Fortinet, Inc.

Previous wording

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

Current wording

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

Previous wording

•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;

Current wording

•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 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 Secure Access Service Edge (“SASE”) and AI-driven security operations (“SecOps”). As of June 30, 2026, 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 (“OT”) 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 June 30, 2026, we held 1,115 U.S. patents and a total of 1,448 global patents.

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 Secure Access Service Edge (“SASE”) and AI-driven security operations (“SecOps”). As of September 30, 2026, 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 (“OT”) 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 September 30, 2026, we held 1,159 U.S. patents and a total of 1,474 global patents.

Previous wording

Security Fabric, FortiOS empowers organizations to unify management and analytics, providing network visibility and control at scale. FortiOS includes advanced encryption, quantum safe tools, and other security technologies designed to address evolving cybersecurity threats, including emerging quantum-resistant cryptographic capabilities.

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, quantum safe tools, and other security technologies designed to address evolving cybersecurity threats, including emerging quantum-resistant cryptographic capabilities.

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 a broad range of functions that can be delivered via 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 (secure sockets layer inspection, virtual private network and Internet Protocol Security connectivity). Our ability to converge networking and security also enables ethernet or Wi-Fi to become an extension of our customers’ security infrastructure through FortiLink and FortiSwitch and FortiAP. FortiExtender secures 5G/LTE and remote ethernet extenders to connect and secure any branch environment. Our Secure Connectivity solution includes

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 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 (secure sockets layer inspection, virtual private network and Internet Protocol Security connectivity). Our ability to converge networking and security also enables ethernet or Wi-Fi to become an extension of our customers’ security infrastructure through FortiLink and FortiSwitch and FortiAP. 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 Network Access Control for securing Internet of Things (“IoT”) devices.

Previous wording

•Total gross profit was $1.64 billion and $3.13 billion during the three and six months ended June 30, 2026, an increase of 25% and 22%, respectively, compared to $1.32 billion and $2.56 billion in the same periods last year.

Current wording

•Total gross profit was $1.64 billion and $4.77 billion during the three and nine months ended September 30, 2026, an increase of 18% and 21%, respectively, compared to $1.39 billion and $3.95 billion in the same periods last year.

Previous wording

•Total gross margin was 80.2% and 80.3% during the three and six months ended June 30, 2026, a decrease of 0.5 in each period, compared to 80.7% and 80.8% in the same periods last year.

Current wording

•Total gross margin was 79.0% and 79.8% during the three and nine months ended September 30, 2026, a decrease of 1.8 and 1.0 percentage points, respectively, compared to 80.8% in the same periods last year.

Previous wording

•Cash, cash equivalents, short-term and long-term investments were $4.47 billion as of June 30, 2026.

Current wording

•Cash, cash equivalents, short-term and long-term investments were $5.32 billion as of September 30, 2026.

Previous wording

•Deferred revenue was $7.68 billion, including short-term deferred revenue of $3.84 billion, as of June 30, 2026.

Current wording

•Deferred revenue was $7.93 billion, including short-term deferred revenue of $3.96 billion, as of September 30, 2026.

Previous wording

•Cash flows from operating activities were $2.12 billion during the six months ended June 30, 2026, an increase of $805.5 million, or 61%, compared to the same period last year.

Current wording

•Cash flows from operating activities were $3.07 billion during the nine months ended September 30, 2026, an increase of $1.10 billion, or 56%, compared to the same period last year.

Previous wording

Revenue continues to be diversified globally, which remains a key strength of our business. During the three months ended June 30, 2026, the EMEA region, the Americas region and the APAC region contributed 43%, 39% and 18% of our total revenue, respectively, and revenue grew 31%, 23% and 21% in these regions compared to the same period last year, respectively. During the six months ended June 30, 2026, EMEA, the Americas and APAC regions contributed 42%, 40% and 18% of our total revenue, respectively, and revenue grew by 28%, 20% and 18% in these regions compared to the same period last year, respectively.

