Fortinet (FTNT) Barclays 22nd Annual Global Technology Conference 2024 summary

Business segment insights

• Three pillars drive growth: network security, Unified SASE, and SecOps, with network security seeing robust OT market expansion and regulatory-driven demand.

• SASE and SSE adoption is growing, but most customers prefer hybrid solutions combining edge and cloud protection for effectiveness and cost efficiency.

• SD-WAN remains over half of Unified SASE revenue, with SSE as the fastest-growing component.

• SecOps leverages a data lake to aggregate security data, enabling cross-sell opportunities and enhanced visibility for large enterprises.

• Refresh cycles, especially a large 2026 cohort, are expected to drive $400M–$450M in incremental product billings, with another cohort in 2027.

Technology and infrastructure strategy

• Hybrid security models are favored, combining on-prem firewalls with SASE for flexibility and performance.

• Building proprietary POPs and data centers for SSE is seen as a long-term cost advantage, with CapEx expected to remain in the $300M–$400M range.

• Partnerships with cloud providers supplement coverage but are not core to the long-term architecture.

• ASIC-based hardware refreshes occur every 3–5 years, boosting performance and coverage, especially for OT environments.

Financial outlook and margin dynamics

• Medium-term revenue and billings are targeted to grow at a CAGR above 12%, based on market growth rates and internal mix.

• Product gross margins have normalized to 65%–67% after supply chain disruptions and inventory adjustments.

• Long-term operating margin target raised to 30%+, with plans to reinvest in go-to-market, R&D, and channel expansion.

• Investments will also support cross-selling new products during refresh cycles and integration of recent acquisitions.