We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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 Inc. (FTNT - Free Report) reported strong first-quarter 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.
Fortinet reported first-quarter 2024 non-GAAP earnings per share (EPS) of 43 cents, which beat the Zacks Consensus Estimate by 13.16%. The bottom line climbed 26.5% from the year-ago quarter’s earnings of 34 cents per share.
Total revenues of $1.353 billion beat the consensus mark by 1.4% and improved 7.2% year over year, driven by strong growth in services revenues.
Segment-wise, Product revenues declined 18% year over year to $409 million, primarily due to a tough comparison. Product revenues grew 35% in the prior-year period, benefiting from the drawdown of backlog. Software license revenues increased 20% and represented a mid-to-high teens mix of product revenues.
Combined revenues from software licenses and software services, such as cloud and SaaS security solutions, increased 29% and represented an annual revenue run rate approaching $750 million.
Services revenues climbed 24% to $944 million, primarily driven by more than 30% growth from Unified SASE and SecOps. Services revenues accounted for 70% of total revenues.
Billings were down 6.4% to $1.407 billion. The performance was due to the difficult year-earlier comparison created by the backlog contributions to billings that occurred in the year-ago quarter.
For the first quarter, Unified SASE accounted for 24% of total billings. Fortinet’s Security Operations solutions, which are better integrated and automated together than competitors, accounted for 9% of total billings. Initially launched as part of FortiSIEM and FortiSOAR, the GenAI technology, FortiAI, is being deployed across both networking and security products. Secure Networking accounted for 67% of total billings.
Larger enterprises are proving to be the company’s largest customer segment, with large and mid-enterprises representing 78% and 84% of SecOps and Unified SASE billings.
As of Mar 31, 2024, deferred revenues were $5.79 billion, up 18.6% 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 6.4%, while the Asia Pacific region dropped 1.4%.
Margins
The non-GAAP gross margin expanded 180 basis points (bps) year over year to 78.1% in the first quarter of 2024. Service gross margins of 87.9% were up 200 bps as service revenue growth outpaced labor cost increases and benefited from the mix shift toward higher-margin FortiGuard security subscriptions. Product gross margins were 55.7% as the company witnessed margin pressure related to inventory levels and the transition to a more normalized demand environment.
Non-GAAP operating income was $386.1 million for the first quarter of 2024, representing a non-GAAP operating margin of 28.5%.
Balance Sheet & Cash Flow
Fortinet exited the first quarter with cash and cash equivalents and short-term investments of $3 billion, up from the $2.14 billion reported at the end of the fourth quarter of 2023.
During the reported quarter, FTNT generated operating and free cash flows of $830.4 million and $608.5 million, respectively.
Guidance
Fortinet estimates second-quarter revenues in the range of $1.375-$1.435 billion. Billings are estimated in the band of $1.49-$1.55 billion.
The non-GAAP gross margin is expected in the range of 76.5-77.5%, while the non-GAAP operating margin is anticipated between 25.75% and 26.75%. Non-GAAP EPS is projected in the band of 39-41 cents. The company expects a non-GAAP effective tax rate of 17% for the first quarter and diluted shares outstanding between 775 million and 785 million.
For 2024, Fortinet predicts revenues in the range of $5.745-$5.845 billion. Services revenues are projected in the range of $3.94-$3.99 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 76.5-78% and 26.5-28%, respectively. Non-GAAP EPS is anticipated between $1.73 and $1.79. It forecasts a non-GAAP effective tax rate of 17% and a diluted share count between 780 million and 790 million.
Zacks Rank & Stocks to Consider
Currently, Fortinet carries a Zacks Rank #3 (Hold). Shares of FTNT have gained 11.4% year to date.
Image: Bigstock
Fortinet (FTNT) Q1 Earnings Beat Expectations, Sales Rise Y/Y
Fortinet Inc. (FTNT - Free Report) reported strong first-quarter 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.
