Shares of cybersecurity firm Fortinet have fallen more than 8% in after-hours trading following the release of its fourth-quarter 2024 (Q4 2024) revenue forecast, which fell short of some investor expectations.
Fortinet has faced a mixed economic environment as businesses adjust to higher borrowing costs and conservative spending patterns, impacting technology and cybersecurity investment decisions. Additionally, the company faces strong competition from larger industry peers, such as Palo Alto Networks.
Fortinet’s Q4 2024 guidance and Q3 2024 results
The US networking and security company anticipates Q4 2024 revenue between $1.56bn and $1.62bn, with a midpoint estimate that aligns with analyst projections of $1.59bn. Fortinet additionally projects billings in the range of $1.9bn to $2bn, alongside a non-GAAP gross margin between 79.5% and 80.5%.
For the full fiscal year 2024, Fortinet has adjusted its revenue expectations slightly upward, estimating revenue to reach between $5.86bn and $5.92bn, compared to its earlier forecast of $5.8bn to $5.9bn. Service revenue for the full year is anticipated to be in the range of $4.02bn to $4.05bn. Full-year non-GAAP earnings per share (EPS) are expected to be between $2.2 and $2.28.
During its earnings call, the company highlighted that Fortinet remains the only vendor to utilise a single operating system, FortiOS, across five Gartner Magic Quadrant reports in secure networking, including Security Service Edge (SSE), SD-WAN, Single-Vendor SASE, Network Firewall, and Enterprise Wired and Wireless LAN Infrastructure.
When combined with FortiASIC technology, FortiOS significantly enhances secure computing performance, offering 5x to 10x better results than competitors, the company claimed.
In the third quarter of 2024 (Q3 2024), Unified SASE billings accounted for 23% of the business, reflecting a 1.5-point increase driven by a 220% growth in SSE billings and a 130% increase in the pipeline.
“Our investments in the fast-growing markets of Unified SASE and Security Operations generated strong results as we continued to gain market share in Secure Networking,” said Fortinet’s founder, CEO and chairman Ken Xie. “With our expertise in converging networking and security, a proven track record of innovation, and seamless product integration within our FortiOS and FortiASIC, we are well-positioned to lead in our three core growth areas and drive sustained growth.”
Fortinet’s results for the third quarter ended 30 September 2024 showed total revenue of $1.51bn, representing a 13% increase over the $1.33bn recorded for the same period last year. Product revenue reached $473.9m, a rise of 1.7% from $465.9m in Q3 2023. Service revenue grew by 19.1% from $868.7m to $1.03bn.
The company’s Q3 2024 financial performance also reflected growth in operating income. On a non-GAAP basis, operating income for the quarter was $544.7m. Fortinet’s GAAP net income rose to $539.9m for the third quarter of 2024, compared to $322.9m in the same quarter of 2023.
The security operations segment was Fortinet’s fastest-growing pillar, increasing by 32% and making up 10.5% of the overall business. Fortinet also expanded this portfolio with solutions such as FortiCNAPP and FortiDLP, which it said represented new revenue opportunities with an estimated market size of $20bn.
In September, the company confirmed that a security breach allowed an unauthorised actor to access files on a third-party file-sharing platform used by Fortinet. The company stated that the breach involved data belonging to a small number of customers and that there was no evidence suggesting the incident affected broader customer security.
Read more: Cybersecurity company Fortinet suffers third-party data breach
