Fortinet, Inc. (FTNT)

Fortinet reported third-quarter 2026 revenue of $2.08 billion on 28 October, up 20 percent from a year earlier 1. Product revenue, which covers hardware and software licences, rose 37 percent to $765 million 12. Billings, revenue plus the change in deferred revenue, rose 29 percent to $2.34 billion 12.

The 10-Q says product revenue rose on higher prices for higher performance products, recent pricing actions and more units shipped 2. Product gross margin, what is left of product sales after the cost of making them, fell to 64.4 percent from 67.7 percent, mainly on memory chip costs and inventory reserves 2.

Fortinet raised its 2026 revenue guidance to between $8.125 billion and $8.215 billion 15. It expects service revenue, the subscriptions and support side, of $5.150 billion to $5.170 billion for the year 1. Service revenue was $3,792.8 million in the first nine months, so that range implies about $1,357 million to $1,377 million in the fourth quarter (computed) 1.

The open question is a securities class action filed on 22 September 2025 2. It alleges false or misleading statements about the 2026 firewall refresh cycle, for purchasers of the stock between 8 November 2024 and 6 August 2025 2. The court has appointed a lead plaintiff and lead counsel 2.

Fortinet was incorporated in Delaware in November 2000 and builds security equipment and services that protect company networks 8. Its co-founders, Ken Xie and Michael Xie, still lead it as chief executive and president 3.

FortiGate firewalls have long been the core product, and the company said in its report for fiscal 2021 that it derived a majority of product sales from FortiGate 8. Product revenue rose 37 percent in 2021, which the company credited to FortiGate, its security fabric products, SD-WAN and software licences 8.

Total revenue was $3,342.2 million in 2021, up 29 percent from $2,594.4 million in 2020 8. The company said service revenue grew 24 percent as the deferred revenue balance fed revenue and customers moved to higher support tiers 8.

By 2023 revenue was $5,304.8 million, split between $1,927.3 million of product and $3,377.5 million of service 3. Revenue then reached $5,955.8 million in 2024 as security subscription revenue rose from $1,898.1 million to $2,316.7 million 3.

Product revenue was flat across those years, $1,927.3 million in 2023 and $1,908.7 million in 2024, while services kept growing 3. Product margins were hurt in 2024 by high inventory-related reserves, the company said in its next report 3.

In 2024 Fortinet acquired three cloud and data security businesses 3. It acquired Lacework on 1 August 2024 for $152.3 million in cash, Next DLP on 5 August 2024 for about $105.0 million and the assets of Perception Point on 5 December 2024 3.

Revenue rose to $6,799.6 million in 2025, up $843.8 million or 14 percent, with all regions growing and EMEA adding the most 3. Product revenue grew 16 percent on secure networking hardware and term licences, and service revenue grew 13 percent 3.

Billings, the measure of what customers were invoiced, were $6,399.5 million in 2023, $6,532.5 million in 2024 and $7,553.7 million in 2025 3. Net income was $1,853.4 million in 2025 and operating income was $2.08 billion, 30.7 percent of revenue 3.

The company also returned cash to owners 3. In 2025 it repurchased 28.7 million shares for $2.29 billion, and in August 2025 the board added $1.0 billion to the repurchase authorization 3. It repaid $500.0 million of 2026 senior notes at maturity on 15 March 2026 2.

Through 2026 the story turned on product sales 2. Product revenue grew 43 percent in the first nine months of 2026 and total revenue reached $5,975.9 million, against $4,894.6 million a year earlier 21.

What Fortinet offers

Fortinet makes network security: equipment and software that keep attackers out of company networks, plus the subscriptions and support that keep them current 3. The company calls its platform the Fortinet Security Fabric, spanning secure networking, secure access service edge and security operations 3.

In 2025 revenue was $6,799.6 million: $2,218.4 million of product, $2,633.2 million of security subscription and $1,948.0 million of technical support and other services 3. By region, the Americas, EMEA and Asia Pacific supplied 40, 42 and 18 percent 3.

FortiGate firewalls and FortiOS

A firewall inspects the traffic between a network and the outside world 3. FortiGate is Fortinet's line, deployed at branches, campuses, data centers and in private and public clouds 3.

FortiGate runs on FortiOS, one operating system for physical, virtual, cloud and service-delivered versions, and on FortiASIC chips the company designs to inspect traffic faster with less power 3. Product gross margin was 67.3 percent in 2025, up from 65.8 percent 3.

Gartner named Fortinet a Leader in its 2026 Magic Quadrant for Hybrid Mesh Firewall and placed it highest for ability to execute for the second year running, Fortinet announced on 15 September 2026 71. The announcement is the company's own, published by iTWire, so it is a vendor claim about an analyst's ranking 7.

Rivals in firewalls include Check Point, Cisco, Palo Alto Networks, Huawei, Sophos and SonicWALL 3. IDC, cited by The Register, ranks Palo Alto and Fortinet as the global leaders by market share and revenue in security hardware appliances, with Check Point fourth behind Cisco 6.

Most hardware is made in Taiwan by contract manufacturers, 87 percent according to the 10-K, including Micro-Star, Senao and Wistron 3. Inventory purchase commitments, firm orders for parts, were $810.6 million at the end of 2025 and $1,929.5 million at 30 September 2026 32.

Memory chips are the pressure point 6. Wedbush wrote that organizations building next-generation firewall systems face higher parts costs that may weigh on margins heading into 2026, naming Fortinet among the vendors facing the biggest challenges 6.

