Fortinet (FTNT) Q2 2024 earnings summary

Executive summary

• Achieved record operating margin of 35.1% and gross margin of 81.5%, with Q2 2024 revenue up 11% year-over-year to $1.43B, driven by strong service and software growth, while product revenue declined 4%.

• Added 6,300 new customers, continued investment in Unified SASE and SecOps, and completed acquisitions of Lacework and Next DLP, expanding the addressable market by $10B and adding over 900 customers.

• Fortinet secures over 755,000 organizations globally, including 73% of Fortune 100 and 69% of Global 2000.

• Secure networking accounted for 67% of Q2 billings, with Unified SASE and AI-driven SecOps making up 33%.

Financial highlights

• Total billings were $1.54B, flat year-over-year; service revenue grew 20% to $982.4M, now 69% of total revenue; product revenue was $451.9M, down 4% year-over-year.

• Software license revenue grew 26% year-over-year, now a high-teens percentage of product revenue.

• Free cash flow was $318.9M for Q2 and $927M for the first half of 2024.

• Cash, investments, and marketable securities totaled $3.34B at quarter end.

• Non-GAAP net income was $439.9M, with diluted EPS of $0.57.

Outlook and guidance

• Q3 2024 guidance: revenue $1.445B–$1.505B, billings $1.53B–$1.6B, non-GAAP gross margin 79%–80%, operating margin 30.5%–31.5%, EPS $0.56–$0.58.

• Full-year 2024 guidance: revenue $5.8B–$5.9B, service revenue $3.975B–$4.025B, non-GAAP operating margin 30%–31.5%, EPS $2.13–$2.19.

• Product revenue growth rates expected to remain impacted by backlog drawdown and prior pricing actions for the remainder of 2024.

• Expect firewall refresh cycle to occur in 2025, not 2024, due to macroeconomic and election-year uncertainty.