Fortinet Q1 Earnings & Revenues Beat Estimates, Increase Y/Y

Fortinet FTNT reported impressive first-quarter 2026 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year, exceeding the high end of the company's guidance across billings, revenues, operating margin and earnings per share.Fortinet reported first-quarter 2026 non-GAAP earnings per share (EPS) of 82 cents, which beat the Zacks Consensus Estimate by 34.43% and grew 41% year over year.Total revenues of $1.85 billion beat the consensus mark by 6.79% and improved 20% year over year, driven by broad-based demand across the portfolio, strong execution in the large-enterprise segment and robust traction in Unified SASE, AI-driven security operations and operational technology (OT) markets.Total deferred revenues (current + long-term portions combined) came in at $7.35 billion, while the current portion was $3.73 billion as of March 31, 2026.Total billings increased 31% year over year to $2.09 billion, led by 32% growth in secure networking, more than 70% growth in OT, 31% growth in Unified SASE and 23% growth in AI-driven security operations.Fortinet, Inc. Price, Consensus and EPS Surprise Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. QuoteFTNT's Q1 in DetailSegment-wise, Product revenues increased 41% year over year to $645.1 million, representing 34.9% of total revenues. Growth was driven by demand for higher-performance FortiGate appliances, AI-related deployments — including investments to support increased throughput, segmentation and security across AI infrastructure — technology upgrades, upselling and expansion into new use cases, with a low single-digit contribution from recent pricing changes.Service revenues of $1.20 billion grew 11% year over year, accounting for 65.1% of total revenues. Service billings reaccelerated to 27% growth, and deferred revenues grew 15%, supported in part by SecOps annual recurring revenue (ARR) gains. The company added more than 6,600 new organizations to its FortiOS platform in the quarter, spanning small and mid-size businesses, mid-market and large enterprises. Within large enterprises, the number of deals greater than $1 million and total deal value both grew more than 60%, with notable strength in Europe and the United States. FortiSASE adoption among large enterprise customers rose to 18% from 16% in the prior quarter — an increase of more than 45% year over year.Margins of FTNTTotal GAAP gross margin was 80.3%, contracting 70 basis points (bps) year over year on the strong product mix shift but holding firm through disciplined cost management. Product gross margin expanded to 67.7%, while service gross margin held steady at 87%.GAAP operating margin expanded 190 bps year over year to 31.4% in the first quarter. On a non-GAAP basis, operating margin expanded 160 bps to a first-quarter record of 35.8%, reflecting strong operational leverage and effective cost management. Non-GAAP gross margin came in at 81%.FTNT's Balance Sheet & Cash FlowFortinet exited the first quarter of 2026 with cash and cash equivalents and short-term investments of $3.29 billion, down from $3.58 billion reported at the end of the fourth quarter of 2025, reflecting $823 million of stock repurchases and the $500 million repayment of senior notes during the quarter.Cash flow from operations was a record $1.08 billion for the first quarter of 2026, up from $863.3 million in the prior-year quarter. Free cash flow was a record $1.01 billion for the first quarter of 2026, up from $782.8 million in the prior-year quarter. Adjusted free cash flow reached $1.07 billion, up 27% year over year, representing a 57.6% margin.The company repurchased 10.6 million shares of common stock for $827 million during the first quarter, with an additional 1.9 million shares for $146 million purchased quarter to date. The remaining share repurchase authorization stands at approximately $766 million.FTNT's Q2 & 2026 GuidanceFortinet expects second-quarter revenues in the range of $1.83-$1.93 billion. Billings are estimated in the band of $2.09-$2.19 billion. The non-GAAP gross margin is expected to be in the range of 79.5-80.5%, while the non-GAAP operating margin is anticipated between 33% and 35%. Non-GAAP EPS is projected in the band of 72-76 cents.For 2026, FTNT raised its outlook and now predicts revenues in the range of $7.71-$7.87 billion (up from prior $7.50-$7.70 billion). Services revenues are projected in the range of $5.09-$5.15 billion. Billings are expected in the band of $8.8-$9.1 billion (up from prior $8.4-$8.6 billion). The non-GAAP gross margin is expected in the range of 79-81%, and the operating margin is projected in the band of 33-36%. Non-GAAP EPS is anticipated to be between $3.10 and $3.16 (up from prior $2.94-$3.00).FTNT’s Zacks Rank and Stocks to ConsiderCurrently, FTNT carries a Zacks Rank #3 (Hold).Some better-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Micron Technology MU, Broadcom AVGO and NVIDIA NVDA. Micron Technology sports a Zacks Rank #1 (Strong Buy), while Broadcom and NVIDIA carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Micron Technology’s fiscal 2026 earnings has been revised upward by a penny to $58.36 per share in the past 30 days, suggesting an increase of 604% from fiscal 2025’s reported figure. Micron Technology shares have surged 124.3% year to date (YTD).The Zacks Consensus Estimate for Broadcom’s fiscal 2026 earnings has moved northward by 9 cents to $11.45 per share over the past 30 days and calls for a year-over-year jump of 67.9%. Broadcom shares have soared 25.8% YTD.The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 earnings has moved upward by 4 cents to $8.07 per share in the past 30 days, implying a year-over-year improvement of approximately 69.2%. NVIDIA shares have risen 5.3% YTD.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks