F5 Networks at Goldman Sachs Conference: Navigating Multi-Cloud Complexity

On Tuesday, 09 September 2025, at the Goldman Sachs Communicopia + Technology Conference, F5 Networks (NASDAQ:FFIV) outlined its strategic approach to tackling the complexities of hybrid multi-cloud environments. The company highlighted its focus on application and API delivery and security, while also addressing challenges such as the rapid proliferation of AI applications. Despite these challenges, F5’s market positioning and financial performance have shown resilience and growth.

Key Takeaways

• F5 has gained 16% of the ADC market share over the past five years.
• The company is targeting a 35% operating margin for the year.
• Software revenue is expected to grow in the mid-single digits for fiscal 2026.
• F5 is capitalizing on AI-related investments and hybrid multi-cloud adoption.
• The company aims to unify its product families under a single platform.

Financial Results

F5 Networks reported strong financial performance, with a revenue growth guidance of 9% at the midpoint for the year. The company attributes this growth to its expansion in software and systems. F5 is focusing on improving operating margins through disciplined management, targeting a 35% operating margin for the year.

Operational Updates

F5 emphasized its strategic positioning in the ADC market, gaining 16% market share over the last five years. The company is addressing the refresh cycle of older generation systems, with over 50% of its installed base on older models. F5 is also seeing non-refresh demand driven by hybrid multi-cloud adoption and AI-related investments.

Future Outlook

Looking ahead, F5 aims to bring its product families together under a single Application Delivery and Security Platform (ADSP). The company sees significant opportunities in AI data delivery and security over the next 12-24 months. F5’s management expressed confidence in their strategy, emphasizing their ability to provide a single platform for securing and delivering applications across diverse environments.

Q&A Highlights

During the conference, François Locoh-Donou, President and CEO of F5, highlighted the company’s unique approach of offering all delivery and security services in a single software stack. Cooper Werner, CFO, noted that customers are moving up in the appliance stack, investing in additional capacity ahead of potential AI growth. F5 continues to provide services to assist customers during transitions, with significant cross-sell opportunities after initial entry.

For more detailed insights, readers are invited to refer to the full transcript.

Full transcript - Goldman Sachs Communicopia + Technology Conference 2025:

Mike Ng, Host, Goldman Sachs: Wonderful. Thank you, everybody. Welcome to the F5 Fireside Chat at the Goldman Sachs Communicopia and Technology Conference. I have the privilege of hosting and introducing François Locoh-Donou, who’s the President and CEO of F5, and Cooper Werner, who is the CFO of F5. My name is Mike Ng, and I cover F5 and IT hardware and networking here at Goldman Sachs. We have about 35 minutes for today’s presentation, inclusive of a couple of minutes for a master Q&A. I wanted to thank you both for being here with us. It’s been an incredible privilege to have you here at the conference and on stage with us.

François Locoh-Donou, President and CEO, F5: Thank you for having us, Mike.

Cooper Werner, CFO, F5: Thank you.

François Locoh-Donou, President and CEO, F5: Michael, maybe before I respond, do you mind if I read?

Mike Ng, Host, Goldman Sachs: Please, yeah.

François Locoh-Donou, President and CEO, F5: Safe Harbor. I need to get our Safe Harbor on record. Our discussion today may contain forward-looking statements, which involve uncertainties and risks. Our actual results may differ materially from those expressed or implied by these statements. Please see our SEC filings for more information on these risk factors.

Cooper Werner, CFO, F5: Thank you.

Mike Ng, Host, Goldman Sachs: To start things off, maybe just a bigger picture question. F5 is a leader in the ADC and security market. The company talks about this intensifying complexity that customers face in a hybrid multi-cloud environment. Could you elaborate on some of the challenges here and why F5 is uniquely situated to address some of the complexities that customers face?

François Locoh-Donou, President and CEO, F5: Yes, of course. The complexity that customers face today comes from a couple of what we consider to be secular trends. The first one is that most large enterprises now have embraced hybrid multi-cloud architectures. They need the flexibility of being in multiple infrastructure environments to deploy their apps in the most efficient way, and different apps need different kinds of environments. Of course, with that flexibility of being in multi-cloud environments comes the complexity of securing and delivering apps across these environments. That’s the first source of complexity. The second source of complexity is that the number of application services that are required to secure and deliver applications has increased substantially over the last seven years because applications have evolved substantially. It used to be things like just load balancing and maybe web application firewall. Now you need API security. You need securing against bot attacks, as an example.

