Fortinet Q4 2025 Fortinet Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Fortinet Inc Earnings Call
Operator: Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. Please be advised that this call is being recorded. I would now like to hand the call over to Anthony Luscri, Vice President of Investor Relations. Please go ahead.
Operator: Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. Please be advised that this call is being recorded. I would now like to hand the call over to Anthony Luscri, Vice President of Investor Relations. Please go ahead
Speaker #1: Conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we will conduct a question-and-answer session. Please be advised that this call is being recorded.
Speaker #1: I would now like to hand the call over to Anthony Luscri, Vice President of Investor Relations. Please go
Speaker #1: ahead. Thank you.
Anthony Luscri: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Fortinet's Q4 and full year 2025 financial results. Joining me on today's call are Ken Xie, Fortinet's founder, chairman, and CEO, Christiane Ohlgart, our CFO, and John Whittle, our COO. Ken will begin our call today by providing a high-level perspective on our business. Christiane will then review our financial results for the Q4 and the full year of 2025, before providing guidance for the Q1 and full year of 2026. We will then open the call for questions. During the Q&A session, we will ask you to please limit yourself to one question and one follow-up question to allow others to participate.
Anthony Luscri: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Fortinet's Q4 and full year 2025 financial results. Joining me on today's call are Ken Xie, Fortinet's founder, chairman, and CEO, Christiane Ohlgart, our CFO, and John Whittle, our COO. Ken will begin our call today by providing a high-level perspective on our business. Christiane will then review our financial results for the Q4 and the full year of 2025, before providing guidance for the Q1 and full year of 2026. We will then open the call for questions. During the Q&A session, we will ask you to please limit yourself to one question and one follow-up question to allow others to participate.
Speaker #2: Good afternoon, and thank you for joining us on today's conference call to discuss Fortinet's fourth quarter and full year 2025 financial results. Joining me on today's call are Ken Xie, Fortinet's founder, chairman, and CEO; Christiane Ohlgart, our CFO; and John Whittle, our COO.
Speaker #2: Ken will begin our call today, but providing a high-level perspective on our business. Christiane, we'll then review our financial results for the fourth quarter and the full year of 2025 before providing guidance for the first quarter and full year of 2026.
Speaker #2: We will then open the call for questions. During the Q&A session, we will ask you to please limit yourself to one question and one follow-up question to allow others to participate.
Speaker #2: Before we begin, I’d like to remind everyone that on today’s call, we will be making forward-looking statements. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected.
Anthony Luscri: Before we begin, I'd like to remind everyone that on today's call, we will be making forward-looking statements, and these forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Please refer to our SEC filings, in particular, the risk factors in our most recent Form 10-K, and Form 10-Q for more information. All forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation and specifically disclaim any obligation to update forward-looking statements. Also, all references to financial metrics that we make on today's call are non-GAAP, unless stated otherwise. Our GAAP results and GAAP to non-GAAP reconciliations are located in our earnings press release and in the presentation that accompany today's remarks, both of which are posted on our investor relations website.
Anthony Luscri: Before we begin, I'd like to remind everyone that on today's call, we will be making forward-looking statements, and these forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Please refer to our SEC filings, in particular, the risk factors in our most recent Form 10-K, and Form 10-Q for more information. All forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation and specifically disclaim any obligation to update forward-looking statements. Also, all references to financial metrics that we make on today's call are non-GAAP, unless stated otherwise. Our GAAP results and GAAP to non-GAAP reconciliations are located in our earnings press release and in the presentation that accompany today's remarks, both of which are posted on our investor relations website.
Speaker #2: Please refer to our SEC filings, and particularly the risk factors in our most recent Form 10-K and Form 10-Q, for more information. All forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation, specifically disclaiming any obligation, to update forward-looking statements.
Speaker #2: Also, all references to financial metrics that we make on today's call are non-GAAP unless stated otherwise. Our GAAP results and GAAP to non-GAAP reconciliations are located in our earnings press release and in the presentation that accompany today's remarks, both of which are posted on our Investor Relations website.
