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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34511

______________________________________

FORTINET, INC.

(Exact name of registrant as specified in its charter)

______________________________________


Delaware									77-0560389
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

909 Kifer Road

Sunnyvale, California 94086

(Address of principal executive offices, including zip code)

(408) 235-7700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 Par Value

FTNT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2025, there were 743,648,102 shares of the registrant’s common stock outstanding.

FORTINET, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2025

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		Page

	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	83
Item 5.	Other Information	83
Item 6.	Exhibits	84
	Exhibit Index	84
	Signatures	85

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. Some of the principal risks and uncertainties include:

•Our operating results are likely to vary significantly and be unpredictable.

•Adverse economic conditions, such as a possible economic downturn or recession, and possible impacts of inflation or stagflation, tariffs, trade policies or other trade disruptions, changing interest rates, changes in government spending or regulation or reduced information technology (“IT”) spending, including firewall spending, may adversely impact our business.

•We have been, and may in the future be, susceptible to supply chain constraints, supply shortages and disruptions, long or less predictable lead times for components and finished goods and supply changes because some of the key components in our products come from limited sources of supply.

•As a result of supply chain disruptions in previous periods, we increased our purchase order commitments in previous periods and were in some instances required to and may in the future be required to accept or pay for components and finished goods regardless of our level of sales in a particular period, which may negatively or unpredictably impact our operating results and financial condition.

•Our billings, revenue, and free cash flow growth may slow or may not continue to grow, and our operating margins may decline.

•Our real estate assets, including construction, acquisitions, improvements, leasing activity, and ongoing maintenance and management of office buildings, warehouses, data centers and points of presence (“PoPs”), as well as data center operations, expansions or enhancements, could involve significant risks to our business.

•Any weakness in sales strategy, productivity, personnel, retention and execution could negatively impact our results of operations.

•We are dependent on the continued services and performance of our senior management, as well as our ability to hire, retain and motivate qualified personnel.

•We rely on third-party channel partners for substantially all of our billings, revenue, and a small number of distributors represents a large percentage of our revenue and accounts receivable.

•Reliance on a concentration of shipments at the end of the quarter or changes in shipping terms could cause our billings and revenue to fall below expected levels.

•We rely significantly on revenue from FortiGuard and other security subscriptions and FortiCare technical support services, and revenue from these services may decline or fluctuate in manners that could adversely impact our results of operations.

•We face intense competition in our market and we may not maintain or improve our competitive position.

•We are susceptible to defects or vulnerabilities, including critical vulnerabilities, in our products or services, as well as reputational harm from the failure or misuse of our products or services, and any actual or perceived defects or vulnerabilities, including critical vulnerabilities, in our products or services, failure of our products or services to detect or prevent a security incident or to cause a disruption to operations, failure of our customers to implement preventative actions such as updates to one of our deployed solutions or failure to help secure our customers, could cause our products or services to allow unauthorized access to our customers’ networks and harm our operational results and reputation more significantly as compared to other companies. Our Product Security Incident Response Team publicly posts on our FortiGuard Labs website known product vulnerabilities, including critical vulnerabilities, and methods for customers to mitigate the risk of vulnerabilities. However, there can be no assurance that such posts will be sufficiently timely, accurate or complete or that those customers will see such posts or take steps to mitigate the risk of vulnerabilities, and certain customers may be negatively impacted.

•If our internal enterprise IT networks, our operational networks, our research and development networks, our back-end labs and cloud stacks hosted in our data centers or PoPs, colocation vendors or public cloud providers are compromised, public perception of our products and services may be harmed, our customers may be breached and harmed, we may become subject to liability, and our business, operating results and stock price may be adversely impacted.

•We have incurred indebtedness and may incur other debt in the future, which may adversely affect our financial condition and future financial results.

•We generate a majority of billings, revenue and cash flow from sales outside of the United States.

•Our backlog may fluctuate over quarters. If we experience supply chain shortages and cannot fulfill orders or if customers cancel or delay delivery of orders, our backlog may be affected, which will negatively impact our aggregate backlog to billings conversion and revenue in such quarter. Generally, a reduction to backlog increases our aggregate billings and revenue during the quarter when delivered.

•We may not be successful in executing our strategy to increase our sales to large- and medium-sized end-customers.

•A portion of our revenue is generated by sales to government organizations and other customers, which are subject to a number of regulatory requirements, their own supply chain constraints and contractual requirements, challenges and risks, including impacts from political dynamics.

•We order components and finished goods from third-party manufacturers based on our forecasts of future demand and targeted inventory levels, which exposes us to the risk of product shortages, tariffs, may result in lost sales, higher expenses and inventory excesses which may lead to inventory charges and costs related to future purchase commitments, possibly requiring us to sell our products at discounts or offer various other incentives.

•We depend on third parties to provide various components for our products and build our products and are susceptible to manufacturing delays, capacity constraints, cost increases, and changes in the geopolitical environment.

•Our inability to successfully acquire and integrate other businesses, products or technologies, or to successfully invest in and form successful strategic alliances with other businesses, could seriously harm our competitive position and could negatively affect our financial condition and results of operations.

•Investors’, activists’ and regulators’ expectations of our investments and performance relating to operational sustainability factors may impose additional costs and expose us to new risks.

•We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

•Our proprietary rights may be difficult to enforce and we may be subject to claims by others that we infringe their proprietary technology.

•The trading price of our common stock may be volatile, which volatility may be exacerbated by share repurchases under our Share Repurchase Program (the “Repurchase Program”).

•Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

•Global economic uncertainty can weaken and harm our financial position.

•Weakening product demand caused by political instability, changes in trade agreements, wars and foreign conflicts, such as the war in Ukraine or tensions between China and Taiwan, could adversely affect our business and financial performance.

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PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

FORTINET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except per share amounts)


	September 30, 2025		December 31, 2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,995.7	$	2,875.9
Short-term investments	1,127.7		1,190.6
Accounts receivable—net	1,168.3		1,463.4
Inventory	426.6		315.5
Prepaid expenses and other current assets	195.2		126.1
Total current assets	4,913.5		5,971.5
LONG-TERM INVESTMENTS	289.1		—
PROPERTY AND EQUIPMENT—NET	1,605.2		1,349.5
DEFERRED CONTRACT COSTS	682.2		622.9
DEFERRED TAX ASSETS	1,367.8		1,335.6
GOODWILL	258.3		235.4
OTHER INTANGIBLE ASSETS—NET	110.2		115.0
OTHER ASSETS	135.0		133.2
TOTAL ASSETS	$	9,361.3	$	9,763.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	221.3	$	190.9
Accrued liabilities	330.6		337.9
Accrued payroll and compensation	274.3		255.7
Current portion of long-term debt	499.4		—
Deferred revenue	3,460.5		3,276.2
Total current liabilities	4,786.1		4,060.7
DEFERRED REVENUE	3,189.9		3,084.7
LONG-TERM DEBT	496.5		994.3
OTHER LIABILITIES	153.7		129.6
Total liabilities	8,626.2		8,269.3
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value—1,500.0 shares authorized; 742.9 and 767.0 shares issued and outstanding on September 30, 2025 and December 31, 2024, respectively	0.7		0.8
Additional paid-in capital	1,714.7		1,636.2
Accumulated other comprehensive loss	(21.8)		(26.1)
Accumulated deficit	(958.5)		(117.1)
Total stockholders’ equity	735.1		1,493.8
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,361.3	$	9,763.1

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
REVENUE:
Product	$	559.3	$	473.9	$	1,527.3	$	1,334.7
Service	1,165.6		1,034.2		3,367.3		2,961.0
Total revenue	1,724.9		1,508.1		4,894.6		4,295.7
COST OF REVENUE:
Product	180.7		136.1		496.5		474.0
Service	151.0		127.3		443.2		369.1
Total cost of revenue	331.7		263.4		939.7		843.1
GROSS PROFIT:
Product	378.6		337.8		1,030.8		860.7
Service	1,014.6		906.9		2,924.1		2,591.9
Total gross profit	1,393.2		1,244.7		3,954.9		3,452.6
OPERATING EXPENSES:
Research and development	202.4		187.3		610.5		525.7
Sales and marketing	583.5		515.9		1,718.2		1,518.3
General and administrative	61.4		71.7		176.1		182.7
Gain on intellectual property matters	(1.4)		(1.1)		(9.0)		(3.4)
Total operating expenses	845.9		773.8		2,495.8		2,223.3
OPERATING INCOME	547.3		470.9		1,459.1		1,229.3
INTEREST INCOME	40.7		42.4		130.0		112.9
INTEREST EXPENSE	(6.2)		(5.0)		(15.7)		(15.1)

OTHER INCOME—NET	13.0		118.1		58.0		113.0
INCOME BEFORE INCOME TAXES AND GAIN (LOSS) FROM EQUITY METHOD INVESTMENTS	594.8		626.4		1,631.4		1,440.1
PROVISION FOR INCOME TAXES	120.7		81.2		294.3		197.2
GAIN (LOSS) FROM EQUITY METHOD INVESTMENTS	(0.2)		(5.3)		10.3		(23.9)
NET INCOME	$	473.9	$	539.9	$	1,347.4	$	1,219.0
Net income per share (Note 8):
Basic	$	0.63	$	0.71	$	1.77	$	1.60
Diluted	$	0.62	$	0.70	$	1.75	$	1.58
Weighted-average shares outstanding:
Basic	755.5		765.0		763.1		763.7
Diluted	761.2		771.9		770.2		770.8

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in millions)


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Net income	$	473.9	$	539.9	$	1,347.4	$	1,219.0
Other comprehensive income (loss):
Change in foreign currency translation	(1.9)		9.1		4.0		(0.3)
Change in unrealized gains (losses) on investments	1.1		2.5		0.5		1.6
Less: tax benefit related to items of other comprehensive income (loss)	0.3		0.6		0.2		0.4
Other comprehensive income (loss)	(1.1)		11.0		4.3		0.9
Comprehensive income	$	472.8	$	550.9	$	1,351.7	$	1,219.9

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited, in millions)


	Three Months Ended September 30, 2025
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity
	Shares	Amount
BALANCE—June 30, 2025	765.6	$	0.8	$	1,715.9	$	(20.7)	$	364.4	$	2,060.4
Issuance of common stock in connection with equity incentive plans - net of tax withholding	0.6	—		(20.7)		—		—		(20.7)
Repurchase and retirement of common stock	(23.3)	(0.1)		(34.6)		—		(1,796.8)		(1,831.5)
Excise tax on net stock repurchases	—	—		(17.7)		—		—		(17.7)
Stock-based compensation expense	—	—		71.8		—		—		71.8
Net unrealized gain on investments - net of tax	—	—		—		0.8		—		0.8
Foreign currency translation adjustment	—	—		—		(1.9)		—		(1.9)
Net income	—	—		—		—		473.9		473.9
BALANCE—September 30, 2025	742.9	$	0.7	$	1,714.7	$	(21.8)	$	(958.5)	$	735.1



	Three Months Ended September 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
BALANCE—June 30, 2024	764.2	$	0.8	$	1,499.0	$	(29.0)	$	(1,182.6)	$	288.2
Issuance of common stock in connection with equity incentive plans - net of tax withholding	1.5	—		3.7		—		—		3.7
Repurchase and retirement of common stock	—	—		—		—		(0.6)		(0.6)
Stock-based compensation expense	—	—		65.9		—		—		65.9
Net unrealized gain on investments - net of tax	—	—		—		1.9		—		1.9
Foreign currency translation adjustment	—	—		—		9.1		—		9.1
Net income	—	—		—		—		539.9		539.9
BALANCE—September 30, 2024	765.7	$	0.8	$	1,568.6	$	(18.0)	$	(643.3)	$	908.1

See notes to condensed consolidated financial statements.

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	Nine Months Ended September 30, 2025
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
BALANCE—December 31, 2024	767.0	$	0.8	$	1,636.2	$	(26.1)	$	(117.1)	$	1,493.8
Issuance of common stock in connection with equity incentive plans - net of tax withholding	3.8	—		(66.3)		—		—		(66.3)
Repurchase and retirement of common stock	(27.9)	(0.1)		(43.7)		—		(2,188.8)		(2,232.6)
Excise tax on net stock repurchases	—	—		(18.5)		—		—		(18.5)
Stock-based compensation expense	—	—		207.0		—		—		207.0
Net unrealized gain on investments - net of tax	—	—		—		0.3		—		0.3
Foreign currency translation adjustment	—	—		—		4.0		—		4.0
Net income	—	—		—		—		1,347.4		1,347.4
BALANCE—September 30, 2025	742.9	$	0.7	$	1,714.7	$	(21.8)	$	(958.5)	$	735.1

	Nine Months Ended September 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
BALANCE—December 31, 2023	761.0	$	0.8	$	1,416.4	$	(18.9)	$	(1,861.7)	$	(463.4)
Issuance of common stock in connection with equity incentive plans - net of tax withholding	4.7	—		(39.9)		—		—		(39.9)
Repurchase and retirement of common stock	—	—		—		—		(0.6)		(0.6)

Stock-based compensation expense	—	—		192.1		—		—		192.1
Net unrealized gain on investments - net of tax	—	—		—		1.2		—		1.2
Foreign currency translation adjustment	—	—		—		(0.3)		—		(0.3)
Net income	—	—		—		—		1,219.0		1,219.0
BALANCE—September 30, 2024	765.7	$	0.8	$	1,568.6	$	(18.0)	$	(643.3)	$	908.1

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Nine Months Ended
	September 30, 2025		September 30, 2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,347.4	$	1,219.0
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	207.0		192.1
Amortization of deferred contract costs	246.0		218.3
Depreciation and amortization	112.5		87.6
Amortization of investment discounts	(27.3)		(37.3)
Other	(53.1)		(85.7)
Changes in operating assets and liabilities, net of impact of business combinations:
Accounts receivable—net	308.7		376.5
Inventory	(109.1)		104.9
Prepaid expenses and other current assets	(64.3)		(9.0)
Deferred contract costs	(305.3)		(212.2)
Deferred tax assets	13.7		(187.6)
Other assets	(13.6)		(8.8)
Accounts payable	11.5		(32.0)
Accrued liabilities	(15.5)		(72.3)
Accrued payroll and compensation	16.3		(7.9)
Deferred revenue	288.1		234.4
Other liabilities	7.4		0.5
Net cash provided by operating activities	1,970.4		1,780.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	(1,512.6)		(1,485.3)
Sales of investments	5.7		—
Maturities of investments	1,317.6		1,382.7
Purchases of property and equipment	(322.0)		(281.3)
Payments made in connection with business combinations, net of cash acquired	(41.6)		(247.0)
Purchases of marketable equity securities	—		(16.7)
Other	0.1		0.1
Net cash used in investing activities	(552.8)		(647.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and retirement of common stock	(2,232.6)		(0.6)
Proceeds from issuance of common stock	37.6		39.7
Taxes paid related to net share settlement of equity awards	(103.7)		(79.6)
Other	(0.1)		(0.8)
Net cash used in financing activities	(2,298.8)		(41.3)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	1.0		(0.3)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(880.2)		1,091.4
CASH AND CASH EQUIVALENTS—Beginning of period	2,875.9		1,397.9
CASH AND CASH EQUIVALENTS—End of period	$	1,995.7	$	2,489.3
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes—net	$	333.9	$	423.0
Operating lease liabilities arising from obtaining right-of-use assets	$	34.5	$	29.4
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfers of evaluation units and equipment from inventory to property and equipment	$	22.0	$	26.1
Liability for purchase of property and equipment	$	27.7	$	29.1

See notes to condensed consolidated financial statements.

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FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation—The unaudited condensed consolidated financial statements of Fortinet, Inc. and its subsidiaries (collectively, “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2024, contained in our Annual Report on Form 10-K filed with the SEC on February 21, 2025. In the opinion of management, all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation, have been included. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year or for any future periods. The condensed consolidated balance sheet as of December 31, 2024 is derived from the audited consolidated financial statements for the year ended December 31, 2024.

