Fortinet Q1 Earnings Call Highlights

Key Points

• Fortinet beat guidance across billings, revenue, margins and EPS — billings rose 31%, revenue 20%, product revenue 41%, with a record $1 billion free cash flow and non‑GAAP operating margin near 36%.
• Demand is being driven by AI-related deployments, networking‑security convergence, and OT security (OT billings >70%); Secure Networking billings grew 32% and Unified SASE 31%, and the company introduced higher‑performance FortiGate appliances for AI data centers.
• Management raised Q2 and full‑year guidance, continued capital returns (repurchased 10.6M shares for $827M plus 1.9M/$146M YTD with ~$766M left) and signaled low‑single‑digit product pricing adjustments tied to component costs.

Fortinet NASDAQ: FTNT reported first-quarter 2026 results that management said exceeded guidance across billings, revenue, margins, and earnings per share, citing broad-based demand and what executives described as accelerating tailwinds tied to artificial intelligence, networking-and-security convergence, and operational technology (OT) security.

Quarter highlights: billings up 31% and record free cash flow

Founder, Chairman, and CEO Ken Xie said Fortinet delivered “excellent first quarter result, exceeding our guidance through strong execution and broader-based demand.” He reported billings growth of 31%, total revenue growth of 20%, and product revenue growth of 41%. Xie also highlighted profitability and cash generation, noting non-GAAP and GAAP operating margins of 36% and 31%, respectively, and “a record $1 billion free cash flow.” He added that GAAP earnings per share increased 29%.

CFO Christiane Ohlgart said Fortinet “exceed[ed] the high end of our guidance across billings, total revenue, operating margin, and earnings per share.” She reported total billings of $2.09 billion, up 31%, and revenue of $1.85 billion, up 20%.

On the revenue mix, Ohlgart said product revenue increased 41% to $645 million as customers shifted toward higher-performance products, including “a number of AI-related deployments where customers invested in FortiGates to support increased throughput, segmentation, and security requirements across AI infrastructure.” Service revenue grew 11% to $1.21 billion, while service billings growth “re-accelerated to 27%” and deferred revenue increased 15%.

Margins also came in above expectations, according to Ohlgart. Non-GAAP gross margin was 81% and GAAP gross margin was 80.3%. Non-GAAP operating margin was 35.8%, a first-quarter record, while GAAP operating margin was 31.4%.

Fortinet posted non-GAAP EPS of $0.82, up 41%, and GAAP EPS of $0.72, up 29%, Ohlgart said. Free cash flow was $1.01 billion, with adjusted free cash flow of $1.07 billion, up 27%, representing a 58% margin.

Demand drivers: AI, platform consolidation, and OT security

Xie said Fortinet’s “convergence of networking and security” approach is “accelerating in the AI era,” as customers adopt the company’s platform across secure networking, unified SASE, and security operations on a single FortiOS operating system. He pointed to FortiOS 8.0, Fortinet’s proprietary FortiASIC technology, and direct supply chain management as differentiators supporting market share gains.

Ohlgart described demand as broad-based across “customer types, industry verticals, our geos, and all three pillars,” with particular strength in large enterprise. She said the number of deals greater than $1 million and total deal value both grew over 60%, and Fortinet saw strong growth in both Europe and the U.S.

In OT, Xie said “OT security accelerated in the quarter with OT billing growth over 70%,” and Ohlgart said Secure Networking billings grew 32% driven by FortiGate demand as customers expanded protection across OT environments. Xie argued OT security helps protect critical “bottom layers” of infrastructure supporting AI.

In security operations, Xie said AI-driven security operations billings grew 23%, supported by “more than 20 AI-enabled solutions,” as customers consolidate vendors and simplify operations. Ohlgart added that customers deploying AI are concerned about “traffic flows and shadow AI,” driving interest in visibility and monitoring capabilities.

