Fortinet Q3 Revenue Rises 20% as Billings Climb 29%

Fortinet Inc. (NASDAQ: FTNT) reported a 20% year-over-year increase in third-quarter 2026 revenue as stronger product sales helped billings grow 29%. The cybersecurity company also expanded its non-GAAP operating margin and generated a 44% adjusted free cash flow margin, while forecasting full-year revenue of as much as $8.22 billion.

Revenue reached $2.08 billion for the quarter ended in September, up from $1.72 billion a year earlier. Product revenue increased 37% to $765 million, while service revenue rose 13% to $1.31 billion. Total billings, a non-GAAP measure that includes changes in deferred revenue, climbed to $2.34 billion from $1.81 billion.

The value of deals exceeding $1 million grew 51% year over year, indicating stronger activity among larger customers. Current service billings increased 18%, while total service billings rose 26%. Current deferred revenue was up 14%, and total deferred revenue grew 19%.

SASE Firewall Remains the Main Growth Engine

Fortinet’s SASE Firewall pillar, which includes secure networking and Unified SASE, accounted for 90% of total billings and grew 31% year over year. Secure networking represented 66% of billings and increased 34%, while Unified SASE contributed 24% and rose 22%.

Unified SASE annual recurring revenue reached $1.44 billion, up 18% from a year earlier. The company said FortiSASE billings increased 68% in the quarter.

AI-driven Security Operations represented the remaining 10% of billings and grew 15%. Annual recurring revenue for that business increased 16% to $551 million. Fortinet is positioning its security operations portfolio around an integrated AI security platform spanning network detection, cloud security, endpoint protection, data security and security operations tools.

Operational technology security was another area of growth, with billings rising nearly 40% year over year. The company attributed that performance to demand associated with AI infrastructure. Fortinet’s broader product strategy includes security for AI infrastructure, applications, data and users, supported by new FortiGuard services for shadow AI controls, prompt inspection and agentic AI operations.

Operating Margin Expands Despite Lower Gross Margin

Non-GAAP gross margin declined to 79.6% from 81.6% a year earlier. However, non-GAAP operating margin increased to 38.2% from 36.9%, with non-GAAP operating income rising to $793.8 million.

GAAP operating income was $704.3 million, compared with $547.3 million in the prior-year period. Diluted GAAP earnings per share increased to $0.86 from $0.62, while non-GAAP diluted earnings per share rose to $0.91 from $0.74.

Cash flow from operations totaled $946 million. Free cash flow was $864.8 million, and adjusted free cash flow—which adds back cash payments associated with real estate purchases—reached $912.2 million, representing 43.9% of revenue. That compared with adjusted free cash flow of $645.9 million and a 37.4% margin in the year-earlier quarter.

Fortinet had repurchased $973 million of stock in 2026 through Oct. 28 and had $2 billion remaining under its buyback authorization.

Fortinet Forecasts 20% Full-Year Revenue Growth at Midpoint

For the fourth quarter, Fortinet expects billings of $2.78 billion to $2.93 billion, implying 20% year-over-year growth at the midpoint. GAAP revenue is projected at $2.16 billion to $2.25 billion, representing 15% growth at the midpoint.

The company expects a fourth-quarter non-GAAP gross margin of 78% to 80%, a non-GAAP operating margin of 35.5% to 37.5%, and non-GAAP diluted earnings of $0.93 to $0.95 per share.

For full-year 2026, Fortinet forecast billings of $9.57 billion to $9.72 billion, with midpoint growth of 28%. GAAP revenue is expected to range from $8.13 billion to $8.22 billion, representing 20% growth at the midpoint. Service revenue is projected at $5.15 billion to $5.17 billion, or 13% midpoint growth.

Full-year non-GAAP operating margin is expected to be between 36.5% and 37.5%, with non-GAAP diluted earnings of $3.54 to $3.58 per share. Fortinet also plans $390 million to $420 million of infrastructure investments in 2026 and expects cash tax payments of $400 million to $450 million.

The outlook remains subject to economic conditions, changes in IT spending, competition and pricing pressure, longer sales cycles, the timing of large strategic deals, supply-chain constraints and execution risks. Fortinet also identified geopolitical conflicts, tariffs, acquisition integration, cybersecurity incidents and rapid technological changes—including advances in artificial intelligence—as factors that could cause actual results to differ from its projections.