Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
Fortinet's strength should beget strength after a blowout Q2 and raised guidance. Revenue rose 26% to $2.05B versus $1.89B expected, EPS rose 41% and product revenue 52%, with billings up 33%. Q3 and full-year 2026 guidance both topped estimates, with full-year revenue at $8.02-8.18B. Management credits demand for its integrated SASE firewall on a single operating system and custom ASIC. IBM's profit warning flagged clients distracted by cybersecurity concerns, a sector catalyst. x.comÂ
Fortinet's results look excellent and should lift sentiment across security stocks. Its full-year revenue guidance came in about 3% ahead of expectations, with EPS guidance comfortably ahead too. x.comÂ
Fortinet is a beautiful business because recurring security subscriptions make it highly stable and cash-generative. It is the clear leader in firewalls, protecting over 800,000 clients with fast, energy-efficient tools built on its own custom chips. x.comÂ
Fortinet's recurring service growth is slowing while its firewall product refresh does the heavy lifting. Service revenue grew 13% versus 37% for products, and the full-year service guide was cut to $5.15-$5.17 billion. A cut to the recurring guide rarely gets bought back in a week; this looks like the start of a rerating lower. x.comÂ
Fortinet is being welcomed into the portfolio as a new holding. x.comÂ
Fortinet has a possible catalyst in Pace the Frontier, which could lift cybersecurity broadly. On the chart, the stock has reclaimed its pivot while still in a boring consolidation. x.comÂ
Fortinet's valuation leaves it vulnerable to a sharp drop: it trades above 53x next-twelve-month earnings despite EPS growth below 20%. Its post-earnings tumble illustrates that risk. x.comÂ
AI is turning security spending from optional to essential, and beats from CrowdStrike and Okta confirm it. CrowdStrike's Q2 revenue rose 26% with record net new ARR of $333M, up 51%, and raised guidance; Okta's RPO reached $4.86B, up 17%, with a second guidance raise this year, after Fortinet also raised. AI agents and coding widen attack surfaces, Morgan Stanley estimates up to $220B of added security demand, and buyers are consolidating onto platforms. x.com x.comÂ
Fortinet is the best buy in security software on current flows, because frontier AI is increasing security demand rather than replacing it. Companies report that limited releases of models like Anthropic's Mythos have reinforced enterprise demand for security; as stronger models deploy more widely, the attack surface expands and security spending follows. Security software is up 20.9% this year while broader software is down 3.4%, a divergence with further to run as AI deployment accelerates. … Show more
Fortinet looks expensive at 48x cash earnings and 40x next year's, versus about 30x for software companies. Fair value is $116-$148, roughly 30x next year's cash earnings give or take 12%, so the stock trades 19% above the top of fair and turns expensive above $196. This is a valuation screen based on reported earnings and revenue estimates, with no deeper fundamental work. x.comÂ
Cybersecurity, the best-performing part of software this year, can keep rising as AI safety concerns emerge. Okta is up 116% year to date, Fortinet 113%, Palo Alto Networks 104%, CrowdStrike 99%, Datadog 69%, Cloudflare 67%, F5 61% and SentinelOne 50%. Every one beat on both revenue and EPS last quarter and trades above major technical supports. x.comÂ
