Fortinet Q1 2025 Earnings Report

Fortinet EPS Results

• Actual EPS: $0.58
• Consensus EPS: $0.53
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: $0.43

Fortinet Revenue Results

• Actual Revenue: $1.54 billion
• Expected Revenue: $1.54 billion
• Beat/Miss: Missed by -$2.38 million
• YoY Revenue Growth: +13.80%

Fortinet Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 4:30PM ET

Fortinet (NASDAQ:FTNT) provides cybersecurity and convergence of networking and security solutions worldwide. It offers secure networking solutions focus on the convergence of networking and security; network firewall solutions that consist of FortiGate data centers, hyperscale, and distributed firewalls, as well as encrypted applications; wireless LAN solutions; and secure connectivity solutions, including FortiSwitch secure ethernet switches, FortiAP wireless local area network access points, FortiExtender 5G connectivity gateways, and other products. The company also provides the Fortinet Unified SASE solutions that include firewall, SD-WAN, Secure web gateway, cloud access services broker, data loss prevention, zero trust network access, and cloud security, including web application firewalls, virtualized firewalls, and cloud-native firewalls. In addition, it offers security operations solutions comprising FortiAI generative AI assistant, FortiSIEM security information and event management, FortiSOAR security orchestration, automation and response, FortiEDR endpoint detection and response, FortiXDR extended detection and response, FortiMDR managed detection and response service, FortiNDR network detection and response, FortiRecon digital risk protection, FortiDeceptor deception technology, FortiGuard SoCaaS, FortiSandbox sandboxing, FortiGuard incident response, and other products. Further, the company offers FortiGuard security services consisting of FortiGuard application security, content security, device security, NOC/SOC security, and web security services; FortiCare technical support services; and training services to customers and channel partners, as well as operates a FortiGuard Lab, a cybersecurity threat intelligence and research organization. It serves enterprise, communication and security service providers, government organizations, and small and medium-sized businesses. The company was incorporated in 2000 and is headquartered in Sunnyvale, California.

Fortinet Q1 2025 Earnings Call Transcript

Key Takeaways

• Revenue growth accelerated 14% YoY to $1.54 billion in Q1, delivering a record operating margin of 34.2% and free cash flow of $783 million (51% margin).
• Unified SaaS and SecOps expansion drove 18% billing growth in unified SaaS (with over 110% growth in security service edge) and 29% growth in AI-driven SecOps, now representing 25% and 10% of total billings respectively.
• Product gross margin jumped 1,200 basis points to 67.7% as inventory-related charges normalized, lifting total non-GAAP gross margin to 81.9%.
• Management maintained full-year billings and revenue guidance (midpoint growth ~12–13%) despite FX headwinds of 90–120 bps and macro uncertainties, while raising the midpoint of its operating margin range.
• Fortinet is positioned to lead the ongoing global firewall upgrade cycle and SASE adoption—73% of large enterprises have deployed its SD-WAN and FortiSaaS penetration rose 10 points to 11%, supporting further market share gains.

Presentation

[Operator]

Hello, and welcome to Fortinet's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, we will conduct a question and answer session. Please be advised that this call is being recorded. I would now like to hand the call over to Aaron Ovadia, Senior Director of Investor Relations. Please go ahead.

[Aaron Ovadia, Senior Director - IR at Fortinet]

Thank you, and good afternoon, everyone. This is Aaron Ovadia, Senior Director of Investor Relations at Fortinet. I am pleased to welcome everyone to our call to discuss Fortinet's financial results for the first quarter of twenty twenty five. Joining me on today's call are Ken Zee, Fortinet's Founder, Chairman and CEO Keith Jensen, our CFO Christiana Olgaard, our CAO and Sales Operations Leader and John Whittle, our COO. As a reminder, Keith will be stepping down from the CFO role on May 15, and Christiana will take over as our next CFO.

[Aaron Ovadia, Senior Director - IR at Fortinet]

Ken will begin our call today by providing a high level perspective on our business. Keith will then review our financial results for the first quarter of twenty twenty five, and Christiana will provide a forward looking view, including guidance for the second quarter and updating the full year. We will then open the call for questions. During the Q and A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate. Before we begin, I'd like to remind everyone that on today's call, we will be making forward looking statements, and these forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected.

[Aaron Ovadia, Senior Director - IR at Fortinet]

Please refer to our SEC filings, in particular, risk factors in our most recent Form 10 ks and Form 10 Q for more information. All forward looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation and specifically disclaim any obligation to update forward looking statements. Also, all references to financial metrics that we make on today's call are non GAAP unless otherwise stated. Our GAAP results and GAAP to non GAAP reconciliations are located in our earnings press release and in the presentation that accompany today's remarks, both of which are posted on our Investor Relations website. As a reminder, this is a live call that will be available for replay via webcast on our Investor Relations website.

[Aaron Ovadia, Senior Director - IR at Fortinet]

The prepared remarks will also be posted on the quarterly earnings section of our IR website following today's call. Lastly, all references to growth are on a year over year basis unless noted otherwise. I will now turn the call over to Ken.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Thank you, Aaron, and thank you to everyone for joining our call. We are pleased with our strong performance in the first quarter, successfully balancing growth and profitability, including building a revenue growth of 14%, record first quarter operation margin of 34%, record free cash flow of $783,000,000 a margin of 51%, and strong growth in secure operations and unified SaaS with security service edge billing growth of over 110%, which drove our unified SaaS billing growth to 18%, accounting for 25% of our business. So Fortinet leadership in innovation and long term investment is evident in our market position as the number one deployed firewall vendor worldwide, a market leader in SD WAN and OT security. And with our strong SASE strategy and growth, we are confident we'll be number one in this space as well. The strong momentum behind our unified SASE pillar underscore the value customer placed on our single OS platform.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

