Network application delivery and security specialist F5 (NASDAQ: FFIV) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 12.2% year on year to $780.4 million. Guidance for next quarter’s revenue was better than expected at $790 million at the midpoint, 1.9% above analysts’ estimates. Its non-GAAP profit of $4.16 per share was 18.9% above analysts’ consensus estimates.
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F5 (FFIV) Q2 CY2025 Highlights:
- Revenue: $780.4 million vs analyst estimates of $753.3 million (12.2% year-on-year growth, 3.6% beat)
- Adjusted EPS: $4.16 vs analyst estimates of $3.50 (18.9% beat)
- Adjusted Operating Income: $267.3 million vs analyst estimates of $255 million (34.3% margin, 4.8% beat)
- Revenue Guidance for Q3 CY2025 is $790 million at the midpoint, above analyst estimates of $774.9 million
- Adjusted EPS guidance for Q3 CY2025 is $3.93 at the midpoint, above analyst estimates of $3.84
- Operating Margin: 25.2%, up from 23.4% in the same quarter last year
- Free Cash Flow Margin: 35.1%, up from 33.7% in the previous quarter
- Billings: $814.7 million at quarter end, up 24.2% year on year
- Market Capitalization: $17.19 billion
“We delivered third quarter revenue of $780 million, representing 12% growth year over year, driven by 26% product revenue growth, which included 39% growth in systems revenue and 16% growth in software revenue,” said François Locoh-Donou, F5’s President and CEO.
Company Overview
Initially started as a hardware appliances company in the late 1990s, F5 (NASDAQ: FFIV) makes software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, F5’s sales grew at a weak 4.1% compounded annual growth rate over the last three years. This fell short of our benchmark for the software sector and is a tough starting point for our analysis.
This quarter, F5 reported year-on-year revenue growth of 12.2%, and its $780.4 million of revenue exceeded Wall Street’s estimates by 3.6%. Company management is currently guiding for a 5.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 2.1% over the next 12 months, a slight deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will face some demand challenges.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
F5’s billings punched in at $814.7 million in Q2, and over the last four quarters, its growth was solid as it averaged 16.2% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
F5 is extremely efficient at acquiring new customers, and its CAC payback period checked in at 12.5 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give F5 more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
Key Takeaways from F5’s Q2 Results
We were impressed by how significantly F5 blew past analysts’ billings expectations this quarter. We were also glad its full-year revenue guidance trumped Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 9.2% to $327 immediately after reporting.
F5 put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
