FFIV - Earnings call transcript Q1 2025

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Operator

Good afternoon and welcome to the F5 Inc.

First Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions] Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. I'll now turn the call over to Ms. DuLong. Suzanne begin. may you Ma'am,

Suzanne DuLong

Locoh-Donou, FX's and welcome. Investor discuss are and Vice CFO, Executive of Q&A results. DuLong, answer during first also CEO; remarks here I'm making will the of We're here session. Suzanne President Other the Francois financial Relations. XXXX to fiscal FX's President call. with and to today's members Vice quarter FX and Werner, President year Hello, FX's you be prepared our Cooper on today executive team questions

A our XXXX. copy will an of available slide our of today's XX, press site today's audio post We'll release archived website is on accompanying be today's April to deck access To the XXX-XXXX where at Pacific The through the through call. our Time, available fX.com, replay webcast version dial today's telephonic available XX, by meeting of conclusion (XXX) replay XXXX. the or ID webcast (XXX) midnight January and phone, XXX-XXXX use XXXXXXXX. be of will at IR

For follow-up questions, out at reach additional information directly or to s.dulong@fX.com. me please

to expressed today these which that as and materially include expect anticipate, statements words These discussion actual will those by statements, forward-looking believe, our results uncertainties cause from target. and contain may or involve risks implied such Our differ forward-looking statements.

factors announcing summarized may our have detail that in our release results filings. SEC We financial affect in the press our in results and

any reference non-GAAP will during information update Please call. see our and today's has that deck. metrics no we of non-GAAP today's reconciliation the this in in duty note to addition, press full slide In earnings discussion. appendix GAAP presented in Please our to FX release

growth strategy outlook. the then our review results details Cooper our During our QX today's to will will call, highlights opportunities. and and QX of our Francois and speak

I'll now to turn call Francois. over the

François Locoh-Donou

Thank Suzanne, and hello, everyone. you,

trends record We execution to and total share delivered to results another revenue growth, IT more with FX's today. alignment product pleased with quarter. revenue significant contributed really environment our QX robust strong you including a XX% our secular stable are We spending XX% growth.

grew revenue with geographies. Software revenue from all XX%, strength systems XX% grew and

drove a a revenue half The we of $X.XX, of of also is and the observed reflects our the of outperformance above Our top in QX trends of last $X.XX EPS end guidance multifaceted range. continuation quarter the non-GAAP strength beat year. second

we from subscriptions, our strong expansion forecast. have of our benefiting First, are consistently expansion software of exceeded many which

Second, environment, spending modernization systems. and with new increasing, and demand software stable as both a IT technology activity to driving third, customers resume And continues software for grow refresh is transformative more projects. demand

persist growth revenue to our shows implying the QX, pipeline range these million, roughly of for to at will into expectations contributing QX midpoint. million drivers Our in X% a $XXX $XXX

forecast, X% our X% from reflecting outperformance of outlook to our are up in our greater expectations raising X% to to our revenue growth better-than-expected we 'XX QX guidance in FY X% few addition, minutes. and to just Cooper a initial our growth. In QX speak detail will

some QX. spend Before a wins minutes I FX's customer highlighting will differentiation and he does, from discussing few

set fire. also architectures hybrid overwhelmed of high-cost it several reshaped AI crushing by With and last of IT the advantages, risk the substantially ball its the we and multi-cloud being complexity Over for are brings call cyber years, challenges. era. FX teams challenges multi-cloud have escalating all hybrid new we the a with of

innovated last to world, and ball sophisticated SaaS stay years, hardware. threats. capacity in security more several invested of new or massive traffic software to ubiquitous, or reduced fire FX across their significantly SaaS, Unlike multi-cloud over in amount security patterns ahead capabilities who and becomes data traffic requiring applicability with of cloud add handle limiting of and competitors investment hybrid solely the next-generation a more fuel it complex management enhanced deal to AI As will the to

we result, alone application only a security hybrid the stand portfolio multi-cloud and complete with delivery. for As

of can and only secure are with or CIO a environment. all and deliver CISO to We partner APIs player across applications their the that hybrid, multi-cloud

are X We vectors. primary differentiated across

Along renewal a comprehensive significant and NGINX industry. consolidate larger-than-expected most expansion point security First, a power integrated expansion the and We what adding capabilities. major and DDoS and an platform effective point renewal. cases. customers FX, FX of expansion on specific comes its a in example to with platform with ability security subscription, to QX the a was form our application of point suite customer. and enable products onto anticipated of solutions in our term notable security the The API threats multiple with A a of of sizable has products best-in-class financial X-figure renewal the single targeting the to BIG-IP on already converted SSLO use multiple and services the was customer result consolidate

company access applications investment also on its on-premise distributed FX. single FX cloud deployed hybrid their infrastructure a a The for Only extend customers' simplifies security on FX's BIG-IP services Second, strategy to consolidation multi-cloud infrastructure. FX FX competitors and and environment and and in consolidating applications North FX edge. the clouds public them. and traditional connecting deployed applications that across across and vendor hosting, America enables to X its customer regional from modernized the app utility delivers displacing solutions disparate In environment security delivery. in support application QX, modern and modern remote

with policies all to We Third, operational customers FX across their comprehensive and management analytics. enable consistent solutions simplify streamlined rich environments. automation customers' operations

consolidating security policy SaaS, their complexity choice. and banks with and enables a address to of full in competitors fire deployed displacing FX multi-cloud vastly operating simplifying empowering in and traffic One and FX gateway for Kubernetes their is dynamic. best largest solutions fits has FX and hardware, sector this clouds, example to securely on-premises, of app are tame great web across API edge. for simplicity security, hybrid use AI networking hardware model, unified public point management, software we The and converging leveraging FX multiple customer high-performance By private APAC multicloud and models. the mix with X-point them on offers that capabilities, and deployment environment, customers FX's the SaaS ball cases cloud customers. or deploying the multiple on-premises of in the the consistently software security of right at

