BEN BOLLIN
bbollin@cleveland-research.com
(216) 649-7211
ANDREW KUCH
akuch@cleveland-research.com
(216) 649-7291
BRIAN WILCOX
bwilcox@cleveland-research.com
(216) 649-7220
BRETT HIGH
bhigh@cleveland-research.com
(216) 649-7264
July 25, 2025
Fortinet, Inc. (FTNT: $104.77 - NEUTRAL)
Important disclosures can be found in Appendix
FTNT: View 2Q In Line and Outlooks Improving on Larger Cohort Refresh
Opportunity (Cleveland Research)
Key Points
1. View 2Q likely finishing in-line on some appliance refresh, SD-WAN renewals, OT upsell, and some SASE traction; we
also saw more instances of deal slippage at Q-end and view the net performance as in-line
2. Partners appear to be maintaining growth targets for +12-15% rev/billings growth through 2H25 – hearing better line
of sight to large appliance refresh projects in 2H25 and into 2026
3. FTNT share opportunities suggesting some incremental opportunities from large enterprise customers – seeing more
interest from GSIs and signs of pre-existing PANW customers taking more frequent looks at FTNT around renewal
Read through to the Model
• Geo mix - 41% Americas, EMEA 41%, APAC 12%; Rev mix – Products 30%, Service 70%
• 2Q25 Revenue of $1,627M, +13% vs. cons of $1,626M, +13%; EPS of $0.60 vs. cons of $0.59
• 2Q25 Billings of $1.73B, +12% Y/Y vs. cons of $1.72B, +12% Y/Y
• FY25 Revenue of $6.77B, +14% vs. cons of $6.76B, +14%; FY25 EPS of $2.50 vs. cons of $2.47
• FY25 Billings of $7.37B, +12% vs. cons of $7.32B, +12%
2Q25 & FY25 Guidance:
• 2Q25 Revenue of $1.59-1.65B (+13% at mid-point); billings of $1.685-1.765B (+12% at mid-point)
• 2Q25 GM of 80-81%, OM of 31.5-32.5%, 2Q25 EPS of $0.58 - $0.60
• FY25 Revenue of $6.65-6.85B (+13% at mid-pt); billings of $7.20-7.40B (+12% at mid-pt.)
• FY25 GM of 79-81%; OM of 31.5-33.5%; FY25 EPS of $2.43-2.49
Conclusion
Discussions suggest 2Q likely closed in-line, +12-13% Y/Y, and outlooks appear more favorable into 2H25 and 2026
appliance refresh opportunity. We see pipelines expanding over the next several Qs with more mentions of large refresh
projects (more 8-figure opportunities), favorable OT security demand, and a bigger SD-WAN renewal cohort seen as
supporting more SASE upsell. Partners suggest FTNT is more proactive with partners to get in front of customers and drive
the refresh cohort opportunity, leaving partners more confident in execution over the next several Qs. We view near term
trends as in line, and see 2H outlooks as more encouraging given the pipeline commentary around refresh, improved large
deal visibility, and sales efforts across partners. Our estimates are in line for 2Q/FY25 and we see potential for bigger
refresh projects to be a source of upside exiting FY25 and into FY26.