Fortinet reported first-quarter 2024 non-GAAP earnings per share (EPS) of 43 cents, which beat the Zacks Consensus Estimate by 13.16%. The bottom line climbed 26.5% from the year-ago quarter’s earnings of 34 cents per share.
Total revenues of $1.353 billion beat the consensus mark by 1.4% and improved 7.2% year over year, driven by strong growth in services revenues.
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 18% year over year to $409 million, primarily due to a tough comparison. Product revenues grew 35% in the prior-year period, benefiting from the drawdown of backlog. Software license revenues increased 20% and represented a mid-to-high teens mix of product revenues.
Combined revenues from software licenses and software services, such as cloud and SaaS security solutions, increased 29% and represented an annual revenue run rate approaching $750 million.
Services revenues climbed 24% to $944 million, primarily driven by more than 30% growth from Unified SASE and SecOps. Services revenues accounted for 70% of total revenues.
Billings were down 6.4% to $1.407 billion. The performance was due to the difficult year-earlier comparison created by the backlog contributions to billings that occurred in the year-ago quarter.
For the first quarter, Unified SASE accounted for 24% of total billings. Fortinet’s Security Operations solutions, which are better integrated and automated together than competitors, accounted for 9% of total billings. Initially launched as part of FortiSIEM and FortiSOAR, the GenAI technology, FortiAI, is being deployed across both networking and security products. Secure Networking accounted for 67% of total billings.
Larger enterprises are proving to be the company’s largest customer segment, with large and mid-enterprises representing 78% and 84% of SecOps and Unified SASE billings.
As of Mar 31, 2024, deferred revenues were $5.79 billion, up 18.6% 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 6.4%, while the Asia Pacific region dropped 1.4%.
Margins
The non-GAAP gross margin expanded 180 basis points (bps) year over year to 78.1% in the first quarter of 2024. Service gross margins of 87.9% were up 200 bps as service revenue growth outpaced labor cost increases and benefited from the mix shift toward higher-margin FortiGuard security subscriptions. Product gross margins were 55.7% as the company witnessed margin pressure related to inventory levels and the transition to a more normalized demand environment.
Non-GAAP operating income was $386.1 million for the first quarter of 2024, representing a non-GAAP operating margin of 28.5%.
Balance Sheet & Cash Flow
Fortinet exited the first quarter with cash and cash equivalents and short-term investments of $3 billion, up from the $2.14 billion reported at the end of the fourth quarter of 2023.
During the reported quarter, FTNT generated operating and free cash flows of $830.4 million and $608.5 million, respectively.
Guidance
Fortinet estimates second-quarter revenues in the range of $1.375-$1.435 billion. Billings are estimated in the band of $1.49-$1.55 billion.
The non-GAAP gross margin is expected in the range of 76.5-77.5%, while the non-GAAP operating margin is anticipated between 25.75% and 26.75%. Non-GAAP EPS is projected in the band of 39-41 cents. The company expects a non-GAAP effective tax rate of 17% for the first quarter and diluted shares outstanding between 775 million and 785 million.
For 2024, Fortinet predicts revenues in the range of $5.745-$5.845 billion. Services revenues are projected in the range of $3.94-$3.99 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 76.5-78% and 26.5-28%, respectively. Non-GAAP EPS is anticipated between $1.73 and $1.79. It forecasts a non-GAAP effective tax rate of 17% and a diluted share count between 780 million and 790 million.
Zacks Rank & Stocks to Consider
Currently, Fortinet carries a Zacks Rank #3 (Hold). Shares of FTNT have gained 11.4% year to date.
Some better-ranked stocks from the broader Computer and Technology sector are Arista Networks (ANET - Free Report) , NVIDIA (NVDA - Free Report) and Dell Technologies (DELL - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Arista Networks have gained 11.6% year to date. ANET is set to report first-quarter 2024 results on May 7.
Shares of NVIDIA have surged 74.5% year to date. NVDA is slated to report first-quarter 2024 results on May 22.
Shares of Dell Technologies have rallied 62.1% year to date. DELL is set to report first-quarter fiscal 2025 results on May 30.