F5, INC. 10-Q Summary: Quarter Ended December 31, 2025
Business Context and Reporting Period
This report covers the first quarter of F5, Inc.'s fiscal year 2026, ended December 31, 2025. F5 is a global leader in application delivery and security solutions, offering hardware, software, and SaaS solutions for hybrid and multicloud environments. The company operates as a single reportable segment.
Key Financial Metrics
| Metric | Q1 2026 (Dec 31, 2025) | Q1 2025 (Dec 31, 2024) |
|---|---|---|
| Total Net Revenues | $822.5 million | $766.5 million |
| Net Income | $180.1 million | $166.4 million |
| Diluted EPS | $3.10 | $2.82 |
| Gross Margin | 81.5% | 81.7% |
| Operating Income | $214.2 million | $205.1 million |
| Operating Cash Flow | $159.2 million | $202.8 million |
| Cash & Equivalents (End of Period) | $1.20 billion | $1.15 billion |
| Deferred Revenue | $2.06 billion | $1.95 billion |
Material Changes vs. Prior Period
- Revenue Growth: Total net revenues increased 7.3% year-over-year. Product revenue grew 11.3% driven by a 36.7% surge in systems revenue, partially offset by an 8.1% decline in software revenue due to lower perpetual license sales. Service revenue grew 3.6%.
- Expense Increases: Operating expenses rose to $456.5 million from $420.9 million. General and administrative expenses increased 24.1% and R&D expenses increased 8.2%, both significantly impacted by costs related to a cyber incident.
- Restructuring: The prior year quarter included $11.3 million in restructuring charges, whereas the current quarter recorded a negligible benefit of $0.04 million.
- Share Repurchases: The company accelerated buybacks, repurchasing $301.1 million of common stock in the quarter compared to $125.0 million in the prior year.
Outlook, Risks, and Unusual Items
- Cyber Incident: On October 15, 2025, F5 disclosed a security incident involving long-term persistent access and data exfiltration. The company incurred $17.5 million in response costs during the quarter. These costs were primarily recorded in R&D and G&A expenses. Future legal and professional service expenses are expected.
- Legal Proceedings: A putative class action lawsuit was filed in December 2025 alleging false statements regarding cybersecurity capabilities. Additionally, the NGINX intellectual property dispute with Lynwood Investment remains in discovery.
- Acquisitions: F5 acquired CalypsoAI Corp. in September 2025 for $145.2 million to enhance AI security capabilities. The acquisition was not material to the current quarter's results.
- Liquidity: Cash decreased by $142.3 million quarter-over-quarter, primarily due to share repurchases. The company maintains $622.4 million remaining in its authorized share repurchase program.
Investor Verification Checklist
- Verify the long-term financial impact of the October 2025 cyber incident, including potential insurance recoveries and future litigation costs.
- Monitor the trend of software revenue, specifically the shift from perpetual licenses to subscription models, given the 8.1% decline in software revenue.
- Assess the sustainability of the 36.7% growth in systems revenue and its effect on overall gross margins.
- Review the status of the NGINX intellectual property litigation and the new class action lawsuit regarding cybersecurity disclosures.
- Confirm the company's ability to maintain operating cash flow given the significant cash outflow for share repurchases ($301.1 million in one quarter).