Fortinet — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue grew 20% year over year to $2.08 billion for the quarter ended September 30, 2026.
• Product revenue grew 37% year over year to $765 million.
• Service revenue was $1.31 billion.
• Billings grew 29% year over year to $2.34 billion.
• GAAP operating margin was 34% (GAAP operating income of $704.3 million).
• Non-GAAP operating margin was 38% (Non-GAAP operating income of $793.8 million).
• GAAP earnings per share (diluted) was $0.86.
• Non-GAAP earnings per share (diluted) was $0.91.
• Operating cash flow was $946 million.
• Free cash flow was $865 million.
• Deferred revenue increased to $7.93 billion total ($3.96 billion current, $3.97 billion long-term) from $7.12 billion at December 31, 2025.
• Cash and cash equivalents increased to $3.75 billion from $2.50 billion at December 31, 2025.
• Long-term debt was $497.1 million, with no current portion of long-term debt.

Guidance and Future Outlook:

• Raised 2026 billings guidance to 20% year over year growth.
• Q4 2026 revenue guidance is $2.155 billion to $2.245 billion.
• Q4 2026 billings guidance is $2.775 billion to $2.925 billion.
• Q4 2026 non-GAAP gross margin guidance is 78.0% to 80.0%.
• Q4 2026 non-GAAP operating margin guidance is 35.5% to 37.5%.
• Q4 2026 diluted non-GAAP net income per share guidance is $0.93 to $0.95.
• Full year 2026 revenue guidance is $8.125 billion to $8.215 billion.
• Full year 2026 service revenue guidance is $5.150 billion to $5.170 billion.
• Full year 2026 billings guidance is $9.568 billion to $9.718 billion.
• Full year 2026 non-GAAP gross margin guidance is 79.7% to 80.3%.
• Full year 2026 non-GAAP operating margin guidance is 36.5% to 37.5%.
• Full year 2026 diluted non-GAAP net income per share guidance is $3.54 to $3.58.

Business Segments and Product Lines:

• Announced FortiGuard Inline AI Security Service, delivering AI-specific inspection and guardrails via a cloud-delivered service.
• Announced FortiLink SASE service for securing small branch offices and remote facilities without dedicated on-site firewalls.
• Selected by NVIDIA as a top OpenShell Reference Architecture Partner to Secure AI.
• Announced collaboration with Oracle to combine OCI Enterprise AI with FortiAIGate for AI application protection.
• Selected by Microsoft to join its Sovereign Partner Ecosystem for sovereign AI security solutions.
• Recognized as a Leader in the 2026 Gartner Magic Quadrant for Hybrid Mesh Firewall, positioned highest for Ability to Execute for the second consecutive year.

Market and Competitive Landscape:

• Management cited strong momentum driven by leadership in the AI era and the introduction of new attack surfaces requiring Network Security.
• The company positions its unified platform approach, powered by FortiOS and FortiASIC technology, as delivering industry-leading performance and lower total cost of ownership.
• Over one million lifetime customers trust Fortinet's solutions.

Risks and Challenges:

• Forward-looking statements note risks including general economic risks, inflation, stagflation, changing interest rates, and reduced IT spending.
• Risks include supply chain challenges, global conflicts (e.g., war in Ukraine, tensions between China and Taiwan, Middle East conflicts), and geopolitical dynamics.
• Competition in the security market, dynamic nature of the security market, and pricing pressure are cited as risks.
• Risks related to sales execution, longer sales cycles for large organizations, and the effectiveness of the salesforce are noted.
• Potential vulnerabilities in products, services, or networks, and cybersecurity threats are identified as risks.
• Risks associated with new product adoption, integration of acquisitions, and litigation are mentioned.

Management Commentary and Tone:

• Ken Xie, Founder, Chairman and CEO, stated the company is "very pleased with our excellent third quarter results," reflecting strong execution and broad-based demand.
• Management noted this was the third time in 2026 they raised billings guidance.
• The tone emphasized strong momentum driven by the AI era and the critical role of Network Security in AI Security.

Other Key Points:

• Share repurchase authorization increased by $1.2 billion, leaving a remaining authorization of $2 billion.
• Net cash used in financing activities for the nine months ended September 30, 2026, was $1.509 billion, primarily driven by stock repurchases ($972.8 million) and repayment of senior notes ($500.0 million).
• The company hosts a conference call on October 28, 2026, at 1:30 p.m. Pacific Time.
• Management is scheduled to present at the BMO Technology and Innovation Leaders Conference (Nov 12), UBS Global Technology and AI Conference (Dec 2), and Barclays Global Technology Conference (Dec 9).
• Non-GAAP measures exclude stock-based compensation, amortization of acquired intangible assets, gain on intellectual property matters, gain from escrow settlement, and tax adjustments.