Fortinet Earnings and Data Summary Rating: NEUTRAL Price: $104.77
CRC Cons CRC Cons
1Q25E 0.58$ 1Q26E 0.62$ 0.63$ Shares Outstanding 776.8 FCF Margin 32%
2Q25E 0.60$ 0.59$ 2Q26E 0.67$ 0.66$ Market Cap (mm) $80,082 Book Value/Shr $2.53
3Q25E 0.63$ 0.61$ 3Q26E 0.73$ 0.70$ 52-Week High $115 Net Cash/Shr $5.56
4Q25E 0.69$ 0.69$ 4Q26E 0.80$ 0.79$ 52-Week Low $55 Revenue (Trailing 4Qs) $5,956
Dec-25E 2.50$ 2.47$ Dec-26E 2.80$ 2.77$ AVG Daily Volume 4.6 5-Year CAGR 20%
FY24E FY25E
PE 41.9x PE 37.3x
PE ex cash 39.7x PE ex cash 35.3x
P:FCF 46.7x P:FCF 43.0x
BEN BOLLIN
bbollin@cleveland-research.com
(216) 649-7211
ANDREW KUCH
akuch@cleveland-research.com
(216) 649-7291
BRIAN WILCOX
bwilcox@cleveland-research.com
(216) 649-7220
BRETT HIGH
bhigh@cleveland-research.com
(216) 649-7264
Highlights
1. Partners appeared to achieve mid-point of guidance for rev/billings (+12-13%) – seeing improving refresh
enthusiasm and traction from SD-WAN, OT, and SASE. Discussions suggest FTNT tracked to targets for low-teens
growth for the Jun-Q with large strategic partners pointing to +12-13% rev/billings growth Y/Y. Geo performance
sounded mixed with US seen as tracking ahead of this range, Canada below, EMEA inline, and APAC below targets.
Partners suggest performance was driven by some appliance refresh opportunities for firewall and networking, more
SD-WAN renewals, incremental OT security upsell, some SASE upsell to SD-WAN customers, and some instances of
large deal slippage limiting performance. Commentary on a bigger appliance refresh opportunity sounds to be
improving, with partners expecting this to improve in 2H25 and 2026. Feedback suggested a large 8-figure project
signed in 2Q with a large global bank.
Several partners also noted instances of share gains for FTNT vs. PANW in firewall driven by FTNT’s more attractive
price: performance metrics (seeing some signs of price sensitivity / commoditization in firewall). SecOps traction for
FTNT appears muted with partners noting greater interest in CRWD for SecOps and the recent FTNT/CRWD
partnership seen as supporting some incremental enterprise appliance opportunities (more interest in FTNT for
network security and CRWD for cloud security and SecOps). Our 2Q estimates are in line with guidance and cons.
2. Outlooks appear consistent – discussions suggesting +12-15% growth targets through 2025 with more favorable
appliance refresh pipelines into 2H25 and 2026. Feedback suggests partners are maintaining +12-15% growth targets
through FY25 with expectations for better appliance refresh, more SD-WAN renewals with SASE upsell, favorable OT
security demand, and muted SecOps traction. Work suggests the company has been more proactive with partners to
map refresh and renewal opportunities, giving partners confidence in sustained low-teens growth over the next 6+
months. Pipeline visibility continues to point to a bigger cohort opportunity in 2H25 and 2026 for appliance refresh
and SD-WAN renewals, with some partners noting several 8-figure refresh opportunities in the pipeline. We have
heard of a high 7-figure CHKP displacement for 3Q, multiple 8-figure refresh opportunities for 3Q/4Q ($20m+), and
more instances of quoting for FTNT from PANW customers at renewal (7 & 8-figure).
OT security outlooks also sound to be improving with FTNT seen as most visible in these evaluations. We hear greater
industry regulations for OT/IoT and focus on securing critical infrastructure are seen as drivers. SecOps upsell is
expected to remain muted with more of these opportunities characterized as likely to go to CRWD and the
FTNT/CRWD partnership seen as steering more customers to CRWD for SecOps.
-40%
-20%
0%
20%
40%
60%
80%
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
4Q24
1Q25
2Q25
Cleveland Research FTNT Sentiment Index
Read on Q Read on Outlook
Source: CRC Estimates
BEN BOLLIN
bbollin@cleveland-research.com
(216) 649-7211
ANDREW KUCH
akuch@cleveland-research.com
(216) 649-7291
BRIAN WILCOX
bwilcox@cleveland-research.com
(216) 649-7220
BRETT HIGH
bhigh@cleveland-research.com
(216) 649-7264
Channel feedback on partner sponsorship for FTNT sounds better over the next several Qs. We hear several GSI
partners are making bigger investments in FTNT, following several years of underinvestment given FTNT’s SMB
exposure. Partners suggest FTNT visibility in large enterprise is increasing with favorable price: performance vs. PANW
seen as a bigger driver, and the FTNT/CRWD partnership seen as supporting enterprise momentum. We view the
increased partner sponsorship as an opportunity to drive more enterprise traction and potential PANW share gains
over the next 12+ months.
