Summary
F5 closed fiscal 2023 with fourth-quarter revenue of $706.97 million, up 1.0% from the prior-year quarter. Full-year revenue reached $2.81 billion, up 4.4%. The mix was uneven. Management pointed to software revenue growth and a decline in systems revenue, while services revenue grew. For the full year, services revenue grew and product revenue was roughly flat. Management tied the product softness to customer caution and budget constraints that began in late fiscal 2022 and continued through fiscal 2023.
Profitability improved sharply in the quarter. GAAP gross profit was $566.01 million, up 2.4%, and GAAP gross margin was 80.1%, up 1.1 percentage points. GAAP operating income was $171.74 million, up 59.7%, and GAAP operating margin was 24.3%, up 8.9 percentage points. GAAP net income was $152.13 million, up 70.3%. For the full year, GAAP gross profit was $2.22 billion, up 3.0%, with GAAP gross margin of 78.9%, down 1.1 percentage points. Full-year GAAP operating income was $472.57 million, up 17.0%, and GAAP operating margin was 16.8%, up 1.8 percentage points. Full-year GAAP net income was $394.95 million, up 22.6%, and diluted EPS was $6.55, up 24.3%. Non-GAAP operating margin was 33.9% in the quarter and 30.2% for the year. Non-GAAP diluted EPS was $3.50 in the quarter and $11.70 for the year.
Cash generation and backlog metrics were solid. Fourth-quarter operating cash flow was $189.80 million, up 23.0%, and full-year operating cash flow was $653.41 million, up 47.6%. Capital expenditures were $15.38 million in the quarter, up 80.8%, and $54.18 million for the year, up 61.1%. Deferred revenue at September 30, 2023 was $1.78 billion, up 4.9% from the prior-year date. Remaining performance obligations were $1.80 billion, up 5.9%. F5 also took restructuring actions in fiscal 2023 that it estimates will produce annualized savings of approximately $130 million.
Guidance points to a slower fiscal 2024. For the full fiscal year 2024, F5 expects revenue that is flat to a low-single-digit percentage decline from fiscal 2023 revenue. It expects non-GAAP earnings per share growth of 5% to 7% year over year, or at least 10% on a tax neutral basis. For the first quarter of fiscal 2024, the company guided revenue of $675 million to $695 million and non-GAAP earnings of $2.97 to $3.09 per diluted share. Management said subscription renewals performed well in fiscal 2023 and enterprise customer signs were encouraging in the fourth quarter, but customer caution is expected to persist. A $180 million headwind from strong backlog fulfillment in fiscal 2023 also tempers fiscal 2024 revenue growth expectations.
Risks remain centered on the demand environment. F5 cited uncertain macroeconomic conditions, customer budget constraints, softer demand for software and systems products and services, supply chain disruptions, component cost increases, and competitive pricing pressure. The company also faces execution risk around its restructuring and the need to convert its subscription and SaaS offerings into durable growth. Deferred revenue growth and a rising RPO balance offer some visibility, but the guidance implies that new product demand may stay muted until customer budgets loosen.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $707.0M | $702.6M | +0.6% | $700.0M | +1.0% |
| Gross profit | $566.0M | $561.0M | +0.9% | $552.6M | +2.4% |
| Gross margin | 80.1% | 79.8% | +0.2 pp | 78.9% | +1.1 pp |
| Research & development | $127.8M | $128.8M | -0.7% | $138.5M | -7.7% |
| Sales & marketing | $204.8M | $207.2M | -1.1% | $237.0M | -13.6% |
| General & administrative | $61.6M | $64.8M | -4.9% | $69.5M | -11.4% |
| Total operating expenses | $394.3M | $457.4M | -13.8% | $445.0M | -11.4% |
| Operating income (loss) | $171.7M | $103.6M | +65.8% | $107.5M | +59.7% |
| Operating margin | 24.3% | 14.7% | +9.5 pp | 15.4% | +8.9 pp |
| Net income (loss) | $152.1M | $89.0M | +71.0% | $89.3M | +70.3% |
| Net margin | 21.5% | 12.7% | +8.9 pp | 12.8% | +8.8 pp |
| Diluted EPS | $2.52 | $1.48 | +$1.04 | $1.46 | +$1.06 |
Risks
MD&A states that uncertain macroeconomic conditions and customer budget constraints led to softer demand for software and systems products and services, and stronger than normal maintenance renewals signal delayed purchases. Management believes the demand environment is temporary but continues to monitor it.
F5 has a lengthy and unpredictable sales cycle, relies on indirect channel partners, and historically receives a substantial portion of orders in the last weeks of each fiscal quarter. A delay in even one large account can cause quarterly revenue to fall below expectations.
Two worldwide distributors accounted for 30.6% of total net revenue for fiscal year 2023, with Ingram Micro at 15.6% and Synnex at 15.0%. A substantial reduction or delay in sales to these partners could harm results if not replaced.
The risk factor states F5's IT infrastructure has experienced breaches or disruptions and may be vulnerable to future attacks, and its multi-cloud security products are used to manage critical customer applications and data. Product errors or vulnerabilities could lead to liability, remediation costs, lost customers, and reputational harm.
Cloud-based and SaaS computing trends create competitive and execution risks, including large cloud providers offering their own application security and delivery functionality. F5 incurs infrastructure and securitization costs that may reduce gross and operating margins.
F5 has offices and employees in Israel, and the risk factor cites a significant increase in hostilities and political unrest in the region. Employees may be called for military reserve duty, which could disrupt operations if many are absent for significant periods.
A newly highlighted risk says F5 incorporates AI in certain products and operations, and AI-related issues or failures could trigger legal or regulatory action, reputational damage, or other material harm. It also faces significant competition in AI technologies.
F5 initiated restructuring plans in fiscal 2023, recording $65.4 million of restructuring charges for the year, including $56.7 million in the third quarter for workforce reduction and leased space exit. The company estimates annualized savings of approximately $130 million but notes execution and attrition risks.
F5 subcontracts hardware manufacturing to a single contract manufacturer and purchases several components from single or limited sources. Loss or impairment of that manufacturer or component supply could delay order fulfillment and harm revenue.
F5 is subject to evolving personal data protection laws, and certain data transfer safe-harbor exemptions have been challenged and may no longer be available. Noncompliance could lead to fines, enforcement, reputational damage, and increased compliance costs.
The effective tax rate rose to 18.7% in fiscal year 2023 from 16.4% in fiscal year 2022, and F5 may face greater than anticipated tax liabilities from transfer pricing, tax law changes, or examinations. The company had approximately $85.4 million of uncertain tax position liabilities as of September 30, 2023.
International revenues represented 47.1% of net revenues in fiscal year 2023, exposing F5 to tariffs, trade restrictions, regulatory changes, and Brexit-related uncertainty. These factors could harm future international revenue and operations.
F5 depends on key personnel and has recently experienced changes in its senior leadership team, while restructuring-related reductions may increase attrition among remaining employees. Competition for skilled personnel in Silicon Valley and Seattle is intense.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from F5, INC.'s SEC filings for Q4 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.