Financial Data and Key Metrics Changes - Total billings grew by 18% to $2.37 billion in Q4 2025, driven by strong growth in Unified SASE and operational technology security [15][22] - Total revenue increased by 15% to $1.91 billion, with product revenue up over 20% to $691 million and service revenue growing 12% to $1.21 billion [16][17] - Operating margin was strong at 37.3%, exceeding guidance, while gross margin was 80.3% [21][22] - Free cash flow reached $577 million, representing a margin of 31% [22][24] Business Line Data and Key Metrics Changes - Unified SASE billings grew 40%, representing 27% of total billings, indicating strong demand for cloud security solutions [8][15] - Operational technology solutions saw billings growth of over 25%, reflecting broad-based demand [10][16] - AI-driven SecOps billings grew 6% in Q4 and 22% for the full year, with ARR up 21% [10][16] Market Data and Key Metrics Changes - The U.S. and Europe were the largest contributors to growth in $1 million-plus deals, each delivering more than 30% growth [16] - 16% of large enterprise customers purchased FortiSASE, an increase of over 50% [15][16] - The company gained market share, maintaining a 55% unit market share in firewalls [7][10] Company Strategy and Development Direction - The company aims to continue growing faster than the overall market, targeting billings and revenue CAGR above 12% and achieving the Rule of 45 [11][27] - Fortinet is focused on integrating networking and security through its FortiOS platform, which is expected to drive upsell opportunities [12][13] - The company is investing in R&D across custom silicon, OS convergence, AI-driven security, and cloud infrastructure to support innovation and growth [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth driven by strong demand across various sectors, including AI and operational technology [33][34] - The company is well-prepared for supply chain challenges and is maintaining healthy margins through strategic pricing and inventory management [42][43] - Management highlighted the importance of AI in cybersecurity, viewing it as an opportunity for growth [37][38] Other Important Information - The company plans to repay $500 million of senior debt at maturity at the end of Q1 2026 [27] - The board approved a $1 billion increase in the authorized stock repurchase amount, with approximately $1.4 billion remaining [22] Q&A Session Summary Question: What drove the strength in Unified SASE billings and the strong guidance for 2026? - Management attributed the growth to unique advantages in Sovereign SASE and the integration of network security, SD-WAN, and SASE on a single OS, which none of their competitors offer [31][32] Question: How is the company navigating the current environment regarding memory prices? - The company has prepared for supply chain issues by maintaining inventory and adjusting prices to manage margins effectively [42][43] Question: What is the revenue mix between Sovereign and public SASE? - Management indicated that the Sovereign SASE market is likely larger than the public SASE market, with strong growth expected due to the lack of competition in this area [50][51] Question: How does the company view the refresh cycles for technology upgrades? - Management noted that while some customers may seek extended support, the primary driver for growth is the demand for new functions and technology upgrades [56][61] Question: What is the expected pricing increase for appliances in 2026? - Management indicated that pricing for appliances is expected to increase between 5% and 20%, depending on the product [73][84] Question: What is the company's M&A philosophy moving forward? - The company remains open to M&A opportunities, particularly in secure operations, but emphasizes a disciplined approach to acquisitions [87][88]

Financial Data and Key Metrics Changes - Total billings grew by 18% to $2.37 billion in Q4 2025, driven by strong growth in Unified SASE and operational technology security [15][22] - Total revenue increased by 15% to $1.91 billion, with product revenue up over 20% to $691 million and service revenue growing 12% to $1.21 billion [16][17] - Operating margin was strong at 37.3%, exceeding guidance due to better-than-expected revenue growth and cost management [21][22] - Free cash flow reached $577 million, representing a margin of 31% [22][24] Business Line Data and Key Metrics Changes - Unified SASE billings grew 40%, representing 27% of total billings, indicating strong demand for cloud security solutions [8][15] - Operational technology solutions saw billings growth of over 25%, reflecting broad-based demand for both hardware and software [10][16] - AI-driven SecOps billings grew 6% in Q4 and 22% for the full year, with annual recurring revenue (ARR) up 21% [10][16] Market Data and Key Metrics Changes - The U.S. and Europe were the largest contributors to growth in $1 million-plus deals, each delivering more than 30% growth [16] - 7,200 new organizations selected the unified FortiOS platform, reinforcing the company's strong position across all market segments [16] Company Strategy and Development Direction - The company aims to continue growing faster than the overall market, with a target of achieving billings and revenue CAGR above 12% [11][27] - Fortinet is positioned as a leader in the 2025 Gartner Magic Quadrant for SASE platform, with a focus on integrating networking and security [10][11] - Continued investment in R&D across custom silicon, OS convergence, AI-driven security, and Fortinet-owned cloud infrastructure supports rapid innovation and organic growth [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth drivers for 2026, citing strong demand across various sectors, including