Fortinet, Inc.
FTNT · Nasdaq
Next quarter
Expected to report Feb 4, 2027 — estimated from last year’s reporting date.
Consensus is $0.84 EPS for Dec 2026 across 12 estimates, ranging $0.79 to $0.85.
FTNT Sep 2026
- 11.69%
- -20.09%
- $0.77
- $0.86
- —
- $2.08B
Reported results
- $2.08B
- 78.95%
- $704.30M
- 33.89%
- $635.50M
- $0.86
Highlights
- Revenue and EPS: Q3 revenue rose 20% year over year to $2.08 billion, while GAAP diluted EPS of $0.86 topped the $0.77 consensus by 11.7%.
- Billings: Billings increased 29% to $2.34 billion, supported by broad-based demand; Fortinet raised its 2026 billings outlook for the third time this year.
- Product growth: Product revenue surged 37% to $765 million, while service revenue grew 13% to $1.31 billion.
- Large-customer demand: Deals valued above $1 million grew 51%; SASE firewall billings rose 31%, OT billings nearly 40%, and AI-driven security operations billings 15%.
- Service conversion: Service billings grew 26%, total deferred revenue 19%, and short-term deferred revenue 14.5%, even as delayed activations at large customers weighed on recognized service revenue.
- Profitability: GAAP operating income increased 29% to $704 million and GAAP operating margin reached 33.9%; non-GAAP operating margin was a record 38.2%.
- Cash generation: Operating cash flow was $946 million and free cash flow was $865 million, up 52% year over year; adjusted free cash flow was $912 million.
- 2026 outlook: Revenue guidance is $8.125–$8.215 billion, implying 20% growth at the midpoint; billings guidance is $9.568–$9.718 billion, implying 28% growth.
- Capital returns: The company added $1.2 billion to its share repurchase authorization, bringing remaining authorization to $2 billion.
Analysis
Fortinet’s September quarter combined strong demand and earnings with a timing issue in service revenue. Revenue of $2.08 billion grew 20% year over year from $1.72 billion in Q3 FY2025 and was up 1.4% from $2.05 billion in Q2 FY2026. GAAP diluted EPS of $0.86 beat the $0.77 consensus by 11.7%, versus $0.62 a year ago and $0.82 last quarter. Billings grew faster than revenue, up 29% to $2.34 billion, while product revenue rose 37% and service revenue 13%. GAAP operating income increased 29% year over year to $704 million; the 33.9% operating margin compared with 31.7% a year ago.
Large enterprise, SASE and OT demand, alongside customers upgrading networks for AI-related security needs, defined the growth story. Service revenue recognition lagged as new and expanded enterprise deals ramped service activations, but service billings and deferred revenue growth provided stronger forward indicators. Fortinet raised full-year revenue and billings guidance again, to ranges implying 20% and 28% growth at the midpoints, respectively. It also generated $865 million in free cash flow and expanded its share repurchase authorization. Gross margin did soften year over year as product mix and rising component costs offset price increases.
Product and security demand
- Product momentum: Product revenue grew 37% to $765 million. Customers shifted toward higher-performance models, lifting average selling prices; management also said price increases contributed about 10 percentage points to year-over-year billings growth.
- Enterprise and vertical demand: Deals above $1 million increased 51%, with an outsized contribution from U.S. large enterprises. OT billings grew nearly 40%, and AI-driven security operations billings rose 15%.
- SASE and AI security: SASE firewall billings increased 31%. Fortinet highlighted new FortiGuard Inline AI Security and FortiLink SASE services, and described demand for network security as a foundation for protecting AI infrastructure and traffic.
- Supply and pricing: Management reported longer lead times and rising component costs, with the benefit from lower-cost inventory fading in Q3. It said pricing had stabilized after increasing earlier in the year and that it seeks to adjust prices with costs to maintain product gross margin.
Service revenue conversion
- Recognized revenue: Service revenue grew 13% to $1.31 billion. Management attributed some near-term pressure to large new-customer and expansion deals whose service activations ramp gradually, as well as consolidated service arrangements that take time to recognize.
- Leading indicators: Service billings grew 26%, total deferred revenue grew 19%, and short-term deferred revenue increased 14.5%, its strongest growth rate in five quarters. Management characterized the issue as timing and said Q1 marked the trough in service revenue growth.
- Forward view: The company expects 2027 service revenue growth to be higher than in 2026, while clarifying that it expects improved growth rates rather than promising a specific acceleration. It noted that hardware-heavy sovereign deployments and product mix can affect service attach and revenue timing.
Margins and earnings
- Operating leverage: GAAP operating income rose to $704.3 million from $547.3 million a year earlier, and GAAP operating margin increased to 33.9% from 31.7%. Non-GAAP operating margin reached 38.2%, up 130 basis points year over year and above the high end of company guidance.
- Gross margin: GAAP gross margin was 79.0%, down from 80.8% a year earlier; non-GAAP gross margin was 79.6% versus 81.6%. Fortinet cited a higher product contribution and rising product costs, partly offset by improving service gross margin.
- Per-share results: GAAP net income rose to $635.5 million from $473.9 million, and diluted EPS increased to $0.86 from $0.62. Non-GAAP EPS was $0.91, up 23% year over year.
Raised 2026 guidance
- Full-year outlook: Revenue is expected at $8.125–$8.215 billion, service revenue at $5.150–$5.170 billion, and billings at $9.568–$9.718 billion. At the midpoints, these ranges imply 20% total revenue growth and 28% billings growth.
- Fourth-quarter outlook: Revenue is forecast at $2.155–$2.245 billion and billings at $2.775–$2.925 billion, implying midpoint growth of 15% and 20%, respectively. Non-GAAP EPS guidance is $0.93–$0.95.
- Size of the revision: Management said current 2026 guidance is $570 million higher for revenue and $1.14 billion higher for billings than its initial February outlook. It said Q3 exceeded the midpoint of guidance across billings, revenue, operating margin and EPS.
Cash and capital returns
- Cash generation: Operating cash flow was $946 million and free cash flow was $864.8 million, up 52% from $567.5 million a year earlier. Free cash flow margin was 41.6%; adjusted free cash flow, which adds back real-estate-related purchases, was $912.2 million.
- Balance sheet and repurchases: Cash and equivalents stood at $3.75 billion at September 30, 2026, compared with $2.50 billion at year-end 2025. Fortinet increased its repurchase authorization by approximately $1.2 billion, leaving $2 billion available.