The typical SASE journey begins with a customer initial purchase of Fortinet, industry leading ASIC based FortiGate firewall powered by FortiOS. From there, the majority of a large enterprise customer expand into SD WAN before progressing into our FortiSaaS solution. This expansion path continue to grow as 73% of large enterprise customer have now adopted our SD WAN solution and have either begin or are well positioned to transition to FortiSaaS. With our FortiSASI penetration among large enterprise increasing nearly 10% quarter over quarter to 11%. We remind the only vendor to have organically developed all of the core SASE capability within a single operating system for DOS, including Net Gen Firewall, SD WAN, ZTNA, Secure Web Gateway, CASB and DLP technologies.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

This native integration of networking and security reduce the capacity and operation cost while enhancing user experience and ensuring secure across both on premise and cloud environments. In addition to our traditional SASE offering, we also offer Sovereign SASE, a tailored solution for large enterprise and service providers that require full on premise or in country control of their data. With Solvign SASE, customers can deploy Forti SASE within their own data centers, ensuring that all data is processed exclusively through customer owned or country specific locations to meet compliance requirement by country or industry regulations. This approach accelerates performance through our Forti ASIC technology and is well suited for highly regulated sectors such as finance, government and health care. AI driven security operation building increased by 29%, accounting for 10% of our business.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

As customers continue to consolidate multiple security vendors on our integrated AI enhanced Forti Fabric solution. Looking ahead, in addition to SASE and SecureOp, we expect OT security and AI to be key growth drivers over the next five years. In OT security, a rapidly expanding market driven by a surge in connected device, Fortinet is recognized as the only leader in the Westland Advisory Report, supported by over a decade of strategic investment and a specialized solution position us for continued growth. We also continue to invest in our AI capabilities, which we began developing more than fifteen years ago and now hold over 500 issued and pending AI patents more than any other competitors. With our AI technology now integrated into a dozen product, new AI capabilities like FortiAi Assist for automating security task, FortiAi Protect for advanced threat detection, and FortiAi Secure AI for protecting AI infrastructure.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Today, we announced the FortiGate seven hundred gs series, a high performance firewall for midsize business and distributed enterprise, powered by our Forti ASIC technology, which deliver a five to 10x performance advantage over our competitors, and FortiOS, the only operating system recognized across five secure networking Gartner Magic Quadrants. This approach significantly lowered total cost of ownership and complexity while reducing energy consumption and drive Fortinet's continued strong growth and market share gain in secure networking. I would like to thank our employees, customers, partners and suppliers worldwide for their continued support and hard work. I will now turn the call over to Keith and Cristiano.

[Keith Jensen, CFO at Fortinet]

Thank you, Ken. Thank you, Aaron. Welcome, Cristiano, and good afternoon, everyone. Let's start with the key financial highlights from the first quarter before handing the call off to Cristiano for a more detailed and forward looking view. We delivered strong performance and top line results that approached the high end of our guidance range, together with record first quarter operating margin of 34%.

[Keith Jensen, CFO at Fortinet]

Total revenue grew 14%, driven by strong product and service revenues, with product revenue growth of 12%. In addition, new logos increased 14% to over 6,300, driven by continued worldwide investments in our channel partners. Looking at our financial results in more detail. Total billings grew 14% to $1,600,000,000 driven by 18% growth in unified SaaSy and 29% growth in AI driven SecOps. Unified SaaSy and SecOps now account for 2510% of total billings, respectively, up one point each.

[Keith Jensen, CFO at Fortinet]

RPO grew 12% to $6,500,000,000 while current RPO grew over 15% to 3,400,000,000.0 Unified SASE and SecOps ARR increased 2630%, respectively, reaching a combined ARR of 1,600,000,000 Turning to revenue and margins. Total revenue grew 14% to $1,540,000,000 Product revenue increased 12% to $459,000,000 driven by growth in both hardware and software solutions. FortiGate hardware revenue grew in the mid teens, outpacing total product revenue growth, driven by strong performance in low end and high end models and supported by early mover large enterprise customers upgrading their firewall infrastructure. Software license revenue grew in the mid teens and represented a high teens percentage of total product revenue, driven by on prem time based software license growth of over 30%. Service revenue of $1,080,000,000 grew 14% to 70% of total revenue.

[Keith Jensen, CFO at Fortinet]

Security subscriptions revenue increased 16%, while support and related service revenues increased 12%. Service billings grew 14%, our highest growth rate in the past five quarters. Total gross margin increased three eighty basis points to 81.9% and exceeded the high end of the guidance range by 90 basis points. Product gross margin of 67.7% increased 1,200 basis points as inventory related charges normalized from the highly elevated levels we saw in the first half of twenty twenty four. This added approximately 1,300 basis points to product gross margin and approximately 400 basis points to total gross margin.

[Keith Jensen, CFO at Fortinet]

Service gross margin of 87.8% was down just 10 basis points as we successfully absorbed increased costs associated with the expansion of hosted security solutions. Operating margin increased five seventy basis points to a first quarter record of 34.2% and was three twenty basis points above the high end of our guidance range, reflecting the strong gross margin and FX tailwind of around 100 basis points and cost efficiencies in the business. Looking to the statement of cash flow summarized on Slides eighteen and nineteen. Free cash flow tends to be seasonally strong in the first quarter was a record $783,000,000 while free cash flow margin was 51%, up six points. Adjusted free cash flow was $839,000,000 representing a margin of 54%.

[Keith Jensen, CFO at Fortinet]

Infrastructure investments were $67,000,000 down $155,000,000 due to a lower level of real estate investment. Cash taxes were $27,000,000 Average contract term was twenty seven months, roughly flat year over year and down two months quarter over quarter. And while we did not repurchase shares during the first quarter, we did repurchase approximately 4,600,000.0 shares for a total of $4.00 $1,000,000 during the month of April. Remaining share buyback authorization as of today is approximately $1,600,000,000 I'll now turn the call over to Christiana to share a few significant wins from the first quarter as well as our more forward looking view, including business conditions in the second quarter and full year guidance.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Thank you, Keith. As Ken mentioned earlier, the noteworthy headline in this uncertain macroeconomic environment is that customer adoption of our solutions is accelerating. This momentum is driven by two key factors: one, our decades long innovation leadership and two, our competitively differentiated dedication to putting the customer first. Together, this creates a powerful network effect with some of the most discerning organizations rapidly adopting Fortinet solution at scale. This is exemplified by Fortinet being the number one solution in firewall as well as a leader in SD WAN and OT security.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Also, our leading SASE strategy is driving strong growth, reinforcing our confidence in becoming the number one player in the SASE market. Building on this momentum, our SSE solution is gaining strong traction, fueled by continued success in upselling SSE to our large SD WAN customer base. With both ARR and billings growth at over 100%, we believe FortiSasi is the fastest growing SSE solution at scale in the market. As shown on Slide seven, the typical FortiSasi journey begins with a customer purchasing our market leading FortiGate firewall, followed by an expansion to SD WAN and then on to our single vendor SASE solution. Our adoption of SD WAN and SSE continues to grow, with our large enterprise expansion penetration rates increasing to 7311%, respectively, with the SSE penetration rate growth increasing nearly 10% quarter over quarter.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

