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Investing.com - Evercore ISI has lowered its price target on Fortinet (NASDAQ:FTNT) to $78.00 from $105.00 while maintaining an "In Line" rating following the company’s second-quarter results. According to InvestingPro data, Fortinet maintains impressive gross profit margins of 81.34% and shows strong financial health with a "GREAT" overall score, suggesting resilience despite market pressures.
The cybersecurity firm delivered in-line Q2 results but revealed a significant shift in its business outlook, particularly regarding its firewall refresh cycle. Fortinet disclosed that 40%-50% of the anticipated refresh cycle is already complete, a substantial revision from the previously stated 20% completion rate mentioned in Q1.
While Fortinet maintained its full-year guidance, the company announced a $50 million mix shift from services to product revenue. Services revenue grew 14.1% year-over-year, significantly below consensus expectations, which management attributed to fading COVID-era deferred revenue tailwinds, longer upsell cycles, and higher churn on acquired assets.
The size of the refresh opportunity remains unchanged at $400 million to $450 million, but the unit count increased from 580,000 to 650,000. Management indicated that higher-value appliances are being refreshed now, with lower-value units expected to make up the remaining 50% of refreshes in 2026.
Evercore ISI noted that inorganic contribution added 2 percentage points to revenue and billings growth in Q2, while management has indicated investors should expect double-digit product revenue growth next year despite the revised refresh cycle timeline. With a market capitalization of $73.92 billion and a P/E ratio of 39.44, Fortinet continues to demonstrate strong fundamentals and growth potential in the cybersecurity sector.
In other recent news, Fortinet reported billings growth of 15.4% year-over-year, surpassing the consensus expectations of 11.8%. Despite this positive earnings report, several firms have expressed concerns about the company’s future growth trajectory. Jefferies lowered its price target for Fortinet to $85, maintaining a Hold rating due to growth concerns. Morgan Stanley (NYSE:MS) downgraded Fortinet from Overweight to Equalweight, reducing its price target significantly to $78, citing a "meaningful reset of expectations" for the firewall refresh cycle. Piper Sandler also downgraded Fortinet to Neutral, cutting the price target to $90, due to concerns about the company’s 2026 renewal cohort. KeyBanc followed suit, downgrading Fortinet to Sector Weight, with apprehensions about the product refresh cycle and underlying revenue growth. Raymond (NSE:RYMD) James maintained a Market Perform rating, noting that while billings were above expectations, commentary from Fortinet dampened enthusiasm for a potential "supercycle" bull case. These developments indicate a cautious outlook from analysts regarding Fortinet’s future performance.
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