Summary
Fortinet reported second quarter fiscal 2025 revenue of $1.63 billion, up 14% year over year. Gross profit was $1.32 billion, up 13.4%. Operating income reached $458.0 million, up 4.8%. Net income was $440.1 million, up 15.9%. Diluted earnings per share were $0.57, up 16.3%. Gross margin slipped to 80.7%, down 0.1 percentage points. Operating margin fell to 28.1%, down 2.4 percentage points. The margin decline came as operating expenses grew faster than revenue.
Cash generation remained strong. Operating cash flow was $451.9 million for the quarter, up 32.1% year over year. Capital expenditures were $167.8 million, up 626.4%, reflecting continued investment in data centers and points of presence. Free cash flow, a non-GAAP measure, was $284.1 million. Deferred revenue was $3.41 billion, up 14.7%. Remaining performance obligations were $6.64 billion, up 12.2%. Billings, a non-GAAP metric, grew 15% to $1.78 billion. Non-GAAP operating margin was 33.1%, and non-GAAP diluted earnings per share were $0.64. For the first six months, revenue was $3.17 billion, up 13.7%, and net income was $873.5 million, up 28.6%. Operating cash flow for the first half was $1.32 billion, up 12.2%.
Operationally, Fortinet highlighted several recognitions. The company was named a Leader in the 2025 Gartner Magic Quadrant for SASE Platforms and ranked first in the Critical Capabilities for SASE Platforms report for the Secure Branch Network Modernization use case. It was the only vendor in five different network security Magic Quadrant reports. Fortinet expanded FortiCloud with FortiIdentity, FortiDrive, and FortiConnect. It was recognized as Overall Leader in the Westlands Advisory IT OT Network Protection Platform Navigator 2025 for the third time in a row. The company also crossed 1,400 issued patents worldwide and over 500 issued and pending AI patents. Headcount rose to 14,898 employees as of June 30, 2025, a 10% increase from 13,527 a year earlier. Unified SASE annual recurring revenue grew 22%, and Security Operations annual recurring revenue grew 35%.
Guidance points to continued growth. For the third quarter of 2025, Fortinet expects revenue of $1.670 billion to $1.730 billion and billings of $1.760 billion to $1.840 billion. Non-GAAP gross margin is guided to 80.0% to 81.0%, and non-GAAP operating margin to 32.5% to 33.5%. Diluted non-GAAP net income per share is expected at $0.62 to $0.64. For the full fiscal year 2025, revenue is guided to $6.675 billion to $6.825 billion, service revenue to $4.550 billion to $4.650 billion, and billings to $7.325 billion to $7.475 billion. Non-GAAP gross margin is guided to 79.0% to 81.0%, and non-GAAP operating margin to 32.0% to 33.5%. Diluted non-GAAP net income per share is guided to $2.47 to $2.53. The company raised its 2025 full year billings guidance midpoint by $100 million.
