Summary
F5 reported fiscal 2023 second quarter revenue of $703 million, up 10.9% from the prior-year quarter. GAAP net income was $81 million, or $1.34 per diluted share, up 44.8% and 45.7% respectively. Non-GAAP net income was $154 million, or $2.53 per diluted share, compared with $131 million, or $2.13 per diluted share, in the prior-year quarter. Gross margin was 77.9%, down 2.2 percentage points. Operating margin was 15.1%, up 3.3 percentage points. The quarter included stronger systems shipments and solid global services performance, while software revenue declined. International revenues represented 48.8% of total net revenues for the three months ended March 31, 2023.
The company also announced a significant cost reduction plan. F5 is reducing its global headcount by approximately 620 employees, or approximately 9% of its total workforce. The company estimates annualized savings of approximately $130 million. It expects to incur approximately $45 million in severance benefits costs and other charges related to these actions in fiscal year 2023. F5 will also reduce its facilities footprint, apply additional scrutiny to discretionary projects, further reduce travel, and substantially reduce the size of its corporate bonus pool in 2023. The CEO will not take an annual cash bonus for FY23, executive leadership team annual cash bonuses will be reduced by 70% for FY23, and the employee MBO bonus pool will be 50% for Q2, Q3 and Q4 of FY23.
Guidance reflects persistent macro uncertainty. For fiscal year 2023, F5 now expects low-to-mid single-digit revenue growth, non-GAAP operating margins of approximately 30%, and non-GAAP earnings growth of 7% to 11%. For the third quarter of fiscal year 2023, the company expects revenue in the range of $690 million to $710 million, with non-GAAP earnings in the range of $2.78 to $2.90 per diluted share. F5 plans to repurchase at least $250 million worth of shares during the third quarter of fiscal year 2023. As of the date of the report, $1.23 billion remained under its currently authorized common stock repurchase program. The company has previously committed to returning at least 50% of its annual free cash flow toward share repurchases.
Balance sheet and cash flow metrics showed mixed trends. Deferred revenue was $1.80 billion, up 12.3%. Remaining performance obligations were $1.80 billion, up 12.5%. Operating cash flow for the current quarter was $140.92 million, up 11.4%. Capital expenditures were $10.69 million, up 104.5%. For the six months ended March 31, 2023, revenue was $1.40 billion, up 6.2%; net income was $153.84 million, up 2.7%; diluted EPS was $2.54, up 4.5%; operating cash flow was $298.55 million, up 37.7%; and capital expenditures were $23.79 million, up 50.7%. Year-to-date gross margin was 77.9%, down 2.3 percentage points, and year-to-date operating margin was 14.1%, down 0.2 percentage points. Days sales outstanding for the second quarter of fiscal year 2023 was 62. Cash and cash equivalents, short-term investments and long-term investments totaled $760.0 million as of March 31, 2023, compared to $894.1 million as of September 30, 2022, a decrease of $134.1 million. The decrease was primarily due to the voluntary prepayment of the Term Loan Facility, including the outstanding principal balance of $350.0 million, and $40.0 million of cash used to repurchase shares.
Risks remain elevated. Management said customer spending is pressured by macroeconomic uncertainty near term. The MD&A notes softer demand in customer orders for both software and systems products and services. F5 believes the current demand environment is temporary, citing its market position, customer budget constraints rather than competitive pressures or architectural shifts, and stronger than normal maintenance renewals. Other risks include supply chain disruptions, inflation, higher interest rates, slower growth, fluctuations in foreign exchange rates, geopolitical events, and the COVID-19 pandemic. The company also faces execution risk around its restructuring and cost reduction actions. The workforce reduction is expected to be completed by April 21, 2023, except in EMEA and parts of APAC where consultation continues.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $703.2M | $700.4M | +0.4% | $634.2M | +10.9% |
| Gross profit | $547.5M | $545.4M | +0.4% | $507.9M | +7.8% |
| Gross margin | 77.9% | 77.9% | -0.0 pp | 80.1% | -2.2 pp |
| Research & development | $141.4M | $142.3M | -0.7% | $135.8M | +4.1% |
| Sales & marketing | $233.1M | $233.1M | -0.0% | $228.8M | +1.9% |
| General & administrative | $67.0M | $70.0M | -4.2% | $68.6M | -2.2% |
| Total operating expenses | $441.5M | $454.2M | -2.8% | $433.2M | +1.9% |
| Operating income (loss) | $106.0M | $91.2M | +16.3% | $74.6M | +42.1% |
| Operating margin | 15.1% | 13.0% | +2.1 pp | 11.8% | +3.3 pp |
| Net income (loss) | $81.4M | $72.4M | +12.5% | $56.2M | +44.8% |
| Net margin | 11.6% | 10.3% | +1.2 pp | 8.9% | +2.7 pp |
| Diluted EPS | $1.34 | $1.20 | +$0.14 | $0.92 | +$0.42 |
Risks
Continued adverse global macroeconomic conditions and uncertainties have softened customer demand and purchase decisions, limiting F5's ability to forecast business activities. The filing cites rising interest rates, inflation, supply chain disruptions, and geopolitical conflicts such as the Russian invasion of Ukraine.
MD&A states that changes in customer buying patterns due to the uncertain macroeconomic environment led to softer demand for software and systems products and services in FY2023 Q2. Management believes this reflects customer budget constraints and delayed purchases rather than competitive or architectural shifts, but timing remains uncertain.
Two distributors accounted for more than 10% of total net revenue in FY2023 Q2: Ingram Micro at 16.5% and Synnex at 14.7%. Synnex also represented 13.9% of total receivables as of March 31, 2023, concentrating credit and revenue risk.
Gross margin decreased to 77.9% in FY2023 Q2 from 80.1% in FY2022 Q2, a decline of 2.2 percentage points. MD&A attributes higher cost of net product revenues to component cost increases, expedite fees, and other sourcing-related costs in the first half of fiscal 2023.
Summary, forecast, risks and KPIs are extracted from F5, INC.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.