FULLTEXT DEL 2 AV 2
10-K – 2025-11-25 – ffiv-20250930.htm
Impact of Macroeconomic Conditions
Our overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on customer behavior. Uncertain economic conditions, including inflation, tariffs and other duties, higher interest rates, slower growth, fluctuations in foreign exchange rates, and other changes in economic conditions, may adversely affect our results of operations and financial performance. For further discussion of the potential impacts of recent macroeconomic events on our business, financial condition, and operating results, see Part I, Item 1A titled "Risk Factors."
Results of Operations
The following discussion and analysis comparing our fiscal 2025 financial results to fiscal 2024 should be read in conjunction with our consolidated financial statements, related notes and risk factors included elsewhere in this Annual Report on Form 10-K. For discussion and analysis related to our financial results comparing fiscal 2024 to 2023, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal 2024, which was filed with the Securities and Exchange Commission on November 18, 2024.
Years Ended September 30,
2025 2024 2023
(in thousands, except percentages)
Net revenues
Products $ 1,508,640 $ 1,272,795 $ 1,334,638
Services 1,579,432 1,543,325 1,478,531
Total $ 3,088,072 $ 2,816,120 $ 2,813,169
Percentage of net revenues
Products 48.9 % 45.2 % 47.4 %
Services 51.1 54.8 52.6
Total 100.0 % 100.0 % 100.0 %
Net Product Revenues. Net product revenues increased 18.5% in fiscal year 2025 from fiscal year 2024. The increase of $235.8 million in net product revenues for fiscal year 2025 was due to an increase in revenues associated with systems and software of $168.2 million and $67.6 million, respectively.
Net Service Revenues. Net service revenues increased 2.3% in fiscal year 2025 from fiscal year 2024. The increase of $36.1 million in service revenue for fiscal year 2025 was primarily the result of increased initial purchases and renewals of maintenance contracts.
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The following presents net product revenues by systems and software (in thousands):
Years Ended September 30,
2025 2024 2023
Net product revenues
Systems revenue
$ 705,551 $ 537,318 $ 670,652
Software revenue
Subscription
507,585 430,474 352,615
SaaS and managed services
175,641 193,201 203,326
Perpetual licenses
119,863 111,802 108,045
Total net product revenue $ 1,508,640 $ 1,272,795 $ 1,334,638
Percentage of net product revenues
Systems revenue
46.8 % 42.2 % 50.2 %
Software revenue
Subscription
33.7 33.8 26.4
SaaS and managed services
11.6 15.2 15.3
Perpetual licenses
7.9 8.8 8.1
Total net product revenue 100.0 % 100.0 % 100.0 %
Total systems revenue increased 31.3% in fiscal year 2025 from 2024 was primarily due to increases in customer demand and pricing increases on system offerings. Total systems revenue decreased 19.9% in fiscal year 2024 from 2023 primarily due to a lower level of shipments due to 2022 supply chain constrained demand fulfilled in 2023. Total software revenue was $803.1 million, $735.5 million, and $664.0 million for fiscal years 2025, 2024, and 2023, respectively. Total software revenue increased by 9.2% in fiscal year 2025 from 2024 primarily due to increases in renewals and initial purchases of subscription offerings. Total software revenue increased by 10.8% in fiscal year 2024 from 2023 primarily due to increases in renewals and initial purchases of subscription offerings. Total SaaS and managed services revenue did not account for 10% or more of total net revenues for any period presented.
The following distributor customers accounted for more than 10% of total net revenue:
Years Ended September 30,
2025 2024 2023
Customer A
15.8 % 16.3 % 15.6 %
Customer B
17.5 % 15.9 % 15.0 %
The following distributor customers accounted for more than 10% of total receivables:
September 30,
2025 2024
Customer A
11.1 % 20.3 %
Customer B
17.8 % 14.8 %
Customer C
10.9 % —
Customer D
11.4 % —
No end-user customers accounted for more than 10% of total net revenue or receivables. No other distributor customers accounted for more than 10% of total net revenue or receivables, other than those noted above.
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Years Ended September 30,
2025 2024 2023
(in thousands, except percentages)
Cost of net revenues and gross profit
Products $ 338,037 $ 336,237 $ 375,192
Services 235,941 221,410 218,116
Total 573,978 557,647 593,308
Gross profit $ 2,514,094 $ 2,258,473 $ 2,219,861
Percentage of net revenues and gross margin (as a percentage of related net revenue)
Products 22.4 % 26.4 % 28.1 %
Services 14.9 14.3 14.8
Total 18.6 19.8 21.1
Gross margin 81.4 % 80.2 % 78.9 %
Cost of Net Product Revenues. Cost of net product revenues consist of finished products purchased from our contract manufacturers, personnel costs, including the salaries, stock-based compensation, and related benefits of our personnel, manufacturing overhead, freight, warranty, provisions for excess and obsolete inventory, technology costs, including cloud hosting and software licenses expenses, facilities and depreciation expenses, and amortization expenses in connection with developed technology from acquisitions. Cost of net product revenues increased primarily due to systems and software revenue growth. The increase was largely offset by an improvement in product margins driven by a more favorable product mix.
Cost of Net Service Revenues. Cost of net service revenues consist of personnel costs, including the salaries, stock-based compensation, and related benefits of our professional services personnel, travel, technology costs, including cloud hosting and software licenses expenses, facilities and depreciation expenses. Cost of net service revenues increased $14.5 million, or 6.6% in fiscal year 2025 from the prior year. The increase in cost of net service revenues was primarily due to an increase in personnel costs.
Years Ended September 30,
2025 2024 2023
(in thousands, except percentages)
Operating expenses
Sales and marketing $ 860,506 $ 832,279 $ 878,215
Research and development 539,815 490,120 540,285
General and administrative 322,340 268,828 263,405
Restructuring charges 25,484 8,655 65,388
Total $ 1,748,145 $ 1,599,882 $ 1,747,293
Operating expenses (as a percentage of net revenue)
Sales and marketing 27.9 % 29.6 % 31.2 %
Research and development 17.5 17.4 19.2
General and administrative 10.4 9.5 9.4
Restructuring charges 0.8 0.3 2.3
Total 56.6 % 56.8 % 62.1 %
Sales and Marketing. Sales and marketing expenses consist of personnel costs, including the salaries, commissions, stock-based compensation, and related benefits of our sales and marketing personnel, the costs of our marketing programs, including public relations, advertising and trade shows, travel, facilities, technology costs, including cloud hosting and software licenses expenses, facilities and depreciation expenses. Sales and marketing expense increased $28.2 million, or 3.4% in fiscal year 2025 from the prior year. The increase in sales and marketing expense for fiscal year 2025 was primarily due to an increase of $20.6 million in personnel costs. Sales and marketing headcount at the end of fiscal year 2025 increased to 2,186 from 2,165 at the end of fiscal year 2024. In addition, technology expenditures to support the sales and marketing organization increased $6.5 million in fiscal year 2025 from the prior year.
Research and Development. Research and development expenses consist of personnel costs, including the salaries, stock-based compensation, and related benefits of our product development personnel, prototype materials and other expenses related to the development of new and improved products, technology costs, including cloud hosting and software licenses expenses,
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facilities, depreciation and amortization expenses. Research and development expense increased $49.7 million, or 10.1% in fiscal year 2025 from the prior year. The increase in research and development expense for fiscal year 2025 was primarily due to an increase of $31.4 million in personnel costs. In addition, technology costs to support the research and development organization increased $18.9 million in fiscal year 2025 from the prior year.
General and Administrative. General and administrative expenses consist of personnel costs, including the salaries, benefits and related costs of our executive, finance, information technology, human resource and legal personnel, third-party professional service fees, bad debt charges, technology costs, including cloud hosting and software licenses expenses, facilities and depreciation expenses. General and administrative expense increased $53.5 million, or 19.9% in fiscal year 2025 from the prior year. The increase in general and administrative expense for fiscal year 2025 was primarily due to an increase of $25.8 million in personnel costs. General and administrative headcount at the end of fiscal year 2025 increased to 898 from 875 at the end of fiscal year 2024. In addition, fees paid for professional services increased $19.7 million in fiscal year 2025 from the prior year, primarily due to activity related to acquisitions.
Restructuring charges . In the first and fourth fiscal quarters of 2025, and the first fiscal quarter of 2024, we completed restructuring plans to better align strategic and financial objectives, optimize operations, and drive efficiencies for long-term growth and profitability. As a result of the first and fourth quarters of fiscal 2025 restructuring initiatives, we recorded charges of $11.3 million and $14.3 million, net of adjustments, related to reductions in workforce that are reflected in our results for fiscal 2025. As a result of the first quarter of fiscal 2024 restructuring initiative, we recorded a charge of $8.7 million, net of adjustments, related to a reduction in workforce that is reflected in our results for fiscal 2024.
Years Ended September 30,
2025 2024 2023
(in thousands, except percentages)
Other income and income taxes
Income from operations $ 765,949 $ 658,591 $ 472,568
Other income, net
42,387 36,874 13,420
Income before income taxes 808,336 695,465 485,988
Provision for income taxes 115,956 128,687 91,040
Net income $ 692,380 $ 566,778 $ 394,948
Other income and income taxes (as percentage of net revenue)
Income from operations 24.8 % 23.4 % 16.8 %
Other income, net
1.4 1.3 0.5
Income before income taxes 26.2 24.7 17.3
Provision for income taxes 3.8 4.6 3.3
Net income 22.4 % 20.1 % 14.0 %
Other Income, Net. The change in other income, net for the fiscal year ended September 30, 2025 was primarily driven by interest income and expense, investment income, and foreign currency transaction gains and losses compared to the same periods in the prior year.
Provision for Income Taxes. We recorded a 14.3% provision for income taxes for fiscal year 2025, compared to 18.5% in fiscal year 2024. The decrease in effective tax rate from fiscal year 2024 to 2025 is primarily due to the tax impact from stock-based compensation and tax reserves.
We record a valuation allowance to reduce our deferred tax assets to the amount we believe is more likely than not to be realized. In making these determinations we consider historical and projected taxable income, and ongoing prudent and feasible tax planning strategies in assessing the appropriateness of a valuation allowance. The net decrease in the valuation allowance of $5.4 million for fiscal year 2025 was primarily related to tax net operating losses and credits incurred in certain foreign jurisdictions, and state tax carryforwards. Our net deferred tax assets as of September 30, 2025 and 2024 were $444.5 million and $358.8 million, respectively.
Our worldwide effective tax rate may fluctuate based on a number of factors, including variations in projected taxable income in the various geographic locations in which we operate, the impact of stock-based compensation, changes in the valuation of our net deferred tax assets, resolution of potential exposures, tax positions taken on tax returns filed in the various geographic locations in which we operate, and the introduction of new accounting standards or changes in tax laws or interpretations thereof in the various geographic locations in which we operate. We have recorded liabilities to address potential tax exposures related to business and income tax positions we have taken that could be challenged by taxing authorities. The
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ultimate resolution of these potential exposures may be greater or less than the liabilities recorded, which could result in an adjustment to our future tax expense.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The new legislation did not have a material impact for fiscal year 2025. The Company is currently evaluating the impact on future years but does not expect a material impact to the consolidated financial statements.
The Company operates in countries that have enacted, or have committed to enact, a minimum tax in accordance with the Organization for Economic Co-operation and Development’s Pillar Two framework. The Pillar Two legislation was effective for the Company starting fiscal year 2025 but did not have a material impact. The Company will continue to monitor for additional guidance but does not expect a material impact to the consolidated financial statements for future years.
Liquidity and Capital Resources
We have funded our operations with our cash balances and cash generated from operations.
Years Ended September 30,
2025 2024 2023
(in thousands)
Liquidity and Capital Resources
Cash and cash equivalents and investments $ 1,359,966 $ 1,083,182 $ 808,391
Cash provided by operating activities 949,666 792,419 653,409
Cash (used in) provided by investing activities (219,491) (59,214) 36,393
Cash used in financing activities (464,815) (457,002) (653,299)
Cash and cash equivalents, short-term investments and long-term investments totaled $1,360.0 million as of September 30, 2025, compared to $1,083.2 million as of September 30, 2024, representing an increase of $276.8 million. The increase was primarily due to cash provided by operating activities of $949.7 million for fiscal 2025, partially offset by cash used for the repurchase of outstanding common stock and the payment of related excise taxes of $502.1 million. In addition, $171.1 million of cash was used for the acquisition of businesses during fiscal 2025, and $43.3 million of cash was used for capital expenditures related to the expansion of our facilities to support our operations worldwide, as well as investments in technology, including cloud hosting and software licenses, and equipment purchases to support our core business activities. As of September 30, 2025, 64.0% of our cash and cash equivalents and investment balances were outside of the U.S. The cash and cash equivalents and investment balances outside of the U.S. are subject to fluctuation based on the settlement of intercompany balances.
