Fortinet Q2 Earnings Surpass Estimates, Sales Increase Y/Y

Fortinet Inc. FTNT reported strong second-quarter 2025 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.

Fortinet reported second-quarter 2025 non-GAAP earnings per share (EPS) of 64 cents, which beat the Zacks Consensus Estimate by 8.47%. The bottom line grew 12.3% from the year-ago quarter’s earnings of 57 cents per share.

Total revenues of $1.63 billion beat the consensus mark by 0.65% and improved 13.6% year over year. Growth was led by EMEA, up 18%, while the Americas and APAC each posted 11% gains.

Remaining performance obligations (RPO) rose 12% year over year to $6.64 billion, while current RPO increased 15% to $3.45 billion.

Fortinet, Inc. Price, Consensus and EPS Surprise

Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote

Total billings increased 15% year over year to $1.78 billion, led by 21% growth in Unified SASE and a strong 31% surge in SecOps.

FTNT’s Q2 in Detail

Segment-wise, Product revenues increased 12.6% year over year to $508.9 million, representing 31.2% of total revenues, driven by upgrade buying and strong growth in operational technology. Software license revenues grew at a high-teens rate and accounted for a high-teens percentage of total product revenues.

Service revenues of $1.12 billion grew 14.1% year over year, accounting for 68.8% of total revenues. Security subscription revenues rose 15.3%, and support and related service revenues increased 12.5%. Service billings grew 17%, which was Fortinet’s highest growth rate in the past six quarters.

Recently, the company expanded its FortiCloud portfolio with three new services: FortiIdentity, FortiDrive and FortiConnect.

Recent investments in the fast-growing unified SASE market and AI-driven secure operations continue to deliver strong returns, with combined billings for both segments growing more than 20% and accounting for 35% of total billings.

Margins of FTNT

Total gross margin increased 10 basis points (bps) to 81.6% and exceeded the high end of the guided range by 60 bps due to strong execution and cost control.

Product gross margin of 67.8% increased 180 bps as inventory-related charges normalized.

Service gross margin declined 80 bps year over year to 87.8%, primarily due to increased investments in expanding hosted security solutions.

Operating margin declined 200 basis points year over year to 33.1% in the second quarter but remained 60 basis points above the high end of guidance. The contraction was due to increased investments in sales headcount, costs associated with recent acquisitions and foreign exchange headwinds due to a weaker U.S. dollar.

FTNT’s Balance Sheet & Cash Flow

Fortinet exited the second quarter of 2025 with cash and cash equivalents and short-term investments of $4.56 billion, down from the $4.78 billion reported at the end of the first quarter of 2025.

Cash flow from operations was $451.9 million for the second quarter of 2025, down from $863.3 million in the previous quarter.

Free cash flow was $284.1 million for the second quarter of 2025, down from $782.8 million in the prior quarter.

FTNT Provides Guidance for Q3 & 2025

Fortinet estimates third-quarter revenues in the range of $1.67-$1.73 billion. Billings are estimated in the band of $1.76-$1.84 billion.

The non-GAAP gross margin is expected in the range of 80-81%, while the non-GAAP operating margin is anticipated between 32.5% and 33.5%. Non-GAAP EPS is projected in the band of 62-64 cents.

For 2025, FTNT predicts revenues in the range of $6.675-$6.825 billion. Services revenues are projected in the range of $4.55-$4.65 billion. Billings are expected in the band of $7.325-$7.475 billion.

The non-GAAP gross margin is expected in the range of 79-81%, and the operating margin is projected in the band of 32-33.5%. Non-GAAP EPS is anticipated to be between $2.47 and $2.53.

FTNT’s Zacks Rank & Other Stocks to Consider

Currently, Fortinet carries a Zacks Rank #2 (Buy).

Vipshop VIPS, Lumentum LITE and NetEase, Inc. NTES are some other top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. While Vipshop sports a Zacks Rank #1 (Strong Buy) at present, Lumentum and NetEase carry a Zacks Rank of 2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vipshop shares have returned 13.1% year to date. VIPS is set to report its second-quarter 2025 results on Aug. 14.

Lumentum shares have appreciated 31% year to date. LITE is set to report its fourth-quarter fiscal 2025 results on Aug. 12.

NetEase shares have rallied 49.1% year to date. NTES is set to report its second-quarter 2025 results on Aug. 14.

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