Financial Analysis

"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 …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

"Commitments and Contingencies 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 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 certain other employees, 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 its systems product offerings. Additional warranty coverage can be purchased by customers through service maintenance agreements 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. Accrued warranty costs as of December 31, 2025 and September 30, 2025 were no …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"Debt Facilities 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 ac …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"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 at December 31, 2025 and September 30, 2025, were as follows (in thousands): Gross Unrealized Classification on Balance Sheet December 31, 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 $ 308,951 $ $ $ 308,951 $ 308,951 $ $ Total cash equivalents $ 308,951 $ $ $ 308,951 $ 308,951 $ $ Changes in fair value recorded in other net income (expense): Equity investments * $ 17,965 $ $ $ 17,965 Total equity investments 17,965 17,965 Total $ 326,916 $ 308,951 $ $ 17,965 * 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. Gross Unrealized Classification on Balance Sheet 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 ma …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Income Taxes The Company's tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items in the related period. The effective tax rate was 19.2% and 20.4% for the three months ended December 31, 2025 and 2024, respectively. The decrease in the effective tax rate for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024 is primarily due to change in unrecognized tax benefits. At December 31, 2025, the Company had $80.9 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. It is anticipated that the Companys existing liabilities for unrecognized tax benefits will change within the next twelve months due to audit settlements or the expiration of statutes of limitations. The Company does not expect these changes to be material to the consolidated financial statements. The Company recognizes interest and, if applicable, penalties for any uncertain tax positions as a component of income tax expense. 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, as well as fiscal years 2020 and 2021. Major jurisdictions where there are wholly owned subsidiaries of F5, Inc. which require income tax filings include the United Kingdom, Singapore, Israel, and In …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

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. The components of the Company's operating lease expenses for the three months ended December 31, 2025 and 2024 were as follows (in thousands): Three Months Ended December 31, 2025 2024 Operating lease expense $ 9,701 $ 10,007 Short-term lease expense 839 819 Variable lease expense 5,945 5,592 Total lease expense $ 16,485 $ 16,418 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): December 31, 2025 September 30, 2025 Operating lease right-of-use assets, net $ 191,350 $ 185,601 Operating lease liabilities, current 1 32,856 31,042 Operating lease liabilities, long-term 234,862 230,749 Total operating lease liabilities $ 267,718 $ 261,791 Weighted average remaining lease term (in years) 7.8 7.7 Weighted average discount rate 3.33 % 3.24 % (1 …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"There have been no changes to the Company's significant accounting policies as of and for the three months ended December 31, 2025. New 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 …

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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 three months ended December 31, 2025 and 2024 (in thousands): Three Months Ended December 31, 2025 2024 Balance, beginning of period $ 76,552 $ 66,258 Additional capitalized contract acquisition costs 12,384 13,223 Amortization of capitalized contract acquisition costs (10,311) (9,134) Balance, end of period $ 78,625 $ 70,347 Amortization of capitalized contract acquisition costs was $10.3 million and $9.1 million for the three months ended December 31, 2025 and 2024, 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. The table below shows significant movements in the deferred revenue balances (current and noncurrent) …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Segment Information 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. 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 Companys 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 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"Summary of Significant Accounting Policies Description of Business 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. Basis of Presentation The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (""GAAP""). In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for their fair statement in conformity with accounting principles generally accepted in the United States of America. Certain information and footnote …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

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 was 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): Three Months Ended December 31, 2025 2024 Shares repurchased 1,203 490 Average price per share $ 249.33 $ 255.31 Amount repurchased $ 300,024 $ 125,010 As of December 31, 2025, the Company had $622.4 million remaining authorized to purchase shares under its share repurchase program.

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