F5 Networks Beats 3Q Estimates, Stock Drops 4% in After-Hours

F5 Networks (FFIV) reported stronger-than-expected 3Q results fueled by increased demand for digital solutions. Its adjusted earnings of $2.18 per share surpassed analysts’ expectations of $2.04 and came in higher than its guidance of $1.91-$2.13 per share, the company said on July 27.

Adjusted revenues in the third quarter increased 4% to $585.9 million year-over-year and beat Street estimates of $572.9 million.

“Large enterprise customers are accelerating their digital transformations, increasing their digital engagement, and boosting capacity and security on customer-facing applications and on platforms that enable employee collaboration,” said F5 CEO François Locoh-Donou. “Demand for solutions to meet these immediate and long-term business requirements drove 4% GAAP and non-GAAP revenue growth, and 43% non-GAAP software revenue growth in our third quarter.”

Buoyed by better-than-expected 3Q results, the company anticipates non-GAAP revenues in the range of $595-$615 million (mid-point $605 million) and earnings per share between $2.30 and $2.42 (mid-point $2.36). F5 Networks’ top and bottom line outlooks at mid-point are higher than Street estimates of $599 million and $2.29 per share respectively.

Ahead of its earnings, RBC Capital analyst Matthew Hedberg raised the stock’s price target to $154 from $135 but maintained a Hold. Hedberg remains optimistic about the potential of software and security. However, he is “reserved” on the service provider spending and the systems end-market.

Overall, FFIV analysts have a cautiously optimistic Moderate Buy consensus on the stock. The average analyst price target stands at $165.50, implying 9.4% upside potential. (See FFIV stock analysis on TipRanks).

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