F5 Inc Drops 7% After Below-Consensus Q1 Earnings Forecast Despite Strong Q4 Results

F5 Inc. fell roughly 7% in premarket trading on October 28 after the company's first-quarter adjusted earnings guidance came in below analyst expectations, overshadowing a fourth quarter in which revenue rose 13% year over year to $917 million and product revenue grew 23%. The stock underperformed peers through the trading session, and Piper Sandler downgraded shares from Overweight to Neutral with a price target of $461.

The cautious outlook reflects a fading hardware refresh tailwind. Management guided fiscal year 2027 revenue growth of 8% to 9%, stepping down from 11% in fiscal 2026, and warned that legacy hardware replacement bookings are expected to decline year over year in the second half of fiscal 2027. Full-year systems growth is forecast in the upper single digits after surging 31% in fiscal 2026. Margin pressure compounds the picture: higher component costs are expected to pull the fiscal 2027 adjusted gross margin down to a range of 80.5% to 82.5%, from 84% in fiscal 2026, and the Q4 adjusted operating margin already slipped to 33.7% from 37% a year earlier.

Software and AI represent the brighter side of the story. Software revenue climbed 19% in the fourth quarter, with double-digit growth expected again in fiscal 2027, weighted toward the second half. Direct AI bookings surpassed $100 million in fiscal 2026, up nearly 300% year over year, while the number of active direct AI customers quadrupled to more than 200. Management cited enterprise multi-cloud security software as a key driver of the revenue beat in the quarter.