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Fortinet's (FTNT) Q3 Earnings and Revenues Beat Estimates
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Fortinet Inc. (FTNT - Free Report) reported third-quarter 2022 non-GAAP earnings per share (EPS) of 33 cents, which topped the Zacks Consensus Estimate of 27 cents. The bottom line improved 65% from the year-ago quarter’s earnings of 20 cents per share.
Total revenues of $1.15 billion beat the Zacks Consensus estimate of $1.12 billion and improved 32.6% 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 in expanding into the adjacent addressable markets and boosting the firm’s global sales force aided Fortinet’s quarterly performance.
Segment-wise, Product revenues jumped 39% year over year to $468.7 million. This upside can be attributed to the continued adoption of the FortiGate-based secure SD-WAN solution, as well as strong revenues of non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 28.4% to $680.8 million.
Billings were up 32.6% to $1.41 billion on solid execution and growth across all regions.
As of Sep 30, 2022, deferred revenues were $4.19 billion, up 35% year over year.
Geographically, the EMEA region registered the highest top-line growth with a 37.3% increase, followed by the Americas’ 33.6% and APAC’s 22.7%.
During the September-end quarter, the company secured 153 total deals worth $1 million or more 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 30 basis points (bps) year over year to 76.2% in the third quarter of 2022. This reflects an expansion of 30 bps in the Product gross margin while Services gross margin remained flat.
Non-GAAP operating income jumped 45.3% to $324.9 million in the reported quarter, while non-GAAP operating margin increased 250 bps to 28.3%.
Balance Sheet & Cash Flow
Fortinet exited the third quarter with cash and cash equivalents and short-term investments of $1.70 billion, down from $1.73 billion reported at the end of second-quarter 2022.
During the reported quarter, FTNT generated operating and free cash flow of $483 million and $395.2 million, respectively. During the first nine months of 2022, the company generated an operating cash flow of $1.20 billion.
In the third quarter, the company bought back $500 million worth of shares and in the first nine months of 2022, it bought back $1.99 billion worth of shares.
Guidance
Fortinet issued impressive guidance for the fourth quarter and raised the same for the full-year 2022. For the fourth quarter of 2022, the company estimates revenues in the range of $1.275-$1.315 billion. Billings are estimated to be $1.665-$1.720 billion.
Non-GAAP gross margin is expected in the range of 75-76%, while non-GAAP operating margin is anticipated between 30% and 31%. Non-GAAP EPS is projected at 38-40 cents.
For 2022, Fortinet predicts revenues in the band of $4.410-$4.450 billion, up from the prior estimate of $4.350-$4.400 billion. However, billings are now expected in the range of $5.540-$5.595 billion compared with the earlier range of $5.560-$5.640 billion.
Non-GAAP EPS is now anticipated between $1.13 and $1.15, up from the previous range of $1.01-$1.06.
Non-GAAP gross margin and operating margin are now expected in the bands of 75-76% and 26-27%, respectively.
Zacks Rank & Other Key Picks
Fortinet currently carries a Zacks Rank #2 (Buy). Shares of FTNT have lost 31.3% in the past year.
The Zacks Consensus Estimate for Okta's third-quarter fiscal 2023 loss has been revised a penny downward to 31 cents per share over the past 60 days. For fiscal 2022, loss estimates have improved by 3 cents to 72 cents per share in the past 30 days.
OKTA’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, the average surprise being 45.5%. Shares of the company have declined 80.1% in the past year.
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised a penny north to 21 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved north by a penny to $1.18 per share in the past 30 days.
ZS' earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 28.6%. Shares of the company have declined 58.4% in the past year.
The Zacks Consensus Estimate for Digi’s fourth-quarter fiscal 2022 earnings has increased by 2 cents to 42 cents per share over the past 90 days. For fiscal 2022, earnings estimates have moved 1.2% down to $1.61 per share in the past 60 days.
DGII's earnings beat the Zacks Consensus Estimate in all the preceding four quarters, the average surprise being 28.6%. Shares of the company have improved 62.1% in the past year.
