By Elsa Ohlen
F5 stock was leading the S&P 500 risers early Wednesday after the cloud service provider beat earnings expectations for yet another quarter.
It shows there's still life in the AI trade after Chinese startup DeepSeek sparked a tech selloff earlier this week.
"We are seeing new opportunities emerge in two main areas: hybrid multicloud and AI," CEO François Locoh-Donou said.
Shares rose 13% to $305.55 in premarket trading Wednesday.
F5 is benefiting from its leadership in hybrid multi-cloud solutions, Evercore analysts led by Amit Daryanani said as they hiked their target price target to $310 from $270 following the earnings report, reiterating a Hold-equivalent rating on the stock
Companies heavily dependent on development of AI and the buildouts necessary to meet the demand for the ever so complicated technology have had a bumpy start to the week. The Chinese company DeepSeek said it trained an AI model able to rival leading western models for a fraction of the price which sent the tech-heavy Nasdaq Composite down 3.1% on Monday.
While some of the losses were recovered on Tuesday, questions remain if the massive spend on AI development by Big Tech such as Microsoft, OpenAI, Meta, Alphabet and others may have been overdone.
But there are winners among the losers, too. Daryanani calls it "the AI agnostic trade" and says that companies like F5 with minimal exposure to the infrastructure buildout narrative should be "fairly safe" if the AI trade keeps going south.
For its first fiscal quarter of 2025, F5 posted earnings per share of $3.84 on sales of $767 million, above expected earnings per share of $3.36 on sales of $715 million, according to FactSet estimates.
The beat was driven by a more stable IT environment, the company said late Tuesday, with software revenue up 22% compared with the same period last year.
F5 stock was up 47% over the last 12 months by Tuesday's close.
Write to Elsa Ohlen at elsa.ohlen@barrons.com
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January 29, 2025 08:00 ET (13:00 GMT)
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