Amounts previously reported as gain on bargain purchase are included in other income—net in prior periods to conform with current period presentation in our condensed consolidated statements of income. Amounts previously reported as loss from equity method investments and gain on bargain purchase are included in other in prior periods to conform with current period presentation in section of net cash provided by operating activities in our condensed consolidated statements of cash flows.

The condensed consolidated financial statements include the accounts of Fortinet, Inc. and its subsidiaries. We consolidate all legal entities in which we have an absolute controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

There have been no material changes to our significant accounting policies as of and for the nine months ended September 30, 2025, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC.

Recent Accounting Standards Not Yet Effective

Income Taxes

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for our annual period beginning fiscal year 2025, with early adoption permitted, and should be applied prospectively. We are currently evaluating the ASU to determine its impact on our disclosures.

Income Statement

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), and in January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. ASU 2024-03 enhances the disclosures required for expense disaggregation in our annual and interim consolidated financial statements. The amendments are effective for our annual reporting period beginning fiscal year 2027, with early adoption permitted, and can be applied prospectively or retrospectively. We are currently evaluating the ASU to determine its impact on our disclosures.

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FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Credit Losses

In July 2025, the FASB issued ASU 2025-05—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Revenue from Contracts with Customers (Topic 606). The amendments are effective for our annual reporting period beginning with fiscal year 2026 and interim reporting periods within those annual reporting periods on a prospective basis, with early adoption permitted. We are currently evaluating ASU 2025-05 to determine its impact on our consolidated financial statements and related disclosures.

Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which amends the cost capitalization criteria for internal-use software development costs by removing all references to prescriptive and sequential software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met. The amendments are effective for our annual period beginning fiscal year 2028 and interim reporting periods within those annual reporting periods and can be applied prospectively, retrospectively, or via a modified prospective transition method, with early adoption permitted. We are currently assessing adoption timing and the method of adoption.

2. REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents our revenue disaggregated by major product and service lines (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Product	$	559.3	$	473.9	$	1,527.3	$	1,334.7
Service:
Security subscription	672.0		595.8		1,939.5		1,691.4
Technical support and other	493.6		438.4		1,427.8		1,269.6
Total service revenue	1,165.6		1,034.2		3,367.3		2,961.0
Total revenue	$	1,724.9	$	1,508.1	$	4,894.6	$	4,295.7

Deferred Revenue

During the three and nine months ended September 30, 2025, we recognized $759.2 million and $2.61 billion in revenue that was included in the deferred revenue balance as of December 31, 2024, respectively. During the three and nine months ended September 30, 2024, we recognized $660.3 million and $2.28 billion in revenue that was included in the deferred revenue balance as of December 31, 2023, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $6.72 billion, which was substantially comprised of deferred security subscription and technical support services revenue as well as unbilled contract revenue from non-cancellable contracts that will be recognized in future periods. We expect to recognize approximately $3.49 billion as revenue over the next 12 months, $2.62 billion in years two and three, and the remainder thereafter.

Deferred Contract Costs

Amortization of deferred contract costs, primarily consisting of sales commissions earned by our sales force, was $86.0 million and $73.6 million during the three months ended September 30, 2025 and 2024, respectively. Amortization of

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deferred contract costs was $246.0 million and $218.3 million during the nine months ended September 30, 2025 and 2024, respectively.

3. FINANCIAL INSTRUMENTS AND FAIR VALUE

Short-Term and Long-Term Investments

Our short-term and long-term investments comprised of available-for-sale investments and marketable equity securities. The following tables summarize our short-term and long-term investments (in millions):


	September 30, 2025
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government and agency securities	$	560.0	$	0.6	$	(0.1)	$	560.5
Commercial paper	370.4		0.1		—		370.5
Corporate debt securities	285.2		0.3		(0.1)		285.4
Certificates of deposit and term deposits	102.2		0.1		—		102.3

Total available-for-sale investments	1,317.8		1.1		(0.2)		1,318.7
Marketable equity securities							98.1
Total short-term and long-term investments	$	1,317.8	$	1.1	$	(0.2)	$	1,416.8


	December 31, 2024
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government and agency securities	$	469.1	$	0.4	$	—	$	469.5
Commercial paper	428.7		0.2		(0.2)		428.7
Corporate debt securities	166.4		0.1		(0.1)		166.4
Certificates of deposit and term deposits	61.8		—		—		61.8
Total available-for-sale investments	1,126.0		0.7		(0.3)		1,126.4
Marketable equity securities							64.2
Total short-term and long-term investments	$	1,126.0	$	0.7	$	(0.3)	$	1,190.6

The following tables show the gross unrealized losses and the related fair values of our available-for-sale investments that have been in a continuous unrealized loss position (in millions):


	September 30, 2025
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government and agency securities	$	560.5	$	(0.1)	$	—	$	—	$	560.5	$	(0.1)
Commercial paper	370.5		—		—		—		370.5		—
Corporate debt securities	285.4		(0.1)		—		—		285.4		(0.1)
Certificates of deposit and term deposits	102.3		—		—		—		102.3		—
Total available-for-sale investments	$	1,318.7	$	(0.2)	$	—	$	—	$	1,318.7	$	(0.2)

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	December 31, 2024
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government and agency securities	$	27.8	$	—	$	—	$	—	$	27.8	$	—
Commercial paper	149.4		(0.2)		—		—		149.4		(0.2)
Corporate debt securities	63.5		(0.1)		—		—		63.5		(0.1)
Certificates of deposit and term deposits	10.9		—		—		—		10.9		—
Total available-for-sale investments	$	251.6	$	(0.3)	$	—	$	—	$	251.6	$	(0.3)

The contractual maturities of our available-for-sale investments were (in millions):


	September 30, 2025		December 31, 2024
Due within one year	$	1,029.6	$	1,126.4
Due within one to three years	289.1		—
Total	$	1,318.7	$	1,126.4

Available-for-sale investments are reported at fair value, with unrealized gains and losses and the related tax impact included as a separate component of stockholders’ equity and in comprehensive income. We do not intend to sell any of the securities in an unrealized loss position and it is not more likely than not that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity.

Realized gains and losses on available-for-sale investments were insignificant in the periods presented.

The changes in fair value of our marketable equity securities are recorded in other income—net on the condensed consolidated statements of income. We recognized a $14.1 million and $10.7 million gain during the three and nine months ended September 30, 2025, respectively. We recognized a $11.1 million and $11.2 million gain during the three and nine months ended September 30, 2024, respectively.

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Assets Measured at Fair Value on a Recurring Basis

The following table presents the fair value of our financial assets measured at fair value on a recurring basis (in millions):


	September 30, 2025								December 31, 2024
	Aggregate Fair Value		Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs		Aggregate Fair Value		Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
			(Level 1)		(Level 2)		(Level 3)				(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market funds	$	170.5	$	170.5	$	—	$	—	$	296.1	$	296.1	$	—	$	—
Commercial paper	34.0		—		34.0		—		59.7		—		59.7		—
Certificates of deposit and term deposits	4.5		—		4.5		—		—		—		—		—
Total cash equivalents	209.0		170.5		38.5		—		355.8		296.1		59.7		—
Short-term investments:
U.S. government and agency securities	437.1		437.1		—		—		469.5		464.5		5.0		—
Commercial paper	370.5		—		370.5		—		428.7		—		428.7		—
Corporate debt securities	119.7		—		119.7		—		166.4		—		166.4		—
Certificates of deposit and term deposits	102.3		—		102.3		—		61.8		—		61.8		—
Marketable equity securities	98.1		98.1		—		—		64.2		64.2		—		—
Total short-term investments	1,127.7		535.2		592.5		—		1,190.6		528.7		661.9		—
Long-term investments:
U.S. government and agency securities	123.4		113.3		10.1		—		—		—		—		—
Corporate debt securities	165.7		—		165.7		—		—		—		—		—
Total long-term investments	289.1		113.3		175.8		—		—		—		—		—
Total	$	1,625.8	$	819.0	$	806.8	$	—	$	1,546.4	$	824.8	$	721.6	$	—

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, 2025 and year ended December 31, 2024.

4. INVENTORY

Inventory, net of reserves, consisted of (in millions):


	September 30, 2025		December 31, 2024
Raw materials	$	63.6	$	90.9
Work in process	4.6		4.1
Finished goods	358.4		220.5
Inventory	$	426.6	$	315.5

The excess and obsolete inventory reserve was $141.9 million and $144.8 million as of September 30, 2025 and December 31, 2024, respectively. Inventory write-downs related to excess and obsolete inventory were immaterial during the three and nine months ended September 30, 2025, and were $8.8 million and $37.6 million during the three and nine months

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ended September 30, 2024, respectively. These were recorded in cost of product revenue on the condensed consolidated statements of income.

5. PROPERTY AND EQUIPMENT—Net

Property and equipment—net consisted of (in millions):


	September 30, 2025		December 31, 2024
Land	$	592.4	$	500.6
Buildings and improvements	974.1		801.4
Computer equipment and software	324.5		279.1
Leasehold improvements	64.4		64.3
Evaluation units	23.4		31.8
Furniture and fixtures	38.3		36.4
Construction-in-progress	50.5		52.0
Total property and equipment	2,067.6		1,765.6
Less: accumulated depreciation	(462.4)		(416.1)
Property and equipment—net	$	1,605.2	$	1,349.5

During the three months ended March 31, 2025, we purchased certain real estate property in Germany totaling $54.5 million, to be used predominantly for data center operations and as office space. The purchase was accounted for under the asset acquisition method, with $16.8 million allocated to land and $37.7 million allocated to buildings and improvements, based on their relative fair values.

During the three months ended June 30, 2025, we purchased certain real estate properties in Canada, the United States and the Netherlands for an aggregate purchase price of $130.5 million, to be used predominantly for data center operations, office space and warehouse operations. The purchases were accounted for under the asset acquisition method, with $43.0 million allocated to land and $87.5 million allocated to buildings and improvements, based on their relative fair values.

During the three months ended September 30, 2025, we purchased certain real estate properties in Canada and the United Kingdom for an aggregate purchase price of $70.8 million, to be used predominantly for office space. The purchases were accounted for under the asset acquisition method, with $37.5 million allocated to land and $33.3 million allocated to buildings and improvements, based on their relative fair values.

Depreciation expense was $25.3 million and $24.5 million during the three months ended September 30, 2025 and 2024, respectively. Depreciation expense was $74.4 million and $76.0 million during the nine months ended September 30, 2025 and 2024, respectively.

6. BUSINESS COMBINATIONS

2025 Acquisitions

Linksys Holdings, Inc.

In 2021, we invested $160.0 million in cash for shares of the Series A Preferred Stock of Linksys for a 50.8% ownership interest in the outstanding equity of Linksys. On January 31, 2025 (“Linksys Acquisition Date”), we acquired all of the remaining outstanding Series A Preferred Stock of Linksys for $20.8 million in cash and now own 100% of the outstanding equity of Linksys. Our pre-existing equity method investment in Linksys of 50.8% ownership interest was remeasured to the fair value of $21.5 million at the Linksys Acquisition Date, which resulted in a $10.8 million gain recorded in gain (loss) from equity method investments on the condensed consolidated statements of income. Therefore, the aggregate purchase consideration for Linksys’ equity equaling the fair value of the previously owned stock and the purchase price for the remaining stock acquired was $42.3 million.

This acquisition was accounted for as a business combination using the acquisition method of accounting. Of the aggregate purchase price, $17.5 million was allocated to identifiable intangible assets acquired, and $64.7 million was allocated

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to other net assets acquired which predominantly included deferred tax asset of $45.8 million, inventory of $21.4 million, and cash of $8.8 million, offset by $11.3 million of net other assets and liabilities assumed. The excess of the fair values of the net assets acquired over the net purchase consideration was recorded as a gain on bargain purchase of $39.9 million within other income—net on the condensed consolidated statements of income. The gain on bargain purchase occurred primarily due to the recognition of the deferred tax assets. The deferred tax assets were comprised primarily of pre-acquisition federal net operating loss carryforwards with an indefinite carryforward period. In addition, we had previously recorded a deferred tax asset of $30.6 million for an outside basis difference in our investment in Linksys when it was accounted for under the equity method. As a result of the acquisition of the remaining shares, we now account for our investment in Linksys under the consolidation method, and therefore we have derecognized this deferred tax asset. The charge is included in the provision for income taxes on the condensed consolidated statements of income. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Other acquisitions

During the three months ended June 30, 2025, we completed other acquisitions for total purchase consideration of $38.3 million in cash. We have accounted for the transactions as business combinations and recorded goodwill of $21.9 million, among which $8.6 million of goodwill is expected to be deductible and $13.3 million of goodwill is not deductible for income tax purposes. Acquisition-related costs were not material and were recorded as general and administrative expense.

2024 Acquisitions

Perception Point Ltd.

On December 5, 2024, we acquired certain assets and liabilities of Perception Point Ltd., a business specializing in advanced collaboration and email security paid in cash. This acquisition was accounted for as a business combination using the acquisition method of accounting. Of the $33.7 million purchase price, $24.5 million was allocated to goodwill, $9.5 million was allocated to developed technology intangible asset, $6.5 million was allocated to customer relationships intangible asset, and $6.8 million was allocated to other net liabilities assumed, which predominantly include deferred revenue. Goodwill recorded in connection with this acquisition is primarily attributable to the assembled workforce acquired and the anticipated operational synergies. All acquired goodwill is expected to be deductible for tax purposes. Acquisition-related costs were not material and were recorded as general and administrative expense.

Next DLP Holdings Limited

On August 5, 2024 (“Next DLP Acquisition Date”), we acquired Next DLP Holdings Limited (“Next DLP”), a privately held insider risk and data loss prevention (“DLP”) company, for approximately $105.0 million in cash. We acquired Next DLP in an effort to improve our position in the standalone enterprise DLP market and strengthen our leadership in integrated DLP markets within endpoint and unified Secure Access Service Edge (“SASE”).

This acquisition was accounted for as a business combination using the acquisition method of accounting. The total purchase price was allocated to Next DLP’s identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. Of the total purchase price, $82.6 million was allocated to goodwill, $13.5 million was allocated to developed technology intangible asset, $10.5 million was allocated to customer relationships intangible asset, offset by $1.6 million of net liabilities assumed, which predominantly included deferred revenue and deferred tax liabilities. Goodwill recorded in connection with this acquisition represents the value we expect to be created through expansion into markets within our existing business, and the anticipated operational synergies, and goodwill is expected to be deductible for U.S. tax purposes. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Lacework Inc.

On August 1, 2024 (“Lacework Acquisition Date”), we acquired Lacework Inc. (“Lacework”), a privately held data-driven cloud security company, for $152.3 million in cash. We acquired Lacework with a goal of offering its Cloud-Native Application Protection Platform solution separately as well as integrated with our existing portfolio, forming a comprehensive, artificial intelligence (“AI”)-driven cloud security platform available from a single vendor, which will help customers identify, prioritize, and remediate risks and threats in complex cloud-native infrastructure from code to cloud.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The total purchase price was allocated to Lacework’s identifiable tangible and intangible assets acquired and liabilities assumed based on

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their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. Of the total purchase price, $244.4 million was allocated to deferred tax assets, $61.3 million allocation to identifiable intangible assets, and $6.2 million cash, offset by net other assets and liabilities assumed of $53.3 million, which predominantly included deferred revenue and other current liabilities. The excess of the fair values of the net assets acquired over the net purchase consideration was recorded as a gain on bargain purchase of $106.3 million within other income—net on the condensed consolidated statements of income. The gain on bargain purchase occurred primarily due to the recognition of the deferred tax assets. The deferred tax assets were comprised primarily of pre-acquisition federal net operating loss carryforwards with an indefinite carryforward period. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Of the total identified intangible assets acquired $39.5 million was developed technology, $10.0 million was backlog, $7.5 million was customer relationships and $4.3 million was trade name.

