Shares of F5 Networks Inc. rose in extended trading today after the company reported fiscal third-quarter earnings and revenue that easily topped Wall Street’s expectations.

The Seattle-based network traffic management and application security firm reported earnings before certain costs such as stock compensation of $2.57 per share. That meant it generated net income of $83 million for the quarter. Analysts had been expecting F5 to report earnings of just $2.23 per share.

The company also reported revenue of $674.5 million, up 4% from a year ago and beating Wall Street’s estimate of $667.4 million. F5’s stock jumped almost 6% in the hours after the report, adding to a slight gain during the regular trading session earlier today.

The company is a leading player in the network security and traffic management industry, primarily serving large enterprises and medium-sized businesses. As well as selling networking gear, it also provides software and services as part of an ongoing effort to move beyond its traditional hardware sales-based business model.

F5 President and Chief Executive Francois Locoh-Donou (pictured) said in a statement that customers rely on the company to secure and deliver digital experiences that fuel their brands. “Demand for security across all customer verticals fueled sales in our third quarter, resulting in 4% total revenue growth despite ongoing semiconductor shortages,” he added.

Digging into those revenue numbers, F5 revealed product revenue growth of 5% from a year earlier. Within that segment, software revenue growth was a real bright spot, rising by 38%. On the other hand, the company’s systems revenue fell by 18% from last year because of shortages of semiconductor components. Elsewhere, global services revenue rose 2% from the year before.

Looking to the final three months of the year, Locoh-Donou said the company has a “strong fourth-quarter pipeline,” though it remains wary of the broader, more cautious environment it’s operating in.

“With our intense business transformation efforts over the last five years, we have built a stronger and more resilient F5, as evidenced by our 72% revenue from recurring sources in the quarter,” the CEO said. “As a result, we have increased confidence in our ability to deliver sustained revenue and earnings growth.”

For the fourth quarter, F5 is forecasting earnings of between $2.45 and $2.57 per share, well ahead of Wall Street’s forecast of $2.28 per share. In terms of revenue, the company said it’s forecasting a range of $680 million to $700 million, the midpoint of which is just ahead of the $689.4 million consensus estimate.

Holger Mueller, an analyst with Constellation Research Inc., told SiliconANGLE that F5 performed well in the quarter considering its ongoing transformation from a systems to software vendor. “Ultimately, though, systems revenue is still declining faster than the software is growing, so it’s a transition that remains underway,” Mueller said. “What is encouraging is that more than 70% of its software revenue came from recurring sources. That’s very good news for the company given the potential economic headwinds that lie ahead. No doubt that’s also the key basis of F5’s optimistic forecast for the rest of the year.”

F5 also revealed that its board of directors has authorized an additional $1 billion to be spent on share repurchases, incremental to the $272 million remaining in its existing stock buyback program.

Photo: F5 Networks