Fortinet (FTNT) BMO Capital Technology and Innovation Leaders Conference summary

Market demand and budgets

• 2026-27 firewall demand has broader drivers than the COVID-era remote-access cycle: AI security, AI sovereignty, hybrid infrastructure and OT security.

• Security budgets are increasing; feedback points to 5%-10% growth next year, with AI spending creating additional security needs and active threats potentially shifting funds toward security.

• Vendor consolidation can free budget for other needs; SD-WAN and firewall consolidation can replace multiple providers, while simplifying management and costs.

Product growth, pricing and refresh

• FY2026 began with a 10%-15% growth assumption excluding price benefits; H1 was outsized from customer demand, competitor supply constraints and share gains, while H2 was expected to normalize.

• Normal inventory remains, but longer lead times and component availability limit the ability to accelerate production; price realization was similar to price increases.

• Customers advanced some upgrades ahead of price increases; Mythos-related vulnerability concerns also drove demand, as firewalls and SASE protect systems while patches undergo testing and deployment.

• New OS features favor higher-end devices; rising net ASPs indicate customers are choosing more capable models, creating future services upsell opportunities.

• Over the next couple of years, broader demand drivers, COVID-era device upgrades and competitor refreshes support confidence in growth and share gains; pricing will be adjusted with costs and market conditions to keep gross margin around 80% across product and services.

Services and SecOps

• FY2026 services assumptions were lowered after large enterprise wins brought new logos with longer deployment ramps; service auto-start is typically 60-120 days, and some enterprise agreements activated after the quarter.

• Enterprise volume discounts compressed service rates, while delayed activations reduced quarterly revenue and ARR conversion; short-term deferred revenue rose in 2026 YoY and was cited as support for higher services growth in 2027.

• SecOps growth was affected by less pricing benefit and sales focus on network security; 2026 work consolidated endpoint capabilities into FortiEndpoint and SIEM, SOAR and FortiAnalyzer into FortiSOC, with activity slowed in Q2-Q3 to deliver the new solutions.

• SecOps growth was expected to normalize as sales teams broaden focus; AI-risk services announced in Q3 provide upsell opportunities in 2027.