F5's fiscal Q3 2026 revenue rose 10.9% to $865.1M as hardware (systems) sales jumped 32%, but spending grew faster than sales and GAAP operating margin slipped to 24.7%; diluted EPS rose 11.4% to $3.62 and full-year guidance was raised.
Revenue
$865M
+10.9% YoY
Net income
$208M
+9.6% YoY
Diluted EPS
$3.62
+11.4% YoY
Operating margin
24.7%
Overview
F5 sells the equipment and software that sit in front of a company's applications: they spread incoming traffic across servers and filter out attacks. In fiscal Q3 2026 (the three months ended June 30, 2026; F5's fiscal year ends in September), revenue rose 10.9% to $865.1 million. Almost all of that growth came from one place: systems revenue, meaning F5's physical appliances, jumped 32.4% to $239.5 million. Software grew 7.4% and the large services business (mostly maintenance contracts) grew 2.7%.
Profit grew more slowly than revenue. GAAP operating income rose 8.6% to $213.3 million, but operating expenses grew faster than sales, so the GAAP operating margin slipped to 24.7% from 25.2%. Operating margin is the share of revenue left after running the business, before interest and tax. Net income rose 9.6% to $208.2 million and diluted EPS rose 11.4% to $3.62. A lower tax rate and a smaller share count helped EPS.
Key metrics
Metric
Fiscal Q3 2026
Fiscal Q3 2025
YoY Change
Total revenue
$865.1M
$780.4M
+10.9%
Product revenue
$462.8M
$388.8M
+19.0%
– Systems (hardware)
$239.5M
$180.9M
+32.4%
– Software
$223.3M
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*Non-GAAP figures come from F5's July 27, 2026 earnings release (Form 8-K, Exhibit 99.1), not the 10-Q. They exclude stock-based compensation, amortization of acquired intangibles, acquisition charges, cyber-incident costs and the related insurance recoveries.
Hardware is doing the heavy lifting
Systems revenue grew 32.4% in the quarter and 31.6% over the first nine months of the fiscal year, to $684.3 million from $520.0 million. The 10-Q gives only a short reason: the increase was "primarily due to increases in customer demand." It does not use the words hardware refresh, and it does not say how much of the demand is tied to AI. The pattern is consistent with customers replacing older BIG-IP appliances, but that is our reading, not something the filing states.
Hardware sales also help later revenue. When a customer buys an appliance, it usually also buys a maintenance contract. That contract is paid for up front but counted as revenue over time. F5 says total deferred revenue (money already billed but not yet counted as revenue) rose to $2.19 billion from $2.00 billion at the end of fiscal 2025. F5 says the increase was "primarily due to an increase in maintenance contracts related to strong systems shipments," plus growth in subscriptions. So the hardware sales should support services revenue in later quarters. That matters because services grew only 2.7% this quarter.
Software grew 7.4%, which F5 attributes to "increased sales of subscription offerings." Over nine months, software grew only 4.3%. Because hardware grew so much faster, systems now make up 51.8% of product revenue, up from 46.5% a year ago.
Margins: product costs fell as a share of sales, but spending rose faster
Gross margin (the share of revenue left after the direct cost of the products and services sold) rose to 82.2% from 81.0%. Product cost of revenue rose only 5.3% while product revenue rose 19.0%. As a result, the gross margin on products alone rose to about 79.8% from 77.2%, by our calculation from the income statement. This happened even though the 10-Q lists "rising costs of memory and storage" as a supply-chain risk, and inventories grew to $126.9 million from $77.2 million in September.
Operating expenses rose 14.4% to $498.2 million, faster than revenue. Research and development spending was up 20.8% (+$28.3M). F5 attributes $13.5M of that to higher technology costs and $10.9M to staff costs. General and administrative spending was up 21.5% (+$16.9M), mostly from $11.7M of higher staff costs. Sales and marketing rose a more modest 8.0%.
