Fortinet, Inc.

Previous wording

•macroeconomic, geopolitical factors and other disruption on our manufacturing or sales, including the transition in administrations, tariffs or other trade disruptions, public health issues, wars, natural disasters and economic growth;

Current wording

•macroeconomic, geopolitical factors and other disruption on our manufacturing or sales, including tariffs or other trade disruptions, public health issues, wars, natural disasters and economic growth;

Previous wording

•drivers of long-term growth and operating leverage, such as pricing of our products and services, sales productivity, pipeline and capacity, functionality, value and technology improvements in our service offerings;

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•drivers of long-term growth and operating leverage, such as pricing of our products and services, sales productivity, pipeline and capacity, functionality, value and technology improvements in our product and service offerings;

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•our ability to successfully anticipate market changes, including those related to cloud-based solutions and to sell, support and meet service level agreements related to cloud-based solutions;

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•our ability to successfully anticipate market changes, including those related to cloud-based and AI solutions and to sell, support and meet service level agreements related to cloud-based solutions;

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•trends in revenue, cost of revenue and gross margin, including expectations regarding product revenue, service revenue and inventory related charges;

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•trends in revenue, cost of revenue and gross margin, including product revenue, service revenue and inventory related charges;

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•trends in our operating expense, including sales and marketing expense, research and development expense, general and administrative expense, and expectations regarding these expenses;

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•trends in our operating expenses, including sales and marketing expenses, research and development expenses, general and administrative expenses;

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•expected impact of plans and strategy for the acceleration of our data center footprint and our points of presence deployment;

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•expected impact of plans and strategy for the acceleration of our data center footprint and our PoP deployment;

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•expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;

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•spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;

Previous wording

Fortinet is a leader in cybersecurity, driving the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations. As of December 31, 2024, our end-customers were located in over 100 countries and included enterprises across a wide variety of market verticals, including financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As of December 31, 2024, our customers included approximately 80% of the Fortune 100 companies and approximately 72% of the Global 2000 companies. We were also ranked #7 in the Forbes Most Trusted Companies list in 2024. As a global company headquartered in Sunnyvale, California, our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of December 31, 2024, we held 1,034 U.S. patents and 1,378 global patents and we have been recognized in over 140 enterprise analyst reports demonstrating both our vision and execution across security and networking products.

Current wording

Fortinet is a leader in cybersecurity, driving the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations. As of December 31, 2025, our end-customers were located in over 100 countries and included enterprises across a wide variety of market verticals, including financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California, our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of December 31, 2025, we held 1,064 U.S. patents and a total of 1,405 global patents, including 321 AI-related patents. We have been recognized in over 140 enterprise analyst reports demonstrating both our vision and execution across security and networking products.

Previous wording

•FortiOS—FortiOS enables the convergence of security and networking to enforce consistent security policies across form factors and edges. As the foundation of the Fortinet Security Fabric, FortiOS empowers organizations to unify management and analytics for comprehensive network visibility and control at scale. To further validate our strategy,

Current wording

•FortiOS—Our unified operating system enables the convergence of networking and AI-powered security to enforce consistent policies across all form factors and edges. As the foundational engine of the Fortinet Security Fabric, FortiOS empowers organizations to unify management and analytics, providing network visibility and control at scale. FortiOS includes advanced encryption and other security technologies designed to address evolving cybersecurity threats, including emerging quantum-resistant cryptographic capabilities.

Previous wording

•FortiASIC—Our ASIC-based SPUs increase the speed, scale, efficiency and value of our solutions while improving user experience, reducing footprint and power requirements. From branch and campus to data center solutions, SPU-powered Fortinet appliances deliver superior Security Compute Ratings versus industry alternatives.

Current wording

•FortiASIC—Our ASIC-based SPUs increase the speed, scale, efficiency and value of our solutions while reducing footprint and power requirements. From branch and campus to data center solutions, SPU-powered Fortinet appliances deliver superior Security Compute Ratings versus industry alternatives.

Previous wording

•FortiCloud—Our organically built global cloud infrastructure, powered by FortiStack, which is our SaaS platform operating as a private cloud service provider and leveraging software and hardware to optimize and secure all layers, provides customers with global reach, flexible connectivity, and cost savings.

