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 Expands via Cross-Selling: A Path to More Profitability?
Read MoreHide Full Article
Key Takeaways
Fortinet's cross-selling to firewall and SD-WAN clients lifted SASE and SecOps revenues sharply.
SASE ARR rose 26% and SecOps ARR 30% year over year, reaching a combined $1.6 billion.
Record 34.2% non-GAAP margin and $839 million free cash flow showcase rising profitability.
Fortinet (FTNT - Free Report) is using its vast customer base to fuel growth, with cross-selling emerging as a key driver of profitability.
By offering a broad range of complementary security solutions, Fortinet encourages existing customers to adopt additional products and services beyond their initial purchase, such as expanding from a FortiGate firewall to SD-WAN and then to a single-vendor SASE solution. This strategy not only increases overall revenues but also boosts recurring revenues through subscription-based services, which typically have higher profit margins.
The company’s first-quarter 2025 results highlighted how this strategy — centered on selling Secure Access Service Edge (SASE) and Security Operations (SecOps) solutions to existing SD-WAN and firewall customers — is delivering strong results. In the quarter, 91% of SASE billings and 97% of SecOps billings came from existing clients.
Unified SASE annual recurring revenues (ARR) climbed 26% year over year, while SecOps ARR surged 30%, bringing combined ARR to $1.6 billion. Notably, its large enterprise customers contributed 48% of SASE and 40% of SecOps revenues, far outpacing mid- and small-sized customers, which highlights Fortinet’s ability to deepen penetration within its most lucrative customer segment.
These gains are translating into stronger profitability, with non-GAAP operating margin reaching a record 34.2% and adjusted free cash flow climbing to $839 million, nearly 54% of total revenues. Together, these results reflect how Fortinet’s cross-selling model enhances operating efficiency and margin leverage.
With RPO up 12% year over year to $6.49 billion, the company anticipates double-digit SASE and SecOps growth in 2025, sustaining profitability through cross-selling.
Fortinet's Competitors in the Cybersecurity Market
Palo Alto Networks (PANW - Free Report) is accelerating growth through strategic alliances with VMware and Aruba Networks under its NextWave program, and key acquisitions such as LightCyber, Morta Security and Cyvera. PANW's innovative next-generation security platforms classify traffic by application, user and content, providing deep visibility and reducing reliance on multiple security tools. By reducing the total cost of ownership and increasing enterprise security, PANW solidifies its competitive edge in today’s mission-critical cybersecurity landscape.
CrowdStrike Holdings (CRWD - Free Report) is strengthening its competitive edge with its Falcon platform, now featuring 29 AI-driven modules for cloud-native endpoint protection and XDR across on-prem, cloud and IoT environments. CRWD’s real-time threat intelligence, rapid incident response and enhanced Falcon XDR capabilities position it as a top choice for enterprises and federal agencies. With rising demand for cybersecurity, CRWD’s product innovation, acquisitions and partnerships continue driving growth and rivalry with Fortinet.
FTNT shares have gained 13.4% in the year-to-date period, underperforming the Zacks Security industry’s growth of 20.1%. However, FTNT has outperformed the Zacks Computer and Technology sector’s return of 9.5%.
FTNT’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Fortinet currently trades at a premium with a Price/Book ratio of 41.7X, higher than the industry’s 24.34X. FTNT has a Value Score of F.
FTNT’s Valuation
Image Source: Zacks Investment Research
The consensus mark for 2025 earnings is pegged at $2.48 per share, which remains unchanged over the past 30 days and has been revised upward by a cent over the past 60 days. The estimate indicates 4.64% year-over-year growth.
Image: Bigstock
Fortinet Expands via Cross-Selling: A Path to More Profitability?
Key Takeaways
Fortinet (FTNT - Free Report) is using its vast customer base to fuel growth, with cross-selling emerging as a key driver of profitability.
By offering a broad range of complementary security solutions, Fortinet encourages existing customers to adopt additional products and services beyond their initial purchase, such as expanding from a FortiGate firewall to SD-WAN and then to a single-vendor SASE solution. This strategy not only increases overall revenues but also boosts recurring revenues through subscription-based services, which typically have higher profit margins.
The company’s first-quarter 2025 results highlighted how this strategy — centered on selling Secure Access Service Edge (SASE) and Security Operations (SecOps) solutions to existing SD-WAN and firewall customers — is delivering strong results. In the quarter, 91% of SASE billings and 97% of SecOps billings came from existing clients.
Unified SASE annual recurring revenues (ARR) climbed 26% year over year, while SecOps ARR surged 30%, bringing combined ARR to $1.6 billion. Notably, its large enterprise customers contributed 48% of SASE and 40% of SecOps revenues, far outpacing mid- and small-sized customers, which highlights Fortinet’s ability to deepen penetration within its most lucrative customer segment.
These gains are translating into stronger profitability, with non-GAAP operating margin reaching a record 34.2% and adjusted free cash flow climbing to $839 million, nearly 54% of total revenues. Together, these results reflect how Fortinet’s cross-selling model enhances operating efficiency and margin leverage.
With RPO up 12% year over year to $6.49 billion, the company anticipates double-digit SASE and SecOps growth in 2025, sustaining profitability through cross-selling.
Fortinet's Competitors in the Cybersecurity Market
Palo Alto Networks (PANW - Free Report) is accelerating growth through strategic alliances with VMware and Aruba Networks under its NextWave program, and key acquisitions such as LightCyber, Morta Security and Cyvera. PANW's innovative next-generation security platforms classify traffic by application, user and content, providing deep visibility and reducing reliance on multiple security tools. By reducing the total cost of ownership and increasing enterprise security, PANW solidifies its competitive edge in today’s mission-critical cybersecurity landscape.
CrowdStrike Holdings (CRWD - Free Report) is strengthening its competitive edge with its Falcon platform, now featuring 29 AI-driven modules for cloud-native endpoint protection and XDR across on-prem, cloud and IoT environments. CRWD’s real-time threat intelligence, rapid incident response and enhanced Falcon XDR capabilities position it as a top choice for enterprises and federal agencies. With rising demand for cybersecurity, CRWD’s product innovation, acquisitions and partnerships continue driving growth and rivalry with Fortinet.
FTNT’s Share Price Performance, Valuation & Estimates
FTNT shares have gained 13.4% in the year-to-date period, underperforming the Zacks Security industry’s growth of 20.1%. However, FTNT has outperformed the Zacks Computer and Technology sector’s return of 9.5%.
FTNT’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Fortinet currently trades at a premium with a Price/Book ratio of 41.7X, higher than the industry’s 24.34X. FTNT has a Value Score of F.
FTNT’s Valuation
Image Source: Zacks Investment Research
The consensus mark for 2025 earnings is pegged at $2.48 per share, which remains unchanged over the past 30 days and has been revised upward by a cent over the past 60 days. The estimate indicates 4.64% year-over-year growth.
Image Source: Zacks Investment Research
Fortinet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.