Daniel Pronk on $FTNT (Nov 4, 2026)
Fortinet is not attractive at this price: at 27 times free cash flow it is still expensive for a business likely to slow further in the coming year. Revenue growth of 20% is decelerating, Q4 guidance implies just 17.8% growth, and analysts expect below 10% by the end of 2027, so the pre-earnings multiple of nearly 40 times free cash flow is contracting with the slowdown.
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There has been a lot of news about stocks like ServiceNow, Intel, and even Fortinet collapsing drastically after releasing their earnings reports.
Fortinet, ServiceNow, and finally we will finish the discussion with Uber.
Okay, let's move on and discuss Fortinet. In the past month, Fortinet's stock has fallen 35 percent from its recent all-time high. This is another company that has suffered a major decline after releasing their earnings report.
Looking at Fortinet's earnings results, we see that overall their revenue increased by 20 percent compared to the previous year. Product revenue increased by 37 percent, which is certainly very good, and billings increased by 29 percent, which is also good to see.
The CEO then said that the company is gaining strong momentum and that AI is acting as a supporting force for their business.
Fortinet, if you don't know, is a cybersecurity company. This industry is currently experiencing major positive benefits due to AI agents and the various AI disruptions around the world.
Fortinet's guidance for the fourth quarter is for revenue to be $2.2 billion and billings to be $2.8 billion. That's just 17.8 percent revenue growth in the next quarter, indicating that the business is starting to slow down.
You can actually see that this quarter, the revenue growth rate has started to slow down from the strong growth that the business was seeing earlier. Analysts now expect this slowdown to continue and growth to fall below 10 percent by the end of 2027, which is quite surprising.
Now, this wouldn't be so bad if Fortinet wasn't trading at nearly 40 times price to free cash flow before its earnings report, which is a high multiple for this business. Seeing growth fall from 20 percent to 17 percent and expectations of further declines are forcing this multiple to shrink.
And as I've been saying throughout the video, business slowdowns are what cause multiple contractions, and Fortinet is showing us that now. So in my opinion, the business was priced based on very good results and continued strong growth, and the market has now priced that down because it is slowing down.
And as I've been saying throughout the video , business slowdowns are what cause multiple contractions, and Fortinet is showing us that now. So in my opinion , the business was priced based on very good results and continued strong growth, and the market has now priced that down because it is slowing down.
Overall, I'm not interested in Fortinet at this price because it's still trading at 27 times free cash flow, which I think is high for this business, especially since it's likely to slow down even more in the coming year.