Financial Data and Key Metrics Changes - Total billings grew by 15% to €1,780 million, driven by 21% growth in unified SASE and 31% growth in SecOps [12][13] - Total revenue increased by 14% to €1,630 million, with product revenue rising by 13% to $509 million [16][20] - Non-GAAP operating margin was 33.1%, slightly above guidance, while total gross margin increased to 81.6% [21][20] - Free cash flow reached $284 million, with adjusted free cash flow at $428 million, reflecting strong cash generation [22] Business Line Data and Key Metrics Changes - Unified SASE and SecOps now account for 24% and 11% of total billings, respectively, both up one percentage point [13] - ARR for unified SASE increased by 22% to $1,150 million, while SecOps ARR grew by 35% to $463 million [15] - The number of deals over $1 million increased by 29%, with total dollar value growing by 51% [13] Market Data and Key Metrics Changes - EMEA led revenue growth at 18%, while the Americas and APAC both grew by 11% [16] - The financial services sector showed strong performance with over 30% billings growth [13] Company Strategy and Development Direction - The company is focusing on expanding its unified SASE and AI-driven secure operations, which are expected to continue delivering strong returns [8] - Fortinet aims to maintain its competitive advantage by owning and managing its infrastructure, enhancing customer experience and cost efficiency [10] - The company is investing in AI and has over 500 issued and pending AI patents, positioning itself as a leader in AI-driven security solutions [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the cybersecurity market despite macroeconomic uncertainties [24][73] - The company raised its full-year billings guidance by €100 million, reflecting strong performance in the first half of the year [25] - Management noted that the ongoing firewall upgrade cycle presents significant opportunities for customer engagement and upselling [23][96] Other Important Information - The company announced the expansion of its Forti Cloud offering with three new services: Forti Identity, Forti Drive, and Forti Connect [10] - The company has invested approximately $2 billion in building a global infrastructure to support its services [9] Q&A Session Summary Question: Concerns about FortiSASI cannibalizing core appliance business - Management clarified that SASE does not replace traditional firewalls but enhances them, with both markets growing [30][32] Question: Insights on services guidance - Management indicated that services billings to revenue conversion takes longer, but product revenue is expected to be stronger for the rest of the year [39][41] Question: Profile of SASE customers - Management noted that over 90% of SASE customers are existing firewall customers, with some displacing competitors [57][58] Question: Growth beyond the upgrade cycle - Management highlighted the new SASE firewall as a significant growth opportunity, alongside the expansion of cloud services [94][96] Question: OT opportunity and competition - Management reported over 20% growth in OT, emphasizing their leadership in the sector and the potential for further expansion [76][80]

Financial Data and Key Metrics Changes - Total billings grew by 15% to €1,780,000,000, driven by 21% growth in unified SASE and 31% growth in SecOps [12][13] - Total revenue increased by 14% to €1,630,000,000, with EMEA leading growth at 18% [15] - Non-GAAP operating margin was 33.1%, exceeding guidance by 60 basis points [20] - Free cash flow was $284,000,000, with adjusted free cash flow reaching $428,000,000, up $104,000,000 [21] Business Line Data and Key Metrics Changes - Unified SASE and SecOps now account for 24% and 11% of total billings, respectively, both up one point [12] - ARR for unified SASE increased by 22% to $1,150,000,000, while SecOps increased by 35% to $463,000,000 [14] - Product revenue increased by 13% to $509,000,000, benefiting from upgrade buying and strong growth in operational technology [15][16] Market Data and Key Metrics Changes - The Americas and APAC both grew by 11%, while EMEA led with 18% growth [15] - Among the top five verticals, financial services led with over 30% billings growth [13] - The number of deals greater than $1,000,000 increased by 29%, with total dollar value growing by 51% [13] Company Strategy and Development Direction - The company is focusing on the fast-growing markets of unified SASE and AI-driven secure operations, with investments yielding strong returns [6] - Fortinet