hybrid differentiated also FX's to our displacement SaaS multi-cloud driving deployment competitive hardware, approach and is of software momentum range across models. full

solution. series takeout record a FX infrastructure operations. a its BIG-IP its security cloud enhancing streamline and is their fact, QX, with In or provider, application American reduced and tools a burdens challenges the web with delivery distributed achieved BIG-IP leading support In QX, tooling. and API a customer and in WAP while provider their they incumbent prior and API cost. are escalating following in customer The leveraging automation FX's longtime and roll with notable with to to example associated ADC of eliminate insurance application doing chose we their replacing win of application competitive cloud These to services include improvement services, displacement. administrative provider protection In distributed of is FX a so, number protection a growing API home them capabilities BIG-IP's security retailer, replacing another customer consolidating competitive

imperative. globe the developments a Cooper, to discuss AI. last as embraced pass the the strategic emerging with will see I across have we quarters, call I AI year, In in latest as Before the I prior have organizations

which processes be of already configuration that with business is There assistance applications provides within this X our of expect than years, agent, own with ramp We will infused distributed our AI. AI more and our leveraging customers of XX% insights. FX in evidence and XX% cloud

infrastructure, compliance, already While simplify accelerating deployments. productivity creating AI for and exacerbating benefits, AI challenges of promises bring to is new customers. networking ball fire massive and hybrid also security the pressure to multi-cloud it the is

speed effect both from on inference. infrastructure perform are augmented and and BIG-IP opportunities to AI see higher part training model security. data expensive efficiency, number concentrated in inference, reliability are a well. lengthy high-performance, dominant training FX X early traffic data speed is the and The inference to Customers of as they increase opportunity of sharp to the data a delivery far for AI model AI training and securing of move management ensure to requires delivering stores, generation and on FX using processes. and stores. process. When their areas AI performance providing their Our AI thus customers a data incredible the at training retrievable is of having efficiency RAG greater or of going profound amounts data for as high queries for

workloads. AI By and to slowing able is latency data a performance. their infrastructure of RAG. BIG-IP to and overall for customers and resiliency result, improved queries increasing result are data As amounts in availability vast deploying handle of the stores, to front experienced their scale stores related The congestion these

hybrid API and that are and including AI The workloads. workloads, FX's leveraging complete APIs spans today protect challenges essential from which their APIs API the with APIs. WAP solutions as second AI portfolio to protect for BIG-IP, and secure multi-cloud AI FX's security security opportunity Customers security, traditional discovery we our same ecosystem and market-leading leverages FX AI functionality subject WAP applications are see inferencing. for services. vulnerabilities AI AI is NGINX solution distributed to to the connect cloud

will organizations from scale. a as at AI We bigger inferencing to become expect opportunity inferencing FX secure experimenting AI leveraging for move

factory load The we third is opportunity on AI AI are focused balancing.

AI advanced performance traffic Here, factories FX and is of the management. scalability optimizing with

clusters. multi-tenancy have factories and AI working AI and partners within works combination and for factories our NVIDIA's improve we AI NVIDIA performance, to are partnered observability. BIG-IP AI customers efficiency ensure going seamlessly improved data provides the toward with are solutions and described last FX massive NVIDIA to to GPU The factories, Next DPUs. BlueField-X this with We BIG-IP DPUs across of deploying factories. and with and customers doing quarter, with deploying Across from of Within as we BIG-IP Kubernetes performance

are AI seeing is with a momentum growing I from it wins QX. we just couple early, While share of will opportunities.

public They platform support first robust net balancing with BIG-IP new stack FX's delivery. load this mobility orchestration customer, was BIG-IP who for with using SSL FX AI customer. a a a large and AI high-performance data high-velocity with protocols and to in replacing data in The performance ingestion addressing computing is APAC, winning for their costly major infrastructure. AI compatibility factor selected cloud is

BIG-IP to I of AI BIG-IP leveraging with EMEA win, for with highlight customer multinational distribution management efficient infrastructure. secure, a scale application. optimize and selected their AI The WAF QX will security FX is infrastructure in existing are bank with and They headquartered their and critical integration our traffic leading data their ensuring AI and region. second The seamless

call and the outlook. to turn Cooper? Cooper on to will elaborate I our Now results

Cooper Werner

before outlook. 'XX our year and Thank hello, I Francois, fiscal elaborate on everyone. will and you, review QX I our QX results

XX% and product systems we reflecting noted, Global X%. of growth. a growing Francois grew an of QX, due software totaled services global up delivered revenue As revenue. million, million revenue of exceptional strong year-over-year a $XXX Product to $XXX mix to services and $XXX million, XX% XX% XX% combination revenue

Our $XXX year-over-year. million, million, XX% software Systems new several totaled total of subscription well grew million to renewals exceptional representing $XXX revenue year-over-year. software reflecting revenue Perpetual software projects. totaled $XX $XXX expansion XX% large in software as Subscription-based QX, license revenue up multiyear year-over-year healthy in XX% revenue. our software X% million, growth as XX% totaled up year-over-year, in up

revenue systems number a from benefiting of Our factors. is

activity momentum building is is aging refresh refresh hardware The First, technology now as widespread. estates. refresh customers

pace dates significant quarter's the Having second environments. of demand next-generation hardware factor standardize support hybrid customers customers top Customers are offering. clarity relates of A for In upcoming of gained of to the in that many VIPRION outside from both a and plans of on our end fact, most the moving on customers. refresh has iSeries balance to software need and forward begun X,XXX for some solutions software accelerate to our families. multi-cloud for our hardware with came

momentum driving displacement to wins. Lastly, both is our customer new and innovation continuous commitment and resulting hardware software in in increased competitive

sources did As into a price previously, from QX implemented we of of systems we've pulled a and QX. believe recurring XX% revenue, contributed reflecting discussed growth. on we X, year-over-year Revenue orders January our XX% see increase we modest amount

of the revenue. combination maintenance a from revenue portion comes of our revenue subscription-based services our global and recurring Our

by revenue distribution region. to Shifting

revenue. Francois the growth representing grew Americas of and a total As representing drove X%, grew noted, of APAC Revenue revenue. teams across all X%, strong XX% XX% our XX% of theaters. grew year-over-year, from XX% EMEA representing revenue,

from at enterprise Looking of quarter, bookings. customers another customers including strong XX% representing major X% product product XX% Government QX's delivered very represented verticals, of Federal. our bookings, U.S.

