Fortinet Inc. (FTNT) shares surged 16.0% to $111.80 on Wednesday after the cybersecurity company reported first-quarter results that blew past estimates on every metric. Adjusted EPS of $0.82 crushed the $0.62 consensus by 32.3%, while revenue of $1.85 billion beat the $1.73 billion estimate by 6.9%. The stock posted its largest single-day gain since February 2024.
Product revenue jumped 41% year-over-year to $726 million — the fastest growth rate since Q1 2022 — as enterprises accelerated cybersecurity hardware and software deployments amid rising nation-state cyber threats. Service revenue grew 16% to $1.12 billion, driven by FortiGuard security subscriptions and FortiSASE cloud security adoption. Total billings surged 22% to $2.14 billion, exceeding the $1.98 billion consensus.
Record Operating Margin
Non-GAAP operating margin expanded to a record 35.8%, up from 31.2% in Q1 2025 and 33.4% in Q4 2025. The margin expansion was driven by operating leverage on the higher revenue base and a favorable product mix shift toward higher-margin software and subscription offerings. Free cash flow reached $724 million, representing a 39.1% free cash flow margin.
Firewall Refresh Cycle Accelerates
CEO Ken Xie attributed the product revenue surge to an accelerating firewall refresh cycle, with enterprises replacing aging FortiGate appliances with next-generation models featuring AI-powered threat detection. Xie noted that 'the Iran conflict and associated state-sponsored cyber campaigns have created a level of urgency in enterprise security spending that we haven't seen since the SolarWinds incident.'
The company raised its full-year billings guidance to $8.2-$8.4 billion from $7.8-$8.0 billion and lifted its revenue outlook to $7.1-$7.2 billion from $6.8-$7.0 billion. Full-year operating margin guidance was raised to 34-35% from 32-33%.
Cybersecurity Sector Beneficiary
Fortinet's