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Network security provider F5 Networks (FFIV +3%) is dodging attacks from plenty of sellers today following its solid Q4 (Sep) report yesterday after the close. FFIV registered solid upside on its top and bottom lines during the quarter while issuing decent FY24 guidance, with earnings and revs tracking modestly below consensus. While this type of guidance could be met by selling pressure, investors were happy to shrug it off after FFIV's peers sounded some alarms ahead of its Q4 report.

We mentioned yesterday that A10 Networks (ATEN) and NetScout Systems (NTCT) were potential canaries in the coal mine following their weak quarterly outlooks. ATEN issued bearish Q3 and Q4 guidance earlier this month, citing stubborn macroeconomic headwinds weighing on results. Specifically, the company continued to endure spending delays as customers pushed out their capital expenditure plans, particularly smaller companies. Then, a couple of weeks later, NTCT guided SepQ revs below consensus due to similar challenges, including higher spending scrutiny and project funding delays.

That is not to say FFIV did not encounter similar hurdles during Q4. Management acknowledged the unfavorable economic landscape. However, its highlights from the quarter demonstrated its ability to buck these trends better than its peers, underpinning a potential competitive edge.

• The most notable comment from FFIV was signs of stabilization. The company witnessed strength from its enterprise vertical, like ATEN, including technology and financial services customers. While this was partially offset by softness from service providers, similar to what we heard from peers, FFIV still managed to expand revs moderately, up 1% yr/yr to $707 mln, ahead of consensus and at the higher end of its $690-710 mln forecast.
• Meanwhile, FFIV is displaying its operating discipline, expanding operating margins by a whopping 600 bps yr/yr to 33.9%. Recall FFIV taking actions to adjust its operations during FY23, resolving supply chain pressures and returning to normalized delivery times. As a result, FFIV boasted adjusted EPS of $3.50, well above its prior guidance of $3.15-3.27.
• Looking ahead to FY24, FFIV expects to maintain current margins, leading to EPS growth of +5-7% yr/yr. While this target was slightly below expectations, it should not be brushed aside so quickly, given current demand conditions. Further, although FFIV's FY24 revenue growth projection of flat to down low single-digits yr/yr missed the mark, it would have been considerably higher when excluding a 6 pt headwind from the company's backlog reduction.
• FFIV also provided a glimpse into its FY25 view, which is shaping up to be a much better year than FY24. Management expects revenue growth in mid-single-digit territory. It also anticipates operating margins to expand again, targeting at least 35% margins.

Bottom line, FFIV is avoiding the broader market sell-off today by delivering Q4 results that provided a much-needed sigh of relief following warnings from peers. We like that FFIV outlined its financial goals for two years, which the company did not do last year.