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    FTNT
    Earnings call· Sep 2025(Q3 FY25)

    Fortinet, Inc. FTNT

    Nov 5, 2025 Source

    Executive summary

    Fortinet Q3 FY25 — Strong Performance Driven by Unified SASE and SecOps Growth

    Fortinet delivered strong Q3 FY25 results, driven by robust demand for its Unified SASE and AI-driven SecOps solutions, outperforming market growth across its three pillars. The company maintains its Rule of 45 target, leveraging its integrated platform and ASIC advantage to gain market share, despite ongoing deceleration in service revenue growth which is expected to improve in H2 FY26.

    Highlights

    5

    • Total billings grew by 14% to $1.81 billion, driven by broad-based demand.

    • Total revenue grew by 14% to $1.72 billion, with product revenue up 18%.

    • Unified SASE billings grew 19%, with FortiSASE billings growing over 100%.

    • AI-driven SecOps billings grew 33%, making it the fastest-growing pillar.

    • Operating margin reached a record 36.9% for the third quarter, up 80 basis points.

    Concerns

    2

    • Service revenue growth decelerated to 13%, marking the ninth consecutive quarter of deceleration.

    • North America growth lagged EMEA and APAC in Q3 FY25, though management stated no share loss.

    Guidance & targets

    20
    CategoryTargetConfidence
    Billings
    $2.185B to $2.285B
    high materiality
    High
    Revenue
    $1.825B to $1.885B
    high materiality
    High
    Non-GAAP Gross Margin
    79% to 80%
    medium materiality
    High
    Non-GAAP Operating Margin
    34.5% to 35.5%
    high materiality
    High
    Non-GAAP EPS
    $0.73 to $0.75
    high materiality
    High
    Infrastructure Investments
    $60M to $110M
    medium materiality
    High
    Non-GAAP Tax Rate
    18%
    low materiality
    High
    Cash Taxes
    $66M to $116M
    low materiality
    High
    Billings
    $7.37B to $7.47B
    high materiality
    High
    Revenue
    $6.72B to $6.78B
    high materiality
    High
    Service Revenue
    $4.575B to $4.595B
    medium materiality
    High
    Non-GAAP Gross Margin
    80.25% to 80.75%
    medium materiality
    High
    Non-GAAP Operating Margin
    34.5% to 35%
    high materiality
    High
    Non-GAAP EPS
    $2.66 to $2.70
    high materiality
    High
    Infrastructure Investments
    $380M to $430M
    medium materiality
    High
    Non-GAAP Tax Rate
    18%
    low materiality
    High
    Cash Taxes
    $400M to $450M
    low materiality
    High
    Rule of 45
    Continue to meet
    high materiality
    High
    Market Share and Growth
    Continue to gain market share and outperform the overall market growth
    high materiality
    High
    Service Revenue Growth
    Improving
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Unified SASE
    Strong growth driven by FortiSASE, making Fortinet one of the fastest-growing SASE leaders at scale. 15% of large enterprise customers now use FortiSASE, representing 55% growth.
    Percentage of total billings: 26%FortiSASE billings growth: >100%ARR: $1.22B
    		—19%——
    AI-driven SecOps
    Fastest-growing pillar in Q3, powered by Fortinet's AI patent portfolio and over 20 AI-driven solutions.
    Percentage of total billings: 11%ARR: $472M
    		—33%——
    Secure Networking
    Outperformed the overall secure networking market, with Fortinet being the #1 leader in firewall with over 50% unit market share.
    		—10%——
    Operational Technology and Critical Infrastructure
    Significant growth driver with broad-based demand for both hardware and software solutions.
    		—30%+——

    Operational metrics

    14
    Non-GAAP Gross Margin
    81.6%
    Q3 FY25

    Better than expected, driven by strong execution and cost control.

    Non-GAAP Operating Margin
    36.9%up 80 bps YoY
    Q3 FY25

    Reached a third quarter record, primarily due to operational efficiencies and strong cost management.

    Adjusted Free Cash Flow Margin
    37%
    Q3 FY25

    Based on adjusted free cash flow of $646M.

    Infrastructure Investments
    $88Mup $51M YoY
    Q3 FY25

    Continued build out of infrastructure footprint.

    Shares Repurchased
    23.3M
    Q3 FY25

    Reduced total share count by approximately 3%.

    Aggregate Purchase Price (Share Repurchase)
    $1.83B
    Q3 FY25

    For 23.3 million shares of common stock.

    Authorized Stock Repurchase Increase
    $1B
    August 2025

    Approved by the Board of Directors.

    Remaining Share Buyback Authorization
    $796M
    as of call date

    As of today.

    SecOps ARR
    $472M25% YoY growth
    Q3 FY25

    Increased by 25%.

    Software License Revenue Growth
    20%
    Q3 FY25

    Software license revenue was up 20%.

    Software License Revenue as % of Total Product Revenue
    mid- to high teens
    Q3 FY25

    Representing a mid- to high teens percentage of total product revenue.

    Average Service Term
    29
    average

    Average service term is approximately 29 months.

    AI Patent Portfolio
    500+
    current

    More than 500 issued AI patents powering over 20 AI-driven solutions.

    Total Dollar Value of Deals > $1M
    30%
    Q3 FY25

    The total dollar value of deals greater than $1 million grew over 30%.

    Industry KPIs

    8
    MetricValueDetails
    Capacity CAPEX$88MUSD
    Revenue growth$1.72BUSD
    Arr net new arr$1.22BUSD
    Bookings billings$1.81BUSD
    Customer account count6,600new organizations
    Large deal new logo metrics26%%
    Operating FCF margin rule of 4036.9%%
    Ai product adoption monetization15%%

    Product announcements

    3
    ProductTypeDetails
    Secure AI data center solutionlaunch
    FortiOS 8.0roadmap
    New ASIC (MPA)roadmap

    Deals & partnerships

    4
    Global Fortune 150 e-commerce companyExpansion of investment for AI data center security

    Already leveraging Fortinet firewalls, the customer selected Fortinet's ASIC-based FortiGate architecture to secure and optimize new AI workloads requiring extreme throughput and reliability. Displaced a competitor.