We’ll talk about AI in a moment, but those are net new services. There are more application services required by customers. Thirdly, AI, the rapid proliferation of AI applications, is also going to exacerbate this complexity because it requires new services like AI security, which we will talk about. For these reasons, and largely because customers have responded to these complexities by adding a lot of point solutions in their environment, they have ended up with very complex application infrastructure environments. We at F5 call this the ball of fire.

The reason we’re very well positioned to address that is because we made a strategic choice several years ago to remain entirely focused on application and API delivery and security, but within that category, to invest across hardware, software, and software as a service, such that we could secure and deliver all these apps and APIs across all these infrastructure environments. Increasingly, we have been bringing all products, all of these form factors in our portfolio into a single platform to make it even easier for customers to operate across multi-cloud environments.

Mike Ng, Host, Goldman Sachs: Great. Maybe just going back to some of the basics, I was wondering if you could just talk about the role of an ADC in a modern data center. I think there’s a perception that, hey, this is a piece of hardware that is probably more of a legacy piece of hardware, but the demand and the growth in the category has been very strong, right? You guys have been leading the charge there. Maybe you could just take a moment and clear up any potential misperceptions beyond ADC just being a legacy device and why the features that are made available through ADC are still critically important to workloads today.

François Locoh-Donou, President and CEO, F5: At a most fundamental level, yes, an ADC sits in the network in enterprise infrastructure, but it’s very different than a traditional data center switch. A data center switch is typically layer three to layer four technology, whereas an ADC is layer seven technology. The simplest analogy here to describe the difference at a fundamental between the two is a data center switch. If you think about it in a postal environment, a data center switch is going to look at a letter you’re sending. It will look at the address of this letter and route it accordingly, whereas an ADC is going to read the entire letter that’s inside and pretty much read every word and make decisions to let the traffic go or route it based on that. This very deep, granular inspection of traffic is what makes ADCs a very unique category.

Essentially, it’s why ADCs have been placed by customers right next to their application, and we control 100% of the traffic that is going into our customers’ mission-critical applications. Why is the category growing? The category is growing because, first of all, the number of applications continues to grow. Applications are deployed in more and more complex environments, and it also requires ADCs in different form factors, in hardware, in software, in software as a service. As application architecture changes and application attacks continue, there are more services, more functions than an ADC needs to do. It’s always from the perspective of having very granular inspection of traffic, but that is the thing that originally allowed us to do maybe just performance and uptime, and now allows us to do a lot more in security. The application delivery and security today have converged. You can’t separate the two.

The role of ADCs for applications has increased significantly. That’s why the category is very different than typical switches, and it’s evolving very quickly because there are more applications, they require more application services, and they are deployed in more diverse environments requiring multiple form factors of ADCs.

Mike Ng, Host, Goldman Sachs: Maybe we can just double-click on what’s happening in the ADC category, talk about ADC market share. Some of the market research data that we’ve seen is that F5 has gained 16% of market share over the last five years within the ADC market. Put simply, what’s going on and why are you gaining so much market share? I think this is a very intriguing story in terms of why there are so many opportunities for you here.

François Locoh-Donou, President and CEO, F5: The choice that we have made, and I think it’s a choice that now dates back to a few years ago, is if I go back a few years ago, at the time, there was this perception that you mentioned that ADCs were hardware, it was legacy, that everything was going to the public cloud, and therefore, there was not going to be a lot of growth opportunity in the ADC market. We took an approach that was to say, actually, we think application delivery and security are converging. We think ADCs are going to be playing a huge role in that convergence, and they’re going to be deployed in multiple form factors. We’re going to double down in this category of application delivery and security, and we will invest in hardware, software, SaaS, all the form factors.

Some of our competitors did not make that choice, stopped either investing, or they were in one category of it and decided to stay in hardware or in pure software or in pure SaaS. No other competitor made the choice to invest in application delivery and security across all form factors. The reason we’re getting share today is that I think we’re reaping the rewards of those strategic choices, meaning we have all of the delivery and security services now in a single software stack, and we can deploy it in any form factor that a customer may want, and also in any commercial model that a customer may want, be it perpetual license, software subscription, or software as a service. That gives us an enormous advantage in that market. The result of that is we’re seeing share gains in a couple of different flavors.