providers bookings. of service represented Finally, XX% QX product

delivered strong margin QX gross growth. We our margin driven operating robust results also XX.X%. was Non-GAAP GAAP by was revenue XX.X%. gross

expenses operating $XXX GAAP Our were million.

million. were $XXX expenses operating non-GAAP Our

XX.X%. was margin operating GAAP Our

the from ago XXX year Our XX.X%, margin non-GAAP basis operating up was points period.

GAAP the quarter Our effective tax rate was for XX.X%.

rate tax effective non-GAAP Our was XX.X%.

$XXX share. Our $X.XX or was per for GAAP income net quarter million the

growth income reflecting net was year XX% or from share, $X.XX per Our EPS the $XXX ago million period. non-GAAP

cash billion generated I at per to software and investments year end. of share. which maintenance the in from quarter QX, will period, Deferred flow price up balance now subscription $XXX QX. XX for $X.XX very of worth all million shares strength operations and revenue billion, was $XXX ago In average and quarter X% $X in $X.XX turn our repurchased very we $XXX was million sheet CapEx remain of by the metrics, flow approximately cash million. at totaled strong. from We days. renewals. was Cash driven healthy an DSO FX

of had billion end $X.X our we QX, As stock on remaining of authorized program. repurchase the

free represented cash XX% repurchases share Our QX flow. of

X,XXX ended the employees. we approximately quarter Finally, with

outlook our QX. to for speak now will I

non-GAAP of exception my the metrics. reference comments With guidance revenue,

QX year-over-year implying midpoint. growth expect million the the revenue range $XXX in X% of $XXX We at million, to

As U.S. it gross our and reminder, our significantly in on October our tax seasonal margins. for we impact being quarter This resets as payroll February, customer operating low expenses. large a noted event and results our in both call, QX and

We to operating non-GAAP approximately million. expect QX XX%. estimate of expenses of to million gross We margin $XXX XX.X% non-GAAP $XXX

to of expense to compensation share-based EPS of non-GAAP in $XX range QX We expect $X.XX QX million. $XX $X.XX We approximately a share. per million anticipate

provide I update 'XX strong In our light fiscal year to results full our of will QX our QX and guidance, outlook. year also an

forecast from FY initial X%. X% healthy revenue in range pipeline guidance outperformance to growth and X% We 'XX our of to for up are QX. raising QX is X% growth This our reflects into to and our revenue our a heading

our up spoke upper quarter. grow at we revenue range XX% Given and expect our last strong the software strong continued is QX from trends, This now performance least to fiscal year expansion in we to single-digit 'XX.

FY the expect 'XX XX% non-GAAP of to and XX% range in XX%. non-GAAP margin margin continue approximately We operating gross to of

remains 'XX of at tax effective XX%. estimate XX% rate non-GAAP FY Our a to range

growth We are our EPS X.X% to prior of to outlook FY up X% raising deliver X% growth. 'XX, in earnings to non-GAAP also now and expect from our guidance X.X%

share Finally, continue towards XX% free cash to our flow we use repurchases least annual FY of to intend in at 'XX.

the pass call Francois. to With that, I'll back

François Locoh-Donou

Thank unique trends. or competitors who hardware. crushing reduced Cooper. we is in multi-cloud. you, ability to conclude, secular from investment, address we the hybrid significant next-generation benefiting our alignment cloud of with significantly SaaS these complexity across To solely our innovated Most are Unlike SaaS hybrid powerful or and among and invested software

to complexity are solutions full reducing for management, address networking traffic web We API multiple customers capabilities. and AI gateway high-performance converging app and multi-cloud by point security,

of SaaS edge, a as AI customers are AI we software increasing enabling choice, open or enterprise model start training and We businesses but to also large still, and hardware, securely amounts inferencing securely opportunity. consistently FX with we and to on-premises, believe the to building we empowering the the indispensable necessary It's in ability at them see call implement early simplicity to and data or as and choose as opportunity positions cloud please rapidly deploy with our and are momentum at questions. scale. Operator, to our AI move the industry-leading for result.

Operator

[Operator Instructions] first question of the with comes Long Our from Barclays. Tim line

Timothy Long

us for the type Just you know Francois, if don't and touch selling number. data systems could. on It on AI sustainability talk of X, if business. of can into you're be you centers, still is of little currently. just AI the touch if breadth can a importantly, might it sounds bit I how could little about there quarter, more pulling a bit of business. just an who government kind scale of But I a what second, the the kind And if have you been hardware would enterprises, of solid combination? can but into customers large the like helpful. these you there Anything then big December into pretty

we those are think going? some like gains It sounds do to helping. inventory where ability or share are So you there with numbers keep

François Locoh-Donou

Thank Tim. you,

have we're with that going pipeline we on a strong pretty the Let on we're have Actually, question hardware, and Look, strong because that's sustainability. to on hardware. me think activity. we largely a start that They seeing second your refresh fact of a time. in to Their period were deploy in the applications growing assets a of by for and need continue have been driven hardware. number customers environments, multi-cloud the sweating capacity. creating hybrid for more it's year