Risks remain. Fortinet cited macroeconomic and geopolitical conditions, including tariffs, inflation, changing interest rates, trade disruptions, and foreign exchange fluctuations. Those factors could lead to longer sales cycles, delayed purchases, and increased inventory and purchase commitment reserves. The company also flagged supply chain constraints, component availability, inventory obsolescence, competition, pricing pressure, and sales execution risks, especially for large strategic deals. It noted integration risks from acquisitions, including Linksys. For the full year 2025, Fortinet expects operating margin to decrease compared to 2024 as it grows sales and marketing and research and development headcount, increases product development investments, and expands its data center footprint. Service gross margin is also expected to decrease for the full year 2025 compared to 2024. Product gross margin is not expected to significantly change for the full year 2025 compared to 2024. The company said U.S. tariffs are not expected to have a meaningful impact on gross margin, but any future tariff increases would mostly affect hardware sales to U.S. customers. A new tax law, H.R. 1, could reduce 2025 cash tax payments by approximately $100 million to $150 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.63B | $1.54B | +5.9% | $1.43B | +13.6% |
| Gross profit | $1.32B | $1.25B | +5.5% | $1.16B | +13.4% |
| Gross margin | 80.7% | 81.0% | -0.3 pp | 80.8% | -0.1 pp |
| Research & development | $209.5M | $198.6M | +5.5% | $165.4M | +26.7% |
| Sales & marketing | $592.0M | $542.7M | +9.1% | $501.3M | +18.1% |
| General & administrative | $56.9M | $57.8M | -1.6% | $56.6M | +0.5% |
| Total operating expenses | $857.1M | $792.8M | +8.1% | $722.1M | +18.7% |
| Operating income (loss) | $458.0M | $453.8M | +0.9% | $437.2M | +4.8% |
| Operating margin | 28.1% | 29.5% | -1.4 pp | 30.5% | -2.4 pp |
| Net income (loss) | $440.1M | $433.4M | +1.5% | $379.8M | +15.9% |
| Net margin | 27.0% | 28.1% | -1.1 pp | 26.5% | +0.5 pp |
| Diluted EPS | $0.57 | $0.56 | +$0.01 | $0.49 | +$0.08 |
Risks
MD&A and risk factors highlight U.S. tariffs and possible retaliatory tariffs, which could increase product costs for the remainder of 2025 and beyond, affect customer sentiment, and contribute to longer sales cycles and delayed purchases. The company said it does not currently expect U.S. tariffs to have a meaningful impact on gross margin, but if tariffs increase, the impact would mostly be on hardware sales to U.S. customers.
Risk factors emphasize sales execution, productivity, and retention challenges, and MD&A says operating margin decreased 2.4 percentage points during the three months ended June 30, 2025. The company expects operating margin to decrease for full year 2025 as it grows its sales and marketing and research and development workforce.
Substantially all revenue comes through channel partners, and one distributor accounted for 27% of total net accounts receivable as of June 30, 2025, while six distributor customers accounted for 63% in aggregate. Financial difficulties or consolidation among these partners could harm billings, revenue, and collections.
Risk factors describe intense competition from Check Point, Cisco, CrowdStrike, Microsoft, Palo Alto Networks, Zscaler, and others, with larger competitors able to bundle products and cloud providers focusing on cloud-delivered security. Vendor consolidation and point-solution alternatives could pressure pricing, revenue, and gross margins.
MD&A says service gross margin decreased 1.1 percentage points during the three months ended June 30, 2025 due to increased cloud service costs from data center, colocation, and cloud provider investments, and expects service gross margin to decrease for full year 2025 as it expands its data center footprint. Capital expenditures were $167.8 million in the current quarter, up 626.4% versus the prior-year quarter, and construction or power access risks could delay projects or increase costs.
Risk factors cite dependence on senior management, including Ken Xie and Michael Xie, and note that CFO Keith Jensen announced his retirement in February 2025. Competition for sales, support, and engineering personnel is intense, especially in the San Francisco Bay Area and Vancouver, Canada.
FortiGuard and FortiCare services are a significant portion of revenue and are recognized ratably over one to five years, so a decline in new or renewed contracts will not be fully reflected in current revenue but will negatively affect future quarters. Short-term deferred revenue was $3.41 billion as of June 30, 2025, up 14.7% versus the prior-year quarter, and RPO was $6.64 billion, up 12.2%.
MD&A says H.R. 1, enacted July 4, 2025, could reduce 2025 cash tax payments by approximately $100 million to $150 million but increase the GAAP effective tax rate for 2025 by approximately 1 point. Risk factors also note ongoing tax audits in the United Kingdom, Canada, Germany, and other jurisdictions focused on allocation of profits among legal entities.
MD&A highlights FortiAI and AI-driven SecOps, while risk factors note the need to anticipate market changes related to cloud-based and AI solutions and competition from cloud security providers. Failure to keep pace could weaken Fortinet's competitive position in unified SASE and SecOps.
SaaS KPIs
All quarters →Billings
Free Cash Flow
Non-GAAP Operating Margin
Deferred Revenue
Short-Term Deferred Revenue
Summary, forecast, risks and KPIs are extracted from Fortinet, Inc.'s SEC filings for Q2 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 2, 2026.