Fortinet: A Top Cybersecurity Stock With Growth Catalysts

Core Viewpoint - Fortinet has emerged as a leading player in the cybersecurity sector, achieving a 52-week total return of 50%, outperforming competitors like Palo Alto Networks and CrowdStrike [1][2]. Group 1: Company Performance - Fortinet's market share in physical firewall units shipped reached over 50% in 2024, bolstered by the use of application-specific integrated circuits (ASICs) known as FortiASIC [3][5]. - The company's services now account for 68% of total revenue in 2024, significantly contributing to a 660 basis point increase in adjusted operating margin [5][6]. - Fortinet reported a sales growth of over 17% and an adjusted EPS increase of 45%, surpassing analyst expectations [6][7]. Group 2: Future Growth Catalysts - The company anticipates a significant refresh cycle in 2026 and 2027, where over one-third of its firewall base will require upgrades, potentially driving service sales growth [11][12]. - Fortinet's ASIC-enabled hardware is being utilized in data centers, with opportunities to secure AI data centers, which is crucial given the increasing data generated by AI [10][9]. - Product revenues grew just under 18%, indicating a strong potential for upselling high-margin service revenue as more physical products are installed [8][6].