Share in network traffic management and security firm F5 Networks Inc. dropped in late trading after it warned of ongoing supply chain constraints for the second quarter.

For the quarter ended March 31, F5 reported a profit before costs such as stock compensation of $131 million, or $2.13 per share, down from $155 million, or $2.50 per share, in the same quarter of last year. Revenue fell 2% from a year ago, to $634 million. Analysts had predicted an adjusted profit $2.01 per share on revenue of $634 million.

Highlights in the quarter included F5 launching a new software-as-a-service distributed cloud service platform in February. The solution combines technology F5 acquired from the acquisitions of Volterra Inc. and Shape Security Inc. to provide load balancing, multicloud networking, cloud-native edge computing services and a Kubernetes gateway.

Looking forward, F5 predicted revenue growth of between 1.5% to 4%, down from a prior outlook of 4.5% to 8% growth. For its fiscal third quarter, the company expects revenue of between $660 million to $680 million.

As with the previous quarter, F5 once again warned of supply chain constraints. The shortage of semiconductors is not a problem unique to F5 and has as its genesis the COVID-19 pandemic. Intel Corp. Chief Executive Pat Gelsinger warned last year that the shortage will likely drag on until 2023 and attempts to expand production this year have been hampered by a lack of skilled workers.

“Our strong 40% software growth enabled us to deliver above the midpoint of our revenue guidance and at the top end of our non-GAAP earnings per share guidance for the quarter,” François Locoh-Donou, F5’s president and chief executive officer, said in a statement. “While our ability to ship systems remains constrained as a result of semiconductor component shortages, momentum in our software business is strong, driven by customers’ growing need for multi-cloud application security and delivery.”

Although F5 beat expectations on both earnings and revenue in the quarter, it was a lower-than-expected outlook from chip shortages that investors focused on. F5 shares were down almost 10% in late trading.

Image: F5