Fortinet's Q1 2025: Navigating Contradictions in Tariffs, Service Revenue, and Market Recovery

Tariffs and demand impact, service revenue dynamics, impact of refresh cycle, service revenue and guidance for the next quarter, market recovery and growth expectations are the key contradictions discussed in Fortinet's latest 2025Q1 earnings call.



Revenue and Market Leadership:
- Fortinet reported record first quarter revenue growth of 14%, surpassing $1.54 billion.
- This growth was driven by strong performance in unified SASE, AI-driven SecOps, and Fortinet's leadership in innovation and market position as the number one deployed firewall vendor worldwide.

Unified SASE and SecOps Expansion:
- Unified SASE and AI-driven SecOps accounted for 25% and 10% of Fortinet's total revenue, respectively, with growth over 18% and 29%, respectively.
- The expansion of these services is attributed to the integration of networking and security capabilities within a single OS, enhancing user experience and ensuring secure environments.

Firewall Upgrade Cycle:
- FortiGate hardware revenue grew in the mid-teens, outpacing overall product revenue growth.
- This growth is driven by large enterprise customers upgrading their firewall infrastructure and the upcoming firewall upgrade cycle, which is expected to gain momentum in the second half of 2025.

Service Revenue Dynamics:
- Service revenue, a significant part of Fortinet's business, grew 14%, although it showed a sequential decline.
- The decline was due to factors like fewer days in the quarter compared to the previous one and the need for acquired entities to grow their revenue streams, but FortiGate growth above building growth signals future service revenue growth.