Fortinet posted solid second-quarter results this week that came in around forecasts, but were a letdown for investors hoping for something extra.
The security company said Q2 revenue increased nearly 17 percent year-over-year to $363.5 million. Billing increased 14 percent to $426.9 million for the quarter.
Both results were basically in line with estimates, though Fortinet management noted a lull in service provider business impacted billing potential during the quarter.
“We continue to be in evaluation mode with the service providers,” Fortinet CFO Drew Del Matto said during the company’s quarterly conference call. “We feel like we’re making good progress with them, and we continue to be a strong player in the space.”
Fortinet CEO Ken Xie said the company was positioned to garner increased service provider business due to a growing focus on cloud-based solutions. Xie explained that focus has the company starting to group service providers and cloud providers under the same umbrella.
Fortinet earlier this year extended its Security Fabric products to cover software-defined wide area networking (SD-WAN) and software-as-a-service (SaaS) applications. Fortinet’s Security Fabric is an umbrella term for all of its security products.
Making Money Not Enough
A slower increase in expenses helped Fortinet boost net income during its latest quarter from a loss of $1.4 million last year to $23 million this year.
Analysts noted Fortinet’s results came in as expected, which was perhaps a letdown for investors seeking more upside.
“We admittedly would have liked to have seen some upside to billings/revenue, though we believe that [Fortinet’s] valuation remains compelling, even with limited changes to our estimates,” said a BMO Capital Markets report.
Fortinet’s shares have sagged on the news, falling nearly 9 percent since it posted results.
Fortinet said it was gaining momentum in the enterprise space, which is an area it admits it lags behind some of its rivals. The company said deals valued at more than $100,000 increased 21 percent year-over-year; deals valued at more than $250,000 grew 5 percent; deals worth more than $500,000 increased 10 percent; and deals worth more than $1 million surged 25 percent year-over-year.
BMO echoed that positive sentiment, noting the company’s security architecture and products were driving adoption.
Looking ahead, Fortinet said it expects Q3 revenue of between $367 million and $373 million. Full-year guidance is for revenue between $1.487 billion and 1.495 billion.