How Does F5 Networks Primarily Make Money: Product Sales or Services?
F5 Networks‘ (NYSE:FFIV) makes money through the sale of networking and security offerings. The company’s stock has been upbeat since it announced the acquisition of NGNIX in March. NGNIX was a key competitor to F5 in the application delivery market, with NGNIX operating as an open source outfit. However, the addition of NGNIX helped F5 post growth rates exceeding 90% in its software business for the last couple of quarters which in turn increased the overall growth momentum for its overall business.
Trefis captures trends in F5 Networks’ Revenues over recent years along with our forecast for the next two in an interactive dashboard. Notably, the company’s product sales revenues over recent years have been dwarfed by its services revenues.
A Quick Look At F5 Networks’ Revenues
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F5 Has Operating Segments:
- Application Delivery Network: Segment revenues are derived from the sale of products, which includes networking and security offerings.
- Services: Segment revenues are derived from the sale of associated professional services, including maintenance contracts.
We expect Application Delivery Network Revenues and Services Revenues to contribute $1.0 billion (43%) and $1.4 billion (57%), respectively, to the company’s 2020 revenue of $2.4 billion.
F5 Networks’ revenue grew 7.3% over 2017 to 2019 to $2 billion and is expected to increase 17% to nearly $3 billion by 2021.
- Application Delivery Network Division revenues have remained quite stagnant over the last couple of years, but we expect it to grow by $0.1 billion over the next two years due to an increasing software component in the revenues, especially driven by NGNIX.
- Services Division revenues have grown 5-6% on average over the last two years, and we expect it to grow at nearly 10% over the next two years thanks to incremental support use cases driven by growing software revenues.
Additional details about the trends in actual revenues for F5 Network’s operating segments over the years can be found in our interactive dashboard.
