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Fortinet's (FTNT) Q2 Earnings Top Estimates, Revenues Match
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Fortinet Inc. (FTNT - Free Report) delivered second-quarter 2022 non-GAAP earnings per share (EPS) of 24 cents, which beat the Zacks Consensus Estimate of 22 cents. The bottom line improved from the year-ago quarter’s earnings of 19 cents per share.
Total revenues of $1.03 billion matched the Zacks Consensus estimate while improving 28.6% year over year. The top line was driven by strong demand for the company’s FortiGate technology, which includes a security processing unit, an integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, and efforts to expand into the adjacent addressable markets and boost the firm’s global sales force aided Fortinet’s quarterly performance.
Segment-wise, Product revenues jumped 34.3% year over year to $400.7 million. This upside can be attributed to the continued adoption of the
FortiGate-based secure SD-WAN solution as well as strong revenues at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 25.2% to $629.4 million.
Billings were up 35.7% to $1.30 billion on solid execution and growth across all regions. Bookings surged 42.1% year over year to $1.38 billion, while the backlog was $349.9 at the close of the second quarter.
Geographically, the APAC region registered the highest top-line growth with a 42.3% increase, followed by the EMEA’s 28% and America’s 22.7%.
During the June-end quarter, the company secured 122 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth in terms of the number of deals worth more than $1 million in the quarter.
Margins
The non-GAAP gross margin contracted 100 basis points (bps) year over year to 76.5% in the second quarter of 2022. This reflects a contraction of 100 bps in the Services gross margin while an expansion of 20 bps in the Product gross margin.
Non-GAAP operating income jumped 25.6% to $255.4 million in the reported quarter, while non-GAAP operating margin shrunk 60 bps to 24.8%.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents and short-term investments of $1.73 billion, down from $2.11 billion reported at the end of first-quarter 2022.
During the April-June period, FTNT generated operating and free cash flow of $323.4 million and $283.5 million, respectively. During the first six months of 2022, the company generated operating cash flow of $719.5 million.
In July 2022, the company increased its share-repurchase authorization by $1 billion. During the reported quarter, the company bought back $800 million worth of shares. As of Aug 1, 2022, the company had approximately $1.03 billion left under the ongoing authorization, which is set to expire on Feb 28, 2023.
Guidance
Fortinet issued impressive guidance for the third quarter and revised the same for the full-year 2022. For the third quarter of 2022, the company estimates revenues in the range of $1.105 billion to $1.135 billion. Billings are estimated to be $1.385-$1.415 billion.
Non-GAAP gross margin is expected in the range of 75% to 76%, while non-GAAP operating margin is anticipated between 25% and 26%. Non-GAAP EPS is projected at 26-28 cents.
For 2022, Fortinet still predicts revenues in the band of $4.350-$4.400 billion. However, billings are expected in the range of $5.560 billion to $5.640 billion now, compared with the earlier range of $5.500 billion to $5.580 billion.
Non-GAAP EPS is now anticipated between $1.01 and $1.06, down from the previous range of $5.00-$5.15.
Non-GAAP gross margin and operating margin are now expected in the bands of 75-76% and 25-26%, respectively.
Zacks Rank & Key Picks
Fortinet currently carries a Zacks Rank #3 (Hold). Shares of FTNT have climbed 4.8% in the past year.
The Zacks Consensus Estimate for Taiwan Semiconductor's third-quarter 2022 earnings has been revised 10 cents northward to $1.70 per share over the past 30 days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 30 days.
TSM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 27.4% in the past year.
The Zacks Consensus Estimate for Clearfield's fourth-quarter fiscal 2022 earnings has been revised upward by 10 cents to 80 cents per share over the past seven days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past seven days.
Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have soared 141.9% in the past year.
The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 22.9% to $1.02 per share over the past seven days. For 2022, earnings estimates have moved 14.2% up to $4.18 per share in the past seven days.
Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 3.5% in the past year.