    Large city police forcePurchase of SD-WAN, SD-Branch, and Sovereign SASE solutions8-figure deal

    Displaced multiple vendors, including their previous SASE provider. Chose Fortinet for flexible and consistent security enforcement and single operating system, supporting network transformation.

    Operational technology organizationConsolidation of security functions onto Fortinet's platform

    A competitive new customer win, purchasing more than 10 Fortinet solutions across all three pillars (Secure Networking, Unified SASE, AI-driven SecOps).

    Retail organizationUpgrade of FortiGates and exploration of ZTNA adoption

    Long-time Fortinet customer upgraded FortiGates across more than 10,000 retail locations, continuing to choose Fortinet for stable performance, consolidated FortiOS, and automated operations. Exploring ZTNA solution.

    Risks & headwinds

    2
    Service Revenue DecelerationCurrent, expected to improve in H2 FY26

    13% YoY growth in Q3 FY25, marking the ninth consecutive quarter of deceleration.

    Mitigation: Management expects improved product revenue growth and customer expansions in 2025 to act as leading indicators for service revenue recovery in the second half of 2026.

    North America Growth LagQ3 FY25

    Lagged EMEA and APAC in total revenue growth.

    Mitigation: Management stated no share loss and attributed the lag to deal timing, noting North America was very strong in Q2.

    What to watch in Q4 FY25

    5

    Service Revenue Growth

    Second half of 2026
    Current13%
    TargetImprovement

    Why it matters

    This is a key indicator of long-term revenue durability and the effectiveness of attach rates from strong product sales.

    We see our improved product revenue growth and customer expansions in 2025 as leading indicators for improving service revenue growth expected for the second half of 2026.

    Q&A highlights

    8

    What are the drivers behind the strong 18% product revenue growth, and how much is it influenced by product refresh cycles related to end-of-service?

    Ken Xie attributed strong product revenue growth to demand in SASE, SecOps, and OT, downplaying end-of-service as a primary driver. He compared it to buying a new car for features, not just because the old one is broken, emphasizing new functions, better hardware (like ASIC), and new market opportunities. John Whittle added that Fortinet has many growth drivers and prioritizes where to focus.

    “The reason to buy a new car is more because you're kind of like the new feature or better performance or some other reason instead of wait -- how many -- I mean, how the old car kind of when will be die out of service.”

    asked by Tal Liani · answered by Ken Xie

    2 min read6 chapters

    Detailed Narrative

    01

    Unified SASE Leadership and Adoption

    Fortinet emphasized its strong position in Unified SASE, with FortiSASE billings growing over 100% and 15% of large enterprise customers now utilizing the solution, representing a 55% increase in adoption. The company attributes this rapid growth to its unique single OS integration (FortiOS) that natively combines next-gen firewall, SD-WAN, and SASE, facilitating quick upsell opportunities within its large customer base. This strategy, including the provision of sovereign SASE for data privacy, positions Fortinet to become the #1 SASE market leader in the coming years.

    02

    Secure Networking Outperformance and ASIC Advantage

    The secure networking segment achieved 10% billing growth, surpassing the overall market. Fortinet highlighted its #1 market share in firewalls (over 50% unit share) and highest product revenue among cybersecurity peers. This leadership is driven by FortiOS, which unifies networking and security, and is accelerated by FortiASIC technology, delivering 5x to 10x better performance, lower TCO, and reduced energy consumption. The company was also recognized as a leader in Gartner's inaugural Magic Quadrant for hybrid mesh firewall.

    03

    AI-Driven SecOps and Data Center Security

    AI-driven SecOps emerged as the fastest-growing pillar in Q3, with billings increasing by 33%. Fortinet leverages its extensive AI patent portfolio (over 500 patents) to power more than 20 AI-driven solutions, offering a broad and integrated secure operation portfolio. The recent launch of a Secure AI data center solution, specifically designed for AI workloads and utilizing Fortinet's ASIC advantage, aims to capture growth opportunities as customers scale AI globally.

    04

    Operational Technology (OT) and Critical Infrastructure Growth

    Operational Technology and critical infrastructure solutions continue to be significant growth drivers for Fortinet, with over 30% billing growth. The company has invested over 10 years in this area, providing deep visibility, advanced threat protection, and secure connectivity for diverse devices in sectors like healthcare, utilities, and manufacturing. Management views this fragmented market as a huge potential, with network security being the primary method to secure these specialized devices.

    05

    Strategic Customer Engagements and Use Cases

    Fortinet showcased several key customer wins demonstrating its market leadership and versatility. These included a Fortune 150 e-commerce company expanding its Fortinet investment for AI data center security, a city police force adopting SD-WAN, SD-Branch, and Sovereign SASE in an 8-figure deal, and an OT organization consolidating multiple security functions onto FortiOS. A retail organization also upgraded FortiGates across 10,000+ locations and is exploring ZTNA, highlighting continued trust and expansion of Fortinet's footprint.

    06

    Product and Service Revenue Trajectory

    Management clarified the relationship between product and service revenue, noting that strong product revenue growth (18% in Q3) serves as a leading indicator for future service revenue. While service revenue growth has decelerated for nine consecutive quarters, it is expected to improve in the second half of 2026. The company emphasized that product upgrades are driven by new features, performance, and use cases (like OT and AI data centers), rather than solely by end-of-service cycles.

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