F5 (NASDAQ:FFIV) Beats Q1 Sales Targets, Stock Jumps 10.6%

Jabin Bastian /
2024/01/29 4:10 pm EST

Network application delivery and security specialist F5 Networks (NASDAQ:FFIV) beat analysts' expectations in Q1 FY2024, with revenue down 1.1% year on year to $692.6 million. Guidance for next quarter's revenue was also better than expected at $685 million at the midpoint, 1.7% above analysts' estimates. It made a non-GAAP profit of $3.43 per share, improving from its profit of $2.47 per share in the same quarter last year.

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F5 Networks (FFIV) Q1 FY2024 Highlights:

  • Market Capitalization: $10.8 billion
  • Revenue: $692.6 million vs analyst estimates of $685.1 million (1.1% beat)
  • EPS (non-GAAP): $3.43 vs analyst estimates of $3.04 (12.9% beat)
  • Revenue Guidance for Q2 2024 is $685 million at the midpoint, above analyst estimates of $673.6 million
  • Management upgraded its FY 2024 EPS guidance to growth of 6% to 8% from 5% to 7%
  • Free Cash Flow of $156.3 million, down 10.4% from the previous quarter
  • Gross Margin (GAAP): 80.3%, up from 77.9% in the same quarter last year

“Our team delivered solid first quarter results, including revenue near the high end and earnings per share above the high end of our guidance ranges,” said François Locoh-Donou, F5’s President and CEO.

Initially started as a hardware appliances company in the late 1990s, F5 Networks (NASDAQ:FFIV) makes software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.

Content Delivery

The amount of content on the internet is exploding, whether it is music, movies and or e-commerce stores. Consumer demand for this content creates network congestion, much like a digital traffic jam which drives demand for specialized content delivery networks (CDN) services that alleviate potential network bottlenecks.

Sales Growth

As you can see below, F5 Networks's revenue growth has been unimpressive over the last two years, growing from $687.1 million in Q1 FY2022 to $692.6 million this quarter.

F5 Networks Total Revenue

This quarter, F5 Networks's revenue was down 1.1% year on year, which might disappointment some shareholders.

Next quarter, F5 Networks is guiding for a 2.6% year-on-year revenue decline to $685 million, a further deceleration from the 10.9% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street was expecting revenue to decline 0.3% over the next 12 months before the earnings results announcement.

Our recent pick has been a big winner, and the stock is up more than 2,000% since the IPO a decade ago. If you didn’t buy then, you have another chance today. The business is much less risky now than it was in the years after going public. The company is a clear market leader in a huge, growing $200 billion market. Its $7 billion of revenue only scratches the surface. Its products are mission critical. Virtually no customers ever left the company. You can find it on our platform for free.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. F5 Networks's free cash flow came in at $156.3 million in Q1, up 8.1% year on year.

F5 Networks Free Cash Flow

F5 Networks has generated $611 million in free cash flow over the last 12 months, an impressive 21.8% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.

Key Takeaways from F5 Networks's Q1 Results

It was good to see F5 Networks upgrade its full-year adjusted EPS guidance and provide a strong revenue forecast for next quarter, which topped analysts' expectations. We were also happy this quarter's revenue, adjusted operating profit, and EPS outperformed Wall Street's estimates. Management attributed the company's performance to stabilizing demand trends across all key geographies. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 10.6% after reporting and currently trades at $205 per share.

So should you invest in F5 Networks right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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