F5 Networks told Wall Street analysts earlier this year that it expects slow revenue growth as it shifts its business from the data center era to the cloud computing era. Its second fiscal quarter earnings results stuck to that story, coming in slightly ahead of what analysts expected from the Seattle application delivery company.
For the three-month period ending March 31st, revenue was $533.3 million, up 2.9 percent compared to the same period last year. Analysts surveyed by Yahoo Finance had predicted $529.97 million, coming off F5’s analyst presentation in March.
Net income for the quarter was $109.6 million, and excluding special items income was $143.3 million, or $2.31 per share. That’s an increase of 13 percent, and analysts were looking for earnings per share excluding items of $2.27.
F5’s transition is a common one among enterprise tech companies that predate the cloud computing era: it is trying to make up for a slow but steady decline in sales of its hardware products with growth in its software products and services. During its second quarter, products revenue declined 1.4 percent, while services revenue grew 6.6 percent.
As part of that transition, the company introduced a new version of its BIG-IP product line called BIG-IP Cloud Edition, designed, as you might expect, for customers running in public clouds. It provides application-delivery services that let administrators set policies around how and where their applications should roll out to customers, F5 said in a separate press release.
F5 is banking on the popularity of the hybrid cloud in the short term to keep its train rolling. At one point a few years ago, things were tense for hardware companies when it looked like people would migrate their apps wholesale to public clouds. That hasn’t happened, and while the overall trend still favors public cloud over on-premises deployments, it seems like an awful lot of big corporations are going to put their eggs in several baskets.
“I think customers are maturing in their decisions around the cloud,” said F5 CEO Francois Locoh-Donou in an interview with GeekWire after the company’s earnings conference call. He said he didn’t talk to a single customer during the past quarter that wasn’t contemplating some sort of hybrid cloud strategy, which he believes positions F5’s products well as bridges between hardware and software on the cloud.
For the upcoming quarter, F5 said revenue would fall between $535 million to $545 million and non-GAAP earnings per share between $2.36 to $2.39. The midpoint of both ranges is ahead of what analysts had been expecting for F5’s third fiscal quarter, but investors saw something they didn’t like in the results, sending shares down 1.32 percent in after-hours trading.
The company also announced Wednesday that it has hired Francis “Frank” Pelzer as executive vice president and chief financial officer, starting later in May. Pelzer replaces longtime F5 CFO Andy Reinland, who announced plans to step down late last year.