Subscriptions and support

FortiGuard security subscriptions add threat updates and services for applications, content, devices, security operations and the web 3. FortiCare is the technical support plan, offered at Elite, Premium and Essential levels 3.

Service revenue grew 13 percent to $4,581.2 million in 2025 as customers' growing deferred revenue, paid for in advance, was recognized over the service term 3. Service gross margin was 86.8 percent 3.

In the third quarter of 2026 service revenue was $1,313.4 million, up 13 percent 12. Security subscription revenue rose 12 percent and technical support and other services rose 13 percent 2.

Remaining performance obligations, contracted revenue not yet recognized, were $7.98 billion at 30 September 2026, with about $3.98 billion expected within the next 12 months 2.

Cloud, SASE and security operations

Unified SASE (secure access service edge) delivers firewall, SD-WAN, web gateway and zero-trust access from the cloud through over 190 points of presence 3. FortiSASE can also run as a sovereign service in infrastructure the customer controls 3.

The security operations line includes FortiAnalyzer, FortiSIEM and FortiSOAR, and FortiEndpoint folds endpoint protection into one agent 3. Fortinet also protects industrial systems in energy, manufacturing and transport with its OT security platform 3.

With the results Fortinet announced the FortiGuard Inline AI Security Service, which adds AI-specific inspection and guardrails for FortiGate customers, and FortiLink SASE, which protects small branches without an on-site firewall 1.

Fortinet said NVIDIA selected it as a partner to secure AI, Oracle and Fortinet announced a collaboration pairing OCI Enterprise AI with FortiAIGate, and Microsoft selected it for its Sovereign Partner Ecosystem 1. As of 31 December 2025 it had 1,064 U.S. patents and 1,405 patents worldwide, 321 of them AI-related 3.

Customers and sales channel

End-customers are in over 100 countries across financial services, retail, healthcare, industrial operations, service providers and government 3. Fortinet reaches them through a two-tier model in which distributors including Arrow Electronics, Exclusive, Ingram Micro and TD Synnex supply resellers and service providers 3.

The company relies on channel partners for substantially all of its revenue, and a small number of distributors represent a large percentage of revenue and receivables 2.

People, sites and workforce

Ken Xie is co-founder, chairman and chief executive, Michael Xie is co-founder, president and chief technology officer, and Christiane Ohlgart signs the 10-Q as chief financial officer 32.

The headquarters in Sunnyvale, California, is about 395,000 square feet on 21 acres 3. The company owned about 4.35 million square feet worldwide, used for offices, data centers, research, warehouses and points of presence 3.

At 31 December 2025 it had 15,109 employees, about 30 percent in the United States, 20 percent in Canada and 50 percent elsewhere 3.

Current problems

Two securities class actions, filed in September and October 2025 and now consolidated, accuse Fortinet and several officers of misleading statements about the 2026 firewall refresh cycle 2. A consolidated amended complaint was filed on 24 April 2026 2.

Shareholder derivative suits on the company's behalf were stayed on 2 April 2026 until the class action ends 2. A jury ruled for Fortinet against Alorica on 4 October 2024, and Alorica has filed a notice of appeal 2.

The umbrella, in words

Fortinet's products share the Forti name: FortiGate firewalls, FortiOS, FortiGuard subscriptions, FortiCare support, FortiSASE, FortiAnalyzer, FortiSIEM and FortiAI 3.

Exhibit 21 lists the subsidiaries, mostly sales and support arms named Fortinet plus a country, such as Fortinet Technologies (Canada) ULC, Fortinet International, Inc. in the Cayman Islands and Fortinet Information Technology (Beijing) Co., Ltd. 4.

Fortinet owns the businesses it acquired in 2024: Lacework, Next DLP and, through an asset purchase, Perception Point 3.

Ken Xie and Michael Xie are the co-founders and officers, which is a person's role and not a stake in the company's name 3. The 10-Q notes anti-takeover provisions in its charter and Delaware law 2.

For the fourth quarter of 2026 Fortinet expects revenue of $2.155 billion to $2.245 billion and billings of $2.775 billion to $2.925 billion 1. It expects non-GAAP gross margin of 78.0 to 80.0 percent and non-GAAP operating margin of 35.5 to 37.5 percent 1.

Non-GAAP measures leave out stock-based compensation, amortization of acquired intangibles and a few one-off items 1. Diluted non-GAAP earnings per share are guided to $0.93 to $0.95 on 741 million to 745 million shares 1.

For all of 2026 it expects revenue of $8.125 billion to $8.215 billion and billings of $9.568 billion to $9.718 billion 1. It expects non-GAAP operating margin of 36.5 to 37.5 percent and earnings per share of $3.54 to $3.58 1.

The company says guidance is forward-looking and actual results may differ materially 1. Its 10-Q states that it expects product revenue to keep growing year over year for the rest of 2026 2.

Operating expenses are expected to rise in 2026 on sales and marketing headcount, product development, data centers and real estate 2. The company says these investments support long-term revenue growth and market expansion 2.

The board raised the share repurchase authorization by $1.2 billion, leaving $2 billion remaining, and the program runs through 28 February 2028 12.

Management is scheduled to present at the BMO conference on 12 November 2026, the UBS conference on 2 December and the Barclays conference on 9 December 1.

Pending decisions include the consolidated securities class action and Alorica's appeal 2. The company says it believes the Alorica outcome will not materially affect its financial position 2.

The 10-K warns that a global shortage of memory chips is affecting the company and may continue 3. The 10-Q shows purchase commitments of $1,929.5 million at 30 September 2026 to secure supply 2.