January 28, 2025
Network application delivery and security specialist F5 (NASDAQ:FFIV) reported Q4 CY2024 results beating Wall Street’s revenue expectations , with sales up 10.7% year on year to $766.5 million. Guidance for next quarter’s revenue was better than expected at $715 million at the midpoint, 1.7% above analysts’ estimates. Its non-GAAP profit of $3.84 per share was 13.7% above analysts’ consensus estimates.
Is now the time to buy F5? Find out in our full research report .
“F5’s alignment with significant secular trends, a more stable IT spending environment, and our strong execution led to another record quarter,” said François Locoh-Donou, F5’s President and CEO.
Initially started as a hardware appliances company in the late 1990s, F5 (NASDAQ:FFIV) makes software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.
The amount of content on the internet is exploding, whether it is music, movies and or e-commerce stores. Consumer demand for this content creates network congestion, much like a digital traffic jam which drives demand for specialized content delivery networks (CDN) services that alleviate potential network bottlenecks.
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, F5 grew its sales at a weak 2.7% compounded annual growth rate. This fell short of our benchmarks and is a poor baseline for our analysis.
This quarter, F5 reported year-on-year revenue growth of 10.7%, and its $766.5 million of revenue exceeded Wall Street’s estimates by 7.2%. Company management is currently guiding for a 4.9% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, similar to its three-year rate. This projection is underwhelming and suggests its newer products and services will not lead to better top-line performance yet.
Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next .
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
F5’s billings came in at $914.8 million in Q4, and over the last four quarters, its growth was underwhelming as it averaged 4.5% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers.
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
F5 is extremely efficient at acquiring new customers, and its CAC payback period checked in at 11 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
We were impressed by how significantly F5 blew past analysts’ revenue, billings, and EPS expectations this quarter. We were also glad its revenue forecast for next quarter outperformed Wall Street’s estimates, though its EPS guidance missed. Still, this quarter had some key positives. The stock traded up 12.7% to $304.04 immediately following the results.
Sure, F5 had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free .
