FFIV • 10-K • FY 2025 • Positive

F5 Shows Strong Product Growth Amid Strategic Shift to Software and Security

November 25, 2025 • 1 min read

TL;DR

F5 delivered impressive product revenue growth of 18.5% YoY to $1.51B, driven by systems revenue recovery and continued software momentum. The company successfully accelerated its transition to software and subscription models, with software now representing 53.2% of product revenue. Notable cybersecurity investments include appointing Michael Montoya as Chief Technology Operations Officer. Customer concentration remains high with two customers representing over 33% of revenue. Forward outlook s

Financial Performance Overview: Total revenue grew 9.7% YoY to $3.09B, with products segment accelerating to 18.5% growth while services grew 2.3%. Gross margins declined slightly but remained healthy at 81.4%. Software revenue mix improved with subscription growing to 33.7% of product revenue. Systems revenue showed strong recovery at 31.3% YoY growth to $706M, demonstrating resilient hardware demand despite software transition.
Strategic Initiatives and Operational Changes: F5 made significant cybersecurity investments, including appointing former board member Michael Montoya as Chief Technology Operations Officer. The company continued executing its software transformation with subscription revenue growing 17.9% YoY. Strategic focus on embedding security across product portfolio positions F5 well in evolving threat landscape. Seattle headquarters lease extends through 2033, providing operational stability.
Market Position and Competitive Dynamics: Customer concentration increased with top two customers representing 33.3% of revenue vs 32.2% prior year. Strong systems revenue growth suggests F5 maintaining leadership in traditional hardware markets while successfully expanding software presence. SaaS revenue decline of 9.1% indicates competitive pressures in cloud-native segments. Company's hybrid portfolio spanning hardware and software creates competitive differentiation.
Operational Efficiency and Profitability: Gross margins compressed slightly to 81.4% from 80.2% on product mix shift. Services margins improved as revenue grew faster than costs. Product costs remained flat despite 18.5% revenue growth, demonstrating strong operational leverage. Infrastructure investments including Seattle headquarters provide foundation for continued scaling.
Growth Catalysts and Material Risks: Key growth drivers include continued software transition, systems revenue recovery, and expanded security capabilities. Customer concentration risk increased materially. Cybersecurity threats remain significant concern requiring ongoing investment. Success depends on balancing legacy hardware business with software/cloud transformation while defending against cloud-native competitors.

Revenue

$3.09B ( YoY) with acceleration in product segment

↑ +9.7%

Gross Margin

(-120bps YoY) maintaining healthy levels

↑ 81.4%

Saas Revenue

$176M ( YoY) showing competitive pressure

↓ -9.1%

Product Revenue

$1.51B ( YoY) showing strong momentum

↑ +18.5%

Systems Revenue

$706M ( YoY) demonstrating hardware resilience

↑ +31.3%

Services Revenue

$1.58B (+2.3% YoY) providing stable foundation

Software Revenue

$803M ( YoY) with subscription growth

↑ +9.2%

Growth Indicators

of product revenue showing transformation progress

↑ 53.2%

Subscription Mix ↑33.7% of product revenue stable YoY

Subscription Revenue

$508M ( YoY) driving recurring revenue

↑ +17.9%

Customer Concentration

from top two customers (+110bps YoY)

↑ 33.3%

Key Risks

Customer concentration at 33.3% for top two customers creates vulnerability
Cybersecurity threats require ongoing investment and pose operational risk
Cloud-native competition pressuring SaaS revenue growth
Balancing hardware and software transformation execution risk

Key Opportunities

Expanded security capabilities addressing growing cybersecurity market
Continued software subscription transition driving recurring revenue
Systems business stability providing cash flow for transformation
Strategic real estate decisions supporting long-term operational scaling

Bottom Line

F5's FY2025 results demonstrate successful execution balancing traditional strength with strategic transformation. Strong product growth of 18.5% validates hybrid strategy spanning hardware and software. Increased customer concentration requires attention but also reflects strong enterprise relationships. Security investments position company for growing opportunities but require sustained focus. Key metrics to watch include software mix evolution, customer concentration trends, and competitive dynamics in cloud-native segments.