A maker of software and hardware that keeps websites and apps fast, secure, and online, F5 sells products like BIG-IP, NGINX, and Distributed Cloud Services to businesses, governments, and service providers around the world. It was founded in Seattle in 1996 as F5 Labs by Jeffrey Hussey, launching its flagship BIG-IP load balancer in 1997. The name comes from the Fujita tornado scale—F5 being the most powerful category—meant to evoke the sheer force of traffic its devices could handle.
Systems revenue rose 32% and software returned to growth, lifting total revenue 11% to $865M and settling the mix-shift question.
F5's hardware business accelerated while software kept growing, ending the mix-shift whiplash that had clouded the margin story. rose 10.9% to $865.1 million, widened 1.3 points to 82.2%, and climbed 11.4% to $3.62, driven by a 32.4% increase in systems sales alongside a 7.4% rise in software subscriptions. The company enters the final quarter of FY2026 with both product categories expanding and $1.6 billion in cash, but operating expenses are climbing faster than revenue as cyber-incident costs persist.
Key takeaways
Systems rose 32.4% , the sixth consecutive quarter of growth and the fastest rate since the hardware recovery began, confirming the business has moved well past the FY2024 trough.
Software grew 7.4%, the second straight quarter of expansion after the 8.1% decline in Q1 FY2026, though the growth rate remains below the 16-18% pace of FY2025.
widened to 82.2% from 81.0% a year ago, as the 19.0% increase in product outpaced a 5.3% rise in product costs, even with the shift toward lower-margin hardware.
Section summaries
Management's Discussion and Analysis
Total revenue rose 10.9% YoY to $865M in Q3 FY2026, driven by a 32.4% surge in systems revenue and higher software subscriptions.
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Net product grew 19.0% to $462.8M, fueled by a 32.4% jump in systems revenue and a 7.4% increase in software revenue from subscription sales.
Net service increased 2.7% to $402.2M, primarily due to higher sales of maintenance contracts.
Operating expenses rose 14.4% to $498.2 million, with R&D up 20.8% and G&A up 21.5%, partly reflecting costs tied to the previously disclosed Cyber Incident; narrowed 0.5 points to 24.7%.
reached $316.2 million, up 12.1% , and the company spent $501.1 million on share repurchases during the quarter, bringing the first-nine-months total to over $1.2 billion.
Cash and equivalents rose to $1.61 billion, up 12.4% , with no debt outstanding.
What changed
The product-mix whiplash flagged in Q1 and Q2 FY2026 has settled: systems grew 32.4% while software grew 7.4%, a reversal from Q1 when systems rose 36.7% and software fell 8.1%, and from Q2 when systems rose 26.2% and software rose 16.7%. Both categories are now expanding simultaneously.
The Cyber Incident costs that appeared as a $9.3 million G&A item in Q1 FY2026 have persisted: operating expenses rose 14.4% , with R&D and G&A both up over 20%, suggesting these are not a one-quarter item.
at 82.2% is the highest in at least five years, up from 81.0% a year ago and 81.4% in Q2 FY2026, indicating that product-cost is more than offsetting the hardware mix shift for now.
Share repurchases accelerated sharply: $501.1 million this quarter, up from $401.1 million in Q2 and $301.1 million in Q1, with over $1.2 billion deployed in the first nine months of FY2026.
What to watch
Whether operating expense growth moderates in Q4 FY2026, or whether the 14.4% rate — driven by Cyber Incident costs and higher personnel spending — represents a new baseline that will compress further.
Whether software growth re-accelerates toward the mid-teens, or whether the 7.4% rate signals that subscription growth is settling into a lower range as comparisons against FY2025 become more demanding.
The trajectory of as systems continues to outgrow software: the 82.2% level held this quarter, but sustained hardware-led growth will test whether product-cost can keep offsetting the mix shift.
The pace of share repurchases under the remaining authorization, given over $1.2 billion has been spent in nine months and cash stands at $1.61 billion.
Total improved to 82.2% from 81.0% a year ago, as product growth outpaced a 5.3% rise in product costs.
Operating expenses climbed 14.4% to $498.2M, with R&D up 20.8% and G&A up 21.5%, partly reflecting costs from the previously disclosed Cyber Incident.
Cash and investments grew to $1.63B, supported by $841.4M in , while $501.1M was used for share repurchases.
Quantitative and Qualitative Disclosures About Market Risk
The company sees no material market risk from interest rates, inflation, or foreign currency at this time.
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Cash equivalents are in money market funds; a 10% rate swing would not materially affect the portfolio's fair value.
Inflation, including tariff impacts, has not materially affected the business, but sustained cost pressures could harm results if not offset by price increases.
Most sales, costs, and expenses are in USD; foreign currency transaction gains or losses have been immaterial to date.
International expansion may increase exposure to currency fluctuations, potentially causing volatility in the future.
No material changes in market risk disclosures occurred during the nine months ended June 30, 2026, versus the FY2025 10-K.
See Note 8 - Commitments and Contingencies of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding legal proceedings in which we are involved.
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See Note 8 - Commitments and Contingencies of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding legal proceedings in which we are involved.
Cybersecurity vulnerabilities, product errors, and AI-related risks remain the primary material risk factors, with no other changes from the 10-K.
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Security breaches or control failures in IT infrastructure or multicloud products could expose sensitive data, disrupt systems, and cause reputational and financial harm.
Undetected errors or vulnerabilities in products may disable customer networks, trigger warranty costs, and lead to legal claims or lost demand.
Advances in AI enable threat actors to discover and exploit vulnerabilities faster, potentially targeting the company's own AI models and infrastructure.
AI development and deployment risks include flawed algorithms, regulatory uncertainty, and the potential for AI to automate functions currently performed by the company's solutions, weakening demand.