Fortinet at Bank of America Global Tech Conference: SASE Ambitions and AI Investments

On Tuesday, 03 June 2025, Fortinet (NASDAQ:FTNT) presented at the Bank of America Global Technology Conference 2025, showcasing its strategic direction amid both opportunities and challenges. The cybersecurity company highlighted its expansion into new markets such as SASE and AI, while addressing competitive pressures and tariff impacts. Despite economic uncertainties, Fortinet remains confident in its growth trajectory, particularly in SASE and OT security.

Key Takeaways

• Fortinet is leveraging its platform approach to strengthen its position in the cybersecurity market.
• The company has become a top-three player in the SASE market within 18 months, surpassing $1 billion in revenue.
• Long-term investments in AI and infrastructure are central to Fortinet’s strategy.
• Economic uncertainties and tariff concerns are being mitigated through a diversified business model.
• A natural upgrade cycle for firewalls is anticipated in 2027-2028.

Financial Results

• Sales conservatism was noted in Q1 due to tariff and economic uncertainties.
• FortiGate experienced a 15% growth in Q1, outperforming overall product revenue growth.
• AI-assisted products see a 25% price increase when AI is enabled.
• Fortinet’s SASE segment has exceeded $1 billion in revenue, marking significant growth.
• OT security revenue is approaching $1 billion, with continued investment expected.

Operational Updates

• Fortinet is expanding its portfolio to provide end-to-end security solutions.
• Its SASE is integrated with the same OS as its firewall and SD-WAN, offering a unified solution.
• Over 15 years of AI investment has resulted in more than 500 patents.
• The company has invested billions in infrastructure, including over 5 million square feet of global facilities and data centers.
• Enhanced pipeline management practices are in place to ensure diligence and confirmation.

Future Outlook

• Fortinet aims to become the leading SASE provider through technology integration and infrastructure advantages.
• The OT security market is expected to grow rapidly, presenting new opportunities.
• A natural upgrade cycle for firewalls is anticipated due to COVID-era purchases.
• Continued focus on AI investment to enhance security and operations.
• Price competition in the SASE market is expected, with Fortinet focusing on cost advantages and easy migration.

Q&A Highlights

• Fortinet products are largely exempt from tariffs, with a global market reducing US-specific risks.
• The company favors a platform approach over single-point solutions in network security.
• SASE is seen as an evolution of the firewall, not a replacement, offering flexible deployment options.
• Guidance philosophy includes considerations of pipeline perspective, sales capacity, and economic conditions.
• A forced upgrade cycle is expected in 2026, with a natural cycle following in 2027-2028.

In conclusion, Fortinet’s presentation at the conference underscored its strategic initiatives and resilience in the cybersecurity sector. For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Bank of America Global Technology Conference 2025:

Unidentified speaker, Analyst: I wanted to get your perspective. Yeah. Yeah.

Christiana, CFO, Fortinet: I would say cybersecurity is a very resilient market. The threat actors are not going away. And so far, we don’t see any impact on our business from the volatility that that you hear about and and the expectations that j GDP might go down. Yeah. So we are very confident that we are not gonna be impacted, and so far we don’t see signs.

Yeah. Can any, when you discuss with your customers,

Unidentified speaker, Analyst: when you discuss kind of spending plans with their customers, how do they react to the uncertainty because of tariffs, etcetera? Is there any hesitation? And the reason why I’m asking it because there are two parts of your business. You have the growth SaaS and OPSEC and others. And then there’s also the more legacy that customers can sweat out or customers can upgrade, delay upgrades.

So how do they react to the uncertainty overall?

Ken, Unidentified, Fortinet: I think if you look in the separate security space, there’s some change in our environment, where the working environment of more device connect online now. So that’s all drive the additional growth plus now the AI is the other driver. So we don’t see this spending slow down even in the current environment, a lot of uncertainty, but cybersecurity is probably more resilient compared to other IT spending. So even like there’s an up and down in different market this year, but cybersecurity market is still pretty stable, whether on the stock market or some other things there. I do believe the convergence will continue to going forward.

