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    FFIV
    Earnings call· Jun 2026(Q3 FY26)

    F5 Q3 FY26 earnings call FFIV

    Jul 27, 2026 Source

    Executive summary

    F5, Inc. Q3 FY26 — Strong Product Growth and Raised FY26 Outlook Driven by AI and Hybrid Cloud Demand

    F5 delivered an outstanding Q3 FY26, driven by strong product revenue growth and increasing demand for application security and delivery solutions amidst hybrid multi-cloud adoption and the AI inference inflection. The company raised its full-year FY26 revenue and EPS outlook, reflecting sustained momentum and disciplined execution. Management highlighted significant traction in AI data delivery, runtime security, and factory load balancing, alongside competitive displacements and platform consolidation wins.

    Highlights

    5

    • Product revenue grew 19% year-over-year to $463 million, marking 8 consecutive quarters of double-digit product growth.

    • Total revenue increased 11% year-over-year to $865 million, exceeding guidance.

    • Non-GAAP EPS grew 14% year-over-year to $4.73, well above expectations.

    • EMEA revenue demonstrated robust growth of 27% year-over-year, contributing 30% of total revenue.

    • AI direct use cases customer count grew 50% in Q3, with AI security customers growing 100% in the quarter.

    Concerns

    3

    • APAC revenue was down 11% year-over-year against a strong prior-year period, representing 15% of total revenue.

    • Perpetual license software revenue decreased 4% year-over-year to $22 million.

    • FY27 gross margin guidance remains at 80%-82% despite Q4 improvements, due to dynamic memory and storage component pricing.

    Guidance & targets

    17
    CategoryTargetConfidence
    Q4 FY26 Revenue
    $870 million to $890 million
    high materiality
    High
    Q4 FY26 Non-GAAP Gross Margin
    83% to 84%
    medium materiality
    High
    Q4 FY26 Non-GAAP Operating Expenses
    $430 million to $442 million
    medium materiality
    High
    Q4 FY26 Share-Based Compensation Expense
    approximately $68 million to $70 million
    low materiality
    High
    Q4 FY26 Non-GAAP EPS
    $4.14 to $4.26 per share
    high materiality
    High
    FY26 Revenue Growth
    approximately 9% to 10%
    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
    83.5% to 84%
    high materiality
    High
    FY26 Non-GAAP Operating Margin
    34.5% to 35.5%
    high materiality
    High
    FY26 Non-GAAP Effective Tax Rate
    18% to 19%
    medium materiality
    High
    FY26 Non-GAAP EPS
    $17.21 to $17.33
    high materiality
    High
    FY26 Share Repurchase
    at least 50% of our free cash flow
    medium materiality
    High
    FY27 Non-GAAP Gross Margin
    80% to 82%
    high materiality
    Medium
    Software Revenue Growth
    reaccelerate to solid double-digit growth
    high materiality
    High
    Hardware Growth
    single-digit to mid-single-digit growth
    high materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Americas
    Represented 55% of total revenue. Underlying demand strength is healthy, with reported growth reflecting timing of shipments.
    		—11%——
    EMEA
    Represented 30% of total revenue, demonstrating a robust quarter.
    		—27%——
    APAC
    Represented 15% of total revenue, against a very strong year-ago period. Not indicative of underlying demand strength.
    		—-11%——
    Enterprise Customers
    Product bookings: 71%
    		————
    Government Customers
    Product bookings: 19%U.S. Federal product bookings: 7%
    		————
    Service Providers
    Product bookings: 11%
    		————

    Operational metrics

    29
    Non-GAAP EPS
    $4.73up 14% YoY
    Q3 FY26
    Non-GAAP Operating Margin
    35%
    Q3 FY26
    Non-GAAP Gross Margin
    84.2%
    Q3 FY26
    Cash and investments balance
    $1.63 billion
    Q3 FY26

    At quarter end.