Cash provided by operating activities during fiscal year 2025 was $949.7 million compared to $792.4 million in fiscal year 2024. Cash provided by operating activities resulted primarily from cash generated from net income, after adjusting for non-cash charges such as stock-based compensation, depreciation and amortization charges and changes in operating assets and liabilities. Cash provided by operating activities for fiscal year 2025 increased from the prior year primarily due to growth of our business as reflected by increases in collections during fiscal 2025, partially offset by higher cash expenditure to support our business growth.
Cash from operations could be affected by various risks and uncertainties, including, but not limited to the risks detailed in Part I, Item 1A titled "Risk Factors." However, we anticipate our current cash, cash equivalents and investment balances and anticipated cash flows generated from operations will be sufficient to meet our liquidity needs.
Cash used in investing activities during fiscal year 2025 was $219.5 million compared to cash used in investing activities of $59.2 million in fiscal year 2024. Investing activities include purchases, sales and maturities of available-for-sale securities, business acquisitions and capital expenditures. Cash used in investing activities for fiscal year 2025 was primarily the result of $171.1 million in cash paid for acquisitions and $43.3 million in capital expenditures related to maintaining our operations worldwide. Cash used in investing activities for fiscal year 2024 was primarily the result of $32.9 million in cash paid for acquisitions and $30.4 million in capital expenditures related to maintaining our operations worldwide, partially offset by $6.2 million in maturities of investments.
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Cash used in financing activities was $464.8 million for fiscal year 2025, compared to cash used in financing activities of $457.0 million for fiscal year 2024. Cash used in financing activities for fiscal year 2025 included $502.1 million of cash used for the repurchase of outstanding common stock and the payment of related excise taxes, as well as $21.9 million in cash used for taxes related to the net share settlement of equity awards. Cash used in financing activities was partially offset by cash received from the exercise of employee stock options and stock purchases under our employee stock purchase plan of $59.2 million. Cash used in financing activities for fiscal year 2024 included $500.6 million of cash used for the repurchase of outstanding common stock and the payment of related excise taxes, as well as $11.5 million in cash used for taxes related to the net share settlement of equity awards. Cash used in financing activities was partially offset by cash received from the exercise of employee stock options and stock purchases under our employee stock purchase plan of $55.1 million.
On January 31, 2020, we entered into a Revolving Credit Agreement (the "Revolving Credit Agreement") that provides for a senior unsecured revolving credit facility in an aggregate principal amount of $350.0 million (the "Revolving Credit Facility"). On January 31, 2025, the Revolving Credit Facility expired. At the time of expiration, there were no outstanding borrowings under the Revolving Credit Facility.
Based on our current operating and capital expenditure forecasts, we believe that our existing cash and investment balances, together with cash generated from operations should be sufficient to meet our operating requirements for the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of expansion into new territories, the timing of introductions of new products and enhancements of existing products, the continuing market acceptance of our products, cash paid for future strategic initiatives such as our share repurchase program and acquisitions, and macroeconomic events or conditions.
Obligations and Commitments
As of September 30, 2025, we had approximately $99.3 million of tax liabilities, including interest and penalties, related to uncertain tax positions (See Note 8 to our Consolidated Financial Statements). Because of the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the years in which future cash outflows may occur.
As of September 30, 2025, our principal commitments consisted of obligations outstanding under operating leases and purchase obligations with one of our component suppliers.
In October 2022, we entered into an unconditional purchase commitment with one of our suppliers for the delivery of systems components. Under the terms of the agreement, we are obligated to purchase $10 million of component inventory annually, with a total committed amount of $40 million over a four-year term. As of September 30, 2025, we had no remaining purchase commitments under the third year of the agreement. Our total non-cancelable long-term purchase commitments outstanding as of September 30, 2025 was $ 10.0 million.
We have a contractual obligation to purchase inventory components procured by our primary contract manufacturer in accordance with our annual build forecast. The contractual terms of the obligation contain cancellation provisions, which reduce our liability to purchase inventory components for periods greater than one year. In order to support our build forecast, we will, from time-to-time prepay our primary contract manufacturer for inventory purchases.
Recently Issued Accounting Pronouncements
Refer to "Recently Issued Accounting Pronouncements" in Note 1. Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.
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Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Interest Rate Risk. Our current cash and cash equivalents consist of money market funds as allowed and specified in our investment policy guidelines. Due to the current nature of our investment portfolio, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. Therefore, we do not expect our operating results or cash flows to be materially affected by a sudden change in interest rates.
Inflation Risk. We are actively monitoring the macroeconomic inflationary environment, including the impact from changes in foreign trade policies, tariffs, and other duties, but we do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. If the inflationary environment constrains our customers’ ability to procure goods and services from us, we may see customers reprioritize these investment decisions. These macroeconomic conditions could harm our business, financial condition and results of operations.
Foreign Currency Risk. The majority of our sales, cost of net revenues, and operating expenses are denominated in U.S. dollars ("USD"). While we conduct transactions in foreign currencies and expect to continue to do so, to date we have not, and do not anticipate that related foreign currency transaction gains or losses will be significant at our current level of operations. However, as we operate in and continue to expand our operations internationally, fluctuations in foreign currency exchange rates relative to the USD, could impact our foreign currency-denominated costs and may result in operating margin volatility. To date, such fluctuations have not had a material impact on our financial results.
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Item 8. Financial Statements and Supplementary Data
F5, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238 )
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Consolidated Balance Sheets
47
Consolidated Income Statements
48
Consolidated Statements of Comprehensive Income
49
Consolidated Statements of Shareholders' Equity
50
Consolidated Statements of Cash Flows
51
Notes to Consolidated Financial Statements
53
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of F5, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of F5, Inc. and its subsidiaries (the "Company") as of September 30, 2025 and 2024, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended September 30, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition for Certain Products and Services
As described in Note 1 to the consolidated financial statements, the Company sells hardware and perpetual software products and offers several products by subscription, either through term-based license agreements or as SaaS offerings. Evidence of a contract generally consists of a purchase order issued pursuant to the terms and conditions of a distributor, reseller or end user agreement. The purchase price stated in an agreed upon purchase order is generally representative of the transaction price. The transaction price in a contract is allocated based upon the relative standalone selling price of each distinct performance obligation identified in the contract. Revenue is recognized at the time the related performance obligation is satisfied by transferring control of promised products and services to a customer. Revenue from the sale of the Company's hardware and perpetual software products is generally recognized at a point in time when the product has been fulfilled and the customer is obligated to pay for the product. Revenue for term-based license agreements is recognized at a point in time, when the Company delivers the software license to the customer and the subscription term has commenced. Revenue for SaaS offerings is recognized ratably as the services are provided. Revenues for post-contract customer support are recognized on a straight-line basis over the service contract term. The Company’s products and services revenue was $1,509 million and $1,579 million, respectively, for the year ended September 30, 2025, of which the majority relates to revenue recognition for certain products and services.
The principal considerations for our determination that performing procedures relating to revenue recognition for certain products and services is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process. These procedures also included, among others, (i) testing certain product and service revenue recognized for a sample of transactions by obtaining and inspecting source documents, such as purchase orders, invoices, and proof of shipments or delivery, where applicable; (ii) evaluating, on a test basis, manual adjustments made related to certain contracts; (iii) testing management’s process for determining and allocating standalone selling price to identified performance obligations and testing the completeness and accuracy of the underlying data used by management; (iv) testing the calculation of certain product and service revenue recognized; and (v) confirming a sample of outstanding customer invoice balances as of September 30, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment or delivery, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
November 25, 2025
We have served as the Company’s auditor since 1996.
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F5, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
2025 2024
ASSETS
Current assets
Cash and cash equivalents $ 1,344,273 $ 1,074,602
Accounts receivable, net of allowances of $ 2,877 and $ 4,585
414,433 389,024
Inventories 77,229 76,378
Other current assets 682,766 569,467
Total current assets 2,518,701 2,109,471
Property and equipment, net 156,947 150,943
Operating lease right-of-use assets 185,601 178,180
Long-term investments 15,693 8,580
Deferred tax assets 446,388 365,951
Goodwill 2,443,882 2,312,362
Other assets, net 552,280 487,517
Total assets $ 6,319,492 $ 5,613,004
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 83,972 $ 67,894
Accrued liabilities 315,383 300,076
Deferred revenue 1,213,226 1,121,683
Total current liabilities 1,612,581 1,489,653
Deferred tax liabilities 1,921 7,179
Deferred revenue, long-term 786,011 676,276
Operating lease liabilities, long-term 230,749 215,785
Other long-term liabilities 96,231 94,733
Total long-term liabilities 1,114,912 993,973
Commitments and contingencies (Note 12)
Shareholders’ equity
Preferred stock, no par value; 10,000 shares authorized, no shares issued and outstanding
— —
Common stock, no par value; 200,000 shares authorized, 57,684 and 58,094 shares issued and outstanding
42,023 5,889
Accumulated other comprehensive loss ( 18,324 ) ( 20,912 )
Retained earnings 3,568,300 3,144,401
Total shareholders’ equity 3,591,999 3,129,378
Total liabilities and shareholders’ equity $ 6,319,492 $ 5,613,004
The accompanying notes are an integral part of these consolidated financial statements.
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F5, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
Years Ended September 30,
2025 2024 2023
Net revenues
Products $ 1,508,640 $ 1,272,795 $ 1,334,638
Services 1,579,432 1,543,325 1,478,531
Total 3,088,072 2,816,120 2,813,169
Cost of net revenues
Products 338,037 336,237 375,192
Services 235,941 221,410 218,116
Total 573,978 557,647 593,308
Gross profit 2,514,094 2,258,473 2,219,861
Operating expenses
Sales and marketing 860,506 832,279 878,215
Research and development 539,815 490,120 540,285
General and administrative 322,340 268,828 263,405
Restructuring charges 25,484 8,655 65,388
Total 1,748,145 1,599,882 1,747,293
Income from operations 765,949 658,591 472,568
Other income, net 42,387 36,874 13,420
Income before income taxes 808,336 695,465 485,988
Provision for income taxes 115,956 128,687 91,040
Net income $ 692,380 $ 566,778 $ 394,948
Net income per share — basic $ 11.96 $ 9.65 $ 6.59
Weighted average shares — basic 57,904 58,720 59,909
Net income per share — diluted $ 11.80 $ 9.55 $ 6.55
Weighted average shares — diluted 58,684 59,359 60,270
The accompanying notes are an integral part of these consolidated financial statements.
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F5, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Years Ended September 30,
2025 2024 2023
Net income $ 692,380 $ 566,778 $ 394,948
Other comprehensive income:
Foreign currency translation adjustment 2,588 2,227 1,477
Available-for-sale securities:
Unrealized gains on securities, net of taxes of $ 0 , $ 18 , and $ 286 for the years ended September 30, 2025, 2024, and 2023, respectively
— 82 2,090
Reclassification adjustment for realized losses included in net income, net of taxes of $ 0 , $ 0 , and $ 78 for the years ended September 30, 2025, 2024, and 2023, respectively
— — ( 612 )
Net change in unrealized gains on available-for-sale securities, net of tax — 82 1,478
Total other comprehensive income 2,588 2,309 2,955
Comprehensive income $ 694,968 $ 569,087 $ 397,903
The accompanying notes are an integral part of these consolidated financial statements.