Secure Networking and Unified SASE: growth and new bundling strategy

Fortinet reported Secure Networking billings growth of 32% and Unified SASE billings growth of 31%. Xie said Fortinet’s SASE firewall “significantly reduce[s] complexity” by delivering core capabilities natively integrated in one operating system. He also emphasized Fortinet’s global cloud infrastructure and its ability to support “sovereign and private SASE” deployments to meet data sovereignty and regulatory requirements.

During Q&A, Xie said Unified SASE comprises SD-WAN and secure service edge offerings including FortiSASE, and he said Unified SASE is “about 25% of billing right now.” He also discussed sovereign SASE, saying it is “almost the same size as the cloud-based SASE, probably even bigger,” and noted service providers—particularly in Europe—are launching sovereign SASE services using Fortinet products.

Management also discussed efforts to increase adoption through packaging. Ohlgart said Fortinet is “introducing a new SD-WAN and SASE services bundle designed to broaden adoption and further support services revenue over time.” In response to analyst questions, Xie said the bundle is intended to accelerate customers turning on SD-WAN and SASE/Zero Trust capabilities from existing firewall deployments, and COO John Whittle did not speak during the transcript provided.

AI data center opportunity and product positioning

Executives repeatedly tied product momentum to AI infrastructure buildouts. Xie said AI-generated traffic increases throughput and “east-west traffic,” driving demand for internal segmentation and higher-performance security. He argued Fortinet’s ASIC-based approach provides performance and energy-cost advantages in data center environments, saying Fortinet is “the only cybersecurity company build their own ASIC chip from day one.”

Fortinet also announced new high-end appliances during the call. Xie said the company introduced the FortiGate 3500G and 400G, which he said deliver “significant performance improvement over previous generations.”

Ohlgart highlighted several large deals discussed as examples of demand:

• A cloud infrastructure provider focused on GPU compute for AI workloads selected Fortinet to secure a new AI data center using FortiGates for perimeter protection, segmentation, and connectivity.
• A generative AI company in the Middle East selected Fortinet for the initial phase of an AI data center project.
• A multinational energy company selected Fortinet to deploy SD-Branch solutions across more than 3,000 locations and OT security for an additional 300 sites, and is exploring an expansion into FortiSASE.
• A global manufacturer selected FortiSASE to secure approximately 40,000 users as part of a remote access modernization initiative.

Capital return, pricing posture, and raised guidance

Fortinet continued to return capital. Ohlgart said the company repurchased 10.6 million shares for $827 million in the first quarter and an additional 1.9 million shares for $146 million quarter-to-date, leaving roughly $766 million remaining under authorization.

On pricing, Ohlgart said guidance includes a “low-single digit amount specifically into product” from pricing. She said Fortinet is “contemplating pricing actions” as component costs increase, with a stated intention to lower prices when cost pressures ease. Xie emphasized the company’s policy is to maintain healthy margins rather than use supply conditions to expand margins, describing “monthly adjustment” tied to costs.

Given first-quarter execution, management raised full-year guidance. For the second quarter, Ohlgart guided to billings of $2.09 billion to $2.19 billion and revenue of $1.83 billion to $1.93 billion, with non-GAAP operating margin of 33% to 35% and non-GAAP EPS of $0.72 to $0.76.

For full-year 2026, Fortinet expects billings of $8.8 billion to $9.1 billion and revenue of $7.71 billion to $7.87 billion. Service revenue is expected to be $5.09 billion to $5.15 billion, with Ohlgart saying the company continues to expect services revenue growth to “pick up in the second half of the year,” citing accelerating product revenue and service billings as leading indicators.

About Fortinet NASDAQ: FTNT

Fortinet, Inc NASDAQ: FTNT is a multinational cybersecurity company that develops and delivers integrated security solutions for enterprise, service provider and government customers worldwide. Founded in 2000 and headquartered in Sunnyvale, California, the company was co‑founded by Ken Xie and Michael Xie. Ken Xie serves as chairman and chief executive officer, and the company operates through a global sales, channel and services organization to support customers across the Americas, EMEA and Asia‑Pacific.

Fortinet's product portfolio centers on network security appliances and software, with its FortiGate next‑generation firewalls and the FortiOS operating system forming a core platform.

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