Fortinet Q2 2026 revenue rose 26% to $2.05B as product (mostly firewall hardware) sales jumped 52% on upgrades and price increases, lifting GAAP operating margin to 33.7% and EPS 44% to $0.82; full-year guidance raised.
Revenue
$2.0B
+25.6% YoY
Net income
$606M
+37.8% YoY
Diluted EPS
$0.82
+43.9% YoY
Operating margin
33.7%
Overview
Fortinet sells network security: mostly firewalls (the FortiGate hardware boxes and software that sit between a company's network and the internet), plus subscriptions that keep them updated against new threats and technical support. In the second quarter of 2026 (April–June), revenue rose 26% to $2.05 billion. The jump came from hardware: product revenue grew 52% to $773.0 million, while service revenue (the recurring subscription and support business) grew 14% to $1.27 billion.
Operating income, the profit left after running the business but before interest and tax, rose 51% to $689.3 million, lifting operating margin (operating income as a share of revenue) from 28.1% to 33.7%. Net income rose 38% to $606.3 million, and diluted earnings per share (EPS, profit divided by all shares including those that could be created from stock awards) rose 44% to $0.82. EPS grew faster than net income because the diluted share count fell 4% to 739.9 million after buybacks.
According to the July 29 earnings release (8-K Exhibit 99.1), the quarter beat the top of the company's own guidance on every line: revenue of $2.05 billion against a guided $1.83–$1.93 billion, billings of $2.37 billion against $2.09–$2.19 billion, and non-GAAP EPS of $0.90 against $0.72–$0.76.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Total revenue
$2,047.9M
$1,630.0M
+25.6%
Product revenue
$773.0M
$508.9M
+52%
Service revenue
$1,274.9M
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*Non-GAAP figures are from the earnings release (8-K Exhibit 99.1). They exclude stock-based compensation ($80.8M this quarter), amortization of acquired intangibles and a small intellectual-property gain, and apply a flat 18% tax rate.
First half (January–June 2026): revenue $3,897.5M (+23%), product revenue $1,418.1M (+46%), service revenue $2,479.4M (+13%), operating income $1,269.3M (+39%, 32.6% margin vs. 28.8%), net income $1,140.8M (+31%), diluted EPS $1.54 vs. $1.13.
Takeaway: This was a hardware quarter. Product sales grew 52% on more units shipped, pricier models and recent price increases, and because operating expenses (sales, R&D, admin) grew only 11%, most of the extra revenue fell through to profit (operating margin +5.6 points). The recurring subscription base underneath grew a steadier 13–14%. Management raised full-year revenue guidance by about $310 million at the midpoint, but its own Q3 range is roughly flat with Q2. So whether this pace lasts depends on whether hardware demand holds up, not on the subscription business.
Product vs. service: what drove the 52%
The 10-Q attributes product growth "primarily" to "higher unit shipments year over year, higher average selling prices resulting from customer demand for higher-performing models and recent pricing actions." It says growth came mainly from secure networking hardware and term software licenses, citing "deployments related to AI infrastructure, technology upgrades, upsell activity, and expansion into new use cases." Product revenue rose from 31% to 38% of total revenue.
Firewall refresh cycle. The 10-Q's discussion of results never uses the word "refresh." It describes the demand as "technology upgrades" and customers moving to higher-performance models. The refresh cycle comes up only in the risk factors, which warn that a "reduced refresh opportunity" could slow hardware unit growth later. The filing therefore supports reading this as an upgrade wave plus pricing. It does not say how long the wave will last. Two related signals: non-cancelable inventory purchase commitments with contract manufacturers roughly doubled, to $1.67 billion from $810.6 million at December 31, which the company links to "growth trends in customer demand, product lead times and increasing components cost." And Fortinet raised prices, which inflates product growth relative to unit growth. The filing does not give a separate price-vs-volume split.
Services. Security subscription revenue (FortiGuard threat updates and cloud-delivered security) grew $85.3 million, or 13%. Technical support and other services (FortiCare) grew $68.5 million, or 14%. The filing credits deferred-revenue build and "growth in SaaS solutions, including unified SASE and SecOps." Unified SASE is Fortinet's cloud-delivered bundle for securing remote users and branches. SecOps covers its security-operations and threat-detection tools. The 10-Q gives no separate revenue or growth figure for either, so their contribution can't be measured from the filing. 90% of the quarter's service revenue came out of the deferred-revenue balance that existed at March 31, which shows how predictable this part of the business is.
