Fortinet Stock Heads for Record Two-Day Rout. A Key Revenue Driver May Be to Blame. -- Barrons.com

By Ty Roush

An earnings beat wasn't enough to save Fortinet stock from a selloff on Thursday. Analysts argue the cybersecurity company's booming firewall business may be approaching a turning point.

Fortinet shares plunged 20% to $138.58. The stock has fallen 27% over the last two sessions, including Thursday, putting it on pace for its worst two-day stretch on record, according to Dow Jones Market Data. Competitor CrowdStrike fell 1.7%, Palo Alto Networks dropped 3.5%, Cisco declined 0.4%, and Zscaler fell 2.9%.

The company reported third-quarter adjusted earnings and revenue above Wall Street's consensus. It expects fourth-quarter adjusted profit of between 93 cents and 95 cents a share, while revenue is projected to fall between $2.155 billion and $2.245 billion. Consensus estimates called for earnings of 88 cents a share and revenue of $2.16 billion.

Fortinet also raised its full-year guidance. The company forecast adjusted earnings of $3.54 to $3.58 a share and revenue of $8.125 billion to $8.215 billion, above estimates for profit of $3.45 a share and $8.12 billion in revenue.

But Wall Street wasn't impressed.

KeyBanc analyst Eric Heath wrote in a research note that Fortinet's firewall upgrade cycle, which has fueled demand for its security equipment, may be losing momentum. Fortinet's product revenue beat consensus estimates by just $40 million, compared with roughly $120 million in each of its previous two quarters, Heath noted.

Product revenue grew 37% year over year in the third quarter, slowing from 52% in the prior quarter. Fortinet's fourth-quarter outlook implies growth of roughly 20%, raising concerns that demand for new firewall equipment could weaken further heading into 2027.

Fortinet's services business already has struggled to gain momentum.

Evercore ISI analysts argued in a note that a delayed acceleration in services revenue could undermine the bullish case for Fortinet's stock, particularly as growth in hardware sales moderates.

Fortinet's services revenue grew 13% year over year to $1.31 billion in the third quarter, falling short of forecasts for roughly $1.33 billion. The company also lowered its full-year services outlook by $40 million.

The company attributed the services weakness partly to large enterprise customers delaying the activation of subscriptions as they roll out new equipment. Customers are still purchasing services, but revenue from those agreements is taking longer to materialize.

Not everyone is convinced the slowdown warrants such a steep selloff.

BTIG analyst Gray Powell wrote in a note that Fortinet's stock plunge in after-hours trading was an "extreme overreaction." Powell argued that Fortinet's underlying growth prospects remain intact, and that services billings are accelerating, which could translate into stronger revenue growth next year.

Powell expects Fortinet's services revenue growth to reach 14% to 15% in 2027, suggesting the weakness could prove temporary.

Write to Ty Roush at tyler.roush@barrons.com

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October 29, 2026 10:28 ET (14:28 GMT)