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- Fortinet Beats Q4 Estimates With 17% Revenue Growth as Firewall Refresh and Enterprise Deals Boost Performance
- Analysts See Fortinet’s Product Refresh Cycle Driving Future Gains Despite Mixed Guidance and CFO Transition
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Cybersecurity firm Fortinet, Inc FTNT released its upbeat fourth-quarter print on Thursday.
Fortinet reported fourth-quarter revenue of $1.66 billion, up 17%, topping the consensus estimate of $1.59 billion. The cybersecurity company reported fourth-quarter adjusted earnings of 74 cents per share, above analyst estimates of 61 cents per share.
Fortinet expects first-quarter revenue of $1.5 billion-$1.56 billion versus estimates of $1.53 billion. The company anticipates first-quarter adjusted earnings of 52 cents-54 cents per share versus estimates of 53 cents per share.
Wall Street analysts rerated the stock:
- Needham analyst Matt Dezort reiterated a Hold on Fortinet.
- Guggenheim analyst John Difucci maintained a Neutral on Fortinet.
- Goldman Sachs analyst reiterated a Buy on Fortinet with a price target of $130.
Needham: Fortinet reported a strong fourth quarter with Billings and Product Revenue well ahead, while guidance was mixed with first-quarter Billings growth of ~11%, modestly below consensus and full-year in-line across the board.
Product Revenue growth of +18% beat consensus by ~10% and was driven by early firewall refresh activity, which was particularly strong in Enterprise/ Mid-Market.
Billings grew 7% to $2 billion, $50 million above forecast, driven by double-digit growth from both SASE and SecOps and strong growth in $5 million-$10 million deals, up 90%.
Fortinet is implementing several new GTM initiatives to maximize the refresh opportunity, including adding capacity, vertical sales plays, and renewed channel incentives. CFO Keith Jensen announced he will be retiring, and Chief Accounting Officer Ms. Christiane Ohlgart will take over the role.
Guggenheim: Fortinet reported fourth-quarter results that were better than consensus estimates as total revenue accelerated to 17% growth and billings grew 7%.
New ARR for Software (Subscription + Support) was flattish, but if assuming a 5-year life for the New Workload, Difucci estimates New ARR was modestly positive (+3%) for the first time in 6 quarters.
In other words, the business is improving, but it remains challenging. First-quarter guidance was essentially in line, though revenue was below consensus at the midpoint, while annual 2025 guidance was better than the Street.
There continues to be much discussion around the product refresh cycle associated with supporting end-of-life in 2026 for products that would constitute $400 million to 450 million in Product revenue over the next two years.
However, Difucci modeled a natural Product refresh on a 5-year bell curve, coincidentally yielding a natural incremental refresh of about $450 million over the next two years. This would provide ample upside to Product and Support revenue implied in guidance, though less to Subscription. Then it comes down to what all this is worth.
Difucci does not see Fortinet as expensive at 17 times EV/NTM recurring revenue or 38 times EV/NTM FCF after the close, but it is not incredibly cheap, either.
While Difucci is comfortable that the Product refresh will provide some business traction, the stock has doubled since the company started pushing this narrative versus the iShares Expanded Tech-Software Sector ETF IGV, up 24%.
This, in addition to the consistently sluggish momentum in the business, as reflected in New ARR growth, or lack thereof, over the past year and a half, kept the analyst at Neutral.
Goldman Sachs: Fortinet’s fourth-quarter billings were 2% above the Street, EBIT was 550bps above, and EPS was 22% above. Fiscal 2025 Billings guidance of +12% and EBIT guidance of 32% (at the midpoint) was in line with the Street.
The fourth-quarter results and 2025 commentary illustrate that Fortinet’s extensive firewall installed base is still early in realizing the potential of upsell from adopting newer converged networking technologies.
EBIT margin outperformance (550bps above the Street) continues to illustrate Fortinet’s structurally better unit economics.
Price Action: FTNT stock is up 4.03% at $108.94 at the last check on Friday.
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