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Fortinet (FTNT) Q4 Earnings Beat Estimates, Sales Rise Y/Y

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Fortinet Inc. (FTNT - Free Report) reported strong fourth-quarter 2023 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Moreover, both the top and bottom lines registered a steady year-over-year improvement.

Fortinet reported fourth-quarter 2023 non-GAAP earnings per share (EPS) of 51 cents, which topped the Zacks Consensus Estimate by 18.6%. The bottom line improved 15.9% from the year-ago quarter’s earnings of 24 cents per share.

Total revenues of $1.415 billion beat the consensus mark by 0.33% and improved 10.3% year over year, driven by strong growth in services revenues.

Fortinet, Inc. Price, Consensus and EPS Surprise

Fortinet, Inc. Price, Consensus and EPS Surprise

Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote

Quarter in Detail

Segment-wise, Product revenues declined 9.6% year over year to $488.1 million due to a tough comparison. Product revenues grew 43% in the prior-year period, benefiting from the drawdown of backlog.

Services revenues climbed 24.8% to $927 million, primarily driven by strength in SecOps, SASE and other security subscriptions. Services revenues accounted for 66% of total revenues.

Billings were up 8.5% to $1.865 billion, driven by increased focus on SecOps, SASE and improved execution from sales teams.

Fortinet’s total addressable market across SecOps, SASE and Secure Networking is expected to increase from $150 billion in 2024 to $208 billion by 2027.

The company’s customer base comprises 76% of the Fortune 100, including nine of the top ten technology companies, manufacturers and healthcare sectors.

In the fourth quarter, SecOps billings grew 44%, which accounted for 11% of total billings with strong performance from several solutions, including EDR, SIEM, Email Security and NDR, to automatically detect, investigate and respond to threats. Unified SASE billings rose 19%, accounting for 21% of total billings. Secure Networking accounted for 68% of total billings.

As of Dec 31, 2023, deferred revenues were $5.74 billion, up 24% year over year.

Geographically, the Middle East and Africa region registered the highest top-line growth with a 12.8% increase, followed by the America region’s 9.2% and the Asia Pacific’s 7.4%.

During the December-end quarter, the company secured 179 total deals worth $1 million or more each. The company added more than 6,400 new logos.


The non-GAAP gross margin expanded 90 basis points (bps) year over year to 78.5% in the fourth quarter of 2023, driven by the increase in Services gross margins and the six-point mix shift from product revenues to services revenues. This reflects a contraction of 510 bps in the Product gross margin, while the Services gross margin expanded 140 bps.

Non-GAAP operating income was $453.5 million for the fourth quarter of 2023, representing a non-GAAP operating margin of 32%.

Balance Sheet & Cash Flow

Fortinet exited the fourth quarter with cash and cash equivalents and short-term investments of $2.41 billion, down from $3.14 billion reported at the end of the third quarter of 2023.

During the reported quarter, FTNT generated operating and adjusted free cash flows of $191.7 million and $164.8 million, respectively.

During the three months ended Dec 31, 2023, Fortinet repurchased 16.8 million shares of its common stock at an average price of $53.29 per share and for an aggregate purchase price of $895.3 million.


Fortinet estimates first-quarter revenues in the range of $1.3-$1.36 billion. Billings are estimated in the band of $1.39-$1.45 billion.

Non-GAAP gross margin is expected in the range of 76.5-77.5%, while the non-GAAP operating margin is anticipated between 25.5% and 26.5%. Non-GAAP EPS is projected in the band of 37-39 cents. The company expects a non-GAAP effective tax rate of 17% for the fourth quarter and diluted shares outstanding between 775 million and 785 million.

For 2024, Fortinet predicts revenues in the range of $5.715-$5.815 billion. Services revenues are projected in the range of $3.92-$3.97 billion. Billings are expected in the range of $6.4-$6.6 billion.

The non-GAAP gross margin and operating margin are expected in the band of 76-78% and 25.5-27.5%, respectively. Non-GAAP EPS is anticipated between $1.65 and $1.7. It forecasts a non-GAAP effective tax rate of 17% and a diluted share count between 785 million and 795 million.

Zacks Rank & Stocks to Consider

Currently, Fortinet has a Zacks Rank #4 (Sell). Shares of FTNT have gained 15.3% year to date.

Some better-ranked stocks from the broader Computer and Technology sector are Arista Networks (ANET - Free Report) , Semtech (SMTC - Free Report) and Badger Meter (BMI - Free Report) . While Arista Networks and Semtech sport a Zacks Rank #1 (Strong Buy) each, Badger Meter carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Arista Networks have surged 110.5% in the past year. The long-term earnings growth rate for ANET is projected at 19.77%.

Shares of Semtech have plunged 42.8% in the past year. The long-term earnings growth rate for SMTC is projected at 15%.

Shares of Badger Meter have gained 15.7% in the past year. The long-term earnings growth rate for BMI is pegged at 12.27%.

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