In addition, a second customer buying journey illustrates the growing convergence of security and networking. It, too, starts with our FortiGate firewalls and expands to our switches and access points. The key to this expansion is FortiOS, FortiLink technology, which enables seamless management of our switches and access points through our unified operating system. Our increased penetration rates show the success of this strategy. Now I'd like to review some deals that showcase our SASE adoption and customer expansion.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

In an 8 figure displacement deal, an international government purchased our SD WAN solution as well as our Forti SASE solution to secure the hybrid workforce of 6,000 users. This customer chose Fortinet for its ability to deliver flexible and consistent security enforcement, ensuring secure access to both on premises and cloud applications while maintaining a seamless user experience. By harnessing the power of our FortiOS, we delivered superior performance over the competition, reduced total cost of ownership and effectively consolidated multiple security functions into a single integrated platform. In another SASE win, we replaced the incumbent vendor at an international education provider, which chose Forti SASE for their 40,000 users. The decision to transition to Forti SASE was driven by ongoing performance challenges with their previous SASE vendor.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Keys to this win included Forti SASE's ease of use, seamless integration with the Fortinet security fabric and proven scalability across their SD WAN sites. Based on the success from their proof of concept, this customer will benefit from improved performance, consistent security for users everywhere and greater operational efficiency. In a 7 figure deal, a large multinational manufacturing company selected our SD WAN and multiple SecOps solutions. Fortinet displaced the legacy SD WAN provider by demonstrating how FortiOS simplifies operations, reduces total cost of ownership and unifies security and networking functions on a single platform. The integrated nature of FortiOS also enables seamless alignment with the company's existing Fortinet security infrastructure, establishing a strong foundation for future projects.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Lastly, a Fortune 500 company signed an 8 figure deal that spans all three of our pillars. Over the past three years, they've expanded their FortiGate installed base by more than 80%, driven by our world class support for their data centers and branch locations as well as the automation and seamless integration enabled by our FortiS operating system. Rounding out the billings commentary. Large enterprise was our top performing customer segment with growth of around 30%. The number of deals greater than €1,000,000 were up 30%, including three eight figure deals this quarter, up from one during the same period last year.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

EMEA was our best performing geography, driven by mid teens growth from international emerging. Among our top five verticals, financial services and worldwide government led the way with growth of over 20%. Before moving on to guidance, I'd like to spend a few minutes discussing The current U. S. Tariff situation.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

The U. S. Tariff situation landscape is evolving rapidly, and our comments on this call reflect the information currently available to us. Despite the current geopolitical uncertainties, demand for our cybersecurity solutions remains strong. Our pipeline continues to grow, and we are not seeing signs of near term erosion.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Additionally, our close rates remain robust, and sales cycles are tracking within our normal historical range. For the second quarter, we do not expect U. S. Tariffs to have a meaningful impact on our operating margin as only a few components are subject to tariff charges. Should tariffs increase in the future, we expect any resulting impact on our operating margin to be limited to hardware sales to U.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

S. Customers. As long as our international hardware sales do not flow through The U. S, they are not subject to U. S.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Import tariffs. Moving on to guidance. As a reminder, our second quarter and full year outlook, which are summarized on Slides twenty one and twenty two, are subject to the disclaimers regarding forward looking information that Eram provided at the beginning of the call. While our business remains strong and we outperformed on the top line in the first quarter with continued confidence in our ability to execute, we recognize that our customers' investment decisions can be influenced by the broader economic outlook. As a result, we are maintaining our full year billings and revenue guidance ranges to account for potential top line risks associated with the evolving geopolitical environment.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Regarding the record firewall upgrade cycle that we've spoken about previously, we continue to expect the firewall upgrade cycle to gain momentum in both purchasing and planning activities in the second half of twenty twenty five. Looking at the bottom line. The U. S. Dollar weakened more than anticipated from early February when we first issued our $20.25 guidance.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

As a result, we expect an operating margin headwind of approximately 120 basis points to the second quarter and approximately 90 basis points to the full year, which is factored into today's outlook. Despite the FX headwinds, we are raising the midpoint of our full year operating margin guidance as a result of our first quarter outperformance and expected efficiencies in the business. Our continued business momentum and strong execution gives us confidence that we are on track to achieve the Rule of 45 for the sixth consecutive year. For the second quarter, we expect billings in the range of €1,685,000,000 to €1,765,000,000 which, at the midpoint, represents growth of 12% revenue in the range of €1,590,000,000 to €1,650,000,000 which at the midpoint represents growth of 13%. Non GAAP gross margins of 80% to 81%.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Non GAAP operating margins of 31.5 to 32.5% non GAAP earnings per share of $0.58 to $0.60 which assumes a share count between $773,000,000 and $777,000,000 infrastructure investments of 180,000,000 to €200,000,000 a non GAAP tax rate of 18% and cash taxes of $230,000,000 to $255,000,000 For the full year, we expect billings in the range of €7,200,000,000 to €7,400,000,000 which at the midpoint represents growth of 12% revenue in the range of €6,650,000,000 to €6,850,000,000 which at the midpoint represents growth of 13% service revenue in the range of €4,575,000,000 to €4,725,000,000 which at the midpoint represents growth of 15%. Non GAAP gross margins of 79% to 81%, non GAAP operating margins of 31.5% to 33.5%. Non GAAP earnings per share of $2.43 to $2.49 which assumes a share count of between $769,000,000 and $779,000,000. Infrastructure investments of three eighty million to €430,000,000 non GAAP tax rate of 18% and cash taxes of between €525,000,000 and $575,000,000 I will now hand the call back over to Aaron to begin the Q and A session.