Speaker #2: As a reminder, this is a live call that will be available via replay via our webcast on the Investor Relations website. The prepared remarks will also be posted on the quarterly earnings section of our Investor Relations website following today's call.
Anthony Luscri: As a reminder, this is a live call that will be available via replay via our webcast on the investor relations website. The prepared remarks will also be posted on the quarterly earnings section of our investor relations website following today's call. Lastly, all references to growth are on a year-over-year basis, unless noted otherwise. I'll now turn over the call to Ken.
Anthony Luscri: As a reminder, this is a live call that will be available via replay via our webcast on the investor relations website. The prepared remarks will also be posted on the quarterly earnings section of our investor relations website following today's call. Lastly, all references to growth are on a year-over-year basis, unless noted otherwise. I'll now turn over the call to Ken.
Speaker #2: Lastly, all references to growth are on a year-over-year basis unless noted otherwise. I'll now turn over the call to Ken.
Speaker #3: Thank you, Anthony. Thank you to everyone for joining our call. We are very pleased with our excellent fourth quarter growth. Driven by broad-based demand across our platform, our building increased 18%, and revenue growth 15%.
Ken Xie: Thank you, Anthony, and thank you to everyone for joining our call. We are very pleased with our excellent Q4 growth, driven by broad-based demand across our platform, as billings increased 18% and revenue growth 15%, driven by product revenue growth of 20%. Our operating margin was strong at 37%, reflecting our continued focus on balancing growth and profitability. Secure networking billings growth 13%, outperforming the overall secure networking market as we continue to gain market share. Fortinet remained the number one firewall leader with a 55% unit market share and the highest product revenue among our cybersecurity peers. Fortinet has led the convergence of networking and security for over 25 years, and secure networking is expected to surpass the traditional networking by the end of this year.
Ken Xie: Thank you, Anthony, and thank you to everyone for joining our call. We are very pleased with our excellent Q4 growth, driven by broad-based demand across our platform, as billings increased 18% and revenue growth 15%, driven by product revenue growth of 20%. Our operating margin was strong at 37%, reflecting our continued focus on balancing growth and profitability. Secure networking billings growth 13%, outperforming the overall secure networking market as we continue to gain market share. Fortinet remained the number one firewall leader with a 55% unit market share and the highest product revenue among our cybersecurity peers. Fortinet has led the convergence of networking and security for over 25 years, and secure networking is expected to surpass the traditional networking by the end of this year.
Speaker #3: Driven by product revenue growth of 20%, our operating margin was strong at 37%, reflecting our continued focus on balancing growth and profitability. Secure networking delivered growth of 13%, outperforming the overall secure networking market as we continue to gain market share.
Speaker #3: Fortinet remained the number one firewall leader, with a 55% unit market share and the highest product revenue among our security peers. Fortinet has led the convergence of networking and security for over 25 years, and secure networking is expected to surpass traditional networking by the end of this year.
Ken Xie: Our firewall leadership is driven by FortiOS, which unifies the networking and security, and our FortiASIC technology deliver 5 to 10x better performance than competitors, while lowering the total cost of ownership and energy consumption, which provide a large advantage and a scaled- and securing AI data center. We will introduce the FortiOS 8.0 at the Fortinet annual customer and partner conference, Accelerate, in March, featuring significant and new capability in security and networking, especially in AI security, such as agentic AI security in enterprise, plus a new bundled SD-WAN and SASE service. We also recently partnered with NVIDIA to leverage their BlueField-3 DPU to secure AI infrastructure. Unified SASE billings grow 40%, representing 27% of our total billings, supporting our belief that Fortinet is the fastest-growing SASE leader at scale. Our momentum is powered by 3 key advantages.