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F5, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Common Stock Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Shareholders’
Equity
Shares Amount
Balances, September 30, 2022 59,860 $ 91,048 $ ( 26,176 ) $ 2,404,106 $ 2,468,978
Exercise of employee stock options 56 1,491 — — 1,491
Issuance of stock under employee stock purchase plan
501 58,468 — — 58,468
Issuance of restricted stock 1,335 — — — —
Repurchase of common stock ( 2,454 ) ( 350,049 ) — — ( 350,049 )
Taxes paid related to net share settlement of equity awards ( 91 ) ( 13,209 ) — — ( 13,209 )
Stock-based compensation — 236,650 — — 236,650
Net income — — — 394,948 394,948
Other comprehensive income — — 2,955 — 2,955
Balances, September 30, 2023 59,207 $ 24,399 $ ( 23,221 ) $ 2,799,054 $ 2,800,232
Exercise of employee stock options 50 1,475 — — 1,475
Issuance of stock under employee stock purchase plan
437 53,604 — — 53,604
Issuance of restricted stock 1,294 — — — —
Repurchase of common stock, including excise taxes ( 2,824 ) ( 281,174 ) — ( 221,431 ) ( 502,605 )
Taxes paid related to net share settlement of equity awards ( 70 ) ( 11,523 ) — — ( 11,523 )
Stock-based compensation — 219,108 — — 219,108
Net income — — — 566,778 566,778
Other comprehensive income — — 2,309 — 2,309
Balances, September 30, 2024 58,094 $ 5,889 $ ( 20,912 ) $ 3,144,401 $ 3,129,378
Exercise of employee stock options 25 963 — — 963
Issuance of stock under employee stock purchase plan
341 58,188 — — 58,188
Issuance of restricted stock 1,190 — — — —
Repurchase of common stock, including excise taxes ( 1,879 ) ( 232,627 ) — ( 268,481 ) ( 501,108 )
Taxes paid related to net share settlement of equity awards ( 87 ) ( 21,881 ) — — ( 21,881 )
Stock-based compensation — 231,491 — — 231,491
Net income — — — 692,380 692,380
Other comprehensive income — — 2,588 — 2,588
Balances, September 30, 2025 57,684 $ 42,023 $ ( 18,324 ) $ 3,568,300 $ 3,591,999
The accompanying notes are an integral part of these consolidated financial statements.
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F5, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended September 30,
2025 2024 2023
Operating activities
Net income $ 692,380 $ 566,778 $ 394,948
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation 231,491 219,108 236,650
Depreciation and amortization 92,399 106,991 112,702
Non-cash operating lease costs 31,503 33,041 38,528
Deferred income taxes ( 72,176 ) ( 68,523 ) ( 108,521 )
Impairment of assets — — 3,455
Other 5,615 ( 962 ) 1,372
Changes in operating assets and liabilities (excluding effects of the acquisition of businesses):
Accounts receivable ( 28,411 ) 63,953 16,704
Inventories ( 851 ) ( 40,504 ) 32,491
Other current assets ( 103,628 ) ( 14,038 ) ( 64,959 )
Other assets ( 91,980 ) ( 91,964 ) 16,591
Accounts payable and accrued liabilities 28,899 40,368 ( 63,100 )
Deferred revenue 200,489 22,838 81,741
Lease liabilities ( 36,064 ) ( 44,667 ) ( 45,193 )
Net cash provided by operating activities 949,666 792,419 653,409
Investing activities
Purchases of investments ( 5,720 ) ( 2,100 ) ( 1,789 )
Maturities of investments 548 6,237 111,330
Sales of investments — — 16,085
Acquisition of businesses, net of cash acquired ( 171,059 ) ( 32,939 ) ( 35,049 )
Purchases of property and equipment ( 43,260 ) ( 30,412 ) ( 54,184 )
Net cash (used in) provided by investing activities ( 219,491 ) ( 59,214 ) 36,393
Financing activities
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan
59,151 55,079 59,959
Payments for repurchase of common stock, including excise taxes ( 502,085 ) ( 500,558 ) ( 350,049 )
Payments on term debt agreement — — ( 350,000 )
Taxes paid related to net share settlement of equity awards
( 21,881 ) ( 11,523 ) ( 13,209 )
Net cash used in financing activities ( 464,815 ) ( 457,002 ) ( 653,299 )
Net increase in cash, cash equivalents and restricted cash 265,360 276,203 36,503
Effect of exchange rate changes on cash, cash equivalents and restricted cash
2,668 1,302 2,125
Cash, cash equivalents and restricted cash, beginning of year 1,078,340 800,835 762,207
Cash, cash equivalents and restricted cash, end of year $ 1,346,368 $ 1,078,340 $ 800,835
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Years Ended September 30,
2025 2024 2023
Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds $ 205,717 $ 181,635 $ 191,569
Cash paid for amounts included in the measurement of operating lease liabilities 44,592 53,346 52,893
Cash paid for interest on long-term debt — — 2,970
Supplemental disclosures of non-cash activities
Right-of-use assets obtained in exchange for lease obligations $ 48,315 $ 12,927 $ 10,544
The accompanying notes are an integral part of these consolidated financial statements.
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F5, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The Company
F5, Inc. (the "Company") is a global leader in application delivery and security solutions which enables its customers to deploy, operate, secure, optimize, and govern every application and API across any architecture - on-premises, in the cloud, or at the edge. The Company's cloud, software, and hardware solutions enable its customers to deliver fast, available, and secure digital experiences to their customers at scale. The Company's enterprise-grade application services are available as hardware, software, and SaaS solutions optimized for hybrid, multicloud environments, with modules that can run independently, or as part of an integrated solution on its high-performance appliances. In connection with its solutions, the Company offers a broad range of professional services, including consulting, training, maintenance, and other technical support services.
Accounting Principles
The Company’s consolidated financial statements and accompanying notes are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America ("GAAP").
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Examples of estimates and assumptions include: revenue recognition, identifying and evaluating the performance obligations of contracts, and the allocation of purchase consideration based on the relative fair value of standalone sales prices of these performance obligations; business combinations, including the determination of fair value for acquired developed technology assets and the evaluation and selection of significant assumptions such as revenue growth rate and technology migration curve; and the incremental borrowing rate for measuring lease obligations. Actual results may differ materially from management's estimates and assumptions.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments, including money market funds, with original maturities of three months or less to be cash equivalents. The Company invests its cash and cash equivalents in deposits with three major financial institutions, which, at times, exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents. Amounts included in restricted cash represent those for which the Company's use is restricted by a contractual agreement.
Investments
Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments, or measured using net asset value as a practical expedient to fair value and are classified as long-term investments on the Company's consolidated balance sheets. The Company performs a qualitative assessment on a periodic basis and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in value are recorded in other income (expense) in the Company's consolidated income statements.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount, net of allowances for credit losses for any potential uncollectible amounts. The allowance for credit losses is based on the assessment of the collectability of accounts. Management regularly reviews the adequacy of the allowance for credit losses on a collective basis by considering the age of each outstanding invoice, each customer’s expected ability to pay and collection history, current market conditions, and reasonable and supportable forecasts of future economic conditions to determine whether the allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. For fiscal years ended September 30, 2025 and 2024, the allowance for credit losses was not material.
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Unbilled Receivables
Unbilled receivables represent amounts related to the Company's unconditional right to consideration associated with contracts with customers that have not yet been billed, net of allowances. Unbilled receivables are converted to accounts receivable at the point in time when the Company has the contractual right to invoice its customers. As of September 30, 2025, unbilled receivables that are expected to be reclassified to accounts receivable within the next 12 months are included in other current assets, with those expected to be transferred to accounts receivables in more than 12 months included in other assets.
Concentration of Credit Risk
The Company extends credit to customers and is therefore subject to credit risk. The Company performs initial and ongoing credit evaluations of its customers’ financial condition and does not require collateral. An allowance for credit losses is recorded for any potential uncollectible amount. Estimates are used in determining the allowance for credit losses in accordance with the Accounts Receivable policy. See Note 15 - Segment Information, for disaggregated accounts receivable by significant customer.
The Company maintains its cash and investment balances with high credit quality financial institutions.
Fair Value of Financial Instruments
In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity, and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances and expands disclosure about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price.
The levels of fair value hierarchy are:
Level 1: Quoted prices in active markets for identical assets and liabilities at the measurement date that the Company has the ability to access.
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Unobservable inputs for which there is little or no market data available. These inputs reflect management’s assumptions of what market participants would use in pricing the asset or liability.
A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
Inventories
The Company outsources the manufacturing of its pre-configured hardware platforms to contract manufacturers, who assemble each product to the Company’s specifications. As protection against component shortages and to provide replacement parts for its service teams, the Company also stocks limited supplies of certain key product components. The Company reduces inventory to net realizable value based on excess and obsolete inventories determined primarily by historical usage and forecasted demand. Inventories consist of hardware and related component parts and are recorded at the lower of cost and net realizable value (as determined by the first-in, first-out method).
Property and Equipment
Property and equipment are stated at net book value. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from three to five years . Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the improvements. The cost of normal maintenance and repairs is charged to expense as incurred and expenditures for major improvements are capitalized at cost. Gains or losses on the disposition of assets are reflected in the consolidated income statements at the time of disposal.
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Business Combinations
The Company’s business combinations are accounted for under the acquisition method. Management allocates the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.
Goodwill
Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. The Company tests goodwill for impairment on an annual basis and between annual tests when impairment indicators are identified, and goodwill is adjusted when impaired. For its annual goodwill impairment test in all periods to date, the Company has operated under one reporting unit and the fair value of its reporting unit has been determined by the Company’s enterprise value. The Company performs its annual goodwill impairment test during the second fiscal quarter.
For its annual impairment test performed in the second quarter of fiscal 2025, the Company completed a quantitative assessment and determined that there was no impairment of goodwill. The Company also considered potential impairment indicators of goodwill at September 30, 2025 and noted no indicators of impairment.
Intangible Assets
Intangible assets with finite lives consist of acquired developed technology, customer relationships, patents and trademarks, trade names, and non-compete covenants acquired through business combinations or asset acquisitions. Intangible assets acquired through business combinations are recorded at their respective estimated fair values upon acquisition close. Other intangible assets acquired through asset acquisitions are recorded at their respective cost. The Company determines the estimated useful lives for acquired intangible assets based on the expected future cash flows associated with the respective asset. The Company's intangible assets with finite lives are amortized using the straight-line method over their estimated useful lives, ranging from four to fifteen years . Amortization expense related to acquired developed technology is charged to cost of product revenues. Amortization expense related to customer relationships, trade names, and non-compete covenants is charged to sales and marketing activities. Amortization expense related to patents and trademarks is charged to general and administrative activities. The Company evaluates the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.
Software Development Costs
The authoritative guidance requires certain internal software development costs related to software to be sold to be capitalized upon the establishment of technological feasibility. Capitalized software development costs are amortized over the remaining estimated economic life of the product. The Company's software development costs incurred subsequent to achieving technological feasibility have not been significant and, as a result, all software development costs have been expensed as research and development activities as incurred.
Internal-Use Software
The Company capitalizes costs incurred during the application development stage associated with the development of internal-use software systems. The capitalized costs are then amortized over the estimated useful life of the software, which is generally three to ten years , and are included in other assets, net in the accompanying consolidated balance sheets.
Impairment of Long-Lived Assets
The Company assesses the impairment of long-lived assets whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be recoverable. When such events occur, management determines whether there has been impairment by comparing the anticipated undiscounted net future cash flows to the related asset’s carrying value. If impairment exists, the asset is adjusted to its estimated fair value.
Revenue Recognition
The Company sells products through distributors, resellers, and directly to end users. Revenue related to the Company's contracts with customers is recognized by following a five-step process:
• Identify the contract(s) with a customer. Evidence of a contract generally consists of a purchase order issued pursuant to the terms and conditions of a distributor, reseller or end user agreement.
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• Identify the performance obligations in the contract. Performance obligations are identified in the Company's contracts and may include hardware, hardware-based software, software-only solutions, cloud-based subscription services as well as a broad range of service performance obligations including consulting, training, installation and maintenance.
• Determine the transaction price. The purchase price stated in an agreed upon purchase order is generally representative of the transaction price. The Company offers several programs in which customers are eligible for certain levels of rebates if certain conditions are met. When determining the transaction price, the Company considers the effects of any variable consideration.
• Allocate the transaction price to the performance obligations in the contract. The transaction price in a contract is allocated based upon the relative standalone selling price of each distinct performance obligation identified in the contract.
• Recognize revenue when (or as) the entity satisfies a performance obligation. The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring control of promised products and services to a customer.
