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Investing.com -- Shares in Fortinet (NASDAQ:FTNT) sank by more than 19% in premarket U.S. trading on Thursday after the cybersecurity firm unveiled a disappointing third-quarter revenue outlook amid worries over a tariff-driven downturn in business spending and the progress of an ongoing firewall refresh cycle.
A host of firms have recently moved to reassess or rein in their spending strategies, citing broader economic uncertainty due to U.S. President Donald Trump’s aggressive trade agenda.
Still, executives at Fortinet, which provides integrated cybersecurity solutions such as firewalls and cloud-based threat protection, said in a post-earnings call that the murky outlook has yet to lead to a negative impact on the business. It added that the broader cybersecurity market has remained strong and resilient against this headwinds.
But analysts flagged concerns around Fortinet’s closely-watched firewall refresh cycle, especially as many of its customers have firewall devices that are nearing their end-of-service dates.
In a note, analysts at KeyBanc Capital Markets highlighted that Fortinet management said that it was already 40% to 50% of the way through its 2026 end-of-service refresh cohort, and "downticked" the same cohort for 2027.
"The progression through the refresh was more than we anticipated, and the underlying product revenue growth excluding the refresh benefit of flat-to-down year-on-year in the first half is worse than we expected," the analysts wrote. They added that the refresh opportunity "may not be as large as" the original projection of $400 million to $450 million Fortinet presented at an analyst day in November.
Downgrading their rating of the stock to "sector weight" from "overweight," the KeyBanc analysts said Fortinet faces a "challenging steup going forward as the refresh tailwind diminishes in 2026.
Separately, analysts at Piper Sandler said that while Fortinet’s results "appeared to be a step in the right direction," the refresh cohort comment will "likely to do much to shake investor confidence." The strategists also lowered their rating, cutting it to "neutral."
In its second quarter ended on June 30, Fortinet reported revenue of $1.63 billion, meeting estimates, while adjusted profit per share of $0.64 topped Wall Street expectations.
Yet Fortinet’s third-quarter revenue outlook of $1.67 billion to $1.73 billion fell just short of analysts’ projections at the midpoint, according to LSEG data cited by Reuters.
(Luke Juricic contributed reporting.)