#1. F5 Is Transitioning Towards A Software Centric Business Model
While F5 derives a majority of its revenues from hardware products, it is transitioning from a product-focused company to a software-based one. F5 Networks’ software revenues witnessed a growth of 60% in FY 2019.This trend carried over in Q1 2020, with the company’s software revenues growing another 50%. Strong demand for security use cases, as well as ongoing enterprise licensing agreements traction, contributed to this growth.Moreover, the company recently acquired Shape Security, a leader in fraud and abuse prevention, that should also fuel the company’s software growth in the coming quarters. Additionally, F5 continues to enjoy strong renewals rates to software sold as perpetual or as subscriptions, including NGINX-related sales. The company is also witnessing increased demand in consulting services associated with growing software sales.Taking all this into consideration, we expect software will continue to drive the company’s growth for the foreseeable future.
#2. F5 Networks Will Continue To Achieve To Benefits From Acquisition In FY’20
F5 acquired NGIXN in May 2019 and recently completed the acquisition of Shape Security. The acquisitions provide a solid platform for the company’s software business.Moreover, the acquisition offers F5 opportunities to cross-sell its products to NGINX and Shape customers-expanding the addressable markets for the company.Shape, in particular, has been a great addition to the company’s application security portfolio. The acquisition will not only double F5’s addressable security market, it will also scale and extend F5's broad portfolio of application services.