Current wording

•FortiCloud—Our organically built global cloud infrastructure provides customers with global reach, flexible connectivity and cost savings. FortiCloud is our private cloud SaaS platform, powered by FortiStack, which is our secure SaaS platform operating as a private cloud service provider and leveraging software and hardware to optimize and secure all layers.

Previous wording

•FortiEndpoint—FortiEndpoint converges secure connectivity, endpoint protection and advanced capabilities like endpoint detection and response and XDR, into a single agent. It simplifies management and enhances visibility while reducing costs and complexity. The solution gives IT teams the visibility and control they need, while security teams benefit from automated threat detection and response. This minimizes the need for manual intervention and provides faster remediation of threats across all environments.

Current wording

•FortiEndpoint—FortiEndpoint converges secure connectivity, endpoint protection and advanced capabilities like endpoint detection and response and ZTNA, into a single agent. It simplifies management and enhances visibility while reducing costs and complexity. The solution gives IT teams the visibility and control they need, while security teams benefit from automated threat detection and response. This minimizes the need for manual intervention and provides faster remediation of threats across environments.

Previous wording

•Secure Networking—Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or SaaS solution. When delivered through our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. Our network firewall offerings consist of a FortiGate data center, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, virtual private network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of our customers’ security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G/LTE and remote ethernet extenders to connect and secure any branch environment. Our Secure Connectivity solution includes FortiSwitch secure ethernet switches, FortiAP wireless local area network access points and FortiExtender 5G connectivity gateways.

Current wording

•Secure Networking—Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports a broad range of functions that can be delivered via a physical, virtual, cloud or SaaS solutions. When delivered through our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. Our network firewall offerings consist of a FortiGate, which can be deployed at branch, campus, data center, internal segmentation, private and public cloud to enable hybrid mesh firewall solutions, as well as encrypted applications (SSL inspection, virtual private network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of our customers’ security infrastructure through FortiSwitch and FortiLink. FortiExtender secures 5G/LTE and remote ethernet extenders to connect and secure any branch environment. Our Secure Connectivity solution includes FortiSwitch secure ethernet switches, FortiAP wireless local area network access points and FortiExtender 5G connectivity gateways and NAC for securing IoT devices.

Previous wording

•Unified Secure Access Service Edge (SASE)—As applications move to the cloud and hybrid workforce is now the norm, enabling secure access for users with zero trust framework becomes important. The Fortinet Unified SASE solution includes a single-vendor SASE solution that includes firewall, SD-WAN, secure web gateway, cloud access services broker, DLP and zero trust network access to deliver flexible secure access for all users. We are one of the few vendors to deliver consistent convergence and AI-powered security across Secure SD-WAN and SSE to enable a single-vendor SASE framework with a cloud-centric architecture powered by FortiOS. Our global and scalable cloud network includes 150+ points of presence to deliver the seamless secure access experience. Given this, we are well positioned to support customers expanding from SD-WAN to a single-vendor SASE platform. Additionally, we offer a full suite of comprehensive, integrated cloud security solutions that enable customers to secure their applications from code to cloud. Our solutions include application security that includes our web application firewalls, cloud network security with virtualized firewalls and cloud-native firewalls, cloud-native application protection and code security. We deliver a holistic approach to cloud security, offering a single unified platform for cloud security and secure CI/CD application development needs, consolidating protection across multiple disparate tools, including coding, deploying, and running applications across hybrid and multi-clouds, and delivering AI-driven security across integrated solutions with visibility and context across hybrid and multi-cloud. Additionally, we also offer flexible consumption licensing programs that enable organizations to dynamically optimize their cloud security needs and investments as well as readily meet their cloud minimum spend commitment obligations with Cloud Service Providers.