3. See favorable product traction for OT security, SD-WAN, some SASE attach; SecOps traction still appears nascent.
• Secure Networking / Firewall (~65% of billings): Work suggests some firewall refresh activity in 2Q likely
supported in line performance. We heard of at least one 8-figure refresh project closing in the Jun-Q and partners
suggested some deal slippage is contributing to a bigger 2H pipeline. Visibility to refresh opportunities in 2H25
and 2026 sounds to be improving with FTNT and partners proactively reaching out to customers around cohort
refresh. We are seeing more instances of large strategic partners having line of sight to large refresh projects that
appear likely to close in 2H25, and 2026 is expected to offer similar volumes of opportunities.
• OT Security: Partners suggest OT security upsell tracked well in 2Q and pipeline opportunities sound encouraging
over the next several Qs. We hear increased regulations around securing critical infrastructure (heavy industries,
utilities, healthcare) are supporting more greenfield opportunities and partners view FTNT as most visible in these
evaluations given the existing footprint in these verticals. Partners also suggest lower pricing for FTNT appliances
continue to drive favorable visibility.
• SASE / SD-WAN (~25% of billings): Partners suggest favorable renewal activity for SD-WAN customers in 2Q and
visibility to more renewals over the next several Qs. We hear an increasing number of these customers are
evaluating FortiSASE, with some upsell traction near term and expectations for improving momentum in 2H25
and into 2026. Partners and CISOs are pointing to FTNT’s lower TCO for SASE (have heard 30%+ cheaper than ZS
or PANW) as supporting visibility in laggard adopters.
• SecOps (~10% of billings): Partners suggest little improvement to FTNT visibility in SecOps evaluations. We hear
customers view CRWD and PANW as more mature in these categories (cloud security, NG-SIEM, EDR/XDR), and
we see more customers leaning into the FTNT + CRWD partnership as a cost-effective way to address network
security (FTNT) and best-of-breed SecOps (CRWD). The partnership is viewed as likely supporting better visibility
for FTNT in some large enterprise accounts, and also limiting traction for FTNT’s own SecOps portfolio.
BEN BOLLIN
bbollin@cleveland-research.com
(216) 649-7211
ANDREW KUCH
akuch@cleveland-research.com
(216) 649-7291
BRIAN WILCOX
bwilcox@cleveland-research.com
(216) 649-7220
BRETT HIGH
bhigh@cleveland-research.com
(216) 649-7264
Fortinet (FTNT)
Benjamin Bollin
bbollin@cleveland-research.com
FY23 FY24 1Q25 2Q25E 3Q25E 4Q25E FY25E 1Q26 2Q26 3Q26 4Q26 FY26
Dec-23 Dec-24 Mar-25 Jun-25 Sep-25 Dec-25 Dec-25 Mar-26 Jun-26 Sep-26 Dec-26 Dec-26
Product 1,927$ 1,909$ 459$ 497$ 512$ 629$ 2,097$ 491$ 532$ 553$ 679$ 2,255$
Y/Y 8% -1% 12% 10% 8% 10% 10% 7% 7% 8% 8% 8%