    GAAP Gross Margin
    82.2%
    Q3 FY26
    GAAP Operating Expenses
    $498 million
    Q3 FY26
    Non-GAAP Operating Expenses
    $426 million
    Q3 FY26
    GAAP Operating Margin
    24.7%
    Q3 FY26
    GAAP Effective Tax Rate
    8%
    Q3 FY26
    Non-GAAP Effective Tax Rate
    12.4%
    Q3 FY26

    Below previously guided annual range, primarily driven by discrete benefits associated with filing annual federal income tax return and changes in unrecognized tax benefits.

    GAAP Net Income
    $208 million
    Q3 FY26
    GAAP EPS
    $3.62
    Q3 FY26
    Capital expenditure
    $36 million
    Q3 FY26
    DSO
    45
    Q3 FY26
    Deferred revenue
    $2.19 billionup 12% YoY
    Q3 FY26
    Share repurchased
    $100 million
    Q3 FY26
    Remaining share repurchase authorization
    $422 million
    Q3 FY26

    As of the end of the quarter.

    Total Revenue
    $865 millionup 11% YoY
    Q3 FY26
    Product Revenue
    $463 millionup 19% YoY
    Q3 FY26
    Services Revenue
    $402 millionup 3% YoY
    Q3 FY26
    Systems Revenue
    $240 millionup 32% YoY
    Q3 FY26
    Software Revenue
    $223 millionup 7% YoY
    Q3 FY26
    Subscription-based Software Revenue
    $201 millionup 9% YoY
    Q3 FY26
    Perpetual License Software Revenue
    $22 milliondown 4% YoY
    Q3 FY26
    Revenue from Recurring Sources
    69%
    Q3 FY26
    AI Direct Use Cases Customer Count
    50%growth in Q3
    Q3 FY26
    AI Security Customers
    100%growth in Q3
    Q3 FY26
    AI-powered WAF Adoption
    15%
    Q3 FY26
    Employees
    6,600
    Q3 FY26

    At quarter end.

    Industry KPIs

    8
    MetricValueDetails
    Capital return$100 millionUSD
    Backlog order book$2.19 billionUSD
    Orders backlog quality8 consecutive quartersquarters
    Product orders order growth$463 millionUSD
    Ai cloud infrastructure orders50%%
    Recurring software service revenue69%%
    Revenue mix by product customer type—
    Design wins product cycle transitionsiSeries refresh

    Product announcements

    4
    ProductTypeDetails
    AI-powered WAF on Distributed Cloudlaunch
    Hardened Software Releaseupdate
    F5 Insightupdate
    AI Security Platformroadmap

    Deals & partnerships

    1
    SurePath AIAcquisition to complement AI security capabilities with Discovery.

    Acquisition of SurePath AI to enhance F5's AI security offerings, specifically complementing capabilities in discovery for AI models and agents.

    Risks & headwinds

    3
    Dynamic pricing environment for memory and storage componentsFY27

    FY27 gross margin guidance reiterated at 80%-82% despite Q4 improvements

    Mitigation: Sourcing components from multiple vendors, making advanced purchases, diversifying supply base.

    AI-driven attacks and zero-day vulnerabilitiesOngoing

    Application layer attacks surged 140% over the last 3 years; Frontier AI models escalated threat level.

    Mitigation: Accelerating innovation in runtime protection, AI-powered WAF, hardened software releases, F5 Insight for fleet management, AI Guardrails and AI Red Team.

    Underlying demand variability in APACQ3 FY26

    APAC revenue down 11% YoY in Q3 FY26.

    Mitigation: Management states underlying demand strength is healthy, variability due to shipping timing.

    What to watch in Q4 FY26

    5

    Software Revenue Growth Reacceleration

    FY27
    Currentmid-single-digit growth (FY26 expectation)
    Targetsolid double-digit growth

    Why it matters

    Software growth is a key component of F5's long-term strategy and overall revenue trajectory, with reacceleration expected from a stronger renewal cohort.

