Fortinet's AI Security Bet Pays Off with Raised Guidance

Fortinet (FTNT) held its third-quarter 2026 earnings call on October 28, 2026, and announced an increase to its full-year billings guidance. This marks the third time the company has raised its outlook in 2026, reflecting growing demand for integrated security platforms as corporate customers adapt to artificial intelligence threats.

Management highlighted that network firewalls are becoming the core enforcement point for securing AI data flows. By integrating secure access service edge (SASE) capabilities, Fortinet expanded its SASE billings by 31% year over year. CEO Ken Xie emphasized that network security is the foundation of AI security, with the firewall serving as a centralized point of in-line enforcement across enterprise, operational technology, and hybrid cloud environments.

Large enterprise deals, those over $1 million, grew 51% during the quarter. However, these multiyear contracts often involve phased rollouts, creating a temporary delay in recognized service revenue. Service revenue grew 13% to $1.31 billion, while short-term deferred revenue grew 14.5%.

Operational technology (OT) billings grew nearly 40% as corporate boards prioritize securing legacy industrial machinery from automated cyberattacks. CFO Christiane Ohlgart noted that safeguarding edge and industrial networks has become one of the most urgent issues discussed at board levels.

Looking ahead, Fortinet expects its total billings and revenue growth in 2027 to outpace the growth of its overall addressable market, driven by the durable nature of AI-driven threats and the company's cost advantages from custom microchips and unified software.

The raised guidance signals that Fortinet is capitalizing on the secular trend of AI-driven cybersecurity spending. As attackers increasingly use AI to target corporate systems, demand for advanced security solutions is likely to remain strong, providing a long runway for growth.

Fortinet's ability to grow large enterprise deals by 51% demonstrates its success in moving upmarket and winning larger contracts. While the temporary delay in service revenue recognition may concern some investors, it reflects the company's growing traction with large customers and should normalize as deals ramp.

The strong growth in SASE and OT billings highlights Fortinet's diversification beyond traditional firewalls. SASE is a fast-growing market as businesses consolidate networking and security, and OT security is becoming critical as industrial systems become more connected. These areas position Fortinet well for future growth.

Management's expectation to outpace the addressable market in 2027 underscores confidence in Fortinet's competitive position. The company's custom microchips and unified software give it a cost advantage, supporting pricing flexibility and margin expansion.

Overall, the earnings call reinforces Fortinet's long-term growth story, with multiple catalysts driving billings and revenue growth. The stock's recent pullback may present an opportunity for long-term investors.