Core Insights - Fortinet (FTNT) has seen a decline of -6.3% recently, while Microsoft (MSFT) is positioned as a more favorable investment option due to stronger revenue growth, enhanced profitability, and lower valuation [1][3] Company Performance Comparison - Microsoft has demonstrated a quarterly revenue growth of 18.4% and a 12-month revenue growth of 15.6%, outperforming Fortinet's 13.6% and 14.5% respectively [6] - In terms of profitability, Microsoft boasts a Last Twelve Months (LTM) margin of 46.3% and a 3-year average margin of 44.6%, indicating superior profitability compared to Fortinet [6] Market Trends and Positioning - Microsoft is recognized as a foundational technology player with strong momentum in artificial intelligence, cloud computing, and enterprise software partnerships, showing resilience during market volatility [3] - Fortinet is primarily focused on cybersecurity solutions but is more vulnerable to fluctuations in IT spending cycles and specific product demand, which has affected its stock performance [3]

Table of Contents ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34511 ______________________________________ FORTINET, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 or (Exact name of registrant as specified in its ...

Core Points - Rosen Law Firm is reminding purchasers of Fortinet, Inc. common stock from November 8, 2024, to August 6, 2025, about the lead plaintiff deadline on November 21, 2025 [1] - Investors who purchased Fortinet stock during the specified period may be entitled to compensation without any out-of-pocket fees through a contingency fee arrangement [2] Class Action Details - A class action lawsuit has been filed against Fortinet, and interested parties can join by submitting a form or contacting the law firm [3][7] - The lawsuit alleges that Fortinet made materially false and misleading statements regarding the business impact of a "record" round of FortiGate unit upgrades, claiming it would generate $400 million to $450 million in product revenue in 2025 and 2026 [5][6] Allegations Against Fortinet - The lawsuit claims that Fortinet misrepresented the potential of the refresh cycle, which consisted of older products that were a "small percentage" of the company's business [6] - It is alleged that Fortinet concealed the true number of FortiGate firewalls eligible for upgrades and misled investors about the momentum of the refresh cycle, which was pushed through rapidly in a short time frame [6]

Core Insights - Fortinet Inc. reported strong third-quarter 2025 results, with both earnings and revenues exceeding expectations and showing year-over-year improvement [1][8] - Non-GAAP EPS for Q3 2025 was 74 cents, surpassing the Zacks Consensus Estimate by 17.46% and growing 17.5% from 63 cents in the same quarter last year [1][8] - Total revenues reached $1.72 billion, beating the consensus mark by 1.34% and reflecting a 14.4% year-over-year increase [2][8] Revenue Breakdown - Total billings increased by 14% year over year to $1.81 billion, driven by 19% growth in Unified SASE and 33% growth in SecOps [3][8] - Product revenues rose 18% year over year to $559.3 million, accounting for 32.4% of total revenues, supported by strong demand for multiproduct deals [4] - Service revenues grew 12.7% year over year to $1.17 billion, making up 67.6% of total revenues, with security subscription revenues increasing by 12.8% [4] Operational Performance - Total gross margin was 81.6%, down 160 basis points year over year but better than expectations, aided by effective cost management [6] - Operating margin expanded by 80 basis points year over year to 36.9%, primarily due to operational efficiencies [6][8] Financial Position - Fortinet ended Q3 2025 with cash and cash equivalents of $3.12 billion, a decrease from $4.56 billion at the end of Q2 2025 [7] - Cash flow from operations was $655.2 million for Q3 2025, up from $451.9 million in the previous quarter [7] Future Guidance - For Q4 2025, Fortinet expects revenues between $1.825 billion and $1.885 billion, with billings estimated between $2.185 billion and $2.285 billion [9] - For the full year 2025, revenues are projected to be in the range of $6.72 billion to $6.78 billion, with non-GAAP EPS anticipated between $2.66 and $2.70 [10]