[Aaron Ovadia, Senior Director - IR at Fortinet]

Thank you, Christiana. As a reminder, during the Q and A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate. Operator, please open the line for questions.

[Operator]

Thank you. If you would like to ask a question, please click on the raise hand button at the bottom of your screen. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself. We'll allow a moment for the queue to form. Our first question will come from Brian Essex with JPMorgan. Please unmute your line and ask your question.

[Brian Essex, Executive Director at JP Morgan]

Hi. Good afternoon. Can you hear me okay?

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes.

[Brian Essex, Executive Director at JP Morgan]

Great. Yeah. Thanks for thanks for taking the question, and congrats on the on the on the results for the quarter.

[Brian Essex, Executive Director at JP Morgan]

I guess maybe for for Keith, maybe or or Christiana, could could you unpack the dynamics behind the maintenance and services revenue? Just trying to understand. It's it's a segment that I think we were expecting to kind of accelerate and decline sequentially. So just trying to understand some of the puts and takes behind that and how you expect that to, I guess, grow throughout the rest of the year so you can kind of like level set expectations.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So on I think there are a couple of aspects that you touched on. One is the quarter over quarter slight decline is really affected by the Q4 having two more days than Q1, and that affects the daily rate going into revenue. Of course, we would have expected a slightly better acceleration, but there's a little bit more time that we need to grow our acquired entities and their revenue streams. So that's impacting Q1 service revenue predominantly.

[Brian Essex, Executive Director at JP Morgan]

Is there a dynamic there between FortiGuard and FortiCare that we need to think about?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

I would say current RPO is still strong. So I mean, we have confidence in the growth.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes. Think also the 40 ks growth above the building growth which will drive future service revenue. So we see the 40 gig growth building growth actually a couple of points above the per before the 2,000 kind of a 40 gross average. So we see it's a pretty good sign. Plus, we're starting to add more service on top of FortiOS and that's also what drive the future service revenue.

[Brian Essex, Executive Director at JP Morgan]

Great. Thanks, Cristiano and Keith. Thank you so much.

[Operator]

Our next question will come from Tal Liani with Bank of America. Please unmute your line and ask your question. Haliyani, you are free to unmute your line and ask your question.

[Tal Liani, Analyst at Bank of America]

There we go. Can you hear me?

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes, please.

[Tal Liani, Analyst at Bank of America]

Okay. Thank you. We spoke about in earlier quarters, we spoke about end of service coming bringing demand forward. Even in the last quarter, you said that demand is going to come this next four or five four quarters, it's going to come this year instead of next year. So the question I have is why is why are we seeing some lightness in the guidance for the next quarter?

[Tal Liani, Analyst at Bank of America]

Why don't we see the demand coming forward to the next quarter? Can you just speak about the drivers? I just compare your numbers, your guidance to the consensus, and I'm trying to understand why don't I see already strength, especially ahead of a tariff increase that is going to increase the prices likely increase the prices for everyone? Thanks.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

I think I don't think we like we mentioned in the tariff, I don't think we plan to change in the price and the current condition. On the other side, there's still some uncertainty. So we try to be kind of a little bit careful. But we do see the customer like the solution we have and just some time the geopolitical and also some other part just increase some kind of uncertainty. So we try to be a little bit careful, probably, Kristina, Keith, you know this better.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So I would say we saw good close rates and good linearity in Q2 in April. So it gives us confidence. But we also are tied a little bit by the expectations that we get from our sales teams. So we see good momentum. But sales is hesitant with all the things that are going on to go up in their expectations for us.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

And so I think that's where we'd rather be careful with the guidance and then hopefully are going to meet our numbers.

[Tal Liani, Analyst at Bank of America]

Got it. Thank you.

[Operator]

Our next call question comes from Gabriela Borges with Goldman Sachs. Please unmute your line and ask your question.

[Gabriela Borges, Analyst at Goldman Sachs]

Hey. Good afternoon. Thank you.

[Gabriela Borges, Analyst at Goldman Sachs]

Maybe, Christian, I'll pick up right where you left off on sales being hesitant. Clearly, we're all seeing similar headlines as as you are. Maybe just tell us specifically, what are some of the conversations that sales is having from customers? What are the reasons they're hesitant to commit to purchasing Fortinet, and how are you thinking about maybe some of that hesitancy getting resolved? Is it maybe when we run into the lead time situation for the end of life?

[Gabriela Borges, Analyst at Goldman Sachs]

Or how do you think about that flowing through over the next few quarters?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

We had a number of events in Q2, and we get really good feedback. So I think it's going to resolve. We have good channel activity. We have good channel programs. And I think some of you may have seen that in channel checks also that they are positive about Fortinet's programs.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So I think it just needs to, with all the macro news that are coming in every day and then don't turn out as bad as they are, there is hesitancy because until a PO is in, it can get delayed. So we are positive. I mean, I think you saw it from my comments, we haven't seen delays yet, but we don't know what happens over the next two months, right, or the rest of the year.

[Gabriela Borges, Analyst at Goldman Sachs]

That's fair. Thank you.

[Operator]

Our next question will come from Keith Weiss from Morgan Stanley. Please unmute your line and ask your question.

[Keith Weiss, Equity Analyst at Morgan Stanley]

Excellent. Thank you for taking the question. Maybe carrying on with that line of thought, if you will. What gives you guys confidence that you're still going to be able to perform to like the stronger second half pickup? I get it.

