What To Expect From F5 Networks’ Q1 Results

by Trefis Team
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F5 Networks
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F5 Networks (NYSE:FFIV) reports its Q1 results on January 23. While the legacy decline in the Application Delivery Controllers market is acknowledged by the company, F5 leaning towards software will likely be the key highlight of the company’s performance. The markets will also be watching out for new customer acquisition across the company’s portfolio.

We currently have a price estimate of $168 per share for F5, which is about in line with the current market price. Our interactive dashboard on F5’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.

 

F5 had reported slowing software revenue growth (24% y-o-y in Q3 an and 19% y-o-y in Q4) last quarter due to lumpiness in sales. The company’s management had also indicated that ELAs were driving consumption. The uptake of Cloud Edition along with better sales follow through and clients releasing pent-up demand (deferred revenue had been weak due to deferrals in Q4 to Q1) is also likely to start showing a ramp in software revenue towards management’s targeted growth of 30-35%.

What could also help software is the adoption of multi-cloud (and potentially edge) use cases, and management commentary around traction in the Cloud Edition is likely to be an important indicator.

On the hardware side, management has been open that it expects the ADC market to decline. However, the company also has been categorical in noting that the decline in the company’s ADC revenue will be slower than the overall market decline. In view of the fact that F5 moved its production out of China to Mexico in 2018, we will be keenly listening in for the company’s perspective of what could happen should President Trump’s envisioned Mexico wall see the light of the day.

Lastly, we will also be looking out for indicators around traction in F5-as-a-service (F5aaS), something the company’s management had mentioned as potentially becoming an important driver in 2019.

Do not agree with our forecast? Create your own price forecast for F5 by changing the base inputs (blue dots) on our interactive dashboard.

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