Additional acquisition-related information

The operating results of the acquired companies are included in our condensed consolidated statements of income from the respective dates of acquisition. Acquisition-related costs related to each acquisition were not material. The operating results of the acquired companies were not material in the years of acquisition. Pro forma information has not been presented, as the impact of these acquisitions, individually and in the aggregate, in each period were not material to our condensed consolidated financial statements.

7. GOODWILL AND OTHER INTANGIBLE ASSETS—Net

Goodwill

The following table presents the changes in the carrying amount of goodwill (in millions):


	Amount
Balance—December 31, 2024	$	235.4
Additions due to business combinations	21.9
Foreign currency translation adjustments	1.0
Balance—September 30, 2025	$	258.3

There were no impairments to goodwill during the nine months ended September 30, 2025 or during prior periods.

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Other Intangible Assets—Net

The following tables present other intangible assets—net (in millions, except years):


	September 30, 2025
	Weighted-Average Useful Life (in Years)	Gross		Accumulated Amortization		Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies	4.3	$	160.1	$	91.9	$	68.2
Customer relationships	5.3	67.3		38.5		28.8
Trade names	4.2	11.5		3.4		8.1
Backlog	2.5	13.7		8.6		5.1
Total other intangible assets—net		$	252.6	$	142.4	$	110.2


	December 31, 2024
	Weighted-Average Useful Life (in Years)	Gross		Accumulated Amortization		Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies	4.4	$	141.9	$	73.7	$	68.2
Customer relationships	5.5	53.9		23.0		30.9
Trade names	7.5	8.8		1.8		7.0
Backlog	2.5	13.5		4.6		8.9
Total other intangible assets—net		$	218.1	$	103.1	$	115.0

Amortization expense was $13.1 million and $5.3 million during the three months ended September 30, 2025 and 2024, respectively. Amortization expense was $38.1 million and $11.6 million during the nine months ended September 30, 2025 and 2024, respectively.

The following table summarizes estimated future amortization expense of finite-lived intangible assets—net (in millions):


	Amount
Years:
2025 (the remainder of 2025)	$	12.5
2026	37.3
2027	27.6
2028	20.0
2029	9.4
Thereafter	3.4
Total	$	110.2

8. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, plus the dilutive effects of restricted stock units (“RSUs”), stock options and performance stock units (“PSUs”). Dilutive shares of common stock are determined by applying the treasury stock method.

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A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share is (in millions, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Numerator:
Net income	$	473.9	$	539.9	$	1,347.4	$	1,219.0

Denominator:
Basic shares:
Weighted-average common stock outstanding-basic	755.5		765.0		763.1		763.7
Diluted shares:
Weighted-average common stock outstanding-basic	755.5		765.0		763.1		763.7
Effect of potentially dilutive securities:
RSUs	1.9		2.0		2.6		2.1
Stock options	3.4		4.4		4.0		4.7
PSUs	0.4		0.5		0.5		0.3
Weighted-average shares used to compute diluted net income per share	761.2		771.9		770.2		770.8
Net income per share
Basic	$	0.63	$	0.71	$	1.77	$	1.60
Diluted	$	0.62	$	0.70	$	1.75	$	1.58

The following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):


	Three Months Ended		Nine Months Ended
	September 30, 2025	September 30, 2024	September 30, 2025	September 30, 2024
RSUs	2.3	0.4	1.8	0.2
Stock options	0.8	3.1	0.6	3.3
PSUs	—	—	—	0.1
Total	3.1	3.5	2.4	3.6

9. DEBT

2026 and 2031 Senior Notes

On March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the “Senior Notes”), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the “2026 Senior Notes”) and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the “2031 Senior Notes”), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. The 2026 Senior Notes were recorded as current portion of long-term debt and the 2031 Senior Notes were recorded as long-term debt as of September 30, 2025 and both of the Senior Notes were recorded as long-term debt as of December 31, 2024, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.

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The total outstanding debt is summarized below (in millions, except percentages):


	Maturity	Coupon Rate	Effective Interest Rate	September 30, 2025		December 31, 2024
Debt
2026 Senior Notes	March 2026	1.0%	1.3%	$	500.0	$	500.0
2031 Senior Notes	March 2031	2.2%	2.3%	500.0		500.0
Total debt				1,000.0		1,000.0
Less: Unamortized discount and debt issuance costs				4.1		5.7
Less: Current portion of long-term debt				$	499.4	$	—
Total long-term debt				$	496.5	$	994.3

As of September 30, 2025 and December 31, 2024, we accrued interest payable of $0.7 million and $4.7 million, respectively, and there are no financial covenants with which we must comply. During the three months ended September 30, 2025 and 2024, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the nine months ended September 30, 2025 and 2024, we recorded $13.5 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the nine months ended September 30, 2025 and 2024, as the costs that qualified for capitalization were not material.

The total estimated fair value of the outstanding Senior Notes was approximately $939.4 million, including accrued and unpaid interest, as of September 30, 2025. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.

10. COMMITMENTS AND CONTINGENCIES

The following table summarizes our inventory purchase commitments as of September 30, 2025 (in millions):


	Total		2025		Thereafter
Inventory purchase commitments	$	732.5	$	359.5	$	373.0

Inventory Purchase Commitments—We purchase components of our inventory from certain suppliers and use several independent contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, non-cancelable and unconditional commitments. Certain of these inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to reschedule and adjust our requirements based on our business needs prior to firm orders being placed.

As of September 30, 2025, we had $732.5 million of non-cancelable inventory purchase commitments with our independent contract manufacturers. We recorded a liability for these purchase commitments for quantities in excess of our future estimated demand forecasts, consistent with the valuation of our excess and obsolete inventory. As of September 30, 2025 and December 31, 2024, the liability for these inventory purchase commitments was $35.2 million and $54.0 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets. The expense related to such accrued liability for inventory purchase commitments is recorded in cost of product revenue on the condensed consolidated statements of income. The expense related to such accrued liability for inventory purchase commitments was immaterial during the three and nine months ended September 30, 2025, and was a $27.4 million benefit and a $11.2 million cost during the three and nine months ended September 30, 2024, respectively.

Other Contractual Commitments and Open Purchase Orders—In addition to commitments with contract manufacturers, we have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. A significant portion of our reported purchase commitments consist of non-cancelable commitments. In certain instances, contractual commitments allow us the option to cancel, reschedule and adjust our

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requirements based on our business needs prior to firm orders being placed. As of September 30, 2025, we had $112.7 million in other contractual commitments having a remaining term in excess of one year that are non-cancelable.

As of September 30, 2025, we had $92.9 million in contractual commitments related to payments for operating leases.

Litigation—We are involved in disputes, litigation, and other legal actions. For lawsuits where we are the defendant, we are in the process of defending these litigation matters, and while there can be no assurances and the outcome of certain of these matters is currently not determinable and not predictable, we currently are unaware of any existing claims or proceedings that we believe are likely to have a material adverse effect on our financial position. There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation fees, costs and substantial settlement charges, and possibly subject us to damages and other penalties. In addition, the resolution of any intellectual property (“IP”) litigation may require us to make royalty payments, which could adversely affect our gross margins in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. Litigation is unpredictable and the actual liability in any such matters may be materially different from our current estimates, which could result in the need to adjust any accrued liability and record additional expenses. We accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. These accruals are generally based on a range of possible outcomes that require significant management judgment. If no amount within a range is a better estimate than any other, we accrue the minimum amount. Litigation loss contingency accruals associated with outstanding cases were not material as of September 30, 2025 and December 31, 2024.

On September 22, 2025, a securities class action was filed against us, our chief executive officer, our chief technology officer, our current chief financial officer and our former chief financial officer in the United States District Court, Northern District of California, captioned Oklahoma Firefighters Pension and Retirement System v. Fortinet, Inc., et al., Case No. 5:25-cv-08037. On October 16, 2025, a securities class action was filed against us, our chief executive Officer, our current chief financial officer and our former chief financial officer in the same court, captioned State of Rhode Island Office of the General Treasurer v. Fortinet, Inc., et al., Case No. 3:25-cv-08888. These suits are brought on behalf of an alleged class of stockholders who purchased or acquired shares of our common stock between November 8, 2024 through August 6, 2025. The complaints allege that defendants made false or misleading statements about our business, operations and prospects, including regarding the 2026 firewall refresh cycle, and purport to assert claims under Sections 10(b) and 20(a) of the Exchange Act. The time to respond to the complaints has not yet passed. We believe these cases are without merit and defendants intend to defend the suits vigorously. Based on the preliminary nature of the proceedings in these cases, the outcome of these matters remains uncertain and we cannot estimate the potential impact, if any, on its business or financial statements at this time. Accordingly, no loss accrual was recorded as of September 30, 2025 related to these litigations. On October 8, 2025, Plaintiff Jack Pittrof filed a stockholder derivative complaint against us as a nominal defendant and certain of our current and former directors and officers in the United States District Court for the Northern District of California. The complaint alleges claims based on events similar to those in the securities class action and asserts causes of action against the individual defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, and for making false and misleading statements about our business, operations, and prospects in violation of Section 10(b) of the Exchange Act. The time to respond to the complaint has not yet passed.

On March 21, 2019, we were sued by Alorica Inc. (“Alorica”) in Santa Clara County Superior Court in California. Alorica alleged breach of warranty and misrepresentation claims, which we denied. After trial, a jury returned a verdict fully in favor of us and against Alorica on October 4, 2024. Alorica has filed a notice of appeal. We believe that the ultimate outcome of this matter will not materially impact our financial position, results of operations or cash flows. However, any further legal proceedings, including Alorica’s appeal, would be subject to inherent uncertainties, and a future unfavorable ruling could occur. No loss accrual had been recorded as of September 30, 2025 or December 31, 2024 related to this litigation.

Indemnification and Other Matters—We enter into indemnification provisions in the ordinary course of business with other companies such as partners, customers, and vendors, where we agree to indemnify, hold harmless, and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party as a result of our activities, including defending against third-party claims asserting various allegations such as product defects, breach of representations or covenants, and infringement of certain IP rights, which may include patents, copyrights, trademarks or trade secrets, and to pay judgments entered on such claims. In some contracts, our exposure under these indemnification provisions is limited by the terms of the contracts to certain defined limits, such as the total amount paid by our customer under the agreement. However, certain agreements include covenants, penalties and indemnification provisions including and beyond indemnification for third-party claims of IP infringement that could potentially expose us to losses in excess of the amount received under the agreement, and in some instances to potential liability that is not contractually limited. Although from time to time there are

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FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

indemnification claims asserted against us and currently there are pending indemnification claims, to date there have been no material awards under such indemnification provisions.

Similar to other security companies and companies in other industries, we have experienced and may experience in the future, cybersecurity threats, malicious activity directed against our information technology infrastructure or unauthorized attempts to gain access to our and our customers’ sensitive information and systems. We currently are unaware of any claims or proceedings related to these types of matters that we believe are likely to have a material adverse effect on our financial position.

11. EQUITY PLANS AND SHARE REPURCHASE PROGRAM

Stock-Based Compensation Plans

We maintain the Amended and Restated Fortinet, Inc. 2009 Equity Incentive Plan (the “Amended Plan”) pursuant to which we have granted RSUs, stock options and PSUs. As of September 30, 2025, there were a total of 48.8 million shares of common stock available for grant under the Amended Plan.

Restricted Stock Units

The following table summarizes the activity and related information for RSUs for the periods presented below (in millions, except per share amounts):


	Restricted Stock Units Outstanding
	Number of Shares	Weighted-Average Grant Date Fair Value per Share
Balance—December 31, 2024	8.4	$	64.70
Granted	2.9	104.05
Forfeited	(0.7)	74.80
Vested	(2.8)	60.50
Balance—September 30, 2025	7.8	$	80.32

Stock compensation expense is recognized on a straight-line basis over the vesting period of each RSU. As of September 30, 2025, total compensation expense related to unvested RSUs granted to employees and non-employees under the Amended Plan, but not yet recognized, was $535.6 million, with a weighted-average remaining vesting period of 2.7 years.

Market/Performance-Based PSUs

We grant market/performance-based PSUs under the Amended Plan to certain of our executives. Based on the achievement of the market/performance-based vesting conditions during the performance period, the final settlement of the PSUs will range between 0% and 200% of the target shares underlying the PSUs based on the percentile ranking of our total stockholder return over one-, two-, three- and four-year periods among companies included in the S&P 500 Index. 20%, 20%, 20% and 40% of the PSUs vest over one-, two-, three- and four-year service periods, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the activity and related information for PSUs for the periods presented below (in millions, except per share amounts):


	Performance Stock Units Outstanding
	Number of Shares	Weighted-Average Grant Date Fair Value per Share
Balance—December 31, 2024	0.4	$	94.93
Granted	0.1	165.91
Forfeited	(0.1)	113.36
Vested	(0.2)	91.19
Balance—September 30, 2025	0.2	$	117.94

As of September 30, 2025, total compensation expense related to unvested PSUs that were granted to certain of our executives, but not yet recognized, was $25.6 million. This expense is expected to be amortized on a graded vesting method over a weighted-average vesting period of 2.1 years.

RSUs and PSUs settle into shares of common stock upon vesting. Upon the vesting of the RSUs and PSUs, we net-settle the RSUs and PSUs and withhold a portion of the shares to satisfy employee withholding tax requirements. The payment of the withheld taxes to the tax authorities is reflected as a financing activity within the condensed consolidated statements of cash flows.

The following summarizes the number and value of the shares withheld for employee taxes (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Shares withheld for taxes	0.3		0.3		1.0		1.2
Amount withheld for taxes	$	26.6	$	16.5	$	103.8	$	79.6

Employee Stock Options

The following table summarizes the weighted-average assumptions relating to our employee stock options:


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Expected term in years	4.5		4.5		4.5		4.5
Volatility	42.2	%	41.7	%	41.7	%	42.8	%
Risk-free interest rate	3.8	%	3.7	%	4.2	%	4.3	%
Dividend rate	—	%	—	%	—	%	—	%

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the stock option activity and related information for the periods presented below (in millions, except exercise prices and contractual life):


	Options Outstanding
	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance—December 31, 2024	8.7	$	37.81	3.1	$	493.8
Granted	0.7	105.38
Forfeited	(0.1)	72.16
Exercised	(1.8)	21.11
Balance—September 30, 2025	7.5	$	47.80
Options vested and expected to vest—September 30, 2025	7.5	$	47.80	3.1	$	290.0
Options exercisable—September 30, 2025	5.8	$	37.84	2.4	$	268.3

The aggregate intrinsic value represents the difference between the exercise price of stock options and the quoted market price of our common stock at the date of the balance sheet for all in-the-money stock options. Stock compensation expense is recognized on a straight-line basis over the vesting period of each stock option. As of September 30, 2025, total compensation expense related to unvested stock options granted to employees but not yet recognized was $52.3 million, with a weighted-average remaining vesting period of 2.6 years.

Additional information related to our stock options is summarized below (in millions, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Weighted-average fair value per share granted	$	31.84	$	29.86	$	42.39	$	27.05
Intrinsic value of options exercised	$	17.5	$	42.6	$	148.7	$	112.5
Fair value of options vested	$	5.7	$	6.4	$	20.7	$	25.0

Stock-Based Compensation Expense

Stock-based compensation expense, including stock-based compensation expense related to awards classified as liabilities, is included in costs and expenses (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Cost of product revenue	$	0.6	$	0.5	$	1.6	$	1.4
Cost of service revenue	6.9		6.3		20.4		19.0
Research and development	25.4		21.9		73.5		63.0
Sales and marketing	30.0		27.0		86.2		79.6
General and administrative	9.3		10.7		27.3		30.7
Total stock-based compensation expense	$	72.2	$	66.4	$	209.0	$	193.7

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes stock-based compensation expense, including stock-based compensation expense related to awards classified as liabilities, by award type (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
RSUs	$	60.8	$	54.8	$	177.9	$	160.8
Stock options	6.7		6.9		20.1		21.3
PSUs	4.7		4.7		11.0		11.6
Total stock-based compensation expense	$	72.2	$	66.4	$	209.0	$	193.7

Total income tax benefit associated with stock-based compensation that is recognized in the condensed consolidated statements of income is (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Income tax benefit associated with stock-based compensation	$	15.9	$	14.7	$	45.9	$	42.9

Share Repurchase Program

In August 2025, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2027, bringing the aggregate amount authorized for repurchases to $9.25 billion of our outstanding common stock through February 28, 2027. Share repurchases may be made by us from time to time in privately negotiated transactions or in open-market transactions. The Repurchase Program does not require us to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time without prior notice.