Current wording

•Unified Secure Access Service Edge (SASE)—As applications move to the cloud and hybrid workforce is now the norm, enabling secure access for users with zero trust framework becomes important. The Fortinet Unified SASE solution includes a single-vendor SASE solution that includes firewall, SD-WAN, secure web gateway, cloud access services broker, DLP, DEM, RBI and ZTNA to deliver flexible secure access for all users. We are one of the few vendors to deliver consistent convergence and AI-powered security across Secure SD-WAN and SSE to enable a single-vendor SASE framework with a cloud-centric architecture powered by FortiOS. Our global and scalable cloud network includes over 190 PoPs to deliver a seamless secure access experience. Leveraging this global infrastructure, we believe we are well positioned to support customers expanding from SD-WAN to a single-vendor SASE platform. We also allow our customers to deploy our FortiSASE as Sovereign SASE, which provides control over the technology elements needed for a SASE solution. FortiSASE Sovereign delivers full SASE capabilities within infrastructure environments that organizations control, including on-premises, in private data centers or trusted colocation environments. Additionally, we offer a full suite of integrated cloud security solutions that enable customers to secure their applications from code to cloud. Our solutions include application security that includes web application firewalls, cloud network security with virtualized firewalls and cloud-native firewalls, cloud-native application protection and code security. We deliver a holistic approach to cloud security, offering a single unified platform, consolidating protection across multiple disparate tools, including coding, deploying, and running applications across hybrid and multi-clouds. Additionally, we also offer flexible consumption licensing programs that enable organizations to dynamically optimize their cloud security needs and investments as well as readily meet their cloud minimum spend commitment obligations with Cloud Service Providers. We continue to develop all the core SASE capabilities in a single operating system, FortiOS, including Next-Gen Firewall, SD-WAN, ZTNA, secure web gateway, cloud access security broker and DLP. This native integration of our Next-Gen Firewall, SD-WAN and SASE has become the New-Generation SASE Firewall.

Previous wording

•AI-Driven Security Operations (SecOps)—Our AI-Driven SecOps portfolio provides a comprehensive suite of cybersecurity solutions that identify, protect, detect, respond and recover from threats, all integrated within the Fortinet Security Fabric. At the core is FortiAnalyzer, which serves as the central SOC platform with its unified data lake that provides built-in SIEM, SOAR, XDR and threat intelligence, enabling centralized visibility, analytics and automation with complete control. FortiSIEM delivers robust security information and event management for more advanced SOC requirements, while FortiSOAR enables automated orchestration and playbook-driven response. This solution set also includes FortiEDR, FortiXDR, FortiNDR, FortiSandbox, FortiDeceptor, FortiDLP and FortiRecon, helping organizations achieve defense in depth, ensuring attackers face multiple layers of detection and mitigation across endpoints, networks, and applications. To bolster their security posture, organizations contending with staff shortages can tap into FortiGuard services, including SOCaaS, MDR, Security Posture Assessment and Incident Response. Finally, FortiAI generative AI assistance streamlines operations, helping security teams stay ahead of an ever-evolving threat landscape.

Current wording

•AI-Driven Security Operations (SecOps)—Our AI-Driven SecOps portfolio provides a suite of cybersecurity solutions that identify, protect, detect, respond and recover from threats, all integrated within the Fortinet Security Fabric. At the core is FortiAnalyzer, which serves as the central SOC platform with its unified data lake that provides: built-in SIEM, SOAR, XDR and threat intelligence, enabling centralized visibility, analytics and automation with complete control. FortiSIEM delivers security information and event management for more advanced SOC requirements, while FortiSOAR enables automated orchestration and playbook-driven response. This solution set also includes FortiEndpoint, FortiNDR, FortiSandbox, FortiDeceptor, FortiDLP and FortiRecon, helping organizations achieve defense in depth, ensuring attackers face multiple layers of detection and mitigation across endpoints, networks, and applications. To bolster their security posture, organizations contending with staff shortages can tap into FortiGuard services, including SOCaaS, MDR, Security Posture Assessment and Incident Response. Finally, FortiAI generative AI assistance streamlines operations, helping security teams stay ahead of an ever-evolving threat landscape.

Previous wording

FortiGuard Labs is our cybersecurity threat intelligence and research organization comprised of experienced threat hunters, researchers, analysts, engineers and data scientists who develop and utilize machine learning and AI technologies to provide timely protection updates and actionable threat intelligence for the benefit of our customers. Using millions of global network sensors, FortiGuard Labs monitors the worldwide attack surface and employs AI to mine that data for new threats.

