Summary
Fortinet started fiscal 2025 with broad-based growth and sharply higher profitability. Total revenue was $1.54 billion in the first quarter of 2025, up 13.8% year over year. Gross profit was $1.25 billion, up 18.9%. Operating income was $453.8 million, up 41.3%. Net income was $433.4 million, up 44.8%. Diluted EPS was $0.56, up $0.17. Gross margin was 81.0%, up 3.5 percentage points. Operating margin was 29.5%, up 5.7 percentage points. On a non-GAAP basis, operating margin was 34.2%, up 570 basis points. Billings were $1.60 billion, up 13.5%. Unified SASE ARR was $1.15 billion, up 25.7%, and Security Operations ARR was $434.5 million, up 30.3%.
Cash generation remained a strength. Operating cash flow was $863.3 million, up 4.0%, and free cash flow, a non-GAAP measure, was $782.8 million. Capital expenditures were $66.5 million, down 70.0%. The operating cash flow figure includes $14.0 million of proceeds from an intellectual property matter. Deferred revenue, current portion, was $3.34 billion, up 14.7%. Remaining performance obligations were $6.49 billion, up 11.7%. The company did not repurchase shares during the quarter, and $2.03 billion remained available under the repurchase program as of March 31, 2025. Subsequent to quarter end through the filing date, Fortinet repurchased 4.6 million shares for $401.1 million. Headcount reached 14,556 employees as of March 31, 2025, an 8% increase from 13,522 a year earlier. Inventory purchase commitments were $689.0 million, up $97.9 million from December 31, 2024.
Guidance points to continued top-line expansion but also to margin pressure ahead. For the second quarter of 2025, Fortinet expects revenue of $1.590 billion to $1.650 billion, billings of $1.685 billion to $1.765 billion, non-GAAP gross margin of 80.0% to 81.0%, non-GAAP operating margin of 31.5% to 32.5%, and diluted non-GAAP EPS of $0.58 to $0.60. That assumes a non-GAAP effective tax rate of 18% and a diluted share count of 773 million to 777 million. For the full fiscal year 2025, the company expects revenue of $6.650 billion to $6.850 billion, service revenue of $4.575 billion to $4.725 billion, billings of $7.200 billion to $7.400 billion, non-GAAP gross margin of 79.0% to 81.0%, non-GAAP operating margin of 31.5% to 33.5%, and diluted non-GAAP EPS of $2.43 to $2.49. That full-year outlook assumes a non-GAAP effective tax rate of 18% and a diluted share count of 769 million to 779 million. Management expects operating margin to decrease for the full year of 2025 compared to 2024 as it grows sales and marketing and research and development workforce and expands data center footprint. Service revenue growth rates are expected to decrease for the remainder of 2025 due to slowing short-term deferred revenue growth. Product gross margin is expected to slightly increase for the full year 2025 compared to 2024, while service gross margin is expected to decrease.
Risks remain familiar for a global cybersecurity vendor. Fortinet cites tariffs, trade disputes, supply chain challenges, longer sales cycles, delayed purchases, and increased commitments with suppliers. It also points to competition, macroeconomic conditions, inflation, changing interest rates, the war in Ukraine, and tensions between China and Taiwan. Sales execution risks include the timing and completion of large strategic deals. The company notes that U.S. tariffs are not currently expected to have a meaningful impact on gross margin, but if tariffs increase, the impact would mostly fall on hardware sales to U.S. customers. Acquisition integration is another area to watch, including the Linksys deal. The quarter showed strong revenue growth, high gross margin, and robust cash flow. The main question is whether Fortinet can sustain that profitability as it invests in Unified SASE, Security Operations, and its data center footprint while service revenue growth decelerates.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.54B | $1.66B | -7.3% | $1.35B | +13.8% |
| Gross profit | $1.25B | $1.35B | -7.4% | $1.05B | +18.9% |
| Gross margin | 81.0% | 81.1% | -0.1 pp | 77.5% | +3.5 pp |
| Research & development | $198.6M | $191.1M | +3.9% | $173.0M | +14.8% |
| Sales & marketing | $542.7M | $526.5M | +3.1% | $501.1M | +8.3% |
| General & administrative | $57.8M | $55.1M | +4.9% | $54.4M | +6.3% |
| Total operating expenses | $792.8M | $771.5M | +2.8% | $727.4M | +9.0% |
| Operating income (loss) | $453.8M | $574.1M | -21.0% | $321.2M | +41.3% |
| Operating margin | 29.5% | 34.6% | -5.1 pp | 23.7% | +5.7 pp |
| Net income (loss) | $433.4M | $526.2M | -17.6% | $299.3M | +44.8% |
| Net margin | 28.1% | 31.7% | -3.6 pp | 22.1% | +6.0 pp |
| Diluted EPS | $0.56 | $0.68 | -$0.12 | $0.39 | +$0.17 |
Risks
U.S. tariffs on imported goods and possible retaliatory tariffs could increase product costs for the remainder of 2025 and beyond, disrupt supply chains, and affect customer sentiment. MD&A states the company does not currently expect a meaningful gross margin impact but expects any future impact to fall mostly on hardware sales to U.S. customers.
Service revenue growth rates are expected to continue to decrease for the remainder of 2025 due to slowing short-term deferred revenue growth over the past several quarters. Service revenue was 70% of total revenue in the quarter ended March 31, 2025, so deceleration could materially affect overall growth.
A small number of distributors represents a large percentage of revenue and receivables. One distributor accounted for 28% of total net accounts receivable as of March 31, 2025, and six distributor customers accounted for 64% in the aggregate, exposing the company to credit and liquidity risk of channel partners.
Operating margin is expected to decrease for the full year 2025 compared to 2024 as the company grows sales and marketing and research and development workforce, increases product development investments, and expands data center, colocation, and cloud hosting capacity. Service gross margin is also expected to decrease for full year 2025 due to this expansion.
Sales to large and medium-sized businesses, service providers, and government organizations involve longer sales cycles, sometimes longer than 12 months, and uneven traction with certain government organizations and service providers. Delays or failure to close expected large deals in a quarter could materially affect results.
The newly formed Department of Government Efficiency (DOGE) has implemented policies to reduce federal expenditures and streamline procurement, which could reduce or eliminate agency operations, cancel or modify contracts, and adversely affect financial results and competitive positioning.
The company depends on senior management, including co-founders Ken Xie and Michael Xie, and in February 2025 CFO Keith Jensen announced his upcoming retirement after 11 years. Competition for skilled sales, support, and engineering personnel is intense, especially in the San Francisco Bay Area and Vancouver.
The network security market is intensely competitive, with competitors such as Cisco, CrowdStrike, Microsoft, Palo Alto Networks, and Zscaler. Larger competitors have broader product offerings, greater resources, and can bundle products, potentially causing price reductions, fewer orders, and loss of market share.
The company plans to expand data centers, points of presence, and office and warehouse capacity, with 2025 capital expenditures estimated between $380.0 million and $430.0 million. Construction delays, equipment availability, power access, and cost increases could harm results and service gross margin.
Inventory purchase commitments totaled $689.0 million as of March 31, 2025, an increase of $97.9 million compared to $591.1 million as of December 31, 2024. The company faces risk of inventory obsolescence due to supply constraints, rapidly changing technology, and customer requirements.
SaaS KPIs
All quarters →Billings
Free Cash Flow
Non-GAAP Operating Margin
Summary, forecast, risks and KPIs are extracted from Fortinet, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.