Summary
F5 reported fiscal 2023 third quarter revenue of $702.64 million, up 4.2% from the prior-year quarter. Gross profit was $560.96 million, up 3.2%, while gross margin slipped to 79.8%, down 0.8 percentage points from the prior-year quarter. Operating income fell to $103.57 million, down 3.6%, and operating margin was 14.7%, down 1.2 percentage points. Net income rose to $88.98 million, up 7.2%, and diluted earnings per share were $1.48, up 8.0% from the prior-year quarter. On a non-GAAP basis, F5 reported gross margin of 82.5%, operating margin of 33.2%, net income of $194 million, and diluted earnings per share of $3.21. The non-GAAP operating margin compared with 28.8% in the prior-year quarter, showing significant operating leverage even as GAAP operating income declined.
Cash generation was a clear highlight. Operating cash flow for the quarter was $165.05 million, up 131.2% from the prior-year quarter. For the first nine months of fiscal 2023, operating cash flow was $463.61 million, up 60.8% from the same period a year earlier. Capital expenditures were $15.01 million in the quarter, up 61.0%. Deferred revenue ended the quarter at $1.79 billion, up 9.4% from the prior-year quarter, and remaining performance obligations were $1.80 billion, up 12.5%. Those backlog and renewal metrics suggest customers continue to commit to maintenance and subscription contracts even as new product demand faces pressure.
Guidance for the fourth quarter of fiscal 2023 calls for non-GAAP earnings of $3.15 to $3.27 per diluted share. Management also reiterated a target of double-digit non-GAAP earnings growth for the full fiscal year 2023. The company described an environment that remains challenged by macroeconomic uncertainty. Customer budget constraints have led to softer demand for software and systems products and services. Management believes the demand environment is temporary, pointing to application and API growth and stronger maintenance renewals. Risks include supply chain disruptions, component cost increases, foreign exchange fluctuations, geopolitical conditions, and the execution of restructuring actions.
The quarter presents a mixed picture. Revenue growth and non-GAAP profitability improved, and cash flow expanded sharply. GAAP operating margin compressed, however, and gross margin declined. The restructuring plan initiated in the third quarter is intended to align costs with strategic priorities and drive long-term efficiencies. Deferred revenue and RPO growth provide some visibility, but the pace of new product demand remains the key variable. Investors will watch whether demand stabilizes in the fourth quarter and whether gross margin trends improve as the company manages costs and supply chain pressures.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $702.6M | $703.2M | -0.1% | $674.5M | +4.2% |
| Gross profit | $561.0M | $547.5M | +2.5% | $543.8M | +3.2% |
| Gross margin | 79.8% | 77.9% | +2.0 pp | 80.6% | -0.8 pp |
| Research & development | $128.8M | $141.4M | -8.9% | $138.7M | -7.2% |
| Sales & marketing | $207.2M | $233.1M | -11.1% | $226.7M | -8.6% |
| General & administrative | $64.8M | $67.0M | -3.4% | $70.8M | -8.5% |
| Total operating expenses | $457.4M | $441.5M | +3.6% | $436.3M | +4.8% |
| Operating income (loss) | $103.6M | $106.0M | -2.3% | $107.5M | -3.6% |
| Operating margin | 14.7% | 15.1% | -0.3 pp | 15.9% | -1.2 pp |
| Net income (loss) | $89.0M | $81.4M | +9.3% | $83.0M | +7.2% |
| Net margin | 12.7% | 11.6% | +1.1 pp | 12.3% | +0.3 pp |
| Diluted EPS | $1.48 | $1.34 | +$0.14 | $1.37 | +$0.11 |
Risks
Risk Factors state continued adverse global macroeconomic conditions and market uncertainties have softened customer demand and purchase decisions, limiting visibility into future business activities. MD&A says changes in customer buying patterns due to the uncertain macroeconomic environment and customer budget constraints led to softer demand for software and systems products and services.
MD&A notes stronger than normal maintenance renewals signal delays in new product purchases as customers extend maintenance contracts over products they currently own, which the company attributes to macroeconomic uncertainties rather than architectural shifts or competitive losses.
In Q3 FY2023 F5 initiated a restructuring plan and recorded a $56.7 million charge for workforce reduction and leased space exit, estimating approximately $130 million in annualized savings. Execution may disrupt operations or fail to achieve expected cost savings.
For the quarter ended June 30, 2023, Ingram Micro accounted for 14.3%, Synnex 15.8%, and Carahsoft 10.7% of total net revenue, and these distributors also represented significant receivables concentrations. Loss or disruption of a major distributor could materially reduce revenue.
Gross margin decreased to 79.8% for the quarter ended June 30, 2023 from 80.6% in the prior-year quarter, and decreased to 78.5% year to date from 80.4%. MD&A attributes product cost pressure partly to component cost increases, expedite fees, and other sourcing-related costs.
Cost of net product revenues increased 19.6% for the quarter and 26.6% year to date, driven by systems product revenue growth and component cost increases, expedite fees, and sourcing-related costs. F5 also has a $40 million four-year component purchase commitment with $30.0 million outstanding as of June 30, 2023.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Summary, forecast, risks and KPIs are extracted from F5, INC.'s SEC filings for Q3 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.