SUNNYVALE, Calif. - Fortinet® (NASDAQ:FTNT), a leader in global cybersecurity, reported a solid earnings beat for the first quarter of 2024, with adjusted earnings per share (EPS) of $0.43, surpassing analyst expectations by $0.05. However, despite the positive earnings outcome, the company's shares fell by 9% following the announcement.
The company's total revenue for the quarter reached $1.35 billion, a 7% increase YoY and slightly above the consensus estimate of $1.34 billion. Service revenue notably rose by 24% YoY to $944 million, reflecting strong demand for Fortinet (NASDAQ:FTNT)'s services. Nevertheless, product revenue saw a significant decline of 18.3% YoY to $408.9 million.
Fortinet's adjusted operating margin for the quarter was 28.5%, showing financial discipline and an improvement from the 26.5% reported in the same quarter last year. The company also generated robust cash flow from operations amounting to $830.4 million and free cash flow of $608.5 million.
Ken Xie, Fortinet's CEO, attributed the strong results to the company's strategic focus on Unified SASE and Security Operations markets, as well as gains in Secure Networking. "We’re pleased to have executed with strong financial discipline in the first quarter leading to outperforming on Non-GAAP operating margin and free cash flow," Xie commented.
Looking ahead to the second quarter of 2024, Fortinet's guidance indicates an EPS range of $0.39 to $0.41, which brackets the analyst consensus of $0.39. Revenue projections for Q2 are set between $1.375 billion and $1.435 billion, with the midpoint slightly below the consensus estimate of $1.39 billion.
For the full fiscal year 2024, the company expects revenue to be in the range of $5.745 billion to $5.845 billion and adjusted EPS between $1.73 and $1.79. These projections are both above the consensus estimates of $5.78 billion in revenue and $1.71 in adjusted EPS.
Despite the earnings beat and optimistic guidance, the significant drop in Fortinet's stock price suggests that investors may have concerns not directly addressed in the earnings report. The company's forward-looking statements reflect confidence in their market position and financial strategy, but the market's reaction indicates there may be underlying factors influencing investor sentiment.
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