And competitive also be we customers in for hardware we to in within rate growth significant year the hybrid that, the call, investments continuing one takeouts where our the So was is we're addition this we are retailers of to displacements likely in in have had the year. to the mentioned multi-cloud -- next-generation existing environment, think on because addition in of see growth I the to in that continue more of earlier hardware And home not. made big we we've quarter. of opportunities one competitive the double-digit competitors

Cooper Werner

We're And our add a generation crisis did the the chain really chain we're demand terms largely to real resilient partners. platforms, supply and the base work that newer front, no during fulfill supply ability on of lot and one Yes. supply now. No on in good right we of thing developing about to more feel seeing term. we I'd of Tim, also this constraints in a near

be in really good perspective. shape should So that we from

François Locoh-Donou

just AI, of Tim, opportunity AI, there the part on so we're in seeing. we're on really for are opportunity frame that X the seeing question categories let first of me FX your

would factories inferencing category to The at the typically are and are opportunity. majority date deals when these from done virtual applications. data that across with the AI have data to to have really -- is generation. in types the cloud to this data or augmented that in typically to their both these say of data and data are I board. really of to being -- in own need either America. from and with that deploying across of influencing the one be really it first we they first use The trained deals stores, are large are have are AI able North moving have models. And access customers where and or securely Asia the It's And model enterprises building and AI are data stores repatriated we speed won or on-premise from on-premises Europe,

So geographies. we've had across deals X all

load traffic ADC our traffic the out management technology. and days, categories typically security with in load security, is and and other it's really would do balancing with third we and that factories, security opportunities, as really there, intra-cluster. that inferencing really is our solutions. early category trackluster, is for term. will this early And and is The for though We discovery of see in AI category balancing then develop know, starting Intra-cluster it's in factories. intercluster it's API AI opportunities then X we've but longer for traditional both you the X the days. announced And NVIDIA with traffic API to think We're partnership of and opportunity

Operator

Our comes Meta next with question Stanley. from the Morgan line of Marshall

Meta Marshall

on back of kind last just year Maybe that loaded cases in Frank the you help had of seen year of growth had Great. us API of noted were kind half maybe the Cooper, size business of this more that quarter. point, And just loaded distributed maybe just second or could at we've half kind cloud back noted if the a you kind security talking -- about? kind for a then you given

particularly to to thinking you any of kind a start just year? are beginning of year, strong how seasonality Just the with the such about the

Cooper Werner

Sure.

we're The the renewal half up latter year, tech question. inflection that second multi-cloud broadly the Having pretty and that, hybrid take really we in overall base the is base that same an that We obviously the I'll saw seeing discussed base. QX. said speed, a is large driving still refresh just picked demand. So strong of the for

customers. trend out does to rest trying growth half. expansion very the that software exceptionally within wouldn't that of it's And already referenced expansion we necessarily been was where But then to we our out. at a increase finish rates so a converge QX in deal that the that half look And multiple we're a security than larger our play assuming rate X-figure example, number assuming that for the was when anticipated. early the up do in an rate customer expansion more customers, second choosing second that closely had out at in the with to really expansion. strong we're that, number a of better that platform. Tech rate we a fairly really, an our strong we're large base. We'll the already we've quarter tied And how in seeing that said expansion engage solutions saw further software we to -- are year, strong to onto base. year, quarter took QX were as in large to larger was play we continue across continue of coming of So the customers with do expansion that saw expansion 'XX. But that's we the for to how we and Refresh having looking even FY a

making assumption continue rate should half. an we'll the continue track, that not in necessarily something second but to expansion it's that, to So that up go

François Locoh-Donou

We fiscal question and the the of shared SaaS $XXX cloud XXXX. Thanks, is And we at end our power year managed our you Cooper. million for part part as around that managed to around distributed to was services know, cloud, the total first portfolio. Meta, ARR SaaS services distributed of your and of roughly

there out broken fairly haven't that, it growing distributed cloud is rapidly. but We within in and

them card for quarter, get this distributed X/X are Service a embracing a customers. using enterprises, growth our adopted who seeing software if X/X or them existing number in FX net FX about roughly hybrid for earlier of are visible cloud. multi-cloud are as existing of of customers because is us are I trend vast and about cloud hardware also of these using over customers we're on-prem are new consistency we the majority, they that of and SaaS, all fact, also customers distributed customers of consolidate an in X,XXX The customers also mentioned solutions, not passed distributed The passed able on Software In milestone delivery in And we important being for us, because strength software having their their get on security in FX. app and that's invested hardware consistency spend to solutions. they a large

In fact, top than where quarter, we this milestone using XX% are of now passed customers our X,XXX more the distributed cloud.

So our largest the also FX comfort customers SaaS, of us lot the are growth around the for a around world potential gives platform. choosing that and of

Operator

from question next Our Chatterjee JPMorgan. comes the Samik of with line

Samik Chatterjee

their customers you is extent. to as Can that X Congrats there for earlier specific as on out to seeing they of to least as I off I largely is on sort doing trigger. Or that of having more want just One, guess, the assets you in all a of as the that of readiness account flesh earlier rate their refreshes terms of they and results more that center? want driving or refresh know you're going at mentioned mean, clarification. Francois, long AI broader commentary customers something just if data broader customers of bit your refreshes that's a We here. that? consort some sweat assets questions part a

sort sort seen about concerns into lot AI just see and and a of the more leverage you last to on now AI a them inferencing do sentiment you versus training rep days, some for driving over overall is quantify sort we've of rate sort of around secondarily, of So AI how of couple the sort about how process of trigger or inferencing, AI there refresh? favorable ships to more us? that's Can you a probably to models your And of talk sort that pretraining training talked that where necessarily compute in to going intensity of now then, you would out. exposure of

