F5 Earnings: We Expect Demand Stabilization to Turn Into Sales Growth in Fiscal 2025

We are maintaining our $205 fair value estimate for narrow-moat F5 after the firm reported strong third-quarter financial results slightly above our estimates. Much like recent quarters, the firm saw continued stabilization in customer demand after a weak 2023. We view this trend as a good omen for the firm and project fiscal 2025 sales to rebound as demand for F5’s solutions picks up. While sales growth has declined in recent quarters, we have been impressed by F5’s ability to ramp up its profitability during this period of cooling sales growth. We expect further margin expansion as the firm’s ongoing operational discipline is buttressed by a return to growth on the top line. With shares trading up more than 10% after hours, we view F5 as fairly valued.