Fortinet, Inc.
FTNT · Nasdaq
Next quarter
Reports Nov 4, 2026.
Consensus is $0.77 EPS for Sep 2026 across 10 estimates, ranging $0.76 to $0.79.
FTNT Jun 2026
- 22.73%
- +0.67%
- $0.66
- $0.81
- —
- $2.05B
Reported results
- $2.05B
- 80.24%
- $689.30M
- 33.66%
- $606.30M
- $0.82
Highlights
- Revenue: Q2 revenue grew 26% year over year to $2.05 billion, up from $1.85 billion in Q1 FY2026 and $1.63 billion a year ago.
- Earnings: Diluted GAAP EPS was $0.82 in the release, versus $0.57 a year ago and $0.72 in Q1; the supplied analyst dataset reports $0.81 against a $0.66 consensus, a 22.73% surprise.
- Product acceleration: Product revenue rose 52% year over year to $773 million, driven by higher unit shipments, pricing actions, demand for higher-performance hardware and AI-infrastructure deployments.
- Forward indicators: Billings increased 33% to $2.37 billion, while deferred revenue reached $7.68 billion, up 8% from December 31, 2025.
- Operating leverage: GAAP operating income rose 51% to $689.3 million and operating margin expanded to 33.7% from 28.1% a year ago, despite a 0.5-point decline in gross margin to 80.2%.
- Cash generation: Operating cash flow was $1.04 billion and free cash flow was $965.6 million, versus $451.9 million and $284.1 million, respectively, in Q2 FY2025.
- Guidance: Fortinet raised FY2026 revenue guidance to $8.02 billion-$8.18 billion, implying 19% year-over-year growth; Q3 revenue guidance is $2.01 billion-$2.10 billion.
- Capital returns and liquidity: The company repurchased $972.8 million of stock in the first half, repaid $500 million of maturing notes, and ended June with $4.47 billion of cash, cash equivalents and investments.
Analysis
Fortinet’s second quarter was a broad beat and an acceleration in hardware-led growth. Revenue of $2.05 billion exceeded the high end of company guidance, rose 26% from $1.63 billion a year ago and increased 11% sequentially from $1.85 billion in Q1 FY2026. Diluted GAAP EPS was $0.82 in the release, compared with $0.57 a year ago and $0.72 in the prior quarter; the supplied analyst dataset records reported EPS of $0.81 versus a $0.66 consensus, a 22.73% surprise. Billings growth was stronger than recognized revenue at 33%, reaching $2.37 billion.
The defining feature was the mix shift toward products: product revenue grew 52% to $773 million, while service revenue grew 14% to $1.27 billion. That mix reduced total gross margin by 0.5 points to 80.2%, but revenue growth outpaced expense growth, lifting GAAP operating margin 5.6 points to 33.7%. Cash conversion was also unusually strong, with $1.04 billion of quarterly operating cash flow and $965.6 million of free cash flow. Management raised full-year revenue guidance to $8.02 billion-$8.18 billion, or 19% growth, while continuing to flag memory-chip availability, higher hardware costs and expanded supply commitments as execution risks.
Quarterly results
Fortinet exceeded the high end of its Q2 guidance on both revenue and profitability. Revenue was $2.05 billion, up 26% year over year and 11% sequentially. Operating income reached $689.3 million, up 51% from $458.0 million in Q2 FY2025 and 19% from $580.0 million in Q1. Net income was $606.3 million versus $440.1 million a year ago and $534.5 million in the prior quarter.
- EPS: Diluted GAAP EPS was $0.82, up 44% year over year from $0.57 and up from $0.72 in Q1; the supplied analyst dataset reports $0.81 versus a $0.66 consensus.
- Geography: EMEA generated $871.7 million of revenue, up 31%; the Americas generated $808.2 million, up 23%; and APAC generated $368.0 million, up 21%.
- Six-month backdrop: First-half revenue was $3.90 billion, up 23%, while operating income rose 39% to $1.27 billion.
Product-led growth
The quarter was defined by a sharp rebound in product demand rather than a change in the recurring service engine. Product revenue increased $264.1 million year over year to $773.0 million, while service revenue increased $153.8 million to $1.27 billion. Fortinet attributed product growth to higher unit shipments, demand for higher-performance models, pricing actions, technology upgrades, upsell activity and deployments tied to AI infrastructure.
- Security subscriptions: Revenue increased 13% to $729.7 million, supported by recognition from the deferred revenue base and growth in on-premise and cloud deployments.
- Technical support: Technical support and other service revenue rose 14% to $545.2 million, including continued growth in FortiCare.
- Pipeline visibility: Billings rose 33% to $2.37 billion, reflecting $324.2 million of quarterly growth in deferred revenue; remaining performance obligations were $7.73 billion at quarter-end.
Margin expansion
Fortinet converted the revenue acceleration into significant operating leverage. GAAP operating margin expanded to 33.7% from 28.1% a year ago as operating expenses grew 11% to $953.9 million, well below the 26% revenue increase. Sales and marketing expense rose 13% to $669.1 million and research and development expense rose 7% to $225.0 million, while headcount increased 4% year over year to 15,472.
- Gross margin: GAAP gross margin declined to 80.2% from 80.7% because products represented 38% of revenue versus 31% a year ago.
- Product economics: Product gross margin improved to 69.8% from 67.4%, helped by pricing actions, although memory-chip costs and hardware mix were headwinds.
- Normalized profitability: Non-GAAP operating margin was 38.0%, versus 33.1% a year ago; non-GAAP diluted EPS was $0.90 versus $0.64.
Cash and capital allocation
Cash generation benefited from higher profitability and a larger deferred revenue balance. Quarterly operating cash flow was $1.04 billion, up from $451.9 million in Q2 FY2025, and free cash flow was $965.6 million, or a 47.2% margin. For the first half, operating cash flow reached $2.12 billion, up 61% year over year.
- Liquidity: Cash, cash equivalents and investments totaled $4.47 billion at June 30, 2026, compared with $3.92 billion at December 31, 2025.
- Repurchases: Fortinet repurchased 12.5 million shares for $972.8 million in the first half, with approximately $765.8 million remaining under its authorization.
- Debt and investment: The company repaid $500 million of notes at maturity in March and ended the quarter with $496.9 million of long-term debt; Moody’s upgraded its senior unsecured rating to A3 from Baa1.
Outlook and execution
Management raised FY2026 revenue guidance to $8.02 billion-$8.18 billion, equivalent to 19% year-over-year growth, and expects service revenue of $5.18 billion-$5.22 billion. Q3 guidance calls for revenue of $2.01 billion-$2.10 billion, billings of $2.25 billion-$2.35 billion and non-GAAP EPS of $0.83-$0.87. The outlook assumes continued product momentum but also incorporates investment in sales capacity, data centers, real estate and cloud delivery.
- Margin framework: Full-year non-GAAP gross margin is expected at 79%-81% and non-GAAP operating margin at 35%-37%; management expects product margin pressure from component costs and modest service-margin pressure from data-center expansion.
- Supply chain: Memory-chip shortages are creating higher sourcing costs and potential delivery delays. Inventory purchase commitments rose to $1.67 billion at June 30, while inventory was $426.3 million.
- Litigation: Fortinet is defending a consolidated securities class action alleging misleading statements about the 2026 firewall refresh cycle; proceedings remain preliminary, no loss accrual was recorded, and the company cannot estimate a potential impact.