Ken Xie: Our firewall leadership is driven by FortiOS, which unifies the networking and security, and our FortiASIC technology deliver 5 to 10x better performance than competitors, while lowering the total cost of ownership and energy consumption, which provide a large advantage and a scaled- and securing AI data center. We will introduce the FortiOS 8.0 at the Fortinet annual customer and partner conference, Accelerate, in March, featuring significant and new capability in security and networking, especially in AI security, such as agentic AI security in enterprise, plus a new bundled SD-WAN and SASE service. We also recently partnered with NVIDIA to leverage their BlueField-3 DPU to secure AI infrastructure. Unified SASE billings grow 40%, representing 27% of our total billings, supporting our belief that Fortinet is the fastest-growing SASE leader at scale. Our momentum is powered by 3 key advantages.
Speaker #3: Our firewall leadership is driven by Fortinet OS, which unified the networking and security, and our Fortinet ASIC technology delivers 5 to 10x better performance than competitors while lowering the total cost of ownership and energy consumption.
Speaker #3: Which provide a large advantage and securing AI data center. We were introduced to Fortinet OS 8.0 and Fortinet's annual customer and partner conference accelerated in March, featuring significant new capabilities in security and networking.
Speaker #3: Especially in AI security, such as identity AI security in the enterprise. Plus, a new bundled SD-WAN and SASE service. We also recently partnered with NVIDIA to leverage their BlueField 3 DPU to secure AI infrastructure.
Speaker #3: Unified SASE building grew 40%, representing 27% of total building, supporting our belief that Fortinet is the fastest-growing SASE leader at scale. Our momentum is powered by three key advantages.
Speaker #3: First, Fortinet's uniquely integrated, legendary firewall, SD-WAN, and SASE run on a single OS, Fortinet OS. Running on-premise or in the cloud, allowing customers to expand SASE in minutes and driving upsell across a large customer base.
Ken Xie: First, Fortinet uniquely integrate next-gen firewall, SD-WAN, and SASE on a single OS, FortiOS, running on-premises or in the cloud, allowing customers to expand SASE in minutes and driven upsell across a large customer base. Second, we support in both sovereign SASE and public SASE. Sovereign SASE enable enterprise and service provider to deploy SASE in their own data center to meet the data privacy, sovereignty, and compliance requirement. We are seeing strong demand in Sovereign SASE, and none of our major SASE competitors offer Sovereign SASE solution, making Fortinet's total unified SASE addressable market significantly greater than our peers. Third, our owned and long-term invested global cloud infrastructure, FortiCloud, delivers high performance and security and roughly one-third the total cost of ownership of our peers.
Ken Xie: First, Fortinet uniquely integrate next-gen firewall, SD-WAN, and SASE on a single OS, FortiOS, running on-premises or in the cloud, allowing customers to expand SASE in minutes and driven upsell across a large customer base. Second, we support in both sovereign SASE and public SASE. Sovereign SASE enable enterprise and service provider to deploy SASE in their own data center to meet the data privacy, sovereignty, and compliance requirement. We are seeing strong demand in Sovereign SASE, and none of our major SASE competitors offer Sovereign SASE solution, making Fortinet's total unified SASE addressable market significantly greater than our peers. Third, our owned and long-term invested global cloud infrastructure, FortiCloud, delivers high performance and security and roughly one-third the total cost of ownership of our peers.
Speaker #3: Second, we support both solving SASE and public SASE. Solving SASE enables enterprises and service providers to deploy SASE in their own data center to meet data privacy, sovereignty, and compliance requirements.
Speaker #3: We are seeing strong demand in solving SASE, and none of our major SASE competitors offer solving SASE solutions, making Fortinet's total unified SASE addressable market significantly greater than our peers.
Speaker #3: Third, our owned and long-term invested global cloud infrastructure for the cloud delivers high performance and security and roughly one-third of the total cost of ownership of our peers.
Speaker #3: This differentiates us, positioning Fortinet as a leader in the 2025 Gartner Magic Quadrant for SASE platform, as we continue to be the leader in SD-WAN.