[Keith Weiss, Equity Analyst at Morgan Stanley]

There's a product cycle going on, and and people have to start preparing at the end of life. But is there no risk there of potentially people kinda sweating the acid or pushing it pushing it out? I guess that's just the question of that. Like where do you stand confidence so that the second half will be stronger? And how much of that second half strength is implied in the guide right now?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

I mean the second half strength is implied in the guide because we have harder comparisons to meet, right, as in the second half as well. What gives us confidence, we have a number of products that have been released, the next generation. And our products provide, I think, significant improvement of total cost of ownership and security compared to what customers bought eight, nine, ten years ago. And we see the activity going on, especially in the enterprise. I think we mentioned in our prepared remarks that FortiGates grew faster than the rest of product revenue, which I think is a testament to the strength that we are seeing.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

The same is true for OT. And so I think we are confident, probably in this room more so maybe than sales when they talk to customers and need to put a commit on their pipeline now.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes. That's where we kind of measure the growth in three different pillar. So if you look on the secure network in the traditional area, we are very strong. We're only one with all this ASIC technology solution single for the OS. So we continue gaining market share even we are the number one leader there.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

And then the unified SaaS, we also believe we are like top three, top two player and then also grow faster than any other player and we'll be the leader. And so each of this also the secure op, we grow like 29%, also probably faster than most other player of a similar size. So that's where each this period of keeping gaining market share, just we are not quite sure the overall market growth later this year and next year will be continue to hold up for whatever some forecast. So that's where we do believe with the technology we have, the unique advantage we for each pillar will drive us keeping gaining market share. But overall market condition kind of has a little bit uncertainty there.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

I know a lot of people talk about security a little bit more sticky and more resistant compared to some other bodies. They do have some impact. So we try to be careful and by the same time we're hoping to overachieve all this guidance.

[Keith Weiss, Equity Analyst at Morgan Stanley]

Got it. That makes a ton of sense. Thank you.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Thank you, Keith.

[Operator]

Our next question will come from Shaul Eyal with TD Cowen. Please unmute your line and ask your question.

[Shaul Eyal, Managing Director - Equity Research at TD Cowen]

Thank you. Good afternoon, everybody, and, congrats on solid set of results considering the growing macro. The number of eight digit transactions has been on the rise over the past few quarters. When we unpack those transactions, and I know they could differ from one another, are they representative of the entire Fortinet platform stack? Do they include SD WAN and SASE?

[Shaul Eyal, Managing Director - Equity Research at TD Cowen]

What's driving those large transactions predominantly from a product perspective? Thank you.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So so a significant driver for these large transactions is SD WAN deployments and enterprises. And so typically, that's the starting point. But then as we mentioned, the customers are buying into the fabric and are buying additional solutions in addition to SD WAN.

[Operator]

Our next question will come from Rob Owens with Piper Sandler. Please unmute your line and ask your question.

[Rob Owens, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Great. Thank you very much. Follow on with, Shaul's question there just around these large deals. Were they considered in the in the pipeline as you as you looked at the first quarter? And I know then back in the fourth quarter, on some of the large larger transactions, you did talk about some potential pull forward relative to the end of life.

[Rob Owens, Managing Director & Senior Research Analyst at Piper Sandler Companies]

So curious if this was a a similar experience with the the larger transactions, or was it more wall wall SD WAN deployment or global SD WAN deployment like you spoke to? Just some more color would be great. Thanks.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So now these were transactions that were in the pipeline and closed as expected. So I think this is where our remarks came in. We do not see deals pushing out yet. But these deals also closed before the March, mostly.

[Operator]

Our next question comes from Eric Heath with KeyBanc. Please unmute your line and ask your question.

[Ritu Kashyap, Equity Research Associate at KeyBanc Capital Markets]

Hi. This is Rizu Praship on for Eric Heath. During your prepared remarks, you talked about how tariffs would impact hardware sales to U.

[Ritu Kashyap, Equity Research Associate at KeyBanc Capital Markets]

S. Customers. Are you able to quantify that impact to margins from tariffs? And also, could you talk through some steps you might be taking to evolve your supply chain to mitigate those impacts?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So we did not mention that we have impact from tariffs in Q1, right? So we don't expect any impact from tariffs in Q1 or significant impacts in Q2 because only very few of our products are subject to tariffs. And then it's only a small portion that actually gets imported into The U. S. For U. S. Customers.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes. The other part is really because we design from ASIC chip to the system to all the OS and service, we'll be able to relocate where we can manufacture. That's also because we also tend to have a little bit more inventory than some other company. So that's also gave us some buffer. So, so far, we don't see the impact of tariff yet.

[Operator]

Our next question will come from Saket Kalia with Barclays. Please unmute your line and ask your question.

[Saket Kalia, Managing Director at Barclays Capital]

Great. Hey, guys. Thanks for taking my questions here. Christian, maybe for you, just stay on that topic, but just from a different angle. Can you just talk about whether there was any changing behavior from channel partners this quarter ahead of tariffs?

[Saket Kalia, Managing Director at Barclays Capital]

I think some industries out there saw just some earlier purchasing ahead of potential price increases. Did Fortinet see any of that this quarter?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

We got questions about whether we would increase our prices, but we did not see specific acceleration of deals.

[Keith Jensen, CFO at Fortinet]

And Saket, maybe I'll just kind of fill in some of that to build on what Christian just said and understanding, one, really aren't tariffs impacting our business today. In the first place that you'll see that would be in cash flow, right? You won't see it in the income statement because of how COGS is recognized for GAAP purposes for several quarters. So you really should just kind of assume there really isn't an impact on tariffs in that regard. I think the other thing that you're probing at as a group is, did we see pull forward as we saw in other industries?

[Keith Jensen, CFO at Fortinet]

And the answer to that is no, not really. And again, because in our business model and with our pricing advantage, that's really not under the gun. We're not raising prices immediately if we had tariffs because it will not hit our p and l for an extended period of time, if that helps.

[Saket Kalia, Managing Director at Barclays Capital]

Yeah. That does help. Super helpful. If if I can sneak in a follow-up maybe for Ken, just just to zoom out a little bit from the tariff discussion, You know, kind of it it was great to see the unified SaaS business just continue to scale. Can you just talk about and and there were some great deals that that that were called out in the prepared remarks.

[Saket Kalia, Managing Director at Barclays Capital]

Can you just talk about what solutions you're typically replacing at these customers? I mean, is it primarily VPN hardware, or is it secure web gateways, or is it other solutions that that that that FortiSASI is able to replace?

