Fortinet (FTNT) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue grew 13% year-over-year to $1.51 billion, driven by strong service revenue growth and a modest 2% increase in product revenue.

• 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 Q3 2024 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

• Total billings were $1.58 billion, up 6.1% year-over-year; deferred revenue grew 13.7% to $6.01 billion.

• Service revenue grew 19% to $1.034 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%, up from 76.2% a year ago; operating margin improved to 36.1%.

• Free cash flow for Q3 2024 was $572 million (38% margin); $1.5 billion for the first nine months.

Outlook and guidance

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

• Full-year 2024 revenue guidance raised to $5.856B–$5.916B (11% growth at midpoint); service revenue $4.015B–$4.045B.

• Non-GAAP gross margin expected at 80.3%–81.3%; operating margin at 32.9%–33.9%.

• Non-GAAP EPS guidance of $2.20–$2.28 for the year.

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