F5 Earnings: Project Delays and Budget Scrutiny Drive Software Decline; FVE Reduced to $170

We are lowering our fair value estimate for narrow-moat F5 to $170 per share from $199 after second-quarter results largely met our expectations, but fell materially short regarding the outlook for the remainder of the fiscal year. Macroeconomic factors continue to weigh heavily on F5’s product revenue, particularly its software revenue, which we believe to be the largest growth driver for the firm. As a result of a difficult macroenvironment, with heightened budget scrutiny, deferred projects, and customers sweating out existing assets, management lowered its revenue guidance for the full year.