Fortinet, Inc. Q4 FY2025 earnings call

Key Points

• Fourth quarter growth: Billings up 18%, revenue up 15%, product revenue up 20%, operating margin 37%.
• Secure networking: Billing grew 13%, Fortinet remains #1 firewall leader with 55% unit market share.
• Unified SASE: Billing grew 40%, representing 27% of total billing, with strong demand for Sovereign SASE.
• AI and OT: AI-driven secure billing grew 6% Q4 and 22% full year, OT solution billing up over 25%.
• Key deals: Large consumer services company adopted FortiSASE, global data center provider signed 8-figure deal, major utility company expanded partnership, Fortune 100 company signed 8-figure Unified SASE deal.

Total billings grew by 18% to $2.37 billion. Product revenue increased by over 20% to $691 million, with both hardware and software growing 20%. Service revenue grew 12% to $1.21 billion. Unified SASE billings grew 40%, representing 27% of total billing. OT security billings grew by over 25%. AI-driven secure billing grew 6% in Q4 and 22% for the full year, with ARR up 21%.

First Quarter

• Billings: $1.77 billion to $1.87 billion (midpoint growth 14%).
• Revenue: $1.7 billion to $1.76 billion (midpoint growth 12%).
• Non-GAAP gross margin: 80% to 81%, non-GAAP operating margin: 30% to 32%, non-GAAP EPS: $0.59 to $0.63.

Full Year 2026

• Expect Rule of 45 for seventh consecutive year.
• Billings: $8.4 billion to $8.6 billion (midpoint growth 13%).
• Revenue: $7.5 billion to $7.7 billion (midpoint growth 12%).
• Service revenue: $5.05 billion to $5.15 billion (midpoint growth 11%).

• Supply chain risks, such as memory price fluctuations.
• Currency risks, with recent weakness of the U.S. dollar potentially creating a headwind in Q1.
• Forward-looking statements subject to risks where actual results may differ materially from projections.

Q: Shaul Eyal asked about what drove the strength in Unified SASE billings and confidence into 2026.

A: Ken Xie stated Unified SASE grew 40% due to unique advantages like Sovereign SASE, single OS integration, and cost advantage. Christiane Ohlgart mentioned broad-based execution in Q4 gives confidence for 2026. John Whittle noted diversified business and focus on growth drivers.

Q: Saket Kalia asked about navigating memory environment and shape of services revenue.

A: Ken Xie said prepared for supply chain with 6 months inventory and adjusting prices. Christiane Ohlgart mentioned planning to maintain profitability by negotiating components and raising prices if needed.

Q: Robbie Owens asked about Sovereign versus Public SASE mix and service revenue shape.

A: Ken Xie said Sovereign SASE market may be bigger, and service revenue turnaround driven by product revenue growth.

Q: Gabriela Borges asked about 2020-2021 refresh cohorts' engagement.

A: Ken Xie said end of service solutions and new function driving growth, Christiane Ohlgart confirmed customer need for additional security.

Q: Fatima Boolani asked about SASE and product refresh growth and pricing impact.

A: Ken Xie said SASE complements product refresh, Christiane Ohlgart said pricing actions are 5% to 20% on specific products and impact services over time.

Q: Junaid Siddiqui asked about SecOps billings decel.

A: Christiane Ohlgart said billings are volatile, Ken Xie said SecureOps is long tail and annual numbers more reasonable.

Q: Patrick Colville asked about pricing comments.

A: Christiane Ohlgart said pricing for appliances in 2026 expected to go up 5% to 20% on average.

Q: Adam Borg asked about ASIC chip adoption and refresh opportunity.

A: Ken Xie said new ASIC chips announced with products and take time to build in, John Whittle said refresh opportunity is expansion chance, Christiane Ohlgart said firewall upgrade at edge combined with FortiSASE discussion.

Q: Brian Essex asked about memory supply chain management and secure networking mix.

A: Ken Xie said memory is 10%-20% of bill of materials, Christiane Ohlgart said secure networking mix is broad-based with similar growth rates across components.