Fortinet Inc (FTNT)

“infrastructure investments of $50 million to $100 million; a non-GAAP tax rate of 18%; and cash taxes of $160 million to $180 million.”

“non-GAAP earnings per share of $0.72 to $0.76, which assumes a share count between 736 million and 740 million;”

“non-GAAP operating margin of 33% to 35%;”

“non-GAAP gross margin of 79.5% to 80.5%;”

“revenue in the range of $1.83 billion to $1.93 billion, which at the midpoint represents growth of 15%;”

“For the second quarter, we expect billings in the range of $2.09 billion to $2.19 billion, which at the midpoint represents growth of 20%;”

“We are confident not only this year, but also about the benefits that service billings give us for next year.”

“Finally, given our strong results and confidence in the business, we are reiterating our 2026 guidance.”

“Regarding pricing, we have said multiple times that we are trying to maintain gross margin. As our component costs increase, we contemplate pricing actions, but we will also bring it down again when we do not have the pressures anymore.”

“So the demand for our products is going to continue as AI data centers are going to be built out and as customers are deploying AI internally.”

“non-GAAP operating margin of 33% to 36%,”

“We expect non-GAAP gross margin of 79% to 81%, non-GAAP operating margin of 33% to 36%”

“We expect non-GAAP gross margin of 79% to 81%, non-GAAP operating margin of 33% to 36%, non-GAAP earnings per share of $3.10 to $3.16, which assumes a share count of 743 million to 749 million, infrastructure investments of $350 million to $550 million, a non-GAAP tax rate of 18%, and cash taxes of $400 million to $450 million.”

“We continue to expect services revenue growth to pick up in the second half of the year, driven by accelerating product revenue growth, a key leading indicator.”

“service revenue in the range of $5.09 billion to $5.15 billion, which at the midpoint represents growth of 12%.”

“revenue in the range of $7.71 billion to $7.87 billion, which at the midpoint represents growth of 15%;”

“For the full year, we expect billings in the range of $8.8 billion to $9.1 billion, which at the midpoint represents growth of 18%;”

“We plan to provide more details next month.”

“We will introduce FortiOS 8.0 at Fortinet's Annual Customer and Partner Conference in March, featuring significant new capabilities in security and networking, especially in AI security, such as agentic AI security in enterprise, plus a new bundled SD-WAN and SASE service.”

“But we feel we are prepared. And with all the diversification we have by vertical and geography, we feel we can maintain the margin and keep the Rule of 45.”

“With our technology, we believe that even with minor price increases, we will continue to be competitive and our growth or market share will not be impacted.”

“We are enforcing our commitment to continued growth beyond that of the overall market.”

“Finally, we reaffirmed the midterm target we shared at our Analyst Day, reinforcing our commitment to continue to grow faster than the overall market, including delivering billing and revenue CAGR above the market growth of 12% and achieving a Rule of 45.”

“We see the new ASIC chip will come up this year, but we tend to announce together with the product.”

“It depends on the appliance, but that's what we are targeting, yes.”

“Christiane, did you say that you expect pricing for appliances in 2026 to go up between 5% and 20% on average?”

“As Ken mentioned, we are planning to maintain our profitability and gross margins on our products in two ways. One is by negotiating to secure components early, and we have already raised some prices where we face component cost pressures. We may continue to do so throughout the year depending on fluctuations in component prices.”

“As Ken highlighted, we have a lot of competitive advantages where we feel we can grow faster than the market and faster than each of the three pillars that we focus on, as we did throughout 2025.”

“We believe we can sustain product revenue growth of 10% to 15% over the midterm on average and reaffirm the midterm targets shared at our Analyst Day, including delivering billings and revenue CAGR above 12% and achieving the Rule of 45.”

“Lastly, we plan to repay the first tranche in the amount of $500 million of our senior debt at maturity at the end of the first quarter. This, alongside lower market interest rates, will reduce net interest income for the year.”

“We expect service revenue growth to pick up in the second half of 2026, driven by accelerating product revenue growth in 2025 as a key leading indicator.”

“Fortinet has led the convergence of networking and security for over 25 years, and secure networking is expected to surpass traditional networking by the end of this year.”

