The networking and security company's fiscal fourth-quarter revenue rose 13% to $917 million and adjusted earnings beat forecasts. The shares fell about 21% after its fiscal 2027 outlook and a downgrade from Piper Sandler.
F5 reported a ninth straight quarter of double-digit product growth on Tuesday evening. On Wednesday the market priced the end of that run.
For the quarter ended Sept. 30, revenue rose 13% to $917 million, above the roughly $884 million analysts expected, and product revenue rose 23%. Adjusted earnings were $4.42 a share against an estimate of $4.26, according to LSEG. "Nine consecutive quarters of double-digit product revenue growth," said François Locoh-Donou, the chief executive.
For the fiscal year, revenue rose 11% to $3.42 billion and adjusted earnings were $17.49 a share. F5 added $1.5 billion to its buyback authorization.
The guidance problem
The outlook is where the stock broke. F5 expects revenue to grow 8% to 9% in fiscal 2027, with adjusted earnings of $18.00 to $18.30 a share. Investors had been expecting growth above 10%, according to Piper Sandler, which downgraded the stock to neutral from overweight with a $461 price target, citing the end of the refresh cycle for its iSeries hardware and a lack of near-term catalysts.
Piper's argument is that part of the recent growth came from customers replacing older equipment. Once that cycle completes, the question is what replaces it. On the call, F5 said bookings tied directly to AI use cases had passed $100 million, and that it expects systems revenue to grow in the upper single digits next year.
A beat that hides a squeeze
One line in the results deserves more attention than it got. GAAP earnings fell to $3.23 a share from $3.26 despite the 13% revenue gain, and the GAAP operating margin narrowed to 23.1% from 25.4%. Adjusted earnings were roughly flat on the year at $4.42 against $4.39. A higher tax rate also weighed on GAAP earnings.
The size of the move
The shares closed Tuesday at $459.36, opened at $421.31 and kept falling, to about $363.71 in early afternoon, down about 21%. Reuters said the stock was heading for its largest one-day drop since April 2013.
Reset or rerating?
The view that this is a reset: F5 still grew double digits, beat the quarter, added AI-related bookings and has $1.8 billion of buyback capacity to deploy into a lower share price. Guidance of 8% to 9% is slower, not negative.
The view that this is a rerating: a hardware refresh that powered results is ending, margins fell even in a strong quarter, and a stock priced for double-digit growth has to find a new valuation for high single digits.
What to watch
First-quarter results against guidance of $875 million to $895 million in revenue, the pace of AI-related bookings, the size and speed of buybacks, and whether other analysts follow Piper Sandler's downgrade.