0001048695-26-000023
SEC filingF5's Q1 FY26 revenue grew 7.3% YoY driven by systems demand, while net income rose 8.2%.
For the three months ended December 31, 2025, F5 reported total net revenues of $822.5 million, a 7.3% increase from $766.5 million in the prior-year period. Product revenues rose 11.3% to $410.3 million, driven by a 36.7% surge in systems revenue ($218.4 million vs. $159.7 million) reflecting increased customer demand, partially offset by an 8.1% decline in software revenue ($191.9 million vs. $208.8 million) due to lower perpetual software sales. Services revenue grew 3.6% to $412.2 million, supported by higher initial and renewal maintenance contracts.
Gross profit increased 7.1% to $670.7 million, but gross margin contracted 20 basis points to 81.5% (from 81.7%). Product gross margin held flat at 22.5%, while services margin slipped 10 bps to 14.4%. Operating expenses rose 8.5% to $456.5 million, driven by higher sales and marketing (+9.1%), R&D (+8.2%), and G&A (+24.1%) costs. Notably, G&A and R&D increases included $9.3 million and $5.6 million, respectively, in costs incurred in response to the Cyber Incident. Restructuring charges were negligible in the current quarter versus $11.3 million in the prior year.
Operating income grew 4.4% to $214.2 million, with operating margin declining 80 bps to 26.0%. Net income rose 8.2% to $180.1 million, benefiting from higher other income ($8.7 million vs. $4.0 million). The effective tax rate was 19.2% versus 20.4% in the prior year.
Product revenue mix shifted notably: systems accounted for 53.2% of product revenue (up from 43.3%), while software fell to 46.8% (from 56.7%). This reflects strong hardware demand but ongoing headwinds in perpetual software sales. Services revenue remained the larger segment at 50.1% of total revenue, though its share declined from 51.9% as product growth outpaced services. Two distributor customers (Customer A at 19.2% and Customer B at 15.5%) represented significant revenue concentration.
Management did not provide explicit forward guidance in this MD&A section. However, they noted that deferred revenues continued to increase in Q1 FY26, primarily due to strong systems shipments and the existing installation base, signaling sustained customer commitment. The company highlighted that cash from operations will continue to be the primary driver of liquidity, with $159.2 million generated in the quarter. The Cyber Incident response costs are expected to be non-recurring, though no specific timeline for normalization was provided. The company continues to evaluate strategic acquisitions and investments, and maintains a strong balance sheet with $1.22 billion in cash and investments despite $301.1 million in share repurchases during the quarter.
As of December 31, 2025, F5 holds $1.20B in cash and cash equivalents with no short-term or long-term debt. Long-term investments total $18.0M (equity securities). Total shareholders' equity is $3.54B. The company has a strong liquidity position with a current ratio of 1.55 ($2.52B current assets / $1.62B current liabilities). Inventory stands at $79.9M, up slightly from $77.2M at September 30, 2025. Goodwill remains $2.44B.
F5 has no material non-cancelable purchase commitments as of December 31, 2025. The previous $40M four-year supply commitment with a component supplier was fully satisfied during fiscal 2025. Operating lease obligations total $308.2M (undiscounted), with $29.8M due in the remainder of fiscal 2026 and $92.3M beyond 2031. The company expects $6.7M in sublease income. Legal contingencies are disclosed but not accrued; the Cyber Incident incurred $17.5M in costs during Q1.
F5 actively repurchased $300.0M of its common stock (1.203M shares at $249.33 average) during Q1 FY2026, exhausting a portion of its authorized program. As of December 31, 2025, $622.4M remains under the repurchase authorization. No dividends were paid. The company has no debt outstanding; the $350M revolving credit facility expired January 31, 2025, with no borrowings drawn. Capital expenditures totaled $9.7M (1.18% of revenue), primarily for property and equipment. The company also spent $12.4M on capitalized contract acquisition costs.
F5 operates as a single reportable segment. Total net revenue for Q1 FY2026 was $822.5M, up 7.3% YoY. Products revenue was $410.3M (systems $218.4M, software $191.9M), services $412.2M. Geographically, Americas contributed $439.8M (53.5%), EMEA $253.7M (30.8%), and APAC $129.0M (15.7%). Two distributor customers accounted for >10% of revenue: Customer A 19.2%, Customer B 15.5%. No end-user customer exceeded 10%. Long-lived assets (property & equipment) totaled $157.1M, with 77% in the Americas.