“Additionally, the recent weakness of the U.S. dollar may create a modest headwind in the first quarter.”

“The other part in helping the margin is we're starting to see the service revenue will be turning around probably during 2026.”

“We are confident that our product revenue growth is solid for next year as well based on all the growth drivers that we've just provided.”

“I am confident this will be a significant growth driver for us.”

“I believe all this will keep driving product revenue growth in double digits.”

“Yes. We are confident about continued product growth, not only next year.”

“In March next year, we are going to launch FortiOS 8.0, which is in the beta process.”

“Infrastructure investments of $380 million to $430 million, a non-GAAP tax rate of 18% and cash taxes of between $400 million and $450 million.”

“For the full year, we continue to remain on track to achieve the Rule of 45 for the sixth consecutive year and expect billings in the range of $7.37 billion to $7.47 billion, which at the midpoint represents growth of 14%.”

“Infrastructure investments of $60 million to $110 million, a non-GAAP tax rate of 18%, and cash taxes of $66 million to $116 million.”

“Non-GAAP earnings per share of $0.73 to $0.75, which assumes a share count between 751 million and 755 million.”

“I believe product and hardware will keep growing at 10% to 15%, which will be the normal growth rate for us, while also gaining market share.”

“This is much more a greenfield opportunity across all three pillars. That’s why we believe strong players will keep gaining share and drive product growth over the next 5 to 10 years.”

“Also, like I mentioned, Gabriela, in your conference, we'll have a new ASIC, MPA, coming out next year, probably a few times faster, more functions, almost the same cost.”

“That gives us the confidence we'll be the #1 leader within a few years.”

“We are confident that at the end of the second half of next year, we will see a pickup.”

“I also believe that product revenue will typically average around 10% to 15%, which represents low double-digit growth and aligns well with our performance over the last 16 years since going public.”

“Finally, the rise of AI is expected to further increase demand for our solutions due to the need to secure LLMs and data movement.”

“We expect continued strong growth in the demand for our products, driven by increased investments in cybersecurity and the convergence of networking and security and vendor consolidation.”

“Looking ahead to the next few years, consistent with the framework that we provided at our Analyst Day last year, we remain confident that we will continue to meet the Rule of 45 and expect to grow faster than the market in all three of our pillars.”

“Lastly, as a result of the strong growth opportunities that lie ahead, we remain confident that we will continue to meet the Rule of 45 and continue to gain market share and outperform overall market growth in 2025, 2026, and beyond, consistent with our mid-term target provided at last year's Analyst Day.”

“Based on this momentum, we are confident in our ability to become the #1 SASE market leader in the next few years.”

“We anticipate that by the end of next year, service revenue will begin to improve, especially with the strong growth in product revenue this year.”

“We see our improved product revenue growth and customer expansions in 2025 as leading indicators for improving service revenue growth expected for the second half of 2026.”

“But for the rest of the year, we decided to be prudent, take the midpoint down, but we believe that we are confident that the product revenue is going to be stronger for the rest of the year based on the pipeline.”

“We think the firewall market will continue to grow naturally as well, and we'll take market share there, too.”

“Despite ongoing uncertainty surrounding tariffs and the global economic outlook, we have not experienced a negative impact on our business. The cybersecurity market and the demand for our solutions remains strong and resilient.”

“A non-GAAP tax rate of 18% and cash taxes of between $400 million to $450 million, which is $125 million lower than our prior expectation, primarily due to new tax law changes.”

“Infrastructure investments of $380 million to $430 million.”

“Non-GAAP gross margin of 79% to 81%, non-GAAP operating margin of 32% to 33.5%.”

“A non-GAAP tax rate of 18%, cash taxes of $60 million to $90 million.”

“Non-GAAP earnings per share of $0.62 to $0.64, which assumes a share count between 772 million and 776 million.”

“We believe we are the leading firewall and SD-WAN provider, and we anticipate being the top SASE provider in the coming years.”

“We estimate that we are approximately 40% to 50% of the way through the 2026 upgrade cycle at the end of the second quarter based on the remaining active units and service contracts, and we expect continued upgrade activity for the remaining devices over the next 6 quarters.”

