What Are F5 Networks’ Key Sources Of Revenue?

Application delivery networking provider F5 Networks (NYSE:FFIV) has reported a declining contribution of product revenues to its net revenues in recent years. While the combined ADN market has grown at double digits in 2016 and 2017, up from mid single-digit growth in previous years, F5’s market share has declined consistently. This was due to the increasing presence of competing players in the market the market including Citrix Systems, Array Networks, Aryaka Networks. Furthermore, other large networking players such as Cisco (NASDAQ:CSCO), HP Enterprise (NYSE:HPE) and Juniper (NYSE:JNPR) also have a presence in this market.

Moreover, customer preferences have transitioned from purchasing standalone hardware and “on-premise” deployment of solutions to cloud-based and software-as-a-services (SaaS) offerings. This has given a strong boost to F5’s services segment. As a result, F5′ services segment has continued to grow at a rapid pace in recent years. This trend is expected to continue through the end of the decade, despite steady growth in revenues for F5 Networks.

We have summarized F5’s historic revenue growth by segment as well as our forecasts for future growth in our interactive dashboard. If you think differently, you can modify assumptions such as market size, F5’s market share, services as a % of product sales and others to see how they impact the company’s expected net revenues and revenue mix. The image above shows one of the key steps in identifying F5 Networks’ net revenue sensitivity to changes in individual drivers. We maintain our long-term price estimate for F5 Networks at $152, which is about in line with the current market price.

See our complete analysis for F5 Networks

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