What To Expect From F5 Networks’ Fourth Quarter Earnings

F5 Networks (NYSE:FFIV) is scheduled to announce its fiscal Q4 FY’18 and full year earnings on Wednesday, October 24. The company has reported a modest 3% increase in net revenues to $1.6 billion for the three quarters of FY’18 combined. Product revenue fell 2% y-o-y to under $704 million, while services revenue rose 7% to $895 million in the same period. F5’s product revenues have stagnated as the company is facing some uncertainty in demand for its core ADC solutions over the cloud, since some of its customers are reevaluating their application architectures and deployment options. Comparatively, the services business has sustained revenue growth and has continued to outpace growth in its core ADN product sales in recent quarters. Going forward, we expect this trend to continue through the end of the current year. We have summarized our expectations and forecasts for FY’18 results on our interactive results forecast dashboard for F5 Networks. If you think differently, you can change expected segment revenue and margin figures for F5 Networks to gauge how it will impact the company’s results for fiscal year 2018.

Key Growth Trends

The combined ADN market has grown in double digits in 2016 and 2017, up from mid single-digit growth in previous years. In the same period, F5’s market share has declined consistently due to the increasing presence of competing players in the market including Citrix Systems, Array Networks and Aryaka Networks. Additionally, other large networking players such as Cisco (NASDAQ:CSCO), HP Enterprise (NYSE:HPE), Huawei and Juniper (NYSE:JNPR) also have a presence in this market. As a result, we forecast product sales for F5 to remain subdued over the next couple of years.

On the other hand, F5’s services segment has grown rapidly with customer preferences transitioning from standalone hardware and “on-premise” deployment of solutions to cloud-based and software-as-a-services (SaaS) offerings. The company reported mid-teens revenue growth consistently from FY’13 through FY’16. Although growth slowed down to around 7% in FY’17 and FY’18 thus far, it is still the only key area of growth for F5 Networks. We expect the company to end the year with sustained high single-digit services revenue growth.

See our complete analysis for F5 Networks

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