F5 Fiscal Q3 Exceeded Expectations on Systems, Gross Margin Upside, Morgan Stanley Says

MT Newswires Live07-28

F5's (FFIV) fiscal Q3 exceeded expectations, driven largely by upside in Systems and gross margins, as its product refresh continues and more AI use cases develop, with product mix and some stability in memory pricing helping margins, Morgan Stanley said Tuesday.

While AI customers grew 50% year-over-year and AI security customers grew 100% quarter-over-quarter, both are growing from small bases, and different deal sizes make it difficult to project AI contributing to more than 3% to 5% of fiscal 2026 revenue, the firm said. This limits the premium that can be assigned to F5 for now, the brokerage said.

Morgan Stanley said it is encouraged by the company benefiting from data sovereignty investments, which will continue to grow in importance.

The brokerage now expects fiscal 2026 adjusted EPS of $17.34, down from $17.57, on a lower fiscal Q4 estimate of $4.26 versus $4.50 previously. It raised its fiscal 2027 adjusted EPS estimate to $18.20 from $17.77, the note added.

Morgan Stanley kept an equalweight rating on F5 and increased its price target to $415 from $380.

Price: 408.32, Change: +0.36, Percent Change: +0.09

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