“Now we see the product revenue accelerating, which will be the leading indicator for the future service revenue which we also view since starting turnaround; especially in both the product revenue and also the service revenue starting kind of instead of keeping dropping gradually, probably will be starting picking up.”

“I do believe probably in the next few years in the SASE market, Sovereign SASE can take almost half the market share compared to this global cloud-based SASE.”

“With our strong SASE strategy and growth, we are confident we'll be number one in this space as well.”

“So, we expect service acceleration through our channel programs, and we expect improvement.”

“Regarding the record firewall upgrade cycle that we've spoken about previously, we continue to expect the firewall upgrade cycle to gain momentum in both purchasing and planning activities in the second half of 2025.”

“As a result, we are maintaining our full-year billings and revenue guidance ranges to account for potential top line risks associated with the evolving geopolitical environment.”

“It will take about 1 to 2 years to co-develop a new product that allows consumers to utilize some of the ASIC technology and other related technology.”

“Looking ahead, in addition to SASE and secure ops, we expect OT security and AI to be key growth drivers over the next five years.”

“We remain cautious but are optimistic about exceeding our guidance.”

“And on the organic growth number, we expect about one point inorganic.”

“For the full year, we expect Linksys and PerceptionPoint to increase billings and revenue growth by approximately one hundred and twenty-five basis points and decreased operating margin by around fifty basis points.”

“Infrastructure investments of three hundred and eighty to four hundred and thirty million, and non-GAAP tax rate of eighteen percent, cash taxes between five hundred twenty-five and five hundred seventy-five million.”

“Non-GAAP operating margin of thirty-one to thirty-three percent, Non-GAAP earnings per share of two dollars and forty-one cents to two dollars and forty-seven cents, which assumes a share count of between seven hundred seventy-three and seven hundred eighty-three million.”

“Service revenue range of $4.575 billion to $4.725 billion, which at the midpoint represents growth of fifteen percent.”

“non-GAAP earnings per share of fifty-two cents to fifty-four cents”

“We expect the momentum to build as we move into the second half of 2025 as we get closer to the 2026 end-of-service dates.”

“but we feel this could be a huge potential in the next five to ten years for the company's growth.”

“So that's why we see that the US could be the fast-growing region in the next few years.”

“We believe we can continue to grow in all these three areas faster than the market, keeping our market share positive, especially in SASE, where we can put out technology in the same OS, along with support for both cloud SASE and private SASE.”

“I think that overall, discounting will be expected to remain stable.”

“Capital expenditures of $380 million to $400 million, non-GAAP tax rate of 17% and cash taxes of between $550 million and $600 million.”

“non-GAAP earnings per share of $0.58 to $0.62, assuming a share count of between $768 million and $778 million”

“In 2026, a record number of FortiGates will reach the end of their support life cycle, and we expect these customers to start their refresh cycle for these products sometime in 2025.”

“We believe we will be the number one leader in the SASE market in the next few years.”

“I think we see the end-of-life of these products starting in the second half of 2026.”

“We see the manufacturing vertical already performing strongly in Q3 and anticipate that post-election properties will also begin accelerating.”

“As we transition into 2025 and 2026, we're additionally expecting some renewals from the early adopters of SD-WAN, which could lead to natural growth.”

“Will there be a mix shift that slows a little bit when firewall and FortiGate starts to return? Sure, absolutely.”

“Looking at the third quarter, we might adjust some of the Street numbers down a bit and expect to see a recovery in the fourth quarter.”

“We anticipate that next year may mark the beginning of a refresh cycle, particularly for existing customers who have been using our products for an average of four to five years, signaling it's time for upgrades.”

“and we expect investment in infrastructure will start to return within the next 1 to 2 years.”

“Again, I think the inventory part of that is I think we've worked our way back to a more normalized state. So I think that is our business model going forward.”

“But I don't see over the next 90 days or 180 days, a dramatic shift in that area.”

“I would expect that to continue on. I think we're getting a little more contribution from sales and marketing than maybe I'd like at the moment and I would expect us to make a bit more investments there as we go through the second half of the year.”

“For the full year, we expect billings in the range of $6.400 billion to $6.600 billion; revenue in the range of $5.800 billion to $5.900 billion which at the midpoint represents growth of 10%.”

