year to $401 million, impacted by the strong refresh cycle replacing legacy appliances.

    • Perpetual license software revenue declined 4% year-over-year to $19 million.

    • Higher component costs, primarily memory, are expected to cause non-GAAP gross margin to step down sequentially from Q3 into Q4 FY26.

    Guidance & targets

    15
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $820 million to $840 million
    high materiality
    High
    Q3 FY26 Non-GAAP Gross Margin
    82.5% to 83.5%
    medium materiality
    High
    Q3 FY26 Non-GAAP Operating Expenses
    $406 million to $418 million
    medium materiality
    High
    Q3 FY26 Share-Based Compensation Expense
    approximately $68 million to $70 million
    low materiality
    High
    Q3 FY26 Non-GAAP EPS
    $3.91 to $4.03 per share
    high materiality
    High
    FY26 Revenue Growth
    7% to 8%
    high materiality
    High
    FY26 Software Revenue Growth
    mid-single-digit
    medium materiality
    High
    FY26 Systems Revenue Growth
    double-digit
    medium materiality
    High
    FY26 Services Revenue Growth
    low single-digit
    medium materiality
    High
    FY26 Non-GAAP Gross Margin
    82.5% to 83.5%
    medium materiality
    High
    FY26 Non-GAAP Operating Margin
    34% to 35%
    medium materiality
    High
    FY26 Non-GAAP Effective Tax Rate
    20% to 21%
    low materiality
    High
    FY26 Non-GAAP EPS
    $16.25 to $16.55
    high materiality
    High
    Full Year Share Repurchase
    at least 50% of our free cash flow
    medium materiality
    High
    Software Growth Rate
    higher growth rate
    medium materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Americas
    Represented 50% of total revenue.
    		—3%——
    EMEA
    Represented 32% of total revenue, showing very strong growth driven by digital sovereignty initiatives.
    		—22%——
    APAC
    Represented 18% of total revenue, showing very strong growth.
    		—19%——
    Enterprise Customers
    Largest contributor to product bookings.
    Product bookings: 66%
    		————
    Government Customers
    Strong product bookings, including U.S. Federal.
    Product bookings: 24%U.S. Federal product bookings: 8%
    		————
    Service Providers
    Contribution to product bookings.
    Product bookings: 9%
    		————

    Operational metrics

    28
    Non-GAAP Gross Margin
    83.7%
    Q2 FY26
    Non-GAAP Operating Expenses
    $406 million
    Q2 FY26
    Non-GAAP Operating Margin
    33.8%
    Q2 FY26
    Non-GAAP Effective Tax Rate
    21.5%
    Q2 FY26
    Non-GAAP Net Income
    $223 million
    Q2 FY26
    Non-GAAP EPS
    $3.9014% growth from year ago period
    Q2 FY26
    Capital Expenditure
    $18 million
    Q2 FY26
    DSO
    47 days
    Q2 FY26
    Cash and Investments Balance
    $1.46 billion
    Q2 FY26

    At quarter end.

    Deferred Revenue
    $2.12 billionUp 10% from year ago period
    Q2 FY26
    Share Repurchases Executed
    $100 million
    Q2 FY26
    Remaining Share Repurchase Authorization
    $522 million
    Q2 FY26

    As of the end of the quarter.

    Total Employees
    6,500
    Q2 FY26

    At quarter end.

    AI-related Sales
    $50 millionUp more than 200% year-on-year
    H1 FY26

    Sales from direct AI use cases (data delivery, runtime security, factory load balancing).

    AI Customers
    approximately 100
    H1 FY26

    Customers directly using F5 for AI use cases.

    Web Attack Increase
    77%
    Year-on-year

    Reported increase in web attacks, driving demand for application security.

    Bot Attack Increase
    150%
    Year-on-year

    Reported increase in bot attacks, driving demand for bot defense.

    Distributed Cloud WAF Customer Growth
    62%
    Year-on-year

    Growth in customers choosing F5 for web application firewalls.

    API Security Customer Growth
    54%
    Year-on-year

    Growth in customers choosing F5 for API security.

    Bot Defense Customer Growth
    33%
    Year-on-year

    Growth in customers choosing F5 for bot defense.

    Customers Recommitted to Hardware
    $60 million
    H1 FY26

    Sales from customers who had previously stopped buying hardware and recommitted.

    AI Factory Efficiency Gain (NVIDIA Integration)
    30% to 40%
    Ongoing

    Validated efficiency gains from F5 software integration on NVIDIA DPUs.

    GAAP Gross Margin
    81.4%
    Q2 FY26
    GAAP Operating Expenses
    $482 million
    Q2 FY26
    GAAP Operating Margin
    22.1%
    Q2 FY26
    GAAP Effective Tax Rate
    21.9%
    Q2 FY26
    GAAP Net Income
    $148 million
    Q2 FY26
    GAAP EPS
    $2.58
    Q2 FY26

    Industry KPIs

    6
    MetricValueDetails
    Capital return$100 millionUSD
    Orders backlog qualityStrong
    Ai cloud infrastructure orders$50 millionUSD
    Recurring software service revenue70%%
    Revenue mix by product customer type51% product revenue, 49% services revenue%
    Design wins product cycle transitionsNVIDIA BlueField integration

    Orderbook & backlog

    1
    Deferred Revenue$2.12 billionQ2 FY26 end

    Up 10% from year ago period

    Strength tied almost entirely to services business, particularly maintenance renewals. Includes some multi-year renewals.