During the three months ended September 30, 2025, we repurchased 23.3 million shares of our common stock under the Repurchase Program in open-market transactions, at a weighted-average price of $78.32 per share, for an aggregate purchase price of $1.83 billion, which excludes a $17.7 million accrual related to the 1% excise tax imposed by the Inflation Reduction Act of 2022. During the nine months ended September 30, 2025, we repurchased 27.9 million shares of our common stock under the Repurchase Program in open-market transactions, at a weighted-average price of $79.88 per share, for an aggregate purchase price of $2.23 billion, which excludes a $18.5 million accrual related to the 1% excise tax imposed by the Inflation Reduction Act of 2022. As of September 30, 2025, approximately $795.9 million remained available for future share repurchases under the Repurchase Program.

12. INCOME TAXES

Our effective tax rate was 20% for the three months ended September 30, 2025, compared to an effective tax rate of 13% for the same period last year. Our effective tax rate was 18% for the nine months ended September 30, 2025, compared to an effective tax rate of 14% for the same period last year. The tax rates for the three months ended September 30, 2025 and 2024 were comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that amounted to $141.0 million and $123.6 million, respectively. The tax rate for the three months ended September 30, 2025 included a tax benefit of $11.1 million from the foreign-derived intangible income (“FDII”) deduction, and excess tax benefits from stock-based compensation expense of $9.2 million. The tax rate for the three months ended September 30, 2024 was impacted by a tax benefit of $33.1 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $9.3 million.

The tax rates for the nine months ended September 30, 2025 and 2024 were composed of U.S. federal and state taxes, withholding taxes and foreign taxes that amounted to $384.2 million and $315.0 million, respectively. The tax rate for the nine months ended September 30, 2025 included a tax provision of $30.6 million related to the derecognition of deferred tax assets from the business combination with Linksys, a tax benefit of $62.0 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $58.5 million. The tax rate for the nine months ended September 30, 2024 was impacted by a tax benefit of $84.0 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $33.8 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On July 4, 2025, H.R. 1, an Act to Provide for Reconciliation Pursuant to Title II of House Concurrent Resolution 14 (the “Act”) commonly referred to as the One Big Beautiful Bill Act, was enacted. The Act makes permanent certain elements of the Tax Cuts and Jobs Act, including immediate expensing of U.S. research and development expenditures, immediate expensing of certain eligible assets, and various modifications to the international tax framework. The income tax effects of the Act have been recognized in our provision for income taxes as of September 30, 2025. As a result of the Act, our cash paid for income taxes in 2025 could reduce by approximately $100 million to $150 million, while our GAAP effective tax rate for 2025 could increase by approximately one percentage point.

As of September 30, 2025 and December 31, 2024, unrecognized tax benefits were $86.6 million and $75.9 million, respectively. If recognized, $70.8 million of the unrecognized tax benefits as of September 30, 2025 would favorably affect our effective tax rate. It is our policy to include accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of September 30, 2025 and December 31, 2024, accrued interest and penalties were $11.6 million and $8.8 million, respectively.

We file income tax returns in the U.S. federal jurisdiction and in various U.S. state and foreign jurisdictions. Generally, we are no longer subject to examination by U.S federal income tax authorities for tax years prior to 2020 and by U.S. state and foreign tax authorities in our significant jurisdictions for tax years prior to 2016. We currently have ongoing tax audits in the United Kingdom, Canada, Germany and several other foreign jurisdictions. The focus of these audits is the inter-company profit allocation.

On January 4, 2022, the U.S. Treasury published another tranche of final regulations regarding the foreign tax credit. These final regulations impose new requirements that a foreign tax must meet in order to be creditable against U.S. income taxes, and generally apply to tax years beginning on or after December 28, 2021. On July 26, 2022, the U.S. Treasury released corrections to the final regulations. On July 21, 2023, the Internal Revenue Service (“IRS”) released a notice that suspended the application of significant portions of the final regulations regarding the foreign tax credit for tax years 2022 and 2023. The notice released in July 2023 favorably impacted our ability to claim foreign tax credits in the United States for certain taxes imposed by certain foreign jurisdictions. On December 11, 2023, the IRS released a notice that extended the suspension of significant portions of the final regulations beyond December 31, 2023, until further guidance is issued.

In December 2021, the Organisation for Economic Co-operation and Development (the “OECD”) enacted model rules for a new global minimum tax framework (“BEPS Pillar Two”), and various governments around the world have enacted, or are in the process of enacting, legislation on this. The OECD continues to release additional guidance on these rules. Based on the enacted laws, BEPS Pillar Two has no impact to our effective tax rate or cash flows for the nine months ended September 30, 2025. We will continue to evaluate the impact of these tax law changes on future reporting periods.

13. DEFINED CONTRIBUTION PLANS

Our tax-deferred savings plan under our 401(k) Plan permits participating U.S. employees to contribute a portion of their pre-tax or after-tax earnings. In Canada, we have a Group Registered Retirement Savings Plan Program (the “RRSP”), which permits participants to make pre-tax contributions. Our board of directors approved 50% matching contributions on employee contributions up to 4% of each employee’s eligible earnings. Our matching contributions to our 401(k) Plan and the RRSP for the three months ended September 30, 2025 and 2024 were $5.0 million and $4.6 million, respectively. Our matching contributions to our 401(k) Plan and the RRSP for the nine months ended September 30, 2025 and 2024 were $15.7 million and $15.2 million, respectively.

14. SEGMENT INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer. Our chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. We have one business activity, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, we have determined that we have one operating segment, and therefore, one reportable segment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table reflects certain financial data for our reportable segment (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Total revenue	$	1,724.9	$	1,508.1	$	4,894.6	$	4,295.7
Less:
Cost of product revenue	180.7		136.1		496.5		474.0
Cost of service revenue	151.0		127.3		443.2		369.1
Research and development expense	202.4		187.3		610.5		525.7
Other sales and marketing expense (1)	469.2		416.3		1,392.6		1,232.1
Commission expense	114.3		99.6		325.6		286.2
General and administrative expense	61.4		71.7		176.1		182.7
Other segment items (2)	48.7		151.3		191.6		190.3
Provision for income taxes	120.7		81.2		294.3		197.2
Net income	$	473.9	$	539.9	$	1,347.4	$	1,219.0

(1) Excludes commission expense.

(2) The following table presents other segment items (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Gain on intellectual property matters	$	1.4	$	1.1	$	9.0	$	3.4
Interest income	40.7		42.4		130.0		112.9
Interest expense	(6.2)		(5.0)		(15.7)		(15.1)
Other income—net	13.0		118.1		58.0		113.0
Gain (loss) from equity method investments	(0.2)		(5.3)		10.3		(23.9)
Total other segment items	$	48.7	$	151.3	$	191.6	$	190.3

The following table presents other segment information (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Significant non-cash items:
Stock‐based compensation expense	$	71.8	$	65.9	$	207.0	$	192.1
Depreciation and amortization expense	38.4		29.8		112.5		87.6

Total assets	$	9,361.3	$	8,852.0	$	9,361.3	$	8,852.0
Purchases of property and equipment	$	87.7	$	36.3	$	322.0	$	281.3

Revenue by geographic region is based on the billing address of our customers. The following tables set forth revenue and property and equipment—net by geographic region (in millions):


	Three Months Ended				Nine Months Ended
Revenue	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Americas:
United States	$	486.6	$	455.1	$	1,415.0	$	1,297.9
Other Americas	193.9		168.9		554.1		478.4
Total Americas	680.5		624.0		1,969.1		1,776.3
Europe, Middle East and Africa (“EMEA”)	713.7		599.3		2,009.2		1,703.9
Asia Pacific (“APAC”)	330.7		284.8		916.3		815.5
Total revenue	$	1,724.9	$	1,508.1	$	4,894.6	$	4,295.7


Property and Equipment—net	September 30, 2025		December 31, 2024
Americas:
United States	$	996.2	$	993.5
Canada	334.3		216.8
Latin America	5.3		4.4
Total Americas	1,335.8		1,214.7
EMEA	199.7		73.3
APAC	69.7		61.5
Total property and equipment—net	$	1,605.2	$	1,349.5

The following distributors accounted for 10% or more of our revenue:


	Three Months Ended				Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Distributor A	27	%	27	%	27	%	29	%
Distributor B	14	%	15	%	14	%	15	%
Distributor C	12	%	12	%	12	%	13	%

The following distributors accounted for 10% or more of net accounts receivable:


	September 30, 2025		December 31, 2024
Distributor A	25	%	31	%
Distributor B	11	%	14	%
Distributor C	12	%	10	%

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, among other things, statements concerning our expectations regarding:

•continued growth and market share gains;

•variability in sales in certain product and service categories from year to year and between quarters;

•expected impact of sales from certain products and services;

•increasing or decreasing inflation or stagflation, and changing interest rates in many geographies and changes in currency exchange rates and currency regulations;

•competition in our markets;

•macroeconomic, geopolitical factors and other disruption on our manufacturing or sales, including tariffs or other trade disruptions, public health issues, wars, natural disasters and economic growth;

•government regulation and other policies;

•drivers of long-term growth and operating leverage, such as pricing of our products and services, sales productivity, pipeline and capacity, functionality, value and technology improvements in our product and service offerings;

•growing our solution sales through channel partners to businesses, service providers and government organizations, our ability to execute these sales and the complexity of providing solutions to all segments (including the increased competition and unpredictability of timing associated with sales to larger enterprises), the impact of sales to these organizations on our long-term growth, expansion and operating results, and the effectiveness of our sales organization;

•our ability to successfully anticipate market changes, including those related to cloud-based and AI solutions and to sell, support and meet service level agreements related to cloud-based solutions;

•growth expectations for the secure networking market;

•supply chain constraints, component availability and other factors affecting our manufacturing capacity, delivery, cost and inventory management;

•forecasts of future demand and targeted inventory levels, including changing market drivers and demands;

•the effect of backlog from current or prior quarters, including its effect on growth of in-quarter billings and revenue;

•our ability to hire properly qualified and effective sales, support and engineering employees;

•risks and expectations related to acquisitions and equity interests in private and public companies, including integration issues related to go-to-market plans, product plans, employees of such companies, controls and processes and the acquired technology, and risks of negative impact by such acquisitions and equity investments on our financial results;

•trends in revenue, cost of revenue and gross margin, including expectations regarding product revenue, service revenue and inventory related charges;

•trends in our operating expense, including sales and marketing expense, research and development expense, general and administrative expense, and expectations regarding these expenses;

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•expected impact of plans and strategy for the acceleration of our data center footprint and our PoPs deployment;

•expectations regarding our gross margins and operating expenses for 2025;

•expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;

•uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;

•expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;

•estimates of a range of 2025 spending on capital expenditures;

•expansions, development, improvements, operating, subleasing and other real property holdings activities;

•expected outcomes and liabilities in litigation;

•our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months;

•other statements regarding our future operations, financial condition and prospects and business strategies; and

•adoption and impact of new accounting standards.

These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Business Overview

Fortinet is a leader in cybersecurity, driving the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations (“SecOps”). As of September 30, 2025, our end-customers were located in over 100 countries and included enterprises across a wide variety of market verticals, including financial services, retail, healthcare and operational technology (“OT”) market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California, our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of September 30, 2025, we held 1,027 U.S. patents and 1,360 global patents, including 307 AI-related patents. We have been recognized in over 140 enterprise analyst reports demonstrating both our vision and execution across security and networking products.

Our competitive differentiation lies in our core technologies, which together provide performance, security, flexibility and integration across diverse environments.

•FortiOS—FortiOS enables the convergence of security and networking to enforce consistent security policies across form factors and edges. As the foundation of the Fortinet Security Fabric, FortiOS empowers organizations to unify management and analytics for comprehensive network visibility and control at scale. To further validate our strategy, FortiOS has been recognized across five Gartner Magic Quadrants, including Firewall, Software-Defined Wide-Area

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Network (“SD-WAN”), Security Service Edge (“SSE”), SASE Platforms and Wired and Wireless Local Area Network (“LAN”).

•FortiASIC—Our Application-Specific Integrated Circuit (“ASIC”)-based SPUs increase the speed, scale, efficiency and value of our solutions while improving user experience, reducing footprint and power requirements. From branch and campus to data center solutions, SPU-powered Fortinet appliances deliver superior Security Compute Ratings versus industry alternatives.

•FortiCloud—Our organically built global cloud infrastructure provides customers with global reach, flexible connectivity, and cost savings. FortiCloud is our private cloud software as a service (“SaaS”) platform, powered by FortiStack, and leveraging software and hardware to optimize and secure all layers.

•FortiAI—FortiAI includes FortiAI-Protect, which defends against emerging AI-driven threats and ensures secure AI usage; FortiAI-Assist, our generative AI product with agentic AI, automates Security Operations Center (“SOC”) and Network Operations Center (“NOC”) operations; and FortiAI-SecureAI, which safeguards AI infrastructure and prevents data leakage into large language models. FortiAI helps security teams make faster, educated decisions while integrating into products like FortiAnalyzer, FortiManager, FortiSIEM, and FortiSOAR to streamline threat investigation, response, and automation.

•FortiEndpoint—FortiEndpoint converges secure connectivity, endpoint protection and advanced capabilities like endpoint detection and response and extended detection and response (“XDR”), into a single agent. It simplifies management and enhances visibility while reducing costs and complexity. The solution gives IT teams the visibility and control they need, while security teams benefit from automated threat detection and response. This minimizes the need for manual intervention and provides faster remediation of threats across all environments.

•OT Security—The Fortinet Security Fabric enables security for converged IT/OT ecosystems. It also provides an OT Security Platform with features and products to extend Security Fabric capabilities to OT networks in many areas, including factories, plants, remote locations and ships. To help alleviate security risks across the organization, we have continued to enhance our OT Security Platform offerings. These innovations range from edge products to NOC and SOC tools and services to provide effective and efficient networking and cybersecurity performance and operation.

These competitive differentiators provide networking and security professionals with a comprehensive cyber security platform comprised of over 50 products across three solution pillars:

•Secure Networking—Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or SaaS solutions. When delivered through our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. Our network firewall offerings consist of a FortiGate data center, hyperscale and distributed firewalls, as well as encrypted applications (secure sockets layer inspection, virtual private network and Internet Protocol Security connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of our customers’ security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G/LTE and remote ethernet extenders to connect and secure any branch environment. Our Secure Connectivity solution includes FortiSwitch secure ethernet switches, FortiAP wireless local area network access points and FortiExtender 5G connectivity gateways.

•Unified Secure Access Service Edge (SASE)—As applications move to the cloud and hybrid workforce is now the norm, enabling secure access for users with zero trust framework becomes important. The Fortinet Unified SASE solution includes a single-vendor SASE solution that includes firewall, SD-WAN, secure web gateway, cloud access services broker, DLP and zero trust network access (“ZTNA”) to deliver flexible secure access for all users. We are one of the few vendors to deliver consistent convergence and AI-powered security across Secure SD-WAN and SSE to enable a single-vendor SASE framework with a cloud-centric architecture powered by FortiOS. Our global and scalable cloud network includes over 170 PoPs to deliver the seamless secure access experience. Given this, we believe we are well positioned to support customers expanding from SD-WAN to a single-vendor SASE platform. Additionally, we offer a full suite of comprehensive, integrated cloud security solutions that enable customers to secure their applications from code to cloud. Our solutions include application security that includes our web application firewalls, cloud network security with virtualized firewalls and cloud-native firewalls, cloud-native application protection and code security. We deliver a holistic approach to cloud security, offering a single unified platform, consolidating protection across multiple disparate tools, including coding, deploying, and running

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applications across hybrid and multi-clouds. Additionally, we also offer flexible consumption licensing programs that enable organizations to dynamically optimize their cloud security needs and investments as well as readily meet their cloud minimum spend commitment obligations with Cloud Service Providers. We continue to develop all the core SASE capabilities in a single operating system, FortiOS, including Next-Gen Firewall, SD-WAN, ZTNA, secure web gateway, cloud access security broker, and DLP. This native integration of our Next-Gen Firewall, SD-WAN, and SASE has become the New-Generation SASE Firewall.