Revenue is recognized net of any taxes collected, which are subsequently remitted to governmental authorities. Shipping and handling fees charged to the Company’s customers are recognized as product revenue in the period shipped and the related costs for providing these services are recorded as a cost of product revenues.
The following is a description of the principal activities from which the Company generates revenue:
Product
Revenue from the sale of the Company's hardware and perpetual software products is generally recognized at a point in time when the product has been fulfilled and the customer is obligated to pay for the product. The Company also offers several products by subscription, either through term-based license agreements or as SaaS offerings. Term-based license agreements include both a software license and post-contract customer support ("PCS"). For these offerings, product revenue is recognized at the point in time the software license is fulfilled to the customer, and services revenues for PCS is recognized over the subscription term. For the Company's SaaS offerings, revenue is recognized ratably as the services are provided. Hardware, including the software run on those devices, is considered systems revenue. Perpetual or subscription software offerings that are, or have the ability to be deployed on a standalone basis, along with the Company's SaaS offerings are considered software revenue. When rights of return are present and the Company cannot estimate returns, revenue is recognized when such rights of return lapse. Payment terms to customers are generally net 30 days to net 60 days.
Services
Revenues for post-contract customer support ("PCS") are recognized on a straight-line basis over the service contract term. PCS includes a limited period of telephone support, updates, repair or replacement of any failed product or component that fails during the term of the agreement, bug fixes and rights to upgrades, when and if available. Consulting services are customarily billed at fixed hourly rates, plus out-of-pocket expenses, and revenues are recognized as the consulting is delivered. Similarly, training revenue is recognized as the training is completed.
Flexible Consumption Program
The Company enters into certain contracts with customers, including flexible consumption programs and multi-year subscriptions, with non-standard terms and conditions. Management assesses contractual terms in these agreements to identify and evaluate performance obligations. Management allocates consideration to each performance obligation based on relative fair value using standalone selling price and recognizes associated revenue as control is transferred to the customer.
Contract Acquisition Costs
Sales commissions earned by the Company's sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions on fulfilled hardware, perpetual software, and fulfilled software from term-based subscription sales are expensed as incurred. Sales commissions on the initial PCS for systems, perpetual software, and term-based license subscription offerings are deferred and then amortized as an expense on a straight-line basis over the period of benefit. Sales commissions on SaaS subscription offerings are deferred and then amortized as an expense on a straight-line basis over the period of benefit. Management has determined the period of benefit to be 4.5 years for initial PCS on hardware and perpetual software offerings, and 3 years for subscription offerings.
Guarantees and Product Warranties
In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, resellers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company
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has agreed to hold the other party harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. The Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.
The Company offers warranties of one year for hardware for those customers without service contracts, with the option of purchasing additional warranty coverage in yearly increments. The Company accrues for warranty costs as part of its cost of sales based on associated material product costs and technical support labor costs. Warranty expense and accrued warranty costs were not material for all periods presented.
Research and Development
Research and development expenses consist of salaries and related benefits of product development personnel, prototype materials and expenses related to the development of new and improved products, technology costs, including cloud hosting and software licenses expenses used to support development activities, and an allocation of facilities, depreciation and amortization expense. Research and development expenses are reflected in the income statements as incurred.
Advertising
Advertising costs are expensed as incurred. The Company incurred $ 6.2 million, $ 5.4 million and $ 8.9 million in advertising costs during the fiscal years 2025, 2024 and 2023, respectively.
Income Taxes
Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The realization of deferred tax assets is based on historical tax positions and estimates of future taxable income. A valuation allowance is recorded when it is more-likely-than-not that some of the deferred tax assets will not be realized.
The Company assesses whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized in the financial statements from such a position is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company adjusts these liabilities based on a variety of factors, including the evaluation of information not previously available. These adjustments are reflected as increases or decreases to income tax expense in the period in which new information is available.
Foreign Currency
The functional currency for the Company’s foreign subsidiaries is either the U.S. dollar or the local currency depending on the assessment of management. An entity’s functional currency is determined by the currency of the economic environment in which the majority of cash is generated and expended by the entity. The financial statements of all majority-owned subsidiaries and related entities, with a functional currency other than the U.S. dollar, have been translated into U.S. dollars. All assets and liabilities of the respective entities are translated at year-end exchange rates and all revenues and expenses are translated at average rates during the respective period. Translation adjustments are reported as other comprehensive income (loss) in the consolidated statements of comprehensive income.
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency, including U.S. dollars. Gains and losses on those foreign currency transactions are included in determining net income or loss for the period of exchange and are recorded in other income, net. The net effect of foreign currency gains and losses was not material during the fiscal years ended September 30, 2025, 2024 and 2023.
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Segments
Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Management has determined that the Company is organized as, and operates in, one reportable operating segment.
Stock-based Compensation
The Company issues incentive awards to its employees through stock-based compensation consisting of restricted stock units ("RSUs"). RSUs are payable in shares of the Company’s common stock as the periodic vesting requirements are satisfied, generally over one to four years . The value of an RSU is based upon the fair market value of the Company’s common stock on the date of grant. The value of RSUs is determined using the intrinsic value method and is based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant.
The Company offers an Employee Stock Purchase Plan ("ESPP") that permits eligible employees to purchase shares of the Company’s common stock at a discount. In determining the fair value of shares issued under the ESPP, the Company uses the Black-Scholes option pricing model. The assumptions within the option pricing model are based on management’s best estimates at that time, which impact the fair value of the ESPP option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the ESPP option.
The Company has also issued stock options as replacement awards, most notably for those assumed as part of business combinations. The Company used the Black-Scholes option pricing model to determine the fair value of the stock option replacement awards. The assumptions within the option pricing model are based on management’s best estimates at that time, which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the term of the option.
The Company accounts for stock-based compensation using the straight-line attribution method for recognizing compensation expense. The Company recognizes compensation expense for only the portion of stock-based awards that are expected to vest. Therefore, the Company applies estimated forfeiture rates that are derived from historical employee termination behavior. Based on historical differences with forfeitures of stock-based awards granted to the Company’s executive officers and Board of Directors versus grants awarded to all other employees, the Company has developed separate forfeiture expectations for these two groups.
The Company issues incentive awards to certain current executive officers as part of its annual equity awards program. A portion of the aggregate number of RSUs issued to executive officers vest in equal quarterly increments, and a portion is subject to the Company achieving specified performance goals.
The Company's Talent and Compensation Committee has adopted a set of metrics for the performance stock awards, including (1) 50 % of the annual performance stock grant is based on achieving certain annual revenue targets; (2) 25 % of the annual performance stock grant is based on achieving certain annual earnings per share targets; and (3) 25 % of the annual performance stock grant is based on relative total shareholder return ("TSR") benchmarked to the S&P 500 index. In each case, no vesting or payment with respect to a performance goal shall occur unless a minimum threshold is met for the applicable goal. Vesting and payment with respect to the performance goal is linear above the threshold of the applicable goal and is capped at achievement of 200 % above target.
The Company recognizes compensation costs for awards with performance conditions and market conditions on a straight-line basis over the requisite service period for each separately vesting portion of the award and, for awards with performance conditions, when it concludes it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment.
Comprehensive Income
Comprehensive income includes certain changes in equity that are excluded from net income, specifically, unrealized gains or losses on securities and foreign currency translation adjustments. These changes are included in accumulated other comprehensive income or loss.
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Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This ASU expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The Company adopted this accounting standard update as of September 30, 2025 and it did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its disclosures in the consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). This ASU requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. In addition, in January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies the effective date of ASU 2024-03. ASU 2024-03 will be effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures in the consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). This ASU simplifies the capitalization guidance by removing all references to software development project stages. The revised guidance is neutral to different software development methods. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
2. Revenue from Contracts with Customers
Capitalized Contract Acquisition Costs
The table below shows significant movements in capitalized contract acquisition costs (current and noncurrent) for the years ended September 30, 2025, 2024, and 2023 (in thousands):
2025 2024 2023
Balance, beginning of year $ 66,258 $ 66,468 $ 77,220
Additional capitalized contract acquisition costs 48,532 35,173 26,960
Amortization of capitalized contract acquisition costs ( 38,238 ) ( 35,383 ) ( 37,712 )
Balance, end of year $ 76,552 $ 66,258 $ 66,468
Amortization of capitalized contract acquisition costs was $ 38.2 million, $ 35.4 million, and $ 37.7 million for the years ended September 30, 2025, 2024, and 2023, respectively, and is recorded in Sales and Marketing expense in the accompanying consolidated income statements. There was no impairment of any capitalized contract acquisition costs during any period presented.
Contract Balances
Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to the Company's contracts with customers. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations, or for contracts with customers that contain the Company's unconditional rights to consideration, for which the customer has not been billed. These liabilities are classified as current and non-current deferred revenue.
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The table below shows significant movements in the deferred revenue balances (current and noncurrent) for the years ended September 30, 2025, 2024, and 2023 (in thousands):
2025 2024 2023
Balance, beginning of year $ 1,797,959 $ 1,775,121 $ 1,691,580
Amounts added but not recognized as revenues 1,344,094 1,179,350 1,162,698
Deferred revenue acquired through acquisition of businesses 789 — 1,800
Revenues recognized related to the opening balance of deferred revenue ( 1,143,605 ) ( 1,156,512 ) ( 1,080,957 )
Balance, end of year $ 1,999,237 $ 1,797,959 $ 1,775,121
Remaining Performance Obligations
Remaining performance obligations represent the amount of the transaction price under contracts with customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the reporting date. The composition of unsatisfied performance obligations consists mainly of deferred service revenue, and to a lesser extent, deferred product revenue, for which the Company has an obligation to perform, and has not yet recognized as revenue in the consolidated financial statements. As of September 30, 2025, the total non-cancelable remaining performance obligations under the Company's contracts with customers was $ 2.0 billion and the Company expects to recognize revenues on 60.7 % of these remaining performance obligations over the next 12 months, 24.1 % in year two, and the remaining balance thereafter.
See Note 15 - Segment Information, for disaggregated revenue by significant customer and geographic region, as well as disaggregated product revenue by systems and software.
3. Business Combinations
Fiscal Year 2025 Acquisition of CalypsoAI Corp
On September 26, 2025, the Company closed on a transaction for the acquisition of CalypsoAI Corp. ("CalypsoAI"), a provider in enterprise AI security for $ 145.2 million in cash, with CalypsoAI immediately becoming a wholly-owned subsidiary of F5 upon the closing of the transaction. The addition of CalypsoAI's platform brings real-time threat defense, red teaming at scale, and data security to enterprises racing to deploy generative and agentic AI. These capabilities will be integrated into the F5 ADSP to create an enhanced solution for securing AI inference.
As a result of the acquisition, the Company acquired all the assets and assumed all the liabilities of CalypsoAI. The goodwill related to the CalypsoAI acquisition is comprised primarily of expected synergies from combining operations and the acquired intangible assets that do not qualify for separate recognition. Goodwill related to the CalypsoAI acquisition was not deductible for tax purposes. Transaction costs associated with the acquisition were not material.
The allocated purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values is presented in the following table (in thousands):
Other net tangible assets acquired, at fair value $ 14,151
Identifiable intangible assets, developed technology
16,900
Goodwill 114,156
Total net assets acquired
$ 145,207
The initial allocation of the purchase price was based on preliminary valuations and assumptions and is subject to change within the measurement period. The Company expects to finalize the allocation of the purchase price as soon as practicable and no later than one year from the acquisition date.
The developed technology intangible assets are amortized on a straight-line basis over the weighted average estimated useful life of 4.21 years and included in cost of net product revenues. The estimated useful lives for the acquired intangible assets were based on the expected future cash flows associated with the respective asset.
The pro forma financial information, as well as the revenue and earnings generated by CalypsoAI, were not material to the Company's operations for the periods presented.
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Other Fiscal Year 2025 Acquisitions
During the second, third and fourth quarters of fiscal 2025, the Company completed three additional acquisitions. The acquired assets and assumed liabilities of the acquisitions were not material and the Company recorded $ 17.4 million of goodwill as a result of the acquisitions. The acquisitions did not have a material impact to the Company's operating results.