[Ken Xie, Founder, Chairman & CEO at Fortinet]

I think we'd see both replacing some some traditional old, like, VPN, but also replace some other SaaS player competitor. We talked about for a few quarters, we have like three key differentiation in the SaaS. Off, SaaS is integrated into the single OS platform, which none other player had that. So that's why it's very easy for the traditional customer, which we are the number one in the firewall space. Over half the global deployment, they can easily add a SaaS service, SD WAN service to their current bot, their current OS there.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

So that's probably over 90% growth come from this. And then the second also differentiation, kind of also our early strategy, we try to work with a lot of carrier service provider and then since they are a little bit slow, so we decided to do ourselves like eighteen months ago. So now we still see the service provider and also a lot of our bigger enterprise customer, especially in finance service healthcare, they still want to do their own private SASE, solving SASE. So their interest got higher and higher. So we started working with them.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

They started to see the real deployment of solving SASE, which we can have a build their SASE solution in their own data center, just a few parts can give them all the solution they need supporting like 100,000, 10 thousand customer, their user there. And then the third one, really the global infrastructure we build out with a lot of our own kind of secure technology also gave us a cost advantage and also gave us more secure solution than some other SaaS player. So that's I see both the traditional VPN replacement and also like in Christiana's remark, we also replace a few SASE player. That's a lot of our big enterprise area. So we see like the traditional one probably more penetrated into the small SMB area, some mid enterprise, which they also see the SaaS give them some kind of ZTN solution.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

But in the big enterprise, we started replacing a lot of other SaaS player.

[Saket Kalia, Managing Director at Barclays Capital]

Very helpful. Thanks, guys.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Thank you.

[Operator]

Our next question will come from Patrick Colville with Scotiabank. Please unmute your line and ask your question.

[Patrick Colville, Lead Equity Research Analyst at Scotiabank]

Hey, Thank you so much for taking the question. I guess I wanna just go back to Keith and Cristiano about the service revenue downtick sequentially. I mean, Christian, you mentioned this was because there's kind of two fewer days in fiscal first quarter versus four q. And I presume, you know, partly, that's because of the leap year. But you you didn't see this dynamic four years ago or even eight years ago.

[Patrick Colville, Lead Equity Research Analyst at Scotiabank]

So I guess what was different now? And could an explanation be that this is customers refreshing appliances and then not adding new subscriptions that just refreshing their subscriptions, and that's how it seems dynamic? Thank you.

[Keith Jensen, CFO at Fortinet]

Patrick, I'm gonna jump in because some of that was historical in nature. So I guess so we actually did have this same conversation in 2021, I believe it was, coming off of a

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Leap year.

[Keith Jensen, CFO at Fortinet]

A leap year as well because the two when you're doing year over year accounts. Right? So that was the unusual thing. I'm it does seem that I forgot about that sometime in the last three year half years that that bites me in the ass. And then from q four to q one, you do just have the natural decline of two days, two days a night, two days call that 2%, which I think is what Cristiano is talking about.

[Keith Jensen, CFO at Fortinet]

And then you were going down a path of customers refreshing on the service revenue. I wasn't clear. We're cutting out a little bit, but but maybe maybe a comment I'll offer and Christiane can correct me is that the conversation about the guidance setting process and what we're seeing about pull forward and such. Look, think in this environment where the guidance up as a bit of an observer to the guidance and not a participant, I think it was prudent in terms of not passing through the beat, if you will. I think that when you the conversations that Krishna was making reference to with channel partners and end users, if you compare where they are today on the upgrade cycle versus where they were six months ago, it's night and day and with our own sales team.

[Keith Jensen, CFO at Fortinet]

I mean, is you're getting into channel checks, you're getting into surveys. It's real. We're picking up in the in the account plans as well. We are not seeing any signs to this point. Customers suggesting they're gonna change their design architecture that has not come up, but we've lost a deal because they're going to a a SASE solution.

[Keith Jensen, CFO at Fortinet]

If they did, I think that the team here would move them in that directionally in that direction over their own product. Similarly, you're not seeing competitor displacements against us. So, you know, I think those are the considerations that went into the guidance setting process, but I'll let Christiane come back and make sure I haven't committed her to something. She doesn't want to be committed.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

I mean, Keith is right that there are a lot of factors why we guided the way we guided from what we can see and what we get from the sales teams, right? Also, don't forget the each fiscal year, you start rolling out new channel programs, and it takes a little bit of time until you see how these are picked up, right? So we expect service acceleration through our channel programs, and we expect improvements. But from a quarter over quarter perspective and from a growth rate, we were not there where we wanted to be. And partially, it's also due to a little bit more churn on some acquired customers.

[Patrick Colville, Lead Equity Research Analyst at Scotiabank]

Okay. Very helpful. Thank you so much for that. Our

[Operator]

next question will come from Srinivasan Khasari with Baird. Please unmute your line and ask your question.

[Shrenik Kothari, Senior Research Analyst at Robert W. Baird & Co]

Hey. Yeah. Thanks. Can you guys hear me alright?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Yeah.

[Shrenik Kothari, Senior Research Analyst at Robert W. Baird & Co]

Great. So so, Keith and and and Christina, you you mentioned EMEA was your best performing geo with with mid teens growth and and partner led Momentum. They're clearly a a tailwind. And and you also made it clear that that tariffs pull forwards are are not really a dynamic. So just curious what is driving strength out there?

[Shrenik Kothari, Senior Research Analyst at Robert W. Baird & Co]

I mean, I I know Ken mentioned about the telco partnerships and and kind of shaping demand for for sovereign chassis. Just curious if you can elaborate a little bit there. And in APAC, are you also starting to see traction from other modernization initiatives around OT or AI SOG deals as well? And I had a quick follow-up.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So in EMEA, specifically in internationally emerging, you see a lot of strength in OT, right? So there's a lot of opportunity in OT and also in government. We see to your question on modernization, we see that in as well. And we had good wins there in government as well as in other areas.