Market Overview - U.S. markets opened with slight changes: Dow increased by 0.05%, Russell 2000 decreased by 0.03%, S&P 500 decreased by 0.05%, and Nasdaq saw a decline of 0.24% [2] Pre-Market Movers - Brighthouse Financial surged by 26.6% following the announcement of its acquisition by Aquarian Capital at $70 per share [3] - Other notable gainers included Penumbra (+16%), Coherent (+14.5%), and Datadog (+12.2%) due to positive earnings reactions [3] Earnings Losers - Dentsply Sirona experienced a significant drop of 14.6% following negative earnings reactions, along with ACADIA Healthcare (-13%) and DoorDash (-12%) [4] - CarMax fell by 11.4% after CEO Bill Nash announced his unexpected departure, with David McCreight set to replace him [5] - Hubspot and Celsius both dropped by 11.6%, while Fortinet decreased by 10.9% due to disappointing earnings [4] Market Sentiment - U.S. stock futures were modestly higher after a rebound on Wednesday, with Russell 2000 gaining 1.53% and large-cap indexes like Nasdaq Composite (+0.65%), Dow (+0.48%), and S&P 500 (+0.37%) also showing positive movements [6] - The market's positive recovery was influenced by the Supreme Court's handling of Trump's tariffs, which elicited varied reactions [7]

Qualcomm - Qualcomm reported an EPS of $3, exceeding the estimate of $2.87, representing a 14% increase year-over-year from $2.69 [2] - Revenue reached $11.27 billion, up 10% year-over-year, beating estimates by approximately $510 million [2][3] - Licensing revenue, primarily from Apple, declined by 7.4%, while QCT revenue increased by 18%, indicating ongoing diversification efforts [3] CarMax - CarMax's stock fell 13% following a lower EPS guidance, with the new adjusted range between 18 and 36 cents, down from 64 cents last quarter [5][6] - Comparable sales are expected to decline by 8 to 12%, alongside additional restructuring costs and layoffs [7] - The wholesale used vehicle market prices are decreasing, with total sales down 2% from August to September [9] Fortinet - Fortinet reported an EPS of 74 cents, surpassing the estimate of 63 cents, marking a 17% increase [10] - Topline sales reached $1.72 billion, a 14% increase, beating estimates by about $20 million [10] - The revenue guidance for the next quarter was widened to a range of $1.83 billion to $1.89 billion, which has put pressure on the shares [11]

Core Viewpoint - The Gross Law Firm has issued a notice to shareholders of Fortinet, Inc. regarding a class action lawsuit due to alleged false statements and misrepresentations made by the company during a specific class period [1]. Group 1: Allegations and Misrepresentations - The complaint alleges that Fortinet misrepresented the potential profitability of its product refresh cycle, claiming it would be more lucrative than it actually was, as it involved old products that constituted a "small percentage" of the company's business [1]. - It is claimed that Fortinet did not have a clear understanding of the actual number of FortiGate firewalls eligible for upgrades, misleading investors about the refresh gaining momentum over two years while it had already pushed through about half of the refresh in just a few months by the end of Q2 2025 [1]. Group 2: Class Action Participation - Shareholders who purchased shares of Fortinet during the class period from November 8, 2024, to August 6, 2025, are encouraged to register for the class action, with a deadline for lead plaintiff appointment set for November 21, 2025 [2]. - Once registered, shareholders will receive updates through a portfolio monitoring software regarding the status of the case, with no cost or obligation to participate [2].