One is simply displacing competitors as a substitution. You’re going in and a customer had this competitor, and they replace it by F5 because there’s a stronger roadmap, there’s more features, there’s a better commercial model. The second flavor is consolidating spend on F5. There are customers that may be doing one application delivery and security service with a competitor, another one with a second competitor, and a third with F5. Now that we have this portfolio with all form factors and all commercial models, it’s easy for customers to say, I will just consolidate the spend on F5.

We are accelerating that phenomenon by bringing all of our products into the single application delivery and security platform, which not only makes it easy commercially for customers to consolidate on F5, but makes it easier for customers operationally to do that because we give them a single pane of glass, a single software stack, and a single place to put policy and orchestration of our solutions.

Mike Ng, Host, Goldman Sachs: How would you describe why your competitors in the ADC market aren’t investing like the way you are? My understanding was your primary competitors have either been acquired and kind of run for cash, and that includes being really aggressive with price increases. I don’t know if that’s a fair description of how you view the competitive market, but we’d just love to hear your thoughts there.

François Locoh-Donou, President and CEO, F5: I think it’s a fair description of how I view our competitors in the traditional ADC market. We have competitors in software as a service. We have competitors that come more from a cloud offering in security in particular. We have competitors in each of these categories, but where we are unique is in our ability to bring all of that under a single platform that can be delivered in multiple form factors, but it’s a single platform. That’s where we don’t really have competition today.

When you look at the complexity that customers are facing, what I called the ball of fire earlier, having a single platform that you can go to and say, I’m going to have a single place from which I can see how I’m securing all of my applications across all clouds, I’m securing all of my APIs across all cloud environments is a pretty powerful proposition. Beyond the sheer, OK, these are the technology assets we have on the table, I think our customers also see us as a company that is invested in the space, that is innovating, and that is trusted. That is an important part of how we differentiate.

Mike Ng, Host, Goldman Sachs: Right. You’ve got market share gains, but I think there’s also a very interesting refresh story as well, where you have this large installed base of users. I think you have said more than 50% of the installed base is on older generation Viprion or iSeries, and I think there’s an emphasis on well over 50%. I don’t think you guys have quantified exactly where that number is. With end-of-software support for some of these legacy products coming in the next 12 to 24 months, maybe you could just update us on the pace and timing of refresh and how that gives you visibility into, I’ll call them, upgrades over the next couple of years.

Cooper Werner, CFO, F5: Yeah, I’ll take that. In the last refresh cycle, we saw customers that were refreshing at a slower pace than we normally would have seen. We think a lot of that was they were still kind of grappling with the architectural choice of where ultimately are their applications going to live. There’s aspirations to move everything to the public cloud, so they were kind of reinvesting in that refresh motion at a bare minimum cadence. As you progressed through that refresh cycle, you saw a lot of customers, for macro reasons and budget impacts, sweating their infrastructure. There’s a little bit of a lag on what would normally be the cadence that they would refresh their equipment. What we’re seeing now is a more orderly approach to that refresh with customers.

As you said, we’re still very early in that refresh cycle, but we’re seeing really a pickup as customers have maybe recognized some of the challenges that were brought from a prior approach to that refresh. We’re also seeing growth in the form of capacity expansion at that time of refresh. Customers are recognizing some kind of new dynamics around things like data sovereignty and compliance considerations, where they recognize that the data center is an area where they need to be invested for the long term. We’re also seeing what we call indirect demand related to AI, where customers are recognizing that the growth in application workloads may be accelerated based on their AI journey. At that time of refresh, they are expanding at a higher rate than what they may have otherwise expanded at.

One of the things that we’re seeing is a lot of customers at the time of refresh are moving up in the stack. We have an appliance family that runs from the low end to the high end. Typically, in a refresh cycle, that mix would stay pretty consistent. What we’re seeing is that a subset of our customers are moving up in that stack from either the low end to the mid end or mid end to the high end. We see that as additional capacity that they’re investing in ahead of some of the growth they could be seeing from AI.