Current wording

Revenue continues to be diversified globally, which remains a key strength of our business. During the three months ended September 30, 2026, the EMEA region, the Americas region and the APAC region contributed 42%, 40% and 18% of our total revenue, respectively, and revenue grew 23%, 21% and 14% in these regions compared to the same period last year, respectively. During the nine months ended September 30, 2026, EMEA, the Americas and APAC regions contributed 42%, 40% and 18% of our total revenue, respectively, and revenue grew by 26%, 20% and 17% in these regions compared to the same period last year, respectively.

Previous wording

Product revenue increased 52% and 46% during the three and six months ended June 30, 2026, respectively, compared to the same periods last year, primarily driven by hardware revenue growth resulting from higher unit shipments year over year and recent pricing actions. We experienced product revenue growth across our hardware products and software licensing, which mainly benefited from growth in secure networking hardware products and term licenses, including increased demand for higher performance products, deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases. We expect our product revenue to continue to grow year over year for the remainder of 2026 compared to the same periods of 2025.

Current wording

Product revenue increased 37% and 43% during the three and nine months ended September 30, 2026, respectively, compared to the same periods last year, primarily driven by hardware revenue growth resulting from higher average selling prices resulting from customer demand for higher performance products and recent pricing actions, as well as higher unit shipments year over year. We experienced product revenue growth across our hardware products and software licensing, which mainly benefited from growth in secure networking hardware products and term licenses, including increased demand for higher performance products, deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases. We expect our product revenue to continue to grow year over year for the remainder of 2026 compared to the same periods of 2025.

Previous wording

Service revenue increased $153.8 million, or 14% and $277.7 million, or 13%, during the three and six months ended June 30, 2026, respectively, as compared to the same periods last year, primarily driven by the strength of our security subscription revenue, which increased $85.3 million, or 13% and $156.2 million, or 12%, respectively, and our technical support and other services revenue, which increased $68.5 million, or 14% and $121.5 million, or 13%, respectively. The increase was primarily due to the recognition of 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, as well as FortiCare technical support service. We expect our service revenue to continue to grow year over year for the remainder of 2026.

Current wording

Service revenue increased $147.8 million, or 13%, and $425.5 million, or 13%, during the three and nine months ended September 30, 2026, respectively, as compared to the same periods last year, primarily driven by growth in security subscription revenue of $81.6 million, or 12%, and $237.8 million, or 12%, respectively, and our technical support and other services revenue, which increased $66.2 million, or 13%, and $187.7 million, or 13%, respectively. The increase was primarily due to the recognition of 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, as well as FortiCare technical support service. We expect our service revenue to continue to grow year over year for the remainder of 2026.

Previous wording

Our billings were diversified on a geographic basis. During the three months ended June 30, 2026, 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.

Current wording

Our billings were diversified on a geographic basis. During the three months ended September 30, 2026, five 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 decreased 0.5 percentage points during each of the three and six months ended June 30, 2026, compared to the same periods last year, primarily due to a shift in the revenue mix from service revenue to lower margin product revenue. Our overall gross margin for the full year of 2026 will be impacted by service and product revenue mix and their respective gross margins. Our product gross margin may decline for the full year 2026 as compared to 2025 primarily due to continued higher hardware component costs. We also expect service gross margin to decline slightly for the full year 2026 as compared to 2025, primarily due to 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.

Current wording

Total gross margin decreased 1.8 and 1.0 percentage points during the three and nine months ended September 30, 2026, compared to the same periods last year, primarily due to a shift in the revenue mix from service revenue to lower margin product revenue. Our overall gross margin for the full year of 2026 will be impacted by service and product revenue mix and their respective gross margins. Our product gross margin may decline for the full year 2026 as compared to 2025 primarily due to continued higher hardware component costs. We also expect service gross margin for the full year 2026 to remain relatively consistent with 2025, while continuing 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 tariff 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 U.S. customers.

Previous wording

Operating expenses as a percentage of revenue decreased by 6.0 and 4.4 percentage points during the three and six months ended June 30, 2026, respectively, compared to the same periods last year, mainly because our revenue growth outpaced the growth in our personnel costs. Headcount increased to 15,472 employees as of June 30, 2026, a 4% increase compared to 14,898 as of June 30, 2025.

