Fortinet stock drops 25% despite beating earnings estimates due to downgrade and concerns over future firewall-product upgrades.

Fortinet stock fell 25% despite beating earnings expectations due to a downgrade from KeyBanc analysts. The analysts cited a challenging setup ahead as the refresh tailwind for firewall-product upgrades diminishes in 2026. The company's solid quarter was overshadowed by concerns about its outlook.

Fortinet's stock experienced a significant drop of 25% despite the company beating earnings expectations in the second quarter. The stock decline can be attributed to a downgrade from KeyBanc analysts, who cited concerns about the company's future growth prospects. The analysts specifically mentioned a challenging setup ahead as the refresh tailwind for firewall-product upgrades diminishes in 2026.

Fortinet reported a 14% increase in revenue for the second quarter, reaching $1.63 billion, and exceeded analyst expectations for earnings and billings. However, the company's solid quarter was overshadowed by concerns about its outlook. KeyBanc analysts noted that Fortinet has already processed 40-50% of its 2026 renewal cohort, which could undermine investor confidence in the company's growth trajectory [2].

Analysts are concerned that Fortinet is already halfway through its firewall upgrade cycle, which could limit how much more the company can grow from this product line. Additionally, the company cited global trade tensions and reduced business spending as reasons for its lower revenue forecast [1].

While Fortinet's stock price sank following the report, some analysts maintained their ratings, noting positive aspects such as billings and product revenue strength. Fortinet's co-founder and CEO, Ken Xie, emphasized that the refresh cycle is much less important than focusing on helping customers upgrade to new security infrastructure.

Despite the concerns, Fortinet remains optimistic about its growth prospects in newer businesses, such as SASE (secure access service edge) and security operations technology. The company has been elevated to the "leaders" category in Gartner's 2025 SASE Magic Quadrant, joining other top vendors like Palo Alto Networks, Netskope, and Cato Networks [3].

References:
[1] https://www.alphaspread.com/market-news/stock-movements/fortinet-shares-plunge-after-lower-sales-forecast-despite-strong-earnings
[2] https://www.crn.com/news/security/2025/fortinet-firewall-refresh-results-have-been-disappointing-analysts
[3] https://za.investing.com/news/analyst-ratings/piper-sandler-downgrades-fortinet-stock-rating-to-neutral-on-renewal-concerns-93CH-3824671