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Fortinet Inc. (FTNT - Free Report) reported strong first-quarter 2025 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.
Fortinet reported first-quarter 2025 non-GAAP earnings per share (EPS) of 58 cents, which beat the Zacks Consensus Estimate by 9.43%. The bottom line climbed 34.9% from the year-ago quarter’s earnings of 43 cents.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Total revenues of $1.54 billion beat the consensus mark by 0.21% and improved 13.8% year over year, driven by strong growth in services and product revenues.
In the first quarter, Fortinet added more than 6,300 new logos, driven by continued worldwide investments in its channel partners.
RPO grew 12% to $6.5 billion and total billings rose 14% to $1.6 billion, driven by double-digit growth in AI-driven SecOps and Unified SASE.
Segment-wise, Product revenues increased 12.3% year over year to $459.1 million, driven by growth in both hardware and software solutions. FortiGate hardware revenues grew outpacing total product revenue growth, driven by strong performance in low-end and high-end models. Software license revenue growth was driven by on-prem, time-based software license growth of more than 30%.
Service revenues of $1.08 billion grew 14.4% year over year, accounting for 70% of total revenues. Security subscriptions revenues rose 16%, and support and related service revenues increased 12%. Service billings grew 14%, which was Fortinet’s highest growth rate in the past 5 quarters.
Unified SASE and Security Operations gained considerable traction, with security service edge billings growth of more than 110%, which drove FTNT’s Unified SASE billings growth to 18%, accounting for 25% of the business.
AI-driven Security Operations billings increased 29%, accounting for 10% of FTNT’s business, driven by customers continuing to consolidate multiple security vendors on the company’s integrated and AI-enhanced FortiFabric solution.
Margins of FTNT
Total gross margin increased 380 basis points (bps) to 81.9% and exceeded the high end of the guided range by 90 bps.
Product gross margin of 67.7% increased 1,200 bps as inventory-related charges normalized from last year’s highly elevated levels, adding 1,300 bps to product gross margin and 400 bps to total gross margin.
Service gross margin of 87.8% decreased 10 bps, as Fortinet absorbed increased costs associated with the expansion of hosted security solutions.
Operating margin increased 570 bps to a first-quarter record of 34.2% and was 320 bps above the high-end of the company’s guidance, reflecting the strong gross margin, a Fx tailwind of 100 bps, as well as cost efficiencies in the business.
FTNT Balance Sheet & Cash Flow
Fortinet exited the first quarter of 2024 with cash and cash equivalents and short-term investments of $4.78 billion, up from the $4 billion reported at the end of the fourth quarter of 2024.
Cash flow from operations was $863.3 million for the first quarter of 2025 compared with $830.4 million for the same quarter of 2024.
Free cash flow was $782.8 million for the first quarter of 2025 compared to $608.5 million for the same quarter of 2024.
FTNT Provides Guidance for Q2 & 2025
Fortinet estimates second-quarter revenues in the range of $1.59-$1.65 billion. Billings are estimated in the band of $1.685-$1.765 billion.
The non-GAAP gross margin is expected in the range of 80-81%, while the non-GAAP operating margin is anticipated between 31.5% and 32.5%. Non-GAAP EPS is projected in the band of 58-60 cents.
For 2025, FTNT predicts revenues in the range of $6.65-$6.85 billion. Services revenues are projected in the range of $4.575-$4.725 billion. Billings are expected in the band of $7.2-$7.4 billion.
The non-GAAP gross margin is expected in the range of 79-81%, and the operating margin is projected in the band of 31.5-33.5%. Non-GAAP EPS is anticipated between $2.43 and $2.49.
FTNT Zacks Rank & Stocks to Consider
Currently, Fortinet carries a Zacks Rank #3 (Hold).
Image: Bigstock
Fortinet Q1 Earnings Surpass Expectations, Sales Increase Y/Y
Fortinet Inc. (FTNT - Free Report) reported strong first-quarter 2025 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.
Fortinet reported first-quarter 2025 non-GAAP earnings per share (EPS) of 58 cents, which beat the Zacks Consensus Estimate by 9.43%. The bottom line climbed 34.9% from the year-ago quarter’s earnings of 43 cents.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Total revenues of $1.54 billion beat the consensus mark by 0.21% and improved 13.8% year over year, driven by strong growth in services and product revenues.