By region: EMEA $871.7M (+31%), Americas $808.2M (+23%), APAC $368.0M (+21%). EMEA contributed the most growth in both dollars and percentage.
Billings and deferred revenue
Billings (revenue plus the change in deferred revenue, i.e. roughly what was invoiced in the quarter) grew 33% to $2.37 billion, faster than revenue. That means customers signed and paid up front for more multi-year service than was recognized as revenue this quarter. Deferred revenue, meaning cash billed for services that will be recognized as revenue later, reached $7.68 billion: up 17% year over year and up $559.9 million (8%) since December 31. The long-term portion grew faster ($3.83B, up from $3.48B at year end) than the short-term portion ($3.84B, +6%). Longer contract terms add to billings now but spread the revenue over more years.
Margins: mix drag vs. operating leverage
Gross margin (revenue minus the direct cost of goods and services, as a share of revenue) slipped to 80.2% from 80.7%. Hardware carries lower margins than subscriptions, and product rose 6.5 points as a share of revenue. Product gross margin actually improved to 69.8% from 67.4%, "primarily driven by recent pricing actions, partially offset by a shift in revenue mix to hardware and increased costs of memory chips." Service gross margin was flat at 86.6% (vs. 86.7%) as data-center and cloud costs rose. So the headline decline comes entirely from the mix shift, not from weaker pricing.
Operating margin rose 5.6 points to 33.7% (GAAP) because operating expenses grew only 11% against 26% revenue growth. Sales and marketing fell to 33% of revenue from 36%, R&D to 11% from 13%. Headcount rose just 4% to 15,472.
Below operating income, the picture was less strong. Interest income fell $11.8M (lower rates and less cash after buybacks and repaying debt), and other income fell $18.0M, mostly from a $10.1M increase in foreign-exchange losses. The effective tax rate rose to 16% from 15%. That is why net income grew 38% while operating income grew 51%.
Cash, buybacks and balance sheet
Operating cash flow was $1.04 billion in the quarter (vs. $451.9M) and $2.12 billion in the first half (+61%). Free cash flow (operating cash flow minus capital spending) was $965.6M, helped by capex falling to $78.0M from $167.8M. Full-year capex is guided at $350–$550 million.
In the first half, Fortinet bought back 12.5 million shares for $972.8 million (average $77.73). Only 1.9 million of those shares ($77.95 average, all in April) were bought in Q2; none were bought in May or June. About $765.8 million of the $10.25 billion authorization remains (it runs through February 2027). The company also repaid its $500 million 2026 notes in March. The remaining debt is $496.9M of 2031 notes, against $4.47 billion of cash and investments. Moody's upgraded Fortinet to A3 in July.
Guidance
From the earnings release (8-K Exhibit 99.1), with the prior (May 6) full-year ranges for comparison:
Full-year 2026
New guidance
Prior guidance (May)
Revenue
$8.020–$8.180B
$7.710–$7.870B
Service revenue
$5.180–$5.220B
$5.090–$5.150B
Billings
$9.350–$9.550B
$8.800–$9.100B
Non-GAAP operating margin
35.0–37.0%
33.0–36.0%
Non-GAAP diluted EPS
$3.41–$3.47
$3.10–$3.16
The release describes the new revenue range as 19% year-over-year growth (up from 15% in May). For Q3 2026 the company guides revenue of $2.010–$2.100 billion, billings of $2.250–$2.350 billion, non-GAAP operating margin of 35–37% and non-GAAP EPS of $0.83–$0.87. In the 10-Q, management expects product and service revenue to keep growing year over year for the rest of 2026. It also expects product gross margin "may decline" for the full year on higher hardware component costs and service gross margin to "decline slightly" as data-center capacity expands.
Outlook
The full-year guide implies second-half revenue of roughly $4.12–$4.28 billion against $3.90 billion in the first half. The Q3 revenue midpoint ($2.055B) is essentially level with Q2's $2.048B. That looks conservative after two quarters of beating the top of guidance, but it also signals that management isn't assuming the hardware surge keeps accelerating. Three things will show whether this is a durable step-up or a one-off burst: (1) whether product growth holds once the recent price increases are no longer in the year-ago comparison; (2) whether rising memory-chip costs and the $1.67 billion in purchase commitments squeeze product margins, as the 10-Q itself warns; and (3) whether the 13% subscription growth speeds up as this year's hardware installs start renewing their security subscriptions. That last point matters most for the long-term value of the upgrade wave. The pause in buybacks after April, with $766 million left on the authorization, also leaves less room for share-count reduction to keep lifting EPS above net income growth.