Mike Ng, Host, Goldman Sachs: Great. I think on the, I think it was last year’s call, you guys talked about one third of the systems revenue coming from what was described as, I think, non-refresh demand, right? Some of that was AI. I guess some of that is new use cases, modernization, capacity expansion. Maybe you can just talk a little bit about the key drivers of those non-refresh demand drivers and whether these are related to mostly existing customers or are you actually getting net new customers who are interested in some of the things like supporting AI application delivery and security that helps you get new customers as well.

François Locoh-Donou, President and CEO, F5: I would say there are three drivers of this non-refresh, non-tech refresh motion that we’re seeing. I think those are more secular. Refresh, of course, is a cyclical phenomenon. These other drivers are more secular trends that we’re seeing. The first is hybrid multi-cloud architectures. We’re seeing customers who in the past had been maybe hesitant to add data center capacity because they thought ultimately they would all go in the cloud, who are now embracing that they’re going to be a hybrid multi-cloud environment, that their data center assets are actually strategic assets for them, and therefore are much more comfortable investing in hardware in data centers. Sometimes hardware and software, but that’s trend number one. Trend number two, we already talked about, which is competitive takeouts. That’s not a refresh per se, but it’s taking wallet share or taking footprint from competitors.

We can see you see opportunity there for multiple years. I would say the third driver is really related to AI, and it’s in two flavors. One is customers getting their data center ready for AI, investing in more capacity, potentially doing some data repatriation or application repatriation, and generally expecting that AI traffic is going to be important and making sure their infrastructure is ready for that. The second flavor of AI is those are direct use cases where we know customers are putting F5 hardware in front of data stores in a data delivery use case, meaning they’re trying to connect AI models to data store or AI applications to data stores. They do need in front of these data stores high-performance traffic management and security, and they are introducing F5 for that.

Those are net new use cases that are not related to refresh that we are starting to see. It’s a small number of our customers that do that today. It’s a tiny portion. We said on our earnings call in July that it was single-digit millions of dollars per quarter, but we expect that to be steady growth going forward.

Mike Ng, Host, Goldman Sachs: That’s great. Shifting gears and maybe just talking about software growth and software renewals, I think you have a revenue growth outlook for fiscal 2026 of mid-single-digit growth in software. And software is a lot of different components, perpetual, SaaS, and term. Could you just talk a little bit about some of the dynamics that impact software revenue growth? What does the fiscal 2023 cohort look like for term, and how does that inform how you think about fiscal 2026?

Cooper Werner, CFO, F5: Yeah, you’re right. We have a number of flavors of software. We’ve got perpetual software, which is a fairly steady state. It’s one of the benefits that François alluded to, where we provide customer choice. We’re very intentional about that, and it’s a good contributor to our software revenue. We have our SaaS and managed service business, which is largely our distributed cloud platform, and then some legacy offerings that we are transitioning onto that platform. The biggest part of the business is the term license subscription business that you’re referencing. That’s kind of where we’re looking ahead to next year and providing, it’s not an outlook yet, but it’s just kind of a starting point on how to think about next year. What we’ve said is the majority of our term license subscription business is sold on these multi-year subscriptions. We call it the flexible consumption program.

It’s been probably the most successful commercial model that we’ve had over the course of our history at F5. It really facilitates a glide path for customers to expand how they’re consuming F5. It takes a lot of the friction out of the process. That motion, because it’s a three-year motion, that renewal, when you look at what that opportunity could look like, you want to look back three years ago. FY 2023, that was where we had some challenges related to the macro. The software business was flattish year over year. Within that subscription cohort, there was modest growth. As you look ahead to three years later, that base, that’s what we’re growing against, a base that had modest growth in it. What’s the expansion opportunity off of that base? This year, we’ve had strong expansion rates.

Next year, we’ve got a base that’s setting the expansion to the side. That base has modest growth in it. We also expect to see healthy expansion in next year. We’ve talked a lot about our strategy around the platform, the ADSP platform, and really that’s something that we think is going to help drive a faster rate of expansion for customers. That’s the opportunity to drive a higher rate of growth. Just as a starting point, when you look at the base, that’s kind of what we outlined as the dynamic behind that mid-single-digit early view.

