Fortinet (NasdaqGS:FTNT) Q4 2025 Earnings call February 05, 2026 04:30 PM ET Company ParticipantsAnthony Luscri - Vice President of Investor RelationsChristiane Ohlgart - CFOFatima Boolani - Managing DirectorGabriela Borges - Managing DirectorJohn Whittle - COOKen Xie - Founder, Chairman, and CEORob Owens - Managing DirectorShaul Eyal - Managing DirectorConference Call ParticipantsAdam Borg - Equity Research AnalystBrian Essex - Equity Research AnalystJunaid Siddiqui - Equity Research AnalystPatrick Colvill ...

Fortinet (NasdaqGS:FTNT) Q4 2025 Earnings call February 05, 2026 04:30 PM ET Company ParticipantsAnthony Luscri - Vice President of Investor RelationsChristiane Ohlgart - CFOFatima Boolani - Managing DirectorGabriela Borges - Managing DirectorJohn Whittle - COOKen Xie - Founder, Chairman, and CEORob Owens - Managing DirectorShaul Eyal - Managing DirectorConference Call ParticipantsAdam Borg - Equity Research AnalystBrian Essex - Equity Research AnalystJunaid Siddiqui - Equity Research AnalystPatrick Colvill ...

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 is actively participating in the World Economic Forum Annual Meeting to address global cybercrime challenges and promote strategies for accountability and deterrence in the cybersecurity landscape [1][4][10] Group 1: Fortinet's Role and Initiatives - Fortinet is a founding member of the World Economic Forum's Centre for Cybersecurity and is involved in various initiatives aimed at combating cybercrime, including the Cybercrime Bounty program [1][3] - Derek Manky, Chief Security Strategist at Fortinet, will present on incentivizing intelligence sharing and collaborative efforts to disrupt the cybercrime ecosystem during the forum [2][5] - The Cybercrime Bounty program is highlighted as a key initiative to disrupt the growing cybercrime market, emphasizing the importance of building alliances across sectors [2][3] Group 2: Economic Impact of Cybercrime - The annual losses from cybercrime are estimated to exceed $11 trillion, with the rise of AI-enabled cybercrime exacerbating the situation [5] - Organizations are facing an increasing number of tailored cyberattacks, necessitating collaborative approaches to enhance cybersecurity resilience [5][10] Group 3: Forum's Objectives and Discussions - The World Economic Forum Annual Meeting aims to foster dialogue among leaders from various sectors to address shared challenges and promote innovations for a better future [6][8] - Key discussions will focus on the paradigm shift in technology and its implications for cybersecurity, emphasizing the need for trust and collaboration [9][10]

Core Insights - Fortinet will hold a conference call on February 5, 2026, to discuss its fourth quarter and full year 2025 financial results [1] - The conference call will be available in listen-only mode on Fortinet's investor relations website [2] Company Overview - Fortinet is a leader in cybersecurity, focusing on the convergence of networking and security, with a mission to secure people, devices, and data globally [3] - The company offers an extensive portfolio of over 50 enterprise-grade cybersecurity products, trusted by over half a million customers [3] - Fortinet's training institute is one of the largest in the industry, aimed at providing cybersecurity training and career opportunities [3] - Collaboration with public and private sector organizations is a key aspect of Fortinet's commitment to enhancing global cyber resilience [3] - FortiGuard Labs utilizes advanced machine learning and AI technologies to deliver top-rated protection and actionable threat intelligence [3]

Core Insights - Fortinet (FTNT) is focusing on Unified SASE as a key growth strategy, leveraging its architectural advantages to stand out in a competitive security market [1] - The company’s SASE platform is built on FortiOS, integrating next-generation firewall, SD-WAN, and SASE capabilities, allowing for rapid deployment and reduced complexity compared to multi-vendor solutions [1][2] - Fortinet's Sovereign SASE offering provides deployment flexibility for government and large enterprises, addressing data privacy and regulatory compliance needs [2] Deployment and Growth - As of Q3 2025, 15% of large enterprise customers are using FortiSASE, reflecting a 55% growth, with Unified SASE accounting for 26% of total billings [2] - FortiSASE has shown billings growth exceeding 100%, indicating strong momentum in enterprise adoption [2] - The Zacks Consensus Estimate for Fortinet's 2026 revenues is $7.48 billion, representing a year-over-year growth of 10.8% [3][7] Competitive Landscape - Fortinet faces significant competition in the SASE market from Cisco and Zscaler, with Cisco utilizing a multi-product approach and Zscaler focusing on a cloud-only model [4] - Fortinet's hybrid deployment flexibility contrasts with Zscaler's cloud-exclusive offerings, targeting enterprises that prefer unified management solutions [4] Financial Performance and Valuation - Fortinet shares have decreased by 21.2% over the past six months, underperforming the Zacks Security industry's decline of 9.1% [5] - The company is perceived as overvalued, trading at a price-to-book ratio of 84.25, significantly higher than the sector average of 10.79 [9] - The Zacks Consensus Estimate for Fortinet's earnings in 2026 is $2.89 per share, indicating a year-over-year growth of 7.3% [11]

12月18日，专注推动网络与安全融合的全球性综合网络安全解决方案供应商Fortinet，在京成功举办 2025年终媒体会。恰逢公司成立25周年、进入中国市场23年的重要节点，Fortinet中国区总经理李宏 凯、中国区技术总监张略、北亚区OT业务负责人王宏善及首席攻防专家王涛等悉数出席，共同回顾 2025年网络安全行业关键词，深入展望2026年网络安全图景，并深度解析公司在AI驱动安全领域的战 略规划与技术成果，全面展示Fortinet从集成化安全平台到AI驱动自动化防御的演进之路。 稳健增长，平台战略筑牢企业安全底座 "安全技术的演进必须稳健务实。Fortinet不会追逐短期技术热点，而是以统一操作系统FortiOS为核心， 构建覆盖安全网络、统一SASE、AI驱动安全运营的融合架构，坚持将每一类产品深度集成至Security Fabric统一平台中，这正是我们在过去25年，尤其是近两年市场波动中保持增长的核心，"李宏凯强调。 2025年，Fortinet的统一SASE、AI驱动的安全运营（SecOps）与OT解决方案成为增长最快的业务板 块。 攻击工业化，防御应迈向机器速度时代 张略在解读《2026年网络 ...