François Locoh-Donou

you, Thank Samik.

think a with part of factors we're couple the Samik. I seeing Let first refresh me start there, around are activity there the

have part first as larger think data general there revitalization part a center the driven for data destination they customers portfolio The of are are infrastructure much around beyond. that support center a And they that And embracing clearly, couple years is proceed data do There not specific not capacity, That that customers have also with frame of growth, for one just refresh. that more because of specific. right refresh. dates some transient FX infrastructure. is refresh in that's factor. benefiting is large their kind in some driving our having center but refresh not preparing by next activity, do time are these as think as I is the enterprises multi-cloud That coming end that of and And data AI of the they're FX are I of in specific. in cautious, are factors to that capacity spend for by application in we where sure to And to with or XXXX frugal ahead is that going the were to also and over builds. to of last assets of and FX growth enterprises driven also hybrid fact possible. the to have that, very the make very center of but there try sweat strength their and state, decade get And the operate the in from

I seeing. are, we're pipeline the those driving activity and would X say, refresh factors So

see you earlier opportunity X the what When our we of opportunity, at AI. on for categories question second your look I AI. described -- To

for The one, majority that is which large vast retrieval which opportunity first is data The in really of inferencing high from performance to delivery and is augmented generation, enterprises. data stores.

unaffected majority have we the today, the will won opportunity in that And be large that cluster category. factories. so are say And really, the I of by and deals how would our the this discussion AI one in immediate GPU is build-out about

balance As yesterday provide the future inside from AI into management our in track in and it clusters around tied size to factory relates and clusters even load that's to the news in to or clusters. of of discussion go front of yesterday opportunity scale traffic from build-outs and the the go

very We yet are we are not that opportunity. -- in early days

a more say to a in faster to good We That the to opportunity secure And accelerate and started think though, haven't do these if, models AI data be. also their thought AI opportunity is more allow would That fact, I it's build of more stores early it news We in In drive road, have that for because for quantify more sizable us news but yet models, will frankly, proliferation very early adopt would is it and opportunity. opportunity to AI. for revenue faster days. FX delivery creates that -- of source we build because too to means -- workloads. actually to enterprises it than data that applications high-performance applications. it. a and that stands the fact, we have is good it adoption is general, we from it's really FX will cheaper it And if, can train open of down AI very the

-- days. early at we're So it's this point, --

we're our having yet in because want too about meaningful of terms don't and I excited but or opportunities these to think opportunities revenues it's we the we're to ourselves of are the material we not customers. ahead get engagement with seeing

Operator

Sachs. comes line the Michael next from of Ng with question Our Goldman

Michael Ng

well. have X as just I

could third the very could little if the fiscal you second, should as then it run This you wanted business. a bit revenue the that Is Is perpetual I Or is the seasonal wondering we financial was part expansion is consecutive it you think appreciate small quarter. the I XQ. talked rate? indeed this And related just year about to where there? a a I had color about more strong U.S. about? of to federal First, a seasonality? provide ask in

I helpful just you think Any comment would weak? X%. strong? Could mentioned it directionally, color directional was there. Was you that be

Cooper Werner

start the you're question software Sure. And Yes. right. to our results. on Thanks, perpetual perpetual I'll speaking Michael.

calendar to service model, QX. provider see near have we end commercial investment prefer planning. that gravitated We model as model of in Typically, CapEx customers seen that of where vertical, more our of have our to stronger some perpetual that tend their of pronounced coming part in the results the business and year a kind see in we the

in largest our that that our of So the has flexibility And new that to models customers seasonality, yet give QX. tend but to differentiation know It's does in think really kind we helped model. we're our strength point commercial software really to drive this opportunity. something the I say see to fiscal terms is continue best fit ready this of I the don't business their in we that

François Locoh-Donou

a pretty federal -- we the the X% And Fed take important, of part was in small your QX business solid. an I of on our it's business, -- relatively question business. course, but Look, in can component Overall, our

Our pipeline healthy. very looks

level course, there so some And in with government, had of federal good at the looks pretty uncertainty change a the this healthy. there's that's QX, of for generally, we point the everybody business time with doing administration. in pipeline But and

Operator

America. of Liani of line Tal Our Bank comes from next with question the

Tal Liani

me? hear you Can

François Locoh-Donou

Yes.

Tal Liani

I X Good. have questions.

different want of ask a to were Some but them it I in asked, way.

increasing beat, for beat. million quarter, by numbers you million, $XX the this a second the you're meet for the million So $XX about and the million quarter guidance $XX $XX has

that second Or a sorry. call make it forward they're that The So it to QX. the half? the below the And growth -- willing just QX, in is annual conservatism things it guidance the something is -- not line, slightly there QX, on I special Should I... now -- question QX, question in or continue? brings in is should is, second is the is

François Locoh-Donou

ahead. go Sorry,

Tal Liani

Second because on recognize upfront. to renewals separate want contract, I'm question renew trying software you -- I when XX% from is software. new you And

between year which in and and -- very a is left in is X, big -- in X means and X-year upfront for renewal, years fourth year. there year that jump then recognition the revenues between the X there's works are year contract only way So accounting a the third leftovers because

cases understanding to renewals, just because to have cetera. use because we're of the of the how renewals? and So I because you And the phenomenal separate is customer for is, accounting I can growth we're real growth it versus question opportunities. revenues kind of you old new of talking just how want with products, separate it of kind growth growth, is software that growth? much of -- et much seeing, Can of wanted about of software

Cooper Werner

Sure. I them, guess I'll both jump probably in. you of can take and Francois,

with the start question. software Let's

call and subscriptions time. recognition if XX% are we based and #X multiyear sell But that X-year the get is as then So offering you we as These deployable vehicle over or a upfront SaaS-based is opportunity, flexible sell deal, the you're software where is revenue the offerings. in we that program. that the as for typically, -- large consumption right, recognized of it's our what well a service offerings the deployable both offering as license-based that is revenue a remainder larger --

speaking smooth is why a that the so trajectory. revenue growth our of you to is are not -- dynamic And software

And software. get some visibility is in pretty the speak is do a how software And the get the lot rates. questions do the so the revenue have lumpiness because to reality you predictability visibility have we ASC with of that of in around recognized we the in and growth good opportunity, that but XXX is we

renew had we've so you rate number large where have revenue lower then the of opportunities a quarters you've that headline strength on recognition. there was where got And than do upfront business. where bit And underlying growth an the quarters the revenue are the

some And of out. software you're longer-term something so any to degree quarter, we going in talk when eventually But see smooths that that's the opportunity, to growth that's kind of lumpiness. something given

saw very that is saw quarter. was the large said seeing guided we that driven Now this behind And across multiple time we're we strong our had upside to how for at reported having we compared customers offerings. the revenue looking to solutions strength this from those renewal the quarter. really platform. what's that at that in Clearly, software the by converging are onto really expansion subscription of and that,

a and what's the us allowed we're And more So rate software. take customers winning that has in to our seeing the strength. it's do across a higher full for what with marketplace, that's year for really behind and lot portfolio, we're FX at our guide up

Tal Liani

it. Got

Cooper Werner

from that assuming and in the from we when also we And would were flat projects software year-over-year revenue saw new we I that year QX. see then going roughly said will had we projects new where also healthy note did be growth into growth

the course of something that's so year. And continue we'll the monitor to over

Tal Liani

half And second Great. about the question.

Cooper Werner

Yes.

full half. the digit year, we had low it growth for be guide single-digit the would second half that and said So in mid-single the first

And QX of both We related in so the that on pricing it. was increases. strength to that of hardware did pull-in headline that we on hardware and think likely don't software. was saw demand there We that into the was some note some the but growth, QX was

on question, we same the the in of we so And that side, the growth look as half But assess are the software a that on as ahead prior base we half second little said against which year, factoring back to bit. opportunity the year, a base. of the it's the in I

to half opportunity. of And that's in to continue year, continue across and premature that lot strength closely we the a see rates and on that just that expansion same would it to it's assume But that perspective. the something in was of think kind better second early year outcome of so base, could more of a given the certainly really largest we we exceptional expansion a that customers, deals we'll be engage but the QX. a that in some bit if of little see with from pronounced level revenue see those We our

Operator

question of Daryanani the Amit next ISI. comes with Evercore from line Our

Amit Daryanani

got X, that if be -- helpful? would just you you pull-ins on into I year-over-year do ahead what on price And -- went was price the the system XX% increases had growth Jan to by really of you're side. guess that can talk How just think of you the good driven much increases quantify implementing? system of side, sort folks maybe implement that on

Cooper Werner

Yes. Sure.

So it fully that it out. material that price amount pulled there teams it's is hard are across -- but to hardware sales our pulling we want kind view was super But a of results, software. worked was are likely to modest some digits in. that did wasn't increases These mean, and as demand mid-single we kind it the of acknowledge break I to modest of was our a

same business where So magnitude they're price the we not previous pull-in we saw increases pronounced demand. at in of of the more systems a saw

Amit Daryanani

deceleration on you Got XX% I the there to software year should just about? next some in of because minute at could as having And way new then QX are point, the you're that progresses is quarters it to notable growth deceleration the at that Or more back like you if least that you something folks what XX%. discussion a look this don't guiding few kind hit go and ago, the the just it. then see looks that's metrics could know nuanced aware expansion like be projects look in conservativeness Is we like? happening fairly

Cooper Werner

I think just around norms, being in really be mean, I so being tends our because quarters, ahead of well maybe and the to the our has centered of been we're half that of through again, rate second those see up of we that said, prudent. wanting our The we're same it's it opportunity But little larger could No. the it's to that I to together you do say last historical early go rates expansion think as we year, couple deals, when time originally assess the more a year. expansion guidance. a the -- little bit bit is continue year put base in the I

in said really And where saw through in So largest expansion customers, what we those coming on of that given QX. side. software strength saw strength rates kind is seeing what that's flattish just you're the strong on is to more the would the previously against be low the we we QX growth

Operator

with from of the comes RBC. question next Our Matt Edward line

Unknown Analyst

see first presidential I enterprise election, I is guess, Francois, behavior the question? point have X any post that on guess, in clarification the change as U.S. you you IT mentioned. I one, I just some guess, Maybe a the the did well. of the of spending trends buying first specifically, improving in

François Locoh-Donou

want I say no. to

started know, mean, and However, December our quarter, on I on X as October then XX. you end

So election in the the middle. presidential was

is quarter loaded. back-end typically Our

multi-cloud a that acceleration bookings trends around and wanting really XXXX, application So cannot last was factor presidential the of pipeline of amount data naturally, continuation have to quarter a we that of of center to And hybrid in seen to come to election, going growth. of and invest being the we because bit embracing pretty but would point was actually a we capacity the significant our have in quarter more after customers strong. into it fiscal expected the a support

Unknown Analyst

I got it.

