Fortinet(FTNT)2025-05-08 20:43Revenue Growth - Total revenue for the three months ended March 31, 2025, was $1.54 billion, a 14% increase from $1.35 billion in the same period last year[117]. - Product revenue reached $459.1 million, up 12% from $408.9 million year-over-year, driven by growth in hardware and software licenses[117][119]. - Service revenue was $1.08 billion, reflecting a 14% increase compared to $944.4 million in the same period last year, primarily due to a 16% growth in security subscription revenue[117][120]. - Total revenue for the three months ended March 31, 2025, was $1,539.7 million, an increase of $186.4 million, or 14%, compared to $1,353.3 million in the same period last year[139]. - Product revenue increased by $50.2 million, or 12%, to $459.1 million, while service revenue rose by $136.2 million, or 14%, to $1,080.6 million during the same period[140]. - Billings (non-GAAP) for the three months ended March 31, 2025, were $1,597.2 million, a 14% increase from $1,407.2 million in the same period last year[133]. Profitability - Total gross profit was $1.25 billion, a 19% increase from $1.05 billion year-over-year, with a gross margin of 81.0%, up 3.5 percentage points from 77.5%[117]. - Operating income was $453.8 million, reflecting a 41% increase from $321.2 million in the same period last year[125]. - Operating margin improved to 29.5%, an increase of 5.8 percentage points compared to 23.7% in the same period last year[125]. - Total gross margin improved by 3.5 percentage points to 81.0%, driven by a 12.0 percentage point increase in product gross margin[143][144]. - Operating income increased by $132.6 million, or 41%, to $453.8 million, with an operating margin of 29.5%[150]. Expenses and Investments - Research and development expenses rose by $25.6 million, or 15%, primarily due to increased personnel-related costs[147]. - Sales and marketing expenses increased by $41.6 million, or 8%, driven by higher personnel-related costs and marketing program expenses[148]. - The company expects operating margin to decrease for the full year of 2025 compared to 2024 due to increased investments in sales, marketing, and R&D[124]. - The company expects capital expenditures to be between approximately $380.0 million and $430.0 million in 2025 to support growth and expansion[159]. Cash Flow and Liquidity - Cash, cash equivalents, and investments totaled $4.82 billion as of March 31, 2025[125]. - Cash generated from operating activities for the three months ended March 31, 2025, was $863.3 million, driven by improved profitability and effective working capital management[171]. - Cash used in investing activities during the same period was $110.8 million, primarily for property and equipment purchases totaling $66.5 million[173]. - Cash used in financing activities was $32.7 million, mainly for tax withholding related to equity awards[174]. - The company believes its existing cash and cash equivalents will be sufficient for at least the next 12 months to meet working capital and capital expenditure requirements[168]. Deferred Revenue and Inventory - Deferred revenue reached $6.42 billion, an increase of $57.5 million, or 1%, from December 31, 2024[132]. - As of March 31, 2025, inventory purchase commitments totaled $689.0 million, an increase of $97.9 million from $591.1 million as of December 31, 2024[163]. - The liability for inventory purchase commitments was $47.5 million as of March 31, 2025, down from $54.0 million as of December 31, 2024[163]. Market and Geographic Performance - The Americas and Europe, Middle East, and Africa regions each contributed 41% of total revenue, while the Asia Pacific region contributed 18%, with respective year-over-year increases of 13%, 16%, and 10%[118]. - Approximately 50% of billings during the three months ended March 31, 2025, came from eight countries, with the remaining 50% from over 100 countries, each contributing less than 3% individually[121]. Innovation and Patents - As of March 31, 2025, the company held 1,045 U.S. patents and 1,381 global patents, including 271 related to AI[107]. - Fortinet's integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE, and AI-driven security operations, positioning the company as a leader in cybersecurity[107]. Other Financial Metrics - Free cash flow (non-GAAP) was $782.8 million, up from $608.5 million in the same period last year[136]. - Interest income increased by $12.1 million, or 38%, to $44.3 million, primarily due to higher investment balances[151][152]. - Cash and cash equivalents increased to $3.6 billion, up from $2.9 billion as of December 31, 2024[156]. - Changes in operating assets and liabilities included a decrease of $303.9 million in accounts receivable-net during the three months ended March 31, 2025[171]. - There were no material changes in market risk during the three months ended March 31, 2025[175].