Current wording

FortiGuard Labs is our cybersecurity threat intelligence and research organization comprised of experienced threat hunters, researchers, analysts, engineers and data scientists who develop and utilize ML and AI technologies to provide timely protection updates and actionable threat intelligence for the benefit of our customers. Using millions of global network sensors, FortiGuard Labs monitors the worldwide attack surface and employs AI to mine that data for new threats.

Previous wording

FortiCare Technical Support Service is a per-device technical support service, which provides customers access to experts to ensure efficient and effective operations and maintenance of their Fortinet capabilities. Global technical support is offered 24x7 with flexible add-ons, including enhanced SLAs and priority hardware replacement through in-country and local depots. Organizations have the flexibility to procure different levels of service for different devices based on their availability needs. We offer three per-device support options tailored to the needs of our enterprise customers: FortiCare Elite, FortiCare Premium and FortiCare Essential. The FortiCare Elite service aims to provide a 15-minute response time for key product families.

Current wording

FortiCare Technical Support Service is a technical support service, which provides customers access to experts to ensure efficient and effective operations and maintenance of their Fortinet solution. Global technical support is offered 24x7 with flexible add-ons, including enhanced SLAs and priority hardware replacement through in-country and local depots. Organizations have the flexibility to procure different levels of service for different solutions based on their availability needs. We offer three support options tailored to the needs of our enterprise customers: FortiCare Elite, FortiCare Premium and FortiCare Essential. The FortiCare Elite service aims to provide a 15-minute response time for key product families.

Previous wording

In addition to FortiCare device level services, Advanced Support service options are available per account. These services are available for regional account support in three options: Core, Pro and Pro Plus, and can be globalized at the Pro and Pro Plus levels. Advanced Support brings support directly to each account, helping account holders to make their operations more effective and to plan and manage their solution lifecycle.

Current wording

In addition to FortiCare solution based services, Advanced Support service options are available per account. These services are available for regional account support in three options: Core, Pro and Pro Plus, and can be available or provided on a global basis at the Pro and Pro Plus levels. Advanced Support brings support directly to each account, helping account holders to make their operations more effective and to plan and manage their solution lifecycle.

Previous wording

Additionally, we are committed to addressing the cybersecurity skills shortage through training and certification programs for customers, partners and employees. The Fortinet Training Institute’s ecosystem of public and private partnerships around the world extend to industry, academia, government and nonprofits to ensure we are reaching and increasing access of our cybersecurity certifications and training to all populations. The Fortinet Training Institute has issued over one million certifications to date.

Current wording

Additionally, we are committed to addressing the cybersecurity skills shortage through training and certification programs for customers, partners and employees. The Fortinet Training Institute’s ecosystem of public and private partnerships around the world extend to industry, academia, government and nonprofits to ensure we are reaching and increasing access of our cybersecurity certifications and training to all populations. The Fortinet Training Institute has issued approximately two million certifications to date.

Previous wording

•Total revenue was $5.96 billion in 2024, an increase of 12% compared to $5.30 billion in 2023.

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•Total revenue was $6.80 billion in 2025, an increase of 14% compared to $5.96 billion in 2024.

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•Product revenue was $1.91 billion in 2024, a decrease of 1% compared to $1.93 billion in 2023.

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•Product revenue was $2.22 billion in 2025, an increase of 16% compared to $1.91 billion in 2024.

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•Service revenue was $4.05 billion in 2024, an increase of 20% compared to $3.38 billion in 2023.

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•Service revenue was $4.58 billion in 2025, an increase of 13% compared to $4.05 billion in 2024.

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•Total gross profit was $4.80 billion in 2024, an increase of 18% compared to $4.07 billion in 2023.

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•Total gross profit was $5.47 billion in 2025, an increase of 14% compared to $4.80 billion in 2024.

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•Total gross margin was 80.6% in 2024, an increase of 3.9 percentage points compared to 76.7% in 2023.

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•Total gross margin was 80.5% in 2025, remaining comparatively flat compared to 80.6% in 2024.

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•Operating income was $1.80 billion in 2024, an increase of 45% compared to $1.24 billion in 2023.

