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investing.com -- F5 shares soared sharply after lifting its annual guidance as fiscal first-quarter results topped Wall Street estimates, driven by a jump in software and hardware revenue amid a stable enterprise IT spending backdrop.
F5 stock was up more than 15% in the premarket trade Wednesday.
For the three months ended Dec. 31, the company reported adjusted earnings of $3.84 per diluted share on revenue of $766 million, topping analyst estimates of $3.36 on revenue of $715.45M.
Software (ETR:SOWGn) revenue climbed 22% to $209M grew, while hardware sales grew 18.6% to $161M. Global services revenue of $398M grew 3% from the year-ago period.
"Software growth was helped by higher than expected expansion rates, but hardware revenue provided the biggest surprise this quarter, accounting for almost two thirds of the product upside vs. our estimate," Raymond (NSE:RYMD) James analysts said.
But despite the impressively strong first quarter, "the fundamental narrative of the business mix shifting towards software and away from hardware hasn’t changed," they cautioned.
"F5’s products continue to be sticky within its customer base, which helps drive further adoption of hybrid-cloud deployments, but also likely amplifies lumpy results in the immediate term."
For the Q2, non-GAAP earnings were seen in the range of $3.02 to $3.14 per diluted share on revenue between $705M and $725M, compared with consensus estimates for $3.22 and $703.6M, respectively.
For fiscal year 2025, F5 raised its revenue growth expectations to 6% to 7% growth from fiscal year 2024, up from its prior guidance of 4% to 5% growth. The company also raised its fiscal year 2025 non-GAAP earnings per share expectations to reflect 6.5% to 8.5% growth over fiscal year 2024, up from its prior guidance of 5% to 7% growth.
“F5’s alignment with significant secular trends, a more stable IT spending environment, and our strong execution led to another record quarter,” said François Locoh-Donou, F5’s President and CEO.
Similar to Raymond James, Jefferies analysts commended F5’s Q1 performance but retained a cautious stance.
"While we continue to be encouraged by the recent performance, our views of the company’s long-term revenue growth and EPS power haven’t changed significantly," analysts led by George C. Notter said in a note. "Their AI opportunity is interesting, albeit a ways out in the future."
Yasin Ebrahim contributed to this report.