Last Update 05 Jan 26

FTNT: AI Data Center Security Partnerships Will Drive Future Upside Potential

Analysts have trimmed their price targets on Fortinet toward the high $80s to low $100s, with the updated fair value estimate holding near $87.04 as they factor in recent Q3 metrics such as 18% Product revenue growth, 14% Billings growth, and slightly refined assumptions for discount rate, revenue growth, margins, and future P/E.

Analyst Commentary

Recent Street research has shifted to a more balanced stance on Fortinet, with price targets clustering in the high $80s to low $100s range and at least one downgrade to a neutral rating. The updated models are closely tied to the latest Q3 metrics, including 18% Product revenue growth and 14% Billings growth, as well as refined assumptions for discount rate, revenue growth, margins, and future P/E.

Bullish Takeaways

Bullish analysts highlight Fortinet's 18% Product revenue growth as a sign that demand for its core offerings is still supportive of the current valuation framework.
The 14% Billings growth is viewed as a reasonable foundation for future revenue recognition. This feeds into models that support fair value estimates around the current US$80 to US$100 range.
Tighter revenue guidance and higher margin guidance in Q3 updates are seen as helpful for reducing uncertainty in cash flow forecasts and discount rate assumptions.
Some bullish analysts view the revised P/E assumptions as more grounded. They see this as making the stock easier to underwrite for longer term holders at current levels.

Bearish Takeaways

Bearish analysts have shifted ratings to more neutral positions. This reflects concern that the current share price already embeds much of the value implied by their updated models, including the US$86 price target.
The trim in price targets toward the high US$80s to low US$100s suggests caution around how much upside is left relative to refined growth and margin assumptions.
There is some skepticism that Q3 metrics alone, such as 18% Product revenue growth and 14% Billings growth, justify meaningfully higher valuation multiples from here.
More conservative discount rate and future P/E assumptions signal that bearish analysts want a wider margin of safety before becoming more constructive on the shares.

What’s in the News

Fortinet announced a Secure AI Data Center solution, built with Arista Networks and deployed at Monolithic Power Systems, aiming to provide a scalable, zero trust AI data center architecture with hardware accelerated security and unified management across networking and security (Key Developments).
The company introduced an integrated solution with FortiGate VM running on NVIDIA BlueField 3 DPUs, designed to offload firewalling, segmentation, and zero trust controls from host CPUs to DPUs to help secure high performance private cloud and AI environments without adding workload overhead (Key Developments).
Fortinet and Crime Stoppers International launched a global partnership and Cybercrime Bounty program intended to encourage anonymous reporting of cybercriminal activity and route validated threat intelligence to law enforcement for investigations and prosecutions (Key Developments).
New partnerships with TERAGO in Canada and distributor Climb extend Fortinet SD WAN, SASE, and broader security offerings into managed services and reseller channels, targeting more secure connectivity and expanded go to market reach (Key Developments).
For fiscal 2025, Fortinet issued revenue guidance of US$6.72b to US$6.78b and Q4 2025 revenue guidance of US$1.825b to US$1.885b, while also reporting completion of a long running buyback program totaling 117,167,905 shares, or 14.61%, for US$8.4631b since its 2016 launch, including US$1.8315b spent on 23,384,800 shares in Q3 2025 (Key Developments).

Valuation Changes

Fair Value: The fair value estimate remains effectively unchanged at about US$87.04 per share, suggesting only minor model refinements rather than a reset in expectations.
Discount Rate: The discount rate has eased slightly from about 8.48% to about 8.47%, indicating a very small adjustment to the assumed risk profile in the cash flow model.
Revenue Growth: The long term revenue growth assumption is essentially unchanged, holding close to 12.96%, so updated views do not materially alter the growth outlook used in the model.
Net Profit Margin: The net profit margin assumption stays around 25.80%, with only a negligible numerical change that leaves the earnings power assumption broadly intact.
Future P/E: The future P/E multiple has been trimmed slightly from about 30.64x to about 30.63x, signaling a very small recalibration rather than a shift in how much investors are assumed to pay for earnings.