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•Operating income was $2.08 billion in 2025, an increase of 16% compared to $1.80 billion in 2024.

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•Operating margin was 30.3% in 2024, an increase of 6.9 percentage points compared to 23.4% in 2023.

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•Operating margin was 30.7% in 2025, an increase of 0.4 percentage points compared to 30.3% in 2024.

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•Cash, cash equivalents, short-term and long-term investments and marketable equity securities were $4.07 billion as of December 31, 2024, an increase of $1.63 billion, or 67%, from December 31, 2023.

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•Cash, cash equivalents, short-term and long-term investments were $3.92 billion as of December 31, 2025, a decrease of $144.3 million, or 4%, from December 31, 2024.

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•Deferred revenue was $6.36 billion as of December 31, 2024, an increase of $625.9 million, or 11%, from December 31, 2023. Short-term deferred revenue was $3.28 billion as of December 31, 2024, an increase of $427.5 million, or 15%, from December 31, 2023.

Current wording

•Deferred revenue was $7.12 billion as of December 31, 2025, an increase of $754.9 million, or 12%, from December 31, 2024. Short-term deferred revenue was $3.64 billion as of December 31, 2025, an increase of $359.8 million, or 11%, from December 31, 2024.

Previous wording

•Cash flows from operating activities were $2.26 billion in 2024, an increase of $322.6 million, or 17%, compared to 2023.

Current wording

•Cash flows from operating activities were $2.59 billion in 2025, an increase of $332.5 million, or 15%, compared to 2024.

Previous wording

On a geographic basis, revenue continues to be diversified globally, which remains a key strength of our business. In 2024, the Americas region, the Europe, Middle East and Africa (“EMEA”) region and the Asia Pacific (“APAC”) region contributed 41%, 40% and 19% of our total revenue, respectively, and increased 12%, 16% and 6% compared to 2023, respectively.

Current wording

Revenue continues to be diversified globally, which remains a key strength of our business. In 2025, the Americas region, the EMEA region and the APAC region contributed 40%, 42% and 18% of our total revenue, respectively, and increased 11%, 18% and 13% compared to 2024, respectively.

Previous wording

Service revenue grew 20% in 2024 compared to 2023, primarily driven by the strength of our security subscription revenue, which grew 22% in 2024 compared to 2023. The increase was primarily due to the recognition of service revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and strength in unified SASE and SecOps. We expect our service revenue to continue to grow in 2025, with growth opportunities that include unified SASE and SecOps offerings as well as the year over year increase in current deferred revenue. While service revenue is expected to grow in 2025, we anticipate that the growth rates will continue toslow down in 2025 due to slowing short term deferred revenue growth over thepast several quarters.

Current wording

Service revenue grew 13% in 2025 compared to 2024, primarily driven by the strength of our security subscription revenue, which grew 14% in 2025 compared to 2024. The increase was primarily due to the recognition of service revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and strength in unified SASE and SecOps. We expect our service revenue to continue to grow in 2026.

Previous wording

Our billings were diversified on a geographic basis. In 2024, seven countries represented approximately 50% of our billings and the remaining approximately 50% were from over 100 countries that each individually contributed less than 3%of our billings.

Current wording

Our billings were diversified on a geographic basis. In 2025, seven countries represented approximately 50% of our billings and the remaining approximately 50% in the aggregate were from over 100 countries that each individually contributed less than 3%of our billings.

Previous wording

Total gross margin increased 3.9 percentage points in 2024 compared to 2023, primarily driven by increased product and service gross margin and a shift in the revenue mix to higher margin service revenue. Our overall gross margin in 2025 will be impacted by service and product revenue mix and their respective gross margins. We expect our service gross margin to decrease for full year 2025 compared to full year 2024, as we expand our data center footprint and colocation and cloud hosting capacity to support the growth in our unified SASE and SecOps offerings.