“Non-GAAP earnings per share of $0.56 to $0.58 which assumes a share count of between $767 million and $777 million.”

“For the third quarter, we expect billings in the range of $1.530 billion to $1.600 billion which at the midpoint represents growth of 5%, revenue in the range of $1.445 billion to $1.505 billion which at the midpoint represents growth of 10.5%.”

“As a result, we believe a full refresh cycle is unlikely to occur in 2024 but more likely in 2025.”

“We expect our differentiated Unified SASE offering to become a leader in the SASE market.”

“We believe that next year will show a long-term convergence of networking and network security, and we are committed to this path. That's why we project a compound annual growth rate of about 15% in the secure networking sector.”

“Also, we'll benefit from the service revenue, which has a much higher margin compared to the product revenue. So once the product starts growing, because product has a lower gross margin, that probably will impact the margin.”

“We anticipate strong performance in the full year, reflected in the 0.75-point increase in the midpoint margin guidance.”

“We anticipated strong performance in Q4 and set expectations for Q1. Historically, we've recorded about two to three 8-figure opportunities per quarter over the past few years, although their distribution can vary. We expect the rest of the year to yield a few more substantial deals in Q4 and some in Q2.”

“I don't foresee further adjustments in pricing for existing products.”

“With that, for the year, we expect billings in the range of $6.400 billion to $6.600 billion”

“We expect it to return to normal levels in the second half of 2024.”

“The billings headwind from last year's backlog drawdown is over $150 million in 2024 and gradually diminishes throughout the year with no headwind in the fourth quarter.”

“Non-GAAP earnings per share of $0.39 to $0.41, assuming a share count between 775 million and 785 million.”

“The digestion of supply chain issues is nearing completion, perhaps within the next few months.”

“That would suggest that, our expectations are that, billings growth rates should be improving as we move through on a quarterly basis, as we move through the year.”

“non-GAAP operating margin of 25.5% to 27.5%”

“non-GAAP earnings per share of $0.37 to $0.39, which assumes a share count of between $775 million and $785 million”

“In addition, we expect product revenue growth will continue to be impacted by project and product digestion in 2024, and we believe the selling environment should improve in the second half of 2024 and into 2025.”

“we expect service revenues to grow sequentially in the low single digits in the first quarter and to grow sequentially at low to mid-single digits for the remainder of 2024.”

“I think that where we look at in terms of where the street was for free cash flow in 2024 for the full year, I think that's in the ballpark at this early stage.”

“We remain committed to generating a healthy operating margin of 25% or greater in 2024 and 2025.”

“This situation will impact our sales in the short term, but we expect normalcy to return, probably in the second half of next year, after the full launch of the new products and the resolution of inventory issues.”

“Consistent with prior years, we expect that the timing of service revenue growth trends will lag product growth trends.”

“We expect to gradually increase billings growth through the year and approach double-digit growth by the second half of 2024, reflecting the progressively easier comparisons due to the easing of the headwinds from backlog draws in the first half of 2023 and the benefit of our SASE and SecOps focus.”

“We expect product gross margins to be pressured in 2024.”

“Capital expenditures of $220 million to $240 million; non-GAAP tax rate of 17% and cash taxes of $430 million.”

“We expect these longer sales cycles to continue along with the associated budgetary scrutiny and our fourth quarter guidance takes us into consideration.”

“With execution and continued investment in the SASE and SecOps markets, we believe we can return to delivering mid- to high teens top-line growth while continuing to deliver operating margins of 25% or greater.”

“As a result, for the near term, we expect to deliver healthy profitability along with more modest growth.”

“This provides us the flexibility to invest more significantly in our channel partners to enhance collaboration, particularly over the next 6-12 months.”

“Billings for Q3 are projected to show solid growth between 1-2% sequentially, reflecting the usual growth trajectory.”

“Additionally, we expect our 5G growth to ramp up, meaning we are well positioned with top-notch products for these new solutions, so we are optimistic about growth.”

“We expect growth to continue in the non-FortiGate segment as well, with an impressive performance of 45% growth.”

“While it's early to be providing guidance for next year, we would expect our near-term performance to represent a short-term trough.”

