Core Insights - Fortinet's transition to a subscription-driven business model is driving significant growth in recurring service revenues, with service revenues increasing by 14% year-over-year to $1.08 billion in Q1 2025, representing 70% of total revenues [1][11] - The Unified SASE strategy has reported recurring revenues of $1.15 billion, up 25.7% year-over-year, while Security Operations' recurring revenues surged 30.3% year-over-year to $434.5 million [1][11] - Fortinet is aggressively investing in its SASE and SSE offerings to expand subscription-based revenue streams, with notable traction in large-scale enterprise deals [3] Revenue Growth - Multi-year contracts for services such as FortiGuard, FortiCare, FortiCloud, Unified SASE, and Security Operations are driving revenue growth [2] - The company expects service revenues to reach approximately $4.6 billion in 2025, indicating a year-over-year growth of 13.4% [5] Market Position and Competition - Fortinet faces stiff competition in the enterprise security market from companies like Palo Alto Networks and Zscaler [6] - Palo Alto Networks is expected to deliver recurring revenues between $5.52 billion and $5.57 billion for fiscal 2025, while Zscaler has a customer base of over 8,650 organizations [7][8] Pricing and Future Outlook - Fortinet's scalable, per-user pricing model with multi-year discounts is expected to enhance future recurring revenues [4] - Unified SASE and Security Operations are projected to experience a compound annual growth rate (CAGR) of 24% through 2026 [4][11] Stock Performance and Valuation - Fortinet's shares have risen 13.9% year-to-date, underperforming the Zacks Security industry's growth of 27.1% [9] - The stock is currently trading at a Price/Book ratio of 41.98X, compared to the industry's 25.76X, indicating a lower valuation score [14]

Core Viewpoint - Zscaler is expected to report third-quarter fiscal 2025 results with anticipated revenues of $665 million to $667 million, reflecting a year-over-year growth of 20.4% [1]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for Zscaler's fiscal third-quarter revenues is $666.1 million [1]. - Non-GAAP earnings per share are expected to be between 75-76 cents, with the Zacks Consensus Estimate at 75 cents, indicating a year-over-year decline of 14.8% [2]. - Revenue estimates from Channel Partners and Direct Customers are projected at $588 million and $77.4 million, respectively, with a remaining performance obligation of approximately $4.65 billion [10]. Market and Product Insights - Sustained demand for Zscaler's security and networking solutions is anticipated, driven by the expansion of the global security space and the adoption of its Zero Trust Exchange [7]. - The growing adoption of Software-Defined Wide Area Network (SD-WAN) solutions is expected to be a primary driver, with the market projected to reach $80.91 billion by 2034, growing at a CAGR of 31.6% [8]. - Zscaler's existing core products, including Zscaler Internet Access and Zscaler Private Access, are contributing to customer retention, while new features in its Zero Trust Exchange are aiding product portfolio expansion [9]. Competitive Position and Financial Performance - Zscaler's shares have increased by 40.9% year-to-date, outperforming the Zacks Security industry's growth of 16.9% [12]. - The stock is trading at a forward 12-month P/S of 12.79X, which is lower than the industry's 14.21X, indicating potential undervaluation [13]. Strategic Initiatives and Challenges - The company is investing in sales and marketing capabilities and increasing research and development costs to address longer deal cycles due to tighter IT budgets [11]. - Zscaler faces intense competition from established players like Palo Alto Networks and CrowdStrike, necessitating continuous investment in broadening its capabilities [18][19]. Long-term Outlook - The demand for cybersecurity solutions is rising due to increasing data breaches, and Zscaler's strong presence across various verticals provides stability against macroeconomic headwinds [16][17]. - Despite the long-term growth prospects, near-term challenges related to profit growth suggest a cautious approach for new investments [20].