Fortinet's stock rockets higher as earnings help dispel fears of AI disruption

By Emily Bary

An 'increasingly complex threat environment' is boosting demand for Fortinet's cybersecurity offerings

Fortinet easily cleared Wall Street's bar with its latest earnings results.

The software sector is seeing a major shot in the arm from cybersecurity vendor Fortinet's results.

Investors were cheering the company's latest earnings, sending shares up 22% in Thursday morning trading. Fortinet (FTNT) exceeded expectations with its results and outlook, calling out "an increasingly complex threat environment that is being intensified by AI."

Shares of other cybersecurity companies, including Zscaler (ZS) and Palo Alto Networks (PANW), were rising in unison, up 8% and 7%, respectively.

That's been part of the thesis for cybersecurity bulls during what's been a polarizing stretch for the sector. Some investors have worried that artificial-intelligence tools would displace traditional threat defense. Others have said that AI would make bad actors even more powerful, meaning that companies would have to load up on cybersecurity products.

Fortinet plays into other hot trends as well. CEO Ken Xie said in a statement that results were "driven by the continued convergence of networking and security, an approach Fortinet has led for 26 years." Networking has been a strong category as connectivity needs grow in the AI era.

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In the March quarter, Fortinet grew billings - calculated as revenue plus the change in deferred revenue - by 31% to $2.09. That was significantly ahead of the FactSet consensus of $1.82 billion.

Revenue amounted to $1.85 billion, up 20% from a year before, whereas analysts were modeling $1.73 billion. Adjusted earnings per share came in at 82 cents, up 41% from a year earlier and well above the 62-cent consensus view.

"Company commentary suggest it's in no small part a result of the recent cyber implications of the Middle East war plus organizations hardening in preparation for AI," Bernstein analyst Peter Weed wrote. "Hacks like those that hit Stryker and broader nation-state attacks raised urgency" to protect operations technology, he added.

Fortinet's outlook for the June quarter topped expectations. Management expects $1.83 billion to $1.93 billion in revenue and 72 cents to 76 cents in adjusted earnings per share. Analysts tracked by FactSet were modeling $1.82 billion and 69 cents, respectively.

The company "appears to be somewhat of a situational demand bubble above recent trends," Weed noted, but that "may continue to drive elevated purchases for some time as firms fight off attacks." He has a market-perform rating on the stock.

See also: Here's why identity security has become the next hot thing.

Xie said the company has been winning market share and could continue doing so by using its supply chain to "turn supply-chain challenges into opportunities."

-Emily Bary

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05-07-26 1114ET