What happened

Shares of F5 Networks (FFIV -0.39%) have plunged today, down by 8% as of 1:20 p.m. EDT, after the company reported fiscal third-quarter earnings. The results topped Wall Street's expectations, but investors may have been disappointed in decelerating growth in the software business.

So what

Revenue in the fiscal third quarter came in at $583 million, topping the consensus estimate of $572 million in sales. That translated into adjusted net income of $134 million, or $2.18 per share. Analysts were expecting just $2.03 per share in adjusted profit.

Exterior of F5 Networks office in San Jose at dusk

Image source: F5 Networks.

"Customers continue to look to F5 to enable their mission-critical application needs and increasingly, are deploying a combination of F5 solutions spanning our F5, NGINX and Shape multi-cloud application services portfolio," CEO Francois Locoh-Donou said in a statement. "In a challenging COVID-19 environment, our deep incumbency and close alignment with customers' investment priorities are proving distinct competitive advantages and driving resiliency in our business."

Now what

The application delivery tech specialist has been diversifying its business away from hardware, and software revenue grew 43% last quarter. That was deceleration compared to the 50% software revenue growth that F5 reported in the fiscal second quarter.

In terms of guidance, F5 expects revenue in the fiscal fourth quarter to be in the range of $595 million to $615 million, which should result in adjusted earnings per share of $2.30 to $2.42. Consensus estimates call for $597.5 million in revenue and adjusted earnings per share of $2.26 next quarter.