Oct 28, 2026 earnings call — Raised guidance and AI security focus
Raised 2026 billings guidance; total billings grew 29% to $2.34 billion.
Revenue $2.1B (est $2.1B) · EPS $0.91 (est $0.86) · Next-quarter revenue outlook $2.2B–$2.2B
Key quotes
"With the rapid evolution of the AI landscape, Fortinet is leading the next frontier of cybersecurity by securing AI workflow and protecting against AI-discovered vulnerability in real time through our core strength in network security."
"It's really a timing issue. And the strength in our enterprise segment, I think, is part of the reason that we see some delays in the conversion because we sold a number of really nice big deals and they have some ramped service activation."
"To illustrate, a large transportation company selected Fortinet in an 8-figure competitive win to secure its mission-critical OT infrastructure."
Analyst Q&A 12
AI security, SASE and service timing
Q (Shaul Eyal · TD Cowen): Analyst asked where Fortinet fits in AI security and SASE, and how that affects growth and demand. He also asked Christiane to explain service revenue trends, new services, and whether timing explains 2027 improvement.
A: Management said network security is central to AI security because it enforces inline AI traffic and gives visibility; Fortinet has large unit deployments and can train better SASE firewall models, invest in ASICs, and grow faster than the market. They said service revenue indicators improved but some large enterprise deals delayed service activation, so the revenue timing moved later; new FortiGuard Inline AI Service targets AI-specific risks and will be relevant.
"We believe network security is the most important part of AI security because they are the inline enforcer to a lot of AI traffic and also provide better visibility." — Ken Xie (CEO·CHAIR)
2027 product growth and pricing
Q (Saket Kalia · Barclays): Analyst asked how to think about product growth in 2027 given a tough compare in 2026. He also asked where pricing stands after cost pass-throughs and how pricing might be a lever for 2027.
A: Management said it's early to give 2027 guidance but they are confident they will grow faster than the market, pointing to a 16% SASE firewall market growth rate and advantages from their ASICs and direct-managed manufacturing and operations. On pricing, they said price so far added about a 10% benefit to the top line, they used on-hand inventory (about 6 months) earlier in the year, and price increases have stabilized but are hard to forecast; the company aims to keep gross margin steady by adjusting prices with costs.
"I think the price so far has about 10% benefit on the top line." — Ken Xie (CEO·CHAIR)
How big and durable is this AI cycle?
Q (Gray Powell · BTIG): Analyst asked how the current AI-driven spending cycle compares to post-COVID cycles and whether it feels more durable than past cycles.
A: Ken said this cycle feels bigger than 5–6 years ago because AI builds infrastructure and increases security demand, and they have not seen demand slow. John added that their business follows the threat environment and that the AI threat seems more durable and elevated, so it feels like early days for this cycle.
"This AI threat, no one has a crystal ball as someone mentioned earlier, just seems a lot more durable and sustainable in some of those earlier kind of threat drivers." — John Whittle (COO)
Start of Q4 demand and vulnerabilities
Q (Robbie Owens · Piper Sandler): Analyst asked how the start of Q4 is trending given October headlines and new vulnerabilities, and whether they can quantify any change in demand or vulnerability activity.
A: Management said demand remains very strong with no slowdown, and AI is revealing more vulnerabilities that their firewalls and signatures can block. They also said they see more convergence, more high-end units for internal segmentation, strong sovereign AI growth, and a durable hybrid cloud/sovereign demand mix.
"I say that the demand is still very, very strong and no sign of slowdown." — Ken Xie (CEO·CHAIR)
OT security customers and installation help
Q (Meta Marshall · Morgan Stanley): Analyst asked whether OT security billings show a broader customer base or new major customers, and whether customers struggle to install equipment and need Fortinet services to help.
A: Christiane said OT strength exists in certain geos and is expanding to other regions as customer references grow, and Fortinet's specialized devices help that expansion. She said Fortinet services focus on configuration, not racking, and partners handle local racking; they have not seen rollout shortages. Ken added FortiCare now uses AI for some support and adds local service personnel, and John noted some large customers want Fortinet to work directly with partners and MSPs for big rollouts.
"So it's a broadening of the strength and continued expansion because it's also becoming more and more relevant with the tech surface expanding." — Christiane Ohlgart (CFO)
Why did growth slow in Q3?
Q (Adam Borg · Stifel): Analyst asked why growth decelerated in Q3 versus Q2 despite strong demand, and whether the company is supply constrained or seeing higher-priced inventory.