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Fortinet's (FTNT) Q2 Earnings Top Estimates, Revenues Match
Fortinet Inc. (FTNT - Free Report) delivered second-quarter 2022 non-GAAP earnings per share (EPS) of 24 cents, which beat the Zacks Consensus Estimate of 22 cents. The bottom line improved from the year-ago quarter’s earnings of 19 cents per share.
Total revenues of $1.03 billion matched the Zacks Consensus estimate while improving 28.6% year over year. The top line was driven by strong demand for the company’s FortiGate technology, which includes a security processing unit, an integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, and efforts to expand into the adjacent addressable markets and boost the firm’s global sales force aided Fortinet’s quarterly performance.
Fortinet, Inc. Price, Consensus and EPS Surprise
Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote
Quarter in Detail
Segment-wise, Product revenues jumped 34.3% year over year to $400.7 million. This upside can be attributed to the continued adoption of the
FortiGate-based secure SD-WAN solution as well as strong revenues at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 25.2% to $629.4 million.
Billings were up 35.7% to $1.30 billion on solid execution and growth across all regions. Bookings surged 42.1% year over year to $1.38 billion, while the backlog was $349.9 at the close of the second quarter.
Geographically, the APAC region registered the highest top-line growth with a 42.3% increase, followed by the EMEA’s 28% and America’s 22.7%.
During the June-end quarter, the company secured 122 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth in terms of the number of deals worth more than $1 million in the quarter.
Margins
The non-GAAP gross margin contracted 100 basis points (bps) year over year to 76.5% in the second quarter of 2022. This reflects a contraction of 100 bps in the Services gross margin while an expansion of 20 bps in the Product gross margin.
Non-GAAP operating income jumped 25.6% to $255.4 million in the reported quarter, while non-GAAP operating margin shrunk 60 bps to 24.8%.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents and short-term investments of $1.73 billion, down from $2.11 billion reported at the end of first-quarter 2022.
During the April-June period, FTNT generated operating and free cash flow of $323.4 million and $283.5 million, respectively. During the first six months of 2022, the company generated operating cash flow of $719.5 million.
In July 2022, the company increased its share-repurchase authorization by $1 billion. During the reported quarter, the company bought back $800 million worth of shares. As of Aug 1, 2022, the company had approximately $1.03 billion left under the ongoing authorization, which is set to expire on Feb 28, 2023.
Guidance
Fortinet issued impressive guidance for the third quarter and revised the same for the full-year 2022. For the third quarter of 2022, the company estimates revenues in the range of $1.105 billion to $1.135 billion. Billings are estimated to be $1.385-$1.415 billion.
Non-GAAP gross margin is expected in the range of 75% to 76%, while non-GAAP operating margin is anticipated between 25% and 26%. Non-GAAP EPS is projected at 26-28 cents.
For 2022, Fortinet still predicts revenues in the band of $4.350-$4.400 billion. However, billings are expected in the range of $5.560 billion to $5.640 billion now, compared with the earlier range of $5.500 billion to $5.580 billion.
Non-GAAP EPS is now anticipated between $1.01 and $1.06, down from the previous range of $5.00-$5.15.
Non-GAAP gross margin and operating margin are now expected in the bands of 75-76% and 25-26%, respectively.
Zacks Rank & Key Picks
Fortinet currently carries a Zacks Rank #3 (Hold). Shares of FTNT have climbed 4.8% in the past year.
Some better-ranked stocks from the broader Computer and Technology sector are Taiwan Semiconductor (TSM - Free Report) , Clearfield (CLFD - Free Report) and Silicon Laboratories (SLAB - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Taiwan Semiconductor's third-quarter 2022 earnings has been revised 10 cents northward to $1.70 per share over the past 30 days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 30 days.
TSM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 27.4% in the past year.
The Zacks Consensus Estimate for Clearfield's fourth-quarter fiscal 2022 earnings has been revised upward by 10 cents to 80 cents per share over the past seven days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past seven days.
Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have soared 141.9% in the past year.
The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 22.9% to $1.02 per share over the past seven days. For 2022, earnings estimates have moved 14.2% up to $4.18 per share in the past seven days.
Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 3.5% in the past year.