Core Insights - Fortinet (FTNT) and Cisco (CSCO) are key players in the cybersecurity sector, both providing extensive network security solutions to global enterprises, with Fortinet focusing on integrated security platforms and Cisco offering a wider range of networking and cybersecurity products [1][2] Group 1: Fortinet (FTNT) Overview - Fortinet reported third-quarter 2025 revenues of $1.72 billion, marking a 14% year-over-year increase, with product revenues rising 18% to $559.3 million [3] - The company achieved a record non-GAAP operating margin of 37%, indicating strong profitability, while total billings grew 14% to $1.81 billion [3] - FortiSASE, a rapidly growing SASE solution, saw billings increase over 100% year-over-year, contributing to unified SASE annual recurring revenues of $1.22 billion, up 13% [4] - Fortinet's AI-driven security operations are expanding, with over 20 AI solutions powered by FortiAI technology, and the launch of the Secure AI Data Center solution, which offers significant energy savings [5] - For 2025, Fortinet projects revenues between $6.72 billion and $6.78 billion, with non-GAAP EPS expected to be between $2.66 and $2.70, indicating year-over-year growth of 13.5% [6] Group 2: Cisco (CSCO) Overview - Cisco's first-quarter fiscal 2026 revenues reached $14.9 billion, reflecting an 8% year-over-year growth, with non-GAAP EPS of $1, up 10% [7] - The AI infrastructure business is a key growth driver, with orders from hyperscalers totaling $1.3 billion in the first quarter, and expectations of $3 billion in AI infrastructure revenues for fiscal 2026 [8][9] - Cisco's total product orders grew 13% year-over-year, with significant growth in campus networking technologies [10] - However, Cisco's security revenues declined 2% to $1.98 billion, and collaboration revenues fell 3% to $1.06 billion, indicating challenges in the security segment [11] - The fiscal 2026 guidance estimates revenues between $60.2 billion and $61 billion, with non-GAAP EPS projected at $4.08 to $4.14, suggesting a year-over-year growth of 7.6% [12] Group 3: Valuation and Performance Comparison - Fortinet's price-to-book ratio is 85.97x, significantly higher than Cisco's 6.54x, reflecting its superior operating margin of 37% compared to Cisco's 34.4% and higher product revenue growth [13] - Over the past six months, Cisco shares increased by 17.8%, while Fortinet shares declined approximately 18.2%, presenting a potential entry opportunity for investors in cybersecurity [16] - Fortinet's strong profitability and investment in AI innovation differentiate it from competitors, while Cisco is navigating challenges related to declining security revenues and integration complexities [18]

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]

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] - Unified SaaS billings grew 19%, while SecOps saw a 33% increase [11][12] - Operating margin reached a record 37%, with total gross margin at 81.6% [18][19] Business Line Data and Key Metrics Changes - Unified SaaS and SecOps now account for 26% and 11% of total billings, respectively, reflecting a combined increase of three percentage points [11] - Product revenue increased by 18% to $559 million, driven by strong performance in multi-product deals and operational technology security [14] - Service revenue grew by 13% to $1.17 billion, indicating a healthy demand for services [14] Market Data and Key Metrics Changes - EMEA led revenue growth, followed by APAC and the Americas [13] - The number of deals greater than $1 million increased by 26%, with their total dollar value growing by over 30% [12] Company Strategy and Development Direction - The company 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] - Continued investment in cloud delivery infrastructure and strategic partnerships is planned to enhance market presence [23] - The rise of AI is expected to drive demand for Fortinet's solutions, particularly in securing AI workloads [23][106] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting the rule of 45 for the sixth consecutive year, expecting continued growth in demand for cybersecurity solutions [22] - The company anticipates product revenue growth to remain solid, driven by multiple growth drivers including new features and customer upgrades [67][113] Other Important Information - Free cash flow reached $568 million, with adjusted free cash flow up to $646 million, representing a margin of 37% [18] - The company repurchased 23.3 million shares for an aggregate purchase price of $1.83 billion, reducing the total share count by approximately 3% [19] 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 operational technology, rather than end-of-service upgrades [27][30] Question: Why is the guidance for next quarter less inspiring? - Management indicated that service revenue is a leading indicator of future performance, and product revenue growth is expected to positively impact service revenue in the future [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 and customer behavior [41][42] Question: Can you elaborate on the eight-figure deal with the police force? - The deal involved a combination of product and services, with a focus on sovereign SaaS to meet local data governance requirements [47][48] Question: What is the rate of SaaS penetration from the SD-WAN install base? - Management noted that 15% of large enterprise customers are now using Fortinet SaaS, indicating strong adoption and growth potential [60][61] Question: How is the company positioned in the operational technology security market? - Management highlighted significant growth potential in OT security, with a unique approach to securing diverse devices across various industries [77] Question: What are the growth drivers for product revenue next year? - Management is confident in continued product growth driven by new features, customer upgrades, and strong demand in operational technology [67][113]