Title
Earning Preview: Fortinet revenue is expected to increase by 16.62%, and institutional views are bearishAbstract
Fortinet will report quarterly results on February 05, 2026 Post Market, with market attention centered on whether stronger services revenue and elevated gross margin can offset product cost headwinds, as consensus points to solid year-over-year gains in revenue and adjusted EPS alongside debate on margin durability.Market Forecast
Consensus tracking indicates Fortinet’s current-quarter revenue is expected to reach USD 1.86 billion, an estimated year-over-year increase of 16.62%, with adjusted EPS projected at USD 0.74, up 22.10% year over year; EBIT is forecast at USD 648.68 million, implying 20.69% year-over-year growth. Forecast commentary does not provide explicit targets for gross profit margin or net profit margin; expectations are anchored in the recurring revenue mix and operating leverage, while the earnings power is seen improving on higher EPS growth relative to revenue.Fortinet’s main business remains services, which generated USD 1.17 billion last quarter, underpinning recurring revenue resilience and a comparatively high margin mix that supports earnings stability and cash conversion in the period to be reported. The most promising segment is services, with last quarter revenue of USD 1.17 billion; at the company level, revenue is anticipated to rise 16.62% year over year this quarter, offering a favorable backdrop for services-led contribution and incremental margin capture.
Last Quarter Review
Fortinet delivered last quarter revenue of USD 1.72 billion (up 14.38% year over year), a gross profit margin of 80.77%, GAAP net profit attributable to the parent company of USD 474.00 million, a net profit margin of 27.47%, and adjusted EPS of USD 0.74 (up 17.46% year over year).A key financial highlight was sequential profitability improvement: net profit grew 7.68% quarter on quarter, reflecting earnings expansion powered by a favorable revenue mix and disciplined cost control. Main business performance was anchored by services revenue of USD 1.17 billion and product revenue of USD 559.30 million, against a company-level revenue base that advanced 14.38% year over year, balancing recurring services strength with hardware throughput.
Current Quarter Outlook
Main Business Outlook
The main business is driven by services, which comprised 67.57% of last quarter’s revenue and continues to shape the company’s profitability profile through renewals, support subscriptions, and platform coverage expansion. With last quarter’s gross profit margin at 80.77%, the services-heavy mix provides a stabilizing force for margin continuity, reinforcing the operating model’s capacity to translate top-line gains into earnings. The projected company-level revenue increase of 16.62% year over year and adjusted EPS growth of 22.10% year over year suggest ongoing mix and efficiency benefits, as recurring services augment the contribution margin and compress volatility across reporting periods. In this framework, services renewal cadence, bundling across security suites, and expansion of platform entitlements can provide incremental uplift to billings visibility and cash generation, strengthening the earnings trajectory into the quarter.Services also supports pricing and attach dynamics across the installed base, which, over time, can translate into higher average revenue per customer and broaden the monetization of existing deployments. Last quarter’s USD 1.17 billion services revenue offers a reference point for scale, and consensus forecasting for company-level growth this quarter points to favorable operating leverage if renewals and upsells follow typical seasonal patterns. The return profile of services, reflected in the high gross margin and last quarter’s 27.47% net profit margin, is aligned with outperformance on adjusted EPS, giving investors a clean lens on how recurring revenues can anchor reported earnings in the near term.
Most Promising Business
Services stands out as the most promising business, given its larger revenue base and contribution rate, coupled with higher margin intensity and a more predictable renewal cycle. With last quarter services revenue at USD 1.17 billion and company-level revenue expected to grow 16.62% year over year in the quarter to be reported, services is positioned to capture a disproportionate share of incremental profitability through mix enhancement. The interplay between services and product is central: services scale alongside deployments, and robust renewal execution can amplify the impact of new product placements on recurring revenues, fortifying the earnings outlook.This quarter, services momentum should benefit from expanded platform use across customers, with incremental modules, support tiers, and managed offerings augmenting value capture. That dynamic aligns with adjusted EPS forecast growth of 22.10% year over year, implying stronger earnings contribution than the top line—typical of a recurring-heavy mix. In parallel, stronger services anchoring helps insulate operating results from episodic hardware cost pressures, thereby giving earnings some buffer even when product cost inflation emerges or procurement timing shifts.
Stock Price Drivers This Quarter
Stock performance will be driven by revenue growth delivery against the USD 1.86 billion consensus estimate, adjusted EPS execution against USD 0.74, and clarity on margin durability in light of cost headlines circulating around product inputs such as memory. Investors will parse whether the last quarter’s 80.77% gross margin can be maintained, considering the recurring mix tailwinds from services versus potential pressures in hardware margin capture. If services outperforms expectations, that would likely support EBIT expansion beyond the USD 648.68 million forecast and bolster confidence in the EPS trajectory; conversely, cost headwinds in hardware or conservative product shipment patterns could tighten the spread between revenue growth and EPS growth.The balance of product and services will be closely watched because mix shifts can meaningfully influence gross margin and operating profitability in reported results. A constructive outcome would pair strong services renewals with steady product throughput, mitigating unit cost variability and supporting the high-70s to low-80s gross margin profile suggested by recent performance. Another focal point is whether quarter-on-quarter profit momentum can continue after last quarter’s 7.68% sequential net profit growth, reinforcing the thesis that recurring revenue leverage translates into tangible earnings resilience.
Analyst Opinions
Bearish opinions hold the majority in the current window, with a ratio of bearish to bullish at 100.00% to 0.00%, and prominent commentary highlighting margin risk tied to elevated memory costs and their implications for hardware profitability. J.P. Morgan’s Brian Essex reiterated a Sell rating with a USD 75.00 price target in mid-January, citing elevated memory costs and potential margin headwinds that could compress hardware profitability even as services mix remains supportive. This perspective argues that while consensus projects USD 1.86 billion in revenue and USD 0.74 adjusted EPS, achieving both while sustaining recent margin levels may be challenged if input cost inflation is not offset through pricing, product configuration shifts, or mix benefits.The bearish stance emphasizes that the market will scrutinize gross margin progression and product cost trends as core validators of the earnings quality, not just top-line growth. Under this view, the path to beating adjusted EPS expectations could require a firmer services contribution or greater operating discipline to counter hardware margin variability, which has become a key debate point heading into the print. As a result, the majority institutional view frames risk-reward through the lens of margin sensitivity: strong revenue and EPS beats are possible, but durability of margin expansion is the central variable investors will use to judge whether the stock’s earnings power is strengthening at the pace implied by the estimates. This framing places heightened importance on management’s commentary about cost normalization, product pricing, and services momentum—areas likely to define whether the reported results align with the projected year-over-year growth and reassure the market on the sustainability of profitability trends.
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