Fortinet Inc Q3 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : I want to start from the same line of questions that we had last quarter. Product revenues went up 18%, materially below the Street. The Street expected about 12%. What are the drivers? And what is the impact of refresh product refresh product upgrade related to end of service?

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : So if that's the case, that's my follow-up. If that's the case, why is the guidance for next quarter kind of uninspiring revenue growth is slightly below the Street? It's less than 12%. What's unique with this quarter versus next quarter or next quarter versus this quarter? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 05, 2025 / 9:30PM, FTNT.OQ - Q3 2025 Fortinet Inc Earnings Call

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : I wanted to stick to this discussion area with respect to the services revenue trajectory. I think for all of us, very, very familiar with your model, we can appreciate very attached nature of the services, both in the form of subscriptions and support to the appliances. But I'm wondering, Christiane, if you can help put a finer point on what the trajectory of services growth could look like in the next 12 months? And this is just optically looking at services growth that has decelerated for the ninth consecutive quarter, understanding that there's a 29-month period in which there is a catch-up as well as maybe some of the commentary you shared last quarter with respect to a slower billings to revenue conversion as it relates to some of the customer behavior. So just wondering if we should think about 13% services growth as trough or near trough or if that's maybe not the right way to think about it, I would appreciate any feedback on that.

Question: Brian Essex - JPMorgan Chase & Co - Analyst : I guess maybe for Ken, would love to ask a question on your SASE. You guys are a little bit unique in where so much of your SASE business is converting from your installed base upgrade, whether it's from SD-WAN or firewall. What -- could you talk about the rate of SASE penetration or rate of penetration from SASE into your SD-WAN installed base? And what would you need to do to accelerate the volume of business where you can lead with SASE instead of relying on your installed base? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 05, 2025 / 9:30PM, FTNT.OQ - Q3 2025 Fortinet Inc Earnings Call

Question: Brian Essex - JPMorgan Chase & Co - Analyst : Any way to see what percentage of your SD-WAN installed base is remaining where you might convert it to SASE? Like how much of an opportunity that is?

Question: Gabriela Borges - Goldman Sachs Group Inc - Analyst : Christiane, you're giving us an early look at directionally services growth improving into the back half of '26 because of the strength in product revenue this year. My question is on your visibility into product revenue for next year. Certainly, the year-over-year growth has been good year-to-date. But on comps that are much lower. So my question for you is how do you think about product tractor into next year? Are there any ideas product drivers either tied to the COVID cycle or to what you're seeing across your pipeline, so you can give us some color on that we should be aware of as we think about constructor product growth next year?

Question: Junaid Siddiqui - Truist Securities - Analyst : I just wanted to drill a bit on OT security that seems to be a continued driver of growth for you. And if I'm not mistaken, I think growth accelerated from last quarter. Could you just talk about some of the factors that are driving that? And how are you differentiated versus some of the competitors out there?

Question: Meta Marshall - Morgan Stanley - Analyst : I just wanted to ask a question just about the Q4 gross margins. Just wanted to see if there were any headwinds from any tariffs or componentry cost increases that were embedded in that guide?

Question: Robbie Owens - Piper Jaffray Inc - Analyst : I was hoping you could parse for us the different geos and especially North America, which seemed to lag from a growth perspective. Was there something unique there to call out during the third quarter in terms of share losses or anything else that might have been weak within this theater?

Question: Saket Kalia - Barclays Services Corp - Analyst : Christiane, maybe this is for you. There's been a lot of focus on the call on services revenue, understandably so. But I'm curious a little bit on services billings in the quarter just given the strong product result. So can you just talk about whether there was any sort of change in attach rate on appliances? Whether we should think about changing attach rates as software becomes a bigger part of product? Or maybe talk about another item, which is the unattached portion of services billings. I'm just curious, given the sequential decline in services billings, combined with a really strong product result, what were some of the moving parts that we should consider?

Question: Saket Kalia - Barclays Services Corp - Analyst : Okay. Got it. So it sounds like there's a timing element there with services builds and product.

Question: Shrenik Kothari - Robert W. Baird & Co Inc - Analyst : Ken, Christiane, you highlighted the launch of your secure AI data center offering. It seems like a pretty foundational growth pillar. So just stepping back a bit. How large do you think is the addressable opportunity here? And who are you targeting? Are these the AI native players, cloud providers, hyperscalers or just enterprise data center using the refresh cycles? And I had a quick follow-up.

Question: Shrenik Kothari - Robert W. Baird & Co Inc - Analyst : Got it. So were helpful. And just a follow-up for Christiane. I know it's still early days, but as a revenue driver, given the inflection we are seeing in AI, I mean, how should we think about the monetization here next year? Is it mostly be still skewed towards the ad product and hardware is kind of saying the ASICs? Or should we also think about the services layering on top for AIops and unified SecOps stuff?

Question: Ittai Kidron - Oppenheimer & Co Inc - Analyst : Christiane, just I want to make sure I understand the linearity of your product billings going forward. You talked about services accelerating in the second half of next year. What should be in...

Question: Ittai Kidron - Oppenheimer & Co Inc - Analyst : Then if I think about the product revenue, should have perhaps an infras pattern just given at the end of life, you're meaningfully into it right now and somewhere early mid next year, you're largely complete on that front, and then it becomes a difficult comps. Is it fair to say that the product growth potentially decel the rates in the second half of next year?

Question: Ittai Kidron - Oppenheimer & Co Inc - Analyst : Okay. And maybe Ken -- Yes, go ahead, Ken.

Question: Ittai Kidron - Oppenheimer & Co Inc - Analyst : Very good. And then maybe if you could just clarify on the SASE billings. What percent of those are still just stand-alone SD-WAN versus not? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 05, 2025 / 9:30PM, FTNT.OQ - Q3 2025 Fortinet Inc Earnings Call

Question: Brad Zelnick - Deutsche Bank AG - Analyst : I'm hoping you can help reconcile your comments about growing above market in each of your pillars with 13% ARR growth in SASE this quarter. Is there something specific one-off we should consider in Q3? And as well, it would be great if you can comment on pricing trends and competition that you're seeing in SASE more broadly.

Question: Brad Zelnick - Deutsche Bank AG - Analyst : Okay. Great. And any comments on -- especially at the branch, when the customer wants a SASE solution? How often is that going out to competitive bid and any changes in win rates and pricing trends there? Any color would be great.

Question: Gray Powell - BTIG LLC - Analyst : Okay. Great. I just want to make sure, can you hear me okay?

Question: Gray Powell - BTIG LLC - Analyst : Okay. Great. I hopefully, I can ask this question correctly. I Just want to make sure I understood some of the commentary during the Q&A. All right. So -- you called out double-digit or an expectation for 10% to 15% growth in product revenue for 2026 during the Q&A, and that was in response to a question. I'm going to guess there's a reason that, that statement was not in the prepared remarks. So I guess, here's my question. Is the 10% to 15%, is that what you really think you're going to do in 2026 as the year plays out. And I'm asking that because historically, you've given investors a discount when you guide for a new year. So I'm not asking for guidance, but I'm just asking like those 2 things correctly. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 05, 2025 / 9:30PM, FTNT.OQ - Q3 2025 Fortinet Inc Earnings Call