F5 Inc Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Meta Marshall - Morgan Stanley - Analyst : Sorry, there was music for a second. Just a question in terms of what form of kind of conservatism have you put into the estimates. I guess I'm just trying to get a sense of are you accommodating customers through discounting? Is this you're pushing off purchase -- maybe people are pushing off purchasing decisions while they're handling kind of servicing or upgrading incidents? Or are you having to give other incentives to kind of upgrade boxes? Just trying to get a sense of kind of what form that kind of customer conservatism is taking? And then maybe just a second question. Just as you think about kind of the underlying growth of the systems business, like any way to contextualize how much of fiscal '25 growth was kind of due to the product upgrade cycle that was happening?

Question: George Notter - Wolfe Research LLC - Analyst : Thanks a lot, just continuing on that line of discussion. I guess I'm curious about how you actually size any potential impact from the security breach. I would imagine it's probably a complex exercise. But I was curious if you could just kind of walk us through like the logic here. And then maybe related to that, can you give us a sense for how many customers were affected where there was configuration information taken or are there specific customer issues that you can point to?

Question: Michael Ng - Goldman Sachs International - Analyst : I just have two. First, just on OpEx. It seems like the implied OpEx growth for fiscal '26 is about 4% at the midpoint. Just wondering, if you're seeing any additional costs as a result of the data breach, are there investments in systems internally or costs related to offering the free EDR subscriptions to affected customers. And then second, certainly encouraging to hear that it was just BIG-IP that was impacted, not NGINX or DCS. Could you just tell us what percentage of the revenue comes from BIG-IP?

Question: Michael Ng - Goldman Sachs International - Analyst : And any costs related to the Falcon EDR subscription? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 27, 2025 / 8:30PM, FFIV.OQ - Q4 2025 F5 Inc Earnings Call

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : By the way, the sound quality is bad on your end, hard to understand you. I have two sets of questions on Software revenues and System revenues. On Systems, if I look at the dollar revenue for this year, and you started the year with $160 million, but then it accelerated to $180 million a quarter, give or take, $181 million, $186 million but $180 million a quarter. Do you think you can further grow from this level? Or is the growth rate going to decline substantially because this level reflects kind of the level of the refresh going forward, kind of steady-state refresh going forward? Or what are maybe different drivers. I'm just trying to understand if they increase from $130 million to $140 million last year to about $180 million this year, if there is further growth from this level or we stabilize at this level? And on Software, I have the same question almost. If I look at the quarterly level of revenues this year and I average it out, there was a step-up in this year versus last year, but we stayed at the level of about $210 million. I mean, some quarters are below, some quarters are above, but there is kind of a straight line. And this is on the heels of refresh of renewals. So the question is what drives Software to grow from here, if that's the growth we're seeing with renewals and only -- we spoke about in previous quarters and all the accounting treatment of renewals. So bottom line is what drives Software and System growth from here versus the temporary items that are impacting it right now?

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : But Francois, if that's the case -- and I know you reduced the guidance a little bit because of the breach because of the cybersecurity issue. But even before that, you only guided growth to 5%. So if that's the case, why don't we see a faster growth rate?

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. Thank you so much for your candor and openness. I know these questions are tough, but thank you for taking the time to answer them in such detail.

Question: Simon Leopold - Raymond James - Analyst : A couple of things I wanted to check on. One, hopefully, easy is, what are you seeing in terms of US Federal in light of the government shutdown? Is that an aspect that's affecting the outlook for your December quarter? And the other thing I wanted to get a better sense of is you've given us some commentary around the mix of software and hardware for the December quarter. But what's baked in for software versus hardware growth in that full year 0% to 4% guidance?

Question: Simon Leopold - Raymond James - Analyst : Just maybe you could clarify because you've got BIG-IP as the appliance system business, but you have virtual additions of BIG-IP. So when you talked about the breach, you said it affected BIG-IP. Does that mean that the breach affects both software and hardware equally?

Question: Simon Leopold - Raymond James - Analyst : That's what I wasn't sure about. Appreciate it.

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Francois, just curious to hear your thoughts in terms of how the market share dynamics change on account of the potential impact that you're outlining for the first half? Because I'm just wondering if sort of we should expect to see some of the spend from your customers if it does get delayed from first half to see some catch-up in the second half, particularly when it comes to potentially the systems part of your business? And I have a quick follow-up after that, sorry.

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Got it. Got it. And for my follow-up, I was just looking at the disclosure that you had on stand-alone security revenues. I think you said $463 million for this year. Looks like it's been fairly consistent for the last couple of years without material growth, like I have $458 million for fiscal '24, $475 million for the year before. Any sort of more details you can provide in terms of what you're seeing on the standalone security side? And why hasn't there been more significant growth on that front?

Question: Ryan Koontz - Needham & Company LLC - Analyst : Most of my questions have been answered, but just a quick clarification. When you talked about the migration of your end-of-life products out there today, kind of where are you now in that migration. How do you think about that going forward? Are you seeing some push out giving customers any kind of time frame because of the breach to migrate those products going end of life?

Question: Ryan Koontz - Needham & Company LLC - Analyst : Got it. Helpful. And maybe circling back to your comments on the telecom segment. Obviously, 5G has been disappointing there in terms of kind of the deployment of virtualization. But are you seeing any new activities in the telecom domain around the new 5G core, maybe picking up momentum or anything else to call out on the telecom front here?