A solid earnings beat and strong guidance helped push shares of the application services provider F5 Inc. much higher in extended trading today.

The company reported fiscal third-quarter earnings before certain costs such as stock compensation of $2.44 per share, cruising past analysts’ consensus target of just $1.98 per share, while revenue came to $695 million, down from $703 million a year earlier but well above Wall Street’s estimate of $686.1 million.

All told, the company reported a net profit of $144 million, up from just $89 million in the same period one year earlier.

F5 is considered 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.

The move into software and services is appropriate, because F5’s revenue from hardware related sales fell 16% to $130 million, while software revenue increased 3% to $179 million. The company also reported global services revenue of $387 million, up 3% from the year-ago period.

F5 Chief Executive François Locoh-Donou (pictured) said the company’s continued operating discipline was the main factor in its ability to deliver earnings and revenue that came in well ahead of its own guidance range. “F5 is proving itself an invaluable partner as large enterprises across the globe modernize their IT infrastructures and drive IT cost savings,” he insisted.

The CEO told analysts that the company is raising its full-year guidance for adjusted earnings growth to 12%, up from a prior range of between 7% and 9%. He also said the company’s revenue forecast is being boosted.

“Based on our visibility to strong fourth-quarter software demand, we now expect fiscal year 2024 revenue toward the top end of our prior expectations, at approximately $2.8 billion, or roughly flat with last year,” Locoh-Donou said.

For the fourth quarter, F5 is looking at earnings of $3.38 to $3.50 per share on sales of $720 million to $740 million. That compares favorably with the Street’s forecast of $3.33 per share in earnings and $717.4 million in revenue.

Holger Mueller of Constellation Research Inc. said F5 continues to make good progress on its mission to transform itself from a hardware product vendor to one that’s focused on software and services.

“Stagnation on the revenue side is acceptable to investors, when earnings per share are almost up by a dollar from a year earlier,” Mueller said. “Now Francois Locoh-Donou and his team needs to demonstrate their ability to stay the course for the last quarter of the full year. If F5 can deliver to outlook, it will break the full-year earnings per share barrier of $10, and that would be a remarkable feat considering its revenue drop.”

Investors liked what they saw, as F5’s stock gained more than 14% in the extended trading session, having remained flat during the day.

Photo: F5 Networks