Now, what you want to do when you’re considering that is look ahead then to the following year, because that’s a math headwind on FY 2026 reported revenue growth opportunity that flips in FY 2027, where you had a stronger growth of software in FY 2024 that will be coming up and make that next base. The last dynamic is on the SaaS piece of our business, where we’ve been sunsetting some legacy offerings and transitioning some offerings onto the new platform. We think the majority of that work will be behind us as of the end of this year. The underlying growth that you’re seeing on the platform will start to matriculate in terms of ARR growth and then revenue growth in FY 2027.

Mike Ng, Host, Goldman Sachs: That’s great. Sorry, if I could just jump back on the competitive takeouts for a moment. What is the process for a competitive takeout? Like, said differently, as a for instance, if F5 was replacing Citrix, how long would that process take? I know you guys generate an incredible amount of your revenue from services, and maybe you could also just touch upon the service component and the complexity of the systems that require healthy services.

François Locoh-Donou, President and CEO, F5: ADCs in general are very sticky, and that’s because they’re so close to applications. Making a move, changing ADC vendors is actually quite a complex undertaking. We have a number of folks in our services organization that are very, very good, are hand-holding customers and helping them make a transition. Customers don’t do that overnight. Typically, they would introduce F5 in their estate, ensure that for a portion of their estate, all is going well and that transition is going well, and over time, roll out more F5 into their entire estate. That is also why we continue to be excited at this opportunity, is that even though we have won a number of estates from competitors, in a lot of cases, it was the initial entry into these estates.

Even within the estates that we have won, we see a lot of runway to go and get more wallet share over time, in addition to a lot of the new estates that we think we’re going to win in the next couple of years. The process takes time. It could take multiple years for F5 to basically win over the full estate of a customer if the customer has decided to go single source with F5 over time. It’s also a multi-year opportunity in terms of revenue services associated with it. What we’re seeing, Michael, is a lot of customers come to us because they have a single pain point around a certain vendor and they want to replace that vendor. When we come into the estate, they then discover the breadth of F5’s portfolio.

They discover F5 Distributed Cloud, they discover our API security solution, they discover what we’ve done with NGINX around security. We see significant cross-sell opportunities into the estate to bring the breadth of the application delivery and security platform from F5 to these customers.

Mike Ng, Host, Goldman Sachs: Right. Your entrée into a potential competitive displacement might be that person didn’t like the price increases they got from your competitor, and then the...

François Locoh-Donou, President and CEO, F5: We come in with a single product for a single function. That’s the initial entrée. After that, there’s a ton of opportunity to cross-sell and upsell the rest of the platform, if you will.

Mike Ng, Host, Goldman Sachs: Great. Could we just talk a little bit about security? I mean, the company has, I think, increasingly been incorporating and investing in security capabilities across its entire portfolio. I think last year, security represented about 41% of revenue. Why is F5 well positioned to address application security when you think about security as an umbrella? Which facets of security does F5 compete in most aggressively?

François Locoh-Donou, President and CEO, F5: I’m going to go back to what I said earlier, that we, ADCs, control 100% of the traffic going into mission-critical applications. Originally, our customers used the ADC capability, this very granular inspection of application traffic. They used it primarily to keep the applications performing and to keep them available. Over time, customers have realized that that place of inspection was an ideal place to also secure applications, protect them before attacks reach the applications or the database behind the application. F5 has been in security now for over a decade, primarily from this place of inspecting traffic very granularly and securing applications. Today, application delivery and security have converged. You cannot really separate the performance of an application from the application being secure. That makes F5 absolutely critical to all application security. Now, where we do that today is in three places.

The first is we secure the front end of all applications and APIs with what we call our WAP portfolio, which is Web Application API Protection. We secure the front end of applications with those solutions in all forms, in hardware, software, or SaaS. Two is we also secure users and the workforce by securing their access with our zero trust access solution, securing their access to applications. Increasingly, we’re bringing our capabilities to securing the new AI stack. If you think about it in AI, securing AI basically requires securing every token. That is more of a layer seven capability, and that’s where F5 shines. We are bringing this capability. We’ve built and introduced a product called an F5 AI Gateway that secures the connections between AI applications and AI models, provides delivery and security for these connections. That’s very specific to AI traffic and AI protocols.