•AI-Driven Security Operations (SecOps)—Our AI-Driven SecOps portfolio provides a comprehensive suite of cybersecurity solutions that identify, protect, detect, respond and recover from threats, all integrated within the Fortinet Security Fabric. At the core is FortiAnalyzer, which serves as the central SOC platform with its unified data lake that provides built-in Security information and event management (“SIEM”), Security, orchestration, automation, and response (“SOAR”), XDR and threat intelligence, enabling centralized visibility, analytics and automation with complete control. FortiSIEM delivers robust security information and event management for more advanced SOC requirements, while FortiSOAR enables automated orchestration and playbook-driven response. This solution set also includes FortiEDR, FortiXDR, FortiNDR, FortiSandbox, FortiDeceptor, FortiDLP and FortiRecon, helping organizations achieve defense in depth, ensuring attackers face multiple layers of detection and mitigation across endpoints, networks, and applications. To bolster their security posture, organizations contending with staff shortages can tap into FortiGuard services, including SOC-as-a-Service, Managed detection and response, Security Posture Assessment and Incident Response. Finally, FortiAI generative AI assistance streamlines operations, helping security teams stay ahead of an ever-evolving threat landscape.

FortiGuard Labs is our cybersecurity threat intelligence and research organization comprised of experienced threat hunters, researchers, analysts, engineers and data scientists who develop and utilize Machine Learning (“ML”) and AI technologies to provide timely protection updates and actionable threat intelligence for the benefit of our customers. Using millions of global network sensors, FortiGuard Labs monitors the worldwide attack surface and employs AI to mine that data for new threats.

FortiGuard and Other Security Services are a suite of AI-powered security capabilities that are natively integrated as part of the Fortinet Security Fabric to deliver coordinated detection and enforcement across the entire attack surface. The portfolio consists of FortiGuard application security services, content security services, device security services, NOC/SOC security services and web security services.

FortiCare Technical Support Service is a per-device technical support service, which provides customers access to experts to ensure efficient and effective operations and maintenance of their Fortinet capabilities. Global technical support is offered 24x7 with flexible add-ons, including enhanced service-level agreements and priority hardware replacement through in-country and local depots. Organizations have the flexibility to procure different levels of service for different devices based on their availability needs. We offer three per-device support options tailored to the needs of our enterprise customers: FortiCare Elite, FortiCare Premium and FortiCare Essential. The FortiCare Elite service aims to provide a 15-minute response time for key product families.

In addition to FortiCare device level services, Advanced Support service options are available per account. These services are available for regional account support in three options: Core, Pro and Pro Plus, and can be available or provided on a global basis at the Pro and Pro Plus levels. Advanced Support brings support directly to each account, helping account holders to make their operations more effective and to plan and manage their solution lifecycle.

Additionally, we are committed to addressing the cybersecurity skills shortage through training and certification programs for customers, partners and employees. The Fortinet Training Institute’s ecosystem of public and private partnerships around the world extend to industry, academia, government and nonprofits to ensure we are reaching and increasing access of our cybersecurity certifications and training to all populations. The Fortinet Training Institute has issued approximately two million certifications to date.

Financial Highlights

•Total revenue was $1.72 billion and $4.89 billion during the three and nine months ended September 30, 2025, an increase of 14% in each period, compared to $1.51 billion and $4.30 billion in the same periods last year. Product revenue was $559.3 million and $1.53 billion during the three and nine months ended September 30, 2025, an increase of 18% and 14%, respectively, compared to $473.9 million and $1.33 billion in the same periods last year. Service revenue was $1.17 billion and $3.37 billion during the three and nine months ended September 30, 2025, an increase of 13% and 14%, respectively, compared to $1.03 billion and $2.96 billion in the same periods last year.

•Total gross profit was $1.39 billion and $3.95 billion during the three and nine months ended September 30, 2025, an increase of 12% and 15%, respectively, compared to $1.24 billion and $3.45 billion in the same periods last year.

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•Total gross margin was 80.8% during the three and nine months ended September 30, 2025, a decrease of 1.7 percentage points and an increase of 0.4 percentage points, respectively, compared to 82.5% and 80.4% in the same periods last year.

•Operating income was $547.3 million and $1.46 billion during the three and nine months ended September 30, 2025, an increase of 16% and 19%, respectively, compared to $470.9 million and $1.23 billion in the same periods last year.

•Operating margin was 31.7% and 29.8% during the three and nine months ended September 30, 2025, an increase of 0.5 percentage points and 1.2 percentage points, respectively, compared to 31.2% and 28.6% in the same periods last year.

•Cash, cash equivalents, short-term and long-term investments were $3.41 billion as of September 30, 2025.

•Deferred revenue was $6.65 billion, including short-term deferred revenue of $3.46 billion, as of September 30, 2025.

•Cash flows from operating activities were $1.97 billion during the nine months ended September 30, 2025, an increase of $189.9 million, or 11%, compared to the same period last year.

Revenue continues to be diversified globally, which remains a key strength of our business. During the three months ended September 30, 2025, the EMEA region, the Americas region and the APAC region contributed 41%, 40% and 19% of our total revenue, respectively, and revenue grew 19%, 9% and 16% in these regions compared to the same period last year, respectively. During the nine months ended September 30, 2025, EMEA, the Americas and APAC regions contributed 41%, 40% and 19% of our total revenue, respectively, and revenue grew by 18%, 11% and 12% in these regions compared to the same period last year, respectively.

Product revenue increased 18% and 14% during the three and nine months ended September 30, 2025, respectively, compared to the same periods last year. We experienced product revenue growth across our hardware products and software licensing, which mainly benefited from growth in secure networking hardware products and term licenses. We expect our product revenue to continue to grow for the remainder of 2025.

Service revenue growth during the three and nine months ended September 30, 2025 was 13% and 14%, respectively, as compared to the same periods last year, primarily driven by the strength of our security subscription revenue, which grew 13% and 15%, respectively. The increase was primarily due to the recognition of service revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and strength in unified SASE and SecOps. We expect our service revenue to continue to grow for the remainder of 2025.

Our billings were diversified on a geographic basis. During the three months ended September 30, 2025, six countries represented approximately 50% of our billings and the remaining approximately 50% in the aggregate were from over 100 countries that each individually contributed less than 3% of our billings.

Total gross margin decreased 1.7 percentage points during the three months ended September 30, 2025 compared to the same period last year, primarily driven by reduced benefit from net release of inventory related reserves and increased cloud service costs. Total gross margin increased 0.4 percentage points during the nine months ended September 30, 2025 compared to the same period last year, primarily driven by increased product gross margin benefiting from lower impact of inventory reserves in comparison to the nine months ended September 30, 2024. Our overall gross margin for the full year of 2025 will be impacted by service and product revenue mix and their respective gross margins. We do not expect our product gross margin to significantly change for the full year 2025 as compared to 2024. We expect our service gross margin to decrease for the full year of 2025 compared to 2024, as we expand our data center footprint and colocation and cloud hosting capacity to support the growth in our unified SASE and SecOps offerings. We currently do not expect the U.S. tariffs to have a meaningful impact on our gross margin. If tariffs increase in the future, we expect any resulting impact on our gross margin to mostly be on our hardware sales to U.S. customers.

Operating expenses as a percentage of revenue decreased 2.3 and 0.8 percentage points during the three and nine months ended September 30, 2025, respectively, compared to the same periods last year, mainly because our revenue growth outpaced our personnel costs growth. Headcount increased to 15,015 employees as of September 30, 2025, a 7% increase compared to 13,986 as of September 30, 2024.

Operating margin increased 0.5 and 1.2 percentage points during the three and nine months ended September 30, 2025, respectively, driven by revenue growth exceeding expense growth, resulting in improved operating leverage. For the full year 2025, we expect operating margin to be relatively consistent to 2024. Total revenue is expected to be higher in 2025 compared

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to the prior year, while our expenses have also increased due to headcount investments in sales and marketing, product development and the continued investments in data centers and real estate. In addition, our operating expenses have increased compared to 2024 and we expect that trend to continue in part due to a weaker U.S. dollar compared to many foreign currencies, as a portion of our expenses are incurred and paid in currencies other than the U.S. dollar.

Impact of Macroeconomic and Geopolitical Developments

Our overall performance depends in part on worldwide economic and geopolitical conditions, such as trade policies and tariffs, GDP growth or contraction (both domestically and internationally), geopolitical instability and uncertainty, the war in Ukraine or tensions between China and Taiwan, and their impact on customer behavior. Worsening economic conditions, including tariffs, inflation, changing interest rates and other trade disruptions, slower growth, any recession, fluctuations in foreign exchange rates and other changes in economic conditions, may result in decreased sales productivity, lower growth and adversely affect our results of operations and financial performance. We have seen, and could continue to see, certain impacts on our business, results of operations, financial condition, cash flows, liquidity and capital and financial resources such as longer sales cycles, delayed purchases and increased commitments with certain suppliers and increased inventory and inventory purchase commitment reserves. For example, earlier this year the United States announced tariffs on imported goods from most countries, some of which have been temporarily suspended or adjusted from time to time. U.S. tariffs, and any new or additional retaliatory tariffs that could be imposed by other countries in response to such U.S. tariffs could have a material adverse impact on global trade, supply chains worldwide, and other worldwide economic and geopolitical conditions, which could increase our product costs for the remainder of 2025 and beyond, and also affect customer sentiment in deciding whether to purchase our products. We continue to monitor the impact of tariffs on our business.

Worsening economic conditions may have a material negative impact on our results in future periods and may negatively impact our billings, revenue and costs, and may decrease growth and profitability. The extent of the impact of economic conditions on our operational and financial performance will depend on ongoing developments, including those discussed above and others identified in Part II, Item 1A “Risk Factors” in this Form 10-Q. Given the dynamic nature of these circumstances, the full impact of worsening economic conditions on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources cannot be reasonably estimated at this time.

Business Model

We typically sell our security solutions to distributors that sell to networking security focused resellers and to certain service providers and managed security service providers (“MSSPs”), who, in turn, sell to end-customers or use our products and services to provide hosted solutions to other enterprises. At times, we also sell directly to enterprise customers, service providers, systems integrators and large enterprises. We also sell our software licenses and cloud delivered services via different cloud service provider platforms, both directly and through our channel partners. Our end-customers are located in over 100 countries and include small, medium and large enterprises and government organizations across a wide range of industries, including financial services, government, healthcare, manufacturing, retail, technology and telecommunications. An end-customer deployment may involve as few as one or as many as thousands of secure networking, unified SASE and security operations technology products or users, depending on the end-customer’s size and security requirements.

Our customers purchase our hardware products, software licenses, SaaS subscriptions and cloud-delivered solutions, including our FortiGuard security subscriptions and FortiCare technical support services. Depending on the solution, these may be sold in a bundle or standalone as part of a solution sale. We generally invoice at the time of our sale for the total price of the products and services. Standard payment terms are generally no more than 60 days, though we may offer extended payment terms to certain distributors or large enterprises.

We offer our products hosted in our own data centers, PoPs, and through colocations and major cloud service providers, including Amazon Web Services, Microsoft Azure and Google Cloud.

Key Metrics

We monitor several key metrics, including the key financial metrics set forth below, in order to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The following table summarizes revenue, deferred revenue, billings (non-GAAP), net cash provided by operating activities, and free cash flow (non-GAAP). We discuss revenue below under “Results of Operations,” and we discuss net cash

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provided by operating activities below under “—Liquidity and Capital Resources.” Deferred revenue, billings (non-GAAP), and free cash flow (non-GAAP) are discussed immediately below the following table:


	Three Months Ended Or As Of
	September 30, 2025		September 30, 2024
	(in millions)
Revenue	$	1,724.9	$	1,508.1
Deferred revenue	$	6,650.4	$	6,011.7
Billings (non-GAAP)	$	1,807.7	$	1,582.2
Net cash provided by operating activities	$	655.2	$	608.1
Free cash flow (non-GAAP)	$	567.5	$	571.8

Deferred revenue. Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue. The majority of our deferred revenue balance consists of the unrecognized portion of service revenue from FortiGuard and other security subscriptions and FortiCare technical support service contracts, which is recognized as revenue ratably over the service term. We monitor our deferred revenue balance, short-term and total deferred revenue growth and the mix of short-term and long-term deferred revenue because deferred revenue represents a significant portion of free cash flow and of revenue to be recognized in future periods. Deferred revenue was $6.65 billion as of September 30, 2025, an increase of $289.5 million, or 5%, from December 31, 2024. Short-term deferred revenue was $3.46 billion as of September 30, 2025, an increase of $184.3 million, or 6%, from December 31, 2024.

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combinations during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue, which is an important indicator of the health and viability of our business and cash flows. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security subscription and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue. Total billings were $1.81 billion for the three months ended September 30, 2025, an increase of 14% compared to $1.58 billion in the same period last year.

A reconciliation of revenue, the most directly comparable financial measure calculated and presented in accordance with GAAP, to billings is provided below:


	Three Months Ended
	September 30, 2025		September 30, 2024
	(in millions)
Billings:
Revenue	$	1,724.9	$	1,508.1
Add: Change in deferred revenue	82.8		115.5
Less: Deferred revenue balance acquired in business combinations	—		(41.4)
Total billings (non-GAAP)	$	1,807.7	$	1,582.2

Free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus purchases of property and equipment and excluding any significant non-recurring items. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes cash flows from significant non-recurring items, investing activities other than capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the condensed consolidated statements of cash flows and under “Liquidity and Capital Resources” and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all

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of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow is provided below:


	Three Months Ended
	September 30, 2025		September 30, 2024
	(in millions)
Free Cash Flow:
Net cash provided by operating activities	$	655.2	$	608.1
Less: Purchases of property and equipment	(87.7)		(36.3)

Free cash flow (non-GAAP)	$	567.5	$	571.8
Net cash used in investing activities	$	(175.8)	$	(327.1)
Net cash provided by (used in) financing activities	$	(1,851.9)	$	3.0

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, cost of revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

There were no material changes to our critical accounting policies and estimates as of and for the nine months ended September 30, 2025, as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K filed with the SEC on February 21, 2025 (the “Form 10-K”).

See Note 1 of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements.

Results of Operations

Three Months Ended September 30, 2025 and 2024

Revenue


	Three Months Ended
	September 30, 2025				September 30, 2024
	Amount		% of Revenue		Amount		% of Revenue		Change		% Change
	(in millions, except percentages)
Revenue:
Product	$	559.3	32	%	$	473.9	31	%	$	85.4	18	%
Service	1,165.6		68		1,034.2		69		131.4		13
Total revenue	$	1,724.9	100	%	$	1,508.1	100	%	$	216.8	14	%
Revenue by geography:
Americas	$	680.5	40	%	$	624.0	41	%	$	56.5	9	%
EMEA	713.7		41		599.3		40		114.4		19
APAC	330.7		19		284.8		19		45.9		16
Total revenue	$	1,724.9	100	%	$	1,508.1	100	%	$	216.8	14	%
Percentages have been rounded for presentation purposes and may differ from unrounded results.

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Total revenue increased $216.8 million, or 14%, during the three months ended September 30, 2025 compared to the same period last year. We continued to experience diversification of revenue geographically, and across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Product revenue increased $85.4 million, or 18%, during the three months ended September 30, 2025 compared to the same period last year. We experienced product revenue growth across our hardware products and software licensing, mainly driven by growth in secure networking hardware products and term licenses.

