Last Update 22 Feb 26

FFIV: Cybersecurity Demand And AI Security Launches Will Drive Rerating

Analysts have lifted their price targets on F5, with moves such as a $20 raise at RBC Capital and a $35 bump at Goldman Sachs. These changes reflect updated views on the stock's risk profile and earnings potential that align with our refreshed assumptions on discount rate and future P/E.

Analyst Commentary

Recent Street research on F5 clusters around higher price targets and an upgraded stance from JPMorgan. Together, these frame how the sell side is thinking about valuation, earnings power and execution risk.

Bullish Takeaways

Bullish analysts lifting targets by amounts such as $20, $30 and $35 point to a view that the prior discount rate and P/E assumptions were too conservative, implying more confidence in F5's earnings durability.
The JPMorgan upgrade on potential upside to estimates signals that at least one major bank sees room for F5 to outperform current Street expectations if management executes on its plan.
Target increases in a relatively tight time window suggest a broad reassessment of the risk profile, with bullish analysts appearing more comfortable assigning higher valuation multiples to the existing earnings base.
Larger target moves, including the $35 adjustment highlighted earlier, indicate that some analysts see meaningful headroom between F5's current share price and what they view as fair value based on their updated models.

Bearish Takeaways

Even with higher targets, analysts are still embedding specific discount rates and P/E assumptions, which reflects ongoing caution around execution risk and the strength of future earnings delivery.
The language around "potential upside to estimates" from JPMorgan implies that upside is conditional rather than guaranteed, so there is still focus on whether F5 can meet or beat those higher bars.
Incremental target bumps such as the $9 move show that not all analysts are aggressive in re-rating the stock, which can signal reservations about pushing valuation far above current earnings power.
The mix of large and modest target changes hints that views on growth and margin resilience are not fully aligned, leaving room for further revisions if company performance does not track current expectations.

What's in the News

The Trump administration is reported to be weighing the use of private companies in cyberwarfare, which can keep attention on vendors tied to application security and critical infrastructure protection (New York Times).
F5 raised earnings guidance for fiscal 2026. Management now expects revenue growth of 5% to 6% for the year, compared with a prior range of 0% to 4%.
For the second quarter of fiscal 2026, F5 issued revenue guidance of US$770 million to US$790 million, giving investors a concrete near term reference point for upcoming results.
F5 announced general availability of F5 AI Guardrails and F5 AI Red Team, aimed at securing enterprise AI systems across models, apps, and agents while integrating with existing API security, web application firewall, and DDoS tools.
F5 and Scality expanded their partnership, integrating F5's Application Delivery and Security Platform with Scality's S3 compatible object storage to support AI, analytics, and data intensive workloads across on premises, cloud native, and hybrid environments.

Valuation Changes

Fair Value: $310.30 remains unchanged, indicating no adjustment to the central valuation estimate.
Discount Rate: has risen slightly from 8.09% to 8.16%, reflecting a small increase in the required return used in the model.
Revenue Growth: is essentially unchanged at 3.42%, with only a minimal rounding difference between prior and updated figures.
Net Profit Margin: remains steady at 21.89%, suggesting no update to the expected level of profitability.
Future P/E: has fallen slightly from 27.79x to 27.33x, pointing to a modestly lower valuation multiple applied to forward earnings.

Strong enterprise demand for hybrid solutions and AI security is driving product, software, and recurring revenue growth while expanding cross-sell opportunities and margins.
Growing focus on operational discipline, high-margin software, and strategic partnerships is increasing revenue predictability, diversifying earnings, and supporting long-term shareholder returns.
Slower software adoption, customer concentration, hyperscaler dominance, intense competition, and fading hardware tailwinds threaten F5's growth, revenue stability, and long-term margins.

Catalysts

About F5

Provides multicloud application security and delivery solutions in the United States, Europe, the Middle East, Africa, and the Asia Pacific region.What are the underlying business or industry changes driving this perspective?

Accelerated enterprise adoption of hybrid multi-cloud architectures and data center modernization is fueling durable demand for F5's application delivery and security solutions, positioning the company for sustained product and software revenue growth over the next several years.
Increasing complexity from the proliferation of distributed applications and APIs, alongside rising cybersecurity threats-including for AI workloads-is driving enterprises to consolidate multiple point solutions onto F5's integrated platform, supporting cross-sell opportunities, higher attach rates, and enhancing top-line and gross margin expansion.
Early but growing deployments of F5's AI-focused offerings (AI data delivery, AI gateway, runtime security) and partnerships (NVIDIA BlueField-3, MinIO) are establishing new, future insertion points for the business, underpinning long-term revenue growth and diversifying earnings streams as enterprise AI adoption accelerates.
The ongoing shift to high-margin, recurring software and SaaS subscription revenue, along with strong renewal and expand activity from existing customers, is improving revenue visibility and predictability while supporting operating margin and EPS growth.
Effective operational discipline-evident in robust cash flow, continued cost management, and targeted share repurchases-enhances the company's ability to drive EPS growth, maximize shareholder returns, and weather industry cyclicality.

F5 Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming F5's revenue will grow by 6.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 22.1% today to 27.9% in 3 years time.
Analysts expect earnings to reach $1.0 billion (and earnings per share of $17.28) by about September 2028, up from $667.2 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.7x on those 2028 earnings, down from 28.0x today. This future PE is lower than the current PE for the US Communications industry at 27.2x.
Analysts expect the number of shares outstanding to decline by 1.99% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.12%, as per the Simply Wall St company report.

F5 Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Customer preference for hardware deployments over software in recent quarters, driven by performance and regulatory concerns, may indicate slower-than-expected adoption of F5's software/SaaS offerings, which could suppress recurring revenue growth and limit margin expansion if the transition from hardware lags expectations-impacting both revenue stability and net margins.
Intense, persistent reliance on enterprise, financial services, and telecom verticals exposes F5 to elongated sales cycles, budget constraints, regulatory changes, and cyclical/hardware refresh-driven purchasing patterns, increasing earnings volatility and making top-line growth less predictable in downturns.
The continued dominance and in-house capabilities of hyperscale cloud providers (AWS, Azure, Google Cloud) create "winner-take-most" dynamics, potentially reducing the relevance of third-party platforms like F5 for certain cloud-native, application delivery, and security needs-pressuring long-term market share and pricing power, thus adversely affecting revenue and margins.
Competitive pressure from both large incumbents and agile, well-funded startups in application security, delivery, and edge networking can lead to price competition, lost deals, and downward margin pressure, particularly as customers show willingness to consolidate on the most integrated or cost-efficient platforms-putting both revenues and gross margins at risk.
The overall strength in hardware/system sales, currently aided by cyclical tech refresh, data center modernization, and AI "readiness" spending, may not be durable: as those cycles normalize and customers increasingly transition to cloud-native and open-source solutions, future demand for on-premises hardware could decline faster than F5's software business grows, ultimately resulting in revenue deceleration and margin compression in the longer term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $327.182 for F5 based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $390.0, and the most bearish reporting a price target of just $260.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.7 billion, earnings will come to $1.0 billion, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 8.1%.
Given the current share price of $325.41, the analyst price target of $327.18 is 0.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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