Fortinet Shares Fall More Than 25% as Product Revenue Growth Slows to 37%

Fortinet (NASDAQ:FTNT) shares declined more than 25% in U.S. premarket trading on Thursday after the cybersecurity company reported slower product revenue growth in the third quarter of 2026, despite a 20% increase in overall revenue.

Product revenue rose 37% to $765 million, exceeding analysts’ estimates but falling short of investor expectations for growth of approximately 50%. The slowdown prompted questions about the duration of the company’s product replacement cycle.

Fortinet attributed the moderation to a return to more typical growth rates following increased demand during the first half of the year.

Third-Quarter Revenue Rises 20% to $2.08 Billion

Fortinet reported revenue of $2.08 billion for the quarter ended September 30, an increase of 20% compared with the previous year.

Product revenue grew 37% to $765 million, while billings increased 29% to $2.34 billion. Billings represent customer orders and contractual commitments that can provide an indication of future revenue.

Net income increased to $635.5 million, or $0.86 per diluted share, from $473.9 million, or $0.62 per share, a year earlier.

Adjusted earnings per share rose to $0.91 from $0.74, while the company’s operating margin under generally accepted accounting principles increased to 33.9% from 31.7%.

Chief Executive Officer Ken Xie attributed the quarterly performance to demand across the company’s businesses and operational execution.

Product Growth Slows as Services Revenue Misses Estimates

Although Fortinet’s product revenue exceeded analysts’ forecasts, its 37% growth rate was below expectations of approximately 50%.

Management explained that the slowdown reflected a normalization following increased first-half demand associated with anticipated price increases and competition from advanced artificial intelligence models.

Analysts at Jefferies also noted that third-quarter services revenue fell short of estimates, “elevating concerns of lower-than-expected” customer purchases of additional products and services, as well as the sustainability of growth.

“The magnitude of the services miss due to [enterprise license agreements] with ramped service deals leads us to believe that 3Q also benefited from material pull fwd which may hinder growth, particularly in the middle of CY27,” the analysts wrote.

The comments reflected Jefferies’ assessment of the timing of customer purchases and their potential effect on future revenue.

Fortinet Provides Fourth-Quarter Financial Guidance

For the fourth quarter of 2026, Fortinet forecast revenue between $2.155 billion and $2.245 billion.

The company expects billings of $2.775 billion to $2.925 billion and adjusted earnings per share between $0.93 and $0.95.

Fortinet also raised its full-year revenue outlook to a range of $8.125 billion to $8.215 billion, representing approximately 20% annual growth at the midpoint.

Full-year billings are projected at $9.568 billion to $9.718 billion, while adjusted earnings per share are expected to reach $3.54 to $3.58.

Company Expands AI Security Services and Partnerships

Fortinet highlighted additional security services designed to help organizations monitor artificial intelligence activity, reduce the risk of data exposure and protect networks across distributed office locations.

The company also referenced collaborations with Oracle and Microsoft focused on supporting secure AI adoption, alongside cybersecurity solutions for regulated industries.

These initiatives form part of Fortinet’s broader product and services offering as it develops security capabilities for enterprise customers.

Despite higher quarterly revenue, earnings and billings, Fortinet shares declined in premarket trading as investors assessed slower product revenue growth, the services revenue shortfall and the company’s financial outlook.

Fortinet stock price