On the non-GAAP measure, which leaves out stock compensation, amortization and cyber costs, the operating margin rose to 35.0% from 34.3%. The gap between the two measures widened. That points to stock compensation, amortization of acquired technology and one-off costs as the items that pulled GAAP margin down. Stock-based compensation for the nine months was $193.5 million, up from $174.2 million.
The October 2025 security breach: costs are small, demand has held
On October 15, 2025, F5 disclosed that a "threat actor maintained long-term, persistent access to F5 systems" and took certain files. The 10-Q gives the costs:
$3.0 million of response costs in fiscal Q3 and $26.5 million over the nine months.
Professional-services costs tied to the incident added $2.6M to R&D and $3.2M to G&A in the quarter compared with a year earlier.
F5 received $5.3 million in insurance recoveries in the quarter, booked in other income.
Some customers and third parties "may assert claims," and F5 has received "a small number of inquiries from governmental authorities."
The filing does not measure any effect on demand. But product revenue grew 19% two quarters after the disclosure, so there is no sign in the numbers that customers held back purchases. The remaining risk is mainly legal and regulatory, and those costs would be recorded only when they are incurred.
Below operating income: tax helped, other income did not
Other income fell to $12.9 million from $16.7 million, even though it includes the $5.3 million insurance recovery. The effective tax rate fell to 8.0% from 10.8%, which F5 attributes to "a change in unrecognized tax benefits." Pre-tax income grew only 6.2%. The lower tax rate is why net income grew faster (+9.6%). Readers should not count on that tax benefit in future quarters. For the nine months, the tax rate was 16.0%, compared with 15.4% a year earlier.
Cash and buybacks
Operating cash flow for the nine months was $841.4 million, up 13.5% from $741.6 million, which F5 credits to higher collections. Capital spending more than doubled to $63.7 million from $27.1 million.
F5 repurchased 334,000 shares for $100.0 million in the quarter, at an average of $299.34. Over nine months it bought back 1.91 million shares for $500.0 million, and $422.4 million remains authorized. Diluted share count fell 1.6% year over year to 57.55 million. That is part of why EPS grew faster than net income.
F5 has cash and investments of $1.63 billion. It continues to make small AI-security acquisitions: SurePath AI ($50.1 million, closed June 15, 2026, for "shadow AI detection") and CalypsoAI ($145.2 million, closed September 2025). Both are being folded into its "F5 AI Security Platform."
Nine-month view
Metric
9M FY2026
9M FY2025
YoY Change
Revenue
$2,499.2M
$2,278.0M
+9.7%
Systems revenue
$684.3M
$520.0M
+31.6%
Net income
$536.0M
$501.9M
+6.8%
Diluted EPS
$9.29
$8.54
+8.8%
Operating margin (GAAP)
24.3%
24.6%
-0.3 pts
Takeaway: F5's growth is currently hardware-led. Systems revenue grew 32%, while software grew 7% and services 3%. The hardware sales are building a larger pool of maintenance revenue that has not yet been counted, with deferred revenue up to $2.19B. But GAAP operating margin fell because spending, including breach-related costs, grew faster than sales. A lower tax rate did part of the work behind the 11% EPS gain.
Outlook
In the earnings release, F5 raised its fiscal 2026 guidance. It now expects revenue growth of about 9% to 10%, up from 7% to 8%, and non-GAAP EPS of $17.21 to $17.33, up from $16.25 to $16.55. For fiscal Q4 it guides to revenue of $870 million to $890 million and non-GAAP EPS of $4.14 to $4.26. That EPS range is below Q3's $4.73.
Our view: the key question for fiscal 2027 is whether this level of hardware demand can last. Replacement cycles tend to peak and then fade, and the 10-Q gives no backlog figure. If systems growth slows, total growth will depend on software, which grew 4.3% over nine months, and on services, which grew 2.7%. Neither has yet grown fast enough to take hardware's place. Watch whether the higher deferred-revenue balance lifts services growth, and whether memory-cost increases start to show up in product gross margin.