F5’s third quarter was marked by robust revenue growth supported by data center reinvestment and demand for hybrid cloud and AI infrastructure. However, the market reacted negatively following management’s disclosure of a recent security incident impacting its BIG-IP product line. CEO François Locoh-Donou acknowledged, “We are disappointed that this happened and very aware...of the burden that this has placed in our customers who have had to work long hours to upgrade.” While product refreshes and competitive takeouts drove strong sales, near-term business disruption from the incident weighed on investor sentiment.

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While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From F5’s Q3 Earnings Call

• Meta Marshall (Morgan Stanley) asked about the forms of customer conservatism in guidance. CEO François Locoh-Donou explained that near-term disruption mainly reflects customers diverting resources to remediation, delays in project approvals, and some potential project cancellations.
• George Notter (Wolfe Research) pressed for details on how F5 sized the revenue impact from the security breach. CFO Cooper Werner described a granular analysis of revenue streams, focusing on recurring versus new project revenue and referencing similar incidents at peer companies.
• Michael Ng (Goldman Sachs) questioned additional costs from the breach and ongoing security investments. Werner responded that cybersecurity spending had already doubled over three years and that incident-related costs would be managed through insurance or one-time charges.
• Tal Liani (Bank of America) inquired about the sustainability of hardware and software revenue growth. Werner emphasized the early stage of the hardware refresh cycle and the potential for further AI-driven capacity expansion, while Locoh-Donou pointed to growing SaaS adoption and multiyear software agreements.
• Simon Leopold (Raymond James) asked whether the security incident affected both hardware and software equally and sought clarity on U.S. federal demand. Locoh-Donou confirmed both product types were impacted, and noted that government spending is expected to be softer in the near term due to external factors.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be monitoring (1) the pace at which customers complete BIG-IP security upgrades and return to normal purchasing cycles, (2) progress in recapturing software and hardware momentum as remediation efforts wind down, and (3) the effectiveness of F5’s new AI security offerings in winning enterprise deals. Successful integration of CalypsoAI’s technology and continued SaaS adoption will also be important milestones.

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