Current wording

Operating expenses as a percentage of revenue decreased by 3.9 and 4.2 percentage points during the three and nine months ended September 30, 2026, respectively, compared to the same periods last year, mainly because our revenue growth outpaced the growth in our personnel costs. Headcount increased to 15,540 employees as of September 30, 2026, a 3% increase compared to 15,015 as of September 30, 2025.

Previous wording

Operating margin increased 5.6 and 3.8 percentage points during the three and six months ended June 30, 2026, respectively, driven by revenue growth exceeding expense growth, resulting in improved operating leverage, partially offset by lower total gross margin. For the full year 2026, we expect our operating margin to increase slightly compared to 2025, benefiting from operating leverage and measured investments. Both total revenue and operating expense are expected to increase in 2026 compared to the prior year. The increase in expense is expected to primarily reflect investments in sales and marketing headcount, product development, and continued investments in data centers and real estate. We expect these and other investments to support long-term revenue growth and market expansion.

Current wording

Operating margin increased 2.2 and 3.2 percentage points during the three and nine months ended September 30, 2026, respectively, driven by revenue growth exceeding expense growth, resulting in improved operating leverage, partially offset by lower total gross margin. For the full year 2026, we expect our operating margin to increase slightly compared to 2025, benefiting from operating leverage and measured investments. Both total revenue and operating expense are expected to increase in 2026 compared to the prior year. The increase in expense is expected to primarily reflect investments in sales and marketing headcount, product development, and continued investments in data centers and real estate. We expect these and other investments to support long-term revenue growth and market expansion.

Previous 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 on our 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.

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 activity, lower growth and may 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 on our 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 critical 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, 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 II, Item 1A “Risk Factors” in this Form 10-Q. 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.

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 II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q. 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

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 $7.68 billion as of June 30, 2026, an increase of $559.9 million, or 8%, from December 31, 2025. Short-term deferred revenue was $3.84 billion as of June 30, 2026, an increase of $205.8 million, or 6%, from December 31, 2025.

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 $7.93 billion as of September 30, 2026, an increase of $818.6 million, or 12%, from December 31, 2025. Short-term deferred revenue was $3.96 billion as of September 30, 2026, an increase of $325.0 million, or 9%, from December 31, 2025.

Previous wording

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combinations during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue as well as cash flows. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings are impacted by the term of security subscription and support agreements and do not provide an indication as to the timing of revenue being recognized from these service contracts. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue. Total billings were $2.37 billion for the three months ended June 30, 2026, an increase of 33% compared to $1.78 billion in the same period last year.

Current wording

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combinations during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue as well as cash flows. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings are impacted by the term of security subscription and support agreements and do not provide an indication as to the timing of revenue being recognized from these service contracts. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue. Total billings were $2.34 billion for the three months ended September 30, 2026, an increase of 29% compared to $1.81 billion in the same period last year. Total billings were $6.79 billion for the nine months ended September 30, 2026, an increase of 31% compared to $5.18 billion in the same period last year.

Previous wording

Free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus purchases of property and equipment. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes investing activities other than capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the condensed consolidated statements of cash flows and under “Liquidity and Capital Resources” and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow is provided below:

Current wording

Free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus purchases of property and equipment and excluding any significant non-recurring items, such as proceeds from intellectual property matters and proceeds from escrow settlements. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes investing activities other than capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the condensed consolidated statements of cash flows and under “Liquidity and Capital Resources” and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow is provided below:

Previous wording

There were no material changes to our critical accounting policies and estimates as of and for the six months ended June 30, 2026, as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K filed with the SEC on February 25, 2026 (the “Form 10-K”).

Current wording

There were no material changes to our critical accounting policies and estimates as of and for the nine months ended September 30, 2026, as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K filed with the SEC on February 25, 2026 (the “Form 10-K”).

