Fortinet (FTNT) Q3 2024 earnings summary

Executive summary

• Revenue grew 13% year-over-year to $1.51 billion in Q3 2024, driven by strong service revenue growth and a modest product revenue increase.

• Non-GAAP operating margin reached a record 36.1%, up 830 basis points year-over-year; GAAP operating margin was 31.2%.

• Net income for the quarter was $539.9 million, up from $322.9 million a year ago; diluted EPS was $0.70, compared to $0.41.

• Acquisitions of Lacework and Next DLP in August 2024 expanded cloud security and DLP offerings, contributing $13.8 million in revenue and a $106.3 million gain on bargain purchase.

• Cash, cash equivalents, investments, and marketable securities totaled $3.70 billion as of September 30, 2024.

Financial highlights

• Service revenue grew 19% year-over-year to $1.03 billion, accounting for 69% of total revenue.

• Product revenue increased 2% to $474 million, returning to growth after several quarters.

• Gross margin reached a record 83.2% in Q3 2024, up from 78.1% a year ago; product gross margin was 71.6%, including a one-time benefit.

• Operating margin improved to 36.1% (non-GAAP) and 31.2% (GAAP), both up significantly year-over-year.

• Free cash flow for Q3 2024 was $572 million, with $1.5 billion for the first nine months.

Outlook and guidance

• Q4 2024 revenue expected between $1.56 billion and $1.62 billion; billings between $1.9 billion and $2.0 billion.

• FY 2024 revenue expected at $5.856 billion–$5.916 billion; service revenue between $4.015 billion and $4.045 billion.

• Non-GAAP operating margin for FY 2024 projected at 32.9%–33.9%; non-GAAP EPS between $2.20 and $2.28.

• Capital expenditures for 2024 expected between $380 million and $400 million.

• Management expects gross and operating margins to increase for full year 2024 compared to 2023.