Investor Briefing Session Safe Harbor Statement Information, statements and projections contained in these presentation slides concerning Fortinet's business outlook, the first quarter and full year 2026 guidance, mid-term targets, and future prospects and expectations are forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding any indications related to future growth and market share gains, our strategy going forward, and guidance and e ...

Core Insights - Palantir Technologies has experienced significant growth, with Q4 revenue increasing 70% year-over-year (YOY) to $1.4 billion, driven primarily by its U.S. business which accounted for 77% of total revenue and grew 93% YOY [2] - The company has diversified its revenue streams, with commercial revenue rising 82% YOY to $677 million, while government revenue increased 60% YOY to $730 million, indicating a successful expansion beyond government contracts [2] - Palantir's total contract value (TCV) reached a record $4.3 billion in the quarter, with remaining deal value for the year increasing 105% YOY to $11.2 billion, showcasing strong demand for its services [5] Financial Performance - The company's "Rule of 40" score, a metric combining growth and profitability, reached 127%, reflecting a balance between rapid expansion and strong profitability [1] - For the full year, revenue grew 56% to $4.475 billion, with adjusted free cash flow of $2.27 billion and a cash position of $7.2 billion at the end of the quarter [5] - Analysts project earnings to increase by 76% in 2026 and another 39% in 2027, indicating strong future growth potential [7] Strategic Initiatives - Palantir is applying lessons from commercial supply chains to enhance national security, as evidenced by a $448 million contract from the U.S. Navy to modernize shipbuilding supply chains [1] - The company is focusing on organic growth through direct customer connections rather than acquisitions, which is expected to drive continued momentum in the coming years [6] - The average target price for Palantir shares is $200.43, suggesting a potential upside of 51% from current levels, with a Street-high estimate of $260 indicating a possible 95% upside [7]

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 - Total billings grew by 18% to $2.37 billion in Q4 2025, driven by strong growth in Unified SASE and operational technology security [13][20] - 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 [15][21] - Operating margin was strong at 37.3%, exceeding guidance, while gross margin was 80.3% [20][22] - Free cash flow reached $577 million, representing a margin of 31% [20][23] Business Line Data and Key Metrics Changes - Unified SASE billings grew 40%, representing 27% of total billings, indicating strong demand for cloud security solutions [6][15] - Operational technology solutions saw billings growth of over 25%, driven by demand for both hardware and software [9][14] - AI-driven SecOps billings grew 6% in Q4 and 22% for the full year, with annual recurring revenue (ARR) up 21% [9][15] 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 [14] - 16% of large enterprise customers purchased FortiSASE, an increase of over 50%, highlighting continued expansion [13][15] - The company maintains a leading position in the firewall market with a 55% unit market share [5] Company Strategy and Development Direction - The company aims to continue growing faster than the overall market, targeting a billings and revenue CAGR above 12% [10][26] - Focus on integrating networking and security through FortiOS, which enhances performance and reduces total cost of ownership [6][12] - Continued investment in R&D, particularly in AI-driven security and quantum readiness, supports rapid innovation and organic growth [12][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained growth driven by strong demand across cybersecurity markets, including Secure Networking and Unified SASE [11][32] - The company anticipates service revenue growth to accelerate in the second half of 2026, driven by product revenue growth [24][26] - Management highlighted the importance of addressing supply chain challenges and maintaining healthy margins through strategic pricing [41][42] Other Important Information - The company has a disciplined approach to capital allocation, with a focus on maintaining the Rule of 45 and strong free cash flow generation [12][13] - A $1 billion increase in the authorized stock repurchase amount was approved by the board of directors [20] Q&A Session Summary Question: What drove the strength in Unified SASE billings and the strong guidance for 2026? - Management attributed the 40% growth in Unified SASE to unique advantages such as Sovereign SASE and the integration of network security, SD-WAN, and SASE on a single OS [30][31] 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 [41][42] 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 a lack of competition in this area [49] Question: How does the company view the potential for AI to impact cybersecurity? - Management sees AI as an opportunity to enhance cybersecurity measures and control data leakage, with significant demand for AI-driven solutions [36][38] Question: What is the company's approach to M&A? - The company remains open to M&A opportunities, particularly in secure operations, but emphasizes a disciplined approach to acquisitions [86]

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].