And also the format may change a little bit because the next ten years probably need the most secure, a lot of device compared to the last twenty, thirty years, most secure people, whether the laptop or phone or there’s a connection there. So a lot of OT, OT security do keep growing, which Fortinet is the leader, probably the only leader actually based on the Westland report. On the other side, some change in whether SASE, ZTNA will also transition a current firewall into the next generation, right? So traditional firewall is more about the net. There’s a firewall VPN.

That’s my previous company, Nesquen. And then when we started Fortinet, there’s other, we call the UTM or next gen firewall. Now in the same FortiOS, you see all the SASE function built in, all the DLP, the CASB, all the WAF, all the function, all built in the same OS as a firewall SD WAN. So I feel this network security technology will continue to evolving, especially when we secure this IoT, OT environment is a very different than secure to people, laptop, mobile phone. You have a pretty standard operation system, but OT, IoT, most of the device has a different operation system, has a very limited computing power.

Most of the time, the only way to secure it is really by network security. It’s very different than the traditional endpoint security market has a pretty standard operation system. So this is all different operating system and that’s where there will be 10 time more device connect online the next ten year compared to PeopleConnect. So that’s where we feel there’s a lot of driver for the network security growth. Network security continue to be one of the biggest market in cybersecurity.

So we do see keep it grow double digit.

Christiana, CFO, Fortinet: And Tal, I think you mentioned tariffs, right? And I think there’s a lot of anxiety around tariffs because we still promote our hardware, which is extremely important to accelerate security. And so for us, I think it’s important to understand that first of all, our products are predominantly exempt. Maybe some cables coming from somewhere. Our market is not only The US, our market is very global.

So that’s another area where internationally we are not impacted by US tariffs. And so I think we continue to say to our customers, to our partners, I don’t want to say don’t worry, but let’s be transparent that tariffs right now should not have an impact on your pricing, on your products. And we will inform you if something changes. Got it.

Unidentified speaker, Analyst: I’ll get back to it. I wanted to ask Ken about platformization. So, and I’ll ask it from a different angle, not the way that Palo Alto describes reformatization. Bank of America says publicly that we have over 300 vendors for security. But on the other hand, when I look at the offerings today, I don’t know if there is room in the market for another box, another point solution.

It doesn’t, it could be a service, it doesn’t matter. And we see companies offering wider and wider set of solutions. Where is Fortinet in this journey to expand the portfolio horizontally and go into adjacent markets and offer, I’ll call it end to end solution, but you know what I mean, a platform for security.

Ken, Unidentified, Fortinet: I think that’s where, if you look at the platform, that’s all dependent on where you deploy the platform. The network security tend to be more based on in the middle of network, right, to stop the bad traffic or whatever. There’s an endpoint more deploying your laptop or mobile phone. There are some also deploying the cloud, like Waze or some other things there. So that’s where if you look at the network security, that’s why I do believe a lot of things, probably air, you do need a network security like IoT security, most of the device had to be used network security to secure.

But network security, because it’s more based on some appliance or some like a screen, the traffic in the middle network there, you do need to handle more and more function. So if you’re looking at four d OS, so we started probably like a four, five function twenty five years ago, traditional firewall VPN, the antivirus intrusion prevention. Now we have about 30 function now, including all the networking function, all the switching, routing, all the SD WAN and plus all the security function there. So I do believe we’ll continue to add more function and then integrate in the same OS. And then using ASIC will accelerate all this function.

Right now, ASIC can accelerate half of this assertive function. So that’s improving, performed by 10x average. So that’s the progress. That’s also the reason in the network security space, you see pretty much no standalone or single point solution provider anymore. Whether FarEye or some other one, all starting to disappear.

If they only offer like sandbox single function there, you have a very difficult time to compete in with a platform when they add a new function with existing function in a way together, then starting to disappear. The same thing even like SD WAN space. Like five, ten years ago, lot of SD WAN player. So Fortinet is the only one we develop internally integrate with the firewall, with our network security, now with SASE. So that’s where back in a few years, we become the number one SD WAN because it’s well integrated with other functions.

