F5, Inc. FFIV reported better-than-expected fourth-quarter fiscal 2026 results. Non-GAAP earnings of $4.42 per share increased 0.7% year over year and surpassed the Zacks Consensus Estimate by 4.3%.
Revenues rose 13% year over year to $917 million, beating the consensus mark by 3.7%. Results benefited from robust systems demand, software expansion and hybrid multicloud adoption. Product revenues advanced 23%, marking the ninth consecutive quarter of double-digit growth.
FFIV's Q4 Revenue Details
Product revenues, representing 56% of total revenues, increased 23% year over year to $510 million. Systems revenues jumped 29% to $239 million, driven by infrastructure refreshes, capacity expansion, competitive displacements and investments in digital sovereignty and AI readiness.
Software revenues rose 19% to $271 million. Subscription-based software revenues increased 16% to $229 million, representing 85% of software revenues. Perpetual license revenues climbed 37% to $42 million. Services revenues, accounting for 44% of total revenues, grew 3% to $408 million.
F5, Inc. Price, Consensus and EPS Surprise
F5, Inc. price-consensus-eps-surprise-chart | F5, Inc. Quote
Recurring revenue sources contributed 68% of quarterly revenues. Geographically, EMEA led growth with a 31% increase, representing 30% of total revenue. APAC revenues rose 14%, contributing 17%, while Americas revenues increased 5%, accounting for 53%.
F5 Benefits From Hybrid Multicloud and AI Demand
Management highlighted sustained demand from hybrid multicloud adoption, application security modernization and AI inference workloads. Platform consolidation remained a key opportunity, with 29% of F5's top 1,000 customers adopting three or more product families, up from 22% in fiscal 2025.
During the quarter, a large North American financial institution selected F5 for an eight-figure application delivery and security deployment, displacing four incumbent vendors. An Asian central bank technology authority also selected F5 for a national financial services cloud, replacing two competitors.
AI-related opportunities accelerated. Direct AI use-case bookings exceeded $100 million in fiscal 2026, growing nearly 300% year over year. The customer base for these solutions expanded fourfold to more than 200, supported by demand for AI data delivery, runtime security and AI factory load balancing.
FFIV Expands Security and Software Opportunities
F5 continued expanding its AI-powered security portfolio as enterprises sought protection against increasingly sophisticated application and API threats. Its AI-powered Distributed Cloud WAF capabilities attracted more than 300 customers since their March launch, with over 75% operating in blocking mode.
The company also gained more than 200 F5 Insight customers since its March launch. The platform provides automated fleet management and upgrade orchestration, helping enterprises reduce operational complexity and accelerate security updates.
For fiscal 2026, software revenues increased 8% to $870 million. SaaS and managed services annualized recurring revenues reached $211 million, up 14% year over year. Core SaaS and managed services ARR grew 24%, while total security-related revenues increased 10% to approximately $1.3 billion.
F5's Operating Margins Face Cost Pressures
Non-GAAP gross margin contracted 30 basis points year over year to 84%. Non-GAAP operating margin declined 330 basis points to 33.7%, reflecting higher operating expenses despite strong revenue growth.
Management attributed higher operating expenses partly to investments in sales capacity, AI security specialists and marketing. Strong year-end performance also increased commission and bonus expenses.
Non-GAAP operating income increased to $309 million from $299 million.
FFIV Maintains Solid Liquidity and Shareholder Returns
F5 generated $118 million in operating cash flow and $91 million in free cash flow during the quarter. Working capital investments, including inventory accumulation and supplier prepayments, affected cash generation as management secured components for future systems demand.
Cash and investments totaled $1.62 billion at quarter-end. The company repurchased $100 million of shares during the quarter, bringing fiscal 2026 repurchases to $600 million. Its board authorized an additional $1.5 billion for share repurchases, supplementing the $322 million remaining under the existing program.
F5 Issues Fiscal 2027 Growth Outlook
For the first quarter of fiscal 2027, F5 expects revenues between $875 million and $895 million. Non-GAAP earnings are projected in the range of $4.25-$4.37 per share. Non-GAAP gross margin is expected between 81.5% and 82.5%.
For fiscal 2027, management projects revenue growth of 8-9% and non-GAAP earnings of $18.00-$18.30 per share. The company anticipates upper-single-digit systems growth, double-digit software growth and low-to-mid-single-digit services growth.
Non-GAAP gross margin is expected between 80.5% and 82.5%, suggesting higher component costs. Non-GAAP operating margin is projected at 33-35%. Management expects systems growth to be stronger in the first half, while software growth should accelerate in the second half of fiscal 2027 due to subscription renewal timing.
FFIV’s Zacks Rank and Stocks to Consider
Currently, F5 carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI , Applied Materials AMAT and Cisco Systems CSCO , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Analog Devices have rallied 54.4% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $13.00 per share, up by a penny over the past seven days, indicating an increase of 66.9% year over year.
Shares of Applied Materials have jumped 54.5% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.79 per share, unchanged over the past 30 days, indicating a rise of 35.8% year over year.
Cisco Systems shares have surged 45.3% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2027 earnings is pegged at $5.11 per share, unchanged over the past 30 days, indicating an increase of 18% year over year.
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