Yimin X
Founder of YX Insights, Ex-FX/Rates Market Maker
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'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
CrowdStrike may distinguish itself from an expensive cybersecurity group by showing more breakneck growth at earnings next month. Fortinet's slowing product revenue exposed how much relentless execution investors had priced into the group's extreme multiples, pulling CrowdStrike down in sympathy. CrowdStrike remains in a higher tier than Fortinet, which itself ranks above SentinelOne. x.com x.comÂ
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 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
Fortinet has topped because large language models will impair its business. x.com 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
Palo Alto Networks' guidance implies net new next-generation security ARR halving to about $500m a quarter from nearly $1bn just posted, undercutting the growth rate behind its 185% rally. Full-year ARR is guided up only 22-23%, to $11.075-11.175bn from $9.10bn, even as Q1 is guided to 63%; the gap likely reflects the CyberArk acquisition dropping out of comparisons. The quarter swung to a $282m GAAP loss from a profit a year ago. A Q2 with net new ARR near $1bn again would change the view. … Show more
Palo Alto Networks at 21x forward sales is too expensive for 17% pro-forma growth, despite BTIG's view that it is worth more than the current price. 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
Zscaler's after-hours rally is paying for profit, not growth, and the growth outlook remains weak. It beat every line, but reaffirmed fiscal 2027 ARR growth of 16.6% to 17.4%, the framework that sank the stock 31% in May, implying net new ARR down 13% to 17%; excluding Red Canary, organic net new ARR is roughly flat. Q4 free cash flow margin fell to 7% from 24% as capex nearly tripled, and the flat 23.0-23.5% FY27 margin guide rests on a memory-price assumption. x.comÂ
