Application security provider F5 (NASDAQ: FFIV) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 8.5% year on year to $810.1 million. On the other hand, next quarter’s revenue guidance of $755 million was less impressive, coming in 4.7% below analysts’ estimates. Its non-GAAP profit of $4.39 per share was 10.6% above analysts’ consensus estimates.

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Company Overview

Originally named after the F5 tornado, the most powerful on the meteorological scale, F5 (NASDAQ: FFIV) provides security and delivery solutions that protect applications across cloud, data center, and edge environments for large organizations.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, F5 grew its sales at a weak 5.5% compounded annual growth rate. This was below our standard for the software sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. F5’s annualized revenue growth of 4.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, F5 reported year-on-year revenue growth of 8.5%, and its $810.1 million of revenue exceeded Wall Street’s estimates by 2%. Company management is currently guiding for a 1.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.7% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its products and services will face some demand challenges.

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Billings

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 punched in at $851.6 million in Q3, and over the last four quarters, its growth slightly outpaced the sector as it averaged 15.9% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects.

Customer Acquisition Efficiency

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 15.5 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give F5 more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

Key Takeaways from F5’s Q3 Results

We were impressed by how significantly F5 blew past analysts’ billings expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 5% to $276 immediately following the results.

F5 didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.