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Viewpoint - Fortinet, Inc. is facing a class action lawsuit alleging securities fraud due to misleading statements about the company's product upgrade cycle and revenue expectations [3][4]. Group 1: Lawsuit Details - The class action lawsuit is on behalf of investors who purchased Fortinet securities between November 8, 2024, and August 6, 2025 [3]. - Allegations include that Fortinet's management made materially false statements regarding a "record" round of FortiGate unit upgrades, claiming it would generate $400 million to $450 million in product revenue for 2025 and 2026 [3]. - The lawsuit asserts that the management misrepresented the upgrade cycle's potential, stating it would gain momentum in the second half of 2025, while in reality, it was not as lucrative as claimed [3]. Group 2: Financial Impact - On August 6, 2025, Fortinet reported that it was only "approximately 40% to 50% of the way through" the 2026 firewall upgrade cycle, which was below investor expectations [4]. - Following the release of weaker-than-expected revenue guidance for the third quarter, Fortinet's share price dropped by $21.28, or approximately 22%, from $96.58 to $75.30 [4]. Group 3: Investor Actions - Investors have until November 21, 2025, to request the Court to appoint them as lead plaintiff in the class action lawsuit [2]. - Interested investors are encouraged to contact Kirby McInerney LLP for more information regarding their rights or interests in the lawsuit [5].

Financial Data and Key Metrics Changes - Total billings grew by 14% to $1.81 billion, with revenue increasing by 14% to $1.72 billion [11][13] - Operating margin reached a record 37%, with total gross margin at 81.6% [18] - Free cash flow was strong at $568 million, with adjusted free cash flow up to $646 million, representing a margin of 37% [18] Business Line Data and Key Metrics Changes - Unified SaaS billings grew by 19%, with Fortinet SaaS billings growth exceeding 100% [11][6] - SecOps grew by 33%, contributing significantly to overall growth [11][10] - Product revenue increased by 18% to $559 million, driven by strong performance in multi-product deals [14] Market Data and Key Metrics Changes - EMEA led revenue growth, followed by APAC and the Americas [13] - 15% of large enterprise customers are now using Fortinet SaaS, representing a 55% increase [7][11] - Operational technology solutions saw over 30% billing growth, indicating strong demand in that segment [10] Company Strategy and Development Direction - Fortinet aims to become the number one SaaS market leader in the coming years, leveraging its unique integration of NextGen Firewall, SD-WAN, and SaaS on a single operating system [6][8] - The company plans to continue investing in its go-to-market strategy, including cloud delivery infrastructure and increased sales capacity [23] - Fortinet's focus on AI-driven secure operations is expected to capture significant growth opportunities as customers scale AI globally [9][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting the rule of 45 and continuing to gain market share, supported by strong demand for cybersecurity solutions [10][22] - The company anticipates continued strong growth driven by increased cybersecurity spending and the convergence of networking and security [22][23] - Management acknowledged that product revenue growth is a leading indicator for future service revenue, with expectations for improvement in the second half of 2026 [34][41] Other Important Information - Fortinet repurchased 23.3 million shares for $1.83 billion, reducing the total share count by approximately 3% [19] - Infrastructure investments were $88 million, up $51 million, as the company builds out its infrastructure footprint [18] Q&A Session Summary Question: Product revenues went up 18%, below expectations. What are the drivers? - Management attributed growth to strong demand across various segments, including SaaS and SecOps, rather than end-of-service upgrades [27][30] Question: Why is the guidance for next quarter less inspiring? - Management indicated that service revenue may be impacted by previous negative product revenue growth, which affects future service revenue [33][34] Question: What is the trajectory of services growth in the next 12 months? - Management expects service revenue growth to improve in the second half of 2026 due to increased product sales [41][42] Question: Can you elaborate on the eight-figure deal with the police force? - The deal included a combination of product and services, with a focus on sovereign SaaS to meet local data governance requirements [47][48] Question: How is the SaaS penetration rate from the SD-WAN install base? - Management noted that 15% of enterprise customers are adopting SaaS, with expectations for continued growth as more customers transition [60][61] Question: What are the growth drivers for operational technology security? - Management highlighted the increasing number of connected devices and the need for network security as key growth drivers in operational technology [77] Question: What is the impact of the 2026 end-of-service cohort on growth? - Management clarified that while the end-of-service cohort is a factor, the primary growth drivers are new features and technology advancements [81][82]