Cloud Security Demand Boosts Fortinet Results

Network security firm Fortinet has reported strong quarterly growth, an indication of strong demand in the network security market and particularly in the more specialised market for cloud security.

But the gains weren’t enough to satisfy investors, who inflicted a sharp drop in Fortinet’s share price at the end of last week that recovered only marginally on Monday.

The company’s revenues for the quarter were 21 percent higher than the same quarter last year, reaching $453.9 million (£348m), while product revenue grew 20 percent to $164.5m.

Billings increased 22 percent year-over-year to $527.5m, with a non-GAAP operating margin of 24 percent, while earnings jumped 75 percent to $0.49 per share.

Integrated WAN security

Those figures were all ahead of analysts’ estimates, as was Fortinet’s fourth-quarter guidance targets of 19 percent year-on-year revenue growth and a 60 percent growth in earnings.

Fortinet’s founder and chief executive, Ken Xie, said the company saw strong demand for its Security Fabric platform and its SD-WAN, which includes a next-generation integrated firewall.

“SD-WAN plays a pivotal role in realising the true benefit of digital transformation and is forecast to reach $4.5 billion by 2022, up from $1 billion in 2018,” Xie said.

He said Fortinet is the only company that offers both SD-WAN and next-generation firewall features in a single integrated offering for enterprises and smaller businesses.

“We believe this technology advantage puts Fortinet in a solid position to capitalise on strong SD-WAN market growth,” Xie said.

He cited Gartner’s forecast that by 2023, half of all new firewall purchases on a distributed network would use SD-WAN features.

Machine learning

Xie said the recent acquisition of ZoneFox would boost Fortinet’s endpoint and security information and event management (SIEM) technology through its machine learning technology.

Billings to large global customers, excluding service providers and managed security service providers, grew 31 percent year-over-year.

Billings included a seven-figure deal with an undisclosed large US retailer, which focused on FortiGates, which are high-end, ASIC-based firewalls.

Cloud billings for Fortinet’s top five cloud providers grew more than 100 percent.

Fortinet chief financial officer Keith Jensen said a deal with a large US-based financial services firm had displaced four rival firms. Fortinet competes against the likes of Palo Alto Networks, Check Point and Cisco.

Share volatility

In spite of the strong figures, investors were expecting still more, and after major gains over the past year, Fortinet’s shares dropped sharply at the end of last week, plummeting as much as 14.5 percent before closing 13.3 percent lower on Friday and rising only slightly on Monday.

The firm’s share price had more than doubled over the previous 52 weeks, gaining 14 percent in the past three months alone, as investors flocked to the booming security sector.