Fortinet under investigation for potential securities fraud.

• Pomerantz LLP investigates Fortinet for potential securities fraud. • Investors advised to contact Danielle Peyton at newaction@pomlaw.com or 646-581-9980, ext. 7980. • Investigation concerns whether Fortinet and officers/directors have engaged in unlawful practices. • Disappointing Q2 2025 financial results reported by Fortinet. • 40-50% of accelerated firewall refresh completed, causing confusion over lack of growth. • Billings and product revenue not materializing as expected.

In a significant development, Pomerantz LLP has initiated an investigation into Fortinet, Inc. (NASDAQ: FTNT), on behalf of investors. The investigation centers on whether Fortinet and its officers and/or directors have engaged in securities fraud or other unlawful business practices [1]. Investors are advised to contact Danielle Peyton at newaction@pomlaw.com or 646-581-9980, ext. 7980, for more information.

The investigation comes on the heels of Fortinet's disappointing second quarter 2025 financial results, which were reported on August 6, 2025. The company's stock price subsequently fell by $21.28 per share, or 22.03%, to close at $75.30 on August 7, 2025 [2].

One of the key concerns is the early completion of Fortinet's firewall refresh cycle, which was estimated to be a $450 million, 650,000 unit opportunity. The company disclosed that 40% to 50% of this refresh has already been completed, leading to confusion over why product revenue growth and billings are not materializing as expected [3]. Analysts have cited this as a driving factor behind the stock's decline and downgrades [4].

The cybersecurity sector is currently experiencing a significant shift in valuation dynamics. While global spending on digital security is projected to exceed $212 billion in 2025, driven by cloud adoption and systemic cyber risks [5], investors are recalibrating their expectations for growth stocks. Fortinet, with a market cap of $58 billion, is a prime example of this recalibration. Its Q2 2025 results, showing 14% revenue growth and 15% billings growth, mask a critical vulnerability: the early completion of its firewall refresh cycle [6].

Fortinet's newer segments—SASE and Security Operations—show promise with 22% and 35% ARR growth, respectively. However, the firewall business, which still accounts for approximately 40% of revenue, continues to overshadow innovation and is a liability [7]. The company's 94% gross retention rate also lags behind competitors like CrowdStrike, which has a 97% retention rate [8].

The sector-wide trends further complicate Fortinet's outlook. Organizations are consolidating vendors to reduce costs, favoring platforms like Fortinet's Security Fabric. However, this trend also intensifies competition, with startups commanding premium valuations and forcing incumbents to justify their multiples with execution metrics like gross retention [9].

Valuation compression is evident, with the RSA 2025 report noting a 20% decline in median revenue multiples for cybersecurity transactions since 2023 [10]. For Fortinet, this means its 14.2x public company multiple must align with more conservative growth assumptions. Analysts now project a 12-month price target of $93.95, down from $120 [11].

Despite these challenges, Fortinet's pivot to SASE and AI-driven security could unlock value if it captures a larger share of the $12 billion SASE market by 2027. The key will be converting ARR growth into free cash flow and demonstrating resilience against macroeconomic headwinds [12].

References:
[1] https://www.globenewswire.com/news-release/2025/08/29/3141546/1087/en/INVESTOR-ALERT-Pomerantz-Law-Firm-Investigates-Claims-On-Behalf-of-Investors-of-Fortinet-Inc-FTNT.html
[2] https://www.ainvest.com/news/fortinet-shifting-valuation-dynamics-firewall-refresh-challenges-2509/
[3] https://www.crn.com/news/security/2025/fortinet-firewall-refresh-results-have-been-disappointing-analysts
[4] https://www.investing.com/news/stock-market-news/analysts-cut-fortinet-rating-shares-as-firewall-refresh-catalyst-fizzles-out-4177545
[5] https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2025-global-digital-trust-insights.html
[6] https://www.fortinet.com/corporate/about-us/newsroom/press-releases/2025/fortinet-reports-second-quarter-2025-financial-results
[7] https://www.forbes.com/sites/greatspeculations/2025/08/08/fortinet-ftnt-stock-to-150/
[8] https://www.kovrr.com/blog-post/9-cyber-risk-management-trends-in-2025-every-business-should-know
[9] https://www.firstanalysis.com/research/cybersecurity-jul-2025/
[10] https://www.firstanalysis.com/research/cybersecurity-jul-2025/
[11] https://www.trefis.com/stock/ftnt/articles/572070/fortinet-path-to-2x-growth/2025-08-08
[12] https://www.ainvest.com/news/assessing-risks-opportunities-fortinet-nasdaq-ftnt-regulatory-scrutiny-eroding-market-confidence-2508/