Previous wording

Total revenue increased $417.9 million, or 26%, during the three months ended June 30, 2026 compared to the same period last year. We continued to experience geographically diversified revenue, as well as diversification across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Current wording

Total revenue increased $353.5 million, or 20%, during the three months ended September 30, 2026 compared to the same period last year. We continued to experience geographically diversified revenue, as well as diversification across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Previous wording

Product revenue increased $264.1 million, or 52%, during the three months ended June 30, 2026 compared to the same period last year, primarily driven by hardware revenue growth resulting from higher unit shipments year over year, higher average selling prices resulting from customer demand for higher-performing models and recent pricing actions. We experienced product revenue growth across our hardware products and software licensing, mainly driven by growth in secure networking hardware products and term licenses, including increased demand for higher performance products, deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases.

Current wording

Product revenue increased $205.7 million, or 37%, during the three months ended September 30, 2026 compared to the same period last year, primarily driven by hardware revenue growth resulting from higher average selling prices resulting from customer demand for higher performance products and recent pricing actions, as well as higher unit shipments year over year. We experienced product revenue growth across our hardware products and software licensing, mainly driven by growth in secure networking hardware products and term licenses, including increased demand for higher performance products, deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases.

Previous wording

Service revenue increased $153.8 million, or 14%, during the three months ended June 30, 2026 compared to the same period last year. Security subscription revenue increased $85.3 million, or 13%, and technical support and other services revenue increased $68.5 million, or 14%, during the three months ended June 30, 2026 compared to the same period last year. The increase was primarily due to the reco gnition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps, as well as FortiCare technical support service.

Current wording

Service revenue increased $147.8 million, or 13%, during the three months ended September 30, 2026 compared to the same period last year. Security subscription revenue increased $81.6 million, or 12%, and technical support and other services revenue increased $66.2 million, or 13%, during the three months ended September 30, 2026 compared to the same period last year. The increase was primarily due to the reco gnition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps, as well as FortiCare technical support service.

Previous wording

Total gross margin decreased 0.5 percentage points during the three months ended June 30, 2026 compared to the same period last year, primarily driven by a shift in the revenue mix to lower margin product revenue. Revenue mix shifted by 6.5 percentage points from service revenue to product revenue, as a percentage of total revenue.

Current wording

Total gross margin decreased 1.8 percentage points during the three months ended September 30, 2026 compared to the same period last year, primarily driven by a shift in the revenue mix to lower margin product revenue.

Previous wording

Product gross margin increased 2.4 percentage points during the three months ended June 30, 2026 compared to the same period last year, primarily driven by recent pricing actions, partially offset by a shift in revenue mix to hardware and increased costs of memory chips. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs and costs of materials used in production.

Current wording

Product gross margin decreased 3.3 percentage points during the three months ended September 30, 2026 compared to the same period last year, primarily driven by increased costs of memory chips and inventory related reserve expense in the current period, partially offset by recent pricing actions. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs and costs of materials used in production.

Previous wording

Service gross margin decreased 0.1 percentage points during the three months ended June 30, 2026 compared to the same period last year, primarily driven by increased costs related to the continued expansion of our data center and cloud services, partially offset by service revenue growth outpacing increases in labor costs. Cost of service revenue was comprised primarily of personnel-related costs, replacement and repair costs, cloud services costs from owned data centers, colocation providers and cloud service providers, infrastructure depreciation and related operating costs, software and delivery costs, and facility-related costs.

Current wording

Service gross margin increased 0.4 percentage points during the three months ended September 30, 2026 compared to the same period last year, primarily driven by service revenue growth outpacing increases in labor costs. Cost of service revenue was comprised primarily of personnel-related costs, replacement and repair costs, cloud services costs from owned data centers, colocation providers and cloud service providers, infrastructure depreciation and related operating costs, software and delivery costs, and facility-related costs.

Previous wording

Research and development expenses increased $15.5 million, or 7%, during the three months ended June 30, 2026 compared to the same period last year, primarily due to an increase of $13.5 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products and the impact of the recent acquisitions. We expect research and development expenses to increase in absolute dollars year over year during the remainder of 2026 as we invest to drive continued innovation in our products and services.

Current wording

Research and development expenses increased $11.0 million, or 5%, during the three months ended September 30, 2026 compared to the same period last year, primarily due to an increase of $9.4 million in product development costs. We expect research and development expenses to increase in absolute dollars for the full year 2026 as compared to 2025 as we invest to drive continued innovation in our products and services.

