Earnings Recap — Q3 FY2026
CY Q3 2026 · Reported July 27, 2026 · Beat 7 of last 7 quarters
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F5's strong systems growth and AI-related wins underscore the accelerating AI infrastructure buildout, particularly in sovereign AI factories and on-prem AI data delivery. The company's position at the application delivery and security layer is becoming more critical as AI workloads and traffic expand, driving demand for higher-capacity hardware and AI-powered security solutions.
F5 delivered another strong quarter with 11% total revenue growth and 19% product revenue growth, driven by 32% systems growth and 7% software growth. The company highlighted continued momentum in AI use cases, with direct AI customer count up 50% sequentially and AI security customers doubling. They also noted strong adoption of their AI-powered WAF, with 15% of Distributed Cloud WAF customers adopting it and 75% running in blocking mode. Management cited multiple customer wins across hybrid multi-cloud, security consolidation, and AI data delivery, including a Fortune 100 displacement and a sovereign AI factory win in EMEA.
Management raised FY2026 revenue growth guidance to approximately 9% to 10%, up from 7% to 8%, and raised non-GAAP EPS guidance to $17.21–$17.33 from $16.25–$16.55. They expect Q4 revenue of $870M–$890M, with non-GAAP gross margin of 83%–84% (improved from prior view) and non-GAAP EPS of $4.14–$4.26. For FY2026, they expect non-GAAP gross margin of 83.5%–84% and operating margin of 34.5%–35.5%. They noted they are not revising FY2027 gross margin guidance of 80%–82% due to dynamic memory/storage component pricing. They also noted hardware growth is expected to continue for the next few years, supported by secular drivers like sovereignty and AI traffic.
“We have now delivered 8 consecutive quarters of double-digit product growth, a signal that F5 is precisely where the market needs us to be.”
on Product growth momentum
“We are not just riding these trends, we are using them to fuel our growth. We are innovating at a pace that is opening new markets and new use cases for F5 while deepening our relationships with existing customers and expanding our footprint across their environments.”
on Innovation and growth strategy
“We are not just riding these trends, we are using them to fuel our growth. We are innovating at a pace that is opening new markets and new use cases for F5 while deepening our relationships with existing customers and expanding our footprint across their environments.”
on Innovation and growth strategy
Are you seeing and expecting the revenues for your AI-related direct-related business to grow in line with that customer base? Or should we think that 50% growth is kind of a ballpark number there?
Francois said the customer count growth doesn't necessarily approximate revenue growth, but momentum is strong. AI data delivery continues to see strong momentum, and AI security customers grew 100% in the quarter. He also noted the indirect AI opportunity through ADC expansion, with hardware growth above 30% for the first three quarters.
Can you touch on the mix impact on high-performance systems and how sustainable that mix up is?
Cooper said the mix shift is driven by expansion use cases, digital sovereignty, and AI traffic, which require higher-performance units with better margins. He believes this trend will continue as it's still relatively early.
How do you think about the 32% systems growth and how much is cyclical versus secular?
Francois acknowledged a cyclical refresh component but highlighted secular drivers: sovereignty-driven data center reinvestment, AI traffic on-prem, and competitive takeouts. He noted the company changed its long-term hardware outlook to growth for the next few years.