So very easy from networking to the firewall, I mean, from firewall to the SD WAN. That’s where like over 70%, actually 73% of enterprise customer, which is use our firewall also use our SD WAN now. So that’s where when the function can integrate into the platform, especially network security, the single function device have much short life only for few years. Because once the platform player catch up, the customer always willing to use in the platform side, which costs lower and more easy to manage and working together better without a function. So that’s in the network security.

I think in the endpoint in the cloud is a little bit different story because you do can load multiple agent on your laptop. You maybe can run multiple application in the cloud also, but on the network security mostly has a single box. So the more function they can process the better.

Unidentified speaker, Analyst: So do you think there is synergy between SASE and firewall? And the reason why I ask it is because Zscaler is saying the opposite. They say SASE is a separate market. Actually, they want to replace firewalls.

Ken, Unidentified, Fortinet: Which is not the case. If you look at it, we only launched our own SASE like eighteen months ago. So if you look in the Magic Quadrant, I think released last week, we become a fast growing SASE in the top three, top four player. And that’s why in the early release, I keep saying, in a few years, we’ll be the number one SASE player. So feel we have a three key differentiation compared to this scale or any other SASE player in the market.

First, we have the technology integrate all the SASE function, including SD WAN in a single OS. So none of them in a single OS. They have to come from different bug, democratization, SD WAN, different CASB, or different kind of DLP. So we are the only one integrating the same OS, which give the customer you can deploy in the cloud or deploy on premise using hardware, the same OS. The second one, since we have the biggest customer base in enterprise, so we have over 800,000 customer base, bigger than any other SASE player.

So that’s where it’s very quick for a current firewall network security customer to migrate into SASE. That’s the reason in the last, like only eighteen months, we’ve become a fast growing and probably top three players. So we have over a billion dollar unified SASE market right now and continue to grow faster than any other SASE player. And then the third one also, we started investing this, we call it, because SASE eventually, you not only compete on the function, but also compete on the cost of the infrastructure. Because SAS have to leverage a cloud or infrastructure process or their traffic.

So that’s where whoever owns some infrastructure has a cost advantage. Because if you’re using cloud provider compared to your own infrastructure, cloud provider charge probably like five to 10 times more expensive than only infrastructure. Even the colo, the only infrastructure probably only one third cost compared to the colo. That’s where in the last few years, we probably invest billions dollar into the infrastructure. So we have a global facility over 5,000,000 square footage and a lot of data center, all this one, which we have our own engineer running it, has a much cost advantage.

So that’s where the three key differentiation, the owner technology into a single OS, the bigger custom base, very easy to migrate to SASE and then our own infrastructure, which none other SASE player had this three advantage. So that’s where we feel we’ll continue to grow probably the fast in the SASE market and will be the number one in few So

Unidentified speaker, Analyst: there are two deployment models for your SASE. One is to use your own infrastructure and the other one is to use public cloud. I know you said once that if a customer uses your own infrastructure, your price could be one third of the price of Zscaler, for example. What happens to the pricing advantage if the customer uses, in areas where you don’t have infrastructure or they have to use public cloud, what’s your advantage then in that case?

Ken, Unidentified, Fortinet: There’s also a third case is really, we’re working with a service provider carrier. So we offer, we call it a sovereign SASE or private SASE leverage We provide a product, a technology, right? So that’s a third mode, but it’s really customer’s choice, right? So sometime they already a cloud like user, right?

So they can use in whatever the cloud they consume, but we do give them flexibility. You can use in the cloud, you can use in their own service provider or their own lot of like a bank or finance server. They also try to use their own data center. So that’s make the data stay within their data center, process within data center. That’s what we call the private SASE.

And then there’s a lot of sovereign SASE. We are much more international than most other SASE player. So we see a lot of sovereign SASE requirement. And then the third mode is really use our own infrastructure, which we have an advantage on the cost and also on the talent on the engineer side to supporting cost. So we have a lot of other technology beyond just a SASE, like a secure storage, like secure, like a content, like all this 40 stack replaced a lot of a virtual machine, all this kind of technology.

So we’ll be more secure, more cost efficient for infrastructure. That’s where we kind of let customer select.