Previous wording

Sales and marketing expenses increased $77.1 million, or 13%, during the three months ended June 30, 2026 compared to the same period last year, primarily due to an increase of $73.4 million in personnel-related costs. We expect our sales and marketing expenses to increase in absolute dollars year over year during the remainder of 2026 as we continue to invest in our global sales and marketing organization to capture additional market share.

Current wording

Sales and marketing expenses increased $81.5 million, or 14%, during the three months ended September 30, 2026 compared to the same period last year, primarily due to an increase of $71.4 million in personnel-related costs. In addition, travel expense increased $4.5 million and marketing programs increased $3.8 million. We expect our sales and marketing expenses to increase in absolute dollars for the full year 2026 as compared to 2025 as we continue to invest in our global sales and marketing organization to capture additional market share.

Previous wording

General and administrative expenses increased $4.2 million, or 7%, during the three months ended June 30, 2026 compared to the same period last year, primarily due to an increase of $2.1 million in legal related fees and other professional services fees and an increase of $1.5 million in personnel-related costs. We expect our general and administrative expenses to increase in absolute dollars year over year during the remainder of 2026, primarily to support our growing operations while continuing to leverage scale and efficiencies.

Current wording

General and administrative expenses decreased $1.8 million, or 3%, during the three months ended September 30, 2026 compared to the same period last year, primarily due to a decrease of $1.9 million in legal-related fees and other professional services fees. We expect our general and administrative expenses to increase in absolute dollars for the full year 2026 as compared to 2025, primarily to support our growing operations while continuing to leverage scale and efficiencies.

Previous wording

We generated operating income of $689.3 million during the three months ended June 30, 2026, an increase of $231.3 million, or 51%, compared to $458.0 million in the same period last year. Operating margin was 33.7% during the three months ended June 30, 2026, compared to 28.1% in the same period last year. The improvement in operating margin was primarily driven by operating leverage, as revenue growth outpaced the increase in operating expenses, partially offset by lower total gross margin. The 5.6 percentage point increase in operating margin was primarily due to 3.6, 1.9 and 0.6 percentage points decreases in sales and marketing expenses, research and development expenses and general and administrative expenses, as a percentage of revenue, respectively, partially offset by a 0.5 percentage point decrease in gross margin as a percentage of revenue.

Current wording

We generated operating income of $704.3 million during the three months ended September 30, 2026, an increase of $157.0 million, or 29%, compared to $547.3 million in the same period last year. Operating margin was 33.9% during the three months ended September 30, 2026, compared to 31.7% in the same period last year. The improvement in operating margin was primarily driven by operating leverage, as revenue growth outpaced the increase in operating expenses, partially offset by lower total gross margin. The 2.2 percentage point increase in operating margin was primarily due to 1.8, 1.5 and 0.7 percentage points decreases in sales and marketing expenses, research and development expenses and general and administrative expenses, as a percentage of revenue, respectively, partially offset by a 1.8 percentage point decrease in gross margin as a percentage of revenue.

Previous wording

Interest income decreased $11.8 million during the three months ended June 30, 2026 compared to the same period last year, primarily due to lower average interest rates and lower average cash and cash equivalents balances as a result of share repurchases and debt repayment. Interest income varies depending on our average cash, cash equivalents and short-term and long-term investments balances during the period, types and mix of deposits and investments, and interest rates. Interest expense decreased $1.4 million during the three months ended June 30, 2026 compared to the same period last year, primarily due to the repayment of our 2026 Senior Notes at maturity in March 2026. Other income—net decreased $18.0 million during the three months ended June 30, 2026 compared to the same period last year, primarily due to a$10.1 million increase in foreign currency exchange losses and a $6.3 million decrease in netgains on marketable equity securities.