Expanding integrated cybersecurity solutions and a pivot to high-margin, recurring services are boosting revenue quality, margins, and long-term cash flow stability.
Proprietary technology, heavy R&D investment, and platform convergence are extending Fortinet's competitive moat and driving greater customer loyalty and cross-selling opportunities.
Heavy reliance on hardware refresh cycles and legacy customer upselling, combined with rising costs and competition, threatens future revenue growth, margins, and market expansion.

Catalysts

About Fortinet

Provides cybersecurity and convergence of networking and security solutions worldwide.What are the underlying business or industry changes driving this perspective?

Rapidly growing global cybersecurity threats and expanding digital transformation (cloud, IoT, remote work) are sustaining robust demand for integrated, scalable cybersecurity solutions-Fortinet's expanding customer base, strong growth in large enterprise deals, and consistent share gains in high-growth verticals (e.g., financial services, OT/IoT) suggest ongoing top-line revenue acceleration.
Increasing regulatory requirements around data security and infrastructure protection (e.g., GDPR, critical infrastructure rules) are forcing more organizations to upgrade their security posture, leading to significant upgrade cycles and opportunities for cross-selling next-gen SASE and AI-driven solutions-supporting both near
and long-term revenue/EPS growth.
Fortinet's successful pivot toward high-margin, recurring software, subscription, and services revenue-evidenced by rapid ARR growth in Unified SASE (22%), SecOps (35%), and attached/adjacent cloud-based services-is structurally expanding gross and operating margins, decreasing business cyclicality, and boosting long-term earnings quality.
Heavy investment in proprietary infrastructure and R&D, including large-scale global data centers, SOC/NOC capabilities, and unique ASIC-based technology, is enhancing cost efficiency, enabling differentiated performance, and extending Fortinet's competitive moat-positioning margins and market share for further expansion as the industry shifts to integrated security and networking.
Strong channel and direct sales execution, combined with an integrated Security Fabric/platform approach (convergence of SASE, SD-WAN, firewall, and AI security), is driving customer stickiness, increasing multi-product adoption rates, and unlocking sizable cross-sell/upsell potential-contributing to higher customer LTV, stable revenue visibility (RPO/ARR), and improving long-term cash flow generation.

Fortinet Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Fortinet's revenue will grow by 13.1% annually over the next 3 years.
Analysts assume that profit margins will shrink from 30.6% today to 26.4% in 3 years time.
Analysts expect earnings to reach $2.4 billion (and earnings per share of $2.94) by about September 2028, up from $1.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.7 billion in earnings, and the most bearish expecting $1.9 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 36.5x on those 2028 earnings, up from 31.5x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

Fortinet Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The ongoing hardware firewall refresh cycle (with large cohorts in 2026 and smaller, lower revenue cohorts in 2027) is providing a significant near-term tailwind, suggesting that once this upgrade demand is met, product revenue growth could decelerate unless the company is able to meaningfully accelerate new product or service adoption-potentially impacting future revenue growth after the cycle ends.
Despite strong cloud and SASE growth momentum, the vast majority (>90%) of SASE wins are from the existing firewall customer base, signaling a risk that expansion could be limited if Fortinet fails to penetrate greenfield or competitive accounts, which may cap long-term total addressable market expansion and revenue upside.
There is continued pressure on service revenue growth, partly due to timing issues around customer hardware consolidation and elongated sales cycles, as well as a deceleration in deferred revenue recognition from the COVID surge years; if not offset by significantly higher upsell, this trend could compress gross margins and slow overall earnings growth.
Fortinet is investing heavily in infrastructure ($380M–$430M in 2025) and direct enterprise sales, which, while potentially necessary for long-term positioning, has resulted in operating margin declines and poses an execution risk if sales growth in SASE/cloud and large enterprise deals does not consistently outpace these elevated costs-potentially reducing long-term net margins and free cash flow.
The industry's ongoing shift toward cloud-native, security-as-a-service, and platform consolidation-where hyperscalers and larger competitors offer broad security suites-could diminish demand for Fortinet's legacy appliance-heavy solutions and mid-term SASE leadership, heightening the risk of revenue and margin pressure if Fortinet's product and platform differentiation does not keep pace with changing buyer preferences.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $90.322 for Fortinet based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $67.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.2 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 36.5x, assuming you use a discount rate of 8.4%.
Given the current share price of $79.84, the analyst price target of $90.32 is 11.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Fortinet?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.