Sector: Information Technology | Focus: Systems Software
HQ: Sunnyvale, California
Financial Risks
Fortinet faces significant risks from economic downturns, inflation, interest rate changes, and reduced IT spending. Supply chain disruptions, component shortages, and inventory management issues are also major concerns. Competition, product vulnerabilities, and reliance on channel partners with potential financial difficulties pose further risks. Acquisitions and investments carry integration and impairment risks. Currency fluctuations, tax uncertainties, and litigation are additional threats. The company's dependence on international sales and operations exposes it to geopolitical and regulatory risks.
Financial Upside
Fortinet's service revenue is growing significantly, driven by security subscriptions and technical support. Gross margins are improving, primarily due to the shift to higher-margin services. Operating income and margins are increasing, reflecting improved gross margins and lower operating expenses as a percentage of revenue. The company has substantial cash, cash equivalents, and investments, and a large deferred revenue balance. Acquisitions of Lacework and Next DLP, while carrying risks, are expected to contribute to revenue and market share.