[Shrenik Kothari, Senior Research Analyst at Robert W. Baird & Co]

Got it. And just a quick follow-up on the new logos. It was pretty solid, 14% year on year. Just curious, like, how much of SaaS e SecOps growth is now are now driven by kind of first time Fortinet customers versus sort of expansion from your existing installed base? Are these kind of newer models landing early in the deals, or are they still largely dependent on kind of anchoring FortiGate deployments? Thanks a lot.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

I would say the majority of our new customers are smaller customers, as you can tell by the number of customers. We had some nice large new logos, but most of the smaller customers do start with the FortiGate.

[Operator]

Our next question will come from Brad Zelnick with Deutsche Bank.

[Brad Zelnick, Managing Director at Deutsche Bank]

Great. Thanks so much. Can you guys hear me?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Mhmm.

[Brad Zelnick, Managing Director at Deutsche Bank]

Awesome. Thank you. Last quarter, I think it was you talked about investments that you're making in various forms of enablement. So there's a channel and your direct sales would be optimally positioned to capture the refresh opportunity. How is that progressing, and and what have you seen over the past few months in terms of your competitors trying to capitalize on this end of service event that's coming up?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

We don't really see I think our competitors are talking about it, but we don't really see competition in our end of support cohort.

[Keith Jensen, CFO at Fortinet]

And then the incentives on that?

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Yes. I mean, there are a number of channel incentives to execute on new product combined with more services, right? So especially in the lower end of the market, I think the opportunity is huge to expand on SASE and other products. And we have multiproduct incentives with the channel partners.

[Brad Zelnick, Managing Director at Deutsche Bank]

Thanks for that. If I can maybe just ask one follow-up. I think this is the first quarter where you now have Linksys consolidated. I assume it's not all that material, but is there anything just to call out that we should consider when we think about the trends going forward in terms of contribution and flow through to the financials? Thanks again.

[John Whittle, COO at Fortinet]

Yeah. I mean, I hope this is John Whittle. Would say it's immaterial. I don't think there's anything to really factor in there.

[Keith Jensen, CFO at Fortinet]

I think in terms

[Brad Zelnick, Managing Director at Deutsche Bank]

of Thanks for taking the questions, guys.

[Keith Jensen, CFO at Fortinet]

I think the first quarter guide, we provided what we thought the impact would be from the M and As, and I think we were in line with that,

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

if I right now, we are letting them run on their own strategy while we are creating our internal integration play for service providers. Yes.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

It's still like one to two years away to co develop some new product for the consumer, leverage some of ASIC technologies, some other like forge link technology. So it's long term growth potential, but it's not short term.

[Brad Zelnick, Managing Director at Deutsche Bank]

Awesome.

[Operator]

Our next question will come from Adam Borg with Stifel. Please unmute your line and ask your question.

[Analyst]

This is Peter Weed. Great. Do you hear me okay?

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes, please.

[Analyst]

Great. Thank you so much. Just maybe, Christian, on the upcoming refresh cycle, any way to talk through some of the assumptions both in terms of, hey. The number of firewalls we expect to be refreshed will be, you know, the same or fewer than what they had previously? Obviously, I'm assuming the performance of the models will be greater given these are old models.

[Analyst]

And I know you talked about it a a few minutes ago, but maybe talk a little bit more about are you expecting any type of shift towards virtual or SASE from physical as part of this refresh? Thanks so much.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

So what we are seeing so far, the customers that have EOS devices, the smaller customers are buying more. The larger customers who had large FortiGates, it depends on the strategy and it depends on whether they are consolidating on bigger FortiGates or buying pretty much a similar amount of the same next generation model, yes? So I don't think on the enterprise side, in the data center appliance, you see one strategy. It depends on customers. In the MSE, in the smaller customer cohort, what we see is that they are buying more of what than what they had previously.

[Keith Jensen, CFO at Fortinet]

Yes. Interesting conversation, Christian, was sharing with me right before this call was that one of the challenges in tracking the refresh is not just that they're out there and saying, okay, I have 10 products that are going into service. But as she pointed out, they have those 10 plus they're buying for other use cases at the same time. So the deal sizes are getting bigger, but it's a little bit blurrier in terms of how much of that is the old product versus a new use case as you go forward. But I would say that the AS the deal sizes, she's quite pleased with.

[Analyst]

And maybe just go ahead.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Sorry. Also on the product side, we're keeping develop new product like the one we announced today, the FortiGate 700 gs. So there's a few more come towards later this year and next year. So that's why we try to time in some of the replacement from the product side and then try to make sure the new product is way better than the old one. So that's where sometime they also try to see it's still most of the customers probably still one years away, so they still have some time to to evaluate.

[Analyst]

That's great. I really appreciate the color there. Maybe just for Ken, a bigger picture question. You know, in our field work, data security just continues to come up as a really important priority. I know late last year or I think was back in August, you guys acquired NextDLP.

[Analyst]

Love to talk a little bit more about early feedback on that on that acquisition and how you're thinking about the broader data security opportunity for Fortinet? Thanks so much.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yes, that's a great acquisition technology for the DLP not only has the SASE we have, but also can be sell separately to enhance a lot of our big enterprise, the data security, the data leakage side. So we see it's a market and product and a team. And so I totally agree with you. Now it's a they're kind of kind of looking on how to secure the data. That's also the reason we kind of started pushing some of our solvency, some other especially in the finance service area in the government, in healthcare.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

So the data is super important. So it's a very good solution there.

[John Whittle, COO at Fortinet]

We're also seeing that being rolled out at scale at large enterprises. We just have to accelerate that, but it's working well at scale at large enterprises.

[Operator]

Our next question will come from Junaid Siddiqui with Truist.

[Junaid Siddiqui, Investment Analyst at Truist Securities]

Can you hear me?

[Ken Xie, Founder, Chairman & CEO at Fortinet]

Yep.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

Yep.

[Junaid Siddiqui, Investment Analyst at Truist Securities]

Yeah. Alright.

[Junaid Siddiqui, Investment Analyst at Truist Securities]

Great. Thank you. Yeah. I just had a question, on the CNAP market, and, you know, the traction that you're seeing in lace work. You know, one of your competitors, has effectively ceded that space to a partner of yours.