In the first quarter, Fortinet added more than 6,300 new logos, driven by continued worldwide investments in its channel partners.
RPO grew 12% to $6.5 billion and total billings rose 14% to $1.6 billion, driven by double-digit growth in AI-driven SecOps and Unified SASE.
Fortinet, Inc. Price, Consensus and EPS Surprise
Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote
FTNT Quarter in Detail
Segment-wise, Product revenues increased 12.3% year over year to $459.1 million, driven by growth in both hardware and software solutions. FortiGate hardware revenues grew outpacing total product revenue growth, driven by strong performance in low-end and high-end models. Software license revenue growth was driven by on-prem, time-based software license growth of more than 30%.
Service revenues of $1.08 billion grew 14.4% year over year, accounting for 70% of total revenues. Security subscriptions revenues rose 16%, and support and related service revenues increased 12%. Service billings grew 14%, which was Fortinet’s highest growth rate in the past 5 quarters.
Unified SASE and Security Operations gained considerable traction, with security service edge billings growth of more than 110%, which drove FTNT’s Unified SASE billings growth to 18%, accounting for 25% of the business.
AI-driven Security Operations billings increased 29%, accounting for 10% of FTNT’s business, driven by customers continuing to consolidate multiple security vendors on the company’s integrated and AI-enhanced FortiFabric solution.
Margins of FTNT
Total gross margin increased 380 basis points (bps) to 81.9% and exceeded the high end of the guided range by 90 bps.
Product gross margin of 67.7% increased 1,200 bps as inventory-related charges normalized from last year’s highly elevated levels, adding 1,300 bps to product gross margin and 400 bps to total gross margin.
Service gross margin of 87.8% decreased 10 bps, as Fortinet absorbed increased costs associated with the expansion of hosted security solutions.
Operating margin increased 570 bps to a first-quarter record of 34.2% and was 320 bps above the high-end of the company’s guidance, reflecting the strong gross margin, a Fx tailwind of 100 bps, as well as cost efficiencies in the business.
FTNT Balance Sheet & Cash Flow
Fortinet exited the first quarter of 2024 with cash and cash equivalents and short-term investments of $4.78 billion, up from the $4 billion reported at the end of the fourth quarter of 2024.
Cash flow from operations was $863.3 million for the first quarter of 2025 compared with $830.4 million for the same quarter of 2024.
Free cash flow was $782.8 million for the first quarter of 2025 compared to $608.5 million for the same quarter of 2024.
FTNT Provides Guidance for Q2 & 2025
Fortinet estimates second-quarter revenues in the range of $1.59-$1.65 billion. Billings are estimated in the band of $1.685-$1.765 billion.
The non-GAAP gross margin is expected in the range of 80-81%, while the non-GAAP operating margin is anticipated between 31.5% and 32.5%. Non-GAAP EPS is projected in the band of 58-60 cents.
For 2025, FTNT predicts revenues in the range of $6.65-$6.85 billion. Services revenues are projected in the range of $4.575-$4.725 billion. Billings are expected in the band of $7.2-$7.4 billion.
The non-GAAP gross margin is expected in the range of 79-81%, and the operating margin is projected in the band of 31.5-33.5%. Non-GAAP EPS is anticipated between $2.43 and $2.49.
FTNT Zacks Rank & Stocks to Consider
Currently, Fortinet carries a Zacks Rank #3 (Hold).
Chegg (CHGG - Free Report) , GCT Semiconductor Holding, Inc. (GCTS - Free Report) and Magnachip Semiconductor (MX - Free Report) are some better-ranked stocks that investors can consider in the broader Computer and Technology sector.
While MX sports a Zacks Rank #1 (Strong Buy), CHGG and GCTS carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chegg shares have lost 55.7% year to date. CHGG is set to report first-quarter 2025 results on May 12.
Shares of GCT Semiconductor Holding, Inc. have lost 38.7% year to date. GCTS is set to report first-quarter 2025 results on May 14.
Magnachip Semiconductor shares have lost 20.2% year to date. MX is set to report first-quarter 2025 results on May 12.