Report date: Monday, July 27, 2026, after market close
Conference call: 4:30 p.m. ET
Fiscal quarter ended: June 30, 2026
F5 enters fiscal Q3 with strong operating momentum—and a stock price that already reflects substantial optimism.
Fiscal Q2 revenue increased 11%, including 22% product growth, prompting management to raise its full-year revenue-growth outlook to 7%–8% from 5%–6%. The May analyst day subsequently introduced an upper-single-digit revenue CAGR target through fiscal 2029, supported by hardware refreshes, software acceleration, hybrid multicloud adoption, security demand, and emerging AI use cases.
The shares closed July 24 at $392.25, up approximately 54% year to date and 29% since the Q2 report. At roughly 24 times the midpoint of fiscal 2026 non-GAAP EPS guidance, an ordinary in-line quarter may not be enough to sustain the recent rerating. Investors will likely want a beat, stronger guidance, or evidence that current product strength is durable beyond the refresh cycle.
| Metric | Q3 FY26 guidance | Midpoint | Q3 FY25 actual | Midpoint YoY |
|---|---|---|---|---|
| Revenue | $820M–$840M | $830M | $780M | +6.4% |
| Non-GAAP EPS | $3.91–$4.03 | $3.97 | $4.16 | -4.6% |
| Non-GAAP gross margin | 82.5%–83.5% | 83.0% | 83.1% | Roughly flat |
| Non-GAAP operating expenses | $406M–$418M | $412M | — | — |
The guided EPS decline despite revenue growth reflects a tougher expense and margin setup. Component costs—particularly memory—are beginning to enter cost of goods sold, while F5 continues investing in product development and sales capacity.
Product revenue grew 22% in Q2, including:
Q3 faces a demanding comparison: in Q3 FY25, product revenue rose 26%, including 39% systems growth and 16% software growth.
Systems growth will almost certainly decelerate from recent rates, but that alone should not be considered a negative. The more important questions are:
Management says more than half of the iSeries refresh opportunity remained outstanding as of late May and expects refresh strength to extend well into fiscal 2027. Confirmation of that timeline would support the view that the hardware cycle still has room to run.
F5 continues to forecast only mid-single-digit software growth for fiscal 2026, despite Q2’s 17% increase. Reported software revenue can be volatile because much of the business is tied to multiyear subscription renewal timing.
Management expects software growth to accelerate in fiscal 2027 due to:
Investors should therefore focus on renewal activity, consumption, expansion rates and management’s confidence in fiscal 2027—not just Q3’s reported software growth.
A meaningful reduction in confidence around next year’s acceleration would be more concerning than one soft quarter caused by contract timing.
F5 disclosed approximately $50 million of direct AI-related sales during the first half, up more than 200% year over year, across nearly 100 customers. Management divides the opportunity into three categories:
F5 also sees indirect AI demand as customers add infrastructure to handle higher application, API and agent traffic.
Useful disclosures would include customer-count growth, larger deal sizes, repeat purchases, or evidence that AI is driving capacity expansion outside the normal refresh cycle. Management has said it will not report direct AI revenue every quarter, but investors will expect enough commentary to judge whether momentum has continued.
AI-factory load balancing remains particularly early. Proofs of concept and design wins are encouraging, but investors should not yet assign it the same weight as the established data-delivery opportunity.
F5 guided Q3 non-GAAP gross margin to 82.5%–83.5%, versus 83.7% in Q2. Management expects a further sequential decline in Q4 as higher-cost memory and SSD inventory moves through cost of goods sold.
Key questions include:
Management has indicated that pricing actions are unlikely to provide much fiscal 2026 benefit and that elevated memory costs could persist through much of fiscal 2027. Consequently, even a revenue beat may not produce a large EPS increase if the mix is hardware-heavy or cost inflation is worse than expected.
Current full-year guidance is:
At the midpoint, annual revenue would be approximately $3.32 billion. Assuming Q3 revenue of $830 million, that implies roughly $855 million of Q4 revenue, or approximately 6% year-over-year growth.
That is not an especially demanding implied Q4 target, but Q4 will carry greater component-cost pressure. Investors should distinguish between a revenue raise and an EPS raise: the former may be easier if product demand remains robust, while the latter depends on gross margin, operating expenses and taxes.
Q2 growth was especially strong outside the Americas:
EMEA has benefited from digital-sovereignty, defense and resiliency spending. A broader acceleration in the Americas would improve confidence that growth is not overly dependent on a handful of international programs.
Government represented 24% of Q2 product bookings, including 8% from U.S. federal customers. Continued government strength would be positive, although large deals can make quarterly vertical mix volatile.
Services grew only 2% in Q2. Management argues this is temporarily affected by the refresh cycle: maintenance revenue on retired equipment disappears before revenue from newly installed systems fully ramps.
The longer-term thesis is that a larger refreshed installed base eventually produces faster services growth. Investors should listen for whether services remains on track to accelerate from low-single-digit to mid-single-digit growth over time.
F5 generated a record $348 million of free cash flow in Q2 and repurchased $100 million of stock. It ended the quarter with approximately $1.46 billion in cash and investments and $522 million remaining under its authorization.
The company intends to return at least 50% of free cash flow through repurchases. At the current share price, however, buybacks retire fewer shares than they did earlier in the fiscal year, reducing their incremental EPS benefit.
F5’s initial fiscal 2026 outlook incorporated potential customer disruption following its 2025 security incident. That concern has faded materially as revenue guidance rose from 0%–4% at the start of the year to 7%–8% after Q2.
Investors should nevertheless watch for residual sales friction, remediation costs or changes in customer behavior. A clean update would further support the view that the incident’s commercial impact was temporary.
This would be a solid operational report, although the stock reaction could be muted given its year-to-date appreciation.
F5’s operating story is stronger than it was entering fiscal 2026. The company has moved from managing post-incident uncertainty to outlining an accelerating multiyear growth framework, while the hardware refresh, competitive displacement and AI data-delivery opportunities are already visible in reported results.
The tension is valuation and expectations. With the shares up roughly 54% in 2026, the market appears to be pricing in more than a routine delivery against Q3 guidance. The best outcome would combine a revenue beat with stable margins, sustained double-digit product growth, and greater confidence that software and services can take over as the refresh cycle matures.
The most important takeaway will not be whether Q3 revenue is $825 million or $845 million. It will be whether management can demonstrate that F5’s growth is evolving from a strong but cyclical hardware refresh into a broader, durable combination of software, security, AI and platform expansion.
Research basis: F5’s fiscal Q2 2026 release and earnings call, May 28 analyst and investor meeting, fiscal 2025 Q3/Q4 releases, latest 10-Q, and stock-price data through July 24, 2026.