We’re going to augment the capabilities of this solution going forward because we think AI security as a market is one where F5 has an important role to play.

Mike Ng, Host, Goldman Sachs: Great. Cooper, I was wondering if I could ask you about financial guidance. The company has performed incredibly well this year. You guys are guiding to 9% revenue growth at the midpoint, which is up from the initial outlook of 4% to 5%. What drove the outperformance this year, and how are things pacing kind of post last quarter?

Cooper Werner, CFO, F5: Yeah, we’ve been seeing outperformance across both software and systems. Our initial outlook on software was for upper single-digit growth. On the strength of some of the expansion outperformance, we updated our guidance to at or around 10%. On the system side, we don’t specifically guide, but the growth that we’ve seen is in the upper 20% year to date. A lot of that is on some of the factors that we’ve already discussed. We’ve seen real strength in the refresh motion and the expansion at that time of refresh, which is kind of a new phenomenon. Growth in the non-refresh side has been effectively at the same levels of growth as on the refresh, and that is very new.

If you look back two years ago, that wasn’t an area where we anticipated seeing a lot of growth, but some of these new dynamics that customers are grappling with are driving them to increase their capacity and ready for AI. That’s really what’s been behind the strength of the year. We discussed on our April call that we were seeing really strong results. Our pipeline suggested we could have a strong back half of the year, but there was a lot of macro uncertainty related to tariffs, et cetera. We took what we think is a prudent posture around our guide for the second half of the year, while at the same time acknowledging that we’re not actually seeing this impact our business. If we don’t see a deterioration in the macro, we would expect to outperform the rest of the year.

At that time, we had taken our guidance up to 6% to 7%, and we’ve increased it through the year to the 9% guide that we’re at right now.

Mike Ng, Host, Goldman Sachs: Great, on the margin side of the equation, what’s been helping there, and do you see further opportunities for continued margin increasing and expansion?

Cooper Werner, CFO, F5: Yeah, so the margins have been improving. We’re targeting 35% for the year, and this is kind of a multi-year improvement we’ve been driving in our operating margins. We’re very disciplined about how we manage the business. We go through our planning process, and we have a real focus on where we can drive efficiencies in the model to facilitate continued investment in the business. The OpEx is growing slower than the headline revenue growth rate, but our level of investment into new use cases, into AI, et cetera, is at a higher rate than what you would see in the underlying OpEx growth, and that’ll continue to be our model as we look ahead.

Our gross margins have also been improving, and a lot of it is driven on the strength of the software, as well as customers that are moving up the stack on the appliance lineup that carries a higher margin profile.

Mike Ng, Host, Goldman Sachs: François, in closing, I was just wondering if you could tie it all together for us and talk about the next 12 to 24 months, key priorities, things you’re most excited about. It seems like between ADC, refresh, non-refresh demand wins, AI, the term renewals, seeing good expansion rates, it seems like there’s a lot of things going in your favor right now, but perhaps you can pull it all together for us.

François Locoh-Donou, President and CEO, F5: Yes, our focus over the next 12 to 24 months, number one is our F5 Application Delivery and Security Platform. Bringing our product families together under a single platform really makes things way easier for, it has the benefit of making things way easier for our customers in terms of securing and delivering all their apps across all their environments, but doing that with essentially a single way of provisioning policies, orchestrating their environment, visualizing their environments. That F5 Application Delivery and Security Platform and making that real for our customers is kind of the number one priority. Second is AI. In AI, we see opportunity in AI data delivery that I mentioned, which we think is largely an opportunity in hardware for BIG-IP. We see opportunities in AI security that are nascent and also inside of AI factories. These are very early opportunities.

It’s a space that is nascent that we understand less well because there’s less of a history and a track record. It’s very difficult to extrapolate numbers from this because it’s very early days, but we see the opportunity. We are focused on the work to bring these opportunities to life.

Mike Ng, Host, Goldman Sachs: Great place to wrap it up. François, Cooper, thank you so much for coming out here to the conference and being on stage here with us. It’s been an incredible privilege to be able to host you guys. Thank you.

François Locoh-Donou, President and CEO, F5: Thank you so much.

Cooper Werner, CFO, F5: Thank you so much.

François Locoh-Donou, President and CEO, F5: Thank you.

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