AI and operational technology [33][34] - The company is well-prepared for supply chain challenges, maintaining healthy margins and inventory levels [42][43] - Management believes that the Sovereign SASE market presents a significant growth opportunity, as competitors have not yet entered this space [32][50] Other Important Information - The company reaffirmed its commitment to the Rule of 45 for the seventh consecutive year, indicating strong financial health [24][27] - Pricing actions have been implemented, with expected increases between 5% and 20% on specific products, which will positively impact service revenue over time [73][84] Q&A Session Summary Question: What drove the strength in Unified SASE billings and the strong guidance for 2026? - Management highlighted strong growth in Sovereign SASE and the unique advantages of their integrated platform as key drivers [31][32] Question: How is the company navigating the current environment regarding memory prices? - The company has prepared for supply chain issues and maintains a healthy margin, adjusting prices as necessary [42][43] Question: What is the revenue mix between Sovereign and public SASE? - Management indicated that the Sovereign SASE market is likely larger than the public SASE market, with strong growth expected [50] Question: How does the company view the potential for cannibalization between SASE and traditional products? - Management believes SASE will complement rather than cannibalize traditional networking and security solutions, creating additional business opportunities [68][70] Question: What are the expected pricing actions for 2026? - Pricing for appliances is expected to increase between 5% and 20%, depending on the product [73][84]

Financial Data and Key Metrics Changes - The company reported a total revenue growth of 17% for Q4 2024, reaching $1.66 billion, with product revenue increasing by 18% to $574 million, marking the highest growth rate in six quarters [11][15]. - Operating margin reached a record 39.2%, reflecting strong gross margins and favorable foreign exchange impacts [17]. - Free cash flow was $380 million, with a free cash flow margin of 23%, up 11 points year-over-year [18]. Business Line Data and Key Metrics Changes - Unified SASE billing grew by 85%, contributing to a 13% growth in total unified SaaS billing, which accounted for 23% of the business [7][12]. - Security operations and unified SASE ARR grew by 32% and 28%, respectively, with combined revenue exceeding $1.5 billion [12][19]. - The company added a record 6,900 new logos in Q4, driven by strong channel partner alignment [11]. Market Data and Key Metrics Changes - EMEA was the best-performing geography with over 25% growth, while government and service provider verticals grew over 20% [15]. - The SMB segment was the top-performing customer segment, achieving over 30% growth [14]. Company Strategy and Development Direction - Fortinet continues to focus on a single vendor SASE strategy, integrating multiple security functions into a single operating system, FortiOS, which enhances user experience and security [7][9]. - The company aims to leverage its unique ASIC technology to drive growth in secure networking and AI-driven security solutions [9][23]. - Fortinet's acquisition of Perception Point aims to enhance its cybersecurity offerings by extending protection beyond email to the entire modern workspace [8]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential within the secure networking space, anticipating that it will surpass traditional networking by 2026 [9]. - The company acknowledged potential challenges from tariffs and geopolitical factors affecting demand, particularly in Latin America and Canada [42][66]. - Management expects continued momentum in the second half of 2025, particularly related to the upcoming service dates for existing customers [25]. Other Important Information - The company announced the retirement of CFO Keith Jensen, with Christiana Ohlgart set to take over [28][30]. - Fortinet was recognized as the seventh most trusted company in its market by Forbes, highlighting its commitment to transparency and customer trust [10]. Q&A Session Summary Question: Involvement with hyperscalers like Oracle - Fortinet is involved in securing data centers for hyperscalers, leveraging its secure ASIC processor for enhanced computing power [34]. Question: Weak guidance for billings - The company experienced strong performance in Q4 but anticipates a more cautious outlook for Q1 due to external factors like tariffs and government disruptions [42]. Question: Refresh opportunity implications for subscription revenue - Subscription revenue growth is tied to upselling additional services alongside hardware renewals, with plans in place to incentivize sales [48]. Question: Billings guidance assumptions - The guidance includes significant upsell components and expectations for gradual growth rather than spikes [56]. Question: Impact of tariffs on demand and supply chain - The company is monitoring the dynamic situation regarding tariffs, particularly in Latin America and Canada, and acknowledges potential impacts on demand [62][66]. Question: U.S. performance sustainability - Fortinet has enhanced its U.S. enterprise sales and sees significant growth potential in the region due to increased resources and channel partnerships [72]. Question: Linksys relationship and strategic positioning - The acquisition of Linksys positions Fortinet to enter the consumer home-based network security market, leveraging its technology and existing user base [79]. Question: Inventory levels in anticipation of demand - The company targets healthy inventory turns and anticipates a gradual upgrade path for product revenue [84][86].