Unidentified speaker, Analyst: Christiana, you made some comments in the last conference call about conservatism, sales conservatism during Q1 on the Q1 call. Can you walk us through some of conversations you had with your sales team with the market about the outlook? Can you also remind us the changes you’ve made in order to improve the pipeline hygiene and provide better outlook?

Christiana, CFO, Fortinet: So let’s start with conservatism, right? We came out of a, I think a month at the April where a lot of news came up, right around tariffs and so on. And what is the impact on companies? What is the impact on our customers? How do interest rates develop?

How does the US dollar develop? And so there was a little bit more uncertainty despite the fact that I mentioned cybersecurity is resilient. We had a good April, now a good month one. But because we are a highly diversified company with a lot of business coming from smaller entities, significant portion of our pipeline develops throughout the quarter. We have good visibility into large enterprise deals.

We know the size, we know whether it’s an existing customer or whether it’s a new customer. So we can apply our kind of risk adjusted models to the pipeline, but for the lower end of the market, we rely on in quarter pipeline. And so that’s harder for us as well as for the sales teams to assess in times of uncertainty. So that’s where some of the, what we may call conservatism came in. In addition, we’ve scrubbed the pipeline of course more so, and we are putting more diligence on the management of the pipeline.

And so there may not always be run rate markers anymore in the pipeline until they know that this is confirmed it’s coming, right? So it’s a combination of factors that made us pause a little bit to, and say, okay, let’s continue to execute well and see what q two brings.

Unidentified speaker, Analyst: And as far as the environment we’re now in June, as far as the environment versus what you saw in April, Are you in a better position, worse position or how did the environment change? I think understanding a little bit more that there’s going

Christiana, CFO, Fortinet: to be, I think constant news, right? And trying to calm down the news and just allow us to work with our partners, give them confidence that the tariffs are not impacting them, give them, and also the U. S. Dollar of course, with the deterioration may actually benefit us long term, not from a cost perspective, but from a sales perspective because we price in U. Dollars internationally.

So that can actually help us. I think we see good confidence globally that the markets are stable. Yeah. And you’re

Unidentified speaker, Analyst: a new CFO for the company. You’re not new to the company, but new CFO. Can you talk to us about your guidance philosophy? Do you view when you provide guidance? What are the things you’re looking at and how do you set the guidance?

Christiana, CFO, Fortinet: So guidance setting is not a CFO job alone, right? Not just mathematical models. It comes from a bottom up pipeline perspective. It comes from factoring in multiple aspects, whether it’s sales capacity, whether it’s the economy, it’s the sales commit, it’s the composition of the pipeline and everything else. So that gives us kind of the overarching number for billings.

And then of course we look at deferred revenue for service revenue. We look at the pipeline composition to determine how much is hardware. And I know there a lot of you are asking always, what’s the refresh cycle doing, right? So we, of course we look at what’s the renewal pipeline versus what’s the new business and refresh pipeline to determine what is our hardware revenue and that’s shaping. Got it.

Unidentified speaker, Analyst: I’ll come back to something you said, but I want to ask Ken about data security, AI security, because when we talk to companies like we’re not practitioners in the sense that I look at the market from the outside, but when I hear a lot of startups and a lot of public companies talk about something, I know it’s a trend. So I always see things a little bit in delay, but at least I can figure out there’s a trend. So the trend over the last few quarter or the last few months was that companies talk about data security, more about data security and AI security. And we heard it from you look at the strategic direction of Zscaler and just the discussion I had now with Nikesh from Palo and what they announced with AI security. So first, what is your view on the space and then how is Fortinet playing in these markets?

Ken, Unidentified, Fortinet: Yeah, we are more long term player in the space. So we started investing in AI probably fifteen years ago. You can look at the number of pattern we have. It’s over 500 more than any other company in this space. But we also a little bit different than some other company.

They tend to announce something they are not there yet. So we tend to say something which we already delivered. So that’s where it’s a lot different. But for AI, we have probably three main bucket. The one we usually call, probably the biggest one right now, call the AI assist.

