F5, INC. Q1 FY2025 earnings call

• Francois Locoh-Donou highlighted robust Q1 results, noting 11% total revenue growth and non-GAAP EPS of $3.84. The quarter's strength stems from strong software subscription expansion, new software demand, and technology refresh activity.
• F5's differentiation in hybrid multi-cloud includes a comprehensive application and API security platform, consolidation across on-prem, public clouds, and edge, and streamlined operations. Customer wins and competitive displacements were discussed, such as a large mobility platform in APAC using BIG-IP for AI data delivery.
• Francois detailed AI opportunities in high-performance data delivery, secure AI inferencing, and AI factory load balancing, with examples like a large mobility platform in APAC and a leading multinational bank using F5 solutions for AI applications.

F5's first quarter fiscal 2025 saw total revenue of $766 million, with 11% growth. Product revenue grew 20%, with software revenue up 22% and systems revenue up 18%. Recurring revenue contributed 72% of Q1 revenue. By region, Americas revenue grew 15% (56% of total), EMEA 6% (27%), and APAC 6% (17%). Major verticals: enterprise customers made up 71% of product bookings, government 16% (4% U.S. Federal), and service providers 13%.

• Q2 revenue is expected to be in the range of $705 million to $725 million, implying 5% growth at the midpoint. Non-GAAP gross margin for Q2 is预计 to be approximately 82.5% to 83%.
• FY 2025 revenue growth forecast is raised to 6% to 7% from the initial 4% to 5%. Non-GAAP gross margin for FY 2025 is预计 to be in the range of 83% to 84%, and non-GAAP operating margin is预计 to be ~35%. Q2 non-GAAP EPS is预计 to be in the range of $3.02 to $3.14 per share, and FY 2025 non-GAAP EPS growth is预计 to be 6.5% to 8.5%.

• Forward-looking statements involve uncertainties due to factors like market conditions, competitive landscape, and technological changes. Risks are detailed in SEC filings and press releases.

Q: Tim Long asked about the AI business and sustainability of the hardware systems business.

A: Francois Locoh-Donou noted hardware is likely to have double-digit growth due to refresh activity and competitive displacements, while Cooper Werner mentioned good supply chain fulfillment.

Q: Meta Marshall inquired about the distributed cloud business and seasonality.

A: Francois Locoh-Donou stated distributed cloud has over 1,000 customers and is growing, and Cooper Werner discussed seasonality with Q2 being a low margin quarter due to payroll tax resets and a large customer event.

Q: Samik Chatterjee asked about refresh triggers and AI exposure.

A: Francois Locoh-Donou said refresh is driven by data center revitalization and end of support dates, and AI opportunities are early but focus on data delivery and security.

Q: Michael Ng asked about perpetual revenue and U.S. Federal business.

A: Cooper Werner said perpetual revenue has seasonality related to customer CapEx models, and Francois Locoh-Donou noted U.S. Federal business was solid with a healthy pipeline.

Q: Tal Liani asked about guidance and software growth separation.

A: Cooper Werner explained software growth has lumpiness due to revenue recognition, and Francois Locoh-Donou noted strong expansion but caution in guidance.

Q: Amit Daryanani asked about system price increases and software growth deceleration.

A: Francois Locoh-Donou said price increases were mid-single digits with modest pull-in, and Cooper Werner noted prudent guidance due to strong expansion rates.

Q: Matthew Hedberg asked about IT spending trends post-Presidential election and AI tailwinds.

A: Francois Locoh-Donou said pipeline was strong before the election, and AI tailwinds could benefit F5 due to increased complexity.

Q: James Fish asked about sustainability of growth and share gains.

A: Cooper Werner said growth is driven by resolving hybrid multi-cloud complexity, with sustainable expansion in software and hardware.

Q: Victor Chiu asked about systems growth long-term and AI impact.

A: Francois Locoh-Donou said systems growth is tied to hybrid multi-cloud adoption, and AI impact is early.

Q: Matt Dezort asked about AI opportunity visibility and go-to-market.

A: Francois Locoh-Donou said AI opportunities are with large enterprises, using existing solutions, and go-to-market is straightforward.

Q: Sebastien Naji asked about CDN product from Lilac Cloud acquisition.

A: Francois Locoh-Donou said CDN is part of distributed cloud services, used in bundles for security and caching.