aims to maintain its competitive advantage by owning and managing its infrastructure, ensuring better customer experience and cost efficiency [9] - The company is recognized as a leader in the 2025 Gartner Magic Quadrant for SASE platform, highlighting its strong market position [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the cybersecurity market despite macroeconomic uncertainties [24] - The company raised its full-year billings guidance by €100,000,000, reflecting strong performance in the first half of the year [25] - Management noted that ongoing upgrade cycles for firewalls present valuable opportunities for customer engagement [22] Other Important Information - The company announced the expansion of its Forti Cloud offering with three new services: Forti Identity, Forti Drive, and Forti Connect [9] - Total RPO grew by 12% to €6,640,000,000, while current RPO grew by 15% to €3,450,000,000 [14] - The company has invested around $2,000,000,000 in building and operating a global infrastructure [8] Q&A Session Summary Question: Concerns about FortiSASI cannibalizing core appliance business - Management clarified that SASE is enhancing rather than replacing traditional firewalls, with both segments experiencing growth [29][30][32] Question: Specifics on the 2027 product refresh cohort - Management indicated that the 2027 cohort consists of lower-end products, which are significant in unit numbers but less impactful on product revenue [34] Question: Insights on services guidance - Management noted that services billings to revenue conversion takes longer, but they remain confident in product revenue strength for the rest of the year [39][41] Question: Profile of SASE customers - Management stated that over 90% of SASE customers are existing firewall customers, with some displacing competitors [59][60] Question: Margin outlook and investment balance - Management emphasized a long-term strategy, investing in infrastructure for better cost advantages while maintaining healthy margins [62] Question: Growth beyond the upgrade cycle - Management highlighted the new SASE firewall as a significant growth opportunity, addressing new infrastructure security needs [95][96]

Core Viewpoint - Fortinet (FTNT) has demonstrated strong performance in 2025, with a year-to-date (YTD) share price increase of 10.6%, significantly outperforming the S&P 500 index and the Zacks Computer and Technology sector, which saw declines of 0.4% and 1.7% respectively [1][2]. Group 1: Financial Performance - Total revenues for Q1 2025 increased by 14% year over year to $1.54 billion, with product revenues reaching $459 million, up 12% year over year [6]. - Total billings grew by 14% year over year to $1.6 billion, driven by unified SASE and AI-driven SecOps, which contributed 18% and 29% growth respectively [7]. - Gross margin expanded by 380 basis points to 81.9%, and operating margin reached a record 34.2% in Q1 2025 [7]. - Fortinet added over 6,300 new customers during the quarter, marking a 14% increase from the previous year [7]. Group 2: Competitive Positioning - Fortinet differentiates itself in the competitive cybersecurity market through its unified FortiOS platform, which integrates various security solutions, leading to 18% growth in SASE billings and 26% growth in SASE ARR in Q1 2025 [10]. - The company holds over 500 issued and pending AI patents, more than any competitor, and has integrated AI into multiple products, enhancing its market position in AI and firewall solutions [11]. - The introduction of the FortiGate 700G firewall, which offers up to 10x performance gains over competitors, strengthens Fortinet's competitive edge in secure networking [12]. Group 3: Future Outlook - Fortinet anticipates Q2 2025 revenues between $1.59 billion and $1.65 billion, indicating a growth of 13% at the midpoint, with non-GAAP earnings per share expected in the range of 58-60 cents [13]. - The Zacks Consensus Estimate for Q2 2025 revenues is $1.62 billion, suggesting a year-over-year growth of 12.96% [14]. - Fortinet's Price/Book ratio of 40.72X, while above the industry average, is justified by its strong market position and integrated platform strategy, signaling long-term growth potential [15]. Group 4: Investment Recommendation - Fortinet's strong execution and focus on long-term growth, alongside new product innovations, position it as a compelling investment opportunity [17]. - The company maintains a Zacks Rank 2 (Buy) and a Growth Score of A, indicating a favorable investment outlook [18].