    So it all adds up to what we think is a pretty compelling growth opportunity, getting back to a solid double-digit growth outlook for next year.

    Q&A highlights

    6

    Asked about AI-related revenue growth relative to customer count growth and the sustainability of improved gross margins given dynamic component costs.

    Francois stated AI direct use case customer growth doesn't directly map to revenue growth, but momentum is strong, especially in AI security (100% customer growth in Q3). He noted indirect AI opportunity in hardware expansion (32% systems growth). Cooper attributed Q3/Q4 GM improvement to high-performance appliance adoption and better component sourcing, but reiterated FY27 GM guidance due to dynamic memory/storage pricing.

    “I wouldn't necessarily approximate the number -- the growth in the number of customers with the growth of revenue. We did give an indicator of that last quarter that we have passed the $50 million revenue mark. That particular number, we don't intend to update every quarter.”

    asked by Timothy Long · answered by François Locoh-Donou

    2 min read5 chapters

    Detailed Narrative

    01

    Hybrid Multi-Cloud Adoption and Digital Sovereignty

    F5 is capitalizing on accelerating hybrid multi-cloud adoption, which is fueling expansion opportunities and competitive displacements. A large energy and utilities provider repatriated workloads on-premises to F5 hardware due to cloud infrastructure issues. A European government agency standardized delivery and security across its multi-cloud environment with F5's sovereign-by-design architecture, refreshing BIG-IP and adding Distributed Cloud Services. These trends, including a forecast of 75% of international enterprises repatriating workloads in 3-5 years, are driving demand for higher capacity hardware and F5's platform strategy.

    02

    Expanding Threat Landscape and AI-Powered Security

    The expanding threat landscape, particularly a 140% surge in application layer attacks over three years, is a significant tailwind for F5. The company's AI-powered WAF, launched in Q2, has seen 15% adoption among Distributed Cloud WAF customers, with 75% running in blocking mode to stop zero-day attacks. F5 displaced fragmented security tools at a multi-brand telecommunications provider and a multinational healthcare company by consolidating web application and API protection, bot defense, and DDoS mitigation on Distributed Cloud Services. The urgency around AI-driven attacks is accelerating security upgrades, as seen with a European retail bank and an Asian financial institution deploying F5's AI-powered WAF.

    03

    AI Inference Inflection and Direct Use Cases

    The AI inference inflection is driving demand for F5 through AI data delivery, AI runtime security, and AI factory load balancing. The cumulative customer count for direct AI use cases grew 50% in Q3, with AI security customers doubling. F5 secured a win with an autonomous systems manufacturer for AI data delivery, handling escalating data volumes. A U.S. professional sports league deployed AI Guardrails and AI Red Team for sensitive player data. A service provider in EMEA selected F5 for its sovereign AI factory, utilizing BIG-IP Next for Kubernetes, Distributed Cloud Services, and NGINX for secure multi-tenancy and token governance.

    04

    Innovation and Continuous Defense Model

    F5 is accelerating innovation to meet intensifying application delivery and security requirements in the AI era. The company shipped its first hardened software release with a new monthly cadence, using advanced AI models for vulnerability discovery and remediation. New fleet management capabilities in F5 Insight provide visibility into software versions and simplify upgrades, leading to strong early uptake. This continuous defense model leverages AI to identify risks earlier, protect applications at runtime, and deliver faster, more deployable protections.

    05

    Systems Business Strength and Sustainability

    The systems business experienced 32% YoY growth in Q3, driven by a refresh cycle, expansion use cases, digital sovereignty initiatives, and AI-driven traffic. Management believes this growth is more sustainable than prior cycles due to new project contributions and competitive displacements. The iSeries to rSeries refresh is proceeding orderly, with an end-of-software-support date in Q2 FY27 expected to accelerate activity. The company's long-term hardware guidance has shifted from mid-single-digit decline to single-digit to mid-single-digit growth for the next few years.

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