AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 3/6 · 05/11/2026
Moat—
Awaiting a sourced assessment under the current scoring policy and financial basis.
Pricing power—
Awaiting a sourced assessment under the current scoring policy and financial basis.
Predictability98
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 7.77
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.51
- observedAnnualPeriods
- 5.00
Financial strength83
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 100.00
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 33.77
- Debt / FCF (x)
- 0.45
- Net debt / operating income (x)
- -0.72
- Interest coverage (x)
- 103.72
- Current ratio (x)
- 1.17
Capital allocation97
Three-year equal-weight indicators: pretax operating return on average total assets (0–15%; alternative because at least one reported average invested-capital denominator is nonpositive; this is not ROIC), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- -1.43
- 3-year average SBC / revenue (%)
- 4.38
- cashConversionGrade
- 100.00
- operatingAssetReturn
- 20.09
Management—
Awaiting a sourced assessment under the current scoring policy and financial basis.
Evidence
These proprietary ASICs, combined with off-the-shelf central processing units (“CPUs”) and ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video.
2023 Form 10-K, filed February 26, 2024; Business—Secure Networking · Filed 26/02/2024
These proprietary ASICs allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video.
June 2026 Form 10-Q, filed July 30, 2026; Business Overview—Secure Networking · Filed 30/07/2026
•FortiASIC—Our Application-Specific Integrated Circuit (“ASIC”)-based Security Processing Units (“SPUs”) increase the speed, scale, efficiency and value of our solutions while reducing footprint and power requirements.
June 2026 Form 10-Q, filed July 30, 2026; Business Overview—FortiASIC · Filed 30/07/2026
We have no long-term contracts or arrangements with our third-party manufacturers that guarantee capacity, the continuation of particular payment terms or the extension of credit limits.
June 2026 Form 10-Q, filed July 30, 2026; Risk Factors—third-party manufacturing arrangements · Filed 30/07/2026
Accordingly, they are not obligated to continue to fulfill our supply requirements, and the prices we are charged for manufacturing services could be increased on short notice.
June 2026 Form 10-Q, filed July 30, 2026; Risk Factors—manufacturing prices and supply obligations · Filed 30/07/2026
•potential shift or migration from physical appliances that deliver on-premises network security to cloud and SaaS-based security services;
•our channel partners having insufficient financial resources to withstand changes and challenges in business conditions;
•disruptions in our channel or termination of our relationship with important channel partners, including as a result of consolidation among distributors and resellers of security solutions;
•insolvency, credit or other difficulties confronting our key suppliers and channel partners, which could affect their ability to purchase or pay for products and services and which could disrupt our supply or distribution chain;
2023 Form 10-K, filed February 26, 2024; Risk Factors—cloud migration and channel dependencies · Filed 26/02/2024
•FortiOS—Our unified operating system enables the convergence of networking and AI-powered security to enforce consistent policies across all form factors and edges.
June 2026 Form 10-Q, filed July 30, 2026; Business Overview—FortiOS · Filed 30/07/2026
As the foundational engine of the Fortinet
28
Table of Contents
Security Fabric, FortiOS empowers organizations to unify management and analytics, providing network visibility and control at scale.
June 2026 Form 10-Q, filed July 30, 2026; Business Overview—unified management and analytics · Filed 30/07/2026
As of June 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was $7.73 billion, which was substantially comprised of deferred security subscription and technical support services revenue as well as unbilled contract revenue from non-cancellable contracts that will be recognized in future periods.
June 2026 Form 10-Q, filed July 30, 2026; revenue note—remaining performance obligations at June 30, 2026 · Filed 30/07/2026
• Service revenue was $4.58 billion for 2025, an increase of 13% compared to $4.05 billion in 2024.
2026 proxy statement, filed April 29, 2026; 2025 business highlights—service revenue · Filed 29/04/2026
•the purchasing practices and budgeting cycles of our channel partners and end-customers, including the effect of the end of product lifecycles, refresh cycles or price decreases;
June 2026 Form 10-Q, filed July 30, 2026; Risk Factors—purchasing practices and refresh cycles · Filed 30/07/2026
We periodically have discussions with third parties regarding licensing Fortinet’s intellectual property (“IP”) and have sometimes taken legal action against competitors to protect our IP, and as a result third parties have paid us fees in return for licenses or covenants-not-to-sue related to Fortinet IP.
