F5 Sees Big Wins in Multi-Cloud, AI Security, and IT Refresh, Analysts Forecast More Upside

F5 Inc FFIV stock is trading higher Wednesday after the company reported better-than-expected first-quarter financial results and issued strong second-quarter revenue guidance.

F5 reported first-quarter revenue of $766.49 million (versus $692.6 million year-on-year), which beat the analyst consensus estimate of $715.41 million. EPS of $3.84 beat the analyst consensus estimate of $3.36.

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F5 expects second-quarter revenue of $705 million—$725 million, versus the $702.73 million estimate, and EPS of $3.02-$3.14, versus the $3.21 estimate. Wall Street analysts rerated the stock amid an exciting earning season.

Several analyst raised their price forecasts:

Piper Sandler analyst James Fish maintained F5 with a Neutral and raised the price target from $246 to $304.
Needham analyst Matt Dezort reiterated F5 with a Buy and raised the price target from $285 to $360.
Raymond James analyst Simon Leopold maintained F5 with a Hold.
RBC Capital analyst Matthew Hedberg reiterated F5 with a Sector Perform rating and raised the price target to $310 from $260.
JP Morgan analyst Samik Chatterjee maintained a Neutral rating on F5 and a price target of $296, up from $250.

Piper Sandler: Stock gained after F5 reported its most prominent beat in the company’s history, given better IT budgets, data center refresh, vendor consolidation, competitive disruption (Citrix), AI-related demand, and some pull-in of demand ahead of price increases across hardware and software.

Given all the moving parts and upsides from non-recurring sources, the question centers around growth sustainability (versus peak). Many drivers reflect Fish’s fiscal 2025 themes, and the updated guide better reflects what is happening in the environment.

Fish projected second-quarter revenue of $718.9 million and EPS of $3.14.

Needham: F5 posted an impressive first-quarter beat, guided second-quarter revenues ahead, and raised full-year guidance as new opportunities are opening up across hybrid/multi-cloud and GenAI, driven by more stable IT spending, robust software renewals, refresh activity, and improving competitive dynamics.

F5 called out a record number of ADC displacement deals in the first quarter, a trend they expect to continue.

Dezort projected second-quarter revenue of $719.85 million and EPS of $3.08.

Raymond James: The first-quarter report reflected a significant beat and a higher full-year outlook. Higher-than-expected expansion rates helped software growth, but hardware revenue provided the biggest surprise this quarter, accounting for almost two-thirds of the product upside versus Leopold’s estimate.

Management attributed the strong hardware growth to a higher-than-expected acceleration of customers refreshing their aging hardware footprint. Despite the robust first quarter, the fundamental narrative of the business mix shifting towards software and away from hardware has not changed.

F5’s products continue to be sticky within its customer base, which helps drive further adoption of hybrid-cloud deployments but also likely amplifies lumpy results in the immediate term.

Leopold projected second-quarter revenue of $718.9 million and EPS of $3.13.

RBC Capital: F5 reported strong results with outperformance across the board as software revenue grew +22% and systems revenue grew +18%. Positives included an improved IT spending environment, solid refresh activity, secular tailwinds around hybrid and AI, and an optimistic outlook.

Guidance moved higher with midpoint fiscal 2025 revenue and software revenue now pointing to 6.5% and 10%+ Y/Y versus prior expectations of 4.5% and high-single-digit. Hedberg remains impressed with the company’s growing consistency and relevancy in a hybrid cloud world.

Hedberg projected second-quarter revenue of $715.0 million and EPS of $3.08.

JP Morgan: F5 is starting to deliver consistency in executing results materially better than expectations despite operating in an uneven macro backdrop, as the robust capabilities across multi-cloud and AI are helping in competitive wins and enabling consolidation of customer wallet share.

While on the surface, Enterprise IT spending is still lackluster in the aggregate, the increasing complexity of managing a multi-cloud environment drives customers to F5’s solutions, given the depth and breadth of its capabilities relative to the closest competitor.

About these wins, F5 is seeing substantial expansion of deal sizes with customers in their renewals.

Additionally, with managing complexity around AI also on the horizon for Enterprise customers, F5 is starting to see demand to support secure data delivery for RAG as well as secure API access and also awaiting opportunities to leverage its partnership with Nvidia about load balancing in AI clusters in the time to come, although the deal sizes are smaller at this time, they are likely to expand (as F5 is already seeing with one customer) and become a more material driver of growth in the medium term.

Led by the robust portfolio supporting multi-cloud and AI for customers, F5 can balance strong business momentum with price increases across hardware and software, further increasing visibility into the stickiness of F5 solutions with its customers. Chatterjee projected second-quarter revenue of $715.0 million and EPS of $3.08.

Price Action: FFIV stock is up 10.8% at $299.00 at last check Wednesday.

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