Fortinet (FTNT) Q1 2026 Earnings Call — May 6, 2026

Source: Fortinet Q1 2026 press release (May 6, 2026) + Motley Fool transcript (May 6, 2026).

Ken Xie (CEO): Thank you, Anthony, and thank you to everyone for joining our call. We are very pleased with our excellent first quarter result, exceeding our guidance through strong execution and broader-based demand. As a result, billings grew 31%, total revenue increased 20%, and product revenue grew 41%. Non-GAAP and GAAP operating margin were very strong at 36% and 31%. We also generated a record $1 billion of free cash flow, highlighting the strength and durability of our business model. GAAP earnings per share increased 29%.

The convergence of networking and security approach Fortinet has led for 26 years is accelerating in the AI era. Customers are adopting Fortinet's platform with secure networking, unified SASE, and security operations built on a single FortiOS operating system. By delivering all core SASE capability natively integrated in one operating system, our SASE firewall significantly reduces cost for customers. Innovations such as FortiOS 8.0 and FortiASIC technology deliver higher secure computing performance at significantly lower cost.

As AI drives strong demand for SASE and firewalls, secure networking billings grew 32%, outperforming the broader market. OT security accelerated in the quarter with OT billings growth over 70%. Unified SASE billings grew 31%. AI-driven security operations billings grew 23%, supported by more than 20 AI-enabled solutions on our platform.

Christiane Ohlgart (CFO): We delivered a strong first quarter, exceeding the high end of our guidance across billings, total revenue, operating margin, and earnings per share. Total billings grew 31% to $2.09 billion. Total revenue grew 20% to $1.85 billion, with product revenue increasing 41% to $645 million and service revenue growing 11% to $1.21 billion. Service billings growth reaccelerated to 27%, and deferred revenue increased 15%.

Non-GAAP gross margin was 81%, better than expected. Non-GAAP operating margin of 35.8% was a first-quarter record, up 160 basis points. Non-GAAP earnings per share increased 41% to $0.82, while GAAP EPS grew 29% to $0.72. Free cash flow was a record $1.01 billion, and adjusted free cash flow was $1.07 billion, up 27%, representing a margin of 58%. We repurchased 10.6 million shares for $827 million during the quarter.

For the second quarter, we expect billings of $2.09 billion to $2.19 billion (20% growth at the midpoint), revenue of $1.83 billion to $1.93 billion (15% growth), non-GAAP EPS of $0.72 to $0.76, and infrastructure investments of $50 million to $100 million. For the full year, we are raising our guidance: billings of $8.8 billion to $9.1 billion (18% growth), revenue of $7.71 billion to $7.87 billion (15% growth), non-GAAP EPS of $3.10 to $3.16, and infrastructure investments of $350 million to $550 million.

Q&A Highlights (condensed from full transcript)

• Q (Shaul Eyal, TD Cowen): What drove the strength and confidence in guidance? A: AI is a tailwind (15 years of AI investment, 500+ patents); AI accelerates network-security convergence; supply chain and direct manufacturing model turn challenges into share gains.
• Q (Saket Kalia, Barclays): Customer reaction post-Methos (AI)? A: You need AI to secure AI; security operations (20+ AI products) and OT (70% growth) benefiting; the AI five-layer cake drives infrastructure build-out.
• Q (Saket Kalia follow-up): Early-ordering / air pocket risk? A: Different from COVID — the threat landscape is accelerating, not a one-time remote-access need; we do not see pull-forward or channel inventory build; we gained share in the last cycle too.
• Q (Tal Liani, BofA): Why 32% secure-networking billings growth when Check Point saw firewall deceleration? A: 30 years of innovation, integration, improvement; single OS + ASIC; we in-house every new function (UTM→NGFW→SD-WAN→SASE→AI); most competitors stitch together acquisitions.
• Q (Fatima Boolani, Citi): High-end mix and services? A: More advantage in high end with ASIC (3-5x performance at lower cost/energy); AI data centers + internal segmentation driving high-end demand; services billings +27%, deferred +15% — conversion takes time.
• Q (Brian Essex, JPM): Unified SASE breakdown? A: ~25% of billings from SASE; sovereign SASE roughly same size as cloud SASE (perhaps bigger); European telecom providers launching sovereign SASE with us.
• Q (Gray Powell, BTIG): Firewall → SD-WAN → SASE conversion? A: New bundled service (4-5 services in one) accelerates conversion; SASE adoption in large enterprise went from 16% to 18%.
• Q (Christiane, memory/pricing): Pricing? A: Policy is to maintain gross margin — raise price when costs rise, lower when they fall; low single-digit pricing impact baked into product.