So there’s probably over a dozen product. We do charge 25% more when they enable the AI. It’s like 40 manager analyzer, 40 SIM, 40 SIM, FortiSIM, all these, like, helping the secure operation. So that’s where we’re starting to see some good revenue coming from, the FortiAI assist. They do have what we call the FortiAI per tag.

That’s also come from the intelligence there, come from all these other, like how to secure AI infrastructure, secure the data, what’s the the go go into the model, what’s come out. So that’s also working quite well. And then also internally, we also use a lot of AI to do the development, to handle the customer supporting. There’s like a 40% supporting already can handle that use AI to handle. So that’s where we’re in the AI space for quite a while.

And then we probably, once we see the big achievement result, then we probably promote more. Instead, there was some other company always talk about it since probably not there yet. So we will only release or say something when the product are released. Yeah.

Unidentified speaker, Analyst: And there are two types of, when we talk about AI, there is the utilizing AI to improve security or alternatively the security of AI when you deploy AI modules, how do you, so can you distinguish between the two and talk about where you are? I think you spoke at the beginning, you spoke about using AI, utilizing AI in order to improve security. Yes.

Ken, Unidentified, Fortinet: I think that’s what we have quite some improvement on both sides, whether you’re seeing security to secure out AI or kind of use AI internally. So we do have a customer more concerned about how AI eventually may cause some security issue. That’s what we’re keeping working with then not just some customer, but also not just some AI company, but also some service providers, some customer which have the data feed into the AI. And, but internally we also use a lot of AI ourselves. So that’s where it’s kind of a both.

Got it.

Unidentified speaker, Analyst: Cristiano, I’m going to go back to something you said, and I want to understand it. When you provided Q2 guidance, it was a tad weaker than expected. And then when we spoke about conservatism, right? Is there a delay? So before that, in the quarters before that, spoke a lot about the refresh cycle of firewalls and end of service and replacement of end of service.

So is there a delay in customers deployment of new firewalls ahead of end of service because of the environment? Do you see any correlation between some economic uncertainty and the timing in which firewall upgrade is happening?

Christiana, CFO, Fortinet: So far, I would say we haven’t seen a delay. In Q1, we had good FortiGate growth, right? 15%, which was higher than the overall product revenue growth. In Q4 last year, we saw a good growth in the mid range segment. And so there are always different segments that are growing faster.

Gives me confidence is that when we analyze the customers that had end of support devices and who purchased in q one, they all purchased more than than their end of support devices. Right? So we are we are able to expand and and sell more devices, more services, which is what we actually want and what we promised we would do last year when we announced we have

Unidentified speaker, Analyst: a pretty big cohort. Yeah. So you have a big, so I asked you this question before I’m going to ask it again, because it’s important. When you show the chart, there was a big cohort for 2026 end of service, and there was not much smaller from a number of products for 2027. Does it mean that we’re going to have two years of big kind of upgrades or is there a difference between the 2026 cohort and the 2027 cohort?

Christiana, CFO, Fortinet: Yeah, there’s a pretty big difference in the two cohorts. The ’26 cohort is composed of about value wise, one third of large firewalls, one third of mid midsize firewalls, and one third of small firewalls. The 2027 cohort is is the low end of the low end. Right? It’s pretty much one model that drives all the units up.

And so value wise, it’s not as important. What we do have and what we expect, and this is why also our targets were set this way is that we expect from the growth during COVID that in ’27, ’20 ’8, will have a natural, not necessarily forced upgrade cycle, yeah, that customers will go to the next generation because they’ve deployed the firewalls they purchased between ’21 and ’24 for four or five years, which is a natural upgrade cycle. 2026 is really a forced one where the technology is so old that it’s not going to be supported by us anymore.

Unidentified speaker, Analyst: Got it. I want to go back to SASE, Ken and ask about SASE because it’s such a big opportunity. So there used to be two players in the market and now we see Cisco, a firewall company going into SASE. We see Checkpoint buying Perimeter eighty one. We see yourself.

What do you think is going to do? First of all, do you think this market is commoditizing? Do you think that this market pricing will go down? I mean, you’re at the good side of the market because you are a price disruptor, but do you think overall the pricing will go down commoditization or do you think that the market could still be this unique kind of high end, etcetera? And also, sorry, it’s a long question, but Microsoft is in the market and their pricing, if you just look at what they say that they charge for intra is extremely disruptive.

