SEATTLE - F5 Networks, Inc. (NASDAQ:FFIV) experienced an 11% drop in its stock price following the release of its second-quarter financial results, which revealed a guidance miss for the upcoming quarter.
The company reported adjusted earnings per share (EPS) of $2.91, slightly surpassing the analyst estimate of $2.87. However, revenue for the quarter was $681.35 million, falling short of the consensus estimate of $685.51 million.
The company's second-quarter revenue saw a 3% decline from the same period last year, down from $703 million to $681 million. Despite an overall revenue dip, F5's software revenue grew by 20% year-over-year (YoY), bolstered by a 28% increase in subscription software revenue.
Conversely, systems revenue plummeted by 32% YoY, and global services revenue saw a modest 5% YoY increase.
F5's President and CEO, François Locoh-Donou, attributed the solid quarter to strong software subscription renewals amid a cautious customer environment with largely flat IT budgets forecasted for calendar 2024.
He highlighted the company's role in addressing the challenges of operational complexity, costs, and security risks in hybrid and multicloud environments.
Looking ahead, F5 Networks provided guidance for the third quarter of fiscal year 2024, expecting revenue between $675 million and $695 million with adjusted EPS ranging from $2.89 to $3.01. This falls below the analyst consensus of $3.09 for EPS and $694.8 million for revenue.
Furthermore, the company anticipates flat to a 2% decline in fiscal year 2024 revenue growth compared to the previous year, aligning with previous forecasts. However, they have raised their fiscal year 2024 adjusted EPS growth outlook to 7%-9%, up from the earlier projection of 6%-8%.
The company's non-GAAP gross margin improved to 82.1% in the second quarter from 80.4% in the prior-year period, while non-GAAP operating margin increased to 30.9% from 27.2%.
The significant stock price decline reflects investor concerns over the company's lower-than-expected guidance for the next quarter. Despite the current quarter's earnings beat, the guidance miss appears to have overshadowed the positive aspects of the report.
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