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Fortinet's (FTNT) Q3 Earnings and Revenues Beat Estimates
Fortinet Inc. (FTNT - Free Report) reported third-quarter 2022 non-GAAP earnings per share (EPS) of 33 cents, which topped the Zacks Consensus Estimate of 27 cents. The bottom line improved 65% from the year-ago quarter’s earnings of 20 cents per share.
Total revenues of $1.15 billion beat the Zacks Consensus estimate of $1.12 billion and improved 32.6% 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 in expanding into the adjacent addressable markets and boosting 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 39% year over year to $468.7 million. This upside can be attributed to the continued adoption of the FortiGate-based secure SD-WAN solution, as well as strong revenues of non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 28.4% to $680.8 million.
Billings were up 32.6% to $1.41 billion on solid execution and growth across all regions.
As of Sep 30, 2022, deferred revenues were $4.19 billion, up 35% year over year.
Geographically, the EMEA region registered the highest top-line growth with a 37.3% increase, followed by the Americas’ 33.6% and APAC’s 22.7%.
During the September-end quarter, the company secured 153 total deals worth $1 million or more 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 30 basis points (bps) year over year to 76.2% in the third quarter of 2022. This reflects an expansion of 30 bps in the Product gross margin while Services gross margin remained flat.
Non-GAAP operating income jumped 45.3% to $324.9 million in the reported quarter, while non-GAAP operating margin increased 250 bps to 28.3%.
Balance Sheet & Cash Flow
Fortinet exited the third quarter with cash and cash equivalents and short-term investments of $1.70 billion, down from $1.73 billion reported at the end of second-quarter 2022.
During the reported quarter, FTNT generated operating and free cash flow of $483 million and $395.2 million, respectively. During the first nine months of 2022, the company generated an operating cash flow of $1.20 billion.
In the third quarter, the company bought back $500 million worth of shares and in the first nine months of 2022, it bought back $1.99 billion worth of shares.
Guidance
Fortinet issued impressive guidance for the fourth quarter and raised the same for the full-year 2022. For the fourth quarter of 2022, the company estimates revenues in the range of $1.275-$1.315 billion. Billings are estimated to be $1.665-$1.720 billion.
Non-GAAP gross margin is expected in the range of 75-76%, while non-GAAP operating margin is anticipated between 30% and 31%. Non-GAAP EPS is projected at 38-40 cents.
For 2022, Fortinet predicts revenues in the band of $4.410-$4.450 billion, up from the prior estimate of $4.350-$4.400 billion. However, billings are now expected in the range of $5.540-$5.595 billion compared with the earlier range of $5.560-$5.640 billion.
Non-GAAP EPS is now anticipated between $1.13 and $1.15, up from the previous range of $1.01-$1.06.
Non-GAAP gross margin and operating margin are now expected in the bands of 75-76% and 26-27%, respectively.
Zacks Rank & Other Key Picks
Fortinet currently carries a Zacks Rank #2 (Buy). Shares of FTNT have lost 31.3% in the past year.
Some other top-ranked stocks from the broader Computer and Technology sector are Okta (OKTA - Free Report) , Zscaler (ZS - Free Report) and Digi International (DGII - Free Report) . While Okta and Zscaler flaunt a Zacks Rank #1 (Strong Buy), Digi International carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Okta's third-quarter fiscal 2023 loss has been revised a penny downward to 31 cents per share over the past 60 days. For fiscal 2022, loss estimates have improved by 3 cents to 72 cents per share in the past 30 days.
OKTA’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, the average surprise being 45.5%. Shares of the company have declined 80.1% in the past year.
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised a penny north to 21 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved north by a penny to $1.18 per share in the past 30 days.
ZS' earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 28.6%. Shares of the company have declined 58.4% in the past year.
The Zacks Consensus Estimate for Digi’s fourth-quarter fiscal 2022 earnings has increased by 2 cents to 42 cents per share over the past 90 days. For fiscal 2022, earnings estimates have moved 1.2% down to $1.61 per share in the past 60 days.
DGII's earnings beat the Zacks Consensus Estimate in all the preceding four quarters, the average surprise being 28.6%. Shares of the company have improved 62.1% in the past year.