Service revenue increased $131.4 million, or 13%, during the three months ended September 30, 2025 compared to the same period last year. Security subscription revenue increased $76.2 million, or 13%, and technical support and other services revenue increased $55.2 million, or 13%, during the three months ended September 30, 2025 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps.

Of the service revenue recognized during the three months ended September 30, 2025, 90% was included in the deferred revenue balance as of June 30, 2025. Of the service revenue recognized during the three months ended September 30, 2024, 88% was included in the deferred revenue balance as of June 30, 2024.

Cost of revenue and gross margin


	Three Months Ended
	September 30, 2025			September 30, 2024			Change		% Change
	(in millions, except percentages)
Cost of revenue:
Product	$	180.7		$	136.1		$	44.6	33	%
Service	151.0			127.3			23.7		19
Total cost of revenue	$	331.7		$	263.4		$	68.3	26	%
Gross margin (%):
Product	67.7		%	71.3		%
Service	87.0			87.7
Total gross margin	80.8		%	82.5		%

Total gross margin decreased 1.7 percentage points during the three months ended September 30, 2025 compared to the same period last year, primarily driven by decreased product and service gross margins.

Product gross margin decreased 3.6 percentage points during the three months ended September 30, 2025 compared to the same period last year, primarily due to reduced benefit from net release of inventory related reserves. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs, and costs of materials used in production.

Service gross margin decreased 0.7 percentage points during the three months ended September 30, 2025 compared to the same period last year, primarily driven by an increase in cloud service costs as a result of our acquisitions and investment in data centers and related infrastructure, partially offset by service revenue growth outpacing labor, replacement, and repair costs increase. Cost of service revenue was comprised primarily of personnel-related costs, replacement and repair costs, cloud service costs from owned data centers, colocation providers and cloud service providers, infrastructure depreciation and related operating costs, software and delivery costs, and facility-related costs.

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Operating expenses


	Three Months Ended								Change		% Change
	September 30, 2025				September 30, 2024
	Amount		% of Revenue		Amount		% of Revenue
	(in millions, except percentages)
Operating expenses:
Research and development	$	202.4	12	%	$	187.3	12	%	$	15.1	8	%
Sales and marketing	583.5		34		515.9		34		67.6		13
General and administrative	61.4		4		71.7		5		(10.3)		(14)
Gain on intellectual property matters	(1.4)		—		(1.1)		—		(0.3)		27
Total operating expenses	$	845.9	49	%	$	773.8	51	%	$	72.1	9	%
Percentages have been rounded for presentation purposes and may differ from unrounded results.

Research and development

Research and development expense increased $15.1 million, or 8%, during the three months ended September 30, 2025 compared to the same period last year, primarily due to an increase of $12.1 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products and the impact of the recent acquisitions. In addition, non-personnel-related product development costs increased $4.0 million. We currently intend to continue investing in our research and development organization, and expect research and development expense to increase in absolute dollars year over year during the remainder of 2025.

Sales and marketing

Sales and marketing expense increased $67.6 million, or 13%, during the three months ended September 30, 2025 compared to the same period last year, primarily due to an increase of $53.6 million in personnel-related costs, an increase of $5.6 million in marketing program and related expenses, an increase of $4.1 million in amortization expense of certain intangible assets and unfavorable impact of foreign currency fluctuations. We currently intend to continue to make investments in sales and marketing resources, which are critical to support our future growth, and expect our sales and marketing expense to increase in absolute dollars year over year during the remainder of 2025.

General and administrative

General and administrative expense decreased $10.3 million, or 14%, during the three months ended September 30, 2025 compared to the same period last year, primarily due to a decrease of $7.6 million in legal related fees and other professional services fees and a decrease of $1.3 million in personnel-related costs. We expect our general and administrative expense to be relatively consistent in absolute dollars year over year during the remainder of 2025.

Operating income and margin

We generated operating income of $547.3 million during the three months ended September 30, 2025, an increase of $76.4 million, or 16%, compared to $470.9 million in the same period last year. Operating margin was 31.7% during the three months ended September 30, 2025, compared to 31.2% in the same period last year. The 0.5 percentage points increase in operating margin was primarily due to 1.2, 0.6 and 0.4 percentage points decreases in general and administrative expense, research and development expense and sales and marketing expense as a percentage of revenue, respectively, partially offset by 1.7 percentage points decrease in gross margin.

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Interest income, interest expense and other income—net


	Three Months Ended
	September 30, 2025		September 30, 2024		Change		% Change
	(in millions, except percentages)
Interest income	$	40.7	$	42.4	$	(1.7)	(4)	%
Interest expense	$	(6.2)	$	(5.0)	$	(1.2)	24	%

Other income—net	$	13.0	$	118.1	$	(105.1)	(89)	%

Interest income and interest expense remained comparatively flat during the three months ended September 30, 2025 compared to the same period last year. Other income—net decreased $105.1 million during the three months ended September 30, 2025 compared to the same period last year, primarily due to a gain on bargain purchase of $106.3 million during the three months ended September 30, 2024 related to our acquisition of Lacework.

Provision for income taxes


	Three Months Ended						Change		% Change
	September 30, 2025			September 30, 2024
	(in millions, except percentages)
Provision for income taxes	$	120.7		$	81.2		$	39.5	49	%
Effective tax rate (%)	20		%	13		%

Our effective tax rate was 20% for the three months ended September 30, 2025 compared to an effective tax rate of 13% for the same period last year. The provision for income taxes for the three months ended September 30, 2025 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes totaling $141.0 million, which was favorably affected by a tax benefit of $11.1 million from the foreign-derived intangible income deduction (the “FDII deduction”) and excess tax benefits from stock-based compensation expense of $9.2 million.

The provision for income taxes for the three months ended September 30, 2024 was comprised of U.S. federal and state taxes, withholding taxes, and foreign taxes totaling $123.6 million, which were favorably affected by a tax benefit of $33.1 million from the FDII deduction and excess tax benefits from stock-based compensation expense of $9.3 million.

On July 4, 2025, H.R. 1, the Act commonly referred to as the One Big Beautiful Bill Act, was enacted. The Act makes permanent certain elements of the Tax Cuts and Jobs Act, including immediate expensing of U.S. research and development expenditures, immediate expensing of certain eligible assets, and various modifications to the international tax framework. The income tax effects of the Act have been recognized in our provision for income taxes as of September 30, 2025. As a result of the Act, our cash paid for income taxes in 2025 could reduce by approximately $100 million to $150 million, while our GAAP effective tax rate for 2025 could increase by approximately one percentage point.

Loss from equity method investments


	Three Months Ended				Change		% Change
	September 30, 2025		September 30, 2024

	(in millions, except percentages)
Loss from equity method investments	$	(0.2)	$	(5.3)	$	5.1	(96)	%

Loss from equity method investments decreased $5.1 million during the three months ended September 30, 2025 compared to the same period last year which included a $5.2 million loss due to our proportionate share of Linksys’ financial results including our share of the amortization of the basis differences during the three months ended September 30, 2024.

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Nine Months Ended September 30, 2025 and 2024

Revenue


	Nine Months Ended
	September 30, 2025				September 30, 2024
	Amount		% of Revenue		Amount		% of Revenue		Change		% Change
	(in millions, except percentages)
Revenue:
Product	$	1,527.3	31	%	$	1,334.7	31	%	$	192.6	14	%
Service	3,367.3		69		2,961.0		69		406.3		14
Total revenue	$	4,894.6	100	%	$	4,295.7	100	%	$	598.9	14	%
Revenue by geography:
Americas	$	1,969.1	40	%	$	1,776.3	41	%	$	192.8	11	%
EMEA	2,009.2		41		1,703.9		40		305.3		18
APAC	916.3		19		815.5		19		100.8		12
Total revenue	$	4,894.6	100	%	$	4,295.7	100	%	$	598.9	14	%

Total revenue increased $598.9 million, or 14%, during the nine months ended September 30, 2025 compared to the same period last year. We continued to experience diversification of revenue geographically, and across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Product revenue increased $192.6 million, or 14%, during the nine months ended September 30, 2025 compared to the same period last year. We experienced product revenue growth across our hardware products and software licensing, mainly driven by growth in secure networking hardware products and term licenses.

Service revenue increased $406.3 million, or 14%, during the nine months ended September 30, 2025 compared to the same period last year. Security subscription revenue increased $248.1 million, or 15%, and technical support and other services revenue increased $158.2 million, or 12%, during the nine months ended September 30, 2025 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps.

Of the service revenue recognized during the nine months ended September 30, 2025 and 2024, 77% was included in the deferred revenue balance as of December 31, 2024 and 2023 in each period.

Cost of revenue and gross margin


	Nine Months Ended
	September 30, 2025			September 30, 2024			Change		% Change
	(in millions, except percentages)
Cost of revenue:
Product	$	496.5		$	474.0		$	22.5	5	%
Service	443.2			369.1			74.1		20
Total cost of revenue	$	939.7		$	843.1		$	96.6	11	%
Gross margin (%):
Product	67.5		%	64.5		%
Service	86.8			87.5
Total gross margin	80.8		%	80.4		%

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Total gross margin increased 0.4 percentage points during the nine months ended September 30, 2025 compared to the same period last year, driven by increased product gross margin, partially offset by decreased service gross margin.

Product gross margin increased 3.0 percentage points during the nine months ended September 30, 2025 compared to the same period last year, as inventory related reserves expense decreased and normalized as compared to the elevated levels we saw in the nine months ended September 30, 2024. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs and costs of materials used in production.

Service gross margin decreased 0.7 percentage points during the nine months ended September 30, 2025 compared to the same period last year, primarily due to an increase in cloud service costs, partially offset by service revenue growth outpacing labor, replacement, and repair costs increase. Cost of service revenue was comprised primarily of personnel-related costs, replacement and repair costs, cloud services costs from owned data centers, colocation providers and cloud service providers, infrastructure depreciation and related operating costs, software and delivery costs, and facility-related costs.

Operating expenses


	Nine Months Ended								Change		% Change
	September 30, 2025				September 30, 2024
	Amount		% of Revenue		Amount		% of Revenue
	(in millions, except percentages)
Operating expenses:
Research and development	$	610.5	13	%	$	525.7	12	%	$	84.8	16	%
Sales and marketing	1,718.2		35		1,518.3		35		199.9		13
General and administrative	176.1		4		182.7		4		(6.6)		(4)
Gain on intellectual property matters	(9.0)		—		(3.4)		—		(5.6)		165
Total operating expenses	$	2,495.8	51	%	$	2,223.3	52	%	$	272.5	12	%

Percentages have been rounded for presentation purposes and may differ from unrounded results.

Research and development

Research and development expense increased $84.8 million, or 16%, during the nine months ended September 30, 2025 compared to the same period last year, primarily due to an increase of $64.2 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products and the impact of the recent acquisitions. In addition, non-personnel-related product development costs increased $23.3 million.

Sales and marketing

Sales and marketing expense increased $199.9 million, or 13%, during the nine months ended September 30, 2025 compared to the same period last year, primarily due to an increase of $153.9 million in personnel-related costs. In addition, marketing program and related expenses increased $18.2 million and amortization expense of certain intangible assets increased $13.3 million.

General and administrative

General and administrative expense decreased $6.6 million, or 4%, during the nine months ended September 30, 2025 compared to the same period last year, primarily due to a decrease of $7.3 million in legal related fees and other professional services fees, partially offset by an increase of $1.4 million in personnel-related costs.

Operating income and margin

We generated operating income of $1.46 billion during the nine months ended September 30, 2025, an increase of $229.8 million, or 19%, compared to $1.23 billion in the same period last year. Operating margin was 29.8% during the nine months ended September 30, 2025, compared to 28.6% in the same period last year. The 1.2 percentage points increase in operating margin was primarily due to 0.7 and 0.2 percentage points decrease in general and administrative expense and sales

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and marketing expense as a percentage of revenue, respectively, and 0.4 percentage points increase in gross margin, partially offset by 0.2 percentage points increase in research and development expense as a percentage of revenue.

Interest income, interest expense and other income—net


	Nine Months Ended
	September 30, 2025		September 30, 2024		Change		% Change
	(in millions, except percentages)
Interest income	$	130.0	$	112.9	$	17.1	15	%
Interest expense	$	(15.7)	$	(15.1)	$	(0.6)	4	%

Other income—net	$	58.0	$	113.0	$	(55.0)	(49)	%

Interest income increased $17.1 million during the nine months ended September 30, 2025 compared to the same period last year, primarily due to higher average investment balances as we had higher purchases of investments net of sales and maturities. Interest income varies depending on our average investment balances during the period, types and mix of investments, and interest rates. Interest expense remained comparatively flat during the nine months ended September 30, 2025 compared to the same period last year. Other income—net decreased $55.0 million during the nine months ended September 30, 2025 compared to the same period last year, primarily due to a $66.4 million decrease in gains on bargain purchases – we recorded a gain on bargain purchase of $39.9 million related to our acquisition of Linksys during the first quarter of 2025 as compared to a gain on bargain purchase of $106.3 million related to our acquisition of Lacework recorded during the third quarter of 2024 – partially offset by a $7.3 million decrease in foreign currency exchange loss and a $4.8 million increase in net rental income from real estate leases.

Provision for income taxes


	Nine Months Ended						Change		% Change
	September 30, 2025			September 30, 2024
	(in millions, except percentages)
Provision for income taxes	$	294.3		$	197.2		$	97.1	49	%
Effective tax rate (%)	18		%	14		%

Our effective tax rate was 18% for the nine months ended September 30, 2025 compared to an effective tax rate of 14% for the same period last year. The provision for income taxes for the nine months ended September 30, 2025 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that were $384.2 million and a tax provision of $30.6 million related to the derecognition of deferred tax assets from the business combination with Linksys. This provision for income taxes was favorably affected by a tax benefit of $62.0 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $58.5 million.

The provision for income taxes for the nine months ended September 30, 2024 was comprised of U.S. federal and state taxes, withholding taxes, and foreign taxes that were $315.0 million, which were favorably affected by a tax benefit of $84.0 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $33.8 million.

Gain (loss) from equity method investments


	Nine Months Ended				Change		% Change
	September 30, 2025		September 30, 2024

	(in millions, except percentages)
Gain (loss) from equity method investments	$	10.3	$	(23.9)	$	34.2	*
* not meaningful

The $34.2 million change in gain (loss) from equity method investments during the nine months ended September 30, 2025 compared to the same period last year was primarily driven by a $10.8 million gain related to our acquisition of Linksys in the first quarter of 2025 and a $15.4 million loss due to our proportionate share of Linksys’ financial results including our share of amortization of the basis differences and an OTTI charge of $8.0 million during the nine months ended September 30, 2024.

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Liquidity and Capital Resources


	As of
	September 30, 2025		December 31, 2024
	(in millions)
Cash and cash equivalents	$	1,995.7	$	2,875.9
Short-term investments	1,127.7		1,190.6
Long-term investments	289.1		—
Total cash, cash equivalents and investments	$	3,412.5	$	4,066.5
Working capital	$	127.4	$	1,910.8

	Nine Months Ended
	September 30, 2025		September 30, 2024
	(in millions)
Net cash provided by operating activities	$	1,970.4	$	1,780.5
Net cash used in investing activities	(552.8)		(647.5)
Net cash used in financing activities	(2,298.8)		(41.3)
Effect of exchange rate changes on cash and cash equivalents	1.0		(0.3)
Net increase (decrease) in cash and cash equivalents	$	(880.2)	$	1,091.4

Liquidity and capital resources are primarily impacted by our operating activities, as well as repurchases of our common stock, real estate purchases and other capital expenditures, investment grade debt balance, payments of taxes in connection with the net settlement of equity awards, proceeds from the issuance of common stock and business combinations.

