F5, Inc. (FFIV) — Q3 FY26 Earnings Preview
Key Points
| Factor | Details |
|---|---|
| Consensus Revenue | $834M for Q3 FY26 (+7% YoY vs. $780M Q3 FY25 actual) |
| Consensus EPS (GAAP) | $2.91 for Q3 FY26 |
| Guidance (Q3 FY26) | Revenue: $820M–$840M; Non-GAAP EPS: $3.91–$4.03 |
| Full-Year Guidance (FY26) | Revenue growth: 7%–8%; Non-GAAP EPS: $16.25–$16.55; Mid-single-digit software growth; Double-digit systems growth; Low single-digit services growth |
| Q2 FY26 Actuals | Revenue: $812M (+11% YoY); Product revenue: +22% YoY; Systems: +26% YoY; Software: +17% YoY; Services: +2% YoY |
| Q3 FY25 Actuals | Revenue: $780M (+12% YoY); Product revenue: +26% YoY; Systems: +39% YoY; Software: +16% YoY; Services: +1% YoY |
| Comparables | Q3 FY25 was a strong quarter with double-digit product and systems growth; Q3 FY26 faces a tough YoY comp, especially in systems and product revenue |
| Key Watch Areas |
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Recent Results and Guidance
Quarterly Financials — Actuals and Consensus
| Quarter | Revenue ($M) | YoY Growth | Gross Margin (%) | Net Income ($M) | EPS (GAAP) | Non-GAAP EPS | Notes |
|---|---|---|---|---|---|---|---|
| Q2 FY26 | 812 | +11% | 81.4 | 148 | 2.58 | 3.90 | Product +22% YoY |
| Q1 FY26 | 822 | +7% | 81.5 | 180 | 3.10 | 4.45 | Product +11% YoY |
| Q4 FY25 | 810 | +8% | 82.2 | 190 | 3.26 | 4.39 | Product +16% YoY |
| Q3 FY25 | 780 | +12% | 81.0 | 190 | 3.25 | 4.16 | Product +26% YoY |
| Q3 FY26E* | 834 | +7% | 82.7 | 229 | 2.91 | Consensus estimate |
*Consensus figures are not actuals.
Q3 FY26 Guidance (Company)
| Metric | Guidance Range | Notes |
|---|---|---|
| Revenue ($M) | 820 – 840 | Implies +5% to +7.7% YoY |
| Non-GAAP EPS | $3.91 – $4.03 | |
| Non-GAAP Gross Margin | 82.5% – 83.5% | Sequential step-down expected in Q4 due to memory costs |
| Non-GAAP OpEx | $406M – $418M | |
| Share-based Comp | $68M – $70M |
Full-Year FY26 Guidance (as of Q2 FY26)
| Metric | Guidance/Outlook | Notes |
|---|---|---|
| Revenue Growth | 7% – 8% | Raised from 5%–6% after Q2 beat |
| Non-GAAP EPS | $16.25 – $16.55 | Raised from $15.65–$16.05 |
| Non-GAAP Gross Margin | 82.5% – 83.5% | Q4 step-down expected due to memory costs |
| Non-GAAP Operating Margin | 34% – 35% | |
| Non-GAAP Effective Tax Rate | 20% – 21% | Lowered from 21%–22% |
| Software Revenue Growth | Mid-single digits | |
| Systems Revenue Growth | Double digits | |
| Services Revenue Growth | Low single digits | |
| Share Repurchase | ≥50% of free cash flow |
What to Watch for in Q3 FY26
1. Sustainability of Product and Systems Growth
- Q2 FY26 marked the seventh consecutive quarter of double-digit product growth (+22% YoY) and strong systems growth (+26% YoY).
- Q3 FY26 faces a tough YoY comp: Q3 FY25 saw +26% product and +39% systems growth.
- Key question: Can F5 maintain double-digit product/systems growth, or will growth moderate as comps get tougher?
2. Software Revenue Inflection
- Q2 FY26 software revenue grew +17% YoY, rebounding from a soft Q1 (-8% YoY, due to a tough compare).