So just talk to us about overall the pricing environment and the market environment.

Ken, Unidentified, Fortinet: That’s where I put in the three category. There’s like a dedicated SASE player, like Zscaler and the scope of all these things. There’s a come from the cloud provider or service provider, which is whether Microsoft, even Google, started to get in. I think some of the telecom service provider, we’re also working with them. Maybe we’ll offer similar things soon.

And then there’s a traditional firewall company trying to evolve in a firewall into SASE with all the SASE function integrated firewall. That’s Fortinet, Palo Alto also. So that’s where when there’s more competition, I feel there will be a price pressure and also we’ll see who can offer some easy migration. And so that’s also kind of important. That’s where for us, that’s where the focus always on customer, how to easily migrate in from the traditional firewall into this SASE, all these other things in the same OS.

And then also we started investing in infrastructure like five to ten years ago, we spent a billions dollar in infrastructure. We feel will be benefit in the next few years. You’ll see the huge benefit. And so that’s where compared to some other player in the space. I do believe that that’s also the strategy in the early days when we do SASE.

I always try to able to service provider, including cloud provider to SASE. But I have to say they moved kind of slower compared to the SASE player. So we don’t wanna miss the market. We also want to play ourselves. That’s where we changed the strategy eighteen months ago.

And you can see we grew very fast, the fast growing SASE top player. So that’s where we feel will be more competition because there’s a customer need. They do need to have supporting work from home, this kind of ZTNA environment. And on the other side, SD WAN is the most important part of SASE. Since we already the number one in SD WAN and also number in the firewall, which is the same OS as SASE, so we do feel customer migration, we have the easiest solution to customer, which also enable a lot of other service provider using our power advantage and ASIC advantage.

So that’s where we feel we positioned quite well in the SASE space to compete, which a lot of other SASE player don’t have any of this advantage. So that’s where we’re pretty confident that as I keep in saying, we’ll be the number one SASE player.

Unidentified speaker, Analyst: Great. We only have one minute left. Sorry, I know if we probably have questions, but is there any question from the audience? I only managed to ask, I have four pages. I’m gonna have to cover one page of questions.

So I know there are probably some other questions from the audience. No, so can I’ll ask you, I’ll use the last minute just to ask you about OT. Last year you said, or recently you said you’re approaching a billion dollars in OT. Can you talk about the opportunity? Can you talk about what is positioning you better than others in this space?

Ken, Unidentified, Fortinet: Yeah, the OT area we invest for over ten years, not only the platform, you do need to have some recognized solution, but also understand the OT environment. What’s the traffic pattern, the protocol, what’s the device, how to identify the device, how to secure all these traffic. So that’s where we’re doing that for more than ten years. So we have probably billion dollar, over billion dollar in OT security now. That’s also, I believe OT will be one of fast growing network security market going forward because OT to secure this OT, OT device, some other technology in the cybersecurity will be very difficult to apply, like all the endpoint solutions, some other traditional, even the cloud based solution, because OT is really a lot of data, a lot of devices on deploy on edge.

So you do need to have some physical, some edge solution to process in real time. So that’s why we feel we have an advantage. So that’s where, because like I keep in saying, the next ten years will be 10 time more device connect online than people connect online. So that’s where this 10 time more device will create a lot of security issue and will be a big concern for most of user. And even people ourselves, we can see how many appliance won’t connect online now and how we can have to work remotely.

And then eventually all the robot, all to connect the car, all will be have some security issues. So that’s where we feel will be huge market opportunity, but also it will be pretty complicated market. It’s very different than the traditional laptop or mobile phone securities, OS server standard. This one’s a different OS, different device, different traffic pattern, different platform. So it will be pretty complicated area, but you do need a long term investment to play.

Got it. Great. Thank you.

Unidentified speaker, Analyst: We ran out of time. Thank Thank you, Ken. It was great. Thank you. You.

Next time I’m going ask you the other three pages.

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