We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fortinet (FTNT) Q2 Earnings Beat Expectations, Sales Miss
Read MoreHide Full Article
Fortinet Inc. (FTNT - Free Report) reported mixed second-quarter 2023 results, wherein earnings surpassed the Zacks Consensus Estimate but sales missed the same. However, both the figures registered a significant year-over-year improvement.
Fortinet reported second-quarter 2023 non-GAAP earnings per share (EPS) of 38 cents, which topped the Zacks Consensus Estimate of 34 cents. The bottom line improved 58% from the year-ago quarter’s earnings of 24 cents per share.
Total revenues of $1.29 billion narrowly missed the consensus mark of $1.30 billion but improved 26% year over year due to strong demand for the company’s Core and Enhanced Platform Technologies.
Strategic investments in developing powerful products and services, efforts in expanding in adjacent addressable markets and boosting the firm’s global sales force aided Fortinet’s quarterly performance.
Segment-wise, Product revenues jumped 18% year over year to $472.6 million. This upside can be attributed to the continued adoption of the FortiGate-based secure SD-WAN solution, strong revenues from non-FortiGate products and the increased demand for integrated security fabric products.
Services revenues climbed 30% to $820.2 million, primarily driven by strong growth in the company’s security subscriptions. Our model estimates for Product and Services revenues were pegged at $479.7 million and $804.2 million, respectively.
Billings were up 18% to $1.54 billion, primarily driven by strong customer demand across its Core and Enhanced Platform Technologies. Per our model, billings were expected to be $1.57 billion for the reported quarter.
As of Jun 30, 2023, deferred revenues were $5.13 billion, up 30% year over year.
Geographically, the Americas region registered the highest top-line growth with a 29.8% increase followed by the EMEA’s 29.4% and APAC’s 10.8%. Our model estimated 28.8%, 23.8% and 18.4% top-line growth from the Americas, EMEA and APAC regions, respectively. In the second quarter, the Americas accounted for 41.5% of the total revenues, while the EMEA and APAC accounted for 39.2% and 19.3%, respectively.
During the June-end quarter, the company secured 134 total deals worth $1 million or more each.
Margins
The non-GAAP gross margin expanded 140 basis points (bps) year over year to 77.9% in the second quarter of 2023. This reflects an expansion of 160 bps in the Product gross margin, while the Services gross margin increased 30 bps.
Legacy pricing actions, easing supply-chain cost pressures and improved discounting drove the Product gross margin higher. The service gross margin improved due to price increases, which more than offset the negative impact of increased investments in data centers and Points of Presence.
The non-GAAP operating income jumped 36% to $348.1 million in the reported quarter. Meanwhile, the non-GAAP operating margin increased 210 bps to 26.9%, mainly benefiting from higher revenues, an improved gross margin and a positive impact of foreign currency exchange rates.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents and short-term investments of $3.29 billion, up from the $2.85 billion reported at the end of the first quarter of 2023.
During the reported quarter, FTNT generated operating and free cash flows of $515.1 million and $438.3 million, respectively. In the second quarter and first six months of 2023, the company didn’t buy back common stock.
Guidance
For 2023, Fortinet predicts revenues in the range of $5.350-$5.450 billion. Service revenues are projected in the range of $3.350-$3.410 billion. Billings are expected in the range of $6.490-$6.590 billion.
The non-GAAP gross margin and operating margin are still expected in the band of 75.25-76.25% and 25.25-26.25%, respectively. Non-GAAP EPS is anticipated between $1.49 and $1.53. It forecasts a non-GAAP effective tax rate of 17% and a diluted share count between 795 million and 805 million.
Fortinet issued impressive guidance for the third quarter. The company estimates revenues in the range of $1.315-$1.375 billion for the third quarter of 2023. Billings are estimated in the band of $1.560-$1.620 billion.
The non-GAAP gross margin is expected in the range of 75.5-76.5%, while the non-GAAP operating margin is anticipated between 24.5% and 25.5%. Non-GAAP EPS is projected in the band of 35-37 cents. The company assumes a non-GAAP effective tax rate of 17% for the third quarter and diluted shares outstanding between 795 million and 805 million.
Zacks Rank & Other Stocks to Consider
Currently, Fortinet carries a Zacks Rank #2 (Buy). Shares of FTNT have gained 44% over the past year.
The Zacks Consensus Estimate for NVIDIA’s second-quarter fiscal 2024 earnings has been steady at 92 cents per share over the past 90 days. For fiscal 2024, earnings estimates have moved up by 13 cents to $7.79 in the past 30 days.
NVDA's earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing twice, the average surprise being 0.26%. Shares of the company have soared 131.6% in the past year.
The Zacks Consensus Estimate for Salesforce’s second-quarter fiscal 2024 earnings has been revised southward by a penny to $1.60 per share over the past 60 days. For fiscal 2024, earnings estimates have moved up by 4 cents to $7.44 in the past 60 days.
CRM's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 15.5%. Shares of the company have gained 13.1% in the past year.
The Zacks Consensus Estimate for Meta Platforms' third-quarter 2023 earnings has been revised upward by 15.1% to $3.44 per share over the past seven days. For 2023, earnings estimates have moved north by 7.9% to $12.94 in the past seven days.
