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    FTNT
    Earnings call· Jun 2026(Q2 FY26)

    Fortinet Q2 FY26 earnings call FTNT

    Jul 29, 2026 Source

    Executive summary

    Fortinet Q2 FY26 — Strong Billings and Product Growth Driven by SASE Firewall and AI Demand

    Fortinet delivered strong Q2 FY26 results, exceeding guidance across key metrics, driven by broad-based demand and execution. The company is capitalizing on the convergence of networking and security with its "SASE Firewall" strategy, which integrates proprietary FortiOS and FortiASIC technology to address AI-driven security needs and sovereign SASE requirements. This integrated platform approach positions Fortinet for continued growth and market share capture.

    Highlights

    5

    • Total billings grew 33% to $2.37 billion, exceeding guidance.

    • Total revenue increased 26% to $2.05 billion, propelled by 52% product revenue growth to $773 million.

    • Free cash flow more than tripled year-over-year to $966 million.

    • Non-GAAP operating margin reached a Q2 record of 38%, up 490 basis points.

    • Fortinet's SASE Firewall business grew 34% to over $2 billion, cementing its position as a top player.

    Concerns

    4

    • AI-enabled sophisticated attacks

    • Evolving regulatory requirements

    • Expanding enterprise attack surfaces

    • Geopolitical uncertainty

    Guidance & targets

    17
    CategoryTargetConfidence
    Billings
    $2.25B to $2.35B
    high materiality
    High
    Revenue
    $2.01B to $2.1B
    high materiality
    High
    Non-GAAP Gross Margin
    79% to 81%
    medium materiality
    High
    Non-GAAP Operating Margin
    35% to 37%
    high materiality
    High
    Non-GAAP EPS
    $0.83 to $0.87
    high materiality
    High
    Infrastructure Investments
    $100M to $150M
    medium materiality
    High
    Non-GAAP Tax Rate
    18%
    low materiality
    High
    Cash Taxes
    $100M to $130M
    low materiality
    High
    Billings
    $9.35B to $9.55B
    high materiality
    High
    Revenue
    $8.02B to $8.18B
    high materiality
    High
    Service Revenue
    $5.18B to $5.22B
    medium materiality
    High
    Non-GAAP Gross Margin
    79% to 81%
    medium materiality
    High
    Non-GAAP Operating Margin
    35% to 37%
    high materiality
    High
    Non-GAAP EPS
    $3.41 to $3.47
    high materiality
    High
    Infrastructure Investments
    $350M to $550M
    medium materiality
    High
    Non-GAAP Tax Rate
    18%
    low materiality
    High
    Cash Taxes
    $400M to $450M
    low materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Secure Networking
    Driven by persistent high FortiGate demand as customers expanded their network security, including operational technology environments, LAN Edge, and AI data centers.
    Billings growth: 34%
    		—34%——
    Unified SASE
    Momentum built throughout the quarter, benefiting from expansion sales across the installed base, competitive replacements, and new wins with large enterprises, driven by flexible deployment strategies including the new SASE Firewall strategy.
    Billings growth: 35%FortiSASE billings growth: >100%Adoption within installed base: 90% of large enterprises
    		—35%——
    AI-driven Security Operations
    Driven by strong upsell momentum as the installed base increasingly consolidates point solutions onto the broader platform.
    Billings growth: 25%
    		—25%——
    Operational Technology (OT)
    Reflecting continued adoption of Fortinet's solutions in industrial environments, driven by increasing cyber threats, AI adoption, and geopolitical uncertainty.
    Billings growth: 55%
    		—55%——

    Operational metrics

    11
    Product revenue
    $773M52% YoY growth
    Q2 FY26

    Accelerating product revenue benefited from strong FortiGate unit growth and an increase in ASPs as customers shifted towards higher-performing models.

    Service revenue
    $1.27B14% YoY growth
    Q2 FY26

    Growth improving from the prior quarter. Q1 FY26 marked the trough for service revenue growth rate.

    Service billings growth
    26%YoY growth
    Q2 FY26

    Service billings growth increased.

    Total deferred revenue
    17%YoY growth
    Q2 FY26

    Total deferred revenue increased.

    GAAP gross margin
    80.2%
    Q2 FY26

    GAAP gross margin was strong.

    GAAP operating margin
    33.7%
    Q2 FY26

    GAAP operating margin continues to be one of the highest in the industry.

    Non-GAAP EPS
    $0.9041% YoY growth
    Q2 FY26

    Non-GAAP earnings per share increased.

    GAAP EPS
    $0.8244% YoY growth
    Q2 FY26

    GAAP earnings per share grew, significantly outpacing top line growth.

    Shares repurchased
    1.9M shares$146M
    Q2 FY26

    Repurchased shares of common stock during the second quarter.

    Shares repurchased year-to-date
    12.5M shares$973M
    YTD Q2 FY26

    Shares repurchased year-to-date, with an average price of around $78 per share.

    Remaining share repurchase authorization
    $766M
    As of 2026-07-29

    Remaining share repurchase authorization as of today.

    Industry KPIs

    8
    MetricValueDetails
    Capacity CAPEX$100M-$150MUSD
    Revenue growth$2.05BUSD
    Arr net new arr>100%%
    Bookings billings$2.37BUSD
    Customer account count90%%
    Large deal new logo metrics8-figureUSD
    Operating FCF margin rule of 4038%%
    Ai product adoption monetization25%%

    Product announcements

    3
    ProductTypeDetails
    FortiGate 1200Glaunch
    FortiSOClaunch
    FortiEndpointexpansion

    Deals & partnerships

    3
    New cloud providerSecure AI data centers for generative AI workloads8-figure

    Selected Fortinet to secure AI data centers. Chose Fortinet for strong price for performance advantage and ability to deliver scalable, high-throughput security, accelerating deployment of new capacity.

