F5, INC.FFIV
F5, INC. Stock Compensation Disclosure
Stock-based Compensation
The Company recognized $231.5 million, $219.1 million and $236.7 million of stock-based compensation expense for the fiscal years ended September 30, 2025, 2024 and 2023, respectively. The income tax benefit recognized on stock-based compensation within income tax expense was $49.9 million, $44.4 million and $44.7 million for the fiscal years ended September 30, 2025, 2024 and 2023, respectively. As of September 30, 2025, there was $229.0 million of total unrecognized stock-based compensation cost, the substantial majority of which will be recognized over approximately two years. Going forward, stock-based compensation expenses may increase as the Company issues additional equity-based awards to continue to attract and retain key employees. On October 31, 2025, the Company’s Board of Directors and Talent and Compensation Committee approved 81,099 RSUs to be granted to executive officers pursuant to the Company’s annual equity awards program.
The Company has adopted a number of stock-based compensation plans as discussed below.
2011 Employee Stock Purchase Plan. In April 2012, the Board of Directors amended and restated the Company’s 1999 Employee Stock Purchase Plan, or the Employee Stock Purchase Plan. A total of 12,000,000 shares of common stock have been reserved for issuance under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan permits eligible employees to acquire shares of the Company’s common stock through periodic payroll deductions of up to 15% of base compensation. No employee may purchase more than 10,000 shares during an offering period. In addition, no employee may purchase more than $25,000 worth of stock, determined by the fair market value of the shares at the time such option is granted, in one calendar year. The Employee Stock Purchase Plan has been implemented in a series of offering periods, each 6 months in duration. The price at which the common stock may be purchased is 85% of the lesser of the fair market value of the Company’s common stock on the first day of the applicable offering period or on the last day of the respective purchase period. As of September 30, 2025 there were 1,666,569 shares available for awards under the Employee Stock Purchase Plan.
In determining the fair value of the right to purchase under the Employee Stock Purchase Plan, the Company uses the Black-Scholes option pricing model that employs the following key assumptions:
| Employee Stock Purchase Plan Years Ended September 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Volatility | 28.85% - 29.40% | 18.19% - 20.32% | 33.02% - 38.15% | |||||||||||||||||
Expected term (in years) | 0.5 | 0.5 | 0.5 | |||||||||||||||||
Dividend yield | — | — | — | |||||||||||||||||
| Risk-free interest rate | 4.28% - 4.98% | 5.28% - 5.52% | 3.18% - 4.90% | |||||||||||||||||
The expected volatility is based on the historical volatility of our common stock. The expected term is based on the length of the period from the first day of the offering period to the purchase date. The expected dividend yield assumption is based on expectations about the Company’s anticipated dividend policy. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with maturities that approximate the expected term.
Acquisition Related Incentive Plans. In connection with the Company’s acquisitions, the Company has adopted acquisition equity incentive plans and assumed equity incentive plans of certain acquired companies and equity awards granted under such assumed equity incentive plans with awards under such plans being settled in shares of the Company’s common stock. All of these acquisition equity incentive plans and assumed equity incentive plans of acquired companies have been terminated and no additional equity awards will be issued under any of these plans. As of September 30, 2025, there were 19, 174 and 9,341 stock units outstanding under the Nginx, Threat Stack and Lilac Cloud acquisition plans, respectively. As of September 30, 2025, there were options to purchase 1,985, 18,965, 6,005 and 525 shares outstanding under the Nginx, Shape, Volterra and Lilac Cloud assumed plans, respectively.
F5, Inc. Incentive Plan. In March 2022, the Company adopted the F5, Inc. Incentive Plan, or the Plan, which amended and restated the 2014 Incentive Plan. The Plan provides for discretionary grants of stock options, stock units and other equity and cash-based awards for employees, including officers, directors and consultants. A total of 27,880,000 shares of common stock have been reserved for issuance under the Plan. Upon certain changes in control of the Company, all outstanding and unvested options or stock awards under the Plan will vest at the rate of 50%, unless assumed or substituted by the acquiring entity. During the fiscal year 2025, the Company issued no stock options, 120,235 performance stock units and 1,167,667 restricted stock units under the Plan. As of September 30, 2025, there were no options outstanding, 183,723 performance stock units outstanding, 1,197,528 restricted stock units outstanding and 2,922,335 shares available for new awards under the Plan.
