Fortinet shares plunge 26% on growth slowdown despite strong earnings

Earnings beat expectations but growth slows

Fortinet reported adjusted earnings of 91 cents per share for the third quarter, exceeding analyst expectations of 86 cents per share. Revenue grew 20% year-over-year to $2.08 billion, matching forecasts but marking a slowdown from the 26% growth reported in the previous quarter.

Product revenue, driven by demand for FortiGate firewalls, surged 37% to $765 million, while services revenue grew 13% to $1.31 billion. Billings climbed 29% to $2.34 billion, and unadjusted net income rose to $635.5 million, up from $473.9 million a year earlier. Free cash flow reached $865 million.

AI acquisition and product updates

Fortinet acquired Virtue AI Inc. in August for an undisclosed sum described as "immaterial." Virtue AI’s runtime protection and automated validation tools will integrate with Fortinet’s FortiAIGate product, which launched earlier this year as part of its push into AI-driven security.

The company also introduced new controls in its FortiEndpoint product in July to monitor employee use of AI tools and prevent data leaks. Both moves align with Fortinet’s strategy to embed AI into its network security offerings, as reported in its recent expansions of the FortiGate firewall platform.

Guidance and investor reaction

Fortinet slightly reduced its full-year service revenue forecast to $5.15 billion–$5.17 billion from the earlier $5.18 billion–$5.22 billion range. It raised its full-year revenue guidance to $8.125 billion–$8.215 billion and billings forecast to $9.568 billion–$9.718 billion, with adjusted earnings projected at $3.54–$3.58 per share.

Despite the strong results, shares fell 26% in after-hours trading, with investors citing the slower revenue growth and downward revision as key concerns. Competitors Tenable and Palo Alto Networks also saw declines of 5%–7%, while Gen Digital Inc. rose nearly 6% after reporting stronger-than-expected earnings.

Tenable and Gen Digital’s diverging performance

Tenable Holdings reported adjusted earnings of 63 cents per share, up from 42 cents a year earlier, and revenue of $276.4 million, a 9.5% year-over-year increase. The company signed 413 new enterprise platform customers and repurchased $223.8 million worth of shares tied to an $800 million convertible notes offering. However, its shares fell over 5% in after-hours trading, mirroring Fortinet’s decline.

Tenable recently integrated Anthropic PBC’s Claude Mythos model into its Tenable One Adversary View product to surface hidden attack paths and remediation methods, a move that reflects broader industry trends in AI-driven threat detection.

Gen Digital, in contrast, saw its shares rise nearly 6% after reporting fiscal second-quarter revenue of $1.37 billion, up 12% year-over-year, and bookings growth of 10%. The company raised its full-year revenue outlook to $5.465 billion–$5.515 billion and projected adjusted earnings of $2.93–$2.98 per share.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

Fortinet’s results highlight a paradox in cybersecurity: investors are rewarding execution but punishing any hint of deceleration, even when fundamentals remain strong. The 26% after-hours drop—despite earnings beats—suggests that public-market valuations in this sector are now anchored to growth rates rather than absolute performance. For founders and operators, the takeaway is double-edged: expanding into AI-driven security through acquisitions (like Virtue AI) can shore up competitive positioning, but it won’t shield you from the market’s obsession with sequential trends. Private companies eyeing exits or IPOs may need to communicate not just growth, but consistent growth, to avoid similar volatility.

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