[Junaid Siddiqui, Investment Analyst at Truist Securities]

How do see that market shaping up, and, you know, who are you seeing from a competitive perspective? And, how are you differentiating, from some of those competitors? Thank you.

[John Whittle, COO at Fortinet]

So I think we see opportunity with the with Google development. I think that disrupts the market fairly significantly. And so we see we see significant opportunity there. We think the Lacework solution is a very good solution. Think we just have to it's a new sales motion for us a bit, and so we need to focus on that.

[John Whittle, COO at Fortinet]

So it'll just take a little bit of time. But we see it as a good opportunity. Big market, obviously, huge TAM and a lot of disruption in that market, and that solution just got a good rating. It's a very good solution. We just need to kind of refine the sales approach a bit.

[Tal Liani, Analyst at Bank of America]

Great. Thank you.

[Operator]

Our next question will come from Keith Bachman with BMO. Please unmute your line and ask your question.

[Keith Bachman, Senior Research Analyst at BMO Capital Markets]

Thank you very much. I wanted to ask a little bit about sensitivities. And what I mean by that is, Ken, you highlighted the three buckets of spend that Fortinet has, secure networking, unified SaaS, and SecOps. As you think about over the next number of quarters, is there any comment when when you hear feedback from the channel on deal elongation? Is it more in fact on the subscription side than the hardware side with, you know, maybe users not wanting to sweat their assets for regulatory reasons or compliance reasons or governance or what have you?

[Keith Bachman, Senior Research Analyst at BMO Capital Markets]

And is there thereby a risk of some crowding out, if you will, on on hardware refreshes that that perhaps are ongoing that that may may cause some weakness in in the, unified SASE and or SecOps? I think SD WAN, probably not. But just talk about the buckets of spending in terms of sensitivities as we go out over the next number of quarters, whether it be de elongations or what have you. Thank you. And, Keith, certainly, all the best to you.

[Keith Jensen, CFO at Fortinet]

Thank you.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

It's a good question. I think it's yes, I mean, the industry, like, over thirty years, see a few up and down in the economy in the big environment. So you already do in the downturn, they tend to slow down some of the infrastructure change in the hardware purchase and then try to more like stretch whatever the things they have. So there's some uncertainty right now I feel, but it's on the other side because the strengths we have whether in the network security or secure networking and also the unified SaaS is secure up. So we see that's also the opportunity during the downturn to gain market share quickly because we feel we are better positioned than the competitor.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

So even the overall market may grow a little bit slow, but also that's our opportunity to gain more market share quickly because in each category we have pretty unique advantage like secure networking is really carried a convergence and also leverage our ASIC and the single OS. The same thing I mentioned earlier about unified SASE and then you see the secure op also grow like 29%. It's all pretty strong growth. That's how we're continuing to keep in investing the growth and also do some long term investment to keep in driving the next five to ten years long term growth both will benefit the space and benefit the customer and also our partner. So that's where we look on this.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

But also like last quarter, we also see probably the building growth also the first time better than the last six, seven quarter, probably seven quarter. And especially the FortiGate even grow better. So that's I see is a good sign on the strengths we have. Maybe some is because we called upgrade our core refresh. But on the other side, we do see some smaller player in the space where the secure network and some other one get weaker and weaker.

[Ken Xie, Founder, Chairman & CEO at Fortinet]

So we do see some take their market share and some other bigger players starting to shift in some of the focus. And so with us, we feel we have a better product and better position. That's where in all three pillar, we do believe we gain share on each pillar of the market share. That's probably Christian, Keith, any John?

[John Whittle, COO at Fortinet]

Would just say, like Ken said, Q1, we felt good about the growth in Q1. The economy, the geopolitical environment was already kind of a bit uncertain. And then also in 02/2008, '2 thousand and '9 through the financial crisis, we were private at the time, but had good growth through that. And then one of the first companies go public after that based on good growth through that crisis as well. So I think Ken is always focused on never let the opportunities from a good challenge pass you by.

[John Whittle, COO at Fortinet]

And so we'll take we'll look at this from an opportunistic standpoint.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

I would just add one comment as well. And I think what we heard from our customers at our customer events at RSA, they're most of them are going hybrid, right? They will have on prem devices. They will have some cloud devices. They will have some public cloud.

[Christiane Ohlgart, Chief Accounting Officer at Fortinet]

And I think that's our opportunity because we play in all markets, and they can leverage the OS. And I think that's the feedback that we got. So from our perspective, we are well positioned.

[Operator]

This concludes our question and answer session. I will now hand it back to Aaron Ovadia for closing remarks.

[Aaron Ovadia, Senior Director - IR at Fortinet]

Thank you. I'd like to thank everyone for joining today's call. We will be attending investor conferences hosted by JPMorgan and Bank of America during the second quarter. The fireside chat webcast links will be posted on the Events and Presentations section of our Investor Relations website. If you have any follow-up questions, please feel free to contact me. Have a great rest of your day.

Participants

Executives

• Aaron Ovadia, Senior Director - IR
• Ken Xie, Founder, Chairman & CEO
• Keith Jensen, CFO
• Christiane Ohlgart, Chief Accounting Officer
• John Whittle, COO

Analysts

• Brian Essex, Executive Director at JP Morgan
• Tal Liani, Analyst at Bank of America
• Gabriela Borges, Analyst at Goldman Sachs
• Keith Weiss, Equity Analyst at Morgan Stanley
• Shaul Eyal, Managing Director - Equity Research at TD Cowen
• Rob Owens, Managing Director & Senior Research Analyst at Piper Sandler Companies
• Ritu Kashyap, Equity Research Associate at KeyBanc Capital Markets
• Saket Kalia, Managing Director at Barclays Capital
• Patrick Colville, Lead Equity Research Analyst at Scotiabank
• Shrenik Kothari, Senior Research Analyst at Robert W. Baird & Co
• Brad Zelnick, Managing Director at Deutsche Bank
• Analyst
• Junaid Siddiqui, Investment Analyst at Truist Securities
• Keith Bachman, Senior Research Analyst at BMO Capital Markets