That's And then me. maybe Okay. AI an for question helpful. just

it about think And You way come lot up AI more, into talked does of guess how feel little and topic, think genetic like kind changing didn't and a it big it about I remarks. workflow call, the and G&A we automation. the a really your other prepared a organizations in about digging bit is this in

have start obviously You app et focus emerge you tailwind amongst cetera. could security, technology a API to guys on delivery AI and an as proliferates that customers? Do genic think

François Locoh-Donou

these data terms because also are the of data more more -- and and more part to it secure of these models. yes, and way means between require that modules AI in stores agents the And means way it's applications agents that That or security. Well, more to AI that move the APIs needs exist.

also complexity. where more drives So an us, for gentic world

and that multi-cloud. securing distributed They and it that's step bit. customers across spend delivery of this player simplify of do customers talk ball these what driving and like app ball And infrastructure these of them. When we framed on we that and and application have multiple across of connect have customers, our secure a and more If multiple and I security and should that's enterprise they components little are environments infrastructure applications of before together. components environments, or what's all a multi-cloud, sometimes meaning the multiple environments. cloud all can fire environments that have more as that provide is across complex back consolidate hybrid to call to delivering fire, process to across we hybrid about the So applications FX or -- to

about of course, Now agents are that different infrastructure world, be applications are, an calling a think going where AI to this if you in gentic is environment. one

don't even agenetic resides. that application where folks know Sometimes

it more so creates across more even these and multi-cloud need environments. and creates around applications complexity And all those environment, even it secure hybrid to

an from actually that fire complexity. And that that a so and a solve growth that is to world the exponential could solves of ball complexity Agentic in tailwind company come

us early last for over AI. you in know, week something feel that and But we learn be a several the very tailwind. could as new And AI. we out have continue about every days So we as it's days, found significant to

we humble to remain excited both have So but also opportunity. the about

Operator

line Our from Fish the with of James Piper question next comes Sandler.

James Fish

dwell to Can the this, here. to I and get FX, in in of on what's were don't do about pull the software, largest the think share think impressive deal the results. we Citrix is think how flush, these The the you large -- I digits want driving systems we've to How help refresh. gains, budget differences across beat sustainability Cooper, we're ever. the us and but here about I think what also seen on trying at all talked pricing out terms of you mid-single the understand about

for help here level what -- kind sustainable us the of just vision Just growth. is set longer-term

Cooper Werner

our with of I'll resolve that revenue for mean environments. kind what all I really the Sure. with lifting facets And that's of driver kind that's base. the customers we multi-cloud underlying is of start hybrid complexity

show business business so And and and software seeing hardware services the we're the in that up the business.

On manifesting expansion. the really software in is side, what

very That durable. our that that It's is think we that portfolio. to do we really we is something of across And is rate accelerating think and opportunity. so -- and is sustainable that benefit that software think something the long expansion going term is

software see of you we've customers when large recognition see you strong opportunity. agreements, with that across upfront as a large multiyear expansion noted, Now software

invest the in where seeing you the that multi-cloud And rate what going an customers generation That's noted, bit expansion. it both the software where brought need with Francois all hardware our market invest player can their when to to spiky hybrid -- a only be recognize them also is get are But of we see little continue to continued, destination. with they're environment in the form start invested in to in so across has to acceleration and and solutions. time particular, led And working we of as appliances. to new we're systems to over recognizing that's across that systems in factors in that the it in business, is

so what's And sustainable really about the that's opportunity.

going is little expansions. the time. in on super terms may a is help there's the continue that current course, don't theme that's but some which think be for of timing us of have the material, that seen some we the But will software we price bit underlying spikiness rec Now revenue was of the we whether something to broadly, the in pull-in opportunity that there think over to in of rev drive quarter,

James Fish

you we you years lot then average. to guys X, having talk the it, even changed refresh a XX,XXX, X refreshes to hardware supply what's year? think about call FX sorry, XX,XXX XXX,XXX And growth hardware bulge starting and I'm that, double-digit used of around as Obviously, systems, it. Got every more chain things. year or see Are about stuff guys cohort this create roughly this that's double-digit a the bigger and on confidence giving -- we

Cooper Werner

of than families And closer FY it. and so a us to It's the It's with installed product associated of the in that lot bulge bigger. are really referenced more is the that part are half end of pending not those where much are dates software our support is today. certainly that's base that's bulge 'XX and that 'XX. X that we just now, Yes,

to customer customers And planning so in look really different. advance those every is And dates. start

on well through those Some tech where up like earlier what think well drive 'XX. refreshes may we're of the to of -- near-term FY the customers beyond seeing ahead year, run right opportunity the much at could that's of dates. current size shape least it extends look those those will we visibility look to Other and like, But and more dates. kind refresh

Operator

comes from Simon question with line of Leopold the Next Raymond James.

W. Chiu

refreshes. have Simon assets these been up around Leopold. the just just makes around and timing for quite It customers sense But specific surprising someone earlier on of how Chiu the question around while. sweating to it's they're a guess triggers large kind I asked for Victor is I This up that that aligning the wanted the system together. follow

I So the upgrades the of what specific caused was -- to previously, I guess? time? expectations the around versus your delta, guess, guess, that kind the was kind I And dynamic that there triggered of align some same

François Locoh-Donou

say, I to the year. expected Well, first the during in said we think of XXXX be And it sweating all, I at that hardware we of XXXX would summer of start we years said already fact, year stronger after assets. customers for have were the a X.X for

expected we in we to expect expansion beginning actually anticipated. activity is than that of hardware growth stronger thought of and And rates because be stronger the we both takeout the -- refresh and competitors now and we it's so we hardware than all And year. activity the the at year, said have this the is

more need capacity data think also customers in a of they -- We're by customers And cases you embracing expansion If the both on and hybrid driven their that, on root therefore, go back FX. use really of centers. multi-cloud getting that. to we're expansion we realizing cause architectures, it's their getting number consolidating refresh

displace all last our on multiple that and So software on this we That's of on, to other shows business opportunity next-generation the investments we've security by FX and point years, the software security our of and in both to FX. in coming number align and business. the that's quarter -- hardware cases security to made have use customers a driven go consolidate on and vendors for on us systems several over to

W. Chiu

Okay.

does mean, dynamic, continue around expectation? systems expectation term given that do systems growth that's Is time change, that over dynamics? expect I given So the these long to your your still decline? you Or over

