Fortinet FTNT is scheduled to report fourth-quarter 2024 results on Thursday, after market close.

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The cybersecurity firm projects revenues between $1.445 billion and $1.505 billion. The Zacks Consensus Estimate for the same is pegged at $1.48 billion, suggesting year-over-year growth of 10.69%.

The company forecasts third-quarter non-GAAP earnings per share between 56 cents and 58 cents. The consensus mark for earnings is pegged at 51 cents per share, implying a rise of 24.39% from the year-ago quarter’s 38 cents.

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FTNT Earnings Surprise History

In the last reported quarter, the company delivered an earnings surprise of 39.02%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 20.4%.

Earnings Whispers for Fortinet

Our proven model predicts an earnings beat for Fortinet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

FTNT has an Earnings ESP of +1.25% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping Upcoming FTNT Results

Fortinet is expected to report robust third-quarter results, driven by the increasing adoption of its security and networking products in the evolving digital landscape. The company's performance is likely to have reflected the ongoing shift to hybrid work environments and the accelerated deployment of digital technologies across industries.

Fortinet completed the acquisition of Lacework, a cloud security and cloud-native application protection platform trailblazer, effective Aug. 1, 2024. The company also acquired Next DLP, which will improve its position in the standalone enterprise data loss prevention (DLP) market and strengthen its leadership in integrated DLP markets.

In the Product segment, Fortinet's FortiGate-based secure Software-Defined Wide Area Network (SD-WAN) offerings are anticipated to be a key growth driver. Our model projects a year-over-year increase of 3.3% in product revenues, with estimates at $504.4 million for the to-be-reported quarter. 

The Services segment is expected to have witnessed strong growth, fueled by increased demand for FortiGuard security subscriptions and FortiCare technical support services. In the fourth quarter, Fortinet announced the launch of FortiAppSec Cloud, a new cloud-delivered platform that integrates key web application security and performance management tools into a single offering.

Fortinet Expands GenAI Offerings

The company also announced the expansion of GenAI across its product portfolio and launched two integrations with FortiAI to simplify and automate security analyst processes. Our model forecasts Services revenues to reach $1.08 billion, indicating a 16.9% year-over-year increase.

The global cybersecurity market continues to expand rapidly, providing a favorable backdrop for Fortinet's growth. According to a Global Market Insights report, the SD-WAN market, valued at $5.6 billion in 2023, is projected to reach $7.56 billion in 2024 at an impressive compound annual growth rate (CAGR) of 35.1%. The SD-WAN market is expected to continue its exponential growth trajectory, with predictions that it will reach $25.36 billion by 2028, witnessing a CAGR of 35.4%. This growth is attributed to the rising frequency and sophistication of cyberattacks, coupled with increasing IT expenditures. 

FTNT's FortiTrust, a unified solution with a single user-based licensing model for flexible consumption across networks, endpoints and clouds, has been gaining traction. This is expected to have driven the company's private and public cloud billings. For the fourth quarter, Fortinet has provided guidance for Billings in the range of $1.9-$2 billion. Our model estimates Billings to reach $1.9 billion, indicating 2.2% year-over-year growth. Fortinet operates in a fiercely competitive cybersecurity market, contending with industry giants like Palo Alto Networks PANW, Check Point Software Technologies CHKP and Cisco Systems CSCO.

FTNT Price Performance & Stock Valuation

Shares of Fortinet have rallied 53.6% in the past year, outperforming the Zacks Computer and Technology and the S&P 500 index’s appreciation of 23.3% and 22.9%, respectively.

1-Year Stock Performance

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Valuation-wise, Fortinet's premium pricing is evident. Its trailing 12-month price-to-sales (P/S) ratio of 13.64X is way ahead of the Zacks Internet Software industry average of 4.06X. This elevated valuation suggests high growth expectations from investors but also implies increased risk.

FTNT P/S Ratio Depicts Stretched Valuation

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Investment Considerations: Balancing Risk and Reward

Fortinet faces significant challenges from macroeconomic uncertainties and intensifying competition in the cybersecurity sector. Despite these headwinds, FTNT maintains a strong market position with its integrated security fabric approach, resonating well with enterprise customers. The company's focus on innovation and R&D investment positions it favorably to capitalize on emerging trends like SASE and ZTNA.

The company's Security Fabric, an integrated and automated platform, provides comprehensive protection across various digital environments. Fortinet's commitment to innovation, evident in its AI-powered solutions and GenAI assistant, further strengthens its competitive edge in the rapidly evolving cybersecurity landscape.

Final Thought

The ongoing digital transformation across industries continues to drive demand for comprehensive cybersecurity solutions. Fortinet's strategic positioning, innovative approach and commitment to industry development make it a compelling investment opportunity ahead of the fourth-quarter earnings results despite its recent price appreciation. As organizations worldwide prioritize their digital defenses against increasingly sophisticated cyber threats, Fortinet appears well-positioned to capitalize on this growing market demand and deliver continued value to investors.

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