Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 29, 2026 · Beat 7 of last 7 quarters
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Fortinet's strong product revenue growth, driven by AI data center wins and OT security, underscores the increasing demand for security infrastructure as AI compute scales. The company's SASE Firewall strategy, which converges networking and security, positions it to capture a larger share of the AI infrastructure buildout. The 8-figure AI data center win and expansion of sovereign SASE indicate that security is a critical component of AI infrastructure deployments.
Fortinet delivered a strong Q2, with billings up 33% to $2.37B and revenue up 26% to $2.05B, exceeding guidance. Product revenue surged 52% to $773M, driven by FortiGate demand and AI data center wins, including an 8-figure deal with a cloud provider. Service revenue grew 14% to $1.27B, with service billings up 26%. Non-GAAP operating margin hit a record 38%, and free cash flow more than tripled to $966M. The company also highlighted strong growth in OT (up 55%) and Unified SASE (up 35%), with FortiSASE billings doubling.
Management raised full-year guidance across billings, revenue, service revenue, operating margin, and EPS. Q3 billings guidance of $2.25-$2.35B implies 27% growth at the midpoint; full-year billings guidance raised to $9.35-$9.55B (25% growth at midpoint). Service revenue growth is expected to improve in the second half, with Q1 2026 seen as the trough. The company highlighted durable demand drivers including AI-driven security modernization, SASE Firewall adoption, OT security, and sovereign SASE. Management expressed confidence in long-term growth, citing a larger TAM for SASE Firewall (2-3x cloud-only SASE) and continued share gains.
“By combining our secure networking and Unified SASE pillar, which both run on the same FortiOS to create what we are calling the SASE Firewall.”
on SASE Firewall strategy
“We believe the first quarter of 2026 marked the trough for our service revenue growth rate, and we anticipate a positive trajectory in our growth rates going forward.”
on Service revenue outlook
“AI is becoming a dominant driver of security infrastructure modernization.”
on AI demand driver
This is the second quarter in a row of accelerating billings and product growth. What do you think is driving the accelerating growth here? And how durable do you think it would be?
Ken Xie attributed the growth to AI reshaping the security landscape and Fortinet's differentiated strategy, including ASIC investment and the new SASE Firewall category. He believes the growth is long-term, similar to how UTM/NextGen firewall replaced traditional firewalls 20 years ago.
Can you comment on what component within Unified SASE contributed the most to the acceleration? Are you seeing SD-WAN or access part of SASE become a bigger consideration?
Ken Xie noted FortiSASE more than doubled year-over-year, with strong SD-WAN growth. He highlighted the advantage of a single-box, single-OS approach versus competitors' point solutions, and the new sovereign SASE market as a key driver.
Can you talk about the collaboration with Intel and how that brings you a more advantageous position for future ASICs?
Ken Xie emphasized Fortinet's long-term ASIC investment and the partnership with Intel as significant, combining technologies to advance network security. He noted Fortinet is the only cybersecurity company developing its own ASIC, which provides performance and cost advantages.