François Locoh-Donou

to flexibility they Look, in lot places, that, But their to in in have software more customers we environment. hardware is deploy That said, I'd a different more of actually customers, guidance. time, say That's majority long-term give software hybrid of said the would we're we're towards customers continue what said, environment. are have hardware. the deploy not deploying talking why to more we over here move want and and these that what multi-cloud. about They their expected but we the adopting software

time, the over haven't changed. So business on trajectory hardware views our the is of that --

hardware impact know use that they to Of that. some of course, I and related the on hardware of the of or we business. road AI starting are earlier, cases the the see down the for some It's AI But the trajectory on bit a trajectory a have what to on too opportunities impact and AI have to mentioned business. wildcard could early long-term

Operator

Needham & Our Company. comes from next Matt the of with question line Dezort

Matt Dezort

opportunities? Great. Congrats guys. opportunity I I for the Can results, you who any rollout those? little about in talk you you seeing? whether about, are Francois, guess, at Where you winning And that initial those have talking to And AI investment? on visibility the how are do were guys your opportunities, incremental requiring we of guess, AI you on are these just that's what these opportunities? a go-to-market bit

François Locoh-Donou

you. Thank

are very frankly, and developing make in And quickly, large I'll and body am today. now new let that -- So feel am try we we that and there's of is them. of small -- by generally start to you FX the are because when a I there. kinds focused those speak enterprises. to our samples projections of large cautious me winning very always That questions right long-term said, us available are opportunity as -- saying AI on learnings. to of company very the bundle all I is there's The pattern And a is data things enterprises. I are that's is recognition know, hit deals are I there

with teams where having is are our account already customers. this and working So relationship

infrastructure opportunities get typically traditional deploy the or to the infrastructure stakeholders these winning deploying customers internal who from because deploying FX are We our know for AI because about FX. their folks AI either are

products from make significant amounts had are in and existing haven't speed date of at significant products to to environment. ideal for because We our our securing this data departures very existing moving

both existing it's account find motion straightforward And prosecute with existing to for opportunities these a our fairly teams our so these to go-to-market and opportunities solutions.

may cetera, learn Now more customizations, the but targeted make will going road. down these come opportunities, some these development, for as we et forward, we environments, that about

both In have data on-prem investment terms having software AI in again, hardware multi-cloud environments. because can hybrid architectures for stand the hybrid we cloud. that and in the of competitive inherently multi-cloud are the alone landscape, These you made reside or and in

AI You to on-prem. have are today, but clouds applications are in AI public some deploy models enterprises largely starting that

together need serve elements the to have them. good opportunities the question? win that of to solutions do And engaged of connect we so that that needs. uniquely all I are ability these operate Have We're addressed a you we across And very date. the those environments to is on rate the have positioned why

Matt Dezort

January? the are opportunity rates for do as in competitive and as win to pipeline well trending hardware things really Yes. like you opening up Anything here cloud up can NGINX in opportunities of DCS, you for guys. on And any it then competitive you environment, as prices give with you there. how take are the I anticipate guess on the sounds us changes

François Locoh-Donou

competitive prices. to changes it our don't anticipate We to relates opportunity as

would good to several your of your position, very, do the going that. and of not against we in relates hardware I years it feel competitors next-generation about As result of first market, our competitive software to very investment that is the software chose part which question, hardware in say ADC and

And large so some are significant Fortune out pretty able that are are extraordinarily technology. as And we as take despite customers, companies. XXX to large a that, you sticky ADCs know, estates in

cloud we still So we very to opportunity, are that. we it an front continue. And distributed feel is in of attacker. services, early, a of are In that will think we continue us and about good lot

customers, enterprise more there. customers the customers We time. X All course, And maturity passed paying to we and that from over very our time X,XXX and XX months. are roughly our We win of become competitive is in and -- quarter, happy to over platform customers, expect our just X,XXX of increase all we rate growing went every more

Operator

Naji And from we'll question, Blair. last Sebastien have William as our

Sebastien Cyrus Naji

of of my have I questions and think asked been a sort lot answered.

one just you that came Could CDN perhaps success And the a product much out acquisition? point maybe of about us on a So you're having your bit somewhat update maybe and question. little me for of Lilac how talk is right part business that that growing of space in is very That more to near a here? fast growing or be And DCS inflecting now. be if seems could here future. wondering this rapidly I'm just that a the

François Locoh-Donou

Well, Sebastien. thank you,

yes, are CDN overall bring platform. Lilac services clarification bring and here. our a did -- into capability cloud distributed We we now we

a strong protection, And players in market. go right about city principle not Akamai. that and we well the we to want We we like end with the market that absolutely DDoS But web is that. web want You're have number scanning, served from feel did in in did cash like capability. compete at security, the times, firewall, market because in that CDN bundled like a security And of we want cetera. as with capabilities that that FX the et because rather customers some things API

customers with it bundle FX CDN. able from of includes a on offer that Lilac. capabilities, And of earlier. solution And the full felt I have that, course, generally, the But to well don't we're doing a we CDN customers got come security, X,XXX includes we a we'd a actually passed A FX. that of our looking for that to customers we bundle solution was them. looking took from that these that mentioned the They entire be number to so And bundle into come capability CDN. FX purchasing for for they're important

Operator

Thank you.

this there remarks. CEO, time. As to further closing for floor at are back I would to no Locoh-Donou Francois turn the questions like

François Locoh-Donou

look Well, and AI discussing thank hybrid you opportunities. for to during our you. joining you of us. and multi-cloud to forward many quarter the Thank seeing We

Operator

you Thank and may lines participation. at your your this Thank time. today's this you you. disconnect concludes for And conference,

F5 (FFIV) 28 Jan 252025 Q1 Earnings call transcript