Fortinet, Inc. Q2 FY2025 earnings call

Key Points

• Ken Xie noted strong second quarter performance, beating billing and operating margin guidance. Billing growth was driven by large enterprise customers with deals over $1 million up over 50%. Unified SASE and AI-driven secure operations billing grew over 20% to 35% of total billings. Fortinet was named a leader in the 2025 Gartner Magic Quadrant for SASE platform.
• Christiane Ohlgart discussed financial results: total billings $1.78 billion, up 15%; RPO grew 12% to $6.64 billion; total revenue $1.63 billion, up 14%. Product revenue $509 million, up 13%; service revenue $1.12 billion, up 14%. Highlighted 7-figure deals showcasing FortiSASE adoption. Margins: total gross margin 81.6%, operating margin 33.1%. Free cash flow $284 million, adjusted free cash flow $428 million. Update on firewall upgrade cycle: ~40%-50% through 2026 upgrade cycle, 2027 cohort is low-end devices.
• John Whittle mentioned both firewall and SASE markets growing and fragmented, allowing Fortinet to grow market share.

In the second quarter, billing grew by 15% and revenue grew by 14%. Non-GAAP operating margin was 33%. Unified SASE and AI-driven secure operations billing each grew over 20% to a combined 35% of total billings. Total revenue grew to $1.63 billion, with EMEA growing 18%, Americas and APAC both 11%. Product revenue increased 13%, service revenue grew 14%. Product revenue benefited from upgrade buying and strong growth in operational technology, while service revenue saw 17% growth in billings, the highest in 6 quarters.

Third Quarter

• Expect billings in range of $1.76 billion to $1.84 billion (midpoint 14% growth), revenue $1.67 billion to $1.73 billion (midpoint 13% growth), non-GAAP gross margins 80%-81%, non-GAAP operating margin 32.5%-33.5%, non-GAAP EPS $0.62-$0.64, infrastructure investments $110 million-$130 million.

Full Year

• Raised full year billings guidance midpoint by $100 million, now $7.325 billion-$7.475 billion (midpoint 13% growth). Revenue $6.675 billion-$6.825 billion (midpoint 13.3% growth), service revenue $4.55 billion-$4.65 billion (midpoint 14% growth), non-GAAP gross margin 79%-81%, non-GAAP operating margin 32%-33.5%, non-GAAP EPS $2.47-$2.53, infrastructure investments $380 million-$430 million.

Q: Shaul Eyal asked if sales of FortiSASE cannibalize core appliance business. Ken Xie responded that SASE doesn't replace the firewall but enhances it, with Christiane adding it's an expansion not replacement, and John Whittle noting both markets growing and fragmented.

Q: Tal Liani asked about SASE customer profile. Ken Xie said it's both displacements of existing vendors and greenfield, with Christiane adding win-loss analysis shows little reason for customers moving to cloud not continuing to buy.

Q: Gabriela Borges asked about growth rate through cycles and why not more upside from refresh cohort. Christiane Ohlgart said it's by FortiGate model, with Ken Xie adding refresh upgrade is for much older products different from supply chain issues.