Fortinet (NASDAQ:FTNT) executives highlighted broad-based demand and accelerating product revenue growth as the company reported fourth quarter and full-year 2025 results that exceeded management’s guidance on billings, revenue, and operating margin. On the call, Founder, Chairman, and CEO Ken Xie and CFO Christiane Ohlgart pointed to momentum in Unified SASE, operational technology (OT) security, and large enterprise deals, while reiterating midterm targets tied to growing faster than the overall cybersecurity market and maintaining what the company calls a “Rule of 45-plus” profile.
Fourth quarter results: billings up 18%, product revenue up more than 20%
Ohlgart said fourth quarter billings rose 18% year over year to $2.37 billion, supported by “strong growth in Unified SASE, OT security, and success in large enterprises in the U.S. and Europe.” Revenue increased 15% to $1.91 billion, with product revenue up more than 20% to $691 million and service revenue up 12% to $1.21 billion.
Profitability also came in above guidance. Ohlgart said total gross margin was 80.3%, which she described as better than expected despite the mix shift toward product revenue. Non-GAAP operating margin was 37.3%, exceeding the high end of the company’s guidance, driven by stronger-than-expected revenue and cost management.
Cash generation remained a focus. Fortinet posted free cash flow of $577 million and adjusted free cash flow of $589 million, representing a 31% margin. The company repurchased about 730,000 shares for $57 million during the quarter, plus an additional 4.6 million shares for $356 million quarter-to-date. Ohlgart added that the board approved a $1 billion increase to the share repurchase authorization in January, leaving roughly $1.4 billion remaining.
Unified SASE growth and the case for “sovereign SASE”
Unified SASE was a central theme, with Xie and Ohlgart both citing 40% billings growth in the quarter. Xie framed Fortinet’s position around three advantages: integrating firewall, SD-WAN, and SASE on a single operating system (FortiOS); supporting both public SASE and “sovereign SASE” deployments (where enterprises or service providers deploy SASE in their own data centers); and leveraging Fortinet-owned cloud infrastructure (FortiCloud) as a cost differentiator.
In response to analyst questions about what drove the strength and why management is confident going into 2026, Xie emphasized “very strong growth” in sovereign SASE and argued that none of Fortinet’s major SASE competitors offer comparable sovereign SASE solutions. He said the sovereign approach often begins with product purchases, followed by ongoing service support, which management views as a significant market opportunity.
On customer adoption, Ohlgart said 16% of Fortinet’s large enterprise customers have purchased FortiSASE, representing an increase of “over 50%.” She also reported Unified SASE ARR rose 11% to $1.28 billion, including an increase of “over 90%” in FortiSASE ARR.
Enterprise deal activity, OT security, and platform expansion
Fortinet also pointed to stronger enterprise execution. Ohlgart said the number of deals greater than $1 million increased by over 30%, while total deal value grew by over 40%, with the U.S. and Europe each delivering more than 30% growth in $1 million-plus deals. She added that 7,200 new organizations selected Fortinet’s FortiOS platform in the quarter.
Several large customer wins were discussed to illustrate cross-selling and expansion:
- A large consumer services company (an existing SD-WAN customer) selected FortiSASE to secure more than 10,000 users, with Fortinet citing a single-OS approach and lower total cost of ownership.
- A global data center provider supporting AI and cloud workloads signed an eight-figure deal tied to global expansion, standardizing on FortiGate, FortiSwitch, and FortiAP.
- A major utility expanded with a high seven-figure agreement for OT security, including segmentation, identity and access management, zero-day threat detection, and adoption of FortiAI.
- A Fortune 100 company signed an eight-figure multi-year Unified SASE deal, selecting FortiGate VM through the FortiFlex consumption program to secure roughly 1,800 store locations.
OT security was another growth area. Xie said OT billings grew more than 25%, and Ohlgart echoed that OT use cases contributed “significant growth,” driven by demand for both hardware and software.
Full-year 2025: revenue up 14%, free cash flow hits a record
For the full year, Ohlgart reported billings grew 16% to $7.55 billion and revenue grew 14% to $6.8 billion. Product revenue increased 16%, and service revenue grew 13% to $4.58 billion, representing 67% of total revenue.
Operating margin increased 50 basis points to a record 35.5%, producing operating income of $2.41 billion (up 16%). Ohlgart said GAAP operating margin was 30.7%, which she described as among the highest in the industry. Earnings per share increased 16% to $2.76. Free cash flow was a record $2.21 billion (33% margin), and adjusted free cash flow was $2.5 billion (37% margin).
Ohlgart said Unified SASE and SecOps, described as faster-growing pillars, grew a combined 24% for the year and now represent 36% of total billings. She also reported SecOps ARR increased 21% to $491 million.
2026 outlook: billings growth of 13% at midpoint, infrastructure investment ramps
For the first quarter of 2026, Fortinet guided billings to $1.77 billion to $1.87 billion (14% growth at the midpoint) and revenue to $1.7 billion to $1.76 billion (12% growth at the midpoint). The company expects non-GAAP gross margin of 80% to 81% and non-GAAP operating margin of 30% to 32%.
For full-year 2026, the company guided billings to $8.4 billion to $8.6 billion (13% growth at the midpoint) and revenue to $7.5 billion to $7.7 billion (12% growth at the midpoint). Service revenue is expected to be $5.05 billion to $5.15 billion (11% growth at the midpoint), with Ohlgart saying service revenue growth is expected to “pick up in the second half of 2026,” driven by accelerating product revenue growth in 2025.
Management also discussed several modeling considerations, including that the first quarter has two fewer days than Q4 (affecting ratable service revenue recognition), marketing event timing affecting Q1 operating margin, and “recent weakness of the U.S. dollar” potentially creating a modest headwind. Ohlgart said Fortinet plans to repay a $500 million senior debt tranche at the end of the first quarter, which, along with lower market rates, is expected to reduce net interest income for the year.
On cost pressures, executives addressed memory component pricing and supply chain readiness. Xie said Fortinet maintains about six months of inventory on average and views component volatility as an opportunity to gain share. Ohlgart said the company has raised prices on specific products where component costs increased, describing pricing actions “between 5% and 20%” depending on the appliance, with the ability to adjust pricing monthly with distributor notification. She added that services pricing is a percentage of list price, though it takes longer for pricing changes to flow into recognized service revenue.
About Fortinet (NASDAQ:FTNT)
Fortinet, Inc (NASDAQ: FTNT) is a multinational cybersecurity company that develops and delivers integrated security solutions for enterprise, service provider and government customers worldwide. Founded in 2000 and headquartered in Sunnyvale, California, the company was co‑founded by Ken Xie and Michael Xie. Ken Xie serves as chairman and chief executive officer, and the company operates through a global sales, channel and services organization to support customers across the Americas, EMEA and Asia‑Pacific.
Fortinet’s product portfolio centers on network security appliances and software, with its FortiGate next‑generation firewalls and the FortiOS operating system forming a core platform.