Product Mix 36% 32% 30% 31% 30% 33% 31% 28% 29% 28% 32% 29%
Service 3,378$ 4,047$ 1,081$ 1,130$ 1,200$ 1,260$ 4,670$ 1,243$ 1,311$ 1,392$ 1,461$ 5,406$
Y/Y 28% 20% 14% 15% 16% 16% 15% 15% 16% 16% 16% 16%
Service Mix 64% 68% 70% 69% 70% 67% 69% 72% 71% 72% 68% 71%
Total revenues 5,305$ 5,956$ 1,540$ 1,627$ 1,711$ 1,888$ 6,766$ 1,734$ 1,842$ 1,944$ 2,140$ 7,661$
Q/Q -7% 6% 5% 10% -8% 6% 6% 10%
Y/Y 20% 12% 14% 13% 13% 14% 14% 13% 13% 14% 13% 13%
Cost of Product 755$ 646$ 148$ 174$ 200$ 245$ 767$ 187$ 202$ 210$ 258$ 857$
Y/Y 11% -14% -18% 13% 48% 39% 19% 26% 16% 5% 5% 12%
% of revs 14% 11% 10% 11% 12% 13% 11% 11% 11% 11% 12% 11%
Product GM 60.8% 66.2% 67.7% 65.0% 61.0% 61.0% 63.4% 62.0% 62.0% 62.0% 62.0% 62.0%
Cost of Service 443$ 469$ 131$ 138$ 146$ 154$ 569$ 162$ 170$ 167$ 175$ 674$
Y/Y 21% 6% 15% 23% 24% 24% 21% 23% 24% 14% 14% 18%
% of revs 8% 8% 9% 8% 9% 8% 8% 9% 9% 9% 8% 9%
Service GM 86.9% 88.4% 87.8% 87.8% 87.8% 87.8% 87.8% 87.0% 87.0% 88.0% 88.0% 87.5%
Total cost of revenues 1,197$ 1,115$ 279$ 312$ 346$ 399$ 1,336$ 348$ 372$ 377$ 433$ 1,531$
% of revs 23% 19% 18% 19% 20% 21% 20% 20% 20% 19% 20% 20%
Y/Y 14% -7% -6% 17% 37% 33% 20% 25% 19% 9% 9% 15%
Total Gross Profit 4,108$ 4,841$ 1,260$ 1,315$ 1,366$ 1,490$ 5,430$ 1,386$ 1,470$ 1,567$ 1,707$ 6,130$
GM 77% 81% 82% 81% 80% 79% 80% 80% 80% 81% 80% 80%
Y/Y 21.9% 17.9% 19.2% 12.5% 8.8% 9.5% 12.2% 10.0% 11.8% 14.8% 14.6% 12.9%
R&D 537$ 631$ 176$ 195$ 197$ 208$ 775$ 191$ 203$ 204$ 235$ 833$
Y/Y 20% 17% 15% 35% 19% 23% 23% 9% 4% 4% 13% 7%
% of Rev 10.1% 10.6% 11.4% 12.0% 11.5% 11.0% 11.5% 11.0% 11.0% 10.5% 11.0% 10.9%
S&M 1,890$ 1,932$ 511$ 545$ 565$ 604$ 2,225$ 590$ 608$ 642$ 685$ 2,524$
Y/Y 20% 2% 8% 15% 16% 22% 15% 15% 12% 14% 13% 13%
% of Rev 35.6% 32.4% 33.2% 33.5% 33.0% 32.0% 32.9% 34.0% 33.0% 33.0% 32.0% 32.9%
G&A 173$ 193$ 47$ 54$ 56$ 62$ 220$ 61$ 64$ 64$ 64$ 254$
Y/Y 25% 11% 6% 16% -2% 41% 14% 28% 20% 14% 3% 15%
% of Rev 3.3% 3.2% 3.1% 3.3% 3.3% 3.3% 3.2% 3.5% 3.5% 3.3% 3.0% 3.3%
OPEX 2,601$ 2,756$ 734$ 794$ 818$ 874$ 3,220$ 841$ 875$ 910$ 985$ 3,611$
% of Rev 49% 46% 48% 49% 48% 46% 48% 49% 48% 47% 46% 47%
Operating Income 1,507$ 2,085$ 526$ 521$ 547$ 615$ 2,210$ 545$ 595$ 657$ 722$ 2,519$
OM 28% 35% 34% 32.0% 32.0% 32.6% 32.7% 31.4% 32.3% 33.8% 33.8% 32.9%
Y/Y 25% 38% 36% 3% 1% -5% 6% 4% 14% 20% 17% 14%
Incr Margin 75%
Interest Income 120$ 155$ 44$ 46$ 46$ 46$ 183$ 47$ 48$ 49$ 50$ 195$
Other Income (Expense) (5)$ (3)$ 26$ -$ -$ -$ 26$ (4)$ (4)$ (4)$ (4)$ (16)$
Int Expense (23)$ (3)$ (5)$ (7)$ (7)$ (7)$ (26)$ (7)$ (7)$ (7)$ (7)$ (28)$
Income before Tax 1,622$ 2,237$ 591.7$ 567$ 594$ 662$ 2,419$ 588$ 639$ 703$ 769$ 2,699$
Income Tax 272$ 380$ 99$ 102$ 107$ 126$ 434$ 100$ 109$ 119$ 131$ 459$
% 17% 17% 17% 18% 18% 19% 18% 17% 17% 17% 17% 17%
Gain/Loss on intell prop
Loss from Equity method investment (29)$ (40)$ (40)$ (40)$ (40)$ (40)$ (40)$ (40)$ (40)$
