Shares in F5 Inc. fell slightly in late trading today after the application security firm reported beats in both earnings and revenue in its latest quarter but fell short on its outlook.

For its fiscal third quarter ended Sept. 30, F5 reported adjusted net income of $209 million, or $3.50 per share, up from $158 million or $2.62 per share, in the same quarter of last year. Revenue came in at $707 million, up 1% year-over-year. Both were beats, as analysts had expected earnings per share of $3.21 and revenue of $701.45 million.

By sector, F5 saw its global services revenue grow 9% year-over-year, while its product revenue fell 7%. The product revenue reflected 11% software revenue growth and a 25% decline in systems revenue compared to the year-ago period.

The application security firm booked $566 million in gross profit in the quarter, up from $553 million in the same quarter of last year, while gross margin was 80.1%, up from 78.9%. F5’s operating profit in the quarter was $172 million, up from $108 million in the year-ago period.

For its full fiscal year 2023, F5 reported adjusted net income of $705 million, or $11.70 per share, up from $623 million or $10.19 per share, the fiscal year prior. Revenue was up 4% over the same period, to $2.8 billion.

“In our fourth quarter, we delivered 11% software revenue growth, operating margin improvement and double-digit earnings per share growth,” Chief Executive François Locoh-Donou said in the company’s earnings release. “Our focus on operating discipline enabled us to deliver fiscal year 2023 earnings per share in line with the high end of our beginning of year expectations despite a challenging macroeconomic environment and resulting customer spending caution.”

Looking forward, F5 says it expects first-quarter earnings of $2.97 to $3.09 per share on revenue of $675 million to $695 million. The earnings outlook at the midpoint was exactly what analysts were expecting, $3.03 per share, but the revenue outlook fell below an expected $698.8 million.

For its full fiscal year 2024, the company did not provide solid figures but warned that it expects revenue to be flat or a low-single-digit percentage decline from 2023. However, F5 does expect adjusted earnings per share growth of 5% to 7%.

While noting that he believes the broader environment is stabilizing and that there were positive signs from enterprise customers in the fourth quarter, Locoh-Donou did warn that the company still expected some issues going forward.

“We expect some customer caution will persist into fiscal year 2024 and that, combined with the $180 million headwind from strong backlog fulfillment in fiscal year 2023, tempers our 2024 revenue growth expectations,” Locoh-Donou explained. “We remain focused on delivering earnings growth and returning cash to our shareholders.”

Image: F5