Fiscal Year 2024 Acquisitions
During the second quarter of fiscal 2024, the Company completed two acquisitions. The acquired assets and assumed liabilities of the acquisitions were not material and the Company recorded $ 23.6 million of goodwill as a result of the acquisitions. The measurement period for the two acquisitions lapsed during the second quarter of fiscal 2025. The Company recorded an immaterial adjustment to consideration exchanged for the purchase of the acquired companies within the post-close measurement period. The acquisitions did not have a material impact to the Company's operating results.
Fiscal Year 2023 Acquisition
In February 2023, the Company acquired Lilac Cloud, Inc. ("Lilac"), a provider of innovative application delivery services. The acquired assets and assumed liabilities of Lilac were not material. The Company recorded $ 29.4 million of goodwill as a result of the acquisition. The measurement period for the Lilac acquisition lapsed during the second quarter of fiscal 2024. The acquisition did not have a material impact to the Company's operating results.
4. Fair Value Measurements
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The Company's financial assets measured at fair value on a recurring basis subject to the disclosure requirements at September 30, 2025 and 2024, were as follows (in thousands):
Gross Unrealized Classification on Balance Sheet
As of September 30, 2025 Fair Value Level Cost or Amortized Cost Gains Losses Aggregate
Fair Value Cash and Cash Equivalents Short-Term Investments Long-Term Investments
Changes in fair value recorded in other comprehensive income (loss):
Money market funds
Level 1 $ 642,997 $ — $ — $ 642,997 $ 642,997 $ — $ —
Total cash equivalents
$ 642,997 $ — $ — $ 642,997 $ 642,997 $ — $ —
Changes in fair value recorded in other net income (expense):
Equity investments * $ 15,693 $ — $ — $ 15,693
Total equity investments 15,693 — — 15,693
Total
$ 658,690 $ 642,997 $ — $ 15,693
* Equity investments presented in the table above include investments without readily determinable fair values that are measured at fair value using net asset value ("NAV") as a practical expedient, or are measured at cost with adjustments for observable changes in price or impairments. The equity investments are not classified within the fair value hierarchy.
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Gross Unrealized Classification on Balance Sheet
As of September 30, 2024 Fair Value Level Cost or Amortized Cost Gains Losses Aggregate
Fair Value Cash and Cash Equivalents Short-Term Investments Long-Term Investments
Changes in fair value recorded in other comprehensive income (loss):
Money market funds
Level 1 $ 437,273 $ — $ — $ 437,273 $ 437,273 $ — $ —
Total cash equivalents
$ 437,273 $ — $ — $ 437,273 $ 437,273 $ — $ —
Changes in fair value recorded in other net income (expense):
Equity investments ** $ 8,580 $ — $ — $ 8,580
Total equity investments 8,580 — — 8,580
Total
$ 445,853 $ 437,273 $ — $ 8,580
** The fair value of this equity investment is measured at NAV which approximates fair value and is not classified within the fair value hierarchy.
The Company uses the fair value hierarchy for financial assets and liabilities. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value due to their short-term nature.
Interest income from cash, cash equivalents, and investments was $ 40.8 million, $ 35.1 million and $ 18.2 million for the years ended September 30, 2025, 2024, and 2023, respectively. Interest income is included in other income (expense), net on the Company's consolidated income statements. There were no unrealized losses on investments that were held for a period greater than 12 months at September 30, 2025 and 2024.
The Company determined that as of September 30, 2025, there were no credit losses on any investments within its portfolio.
Assets Measured and Recorded at Fair Value on a Non-Recurring Basis
The Company’s non-financial long-lived assets, which include goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis. These non-financial assets are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. The Company reviews goodwill for impairment annually, during the second quarter of each fiscal year, or as circumstances indicate the possibility of impairment. The Company monitors the carrying value of tangible and intangible long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable.
During the year ended September 30, 2023, the Company recorded an impairment of $ 3.5 million against the operating lease right-of-use asset related to its third quarter of fiscal 2023 restructuring plan, see Note 13, Restructuring Charges. The charge was reflected in the Restructuring Charges line item on the Company's consolidated income statement.
The Company did not recognize any other material impairment charges related to non-financial long-lived assets for the years ended September 30, 2025, 2024, and 2023.
5. Balance Sheet Details
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of the Company’s cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash shown in the Company’s consolidated statements of cash flows for the periods presented (in thousands):
September 30,
2025 2024
Cash and cash equivalents $ 1,344,273 $ 1,074,602
Restricted cash included in other assets, net 2,095 3,738
Total cash, cash equivalents and restricted cash $ 1,346,368 $ 1,078,340
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Inventories
Inventories consist of the following (in thousands):
September 30,
2025 2024
Finished goods $ 26,933 $ 27,922
Raw materials 50,296 48,456
$ 77,229 $ 76,378
Other Current Assets
Other current assets consist of the following (in thousands):
September 30,
2025 2024
Unbilled receivables $ 498,288 $ 401,104
Prepaid expenses 86,346 93,467
Capitalized contract acquisition costs 37,023 32,681
Other 61,109 42,215
$ 682,766 $ 569,467
Property and Equipment
Property and equipment consist of the following (in thousands):
September 30,
2025 2024
Computer equipment $ 228,514 $ 206,861
Software 70,808 71,690
Office furniture and equipment 46,903 44,776
Leasehold improvements 190,637 186,179
536,862 509,506
Accumulated depreciation and amortization ( 379,915 ) ( 358,563 )
$ 156,947 $ 150,943
Depreciation and amortization expense totaled approximately $ 42.9 million, $ 49.3 million, and $ 53.3 million for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.
Goodwill
Changes in the carrying amount of goodwill during fiscal years 2025 and 2024 are summarized as follows (in thousands):
Balance, September 30, 2023 $ 2,288,678
Other business acquisitions 23,684
Balance, September 30, 2024 2,312,362
Other business acquisitions 131,520
Balance, September 30, 2025 $ 2,443,882
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Other Assets
Other assets consist of the following (in thousands):
September 30,
2025 2024
Intangible assets $ 96,266 $ 111,576
Unbilled receivables 340,153 277,965
Capitalized contract acquisition costs 39,529 33,577
Other 76,332 64,399
$ 552,280 $ 487,517
Intangible assets are included in other assets on the consolidated balance sheets and consist of the following (in thousands):
September 30, 2025 September 30, 2024
Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount
Developed technology
$ 280,954 $ ( 200,554 ) $ 80,400 $ 287,431 $ ( 192,967 ) $ 94,464
Customer relationships
12,000 ( 5,133 ) 6,867 17,700 ( 10,034 ) 7,666
Patents and trademarks
12,308 ( 4,517 ) 7,791 9,795 ( 3,629 ) 6,166
Trade names
14,500 ( 13,292 ) 1,208 15,473 ( 12,193 ) 3,280
Non-compete covenants
— — — 1,960 ( 1,960 ) —
$ 319,762 $ ( 223,496 ) $ 96,266 $ 332,359 $ ( 220,783 ) $ 111,576
Amortization expense related to intangible assets was $ 42.9 million, $ 24.4 million, and $ 29.1 million for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.
For intangible assets held as of September 30, 2025, amortization expense for the five succeeding fiscal years is as follows (in thousands):
2026 $ 43,531
2027 25,349
2028 12,914
2029 8,252
2030 3,091
$ 93,137
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
September 30,
2025 2024
Payroll and benefits $ 189,337 $ 171,571
Operating lease liabilities, current 31,042 33,779
Income and other tax accruals 44,051 45,247
Other 50,953 49,479
$ 315,383 $ 300,076
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Other Long-term Liabilities
Other long-term liabilities consist of the following (in thousands):
September 30,
2025 2024
Income taxes payable $ 85,278 $ 85,461
Other 10,953 9,272
$ 96,231 $ 94,733
6. Debt Facilities
Term Credit Agreement
In connection with the acquisition of Shape, on January 24, 2020, the Company entered into a Term Credit Agreement ("Term Credit Agreement") with certain institutional lenders that provides for a senior unsecured term loan facility in an aggregate principal amount of $ 400.0 million (the "Term Loan Facility"). The Term Loan Facility had an original maturity date of January 24, 2023 with quarterly installments equal to 1.25 % of the original principal amount. Borrowings under the Term Loan Facility bore interest at a rate equal to LIBOR, plus an applicable margin of 1.125 % to 1.75 % depending on the Company's leverage ratio. The proceeds from the Term Loan Facility were primarily used to finance the acquisition of Shape and related expenses. In connection with the Term Loan Facility, the Company incurred $ 2.2 million in debt issuance costs, which were recorded as a reduction to the carrying value of the principal amount of the debt.
On December 15, 2022, the Company voluntarily prepaid, in full, all borrowings under the Term Loan Facility, including the outstanding principal balance of $ 350.0 million, and all accrued, but unpaid interest outstanding of $ 3.0 million. All remaining debt issuance costs were amortized to interest expense in connection with the prepayment. As a result of the payoff of its Term Loan Facility, the Company was released of any and all obligations, maintenance of covenants, and indebtedness under the Term Credit Agreement. The weighted average interest rate on the principal amount under the Term Loan Facility outstanding balance was 4.072 % for the period of October 1, 2022 to December 15, 2022.
Revolving Credit Agreement
On January 31, 2020, the Company entered into a Revolving Credit Agreement (the "Revolving Credit Agreement") that provides for a senior unsecured revolving credit facility in an aggregate principal amount of $ 350.0 million (the "Revolving Credit Facility"). The Company has the option to increase commitments under the Revolving Credit Facility from time to time, subject to certain conditions, by up to $ 150.0 million. Historically, borrowings under the Revolving Credit Facility bore interest at a rate equal to, at the Company's option, (a) LIBOR, adjusted for customary statutory reserves, plus an applicable margin of 1.125 % to 1.75 % depending on the Company's leverage ratio, or (b) an alternate base rate determined in accordance with the Revolving Credit Agreement, plus an applicable margin of 0.125 % to 0.750 % depending on the Company's leverage ratio. On May 26, 2023, the Company amended the Revolving Credit Agreement as a result of the cessation of the LIBOR borrowing reference rate. The amendment modified and directly replaced the LIBOR borrowing reference rate within the Revolving Credit Agreement to the Secured Overnight Financing Rate ("SOFR"). After the amendment, borrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company's option, (a) SOFR plus 0.10 %, plus an applicable margin of 1.125 % to 1.75 % depending on the Company's leverage ratio, or (b) an alternate base rate determined in accordance with the Revolving Credit Agreement, plus an applicable margin of 0.125 % to 0.750 % depending on the Company's leverage ratio. The Revolving Credit Agreement also requires payment of a commitment fee calculated at a rate per annum of 0.125 % to 0.300 % depending on the Company's leverage ratio on the undrawn portion of the Revolving Credit Facility. Commitment fees incurred during fiscal years 2025, 2024 and 2023 were not material.
On January 31, 2025 , the Company's Revolving Credit Facility, with an aggregate principal amount of $ 350.0 million, expired. At the time of expiration, there were no outstanding borrowings under the Revolving Credit Facility.
7. Leases
The majority of the Company's operating lease payments relate to its corporate headquarters in Seattle, Washington, which includes approximately 515,000 square feet of office space. The lease commenced in April 2019 and expires in 2033 with an option for renewal. The Company also leases additional office and lab space for product development and sales and support personnel in the United States and internationally. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
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The components of the Company's operating lease expenses for the years ended September 30, 2025, 2024, and 2023 were as follows (in thousands):
Fiscal year ended September 30,
2025 2024 2023
Operating lease expense $ 39,630 $ 40,655 $ 47,036
Short-term lease expense 2,890 2,791 2,986
Variable lease expense 23,032 23,268 23,139
Total lease expense
$ 65,552 $ 66,714 $ 73,161
Variable lease expense primarily consists of common area maintenance, real estate taxes and parking expenses.
Supplemental balance sheet information related to the Company's operating leases was as follows (in thousands, except lease term and discount rate):
September 30,
2025 2024
Operating lease right-of-use assets, net $ 185,601 $ 178,180
Operating lease liabilities, current 1
31,042 33,779
Operating lease liabilities, long-term 230,749 215,785
Total operating lease liabilities
$ 261,791 $ 249,564
Weighted average remaining lease term (in years) 7.7 7.9
Weighted average discount rate 3.24 % 2.94 %
(1) Current portion of operating lease liabilities is included in accrued liabilities on the Company's consolidated balance sheets.