Non-cash charge on equity method investment 800%
Adjustment to non-controlling interest
Net Income (Non-GAAP) 1,350$ 1,836$ 452.3$ 465$ 487$ 536$ 1,985$ 488$ 530$ 583$ 638$ 2,240$
Y/Y 41% 36% 35% 6% 0% -6% 8% 8% 14% 20% 19% 13%
Share Count 772.3 771.9 776.8 776.8 776.8 776.8 776.8 783.8 788.8 793.8 798.8 798.8
EPS (Non-GAAP) 1.63$ 2.38$ 0.58$ 0.60$ 0.63$ 0.69$ 2.50$ 0.62$ 0.67$ 0.73$ 0.80$ 2.80$
BEN BOLLIN
bbollin@cleveland-research.com
(216) 649-7211
ANDREW KUCH
akuch@cleveland-research.com
(216) 649-7291
BRIAN WILCOX
bwilcox@cleveland-research.com
(216) 649-7220
BRETT HIGH
bhigh@cleveland-research.com
(216) 649-7264
APPENDIX
Important Disclosures
Important Disclosures can be found at www.cleveland-research.com/clients/disclosures
Companies Mentioned in the Report:
Check Point Software Technologies Ltd. (CHKP: $222.01 - NEUTRAL)
CrowdStrike Holdings, Inc. Class A (CRWD: $462.03 - BUY)
Fortinet, Inc. (FTNT: $104.77 - NEUTRAL)
Palo Alto Networks, Inc. (PANW: $201.16 - BUY)
Cleveland Research Company - Ratings Distribution
Rating
Percent
Buy
24%
Neutral
76%
Underperform
0%
Disclosures
Buy: The stock’s return is expected to exceed the market due to superior fundamentals and positive catalysts.
Underperform: The stock’s total return is expected to underperform the market due to weak fundamentals and a lack of catalysts.
Neutral: The stock is expected to be in line with the market due to full valuation and/or a lack of catalysts.
Valuation and Risk: Price targets are established under various valuation methods including P/E, P/S, EV/EBITDA on financial estimates based on forward earnings.
Price targets are not established for every stock. The price target’s effectiveness may be affected by various outside factors. Risk assessments can be found in the most
recent research on these stocks.
BEN BOLLIN
bbollin@cleveland-research.com
(216) 649-7211
ANDREW KUCH
akuch@cleveland-research.com
(216) 649-7291
BRIAN WILCOX
bwilcox@cleveland-research.com
(216) 649-7220
BRETT HIGH
bhigh@cleveland-research.com
(216) 649-7264
Other Disclosures: We, Benjamin J. Bollin, Andrew Kuch, Brian Wilcox and Brett High, certify that the views expressed in the research report(s) accurately reflect our
personal views about the subject security(s). Further we certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in the research report(s). CRC, its principals and partners, have investments and own a minority interest in a fund manager which
may or may not have a position in this security in the funds it manages and oversees. Cleveland Research Company provides no investment banking services of any type
on this or any company. Proprietary research and Information contained herein which forms the basis for findings or opinions expressed by Cleveland Research Company
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