A month has gone by since the last earnings report for F5 Networks (FFIV). Shares have added about 18.3% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is F5 due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for F5, Inc. before we dive into how investors and analysts have reacted as of late.
F5 Q2 Earnings and Revenues Beat Estimates
F5 delivered better-than-expected second-quarter fiscal 2026 results. FFIV reported second-quarter non-GAAP earnings per share (EPS) of $3.90, which surpassed the Zacks Consensus Estimate by 12.44%. The bottom line increased 14% year over year.
F5’s revenues of $812 million for the second quarter beat the consensus mark by 3.49%. The top line rose 11% on a year-over-year basis.
FFIV’s Q2 Details
Product revenues (50.6% of total revenue) climbed 22% year over year to $411 million, supported by continued strength in Systems. Systems revenues increased 26% to $226 million, reflecting customers upgrading to higher-performance and higher-capacity platforms as they modernize data centers for resiliency, sovereignty requirements and AI readiness. Our model estimates for the Product segment and Systems sub-segment revenues were pegged at $381.1 million and $199.6 million, respectively.
Management characterized the cycle as “refresh plus,” where refresh activity also becomes a moment to attach new use cases and expand wallet share. On the earnings call, the company cited instances where customers broadened projects beyond replacements into AI-related deployments and pointed to increased competitive displacement as enterprises consolidate around fewer, more capable platforms.
Software revenues grew 17% to $184 million, with subscriptions remaining the dominant contributor. Subscription-based software revenues totaled $165 million, representing 90% of software revenues, while perpetual license software was $19 million. Our model estimates for Software revenues were pegged at $181.5 million.
While Systems has been the faster-growing piece recently, the company emphasized that software performance is largely shaped by subscription renewals and expansion within the installed base. On the call, management reiterated that software growth can look uneven quarter to quarter due to the renewal cycle, even as attach and consumption trends remain constructive.
Global Services revenues (49.4% of total revenues) grew 2% year over year to $401 million. Our model estimates for the Global Services segment revenues were pegged at $399.9 million.
FFIV’s Solid Profitability & Operating Discipline
F5’s profitability profile remained solid despite ongoing hardware-related input volatility. GAAP gross margin expanded 70 basis points to 81.4%, and non-GAAP gross margin increased by 60 basis points to 83.7%. GAAP operating margin improved by 40 basis points to 22.1%, while non-GAAP operating margin increased by 190 basis points to 33.8%.
The company also highlighted disciplined spending. Management flagged higher component costs, particularly memory, as a modeling factor that could pressure gross margin sequentially later in the year, but indicated it continues to balance pricing actions and discount discipline to help offset cost inflation.
F5’s Balance Sheet & Cash Flow
F5 ended the March 2026 quarter with cash and short-term investments of $1.44 billion, up from $1.22 billion in the previous quarter.
Cash generation was a clear highlight in the second quarter. FFIV produced $366 million in cash flow from operations and reported free cash flow of $348 million, supported by strong collections and profitability. In the first half of fiscal 2026, the company generated operating and free cash flows of $525 million and $497 million, respectively.
F5 repurchased $100 million of stock during the quarter and $401 million in the first half of fiscal 2026. At the end of the second quarter, the company had $522 million remaining under its authorization.
F5 Initiates Q3 Guidance & Updates FY26 View
Management raised its full-year fiscal 2026 outlook following strong execution and improved visibility. FFIV now expects revenue growth of 7% to 8%, up from the prior 5%-6% range, and increased its non-GAAP earnings outlook to the $16.25-$16.55 per share band from the $15.65-$16.05 range.
For the third quarter of fiscal 2026, F5 guided revenues in the range of $820-$840 million and non-GAAP earnings in the band of $3.91-$4.03 per share. Executives tied the outlook to three demand drivers: accelerating hybrid multi-cloud adoption, an expanding threat landscape and an inflection in AI inference.
During the call, management added that AI-related use cases generated about $50 million in sales in the first half of the fiscal year and that the company is approaching 100 customers using F5 in those AI deployments.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, F5 has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise F5 has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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F5, Inc. (FFIV): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).