Will Fortinet's Firewall Upgrade Cycle Continue to Power Top-Line Growth?

Fortinet FTNT stands at an inflection point as its firewall upgrade cycle, a key contributor to billings expansion, reaches the halfway mark. Management recently disclosed that roughly 40-50% of the refresh opportunity has been completed, largely driven by customers replacing legacy systems with Next-Generation Firewalls (NGFWs) ahead of their 2026 end-of-service dates.

In the second quarter of 2025, billings rose 15% year over year to $1.78 billion, underscoring resilient demand for Fortinet’s advanced NGFWs. These modern firewalls combine AI-driven threat prevention, zero-trust access and secure SD-WAN in a single platform, enabling customers to modernize network security while laying the foundation for future cloud-based service adoption. The company estimates that around 650,000 firewall units will reach end-of-service by late 2026, followed by another 350,000 low-end units in 2027, providing a stable revenue opportunity in the near term.

Fortinet’s management remains confident that the upgrade cycle will continue through at least the next four to six quarters, supporting steady product demand. However, as the cycle matures, the company is focusing more on faster-growing areas like Secure Access Service Edge (SASE) and Security Operations (SecOps). Reflecting confidence in this diversified approach, Fortinet raised its 2025 billings guidance by $100 million to $7.325-$7.475 billion.

According to the Zacks Consensus Estimate, Fortinet’s total revenues are projected to grow 13.29% in 2025 and 11.05% in 2026, showing steady double-digit growth. As the firewall cycle matures, the company's focus on AI, cloud and next-generation services is seen as key to sustainable top-line growth.

How Rivals Stack Up Against FTNT's Firewall

Palo Alto Networks PANW competes directly with Fortinet in next-generation firewalls, excelling in enterprise deployments with advanced cloud integration, identity-based control and unified management. Palo Alto's Strata Cloud Manager, named a 2025 Gartner Leader for Hybrid Mesh Firewalls, increases visibility and management simplicity. Powered by the Single-Pass Parallel Processing (SP3) engine, Palo Alto delivers stronger performance, reliability and scalability, outpacing Fortinet in large, complex networks. However, FTNT retains an edge in cost efficiency for mid-sized businesses.

Check Point Software Technologies CHKP competes closely with Fortinet in the next-generation firewall market, emphasizing a prevention-first security approach and advanced threat intelligence. Its Quantum NGFW solutions offer deep packet inspection and centralized management, appealing to large enterprises. However, Fortinet’s integrated Security Fabric, superior performance and faster innovation give it a competitive edge in scalability and efficiency. While Fortinet continues to expand aggressively, Check Point maintains its strength through stability, mature architecture and a consistent real-time threat prevention focus.

FTNT’s Share Price Performance, Valuation & Estimates

Fortinet shares have declined 10.4% year to date, underperforming the Zacks Security industry’s 23.2% rally and the broader Computer and Technology sector’s 23.8% growth.

FTNT’s YTD Price Performance

From a valuation standpoint, FTNT appears overvalued, trading at a forward 12-month price-to-sales ratio of 8.84, higher than the sector's average of 6.94. The company carries a Value Score of D.

FTNT’s Valuation

The Zacks Consensus Estimate for Fortinet’s earnings is pegged at $2.52 per share for 2025 and $2.77 per share for 2026, with both figures holding steady over the past 30 days. These projections imply year-over-year earnings growth of 6.33% for 2025 and 9.83% for 2026.

Fortinet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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