Fortinet Exceeds Q4 EPS Forecasts

Cybersecurity solutions provider Fortinet (NASDAQ:FTNT) reported fourth-quarter and full-year 2024 earnings on Thursday, Feb. 6, that showed significant growth across key financial metrics. The company delivered adjusted earnings per share (EPS) of $0.74, surpassing analyst expectations and marking a 45% year-over-year increase. Revenue for the quarter reached $1.66 billion, up 17.3% from the previous year and also topping forecasts.

Fortinet's strong operational performance was further evidenced by an adjusted operating margin of 39.2%, which was well above management's guidance range for the quarter. Overall, the quarter was marked by substantial revenue growth and improved profitability.

Source: Fortinet. Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. pps = Percentage points.

Overview of Fortinet's Business

Fortinet specializes in cybersecurity solutions, emphasizing its integration of networking and security through its Fortinet Security Fabric. This approach unites various security and networking functionalities, offering comprehensive protection against evolving threats. The company's recent focus has been on enhancing its AI-driven security operations and leveraging proprietary ASIC (Application-Specific Integrated Circuit) technology to boost product performance. These strategic areas are critical for the company's success, as they allow for efficient threat detection and response while ensuring strong customer adoption and retention.

Fortinet's proprietary ASICs provide a competitive advantage by enabling high data throughput with minimal power consumption. Its broad and diverse customer base further strengthens its position, offering stability across different industries and reducing reliance on any single market.

Quarterly Highlights

Fortinet's fourth-quarter Service segment revenue saw a significant increase of 17.2%, amounting to $1.09 billion. Product revenue rose by 17.6% to $574 million, contributing to the overall revenue growth. Operationally, Fortinet achieved an adjusted operating margin of 39.2%, well above management's guidance range of 33% to 34% (issued back in November 2024), pointing to effective cost strategies. Free cash flow also saw remarkable growth, more than doubling from the previous year to $380 million. The company noted solid relatively modest billings growth, with $2 billion meeting the upper end of management's guidance.

Key business advancements include a 28% increase in annual recurring revenue (ARR) for its Unified SASE and a 32% increase in ARR for its Security Operations. The company has maintained its focus on integrating network and security solutions and leveraging its proprietary technologies to gain a competitive edge in the cybersecurity market.

In terms of strategic movements, Fortinet's partnership with CrowdStrike exemplifies its ongoing adaptation to dynamic market demands. This collaboration is aimed at enhancing product integration capabilities, combining Fortinet's robust network security with CrowdStrike's endpoint expertise, thereby addressing a broader range of cybersecurity challenges.

Looking Ahead

For the first quarter of 2025, Fortinet management anticipates revenue between $1.5 billion and $1.56 billion. The full-year projection for 2025 is set between $6.65 billion and $6.85 billion, indicating continued growth expectations. Service segment revenue for 2025 is forecast in the range of $4.575 billion to $4.725 billion, while Billings are forecast in the range of $7.2 billion to $7.4 billion. The company expects an adjusted operating margin between 31% and 33% for 2025, suggesting a cautious, yet optimistic approach to profitability.

Investors should watch for developments in Fortinet's strategic initiatives, such as the expansion of its AI-driven security solutions and its capabilities in integrated security technologies through partnerships. Fortinet's focus on leveraging its unique technologies, like ASICs, combined with a potential firewall refresh cycle, positions it to capture additional market share and sustain its growth trajectory in the competitive cybersecurity industry.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Fortinet. The Motley Fool has a disclosure policy.