Fortinet, Inc. (FTNT)

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 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 disruptions to 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 Artificial Intelligence (“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 (including constraints on the availability of memory chips), 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 product revenue, service revenue and inventory related charges;

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

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

•our gross margins and operating margins for 2026;

•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;

•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 2026 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;

•our expectation to have sufficient liquidity to meet our operating requirements for at least the next 12 months and thereafter for the foreseeable future;

•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 Secure Access Service Edge (“SASE”) and AI-driven security operations (“SecOps”). As of June 30, 2026, 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 June 30, 2026, we held 1,115 U.S. patents and a total of 1,448 global patents.

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

•FortiOS—Our unified operating system enables the convergence of networking and AI-powered security to enforce consistent policies across all form factors and edges. As the foundational engine of the Fortinet

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Security Fabric, FortiOS empowers organizations to unify management and analytics, providing network visibility and control at scale. FortiOS includes advanced encryption, quantum safe tools, and other security technologies designed to address evolving cybersecurity threats, including emerging quantum-resistant cryptographic capabilities.

•FortiASIC—Our Application-Specific Integrated Circuit (“ASIC”)-based Security Processing Units (“SPUs”) increase the speed, scale, efficiency and value of our solutions while 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, which is our secure SaaS platform operating as a private cloud service provider, and leveraging software and hardware to optimize and secure all layers.

•FortiAI—FortiAI brings AI and agentic capabilities to products within the Fortinet Security Fabric. Generative and agentic AI support Network Operations Center (“NOC”) and Security Operations Center (“SOC”) teams in monitoring, analysis and response activities across enterprise environments, including automating operational workflows and assisting security personnel with analysis and response activities. AI within our firewalls allows for improved defense against evolving, AI-driven and zero-day attacks. AI focused features enable our customers to improve their governance over generative AI (“GenAI”) applications by providing visibility into AI application usage and helping organizations govern and control the flow of data across public and private AI applications. Products such as FortiAIGate focus on protecting an organization’s AI infrastructure, including large language models (“LLMs”) and Application Programming Interface, supporting the secure deployment and operation of enterprise AI and LLM environments while preventing data leakage into and out of LLMs. Fortinet’s AI offerings protect the AI ecosystem, infrastructure, models, workloads, data and supply chains, while leveraging unified AI intelligence across the Fortinet Security Fabric to defend against threats.

•FortiEndpoint—FortiEndpoint converges secure connectivity, endpoint protection and advanced capabilities like endpoint detection and response and universal Zero Trust Network Access (“ZTNA”), into a unified agent and management console. 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 environments.

•OT Security—The Fortinet Security Fabric enables security for OT systems and Cyber-Physical Systems (“CPS”), including converged IT/OT architectures. Our OT Security Platform is purpose-built to protect the engineered systems that underpin critical infrastructure and supply chains around the world. This includes securing energy and utilities systems, manufacturing environments, and transportation, utilizing FortiGuard OT Security Services. These offerings include security capabilities for CPS assets and tools that support centralized NOC and SOC functions.

These competitive differentiators provide networking and security professionals with a cybersecurity 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 a broad range of functions that can be delivered via 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, which can be deployed at branch, campus, data center, internal segmentation, private and public cloud to enable hybrid mesh firewall solutions, 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 ethernet or Wi-Fi to become an extension of our customers’ security infrastructure through Forti

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of 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 product revenue, service revenue and inventory related charges;

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

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

•our gross margins and operating expenses for 2026;

•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;

•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 2026 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 Annual Report on Form 10-K and, in particular, the risks discussed under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K 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. As of December 31, 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 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 December 31, 2025, we held 1,064 U.S. patents and a total of 1,405 global patents, including 321 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—Our unified operating system enables the convergence of networking and AI-powered security to enforce consistent policies across all form factors and edges. As the foundational engine of the Fortinet Security Fabric, FortiOS empowers organizations to unify management and analytics, providing network visibility and control at scale. FortiOS includes advanced encryption and other security technologies designed to address evolving cybersecurity threats, including emerging quantum-resistant cryptographic capabilities.

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•FortiASIC—Our ASIC-based SPUs increase the speed, scale, efficiency and value of our solutions while 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 SaaS platform, powered by FortiStack, which is our secure SaaS platform operating as a private cloud service provider and leveraging software and hardware to optimize and secure all layers.

•FortiAI—FortiAI provides a dual-layered defense across the Fortinet Security Fabric through the AI for Security and Security for AI framework. Within AI for Security, FortiAI-Assist uses generative and agentic AI to support NOC and SOC teams in monitoring, analysis and response activities across enterprise environments. Security for AI comprises of FortiAI-Protect and FortiAI-SecureAI. FortiAI-Protect utilizes AI/ML to address AI-driven threats and zero-day attacks, and support governance over GenAI applications, FortiAI-SecureAI focus on protecting an organization’s AI infrastructure, including LLMs and APIs, and preventing data leakage into and out of LLMs. FortiAI protects the AI ecosystem, infrastructure, models, workloads, data and supply chains, while leveraging unified AI intelligence across the Fortinet Security Fabric to defend against threats.

•FortiEndpoint—FortiEndpoint converges secure connectivity, endpoint protection and advanced capabilities like endpoint detection and response and ZTNA, 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 environments.

•OT Security—The Fortinet Security Fabric enables security for OT systems and CPS, including converged IT/OT architectures. Our OT Security Platform is purpose-built to protect the engineered systems that underpin critical infrastructure and supply chains around the world. This includes securing energy and utilities systems, manufacturing environments, and transportation, utilizing FortiGuard OT Security Services. These offerings include security capabilities for CPS assets and tools that support centralized NOC and SOC functions.

These competitive differentiators provide networking and security professionals with a 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 a broad range of 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, which can be deployed at branch, campus, data center, internal segmentation, private and public cloud to enable hybrid mesh firewall solutions, as well as encrypted applications (SSL inspection, virtual private network and IPsec 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. 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 and NAC for securing IoT devices.

•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, DEM, RBI and 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 a

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]