Fortinet Sinks More Than 20% as a Cut to Its Service Revenue Outlook Overshadows a Q3 Beat and Raise

FTNT lost more than a quarter of its value in premarket trading Thursday, with losses near 27% before the open, and was down 22.5% at $134.83 in early afternoon trading, from a Wednesday close of $174.08 that had already slipped about 5.8% before the results came out after the bell. The trigger was a single line in an otherwise upbeat report: Fortinet trimmed its full-year 2026 service revenue outlook to $5.15 billion to $5.17 billion, from $5.18 billion to $5.22 billion, below the roughly $5.2 billion analysts expected.

The rest of the quarter beat. Revenue rose 20% to $2.08 billion against a $2.06 billion consensus, non-GAAP earnings were $0.91 a share against $0.85, product revenue jumped 37% to $765 million, and billings grew 29% to $2.34 billion, according to the company's release and Zacks. Fortinet also raised its full-year revenue range to $8.125 billion to $8.215 billion and its non-GAAP EPS range to $3.54 to $3.58. But service revenue, the recurring subscription and support business that underpins the valuation, grew only about 13% to $1.31 billion and came in below the $1.33 billion consensus.

Investors also questioned product momentum. Product revenue beat estimates but fell short of hopes for roughly 50% growth, and Jefferies noted the quarter "benefited from material pull fwd which may hinder growth". Management called the service shortfall a timing issue tied to delayed activations on large enterprise deals. Brokers cut targets across the board: Scotiabank to $140 from $163, TD Cowen to $190 from $225, Citigroup and Stifel to $140, and Mizuho to $118, while Bank of America downgraded the shares to Neutral with a $140 target.

The selloff spread across cybersecurity: PANW fell about 5% and CRWD about 4% in morning trading. The next test is whether service revenue growth reaccelerates as delayed activations come through, which management expects in 2027, and whether product demand holds up after the pull-forward Jefferies flagged.