Fortinet Inc. (NASDAQ:FTNT) saw its shares surge 11.1% in after-hours trading on Wednesday, reaching $170.22, following the release of its second-quarter financial results that handily beat analyst expectations. The stock had already gained 2.2% during the regular session, closing at $153.22.
Strong Q2 Results
The cybersecurity company reported second-quarter revenue of $2.048 billion, surpassing the consensus estimate of $1.890 billion by 8.4%. Adjusted earnings per share came in at $0.90, 20% higher than the $0.75 that analysts had projected. Billings, a key forward-looking metric, reached $2.372 billion, exceeding forecasts by 11.1%.
Service billings rose 26% year-over-year, nearly double the 14% growth in service revenue, indicating robust demand for future services. Deferred revenue increased 17%, suggesting that new appliance sales are contributing to future support and subscription revenues.
Segment Performance
Product revenue surged 51.9% to $773 million, while service revenue remained higher at $1.275 billion, growing 13.7%. Secure Networking billings increased 34%, and unified secure access service edge (SASE) billings climbed 35%. Billings for FortiSASE more than doubled, while operational technology billings surged over 55%. AI-driven Security Operations billings rose 25%.
Raised Guidance
Management increased its guidance for the full year 2026. The new midpoint for billings rose 5.6% to $9.45 billion, compared to a 1.6% increase in service revenue guidance to $5.2 billion. The adjusted EPS midpoint was raised to $3.44, up 9.9% from the prior $3.13. For the third quarter, the company expects revenue between $2.01 billion and $2.1 billion, with billings in the range of $2.25 billion to $2.35 billion.
Chief Financial Officer Christiane Ohlgart stated, “We believe the first quarter of 2026 marked a trough for our service revenue growth rate.” This outlook is supported by the strong billings performance in the second quarter, which points to future revenue recognition.
Market Context
The after-hours rally stood in contrast to the broader market’s performance during the regular session, where the S&P 500 fell 1.52% to 7,316.15. Among Fortinet’s peers, Palo Alto Networks (PANW) fell 1.54% to $314.15, CrowdStrike (CRWD) declined 1.33% to $179.38, while Check Point Software (CHKP) gained 1.71% to $139.67.
Financial Metrics
GAAP gross margin slipped by 50 basis points to 80.2% due to the hardware-focused product mix. However, adjusted operating margin expanded by 490 basis points to 38.0%. Free cash flow surged to $966 million, up from $284 million in the same period last year.
At the after-hours price of $170.22, the stock trades at roughly 49.5 times the updated adjusted EPS midpoint. The market will be watching closely to see if the after-hours gain holds during Thursday’s regular session.