As of September 30, 2025, the future operating lease payments for each of the next five years and thereafter is as follows (in thousands):
Fiscal Years Ending September 30: Operating Lease
Payments
2026 $ 38,700
2027 40,386
2028 37,001
2029 34,188
2030 33,715
Thereafter 115,208
Total lease payments 299,198
Less: imputed interest ( 37,407 )
Total lease liabilities $ 261,791
Operating lease liabilities above do not include sublease income. As of September 30, 2025, the Company expects to receive sublease income of approximately $ 7.5 million, which consists of $ 2.3 million to be received in fiscal year 2026 and $ 5.2 million to be received over the seven fiscal years thereafter.
During the year ended September 30, 2023, the Company recorded an impairment of $ 3.5 million against the operating lease right-of-use asset related to its third quarter of fiscal 2023 restructuring plan, see Note 13, Restructuring Charges. There were no material impairments against right-of-use assets for the years ended September 30, 2025 and 2024.
As of September 30, 2025, the Company had no significant operating leases that were executed but not yet commenced.
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8. Income Taxes
The United States and international components of income before income taxes are as follows (in thousands):
Years Ended September 30,
2025 2024 2023
United States $ 547,633 $ 430,532 $ 268,314
International 260,703 264,933 217,674
$ 808,336 $ 695,465 $ 485,988
The provision for income taxes consists of the following (in thousands):
Years Ended September 30,
2025 2024 2023
Current
U.S. federal $ 90,560 $ 99,745 $ 115,170
State 20,937 17,957 18,359
Foreign 77,008 79,200 66,053
Total 188,505 196,902 199,582
Deferred
U.S. federal ( 45,160 ) ( 51,968 ) ( 89,280 )
State ( 10,476 ) ( 11,100 ) ( 18,576 )
Foreign ( 16,913 ) ( 5,147 ) ( 686 )
Total ( 72,549 ) ( 68,215 ) ( 108,542 )
$ 115,956 $ 128,687 $ 91,040
The effective tax rate differs from the U.S. federal statutory rate as follows (in thousands):
Years Ended September 30,
2025 2024 2023
Income tax provision at statutory rate $ 169,750 $ 146,048 $ 102,058
State taxes, net of federal benefit 11,724 10,548 6,806
Foreign-derived intangible income deduction ( 32,192 ) ( 28,036 ) ( 30,086 )
Tax impact of foreign earnings ( 9,922 ) 7,359 9,856
Research and development and other credits ( 24,467 ) ( 14,748 ) ( 17,654 )
Stock-based and other compensation ( 2,635 ) 8,145 20,145
Other 3,698 ( 629 ) ( 85 )
$ 115,956 $ 128,687 $ 91,040
The Company does not maintain an indefinite reinvestment assertion on unremitted foreign earnings and has recorded a deferred tax liability for any estimated foreign, federal, or state tax liabilities associated with a future repatriation of foreign earnings.
The Company benefits from tax incentive arrangements in certain foreign jurisdictions, which expire in fiscal years 2026 to 2034. The tax incentive agreements are conditional upon meeting certain operational, employment, and investment requirements. These arrangements decreased foreign taxes by $ 9.4 million, $ 7.2 million and $ 6.0 million, and increased diluted earnings per common share by $ 0.16 , $ 0.12 and $ 0.10 for the years ended September 30, 2025, 2024 and 2023, respectively.
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The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities are as follows (in thousands):
Years Ended September 30,
2025 2024
Deferred tax assets
Net operating loss carry-forwards $ 47,028 $ 34,787
Capitalized research and development costs 417,392 337,626
Accrued compensation and benefits 14,444 13,493
Stock-based compensation 9,933 8,606
Deferred revenue 31,341 39,042
Lease liabilities 56,282 53,945
Other accruals and reserves 28,191 28,729
Tax credit carryforwards 27,398 25,052
Depreciation 1,759 1,507
633,768 542,787
Valuation allowance ( 34,281 ) ( 39,651 )
599,487 503,136
Deferred tax liabilities
Purchased intangibles ( 59,096 ) ( 53,047 )
Depreciation ( 32,269 ) ( 29,441 )
Deferred costs ( 11,728 ) ( 10,752 )
Lease assets ( 36,629 ) ( 36,610 )
Other accruals and reserves ( 15,298 ) ( 14,514 )
( 155,020 ) ( 144,364 )
Net deferred tax assets $ 444,467 $ 358,772
At September 30, 2025, the Company had foreign net operating loss carryforwards of approximately $ 53.2 million that can be carried forward indefinitely. The Company had $ 122.9 million of federal net operating loss carryforwards, of which $ 107.7 million can be carried forward indefinitely and $ 15.2 million that will expire in fiscal years 2033 to 2038. The annual utilization of the federal net operating loss carryforwards is limited under Internal Revenue Code Section 382. The Company also had $ 260.8 million of state net operating loss carryforwards, of which $ 92.0 million can be carried forward indefinitely and $ 168.8 million will expire in fiscal years 2028 to 2045. In addition, there are $ 2.5 million of foreign tax credit carryforwards that will expire in fiscal years 2026 to 2040, $ 4.1 million of federal tax credit carryforwards that will expire in fiscal years 2028 to 2044, $ 37.6 million of state tax credit carryforwards that can be carried forward indefinitely, and $ 3.2 million of state tax credit carryforwards that will expire in fiscal years 2032 to 2040. Management believes that it is more likely than not that the benefit from certain foreign net operating loss and credit carryforwards and state tax net operating loss and credit carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance on the deferred tax assets relating to these carryforwards. The net change in the total valuation allowance was a decrease of $ 5.4 million and a decrease of $ 4.3 million for years ended September 30, 2025 and 2024, respectively.
The Company recognizes the financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest impact that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
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The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits in fiscal years 2025, 2024 and 2023 (in thousands):
2025 2024 2023
Balance, beginning of period $ 86,877 $ 79,167 $ 66,840
Gross increases related to prior period tax positions 5,292 7,939 4,270
Gross decreases related to prior period tax positions ( 2,381 ) ( 7,659 ) ( 70 )
Gross increases related to current period tax positions 10,244 8,494 9,224
Decreases relating to settlements with tax authorities — ( 50 ) ( 300 )
Reductions due to lapses of statute of limitations ( 13,435 ) ( 1,014 ) ( 797 )
Balance, end of period $ 86,597 $ 86,877 $ 79,167
The total amount of gross unrecognized tax benefits was $ 86.6 million, $ 86.9 million, and $ 79.2 million as of September 30, 2025, 2024, and 2023, respectively, of which, $ 54.7 million, $ 56.2 million, and $ 51.2 million, if recognized, would affect the effective tax rate. There is a reasonable possibility that the Company’s unrecognized tax benefits will change within twelve months due to audit settlements or the expiration of statute of limitations, but the Company does not expect the change to be material to the consolidated financial statements.
The Company recognizes interest and, if applicable, penalties (not included in the "unrecognized tax benefits" table above) for any uncertain tax positions. Interest and penalties are recorded as a component of income tax expense. In the years ended September 30, 2025, 2024 and 2023, the Company recorded approximately a $ 0.9 million increase, $ 5.6 million increase and $ 3.3 million increase, respectively, of interest and penalty expense related to uncertain tax positions. As of September 30, 2025 and 2024, the Company had a cumulative balance of accrued interest and penalties on unrecognized tax positions of $ 12.7 million and $ 11.8 million, respectively.
The Company and its subsidiaries are subject to U.S. federal income tax as well as the income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for fiscal years through September 30, 2018 and fiscal year ended September 30, 2021. Major jurisdictions where there are wholly owned subsidiaries of F5, Inc. which require income tax filings include the United Kingdom, Singapore, Israel, and India. The earliest periods open for review by local taxing authorities are fiscal years 2024 for the United Kingdom, 2019 for Singapore, 2019 for Israel, and 2019 for India. The Company is currently under audit by the Internal Revenue Service for fiscal year 2019, by various states for fiscal years 2018 through 2021, and by various foreign jurisdictions including India for fiscal years 2019 to 2024, Israel for fiscal years 2019 to 2023, Saudi Arabia for fiscal years 2015 to 2021, and Singapore for fiscal years 2019 to 2023.
9. Shareholders' Equity
Common Stock Repurchase
On October 25, 2024, the Company announced that its Board of Directors authorized an additional $ 1.0 billion for its common stock share repurchase program. This authorization is incremental to the existing $ 6.4 billion program, initially approved in October 2010 and expanded in subsequent fiscal years. Acquisitions for the share repurchase programs will be made from time to time in private transactions, accelerated share repurchase programs, or open market purchases as permitted by securities laws and other legal requirements. The programs can be terminated at any time.
The following table summarizes the Company's repurchases and retirements of its common stock under its Stock Repurchase Program (in thousands, except per share data):
Years Ended September 30,
2025 2024 2023
Shares repurchased 1,879 2,824 2,454
Average price per share $ 266.04 $ 177.08 $ 142.62
Amount repurchased $ 500,037 $ 500,056 $ 350,049
As of September 30, 2025, the Company had $ 922.4 million remaining shares authorized under its share repurchase program.
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10. Stock-based Compensation
The Company recognized $ 231.5 million, $ 219.1 million and $ 236.7 million of stock-based compensation expense for the fiscal years ended September 30, 2025, 2024 and 2023, respectively. The income tax benefit recognized on stock-based compensation within income tax expense was $ 49.9 million, $ 44.4 million and $ 44.7 million for the fiscal years ended September 30, 2025, 2024 and 2023, respectively. As of September 30, 2025, there was $ 229.0 million of total unrecognized stock-based compensation cost, the substantial majority of which will be recognized over approximately two years . Going forward, stock-based compensation expenses may increase as the Company issues additional equity-based awards to continue to attract and retain key employees. On October 31, 2025, the Company’s Board of Directors and Talent and Compensation Committee approved 81,099 RSUs to be granted to executive officers pursuant to the Company’s annual equity awards program.
The Company has adopted a number of stock-based compensation plans as discussed below.
2011 Employee Stock Purchase Plan. In April 2012, the Board of Directors amended and restated the Company’s 1999 Employee Stock Purchase Plan, or the Employee Stock Purchase Plan. A total of 12,000,000 shares of common stock have been reserved for issuance under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan permits eligible employees to acquire shares of the Company’s common stock through periodic payroll deductions of up to 15 % of base compensation. No employee may purchase more than 10,000 shares during an offering period. In addition, no employee may purchase more than $ 25,000 worth of stock, determined by the fair market value of the shares at the time such option is granted, in one calendar year. The Employee Stock Purchase Plan has been implemented in a series of offering periods, each 6 months in duration. The price at which the common stock may be purchased is 85 % of the lesser of the fair market value of the Company’s common stock on the first day of the applicable offering period or on the last day of the respective purchase period. As of September 30, 2025 there were 1,666,569 shares available for awards under the Employee Stock Purchase Plan.
In determining the fair value of the right to purchase under the Employee Stock Purchase Plan, the Company uses the Black-Scholes option pricing model that employs the following key assumptions:
Employee Stock Purchase Plan
Years Ended September 30,
2025 2024 2023
Volatility
28.85 % - 29.40 %
18.19 % - 20.32 %
33.02 % - 38.15 %
Expected term (in years)
0.5 0.5 0.5
Dividend yield
— — —
Risk-free interest rate 4.28 % - 4.98 %
5.28 % - 5.52 %
3.18 % - 4.90 %
The expected volatility is based on the historical volatility of our common stock. The expected term is based on the length of the period from the first day of the offering period to the purchase date. The expected dividend yield assumption is based on expectations about the Company’s anticipated dividend policy. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with maturities that approximate the expected term.
Acquisition Related Incentive Plans. In connection with the Company’s acquisitions, the Company has adopted acquisition equity incentive plans and assumed equity incentive plans of certain acquired companies and equity awards granted under such assumed equity incentive plans with awards under such plans being settled in shares of the Company’s common stock. All of these acquisition equity incentive plans and assumed equity incentive plans of acquired companies have been terminated and no additional equity awards will be issued under any of these plans. As of September 30, 2025, there were 19 , 174 and 9,341 stock units outstanding under the Nginx, Threat Stack and Lilac Cloud acquisition plans, respectively. As of September 30, 2025, there were options to purchase 1,985 , 18,965 , 6,005 and 525 shares outstanding under the Nginx, Shape, Volterra and Lilac Cloud assumed plans, respectively.