META’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, the average surprise being 19%. Shares of the company have surged 83.6% in the past year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Fortinet (FTNT) Q2 Earnings Beat Expectations, Sales Miss
Fortinet Inc. (FTNT - Free Report) reported mixed second-quarter 2023 results, wherein earnings surpassed the Zacks Consensus Estimate but sales missed the same. However, both the figures registered a significant year-over-year improvement.
Fortinet reported second-quarter 2023 non-GAAP earnings per share (EPS) of 38 cents, which topped the Zacks Consensus Estimate of 34 cents. The bottom line improved 58% from the year-ago quarter’s earnings of 24 cents per share.
Total revenues of $1.29 billion narrowly missed the consensus mark of $1.30 billion but improved 26% year over year due to strong demand for the company’s Core and Enhanced Platform Technologies.
Strategic investments in developing powerful products and services, efforts in expanding in 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 18% year over year to $472.6 million. This upside can be attributed to the continued adoption of the FortiGate-based secure SD-WAN solution, strong revenues from non-FortiGate products and the increased demand for integrated security fabric products.
Services revenues climbed 30% to $820.2 million, primarily driven by strong growth in the company’s security subscriptions. Our model estimates for Product and Services revenues were pegged at $479.7 million and $804.2 million, respectively.
Billings were up 18% to $1.54 billion, primarily driven by strong customer demand across its Core and Enhanced Platform Technologies. Per our model, billings were expected to be $1.57 billion for the reported quarter.
As of Jun 30, 2023, deferred revenues were $5.13 billion, up 30% year over year.
Geographically, the Americas region registered the highest top-line growth with a 29.8% increase followed by the EMEA’s 29.4% and APAC’s 10.8%. Our model estimated 28.8%, 23.8% and 18.4% top-line growth from the Americas, EMEA and APAC regions, respectively. In the second quarter, the Americas accounted for 41.5% of the total revenues, while the EMEA and APAC accounted for 39.2% and 19.3%, respectively.
During the June-end quarter, the company secured 134 total deals worth $1 million or more each.
Margins
The non-GAAP gross margin expanded 140 basis points (bps) year over year to 77.9% in the second quarter of 2023. This reflects an expansion of 160 bps in the Product gross margin, while the Services gross margin increased 30 bps.
Legacy pricing actions, easing supply-chain cost pressures and improved discounting drove the Product gross margin higher. The service gross margin improved due to price increases, which more than offset the negative impact of increased investments in data centers and Points of Presence.
The non-GAAP operating income jumped 36% to $348.1 million in the reported quarter. Meanwhile, the non-GAAP operating margin increased 210 bps to 26.9%, mainly benefiting from higher revenues, an improved gross margin and a positive impact of foreign currency exchange rates.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents and short-term investments of $3.29 billion, up from the $2.85 billion reported at the end of the first quarter of 2023.
During the reported quarter, FTNT generated operating and free cash flows of $515.1 million and $438.3 million, respectively. In the second quarter and first six months of 2023, the company didn’t buy back common stock.
Guidance
For 2023, Fortinet predicts revenues in the range of $5.350-$5.450 billion. Service revenues are projected in the range of $3.350-$3.410 billion. Billings are expected in the range of $6.490-$6.590 billion.
The non-GAAP gross margin and operating margin are still expected in the band of 75.25-76.25% and 25.25-26.25%, respectively. Non-GAAP EPS is anticipated between $1.49 and $1.53. It forecasts a non-GAAP effective tax rate of 17% and a diluted share count between 795 million and 805 million.
Fortinet issued impressive guidance for the third quarter. The company estimates revenues in the range of $1.315-$1.375 billion for the third quarter of 2023. Billings are estimated in the band of $1.560-$1.620 billion.
The non-GAAP gross margin is expected in the range of 75.5-76.5%, while the non-GAAP operating margin is anticipated between 24.5% and 25.5%. Non-GAAP EPS is projected in the band of 35-37 cents. The company assumes a non-GAAP effective tax rate of 17% for the third quarter and diluted shares outstanding between 795 million and 805 million.
Zacks Rank & Other Stocks to Consider
Currently, Fortinet carries a Zacks Rank #2 (Buy). Shares of FTNT have gained 44% over the past year.
Some other top-ranked stocks from the broader Computer and Technology sector are NVIDIA Corporation (NVDA - Free Report) , Salesforce (CRM - Free Report) and Meta Platforms (META - Free Report) . While NVIDIA sports a Zacks Rank #1 (Strong Buy), Salesforce and Meta carry a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA’s second-quarter fiscal 2024 earnings has been steady at 92 cents per share over the past 90 days. For fiscal 2024, earnings estimates have moved up by 13 cents to $7.79 in the past 30 days.
NVDA's earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing twice, the average surprise being 0.26%. Shares of the company have soared 131.6% in the past year.
The Zacks Consensus Estimate for Salesforce’s second-quarter fiscal 2024 earnings has been revised southward by a penny to $1.60 per share over the past 60 days. For fiscal 2024, earnings estimates have moved up by 4 cents to $7.44 in the past 60 days.
CRM's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 15.5%. Shares of the company have gained 13.1% in the past year.
The Zacks Consensus Estimate for Meta Platforms' third-quarter 2023 earnings has been revised upward by 15.1% to $3.44 per share over the past seven days. For 2023, earnings estimates have moved north by 7.9% to $12.94 in the past seven days.
META’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, the average surprise being 19%. Shares of the company have surged 83.6% in the past year.