A: Management said demand stayed strong, but the first half benefited from on-hand inventory they normally keep (about 6 months), and starting in Q3 that inventory advantage began to disappear. They also said some components have longer lead times, so it's a bit of both supply constraints and longer lead times.
"So the on-hand inventory advantage kind of starting to disappear." — Ken Xie (CEO·CHAIR)
Services attach rates and subscription motion
Q (Joseph Gallo · Jefferies): Analyst asked if attach rates are the same when removing delayed ELAs, whether networking and data center strength hurt attach rates, and whether subscriptions are sold separately from hardware.
A: Christiane said there is a product mix shift toward networking and sovereign (product-heavy) deployments that can lower attach rates, and FortiGate growth helps attach rates. She said the initial purchase typically attaches certain services (FortiCare and bundles for smaller customers), while larger enterprises are an upsell motion for additional security subscriptions, and the increased threat environment should drive more subscription uptake.
"The initial purchase always attaches certain services." — Christiane Ohlgart (CFO)
Large enterprise ramp dynamics and pipeline
Q (Gabriela Borges · Goldman Sachs): Analyst asked whether U.S. enterprise was stronger than expected, whether deals turned into ramp deals, and whether the ramp dynamic will affect Q4 and beyond.
A: Christiane said Q3 included many large new and expansion customers who sometimes defer buying services when rolling out infrastructure, which led to delayed service recognition in Q3. She said the trend does affect Q4 and they adjusted 2026 service revenue guidance, but customers are buying services (visible in deferred revenue and service billings) and more services will convert later.
"The good news is the customers are buying services, which you can see in deferred revenue, which you can see in service billings." — Christiane Ohlgart (CFO)
Customer appliance stretching and gross margin mix
Q (Fatima Boolani · Citi): Analyst asked if customers are stretching appliances longer and how Fortinet defends growth, and asked Christiane to reconcile ASP uplift with product gross margin compression.
A: Ken said AI security functions need higher-end, higher-compute FortiGate systems so ASPs rise and customers are less likely to stretch older hardware long term; first waves come from enterprise and data center. Christiane said H1 gross margin benefited from lower-cost inventory while prices rose, but in H2 costs crept up and product gross margin compressed; service gross margin is improving to offset this and overall gross margin guidance remains at 80% for the full year.
"the guidance for the overall gross margin remains at 80% for the full year, right, which was what we said at the beginning of the year." — Christiane Ohlgart (CFO)
Open-weight models and SASE bundle uptake
Q (Junaid Siddiqui · Truist): Analyst asked whether enterprises running open-weight models expand Fortinet's opportunity and whether that has driven security demand. He also asked about early adoption of SASE bundles and pricing uplift.
A: Ken said they see more enterprises running open-source or open-weight models internally, which increases demand to monitor and manage AI models and drives enterprise network security demand; their high-performance ASICs give an advantage for internal high-speed deployments. Christiane said pricing uplift depends on definition; FortiCare and SD-WAN pricing is tied to hardware percent, there is some uptick but many customers use SD-WAN via FortiCare, and adoption of incremental subscriptions will take longer.
"Yes, we do see more enterprise running whether it's an open-source, open-weight model internally." — Ken Xie (CEO·CHAIR)
Serving very large customers and services outlook
Q (Adam Tindle · Raymond James): Analyst asked about pros and cons of serving sovereigns and neoclouds and whether they considered a lower-service, higher-volume product model; he also asked Christiane to explain confidence in stronger services in 2027.
A: Ken said large customers sometimes use Fortinet as underlying tech while offering their own services, so Fortinet becomes Tier 2/3; these customers often deploy hardware first and then add services over time, and billing and deferred revenue look healthy. Christiane clarified she used the phrase "improved growth rates" not "acceleration," said growth rates bottomed in Q1, and expressed confidence services sold will convert into revenue over the course of 2027.
"I would say I haven't used the word acceleration. I've used the word improved growth rates." — Christiane Ohlgart (CFO)
Delayed service activation and channel inventory
Q (Patrick Edwin Colville · Scotiabank): Analyst asked if the message is that delayed service activation in large new customers caused the revenue and billings miss, and asked about channel inventory and billings duration.
A: Christiane said Q3 was a good quarter with large new and expansion deals, but many large deals had delayed service activation which is common in big deals; other factors include price/hardware versus services dynamics and U.S. tax-driven hardware demand. She said duration remained similar and channel inventory is flat or down as a percent of billings.
"But they also -- they came with some of delayed service activation, which is actually typical in -- or happens more often in large deals." — Christiane Ohlgart (CFO)