What Can We Expect From F5 Networks’ Q4’16 Earnings?

Leading application delivery controller provider, F5 Networks (NYSE:FFIV) is set to report its Q4 2016 earnings on October 26th. (Fiscal years end with September.) The company has guided a revenue of approximately $520 million for the fourth quarter, which essentially implies an annual revenue of $1.98 billion, reflecting approximately 3.6% year over year growth. The tepid revenue growth estimate for F5 is indicative of the challenges faced by the company in the evolving landscape of the Application Delivery Controller (ADC) market.

The company is facing competition not only from new entrants in the ADC market but also from native cloud-based service providers. Traditionally, ADC vendors have focussed on helping customers manage applications in their own data centers. However, as more and more applications are now being deployed on cloud, ADC vendors are increasingly focussed on evolving their support for applications on the cloud. Consequently, these companies have to compete with the offerings of cloud vendors. Thus, despite being a market leader in the ADC market, F5’s market share is being slowly eroded by cloud vendors. According to Gartner, F5’s market share declined from 49% in 2014 to 47% in 2015.

Nevertheless, the company’s product refresh cycle should support its product revenue growth in the near term. Meanwhile, the company can work on strengthening its cloud-based offerings to maintain long-term growth. F5 claims that its new appliances, named the Shuttle series, have significant performance improvements over its previous line of products, due to which we can expect a slight uptick in the company’s revenues and gross margins in the near term.

In the table below we look at the key metrics as expected for the company in Q4’16:

For information, please refer to our complete analysis for F5 Networks

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