2023 Form 10-K, filed February 26, 2024; Business—Intellectual Property · Filed 26/02/2024
Reconciliation of GAAP to non-GAAP gross profit, gross margin, operating income, operating margin, net income and diluted net income per share
Three Months Ended
June 30,
2026
June 30,
2025
Revenue
$
2,047.9
$
1,630.0
Reconciliation of non-GAAP gross profit:
GAAP gross profit
$
1,643.2
$
1,315.1
GAAP gross margin
80.2
%
80.7
%
Add back:
Stock‐based compensation
8.7
7.5
Amortization of acquired intangible assets
5.8
7.3
Non‐GAAP gross profit
$
1,657.7
$
1,329.9
Non‐GAAP gross margin
80.9
%
81.6
%
Reconciliation of non-GAAP operating income:
GAAP operating income
$
689.3
$
458.0
GAAP operating margin
33.7
%
28.1
%
Add back:
Stock‐based compensation
80.8
69.9
Amortization of acquired intangible assets
9.9
13.2
Gain on intellectual property matters
(1.3)
(1.3)
Non‐GAAP operating income
$
778.7
$
539.8
Non‐GAAP operating margin
38.0
%
33.1
%
Reconciliation of non-GAAP net income:
GAAP net income
$
606.3
$
440.1
Add back:
Stock‐based compensation
80.8
69.9
Amortization of acquired intangible assets
9.9
13.2
Gain on intellectual property matters
(1.3)
(1.3)
Tax adjustment (a)
(30.7)
(30.8)
Non-GAAP net income
$
665.0
$
491.1
Reconciliation of non-GAAP net income per share, diluted
GAAP net income per share, diluted
$
0.82
$
0.57
Add back:
Non-GAAP adjustments to net income per share
0.08
0.07
Non-GAAP net income per share, diluted
$
0.90
$
0.64
Shares used in diluted net income per share calculations
739.9
772.7
(a) Non-GAAP financial information is adjusted to an effective tax rate of 18% in each period for the three months ended June 30, 2026 and 2025, on a non-GAAP basis, which differs from the GAAP effective tax rate.
Second-quarter 2026 results, filed July 29, 2026; GAAP and non-GAAP reconciliation for three months ended June 30, 2026 and 2025 · Filed 29/07/2026
Reconciliation of net cash provided by operating activities to adjusted free cash flow
Three Months Ended
June 30,
2026
June 30,
2025
Net cash provided by operating activities
$
1,043.6
$
451.9
Less: Purchases of property and equipment
(78.0)
(167.8)
Free cash flow
$
965.6
$
284.1
Add: Real estate related purchases
30.3
143.8
Adjusted free cash flow
$
995.9
$
427.9
Free cash flow margin
47.2
%
17.4
%
Adjusted free cash flow margin
48.6
%
26.3
%
Net cash used in investing activities
$
(184.6)
$
(266.2)
Net cash used in financing activities
$
(147.9)
$
(414.2)
Reconciliation of total revenue to total billings
Three Months Ended
June 30,
2026
June 30,
2025
Total revenue
$
2,047.9
$
1,630.0
Add: Change in deferred revenue
324.2
149.2
Less: Deferred revenue balance acquired in business acquisitions
—
(0.8)
Total billings
$
2,372.1
$
1,778.4
1 A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release.
Second-quarter 2026 results, filed July 29, 2026; operating cash flow, capital expenditures and billings reconciliation · Filed 29/07/2026
Reconciliation of net cash provided by operating activities to adjusted free cash flow
Three Months Ended
March 31,
2026
March 31,
2025
Net cash provided by operating activities
$
1,077.1
$
863.3
Less: Purchases of property and equipment
(70.6)
(66.5)
Less: Proceeds from intellectual property matter
—
(14.0)
Free cash flow
$
1,006.5
$
782.8
Add: Real estate related purchases
58.5
56.2
Adjusted free cash flow
$
1,065.0
$
839.0
Free cash flow margin
54.4
%
50.8
%
Adjusted free cash flow margin
57.6
%
54.5
%
Net cash used in investing activities
$
(5.7)
$
(110.8)
Net cash used in financing activities
$
(1,342.9)
$
(32.7)
Reconciliation of total revenue to total billings
Three Months Ended
March 31,
2026
March 31,
2025
Total revenue
$
1,849.6
$
1,539.7
Add: Change in deferred revenue
235.7
57.5
Total billings
$
2,085.3
$
1,597.2
1 A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release.
First-quarter 2026 results, filed May 6, 2026; operating cash flow, capital expenditures and billings reconciliation · Filed 06/05/2026
During the six months ended June 30, 2026, we repurchased 12.5 million shares of our common stock under the Repurchase Program in open-market transactions, at a weighted-average price of $77.73 per share, for an aggregate purchase price of $972.8 million, which excludes a $6.7 million accrual related to the 1% excise tax imposed by the Inflation Reduction Act of 2022.