Current wording

Total gross margin remained comparatively flat in 2025 compared to 2024. Our overall gross margin in 2026 will be impacted by service and product revenue mix and their respective gross margins. While we are implementing price increases to mitigate higher hardware component costs, the impact on our margins will depend on the timing and market acceptance of these adjustments. Our product gross margin may decline if these pricing actions do not fully offset rising input costs. Our service gross margin is expected to remain relatively consistent, for full year 2026 compared to full year 2025, despite continued expansion of our data center footprint and colocation and cloud hosting capacity to support the growth in our unified SASE and SecOps offerings. We currently do not expect the U.S. tariffs to have a meaningful impact on our gross margin. However, changes in trade policy, including increases in tariff rates, changes in customs or tariffs classifications, or modifications to tariff exemptions, could adversely affect our gross margin in the future, and we expect any resulting impact would primarily relate to our hardware sales to the U.S. customers.

Previous wording

Operating expenses as a percentage of revenue decreased approximately 3.0 percentage points in 2024 compared to 2023, mainly because our revenue growth outpaced personnel costs. Headcount increased 4% to 14,138 employees as of December 31, 2024, up from 13,568 as of December 31, 2023. We expect our operating expenses as a percentage of revenue to increase for full year 2025 compared to full year 2024 as we expand our workforce organically and through acquisitions.

Current wording

Operating expenses as a percentage of revenue decreased 0.5 percentage points in 2025 compared to 2024, mainly because our revenue growth outpaced our personnel costs growth. Headcount increased 7% to 15,109 employees as of December 31, 2025, up from 14,138 as of December 31, 2024.

Previous wording

Impact of Macroeconomic and Geopolitical Developments

Current wording

Impact of Macroeconomic and Geopolitical and Supply Chain Developments

Previous wording

Our overall performance depends in part on worldwide economic and geopolitical conditions, such as GDP growth, the war in Ukraine or tensions between China and Taiwan, and their impact on customer behavior. Worsening economic conditions, including inflation, changing interest rates, tariffs and other trade disruptions, slower growth, any recession, fluctuations in foreign exchange rates and other changes in economic conditions, may result in decreased sales productivity and growth and adversely affect our results of operations and financial performance. We have seen certain impacts on our business, results of operations, financial condition, cash flows, liquidity and capital and financial resources such as longer sales cycles, delayed purchases and increased commitments with certain suppliers and increased inventory and inventory purchase commitment reserves.

Current wording

Our overall performance depends in part on worldwide economic and geopolitical conditions, such as trade policies and tariffs, GDP growth or contraction (both domestically and internationally), geopolitical instability and uncertainty, the war in Ukraine, tensions between China and Taiwan or conflicts in the Middle East, and their impact on customer behavior. Worsening economic conditions, including tariffs, inflation, changing interest rates and other trade disruptions, slower growth, any recession, fluctuations in foreign exchange rates and other changes in economic conditions, may result in decreased sales productivity, lower growth and adversely affect our results of operations and financial performance. We have seen, and could continue to see, certain impacts on our business, results of operations, financial condition, cash flows, liquidity and capital and financial resources such as longer sales cycles, delayed purchases and increased commitments with certain suppliers and increased inventory and inventory purchase commitment reserves. Tariffs imposed by the United States, as well as any new or additional retaliatory tariffs that could be imposed by other countries in response, could have a material adverse impact on global trade, supply chains and other worldwide economic and geopolitical conditions, which could increase our product costs and also affect customer sentiment in deciding whether to purchase our products. We continue to monitor the impact of tariffs onour business. In addition, as a result of the rapid global build-out of AI infrastructure, there is currently a global shortage of memory chips, which are a component in certain of our products. As a result, we are currently experiencing, and may continue to experience, constraints on the availability of memory chips, which may lead to delays in the production and delivery of our products and increased costs to source available memory chips, any of which could harm our business, financial condition and results of operations. To mitigate increased hardware costs resulting from these shortages, we are implementing price increases, which may negatively impact demand for our products and may not be sufficient or timely to offset rising input costs, potentially resulting in margin compression and adversely affecting our business, financial condition and results of operations.

Previous wording

Worsening economic conditions may have a material negative impact on our results in future periods and may negatively impact our billings, revenue and costs, and may decrease growth and profitability. The extent of the impact of economic conditions on our operational and financial performance will depend on ongoing developments, including those discussed above and others identified in Part I, Item 1A “Risk Factors” in this Form 10-K. Given the dynamic nature of these circumstances, the full impact of worsening economic conditions on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources cannot be reasonably estimated at this time.