- Management continues to guide for mid-single-digit software growth for FY26, with an expected acceleration in FY27 as renewal cohorts improve.
- Watch for: Signs of acceleration in software, expansion rates in term subscriptions, and SaaS/managed services momentum.
3. Margin Impact from Memory Costs
- Gross margin guidance for Q3 is 82.5%–83.5%, but management expects a sequential step-down in Q4 due to higher memory/SSD costs.
- Commentary on supply chain, pricing actions, and ability to offset cost inflation will be important.
4. AI-Related Revenue and Use Cases
- F5 reported ~$50M in direct AI use case sales in 1H FY26, up >200% YoY, with ~100 AI customers.
- Three main AI use cases: AI data delivery, AI runtime security, AI factory load balancing.
- Investors will look for updated AI revenue/customer metrics, pipeline commentary, and new wins.
5. Regional Growth Trends
- Q2 FY26: EMEA +22% YoY, APAC +19% YoY, Americas +3% YoY.
- EMEA strength driven by digital sovereignty and regulatory drivers (DORA, NIS2).
- Watch for: Continued outperformance in EMEA/APAC, any signs of U.S. acceleration or lag.
6. Competitive Takeouts and Platform Adoption
- Management highlights increased competitive displacement (Citrix, Broadcom), especially as customers consolidate vendors for hybrid multicloud and security.
- Platform adoption (ADSP) and cross-sell of multiple deployment modes (hardware, software, SaaS) are key themes.
7. Deferred Revenue and Backlog
- Deferred revenue up 10% YoY in Q2 FY26, with strong multi-year renewals.
- Any commentary on backlog, order timing, or pull-ins will be scrutinized for demand signals.
How Did They Report Last Year? (Q3 FY25)
| Metric | Q3 FY25 Actual | YoY Growth |
|---|---|---|
| Revenue ($M) | 780 | +12% |
| Product Revenue ($M) | 389 | +26% |
| Systems Revenue ($M) | 181 | +39% |
| Software Revenue ($M) | 208 | +16% |
| Services Revenue ($M) | 392 | +1% |
| GAAP Gross Margin | 81.0% | +60 bps |
| Non-GAAP Gross Margin | 83.1% | flat |
| GAAP Net Income ($M) | 190 | +32% |
| GAAP EPS | 3.25 | +33% |
| Non-GAAP EPS | 4.16 | +24% |
- Q3 FY25 was a very strong quarter, especially in product and systems revenue, setting a high bar for YoY comparisons in Q3 FY26.
Summary and Conclusions
- Q3 FY26 faces a tough YoY comp after seven quarters of double-digit product growth and a particularly strong Q3 FY25.
- Consensus and guidance both point to continued growth, but the pace may moderate as comps get harder.
- Key focus areas: sustainability of product/systems growth, software revenue inflection, margin resilience amid memory cost inflation, AI revenue traction, regional growth (especially EMEA), and competitive takeout momentum.
- Management has raised full-year guidance twice in FY26 (now 7%–8% revenue growth, $16.25–$16.55 non-GAAP EPS), reflecting strong execution and visibility.
- Risks: Margin pressure from component costs, potential moderation in hardware growth post-refresh cycle, and macro/geopolitical uncertainty.
- Catalysts: Further AI use case wins, continued EMEA/APAC outperformance, and evidence of accelerating software/platform adoption.
Upcoming Catalysts
- Q3 FY26 earnings report (watch for product/systems/software growth, margin trends, AI metrics)
- Analyst & Investor Day follow-ups (long-term guidance, TAM updates)
- New product launches (AI security, PQC, platform enhancements)
- Macro/regulatory developments (digital sovereignty, data center investment cycles)
Bottom Line:
F5 enters Q3 FY26 with strong momentum, but faces a high bar on YoY comparables. The most important factors for the upcoming report are the sustainability of double-digit product/systems growth, software revenue trajectory, margin management amid rising costs, and tangible progress in AI-related revenue. Investors should also monitor regional trends, competitive wins, and deferred revenue for forward demand signals.