“Non-GAAP earnings per share of $0.35 to $0.37, assuming a share count of between 795 million and 805 million.”

“That said, we do anticipate a return to more normal seasonality for Fortinet in the back half of the year, as the tailwinds from supply chain-driven growth subsides, and we cycle the prior period's price increases.”

“We might see a somewhat more cautious outlook for Q4, particularly as the seasonality assumption applied indicates lower growth than in past periods.”

“generating an annual non-GAAP operating margin of at least 25% for each of the next three years.”

“we believe we are well positioned to achieve our 2025 billings target of $10 billion while generating an annual non-GAAP operating margin of at least 25% for each of the next three years.”

“I do think that the risk to cancellations increases as the year progresses”

“The full year estimates assume backlog returns to historical levels later this year.”

“Non-GAAP gross margin of 75% to 76%, non-GAAP operating margin of 25% to 26%, non-GAAP earnings per share of $1.44 to $1.48, which assumes a share count of between 795 and 805 million, capital expenditures of $400 million to $450 million due to the continued cloud, data center, and facilities investments.”

“This guidance assumes a low-single-digit impact on billings growth from backlog.”

“As we bring Universal SASE to market, we expect to make various investments including increasing our Points of Presence. Our guidance reflects the impact of these investments on both our gross margin and capital expenditure estimates.”

“our goal is to become number one in Network firewall, Secure SD-WAN, and OT security markets over the next couple of years.”

“I think all this I see contributing to pretty healthy, I keep saying double-digit growth in the future for the whole security space.”

“long-term will be more profit model, so we have better margin”

“But long-term will be more profit model, so we have better margin, so we will take some time to make sure we build a healthy ecosystem, both with our partner and also with the investment for long-term benefit.”

“We remain on track to achieve our 2025 financial targets, which include billings of $10 billion, revenue of $8 billion, non-GAAP operating margin of at least 25%, and adjusted free cash flow margin in the mid to high 30% range in 2025.”

“With a strong business model and history of execution, we are confident that our market share gains will continue.”

“However, we expect cancellation rates to increase as our focus shifts to a mix of firewalls and network equipment.”

“Net-net, price increases should continue, whereas benefits from discounting and supply chain improvements may not.”

“The price benefit will remain with us moving forward.”

“We're set to continue growing above the market rate, as research indicates a fast-growing market compared to the cybersecurity space with considerable potential going forward.”

“I totally agree that SD-WAN and the OT market are growing faster than the network security average.”

“We're likely to keep gaining more market share in this well-fragmented market.”

“Total service revenue in the range of $3.335 billion to $3.365 billion, which at the midpoint represents growth of 27% and implies a fourth consecutive year of accelerating service revenue growth.”

“Non-GAAP earnings per share of $0.27 to $0.29, which assumes a share count of between $795 million and $805 million, capital expenditures of $80 million to $110 million, non-GAAP tax rate of 17%, cash taxes of $20 million.”

“Our goal is to keep growing and achieve #1 market share in network firewall, Secure SD-WAN, and OT security market over the next couple of years.”

“I want to be clear: we expect backlog to actually increase from Q3 to Q4, not significantly, but slightly.”

“I don't anticipate seeing deal sizes shrink; as we move further into the enterprise segment, we expect average deal sizes to grow.”

“We do expect growth to continue in the next few years with the three growth drivers I mentioned, plus additional service revenue from our large installation base.”

“We see continued service revenue growth driven by two years of very strong product revenue growth and seven consecutive quarters of accelerating short-term deferred revenue growth.”

“We expect cash taxes to be $265 million.”

“We expect our non-GAAP tax rate to be 17%.”

“We expect full-year capital expenditures of $325 million to $335 million.”

“Non-GAAP gross margin of 75% to 76%; non-GAAP operating margin of 26% to 27%, at the midpoint a year-over-year increase of 30 basis points.”

“Full-year backlog is expected to be above the February estimate of $350 million.”

“We expect a non-GAAP tax rate of 17%.”

“We expect capital expenditures of $75 million to $85 million.”

“For the fourth quarter, we expect to again reach the Rule of 60.”

“We believe we can achieve number one market share in SD-WAN in the next couple of years.”