Current wording

Interest income increased $2.0 million during the three months ended September 30, 2026 compared to the same period last year, primarily due to higher average cash and cash equivalents balances in the current quarter compared to the same period in 2025 as a result of stock repurchases in the prior year. Interest income varies depending on our average cash, cash equivalents and short-term and long-term investments balances during the period, types and mix of deposits and investments, and interest rates. Interest expense decreased $3.2 million during the three months ended September 30, 2026 compared to the same period last year, primarily due to the repayment of our 2026 Senior Notes at maturity in March 2026. Other income—net decreased $2.0 million during the three months ended September 30, 2026 compared to the same period last year, primarily due to a $17.5 million decrease related to the fair value of our marketable equity securities, and a$3.1 million decrease in net rental income from real estate leases, partially offset by a $17.0 million gain from escrow settlement and a $1.1 million decrease in foreign currency exchange losses.

Previous wording

Our effective tax rate was 17% for each of the six months ended June 30, 2026 and 2025. The provision for income taxes for the six months ended June 30, 2026 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes totaling $332.0 million, which was favorably affected by a tax benefit of $68.0 million from the FDDEI deduction and excess tax benefits from stock-based compensation expense of $27.1 million.

Current wording

Our effective tax rate was 16% for the three months ended September 30, 2026, compared to an effective tax rate of 20% for the same period last year. The decrease in our effective tax rate compared to the same period in 2025 was primarily due to an increase in the FDDEI deduction and an increase in excess tax benefits from stock-based compensation. The provision for income taxes for the three months ended September 30, 2026 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes totaling $181.2 million, which was favorably affected by a tax benefit of $36.2 million from the FDDEI deduction and excess tax benefits from stock-based compensation expense of $25.5 million.

Previous wording

Total revenue increased $727.8 million, or 23%, during the six months ended June 30, 2026 compared to the same period last year. We continued to experience geographically diversified revenue, as well as diversification across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Current wording

Total revenue increased $1.08 billion, or 22%, during the nine months ended September 30, 2026 compared to the same period last year. We continued to experience geographically diversified revenue, as well as diversification across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Previous wording

Product revenue increased $450.1 million, or 46%, during the six months ended June 30, 2026 compared to the same period last year, primarily driven by hardware revenue growth resulting from higher unit shipments year over year and recent pricing actions. We experienced product revenue growth across our hardware products and software licensing, mainly driven by growth in secure networking hardware products and term licenses, including increased demand for higher performance products, deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases.

Current wording

Product revenue increased $655.8 million, or 43%, during the nine months ended September 30, 2026 compared to the same period last year, primarily driven by hardware revenue growth resulting from higher average selling prices resulting from customer demand for higher performance products and recent pricing actions, as well as higher unit shipments year over year. We experienced product revenue growth across our hardware products and software licensing, mainly driven by growth in secure networking hardware products and term licenses, including increased demand for higher performance products, deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases.

Previous wording

Service revenue increased $277.7 million, or 13%, during the six months ended June 30, 2026 compared to the same period last year. Security subscription revenue increased $156.2 million, or 12%, and technical support and other services revenue increased $121.5 million, or 13%, during the six months ended June 30, 2026 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered toon-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps, as well as FortiCare technical support service.

Current wording

Service revenue increased $425.5 million, or 13%, during the nine months ended September 30, 2026 compared to the same period last year. Security subscription revenue increased $237.8 million, or 12%, and technical support and other services revenue increased $187.7 million, or 13%, during the nine months ended September 30, 2026 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered toon-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps, as well as FortiCare technical support service.

Previous wording

Of the service revenue recognized during the six months ended June 30, 2026 and 2025, 84% was included in the deferred revenue balance as of December 31, 2025 and 2024, respectively.

Current wording

Of the service revenue recognized during the nine months ended September 30, 2026 and 2025, 77% was included in the deferred revenue balance as of December 31, 2025 and 2024, respectively.

Previous wording

Total gross margin decreased 0.5 percentage points during the six months ended June 30, 2026 compared to the same period last year, primarily driven by a shift in the revenue mix to lower margin product revenue. Revenue mix shifted by 5.9 percentage points from service revenue to product revenue, as a percentage of total revenue.

Current wording

Total gross margin decreased 1.0 percentage points during the nine months ended September 30, 2026 compared to the same period last year, primarily driven by a shift in the revenue mix to lower margin product revenue.