F5, Inc. Incentive Plan. In March 2022, the Company adopted the F5, Inc. Incentive Plan, or the Plan, which amended and restated the 2014 Incentive Plan. The Plan provides for discretionary grants of stock options, stock units and other equity and cash-based awards for employees, including officers, directors and consultants. A total of 27,880,000 shares of common stock have been reserved for issuance under the Plan. Upon certain changes in control of the Company, all outstanding and unvested options or stock awards under the Plan will vest at the rate of 50 %, unless assumed or substituted by the acquiring entity. During the fiscal year 2025, the Company issued no stock options, 120,235 performance stock units and 1,167,667 restricted stock units under the Plan. As of September 30, 2025, there were no options outstanding, 183,723 performance stock units outstanding, 1,197,528 restricted stock units outstanding and 2,922,335 shares available for new awards under the Plan.
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A summary of restricted stock unit activity under the Plan is as follows:
Performance Stock Units Restricted Stock Units
Outstanding
Performance
Stock Units Weighted
Average
Grant Date
Fair Value Outstanding
Restricted
Stock Units Weighted
Average
Grant Date
Fair Value
Balance, September 30, 2024 213,776 $ 155.63 1,312,328 $ 158.22
Units granted 120,235 248.47 1,167,667 255.09
Units vested ( 117,333 ) 174.32 ( 1,058,085 ) 174.19
Units cancelled ( 32,955 ) 170.83 ( 224,382 ) 181.40
Balance, September 30, 2025 183,723 $ 220.40 1,197,528 $ 234.22
A majority of the restricted stock units the Company grants to its employees vest quarterly over a two -year period. The performance stock units, restricted stock units and stock options under all plans that were granted during fiscal years 2025, 2024 and 2023 had a per-share weighted average fair value of $ 251.46 , $ 155.99 and $ 144.78 , respectively. The fair value of performance stock units and restricted stock units vested during fiscal years 2025, 2024 and 2023 was $ 322.7 million, $ 228.1 million and $ 195.9 million, respectively. In determining the fair value of the portion of the performance awards based on Total Shareholder Return, the Company uses a Monte Carlo simulation model that employs the following key assumptions:
Performance Awards based on Total Shareholder Return
Years Ended September 30,
2025 2024 2023
Volatility
24.06 % - 30.78 %
22.60 % - 32.35 %
31.74 % - 40.59 %
Expected term (in years)
0.91 - 2.91
0.91 - 2.91
0.91 - 2.91
Dividend yield
— — —
Risk-free interest rate 4.14 % - 4.26 %
4.72 % - 5.32 %
4.44 % - 4.66 %
Grant-date fair value per share
$ 339.61 - $ 346.95
$ 192.58 - $ 210.37
$ 157.36 - $ 194.41
The expected volatility is based on the historical volatility of our common stock and the common stock of the other members of the S&P 500 Index. The expected term is based on each tranche's performance period from the grant date. The expected dividend yield is based on expectations about the Company’s anticipated dividend policy. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with maturities that approximate the expected term.
As of September 30, 2025, the following annual equity grants for executive officers or a portion thereof are outstanding:
Grant Date RSUs Granted Vesting Schedule Vesting Period Date Fully Vested
November 1, 2024 165,912 Quarterly, Annually
3 years November 1, 2027
November 1, 2023 206,560 Quarterly, Annually
3 years November 1, 2026
November 1, 2022 240,808 Quarterly, Annually
3 years November 1, 2025
A summary of stock option activity under all of the Company’s plans is as follows:
Options Outstanding
Number of
Shares Weighted
Average
Exercise Price
per Share
Balance, September 30, 2024 54,090 $ 39.36
Options granted — —
Options exercised ( 25,818 ) 37.28
Options cancelled ( 792 ) 26.52
Balance, September 30, 2025 27,480 $ 41.69
There were no stock options granted in fiscal years 2025 and 2024. All stock options granted in fiscal year 2023 were replacement awards of those assumed as part of business acquisitions.
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The total intrinsic value of options exercised during fiscal 2025, 2024 and 2023 was $ 5.9 million, $ 7.5 million and $ 6.9 million, respectively.
A summary of options outstanding that are exercisable and that have vested and are expected to vest as of September 30, 2025 is as follows:
Number of
Shares Weighted
Average
Remaining
Contractual
Life (in Years) Weighted
Average
Exercise
Price
per Share Aggregate
Intrinsic
Value(1)
(In thousands)
Stock options outstanding 27,480 3.50 $ 41.69 $ 7,736
Exercisable 27,480 3.50 $ 41.69 $ 7,736
Vested and expected to vest 27,480 3.50 $ 41.69 $ 7,736
(1) Aggregate intrinsic value represents the difference between the fair value of the Company’s common stock underlying these options at September 30, 2025 and the related exercise prices.
As of September 30, 2025, equity based awards (including stock options and restricted stock units) are available for future issuance as follows:
Awards
Available for
Grant
Balance, September 30, 2024 3,952,900
Granted ( 1,287,902 )
Cancelled 262,653
Additional shares reserved (terminated), net ( 5,316 )
Balance, September 30, 2025 2,922,335
11. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. The Company’s nonvested restricted stock units do not have nonforfeitable rights to dividends or dividend equivalents and are not considered participating securities that should be included in the computation of earnings per share under the two-class method.
The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
Years Ended September 30,
2025 2024 2023
Numerator
Net income $ 692,380 $ 566,778 $ 394,948
Denominator
Weighted average shares outstanding — basic 57,904 58,720 59,909
Dilutive effect of common shares from stock options and restricted stock units
780 639 361
Weighted average shares outstanding — diluted 58,684 59,359 60,270
Basic net income per share $ 11.96 $ 9.65 $ 6.59
Diluted net income per share $ 11.80 $ 9.55 $ 6.55
Anti-dilutive stock-based awards excluded from the calculations of diluted earnings per share were not material for the years ended September 30, 2025, 2024 and 2023.
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12. Commitments and Contingencies
Purchase Obligations
In October 2022, the Company entered into an unconditional purchase commitment with one of its suppliers for the delivery of systems components. Under the terms of the agreement, the Company is obligated to purchase $ 10 million of component inventory annually, with a total committed amount of $ 40 million over a four -year term. As of September 30, 2025, the Company had no remaining purchase commitments under the third year of the agreement. The Company's total non-cancelable long-term purchase commitments outstanding as of September 30, 2025 was $ 10.0 million.
Litigation
Lynwood Investment CY Limited v. F5 Networks et al.
On June 8, 2020, Lynwood Investment CY Limited ("Lynwood") filed a lawsuit in the United States District Court for the Northern District of California ("District Court") against the Company and certain affiliates, along with other defendants. In its complaint, Lynwood claims to be the assignee of all rights and interests of Rambler Internet Holding LLC ("Rambler"), and alleges that the intellectual property in the NGINX software originally released by the co-founder of NGINX in 2004 belongs to Rambler (and therefore Lynwood, by assignment) because the software was created and developed while the co-founder was employed by Rambler. Lynwood asserted 26 causes of action against the various defendants, including copyright infringement, violation of trademark law, tortious interference, conspiracy, and fraud. The complaint sought damages, disgorgement of profits, declarations of copyright and trademark ownership, trademark cancellations, and injunctive relief. Lynwood also initiated several trademark opposition and cancellation proceedings before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office, which have all since been suspended.
In August and October 2020, the Company and the other defendants filed motions to dismiss Lynwood’s case. On March 25 and 30, 2021, the District Court granted the Company’s and the other defendants’ motions to dismiss with leave to amend. Lynwood filed its amended complaint on April 29, 2021, seeking the same relief against the Company and other defendants. On May 27, 2021, the Company and other defendants filed a consolidated motion to dismiss.
The District Court granted the consolidated motion to dismiss without leave to amend on August 16, 2022 and entered final judgment against Lynwood on September 9, 2022. Following the District Court’s order granting the consolidated motion to dismiss and final judgment in the Company’s favor, the District Court subsequently granted the Company attorneys' fees of over $ 0.8 million, which Lynwood appealed to the Ninth Circuit Court of Appeals. The dismissal appeal and the fees appeal were heard by the Ninth Circuit Court of Appeals ("Court of Appeals") on December 7, 2023. On November 7, 2024, the Court of Appeals partially affirmed the dismissal by affirming dismissal of the state law claims and remanding a portion of the copyright claim to the District Court. The Court of Appeals also vacated the fees award because of the remand.
On December 2, 2024, the Court of Appeals issued its mandate returning the matter to the District Court for further proceedings on the remaining portion of the copyright claim. The parties are engaged in a first phase of discovery ordered by the Court in a March 7th case management conference that is focused on whether any NGINX Plus code was written by individuals employed by Rambler before the end of 2011. On May 19, 2025, the Company and the other defendants answered Lynwood’s second amended complaint filed April 7, 2025, which was limited to the remaining portion of the copyright claim focused on NGINX Plus per the Court’s March 7th order. The Company intends to continue vigorously defending the litigation.
In addition to the above matters, the Company is subject to a variety of legal proceedings, claims, investigations, and litigation arising in the ordinary course of business, including intellectual property litigation. Management believes that the Company has meritorious defenses to the allegations made in its pending cases and intends to vigorously defend these lawsuits; however, the Company is unable to currently determine if an unfavorable outcome is probable or estimate any potential amount or range of possible loss of these or similar matters. There are many uncertainties associated with any litigation and these actions or other third-party claims against the Company may cause it to incur costly litigation and/or substantial settlement charges that could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows.
The Company records an accrual for loss contingencies for legal proceedings when it believes that an unfavorable outcome is both (a) probable and (b) the amount or range of any possible loss is reasonably estimable. The Company has not recorded any accrual for loss contingencies associated with such legal proceedings or the investigations discussed above.
Cyber Incident
On October 15, 2025, we disclosed a security incident in which a threat actor maintained long-term, persistent access to F5 systems, and certain files were exfiltrated, referred to as the "Cyber Incident." In connection with the Cyber Incident, some customers and third parties may assert claims against the Company and or officers and directors of the Company. The Company
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has also received a small number of inquiries from governmental authorities. The Company is cooperating and providing information in connection with these inquiries.
The Company may incur significant legal and professional services and other expenses associated with the incident in future periods. These expenses will be recognized as incurred. Certain costs may be recoverable under the Company’s insurance policies. Any amounts recoverable under such policies will be reflected in future periods in which recovery is considered probable. To date, such costs related to the incident are not material.
13. Restructuring Charges
In the fourth quarter of fiscal 2025 and the first quarters of fiscal 2025, 2024, and 2023, the Company initiated restructuring plans to match strategic and financial objectives and optimize resources for long term growth, including a reduction in force program. In the fourth quarter of fiscal 2025, the Company recorded a restructuring charge of $ 14.3 million. For the year ended September 30, 2025, cash paid for severance benefits costs and related employer payroll taxes was $ 5.5 million. Remaining accrued expenses for the fourth quarter of fiscal 2025 restructuring plan was $ 8.8 million as of September 30, 2025. In the first quarter of fiscal 2025, the Company recorded a restructuring charge of $ 11.3 million. Remaining accrued expenses for the first quarter of fiscal 2025 restructuring plan were not material as of September 30, 2025. In the first quarter of fiscal 2024, the Company recorded a restructuring charge of $ 9.8 million. Remaining accrued expenses for the first quarter of fiscal 2024 restructuring plan were not material as of September 30, 2025 and 2024. In the first quarter of fiscal 2023, the Company recorded a restructuring charge of $ 8.7 million. Remaining accrued expenses for the first quarter of fiscal 2023 restructuring plan were not material as of September 30, 2025, 2024 and 2023. The Company did not record any significant future charges related to the fourth quarter of fiscal 2025 and first quarters of fiscal 2025, 2024, and 2023 restructuring plans.
