Fortinet ((FTNT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Fortinet’s recent earnings call showcased a robust financial performance, marked by impressive growth in key sectors such as Unified SASE, AI-driven SecOps, and large enterprise deals. The company achieved record operating margins, reflecting strong execution and cost control. However, there were concerns about a slowdown in service revenue growth and regional disparities, particularly in North America.
Strong Overall Growth
Fortinet reported a 14% increase in total billings, reaching $1.81 billion. This growth was significantly bolstered by the Unified SASE segment, which saw a 19% increase, and the AI-driven SecOps, which experienced a remarkable 33% growth.
Record Operating Margin
The company achieved a record third-quarter operating margin of 37%. This milestone was driven by effective execution and stringent cost control measures, highlighting Fortinet’s operational efficiency.
Significant SASE Growth
Unified SASE billing grew by 19%, with FortiSASE billing growth exceeding 100%. This positions Fortinet as a leading provider in the SASE market, showcasing its competitive edge in this rapidly evolving sector.
Expansion in Large Enterprise Deals
Fortinet saw a 26% increase in the number of deals exceeding $1 million, with the total dollar value of these deals growing by over 30%. This underscores the company’s strength in securing large-scale contracts.
Broad-Based Demand
The addition of approximately 6,600 new organizations to Fortinet’s client base demonstrates the company’s strong market position across various segments, reflecting widespread demand for its solutions.
Strong Product Revenue Growth
Product revenue increased by 18% to $559 million, driven by multiproduct deals and growth in operational technology security, indicating robust demand for Fortinet’s diverse product offerings.
Deceleration in Service Revenue Growth
Service revenue grew by 13%, marking the ninth consecutive quarter of deceleration. This trend is attributed to past negative product billings growth impacting the attach rate, signaling a potential area of concern.
Challenges in North America
Growth in North America lagged behind other regions, although Fortinet emphasized that there were no losses in market share. This regional disparity highlights a challenge that the company may need to address moving forward.
Forward-Looking Guidance
For the fourth quarter, Fortinet projects billings between $2.185 billion and $2.285 billion, reflecting a 12% growth at the midpoint. Revenue is expected to range from $1.825 billion to $1.885 billion, also indicating a 12% growth. The company anticipates non-GAAP gross margins of 79% to 80% and non-GAAP operating margins of 34.5% to 35.5%. Earnings per share are forecasted between $0.73 and $0.75. These projections underscore Fortinet’s confidence in maintaining strong growth and market leadership.
In summary, Fortinet’s earnings call highlighted a strong financial performance with significant growth in key areas, despite some challenges in service revenue growth and regional performance. The company’s forward-looking guidance suggests continued confidence in its growth trajectory, driven by strategic investments and market leadership.