“We believe the growth driver, especially with the converged network and security, won’t slow down. This will continue to drive product revenue growth in the next 5 to 10 years.”

“If you look at Europe, we do see opportunities for growth in the year 2023. We could see momentum in larger deals, particularly as we continue to consolidate operations, which can help the business remain competitive.”

“I think the components and costs continue to rise. We still have fairly tight inventory, which leads to making most shipments by air instead of by ocean. We’ll have to adjust based on these costs and may raise prices, but we feel that even with price increases, we maintain a price advantage compared to industry averages with our products. Margins are likely to stabilize overall as supply improves.”

“I see this trend will last for the next few years; it will be a pretty long-term change.”

“We probably won’t expect backlog will reduce in Q3, Q4, but the increase will be less each quarter, probably. Next year, we will start to see some improvement within the backlog.”

“So, we do see that this will improve in the long term. We’ll keep increasing some of the product inventory and improving the product turn and balance, not just shipping everything by air, but some by air and some by ocean.”

“we expect cash taxes for the year to be $265 million”

“we expect our non-GAAP tax rate to be 17%”

“revenue in the range of $4,350 million to $4,400 million, which represents growth of 31%”

“we expect a non-GAAP tax rate of 17%.”

“non-GAAP earnings per share of $0.26 to $0.28, which assumes a share count of between 810 million and 820 million”

“Bookings in the range of $1,455 million to $1,485 million, which at the midpoint represents bookings growth of 36%”

“As we balance our pricing actions with the opportunity for continued market share gains, we have passed along most, but not all cost increases. As such, we expect ongoing gross margin volatility from these increases, as well as shifts in our product mix related to inventory availability.”

“As a result, we expect backlog to continue to increase in 2022; and while the situation is very dynamic, we believe we will have access to sufficient inventory to meet our guidance.”

“We believe that even with these actions, demand will continue to outstrip supply.”

“Nonetheless, we still expect supply chain constraints to be challenging throughout the remainder of the year.”

“Second half cash taxes of approximately $135 million are expected to be more evenly spread across the third and fourth quarters.”

“With growth and pricing benefits more than offsetting these headwinds, we expect service revenue growth will continue to accelerate through 2022 and into next year.”

“We feel we have a huge advantage for both the technology and the cost, and we will continue to gain market share, growing above market rates.”

“The OT clearly sees a bigger market going forward, probably bigger than SD-WAN. We're seeing strong growth there, and we anticipate further investment to meet that demand.”

“Given our view of component costs and other supply chain pressures, we expect non-GAAP gross margins of 74% to 76%, non-GAAP operating margins of 24% to 26%, and non-GAAP earnings per share of $5 to $5.15, assuming a share count of between $166 million and $168 million.”

“While the situation is very dynamic, we believe we will have access to sufficient inventory to meet our guidance.”

“As a reminder, backlog is excluded from the current quarter billings and revenue; however, it is expected to provide increased visibility and a top-line tailwind in future quarters.”

“Looking forward, EMEA's pipeline growth indicates continued strength in our EMEA business, despite the situation in Eastern Europe and its potential impact on European economies.”

“Yes, I think that's correct. I think the bookings number in the first quarter was about $12.75 billion, and the bookings number in Q2 at the midpoint is $13.55 billion. I don’t see a deceleration in demand. However, I will admit we do recognize that there are some uncertainties in the current macro environment, and we’d like to see how it plays out a bit more.”

“All of this gives us the confidence that we should see improvements in the second half of this year.”

“Pipeline growth is very strong, and we aim to enhance our marketing, aggressively hiring net sales, and sales capacity to maintain growth going forward.”

“We do see a strong demand from our customers for our security mesh architecture, which will drive non-FortiGate revenue growth.”

“While we're seeing good traction in SD-WAN deployments with some contribution, we anticipate much larger growth potential as 5G ramps up.”

“We are confident that this trend, together with our relentless focus on organic innovation, will drive better-than-industry average long-term growth for Fortinet.”

“Given the investments by Ken and the team, particularly in the U.S. Federal sector, I see potential for further growth in this area moving forward.”

“There is some backlog appearing in some of our fabric products, particularly Non-FortiGate, which may continue into Q4.”