A summary of restricted stock unit activity under the Plan is as follows:
| Performance Stock Units | Restricted Stock Units | |||||||||||||||||||||||||
| Outstanding Performance Stock Units | Weighted Average Grant Date Fair Value | Outstanding Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||||||||||||||||||
| Balance, September 30, 2024 | 213,776 | $ | 155.63 | 1,312,328 | $ | 158.22 | ||||||||||||||||||||
| Units granted | 120,235 | 248.47 | 1,167,667 | 255.09 | ||||||||||||||||||||||
| Units vested | (117,333) | 174.32 | (1,058,085) | 174.19 | ||||||||||||||||||||||
| Units cancelled | (32,955) | 170.83 | (224,382) | 181.40 | ||||||||||||||||||||||
| Balance, September 30, 2025 | 183,723 | $ | 220.40 | 1,197,528 | $ | 234.22 | ||||||||||||||||||||
A majority of the restricted stock units the Company grants to its employees vest quarterly over a -year period. The performance stock units, restricted stock units and stock options under all plans that were granted during fiscal years 2025, 2024 and 2023 had a per-share weighted average fair value of $251.46, $155.99 and $144.78, respectively. The fair value of performance stock units and restricted stock units vested during fiscal years 2025, 2024 and 2023 was $322.7 million, $228.1 million and $195.9 million, respectively. In determining the fair value of the portion of the performance awards based on Total Shareholder Return, the Company uses a Monte Carlo simulation model that employs the following key assumptions:
Performance Awards based on Total Shareholder Return Years Ended September 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Volatility | 24.06% - 30.78% | 22.60% - 32.35% | 31.74% - 40.59% | |||||||||||||||||
Expected term (in years) | 0.91 - 2.91 | 0.91 - 2.91 | 0.91 - 2.91 | |||||||||||||||||
Dividend yield | — | — | — | |||||||||||||||||
| Risk-free interest rate | 4.14% - 4.26% | 4.72% - 5.32% | 4.44% - 4.66% | |||||||||||||||||
Grant-date fair value per share | $339.61 - $346.95 | $192.58 - $210.37 | $157.36 - $194.41 | |||||||||||||||||
The expected volatility is based on the historical volatility of our common stock and the common stock of the other members of the S&P 500 Index. The expected term is based on each tranche's performance period from the grant date. The expected dividend yield is based on expectations about the Company’s anticipated dividend policy. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with maturities that approximate the expected term.
As of September 30, 2025, the following annual equity grants for executive officers or a portion thereof are outstanding:
| Grant Date | RSUs Granted | Vesting Schedule | Vesting Period | Date Fully Vested | ||||||||||
| November 1, 2024 | 165,912 | Quarterly, Annually | 3 years | November 1, 2027 | ||||||||||
| November 1, 2023 | 206,560 | Quarterly, Annually | 3 years | November 1, 2026 | ||||||||||
| November 1, 2022 | 240,808 | Quarterly, Annually | 3 years | November 1, 2025 | ||||||||||
A summary of stock option activity under all of the Company’s plans is as follows:
| Options Outstanding | ||||||||||||||
| Number of Shares | Weighted Average Exercise Price per Share | |||||||||||||
| Balance, September 30, 2024 | 54,090 | $ | 39.36 | |||||||||||
| Options granted | — | — | ||||||||||||
| Options exercised | (25,818) | 37.28 | ||||||||||||
| Options cancelled | (792) | 26.52 | ||||||||||||
| Balance, September 30, 2025 | 27,480 | $ | 41.69 | |||||||||||
There were no stock options granted in fiscal years 2025 and 2024. All stock options granted in fiscal year 2023 were replacement awards of those assumed as part of business acquisitions.
The total intrinsic value of options exercised during fiscal 2025, 2024 and 2023 was $5.9 million, $7.5 million and $6.9 million, respectively.
A summary of options outstanding that are exercisable and that have vested and are expected to vest as of September 30, 2025 is as follows:
| Number of Shares | Weighted Average Remaining Contractual Life (in Years) | Weighted Average Exercise Price per Share | Aggregate Intrinsic Value(1) | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Stock options outstanding | 27,480 | 3.50 | $ | 41.69 | $ | 7,736 | ||||||||||||||||||||
| Exercisable | 27,480 | 3.50 | $ | 41.69 | $ | 7,736 | ||||||||||||||||||||
| Vested and expected to vest | 27,480 | 3.50 | $ | 41.69 | $ | 7,736 | ||||||||||||||||||||
(1)Aggregate intrinsic value represents the difference between the fair value of the Company’s common stock underlying these options at September 30, 2025 and the related exercise prices.
As of September 30, 2025, equity based awards (including stock options and restricted stock units) are available for future issuance as follows:
| Awards Available for Grant | ||||||||
| Balance, September 30, 2024 | 3,952,900 | |||||||
| Granted | (1,287,902) | |||||||
| Cancelled | 262,653 | |||||||
| Additional shares reserved (terminated), net | (5,316) | |||||||
| Balance, September 30, 2025 | 2,922,335 | |||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.