Current wording

Worsening economic, geopolitical and supply chain developments may have a material negative impact on our results in future periods and may negatively impact our billings, revenue and costs, and may decrease growth and profitability. The extent of the impact of such conditions on our operational and financial performance will depend on ongoing developments, including those discussed above and others identified in Part I, Item 1A “Risk Factors” in this Form 10-K. Given the dynamic nature of these circumstances, the full impact of worsening economic, geopolitical and supply chain developments on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources cannot be reasonably estimated at this time.

Previous wording

We typically sell our security solutions to distributors that sell to networking security focused resellers and to certain service providers and managed security service providers, who, in turn, sell to end-customers or use our products and services to provide hosted solutions to other enterprises. At times, we also sell directly to enterprise customers, service providers, systems integrators and large enterprises. We also sell our software licenses and cloud delivered services via different cloud service provider platforms, both directly and through our channel partners. Our end-customers are located in over 100 countries and include small, medium and large enterprises and government organizations across a wide range of industries, including financial services, government, healthcare, manufacturing, retail, technology and telecommunications. An end-customer deployment may involve as few as one or as many as thousands of secure networking, unified SASE and security operations technology products or users, depending on the end-customer’s size and security requirements.

Current wording

We typically sell our security solutions to distributors that sell to networking security focused resellers and to certain service providers and MSSPs, who, in turn, sell to end-customers or use our products and services to provide hosted solutions to other enterprises. At times, we also sell directly to enterprise customers, service providers, systems integrators and large enterprises. We also sell our software licenses and cloud delivered services via different cloud service provider platforms, both directly and through our channel partners. Our end-customers are located in over 100 countries and include small, medium and large enterprises and government organizations across a wide range of industries, including financial services, government, healthcare, manufacturing, retail, technology and telecommunications. An end-customer deployment may involve as few as one or as many as thousands of secure networking, unified SASE and security operations technology products or users, depending on the end-customer’s size and security requirements.

Previous wording

Our customers purchase our hardware products, software licenses and cloud-delivered solutions, including our FortiGuard and other security subscriptions, FortiCare technical support services, certain unified SASE and SecOps services. We generally invoice at the time of our sale for the total price of the products and services. Standard payment terms are generally no more than 60 days, though we may offer extended payment terms to certain distributors or large enterprises.

Current wording

Our customers purchase our hardware products, software licenses, SaaS subscriptions and cloud-delivered solutions, including our FortiGuard security subscriptions and FortiCare technical support services. Depending on the solution, these may be sold in a bundle or standalone as part of a solution sale. We generally invoice at the time of our sale for the total price of the products and services. Standard payment terms are generally no more than 60 days, though we may offer extended payment terms to certain distributors or large enterprises.

Previous wording

Deferred revenue. Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue. The majority of our deferred revenue balance consists of the unrecognized portion of service revenue from FortiGuard and other security subscriptions and FortiCare technical support service contracts, which is recognized as revenue ratably over the service term. We monitor our deferred revenue balance, short term and total deferred revenue growth and the mix of short-term and long-term deferred revenue because deferred revenue represents a significant portion of free cash flow and of revenue to be recognized in future periods. Deferred revenue was $6.36 billion as of December 31, 2024, an increase of $625.9 million, or 11%, from December 31, 2023. Short term deferred revenue was $3.28 billion as of December 31, 2024, an increase of $427.5 million, or 15%, from December 31, 2023.

Current wording

Deferred revenue. Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue. The majority of our deferred revenue balance consists of the unrecognized portion of service revenue from FortiGuard and other security subscriptions and FortiCare technical support service contracts, which is recognized as revenue ratably over the service term. We monitor our deferred revenue balance, short term and total deferred revenue growth and the mix of short-term and long-term deferred revenue because deferred revenue represents a significant portion of free cash flow and of revenue to be recognized in future periods. Deferred revenue was $7.12 billion as of December 31, 2025, an increase of $754.9 million, or 12%, from December 31, 2024. Short term deferred revenue was $3.64 billion as of December 31, 2025, an increase of $359.8 million, or 11%, from December 31, 2024.