    Product announcements

    5
    ProductTypeDetails
    AI-powered Distributed Cloud WAFlaunch
    Agentic Bot Defenselaunch
    F5 AI Remediatelaunch
    F5 Insight for ADSPlaunch
    API Discovery on-premiseupdate

    Risks & headwinds

    2
    Rising Memory Component CostsQ3 FY26 into Q4 FY26 and through FY27

    Expected to cause non-GAAP gross margin to step down sequentially from Q3 into Q4 FY26. Memory prices expected to stay elevated through most of FY27.

    Mitigation: Proactive supply chain management (increased build forecast, extended forecast length, additional supply on constrained components); ongoing price adjustments and discount discipline to offset impact.

    Lag in Services Revenue GrowthNear-term

    Services revenue grew only 2% year-over-year in Q2 FY26.

    Mitigation: Strong refresh cycle replaces legacy appliances, creating a temporary headwind. Longer-term, stronger retention and expansion at refresh will lead to better maintenance revenue outcomes with a larger footprint.

    What to watch in Q3 FY26

    5

    Software Growth Rate

    FY27
    CurrentMid-single-digit for FY26
    TargetHigher growth rate

    Why it matters

    Software growth is a key component of F5's long-term revenue and margin expansion, and an inflection point in FY27 would validate the company's strategic direction.

    And then, yes, as we look ahead to next year, we do expect to see an inflection in the growth rate. We're continuing to see strong trends around consumption rates across that renewal base, and we have a larger base coming up for renewal next year. And so with the expansion we would anticipate against that larger renewal base, we feel pretty confident about a higher growth rate into FY '27.

    Q&A highlights

    6

    Why isn't software guidance raised after a strong Q2, and is acceleration expected next year?

    Q2 software growth was as expected. The full-year mid-single-digit guidance remains due to the renewal base. Stronger growth is anticipated in FY27 due to increased consumption rates and a larger renewal base.

    “And then, yes, as we look ahead to next year, we do expect to see an inflection in the growth rate. We're continuing to see strong trends around consumption rates across that renewal base, and we have a larger base coming up for renewal next year.”

    asked by Timothy Long · answered by Cooper Werner

    3 min read7 chapters

    Detailed Narrative

    01

    Market Forces Driving Demand

    F5 identifies three significant market forces reshaping customer operations: hybrid multicloud adoption, threat landscape expansion, and AI inference inflection. Over 90% of enterprises use hybrid multicloud across an average of 19 locations, driving demand for flexibility, resiliency, and digital sovereignty. The threat landscape is expanding with AI-driven attacks, increasing web attacks by 77% and bot attacks by 150% year-over-year, necessitating best-in-class security. AI inference is becoming a regular part of application execution, with 78% of enterprises running inference using over seven models, driving demand for compute, data delivery, and security.

    02

    Refresh Cycle and Market Share Gains

    The current refresh cycle is characterized by a 'Refresh plus' dynamic, where customers deploy higher performance, higher capacity F5 systems and expand use cases, including AI-driven platforms. F5 is capitalizing on this to attach new use cases, expand footprint, and grow wallet share. The company is also winning market share from competitors unable to support hybrid multicloud environments, displacing incumbents at Fortune 100 energy companies and standardizing API protection across diverse customer footprints.

    03

    AI Momentum and Use Cases

    F5 is seeing direct and indirect demand from AI inference. Direct AI use cases include AI data delivery, AI factory load balancing, and AI runtime security. In the first half of FY26, F5 generated approximately $50 million in AI-related sales, up over 200% year-on-year, with nearly 100 customers utilizing F5 for AI. Examples include improving performance for AI data movement for a global payments company, assessing risk for AI applications for an industrial automation firm, and supporting digital twin operations for a major manufacturer.

    04

    Innovation in AI-Powered Security

    F5 introduced several new AI-powered capabilities in Q2 FY26 to strengthen its leadership in application delivery and security. These include AI-powered Distributed Cloud WAF for automated threat blocking, Agentic Bot Defense for autonomous AI agents, F5 AI Remediate to automate vulnerability mitigation, and F5 Insight for ADSP for deeper visibility across application estates. These innovations aim to help customers run faster, stay protected, and simplify hybrid multicloud and AI environments.

    05

    Geographic Performance and Digital Sovereignty

    While Americas revenue grew 3% year-over-year, EMEA and APAC regions delivered very strong quarters, growing 22% and 19% respectively. This strong international performance, particularly in EMEA, is attributed to robust demand for digital sovereignty initiatives, which drives modernization, reinvestment in data centers, and consistent security across hybrid multicloud environments. F5 is increasing its field coverage in EMEA and focusing on sectors like defense to capitalize on this trend.

    06

    Software Business Dynamics and Future Growth

    Software revenue grew 17% year-over-year in Q2, with subscription-based software representing 90% of the total. The software business is largely subscription-based, with growth primarily driven by renewal motions and expansion of the existing base. While FY26 software growth is expected to be mid-single-digit due to a slower renewal cycle, F5 anticipates an inflection to a higher growth rate in FY27, driven by strong consumption trends and a larger renewal base.

    07

    NVIDIA Partnership and AI Efficiency

    F5 has integrated its software with NVIDIA's BlueField technology, enabling it to run on ARM architectures. This integration, now part of NVIDIA's reference architecture, has been validated to help AI factories generate 30% to 40% more tokens for a given amount of GPUs. F5 is engaged in proof-of-concepts and trials, expecting this value proposition to resonate as more customers move to AI inferencing and seek to optimize GPU efficiency.

    AI-generated summary of the company’s earnings call. Not investment advice.