10-Q: F5, Inc. Reports Strong Q2 2026 Results

F5, Inc. announced its financial results for the quarter ended March 31, 2026, showcasing significant revenue growth and robust profitability.

Summary

• F5, Inc. reported total net revenues of $811.7 million for the three months ended March 31, 2026, an increase of 11.0% compared to $731.1 million in the prior year period.
• For the six months ended March 31, 2026, total net revenues were $1.63 billion, up 9.1% from $1.50 billion in the prior year period.
• Net income for the three months ended March 31, 2026, was $147.8 million, or $2.58 per diluted share, compared to $145.5 million, or $2.48 per diluted share, in the prior year.
• For the six months ended March 31, 2026, net income was $327.8 million, or $5.68 per diluted share, compared to $312.0 million, or $5.30 per diluted share, in the prior year.
• The company acquired CalypsoAI Corp. for $145.2 million in cash on September 26, 2025, to enhance its AI security offerings.
• F5's share repurchase program continued, with $401.1 million used for repurchases in the six months ended March 31, 2026.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing positively due to strong revenue growth and solid profitability, though ongoing legal proceedings and the cyber incident introduce some caution.

Positives

• Total net revenues increased by 11.0% to $811.7 million for the three months ended March 31, 2026.
• Net income for the quarter rose to $147.8 million, with diluted EPS increasing to $2.58.
• Product revenues saw a significant increase of 21.7% to $410.5 million for the three months ended March 31, 2026.
• Systems revenue grew by 26.2% to $226.4 million for the three months ended March 31, 2026.
• Software revenue increased by 16.7% to $184.1 million for the three months ended March 31, 2026.
• Gross margin remained strong at 81.4% for the three months ended March 31, 2026.
• The company continues to execute its share repurchase program, returning capital to shareholders.

Negatives

• Service revenues showed a modest increase of 1.8% to $401.2 million for the three months ended March 31, 2026.
• The effective tax rate increased to 21.9% for the three months ended March 31, 2026, from 15.0% in the prior year, primarily due to the absence of non-recurring tax benefits.
• The company incurred $6.0 million in costs related to the Cyber Incident in the three months ended March 31, 2026.

Risks

• The company is subject to ongoing litigation, including a copyright infringement claim related to NGINX software and a securities class action lawsuit alleging false or misleading statements regarding cybersecurity capabilities.
• A cyber incident disclosed on October 15, 2025, involved persistent access to F5 systems and exfiltration of certain files, potentially leading to customer and third-party claims and governmental inquiries.
• Macroeconomic conditions such as inflation, tariffs, global supply chain shortages, rising interest rates, and geopolitical conflicts may adversely affect results of operations and financial performance.
• Fluctuations in foreign currency exchange rates could impact foreign currency-denominated costs and result in operating margin volatility.
• The company is subject to various legal proceedings, claims, investigations, and litigation arising in the ordinary course of business, which could result in costly litigation or substantial settlement charges.

Future Outlook

The company anticipates that its current cash, cash equivalents, and investment balances, along with anticipated cash flows generated from operations, will be sufficient to meet its liquidity needs. Management continues to evaluate strategic acquisitions and investments.

Management Comments

• F5 is a global leader in application delivery and security solutions which enable its customers to deploy, operate, secure, optimize, and govern every application and API across on-premises architectures, in the cloud, and at the network edge.
• Our cloud, software, and hardware solutions enable our customers to deliver fast, available, and secure digital experiences to their customers at scale.
• We believe customer acceptance rates of our new products, feature enhancements, and consumption models are indicators of future trends.
• Our financial condition remains strong with significant cash and investments.
• We anticipate our current cash, cash equivalents and investment balances and anticipated cash flows generated from operations will be sufficient to meet our liquidity needs.

Industry Context

StockSavvy.ai notes that F5's performance in application delivery and security solutions aligns with the growing demand for robust digital infrastructure and cybersecurity in an increasingly complex hybrid and multi-cloud environment. The acquisition of CalypsoAI signals a strategic move to bolster AI security capabilities, a critical area for enterprises.

Comparison to Industry Standards

• F5's revenue growth of 11.0% for the quarter is strong compared to the broader enterprise software market, which has seen varied performance due to economic uncertainties.
• The company's gross margin of 81.4% is indicative of a strong pricing power and efficient cost management, often exceeding industry averages for software and hardware providers.
• Competitors like Palo Alto Networks and Fortinet are also investing heavily in AI-driven security, indicating a competitive landscape where F5's acquisition of CalypsoAI is a timely strategic move.
• The shift towards subscription and SaaS models, reflected in F5's software revenue growth, is a dominant trend across the cybersecurity and cloud infrastructure industry.

Legal Proceedings

• Lynwood Investment CY Limited v. F5 Networks et al.: A lawsuit alleging copyright infringement related to NGINX software, with a portion of the copyright claim remanded to the District Court for further proceedings.
• Matthew Smith v. F5, Inc., et al.: A putative class action complaint alleging false or misleading statements regarding the company's cybersecurity capabilities.
• In re F5 Inc. Derivative Litigation: Two consolidated stockholder derivative actions alleging breach of fiduciary duty and violations of federal securities laws against certain officers and directors.
• The company is subject to other legal proceedings, claims, investigations, and litigation arising in the ordinary course of business.

Stakeholder Impact

• Shareholders: Continued share repurchases may benefit shareholders through increased earnings per share and potential stock price appreciation. Ongoing litigation could pose a risk.
• Employees: The adoption of the 2026 Incentive Award Plan provides for equity-based compensation, aligning employee interests with the company's performance.
• Customers: The acquisition of CalypsoAI aims to enhance security for customer applications, particularly in the AI space. The cyber incident may raise concerns about data security.
• Suppliers: The company has unconditional purchase commitments with a supplier for systems components.

Next Steps

• Continue to integrate CalypsoAI's platform into F5 ADSP to enhance AI security solutions.
• Monitor and manage the ongoing legal proceedings.
• Respond to governmental inquiries related to the Cyber Incident.
• Continue executing the share repurchase program.

Key Dates

Recommendation

The company demonstrates solid revenue growth and profitability, supported by strategic acquisitions and capital return programs. However, the ongoing legal proceedings, particularly the securities class action and the cyber incident, introduce significant uncertainty and potential downside risk that warrants a cautious 'hold' stance until these matters are resolved.

Keywords

F5 Networks, 10-Q, Quarterly Report, Financial Results, Application Delivery, Security Solutions, Cloud, Software, Hardware, Revenue, Net Income, EPS, Share Repurchase, Cyber Incident, CalypsoAI