June 2026 Form 10-Q, filed July 30, 2026; repurchases during six months ended June 30, 2026 · Filed 30/07/2026
Based on our growth and profitability for the year, and after accounting for individual performance during the year, our executives earned 103% of their target annual incentives, on average.
2026 proxy statement, filed April 29, 2026; 2025 Compensation Highlights—earned annual incentives · Filed 29/04/2026
• Continued to Emphasize Performance-Based Long-Term Incentives: In 2025, our NEOs were granted long-term incentive awards in a mix of time-based restricted stock units (“RSUs”) and performance-based awards (“PSUs”) that are eligible to be earned based on our relative total stockholder return (“TSR”) as compared to the S&P 500.
2026 proxy statement, filed April 29, 2026; 2025 Compensation Highlights—granted RSUs and relative-TSR PSUs · Filed 29/04/2026
Performance-based compensation provided under the Bonus Program and PSUs granted to our NEOs are subject to recovery pursuant to the Clawback Policy discussed above in “— Corporate Governance — Clawback Policy.”
2026 proxy statement, filed April 29, 2026; Performance-Based Compensation Recovery · Filed 29/04/2026
20
Table of Contents
As part of our engagement with stockholders, we regularly evaluate our corporate governance structure and practices, and have implemented the following measures, among others: adopted a majority voting standard for uncontested elections of directors; removed supermajority voting requirements in our certificate of incorporation and bylaws; allowed stockholders to call special meetings of our stockholders; declassified our Board of Directors; implemented proxy access; and implemented stock ownership guidelines with respect to our non-employee directors.
2026 proxy statement, filed April 29, 2026; implemented corporate-governance measures · Filed 29/04/2026
• All committees of the Board of Directors are composed of independent directors, with the exception of the Cybersecurity Committee.
2026 proxy statement, filed April 29, 2026; Board Highlights—committee independence exception · Filed 29/04/2026
Fortinet’s stockholders approved the election of nine directors to Fortinet’s Board of Directors, each to serve for a one-year term expiring at the 2027 Annual Meeting of Stockholders and until such director’s successor is elected and qualified, by the following votes:
Nominee
Votes For
Votes Against
Abstentions
Broker Non-Votes
Ken Xie
529,845,773
42,170,335
0
73,355,332
Michael Xie
567,230,046
4,786,062
0
73,355,332
Kenneth A.
Annual-meeting report, filed June 16, 2026; June 12, 2026 director election results and annual terms · Filed 16/06/2026
• Total revenue was $6.80 billion for 2025, an increase of 14% compared to $5.96 billion in 2024.
2026 proxy statement, filed April 29, 2026; 2025 total revenue and comparison with 2024 · Filed 29/04/2026
• Operating income was $2.08 billion in 2025, an increase of 16% compared to $1.80 billion in 2024.
2026 proxy statement, filed April 29, 2026; 2025 operating income and comparison with 2024 · Filed 29/04/2026
Total billings were $6.53 billion in 2024, an increase of 2% compared to $6.40 billion in 2023.
2024 Form 10-K, filed February 21, 2025; MD&A—2024 billings growth · Filed 21/02/2025
•We have been, are currently and may in the future be susceptible to supply chain constraints, supply shortages and disruptions, long or less predictable lead times for components and finished goods and supply changes because some of the key components in our products come from limited sources of supply.
June 2026 Form 10-Q, filed July 30, 2026; Summary of Risk Factors—current and historical supply constraints · Filed 30/07/2026
•During prior periods of supply chain disruption, including during the COVID-19 pandemic, we increased our purchase order commitments.
June 2026 Form 10-Q, filed July 30, 2026; Summary of Risk Factors—historical purchase-order commitments · Filed 30/07/2026
Our insider trading policy expressly prohibits short sales and derivative transactions of our stock by our officers, directors, employees and certain designated consultants and contractors, including short sales of our securities and the purchase or sale of puts, calls, or other derivative securities of the company or any derivative securities that provide the economic equivalent of ownership.
2026 proxy statement, filed April 29, 2026; insider-trading policy—short-sale and derivative restrictions · Filed 29/04/2026
