Fortinet Inc., a leading cybersecurity company, reported an “unusually large volume of deals” that were delayed beyond the June quarter, according to Chief Financial Officer Keith Jensen. This news has had a negative impact on the broader cybersecurity sector.
Jensen explained that a combination of macro uncertainty and shorter contract durations affected Fortinet’s billings performance. Additionally, the company experienced an elevated level of enterprise deals that were pushed out into future quarters.
Although Fortinet exceeded expectations with adjusted earnings per share of 38 cents (compared to the 34-cent FactSet consensus) and $1.29 billion in revenue that matched analyst predictions, the company fell short on billings in Q2. While analysts were expecting $1.59 billion, Fortinet reported $1.54 billion in billings.
The outlook for the company also disappointed, with projected third-quarter revenue ranging from $1.315 billion to $1.375 billion, and billings estimated between $1.560 billion and $1.620 billion. This fell below analysts’ forecasts of $1.382 billion in revenue and $1.678 billion in billings.
As a result, Fortinet’s stock plummeted nearly 16% in after-hours trading on Thursday. This decline was mirrored by other cybersecurity companies such as Palo Alto Networks Inc., CrowdStrike Holdings Inc., and Zscaler Inc., whose shares also saw steep drops.
Jensen acknowledged that cybersecurity remains a priority for corporate IT departments, but he anticipates a return to more normal seasonality for Fortinet in the second half of the year. This is due to the company’s previous price increases leveling out and some other tailwinds diminishing.
While it is still early to provide guidance for next year, Jensen expressed confidence in Fortinet’s solutions and offerings, expecting a short-term trough in performance and growth comparisons easing by the fourth quarter of 2024. He projects billings growth to approach high teens during that period.
Fortinet’s challenges underscore the impact of macro uncertainty on the cybersecurity sector. However, the company remains optimistic about its future prospects and its ability to adapt to changing market conditions.