    Global pharmaceutical companyFortiSASE deal to secure over 45,000 users7-figure

    Chose Fortinet for its unified architecture and integrated platform approach across SD-WAN, next-generation firewall, and switching. Key differentiator was the ability to extend security processing to the edge through on-premises appliances, providing greater control, improved performance, and deeper visibility.

    Major utility organizationSupport large-scale communications modernization OT initiative7-figure

    Selected Fortinet to support an OT initiative spanning thousands of distributed field locations. The deployment leverages the integrated FortiOS platform to enable reliable, secure connectivity for operational environments while simplifying management and reducing infrastructure complexity.

    Risks & headwinds

    4
    AI-enabled sophisticated attacksOngoing

    Increasing speed and complexity of threats

    Mitigation: Fortinet's FortiOS platform and FortiASIC technology allow enterprises to securely scale their next-generation AI environment with faster and better protection and simplified operation.

    Evolving regulatory requirementsOngoing

    Requires companies to act

    Mitigation: Fortinet's solutions address evolving compliance and sovereignty requirements, playing directly into its strong market position, especially in EMEA and public sector.

    Expanding enterprise attack surfacesOngoing

    Across cloud, AI, OT, and critical infrastructure environments

    Mitigation: Fortinet's integrated platform approach provides shared telemetry, improved visibility, and reduced operational overhead to navigate growing complexity.

    Geopolitical uncertaintyOngoing

    Contributing to strong demand for OT portfolio

    Mitigation: Fortinet's integrated platform approach provides visibility across both OT and IT networks, addressing critical business and board-level risk priorities.

    What to watch in Q3 FY26

    5

    Service Revenue Growth Trajectory

    Going forward
    Current14% YoY in Q2 FY26
    TargetPositive trajectory

    Why it matters

    Reinforces the compounding strength and high margin predictability of Fortinet's recurring revenue model.

    We believe the first quarter of 2026 marked the trough for our service revenue growth rate, and we anticipate a positive trajectory in our growth rates going forward⏳.

    Q&A highlights

    6

    What's driving the accelerating growth and how sustainable is it?

    Ken Xie attributes the accelerating growth to new market trends like AI reshaping security, Fortinet's differentiated strategy (ASIC, infrastructure, R&D), and the "SASE Firewall" concept replacing traditional firewalls and competing with cloud-only SASE. He believes it's a long-term growth trend, similar to the shift from traditional firewalls to UTM NextGen firewalls 20 years ago.

    “We do believe the growth actually is a long term for Fortinet. Definitely, you see the AI changed a lot of our security landscape. And also with our kind of like investment like from the ASIC chip, from our own infrastructure, from the R&D innovation, we also positioned much better than any of our other competitors, that's also the reason I kind of tried to call a new term, which I'm not sure will be -- everybody would like that is a SASE Firewall.”

    asked by Saket Kalia · answered by Ken Xie

    2 min read6 chapters

    Detailed Narrative

    01

    SASE Firewall Strategy and Market Opportunity

    Ken Xie introduced the "SASE Firewall" concept, combining secure networking and Unified SASE on FortiOS, which he believes represents a massive opportunity for accelerated growth. This new approach addresses a total addressable market approximately 2 to 3 times larger than cloud-only SASE solutions, primarily due to its unique ability to offer easily deployable on-premise sovereign SASE alongside cloud SASE, meeting customer demands for data privacy and local enforcement.

    02

    AI-Driven Security Demand and Innovation

    The company highlighted strong demand for AI-driven security solutions, with billings in this pillar growing 25%. AI is rapidly reshaping the security landscape, increasing the speed and complexity of threats. Fortinet is uniquely positioned with its FortiOS platform and FortiASIC technology to help enterprises securely scale their next-generation AI environments, protect AI models and data sets, and secure large volumes of east-west traffic.

    03

    Accelerating Product and Service Revenue

    Product revenue surged 52% to $773 million, driven by robust FortiGate unit growth and increased Average Selling Prices (ASPs) as customers shifted to higher-performing models. Service revenue grew 14% to $1.27 billion, with management noting Q1 FY26 marked the trough for service revenue growth and anticipating a positive trajectory going forward⏳, reinforcing the durability of its recurring revenue model.

    04

    Leadership in OT Security

    OT billings increased over 55%, reflecting continued adoption of Fortinet's solutions in industrial environments. This growth is attributed to Fortinet's long-term investment in OT, its integrated platform approach providing visibility across IT and OT networks, and increasing regulatory requirements and cyber threats targeting critical infrastructure globally, particularly in EMEA.

    05

    Strong Profitability and Cash Flow Generation

    Fortinet achieved a non-GAAP operating margin of 38%, a second-quarter record and a 490 basis point increase year-over-year, exceeding guidance. This performance was driven by stronger-than-expected revenue growth, disciplined cost management, and growing efficiencies from internal AI initiatives. Free cash flow more than tripled year-over-year to $966 million, demonstrating exceptional operational performance and working capital discipline.

    06

    Key Customer Wins and Competitive Differentiators

    The company secured an 8-figure AI data center win with a new cloud provider and a 7-figure FortiSASE deal with a global pharmaceutical company, displacing an incumbent SSE-only provider. These wins highlight Fortinet's unified architecture, integrated platform approach, ability to extend security processing to the edge through on-premises appliances (FortiSASE Outpost), and strong price-for-performance advantage as key competitive differentiators.

    AI-generated summary of the company’s earnings call. Not investment advice.