F5 Networks (FFIV, Financial) is receiving positive feedback from shareholders after surpassing Q1 2025 estimates and offering an optimistic forecast for FY25. This marks the third consecutive quarter of exceeding expectations, driven by its shift to a software-centric business model. FFIV has also become a significant player in AI, providing systems and software that secure data delivery for AI model training and inference.

Several factors are contributing to FFIV's impressive revenue growth of 10.5% in Q1 2025, the second-highest in three years:

• FFIV benefits from a stable IT spending environment, with strong demand for software that aids enterprises in transformation and modernization projects, including hybrid multi-cloud architectures. This setup presents challenges like IT complexity and cyber vulnerabilities, which FFIV's products address by simplifying environments and consolidating data delivery and security apps on a single platform.
• Software revenue increased by 22% to $209 million, driven by significant expansion in multi-year subscription renewals and new software projects. FFIV achieved a record number of competitive displacements in Q1, showcasing the effectiveness of its software and hardware offerings.
• Hardware revenue growth surged to 18%, recovering from a 3% decline last quarter, thanks to a technology refresh. This refresh has sparked widespread demand, particularly from customers outside FFIV's top 1,000. However, some hardware orders were pulled forward into Q1 to avoid a price increase effective January 1, 2025.
• FFIV is optimistic about its future, with upwardly revised FY25 EPS and revenue guidance. Although Q2 EPS guidance fell short of expectations, the focus remains on AI opportunities. FFIV's primary AI focus is on data delivery and security for AI model training, with plans to expand into WAAP solutions for AI inferencing and load balancing.

In summary, FFIV's turnaround is accelerating, supported by its software-centric transition and increasing momentum in AI applications. The company's strong performance and outlook are promising for competitors like Cisco (CSCO, Financial), Akamai Technology (AKAM, Financial), and Cloudflare (NET, Financial), who are set to report earnings soon.