Key Takeaways
- Fortinet stock fell 31% in the past week after its third-quarter report, though revenue grew 20% and the company raised its 2026 outlook.
- Investors sold on slower product growth and lagging service revenue, while ServiceNow’s report weighed on software stocks too.
- At least 18 firms cut their price targets, and analysts expect earnings growth to slow to about 10% next year.
- The drop looks overdone, but the fourth-quarter report has to show service revenue catching up.
Fortinet (FTNT) beat Wall Street’s estimates and raised its 2026 outlook after the close on Oct. 28. The stock is down 31% in the past week anyway.
It didn’t help that ServiceNow (NOW) disappointed the same week, and software stocks fell together on worries that AI will disrupt the group.
The quarter was good
Revenue grew 20% to $2.08 billion, and non-GAAP EPS of $0.91 topped the $0.86 consensus. Billings rose 29% to $2.34 billion, free cash flow came in at $865 million, and Fortinet raised its billings guidance for the third time this year.
TIKR tracks 43 analysts on Fortinet. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Fortinet, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Fortinet’s Analyst Ratings
Investors sold the slowdown
Product revenue grew 37% to $765 million, which was slower than the quarter before, and some analysts warned that a key revenue driver may have peaked. Service revenue lagged billings because customers were slow to activate what they’d bought.
BofA downgraded the stock to Neutral. Even Goldman Sachs, which rates it a Buy, cut its target to $165 from $190, and Wells Fargo went to $115.
Analysts expect normalized EPS to grow about 29% this year, in line with the new $3.54-$3.58 guidance, then about 10% in 2027:
A “share donor” with 29% billings growth
On Mad Money, Jim Cramer said “my work shows that Fortinet has been what we call a share donor,” though “Fortinet’s weakness is not a tell about a slowdown in cybersecurity.”
I buy the second half more than the first. Billings growth sped up to 29% this quarter, which isn’t what a company losing business usually looks like.
Investors also lumped Fortinet in with ServiceNow, down 30% over the same week, on the AI worry. Fortinet’s management argues the opposite: AI creates new attack surfaces for it to secure.
Cheaper, with something to prove
As of Monday’s close, Fortinet trades at 34x forward earnings. That’s well below its five-year average of 43x but above the 25x it hit in February:
The consensus price target fell with the cuts, to $146, which is still about 16% above Monday’s close:
A 31% drop overshoots for a business whose billings are speeding up. But 34x is no bargain for 10% earnings growth if those billings don’t turn into service revenue.
Management presents at BMO’s conference on Nov. 12, and fourth-quarter results should land in early February. Fortinet guides to $5.15-$5.17 billion of service revenue for 2026, and that’s the number to watch.
So what is Fortinet stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