In recent years, we have received significant capital resources from our billings to customers, issuance of investment grade debt and, to some extent, from the exercise of stock options by our employees. Additional increases in billings may depend on a number of factors, including demand for and availability of our products and services, competition, pricing actions, market or industry changes, macroeconomic events such as rising inflation and changing interest rates, economic strength, supply chain capacity and disruptions, tariffs and other trade restrictions, international conflicts, including the war in Ukraine or tensions between China and Taiwan, an increase in installment billings, and our ability to execute. We expect proceeds from the exercise of stock options in future years to continue to be impacted by the increased mix of restricted stock units and performance stock units versus stock options granted to our employees and to vary based on our share price.

In August 2025, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2027, bringing the aggregate amount authorized for repurchases to $9.25 billion of our outstanding common stock through February 28, 2027. During the nine months ended September 30, 2025, we repurchased 27.9 million shares of common stock under the Repurchase program for an aggregate purchase price of $2.23 billion. As of September 30, 2025, approximately $795.9 million remained available for future share repurchases. Refer to Note 11. Equity Plans and Share Repurchase Program.

We expect to continue to increase our data center, PoP, office and warehouse capacity to support growth and the expansion of existing services or introduction of new services. As we purchase new properties, we will work to incorporate these properties into the environmental goals we have established. We estimate capital expenditures to be between approximately $60 million and $110 million for the fourth quarter of 2025.

We believe that our cash provided by operating activities, together with our existing cash, cash equivalents and investments will be sufficient to meet our anticipated cash needs and do not currently intend to retire our Senior Notes early. Refer to Note 9. Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Senior Notes. As of September 30, 2025, the current portion of long-term debt and long-term debt, net of unamortized discount and debt issuance costs, were $995.9 million.

We purchase components of our inventory from certain suppliers and use several independent contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or that establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, non-cancelable and

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unconditional commitments. Certain of these inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to reschedule and adjust our requirements based on our business needs prior to firm orders being placed.

These inventory purchase commitments as of September 30, 2025 totaled $732.5 million, an increase of $141.4 million compared to $591.1 million as of December 31, 2024, as we continued to work with contract manufacturers and suppliers to optimize our inventory and purchase commitments position based on growth trends in customer demand. We record a liability for inventory purchase commitments in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of September 30, 2025 and December 31, 2024, the liability for these inventory purchase commitments was $35.2 million and $54.0 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets.

Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory obsolescence because of supply constraints, rapidly changing technology, and customer requirements. We believe the amount of our inventory and purchase commitments is appropriate for our current and expected customer demand and revenue levels.

We also have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. As of September 30, 2025, we had $112.7 million in other contractual commitments having a remaining term in excess of one year that are non-cancelable.

There have been no significant changes to our leases as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

As of September 30, 2025, our cash, cash equivalents and short-term and long-term investments of $3.41 billion were invested primarily in deposit accounts, commercial paper, corporate debt securities, U.S. government and agency securities, certificates of deposit and term deposits, money market funds and marketable equity securities. It is our investment policy to invest excess cash in a manner that preserves capital, provides liquidity, and generates return without significantly increasing risk. We currently expect to repay the outstanding balance of the 2026 Senior Notes maturing on March 15, 2026 at the date of maturity. Based on current projections, we expect to have sufficient liquidity to fund this repayment and meet our operating requirements for at least the next 12 months and thereafter for the foreseeable future, including our foreseeable future supply obligations, capital expenditures and share repurchases.

The amount of cash, cash equivalents and investments held by our international subsidiaries was $250.6 million as of September 30, 2025 and $207.8 million as of December 31, 2024.

We believe that our existing cash and cash equivalents and cash flow from operations will be sufficient for at least the next 12 months to meet our requirements and plans for cash, including meeting our working capital requirements and capital expenditure requirements. In the long term, our ability to support our requirements and plans for cash, including our working capital and capital expenditure requirements will depend on many factors, including our growth rate, the timing and amount of our share repurchases and debt retirement, the expansion of sales and marketing activities, pricing actions, the introduction of new and enhanced products and services offerings, the continuing market acceptance of our products, the timing and extent of spending to support development efforts, our investments in purchasing, developing or leasing real estate, cash paid for taxes and macroeconomic impacts such as rising inflation and changing interest rates, changes in tariffs and other trade restrictions, impacts of international conflicts, including the war in Ukraine or tensions between China and Taiwan. Historically, we have required capital principally to fund our working capital needs, share repurchases, capital expenditures and acquisition activities. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

As of September 30, 2025, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Operating Activities

Cash generated by operating activities is our primary source of liquidity. It is primarily comprised of net income, as adjusted for non-cash items and changes in operating assets and liabilities. Non-cash adjustments consist primarily of amortization of deferred contract costs, stock-based compensation and depreciation and amortization. Changes in operating assets and liabilities consist primarily of changes in accounts receivable—net, deferred contract costs, deferred revenue, inventory, prepaid expenses and other current assets, accrued liabilities and accounts payable.

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Our operating activities during the nine months ended September 30, 2025 provided cash flows of $1.97 billion as a result of the continued growth of our business, improved profitability and our ability to successfully manage our working capital. Changes in operating assets and liabilities were primarily driven by a decrease of $308.7 million in accounts receivable—net, an increase of $305.3 million in deferred contract costs and an increase of $288.1 million in our deferred revenue during nine months ended September 30, 2025. In addition, changes in operating assets and liabilities were driven by an increase of $109.1 million in inventory, an increase of $64.3 million in prepaid expenses and other current assets, a decrease of $15.5 million in accrued liabilities, and an increase of $11.5 million in accounts payable.

Investing Activities

The changes in cash flows from investing activities primarily relate to timing of purchases, maturities and sales of investments, purchases of property and equipment, investments in equity securities and business combinations. Historically, we have elected to own a facility if we believe that purchasing or developing buildings rather than leasing is more closely aligned with our long-term strategy. We expect to make similar decisions in the future. We may also make cash payments in connection with future business combinations.

During the nine months ended September 30, 2025, cash used in investing activities was $552.8 million, primarily driven by $322.0 million used for the purchases of property and equipment, $189.3 million spent for purchases of investments, net of maturities and sales of investments, and $41.6 million used for payments made in connection with business combinations, net of cash acquired.

Financing Activities

The changes in cash flows from financing activities primarily relate to repurchase and retirement of common stock, and taxes paid related to net share settlement of equity awards, net of proceeds from the issuance of common stock under the Amended Plan.

During the nine months ended September 30, 2025, cash used in financing activities was $2.30 billion, driven by $2.23 billion used to repurchase shares of our common stock and $66.1 million used to pay tax withholding related to net share settlement of equity awards, net of proceeds from the issuance of common stock.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in our market risk during the nine months ended September 30, 2025 compared to the disclosures in Part II, Item 7A of the Form 10-K.

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ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act as of September 30, 2025. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2025 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

We are subject to various claims, complaints and legal actions that arise from time to time. We accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows. Refer to Note 10. Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

ITEM 1A. Risk Factors

Investing in our common stock involves a high degree of risk. Investors should carefully consider the following risks and all other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition and results of operations could be materially harmed. In that case, the trading price of our common stock could decline substantially, and investors may lose some or all of their investment. We have summarized risks immediately below and encourage investors to carefully read the entirety of this Risk Factors section.

Risks Related to Our Business and Financial Position

Our operating results are likely to vary significantly and be unpredictable.

Our operating results have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control or may be difficult to predict, including:

•adverse economic conditions, including macroeconomic and regional economic challenges resulting, for example, from a recession, tariffs, disruptions of global supply chains or other economic downturn, increased inflation or possible stagflation in certain geographies, changing interest rates, the war in Ukraine, tensions between China and Taiwan, or other factors;

•policy changes and uncertainty with respect to immigration laws, trade policy and tariffs, including increased tariffs applicable to countries where we manufacture our products, foreign imports and tax laws related to international commerce;

•sales strategy, productivity, retention and execution, and our ability to attract and retain new end-customers or sell additional products and services to our existing end-customers, including customer demand for platform solutions like ours versus point solutions;

•our ability to successfully anticipate market changes related to cloud-based solutions and to sell, support and meet service level agreements related to cloud-based solutions;

•component shortages, including chips and other components, and product inventory shortages, including those caused by factors outside of our control, such as international trade disputes or tariffs, labor or supply chain disruptions, inflation and other cost increases, international conflicts, terrorism, wars, such as the war in Ukraine, tensions between China and Taiwan, critical infrastructure attacks, natural disasters, health emergencies, epidemics and pandemics, power outages and civil unrest;

•inventory management, including future inventory purchase commitments;

•the level of demand for our products and services, which may render forecasts inaccurate, increase backlog or future inventory purchase commitments and lead to price decreases;

•supplier or regulatory cost increases and any lack of market acceptance of our price increases designed to help offset any supplier or regulatory cost increases;

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•the timing of channel partner and end-customer orders and our reliance on a concentration of shipments at the end of each quarter or changes in shipping terms;

•the impact to our business, the global economy, disruption of global supply chains and creation of significant volatility and disruption of the financial markets due to factors such as tariffs and policy disputes, increased inflation or possible stagflation in certain geographies, changing interest rates, the war in Ukraine, tensions between China and Taiwan and other factors;

•defects or vulnerabilities, including critical vulnerabilities, in our products or services, as well as reputational harm from the failure or misuse of our products or services, and any actual or perceived defects or vulnerabilities, including critical vulnerabilities, in our products or services, failure of our products or services to detect or prevent a security incident or to cause a disruption to operations, failure of our customers to implement preventative actions such as updates to one of our deployed solutions or failure to help secure our customers;

•compromising of our internal enterprise IT networks, our operational networks, our research and development networks, our back-end labs and cloud stacks hosted in our data centers or PoPs, colocation vendors or public cloud providers, and resulting harm to public perception of our products and services;

•the timing of shipments, which may depend on factors such as inventory levels, logistics, manufacturing or shipping delays, our ability to ship products on schedule and our ability to accurately forecast inventory requirements and our suppliers’ ability to deliver components and finished goods;

•increased expenses, unforeseen liabilities or write-downs and any negative impact on results of operations from any acquisition or equity investment, as well as integration risks related to product plans and products and risks of negative impact by such acquisitions and equity investments on our financial results;

•investors’ expectations of our operational performance relating to our sustainability commitments;

•certain customer agreements which contain service-level agreements, under which we guarantee specified availability of our platform and solutions;

•inconsistent and evolving data and other security requirements and enforcement across certain jurisdictions;

•impairments as a result of certain events or changes in circumstances;

•the mix of products sold and the mix of revenue between products and services, as well as the degree to which products and services are bundled and sold together for a package price;

•the purchasing practices and budgeting cycles of our channel partners and end-customers, including the effect of the end of product lifecycles, refresh cycles or price decreases;

•any decreases in demand by channel partners or end-customers, including any such decreases caused by factors outside of our control such as international trade disputes or tariffs, labor or supply chain disruptions, inflation and other cost increases, international conflicts, terrorism, wars, such as the war in Ukraine, tensions between China and Taiwan, critical infrastructure attacks, natural disasters, health emergencies, epidemics and pandemics, power outages and civil unrest;

•the effectiveness of our sales organization, generally or in a particular geographic region, including the time it takes to hire sales personnel, the timing of hiring and our ability to hire and retain effective sales personnel, our efforts to align our sales capacity and productivity with market demand and any negative impact to our sales and the effectiveness of our sales team based on changes to sales compensation or to our sales compensation plan;

•sales productivity and sales execution risk related to effectively selling to all segments of the market, including enterprise and small- and medium-sized businesses, government organizations and service providers, and to selling our broad security product and services portfolio, including, among other execution risks, risks associated with the complexity and distraction in selling to all segments, increased competition

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and unpredictability of timing to close larger enterprise and large organization deals, and the risk that our sales representatives do not effectively sell products and services;

•execution risk associated with our efforts to capture the opportunities related to our identified growth drivers, such as risk associated with our ability to capitalize on the convergence of networking and security, vendor consolidation of various cyber security solutions, SD-WAN, infrastructure security, security operations, SASE and other cloud security solutions, endpoint protection, IoT and OT security opportunities and product refresh cycles;

•the seasonal buying patterns of our end-customers;

•our backlog may fluctuate over quarters. If we experience supply chain shortages and cannot fulfill orders or if customers cancel or delay delivery of orders, our backlog may be affected, which will negatively impact our aggregate backlog to billings conversion and revenue in such quarter. Generally, a reduction to backlog increases our aggregate billings and revenue during the quarter when delivered;

•the timing and level of our investments in sales and marketing, and the impact of such investments on our operating expenses, operating margin and the productivity, capacity, tenure and effectiveness of execution of our sales and marketing teams;

•the timing of revenue recognition for our sales, including any impacts resulting from extension of payment terms and fluctuations in backlog levels, which could result in more variability and less predictability in our quarter-to-quarter revenue and operating results;

•the level of perceived threats to network security, which may fluctuate from period to period;

•changes in the requirements, market needs or buying practices and patterns of our distributors, resellers or end-customers;

•changes in the growth rates of the network security market in particular and other security and networking markets, such as SD-WAN, OT, switches, access points, security operations, SASE and other cloud solutions for which we and our competitors sell products and services;

•the timing and success of new product and service introductions or enhancements by us or our competitors, or any other change in the competitive landscape of our industry, including consolidation among our competitors, partners or end-customers;

•the deferral of orders from distributors, resellers or end-customers in anticipation of new products or product enhancements announced by us or our competitors, price decreases or changes in our registration policies, or the acceleration of orders in response to our announced or expected price list increases, including those related to tariffs;

•increases in our expenses caused by fluctuations in foreign currency exchange rates or a weakening of the U.S. dollar, as a significant portion of our expenses are incurred and paid in currencies other than the U.S. dollar, and such fluctuations may negatively affect our financial condition and results of operations;

•compliance with existing laws and regulations;

•our ability to obtain and maintain permits, clearances and certifications that are applicable to our ability to conduct business with the U.S. federal government, other foreign and local governments and other industries and sectors;

•litigation, litigation fees and costs, settlements, judgments and other equitable and legal relief granted related to litigation;

•the impact of cloud-based and hosted security solutions, including increased demand for such services and uncertainty associated with transition to providing such services, on our billings, revenue, operating margins and free cash flow;

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•decisions by potential end-customers to purchase network security solutions from newer technology providers, from larger, more established security vendors or from their primary network equipment vendors;

•price competition and increased competitiveness in our market, including the competitive pressure caused by product refresh cycles and inventory levels;

•our ability to both increase revenue and manage and control operating expenses in order to maintain or improve our operating margins;

•changes in customer renewal rates or attach rates for our services;

•changes in the timing of our billings, collection for our contracts or the contractual term of service sold;

•changes in our estimated annual effective tax rates and the tax treatment of research and development expenses and the related impact of cash from operations;

•changes in circumstances and challenges in business conditions, including decreased demand, which may negatively impact our channel partners’ ability to sell the current inventory they hold and negatively impact their future purchases of products from us;

•potential shift or migration from physical appliances that deliver on-premises network security to cloud and SaaS-based security services;

•our channel partners having insufficient financial resources to withstand changes and challenges in business conditions;

•disruptions in our channel or termination of our relationship with important channel partners, including as a result of consolidation among distributors and resellers of security solutions;

•insolvency, credit or other difficulties confronting our key suppliers and channel partners, which could affect their ability to purchase or pay for products and services and which could disrupt our supply or distribution chain;

•political, economic and social instability, including geo-political instability and uncertainty, such as that caused by the war in Ukraine, tensions between China and Taiwan, and any disruption or negative impact on our ability to sell to, ship product to and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions;

•general economic conditions, both in domestic and foreign markets;

•future accounting pronouncements or changes in our accounting policies as well as the significant costs that may be incurred to adopt and comply with these new pronouncements;

•possible impairments or acceleration of depreciation of our existing real estate due to our current real estate investments and future acquisition and development plans; and

•legislative or regulatory changes, such as with respect to privacy, information and cybersecurity, exports, the environment, regional component bans, and requirements for local manufacturing.

Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our quarterly financial and other operating results. This variability and unpredictability could result in failing to meet our internal operating plan or the expectations of securities analysts or investors for any period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our shares could fall substantially and we could face costly lawsuits, including securities class action suits. In addition, a significant percentage of our operating expenses are fixed in nature over the near term. Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate the negative impact on margins in the short term.

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Adverse economic conditions, such as a possible recession and possible impacts of inflation or stagflation, tariffs or other trade disruptions, changing interest rates, reduced information technology spending, including firewall and other security spending, or any economic downturn or recession, may adversely impact our business.

Our business depends on the overall demand for information technology and on the economic health of our current and prospective customers. In addition, the purchase of our products is often discretionary and may involve a significant commitment of capital and other resources. Weak global and regional economic conditions and spending environments, based on a downturn in the economy, a possible recession and the effects of ongoing or increased inflation or possible stagflation in certain geographies, tariffs or other trade disruptions, changing interest rates, geopolitical instability and uncertainty, a reduction in information technology spending regardless of macroeconomic conditions, the effects of epidemics and pandemics and the impact of the war in Ukraine or tensions between China and Taiwan could have a material adverse impacts on our financial condition and results of operations and our business, including resulting in longer sales cycles, lower prices for our products and services, increased component costs, higher default rates among our channel partners, reduced unit sales, lower prices and slower or declining growth. These can negatively impact our business by putting downward pressure on growth if we are unable to achieve the increases in product prices necessary to appropriately offset the additional costs in a manner sufficient to maintain margins. Any of these impacts may materially and adversely affect our business, financial condition, results of operations and liquidity.

The existence of inflation in certain economies has resulted in, and may continue to result in, changing interest rates and capital costs, increased component or shipping costs, increased costs of labor, weakening exchange rates and other similar effects. Although we take measures to mitigate risks such as those associated with inflation, the mitigating measures may not be effective or their impact may not offset the increased cost of inflation in a timely manner. Inflation, an economic downturn, a recession and any other economic challenges may also adversely impact spending patterns by our distributors, resellers and end-customers.

Any efforts to withdraw from or materially modify international trade agreements, change tax provisions related to global manufacturing and sales or impose new tariffs, economic sanctions or related legislation, could adversely affect our financial condition and results of operations.

Given the international nature of our operations, efforts to withdraw from or materially modify international trade agreements, or to change corporate tax policy related to international commerce, could adversely affect our financial condition and results of operations as could the continuing uncertainty regarding whether such actions will be taken.

Moreover, efforts to implement changes related to export or import regulations (including the imposition of new or increased border taxes or tariffs on foreign imports), trade barriers, economic sanctions and other related policies could harm our results of operations. Recently, the United States has imposed additional import tariffs on certain goods from different countries. For example, earlier this year, the United States announced tariffs on imported goods from most countries, some of which have been temporarily suspended or adjusted from time to time. As a result, other countries have imposed retaliatory tariffs on goods exported from the United States and both the United States and foreign countries have threatened to alter or terminate current trade agreements. While we do not currently expect these tariffs to have a significant effect on our raw material and product import costs, if the United States expands increased tariffs, or if retaliatory trade measures are taken by other countries in response to the U.S. tariffs, the cost of our products could increase, our operations could be disrupted or we could be required to raise our prices, which may result in the loss of customers and harm to our reputation and operating performance. U.S. tariffs, and any new or additional retaliatory tariffs that may be imposed by foreign countries, may also adversely affect our customers and, consequently, demand for our products. The announcement of these tariffs has recently resulted in significant volatility in the stock market. We are monitoring this evolving situation and there can be no assurance that we will be able to mitigate the impacts of any trade measures on our business, which could adversely impact our business, operating results, financial condition, and our stock price.

Any modification in these areas, any shift in the enforcement or scope of existing regulations or any change in the countries, administrations, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations and could result in increased costs. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

Our billings, revenue and free cash flow growth may slow or may not continue, and our operating margins may decline.

We may experience slowing growth or a decrease in billings, revenue, operating margin and free cash flow for a number of reasons, including a slowdown in pipeline growth or for demand for our products or services generally, a shift in

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demand from products to services, decrease in services revenue growth, increased competition, execution challenges including sales execution challenges and lack of optimal sales productivity, worldwide or regional economic challenges based on inflation or possible stagflation, a regional recession or a recession in the global economy, changing interest rates, as a result of regional conflicts, a decrease in the growth of our overall market or softness in demand in certain geographies or industry verticals, such as the service provider industry, changes in our strategic opportunities, execution risks, lower sales productivity and our failure for any reason to continue to capitalize on sales and growth opportunities due to other risks identified in the risk factors described in this periodic report. Our expenses as a percentage of total revenue may be higher than expected if our revenue is lower than expected. If our investments in sales and marketing and other functional areas do not result in expected billings and revenue growth, we may experience margin declines. In addition, we may not be able to sustain our historical profitability levels in future periods if we fail to increase billings, revenue or deferred revenue, and do not appropriately manage our cost structure, free cash flow, or encounter unanticipated liabilities. As a result, any failure by us to maintain profitability and margins and continue our billings, revenue and free cash flow growth could cause the price of our common stock to materially decline.

Our real estate investments, including construction, acquisition, development or leasing of new data centers, data center expansions or office buildings, could involve significant risks to our business.

In order to sustain our growth in certain of our existing and new markets, we may acquire or expand existing data centers, lease new facilities or acquire suitable land, with or without structures, to build new data centers or office buildings. These projects expose us to risks which could have an adverse effect on our results of operations and financial condition. The current global supply chain and inflation issues have exacerbated many of these construction risks and created additional risks for our business. Some of the risks associated with construction projects include:

•construction delays;

•lack of availability and delays for data center equipment, including items such as generators and switchgear;

•unexpected budget changes;

•increased prices for and delays in obtaining building supplies, raw materials and data center equipment;

•labor availability, labor disputes and work stoppages with contractors, subcontractors and other third parties;

•unanticipated environmental or regulatory issues and geological problems;

•delays related to permitting and approvals to open from public agencies and utility companies;

•unexpected lack of power access or unexpected increases in power needs or connectivity;

•failure or inability for any reason to meet customer requirements and service level agreements, and any resulting penalties or liabilities related thereto;

•investor expectations regarding sustainability;

•delays in site readiness leading to our failure to meet commitments made to customers; and

•unanticipated customer requirements that would necessitate alternative data center design, making our sites less desirable or leading to increased costs in order to make necessary modifications or retrofits.

All construction-related projects require us to carefully select and rely on the experience of one or more designers, general contractors and associated subcontractors during the design and construction process. Should a designer, general contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.

We have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance

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deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.

Additionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer’s lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner’s ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations.

We are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.

Our future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.

We rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 25% of our total net accounts receivable as of September 30, 2025.

A significant portion of our sales are generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.

In addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience changes to our overall business and operational relationships due to dealing with a larger combined entity, and our ability to maintain such relationships on favorable contractual terms may be more limited. We may also become increasingly dependent on a more limited number of channel partners, as consolidation increases the relative proportion of our business for which each channel partner is responsible, which may magnify the risks described in the preceding paragraphs.

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Six distributor customers who purchase directly from us accounted for 63% of our total net accounts receivable in the aggregate as of September 30, 2025. See Note 14. Segment Information in Part I, Item 1 of this Quarterly Report on Form 10-Q for distributor customers accounted for 10% or more of our revenue or net accounts receivable. Our largest distributors may experience financial difficulties, face liquidity risk or other financial challenges, which may harm our ability to collect on our accounts receivable.

We provide channel partners with specific programs to assist them with selling our products but there can be no assurance that these programs will be effective. In addition, our channel partners may be unsuccessful in marketing, selling and supporting our products and services and may purchase more inventory than they can sell. Our channel partners generally do not have minimum purchase requirements. Some of our channel partners may have insufficient financial resources to withstand changes and challenges in business conditions. Moreover, many of our channel partners are privately held, including some of our largest partners, and we may not have sufficient information to assess their financial condition. If our channel partners’ financial condition or operations weaken, their ability to sell our products and services could be negatively impacted. Our channel partners may also market, sell and support products and services that are competitive with ours, and may devote more resources to the marketing, sales and support of such products, or may decide to cease selling our products and services altogether in favor of a competitor’s products and services. They may also have incentives to promote our competitors’ products to the detriment of our own, or they may cease selling our products altogether. We cannot ensure that we will retain these channel partners or that we will be able to secure additional or replacement partners or that existing channel partners will continue to perform. The loss of one or more of our significant channel partners or the failure to obtain and ship a number of large orders each quarter through them could harm our operating results.

Any new sales channel partner will require extensive training and may take several months or more to achieve productivity. Our channel partner sales structure could subject us to lawsuits, potential liability and reputational harm if, for example, any of our channel partners misrepresent the functionality of our products or services to end-customers, our service provider customers suffer a cyber event impacting end-users, or our channel partners violate laws or our corporate policies. Additionally, if our channel partners experience issues such as cyberattacks or other operational disruptions, it could negatively impact our ability to receive orders from them and, among other things, may adversely affect our billings and revenue. We depend on our global channel partners to comply with applicable legal and regulatory requirements. To the extent that they fail to do so, that could have a material adverse effect on our business, operating results and financial condition. If we fail to optimize our channel partner model or fail to manage existing sales channels, our business will be seriously harmed.

Reliance on a concentration of shipments at the end of the quarter or changes in shipping terms could cause our billings and revenue to fall below expected levels.

As a result of customer buying patterns and the efforts of our sales force and channel partners to meet or exceed quarterly quotas, we have historically received a substantial portion of each quarter’s sales orders and generated a substantial portion of each quarter’s billings and revenue during the last two weeks of the quarter. We typically arrange for a logistics partner to pick up the last shipment of our products a few hours prior to the end of the quarter, and a delay in the arrival of the logistics partner or other factors such as a power outage could prevent us from shipping and billing for a material amount of products for which we have orders. Further, it is possible that the dollar value of these products intended to be shipped late on the last day of the quarter may be material. Additionally, our service billings are dependent on the completion of certain automated processes by our internal business management systems, some of which cannot be performed until after the related products have been shipped. If we do not have enough time after shipping our products for our systems to perform these processes prior to the end of the quarter, we have system issues that prevent processing in time to realize service billings in a quarter, or there are delays in deals closing or deals are lost, we will not be able to bill and realize billings for those services until possibly the following quarter at the earliest, which may materially negatively impact our billings for a particular quarter. We implemented a cloud-based quoting tool to help provide our sales team with the ability to have faster quote generation, reduce quote errors and increase sales productivity. Our ability to integrate the data from this tool into our order processing may cause order processing delays that could have an effect on our financial results. Our billings and revenue for any quarter could fall below our expectations or those of securities analysts and investors, resulting in a decline in our stock price, if expected orders at the end of any quarter are delayed or deals are lost for any reason or our ability to fulfill orders at the end of any quarter is hindered for any reason, including, among others:

•the failure of anticipated purchase orders to materialize;

•our logistics partners’ failure or inability to ship products prior to quarter-end to fulfill purchase orders received near the end of the quarter;

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•disruption in manufacturing or shipping based on power outages, system failures, labor disputes or constraints, excessive demand, natural disasters, geopolitical matters or widespread public health problems including pandemics and epidemics;

•our failure to accurately forecast our inventory requirements and to appropriately manage inventory to meet demand;

•our inability to release new products on schedule;

•any failure of our systems related to order review and processing; and

•any delays in shipments due to trade compliance requirements, labor disputes or logistics changes at shipping ports, airline strikes, severe weather or otherwise.

We rely significantly on revenue from FortiGuard and other security subscriptions and FortiCare technical support services, and revenue from these services may decline or fluctuate. Because we recognize revenue from these services over the term of the relevant service period, downturns or upturns in sales of FortiGuard and other security subscriptions and FortiCare technical support services are not immediately reflected in full in our operating results.

Our FortiGuard and other security subscriptions and FortiCare technical support services revenue has historically accounted for a significant percentage of our total revenue. Revenue from the sale of new, or from the renewal of existing, FortiGuard and other security subscriptions and FortiCare technical support service contracts may decline and fluctuate as a result of a number of factors, including fluctuations and changes in the mix of our sales from secure networking, unified SASE and security operations between products and services, end-customers’ level of satisfaction with our products and services, the prices of our products and services, the prices of products and services offered by our competitors, reductions in our customers’ spending levels and the timing of revenue recognition with respect to such sales. If our sales of new, or renewals of existing, FortiGuard and other security subscriptions and FortiCare technical support service contracts decline, our revenue and revenue growth may decrease and our business could suffer. In addition, in the event significant customers require payment terms for FortiGuard and other security subscriptions and FortiCare technical support services in arrears or for shorter periods of time than annually, such as monthly or quarterly, this may negatively impact our billings and revenue. Furthermore, we recognize FortiGuard and other security subscriptions and FortiCare technical support services revenue ratably over the term of the service period, which is typically from one to five years. As a result, much of the FortiGuard and other security subscriptions and FortiCare technical support services revenue we report each quarter is the recognition of deferred revenue from FortiGuard and other security subscriptions and FortiCare technical support service contracts entered into during previous quarters or years. Consequently, a decline in new or renewed FortiGuard and other security subscriptions and FortiCare technical support service contracts in any one quarter will not be fully reflected in revenue in that quarter but will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales of new, or renewals of existing, FortiGuard and other security subscriptions and FortiCare technical support services is not reflected in full in our statements of income until future periods. Our FortiGuard and other security subscriptions and FortiCare technical support services revenue also makes it difficult for us to rapidly increase our revenue through additional service sales in any period, as revenue from new and renewal support services contracts must be recognized over the applicable service term.

We face intense competition in our market and we may not maintain or improve our competitive position.

The market for network security products is intensely competitive and dynamic, and we expect competition to continue to intensify. We face many competitors across the different cybersecurity markets. Our competitors include companies such as Check Point Software Technologies Ltd., Cisco Systems, Inc. (“Cisco”), CrowdStrike Holdings, Inc. (“CrowdStrike”), F5 Networks, Inc., Hewlett-Packard Enterprise, Huawei Technologies Co., Ltd., Microsoft Corporation (“Microsoft”), Netskope Inc., Palo Alto Networks, Inc., SonicWALL, Inc., Sophos Group Plc, and Zscaler, Inc. (“Zscaler”).

Some of our existing and potential competitors’ competitive advantages include:

•greater name recognition and/or longer operating histories;

•larger sales and marketing budgets and resources;

•broader distribution and established relationships with distribution partners and end-customers;

•access to larger customer bases;

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•greater customer support resources;

•greater expertise in certain single point solutions;

•greater resources to make acquisitions;

•stronger U.S. government relationships;

•lower labor and development costs; and

•substantially greater financial, technical and other resources.

In addition, certain of our larger competitors may have broader product offerings, and leverage their relationships based on other products or incorporate functionality into existing products in a manner that discourages customers from purchasing our products. These larger competitors often have broader product lines and market focus, and are in a better position to withstand any significant reduction in capital spending by end-customers in these markets. Therefore, these competitors will not be as susceptible to downturns in a particular market. Also, many of our smaller competitors that specialize in providing protection from a single type of security threat are often able to deliver these specialized security products to the market more quickly than we can.

Conditions in our markets could change rapidly and significantly as a result of technological advancements or continuing market consolidation. Our competitors and potential competitors may also be able to develop products or services, and leverage new business models, that are equal or superior to ours, achieve greater market acceptance of their products and services, disrupt our markets, and increase sales by utilizing different distribution channels than we do. For example, certain of our competitors are focusing on delivering security services from the cloud which include cloud-based security providers, such as CrowdStrike and Zscaler. In addition, current or potential competitors may be acquired by third parties with greater available resources, and new competitors may arise pursuant to acquisitions of network security companies or divisions. As a result of such acquisitions, competition in our market may continue to increase and our current or potential competitors might be able to adapt more quickly to new technologies and customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand su

Fortinet, Inc. 10-Q