In the third quarter of fiscal 2023, the Company initiated a restructuring plan to better align strategic and financial objectives, optimize operations, and drive efficiencies for long-term growth and profitability, including a reduction in force affecting approximately 620 employees, or approximately 9 % of the Company’s global workforce as of April 19, 2023. This included $ 53.2 million in severance benefits costs and related employer payroll taxes, and $ 3.5 million in charges related to the reduction of its leased facility space. The Company incurred $ 56.7 million in restructuring costs and did not record any significant subsequent charges related to the third quarter of fiscal 2023 restructuring plan. For the year ended September 30, 2023, cash paid for severance benefits costs and related employer payroll taxes was $ 49.7 million. Remaining accrued expenses for the third quarter of fiscal 2023 restructuring plan were not material as of September 30, 2025 and 2024. As of September 30, 2023, remaining accrued expenses for the third quarter of fiscal 2023 restructuring plan was $ 3.5 million. The Company did not record any significant subsequent charges related to the third quarter of fiscal 2023 restructuring plan.
Charges related to employee severance, benefits, and related costs; as well as charges related to the reduction of the Company’s leased facilities are reflected in the restructuring charges line item on the Company's consolidated income statements.
14. Employee Benefit Plans
The Company has a 401(k) savings plan whereby eligible employees may voluntarily contribute a percentage of their compensation. The Company may, at its discretion, match a portion of the employees’ eligible contributions. Contributions by the Company to the plan during the years ended September 30, 2025, 2024, and 2023 were approximately $ 10.8 million, $ 12.2 million and $ 13.7 million, respectively. Contributions made by the Company vest over four years .
The Company also contributes to other retirement plans covering eligible foreign employees within its international operations. The total expenses for these plans were not material in any period presented.
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15. Segment Information
The Company's Chief Executive Officer, who is the chief operating decision maker ("CODM"), regularly assesses performance and decides how to allocate resources primarily based on consolidated net income reported in the Consolidated Income Statements. The CODM uses consolidated net income to assess performance and make operating decisions by monitoring consolidated net income actual results compared to forecasted results, as well as reviewing historical performance trends. The CODM also manages the Company’s operations by reviewing consolidated net revenues by products and services and consolidated expense information consistent with the financial statement line items reported in the Consolidated Income Statements. Significant expenses include cost of net revenues by products and services, sales and marketing expenses, research and development expenses, general and administrative expenses, restructuring charges, and provision for income taxes, all of which are presented in the Consolidated Income Statements. Other segment items primarily include interest income, interest expense, and foreign currency transactions gains and losses, which are presented in other income, net in the Consolidated Income Statements. The measure of segment assets is reported on the Consolidated Balance Sheets as total assets. The accounting policies and description of products and services are those described in Note 1.
Revenues by Geographic Location and Other Information
The Company does business in three main geographic regions: the Americas (primarily the United States); Europe, the Middle East, and Africa ("EMEA"); and the Asia Pacific region ("APAC"). The Company’s CODM reviews financial information presented on a consolidated basis accompanied by information about net product revenues and revenues by geographic region. The Company’s foreign offices conduct sales, marketing, research and development, and support activities. Revenues are attributed by geographic location based on the location of the end-user customer.
The following presents revenues by geographic region (in thousands):
Years Ended September 30,
2025 2024 2023
Americas:
United States $ 1,631,180 $ 1,488,413 $ 1,487,416
Other 92,889 92,859 96,958
Total Americas 1,724,069 1,581,272 1,584,374
EMEA 827,168 755,934 741,598
APAC 536,835 478,914 487,197
$ 3,088,072 $ 2,816,120 $ 2,813,169
The Company continues to offer its products through a range of consumption models, from physical systems to software solutions and managed services. The following presents net product revenues by systems and software (in thousands):
Years Ended September 30,
2025 2024 2023
Net product revenues
Systems revenue $ 705,551 $ 537,318 $ 670,652
Software revenue 803,089 735,477 663,986
Total net product revenue $ 1,508,640 $ 1,272,795 $ 1,334,638
The following distributor customers accounted for more than 10% of total net revenue:
Years Ended September 30,
2025 2024 2023
Customer A 15.8 % 16.3 % 15.6 %
Customer B 17.5 % 15.9 % 15.0 %
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The following distributor customers accounted for more than 10% of total receivables:
September 30,
2025 2024
Customer A 11.1 % 20.3 %
Customer B 17.8 % 14.8 %
Customer C 10.9 % —
Customer D 11.4 % —
No end-user customers accounted for more than 10% of total net revenue or receivables. No other distributor customers accounted for more than 10% of total net revenue or receivables, other than those noted above.
The Company tracks assets by physical location. Long-lived assets consist of property and equipment, net, and are shown below (in thousands):
September 30,
2025 2024
Americas:
United States $ 118,414 $ 112,420
Other 1,696 1,773
Total Americas 120,110 114,193
EMEA 20,985 21,970
APAC 15,852 14,780
$ 156,947 $ 150,943
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that required information is recorded, processed, summarized and reported within the required timeframe, as specified in the rules set forth by the Securities Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025 and, based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2025.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013) . Based on the results of this assessment and on those criteria, management concluded that our internal control over financial reporting was effective as of September 30, 2025.
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The effectiveness of the Company’s internal control over financial reporting as of September 30, 2025, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
During the fourth fiscal quarter, there were no changes to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the fiscal quarter ended September 30, 2025, no officers or directors adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement".
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Certain information required by this item regarding the Company’s directors and executive officers is incorporated herein by reference to the sections entitled: "Board of Directors — Nominees and Continuing Directors" and "— Director Nomination;" and "Corporate Governance — Governance — Committees of the Board — Audit Committee," "— Insider and Derivatives Trading and Hedging Policies and Arrangements" and "— Code of Ethics for Senior Financial Officers" in the Company’s definitive Proxy Statement that is expected to be furnished to the SEC no later than January 28, 2026 (the "Proxy Statement"). Additional information regarding the Company’s executive officers is set forth in Item 1 of Part I of this Annual Report on Form 10-K under the caption "Business — Executive Officers of the Registrant."
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the sections entitled "Executive Compensation" and "Corporate Governance — Governance — Committees of the Board — Talent and Compensation Committee" and "— Compensation Committee Interlocks and Insider Participation" and "Executive Compensation — Compensation Committee Report" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this item is incorporated by reference to the section entitled "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the sections entitled "Board of Directors — Director Independence" and "Corporate Governance — Related Person Transactions Policy and Procedures" and "— Certain Relationships and Related Person Transactions" in the Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to the section entitled "Audit Committee Report and Auditor Information — Fees Paid to PricewaterhouseCoopers LLP," "— Audit Committee Pre-Approval Procedures" and "— Annual Independence Determination" in the Proxy Statement.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report are as follows:
1. Consolidated Financial Statements:
Our Consolidated Financial Statements are listed in the Index to Consolidated Financial Statements.
2. Financial Statement Schedule:
Financial statement schedules have been omitted because the information required to be set forth therein is not applicable, material, or is shown in the Consolidated Financial Statements or the notes hereto.
3. Exhibits:
The required exhibits are included at the end of this Annual Report on Form 10-K and are described in the Exhibit Index immediately preceding the first exhibit.
Item 16. Form 10-K Summary
Not applicable.
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EXHIBIT INDEX
Exhibit
Number Exhibit Description
3.1 — Fourth Amended and Restated Articles of Incorporation of the Registrant(1)
3.2 — Eighth Amended and Restated Bylaws adopted November 12, 2021(1)
4.1 — Description of the Registrant's Securities(2)
4.2 — Specimen Common Stock Certificate(3)
10.1 — First Amendment to Revolving Credit Agreement (including the Revolving Credit Agreement, as amended), dated as of May 26, 2023, between F5, Inc. and JPMorgan Chase Bank, N.A., as the Administrative Agent(4)
10.2 — Office Lease Agreement between the Registrant and Fifth & Columbia Investors, LLC dated May 3, 2017(5)
10.3 — Form of Indemnification Agreement between the Registrant and each of its directors and certain of its officers(6) §
10.4 — F5, Inc. Employee Stock Purchase Plan, as amended and restated(7) §
10.5 — Form of Change of Control Agreement between the Registrant and the executive officers(8) §
10.6 — F5, Inc. Incentive Plan, as amended and restated(7) §
10.7 — Nginx, Inc. 2011 Share Plan(9) §
10.8 — Nginx, Inc. Acquisition Equity Incentive Plan(9) §
10.9 — Nginx, Inc. Acquisition Equity Incentive Plan Award Agreement(10) §
10.10 — F5 Networks, Inc. Assumed Shape 2011 Stock Plan(11) §
10.11 — F5 Networks, Inc. Shape Acquisition Equity Incentive Plan(11) §
10.12 — Form of 2014 Incentive Plan Award Agreement (Accelerated Vesting) as revised November 2019(12) §
10.13 — F5 Networks, Inc. Assumed Volterra, Inc. Amended and Restated 2017 Stock Plan(13) §
10.14 — F5 Networks, Inc. Volterra Acquisition Equity Incentive Plan(13) §
10.15 — F5 Networks, Inc. Assumed Volterra, Inc. 2019 Restricted Stock Unit Sub-Plan France (sub-plan to the F5 Networks, Inc. Assumed Volterra, Inc. Amended and Restated 2017 Stock Plan)(13) §
10.16 — F5 Networks, Inc. Threat Stack Acquisition Equity Incentive Plan(14) §
10.17 — Offer Letter from the Registrant to François Locoh-Donou(15) §
10.18 — F5, Inc. Assumed Lilac Cloud 2018 Equity Incentive Plan(16) §
10.19 — F5, Inc. Lilac Acquisition Equity Incentive Plan(16) §
19.1 * — F5, Inc. Insider Trading Policy
21.1 * — Subsidiaries of the Registrant
23.1 * — Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
31.1 * — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 * — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 * — Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1 — F5, Inc. Incentive Compensation Recovery Policy (17) §
101.INS * — XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH * — Inline XBRL Taxonomy Extension Schema Document
101.CAL * — Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * — Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * — Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE * — Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 * — Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
§ Indicates a management contract or compensatory plan or arrangement.
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(1) Incorporated by reference from Current Report on Form 8-K dated November 12, 2021 and filed with the SEC on November 15, 2021.
(2) Incorporated by reference from Annual Report on Form 10-K for the year ended September 30, 2022.
(3) Incorporated by reference from Exhibit 4.1 of Registration Statement on Form S-1, File No. 333-75817.
(4) Incorporated by reference from Exhibit 10.1 of Annual Report on Form 10-K for the year ended September 30, 2023.
(5) Incorporated by reference from Current Report on Form 8-K dated May 3, 2017 and filed with the SEC on May 3, 2017.
(6) Incorporated by reference from Exhibit 10.1 of Registration Statement on Form S-1, File No. 333-75817.
(7) Incorporated by reference from Current Report on Form 8-K dated March 9, 2023 and filed with the SEC on March 10, 2023.
(8) Incorporated by reference from Current Report on Form 8-K dated April 29, 2009 and filed with the SEC on May 4, 2009.
(9) Incorporated by reference from Registration Statement on Form S-8 File No. 333-231802.
(10) Incorporated by reference from Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
(11) Incorporated by reference from Registration Statement on Form S-8 File No. 333-236228.
(12) Incorporated by reference from Annual Report on Form 10-K for the year ended September 30, 2020.
(13) Incorporated by reference from Registration Statement on Form S-8 File No. 333-252616.
(14) Incorporated by reference from Registration Statement on Form S-8 File No. 333-260656.
(15) Incorporated by reference from Current Report on Form 8-K dated January 27, 2017 and filed with the SEC on January 30, 2017.
(16) Incorporated by reference from Registration Statement on Form S-8 File No. 333-269532.
(17) Incorporated by reference from Annual Report on Form 10-K for the year ended September 30, 2024.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
F5, I NC .
By: /s/ FRANÇOIS LOCOH-DONOU
François Locoh-Donou
Chief Executive Officer and President
Dated: November 25, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
By: / S / FRANÇOIS LOCOH-DONOU
Chief Executive Officer, President, and
Director (principal executive officer) November 25, 2025
François Locoh-Donou
By: / S / EDWARD C. WERNER
Executive Vice President, Chief Financial
Officer (principal financial officer and principal accounting officer) November 25, 2025
Edward C. Werner
By: / S / ALAN HIGGINSON
Director November 25, 2025
Alan Higginson
By: / S / ELIZABETH L. BUSE
Director November 25, 2025
Elizabeth L. Buse
By: / S / MICHAEL DREYER
Director November 25, 2025
Michael Dreyer
By: / S / NIKHIL MEHTA
Director November 25, 2025
Nikhil Mehta
By: / S / MARIANNE BUDNIK
Director November 25, 2025
Marianne Budnik
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