Ken Xie: These differentiators position Fortinet as a leader in the 2025 Gartner Magic Quadrant for SASE platform as we continue to be the leader in SD-WAN, and I believe we will be the number one Unified SASE within the next few years. AI-driven security, our billings growth 6% in the first quarter and at 22% for the full year, while ARR was up 21%. Our strong performance was driven by more than 20 AI-powered solutions as customers consolidate multiple security vendors onto Fortinet platform. In addition, Fortinet's leadership in security also extends to operational technology and cyber-physical systems, offering enhanced visibility, robust threat protection, and secure connectivity. The demand for OT solutions is driving significant growth, with billings up more than 25%.
Ken Xie: These differentiators position Fortinet as a leader in the 2025 Gartner Magic Quadrant for SASE platform as we continue to be the leader in SD-WAN, and I believe we will be the number one Unified SASE within the next few years. AI-driven security, our billings growth 6% in the first quarter and at 22% for the full year, while ARR was up 21%. Our strong performance was driven by more than 20 AI-powered solutions as customers consolidate multiple security vendors onto Fortinet platform. In addition, Fortinet's leadership in security also extends to operational technology and cyber-physical systems, offering enhanced visibility, robust threat protection, and secure connectivity. The demand for OT solutions is driving significant growth, with billings up more than 25%.
Speaker #3: And I believe we will be the number one unified SASE within the next few years. AI-driven Secure Building grew 6% in the fourth quarter and 22% for the full year.
Speaker #3: While AI was up 21%. Our strong performance was driven by more than 20 AI-powered solutions, as customers consolidate multiple security vendors onto Fortinet's platform.
Speaker #3: In addition, Fortinet's leadership in security also extends to operational technology and cyber-physical systems, offering enhanced visibility, robust threat protection, and secure connectivity. Demand for OT solutions is driven significant growth, with building up more than 25%.
Speaker #3: Finally, we reaffirm the midterm target we shared on our annual State. Reinforcing our commitment to continual growth faster than the overall market, including delivering building and revenue catered above the market growth of 12%.
Ken Xie: Finally, we reaffirm the midterm target we shared on our Analyst Day, reinforcing our commitment to continue growth faster than the overall market, including delivering building and revenue CAGR above the market growth of 12% and achieving the rule of 45. I would like to thank our employees, customers, partners, and suppliers worldwide for their continued support and hard work. I will now turn the call over to Christiane.
Ken Xie: Finally, we reaffirm the midterm target we shared on our Analyst Day, reinforcing our commitment to continue growth faster than the overall market, including delivering building and revenue CAGR above the market growth of 12% and achieving the rule of 45. I would like to thank our employees, customers, partners, and suppliers worldwide for their continued support and hard work. I will now turn the call over to Christiane.
Speaker #3: And achieving the rule of 45. I would like to thank our employees, customers, partners, and suppliers worldwide for their continued support and hard work.
Speaker #3: I will now turn the call over to Christiane.
Speaker #4: Thank you, Ken. And good afternoon, everyone. As Ken mentioned, we are very pleased with our strong fourth quarter performance, exceeding the high end of guidance across billings, total revenue, and operating margins.
Christiane Ohlgart: Thank you, Ken, and good afternoon, everyone. As Ken mentioned, we are very pleased with our strong fourth quarter performance, exceeding the high end of guidance across billings, total revenue, and operating margins. This outperformance reflects solid global execution and broad-based demand for our solutions, with product revenue growth accelerating in the second half of the year. We are well positioned to deliver durable, long-term growth as a leader in large and rapidly expanding cybersecurity markets, including secure networking, Unified SASE, and security operations. This opportunity is supported by strong secular tailwinds, such as vendor consolidation, the convergence of security and networking, ongoing technology upgrades, and the expansion of enterprise attack surfaces across cloud, OT, and AI. Our strong network security foundation drives adoption of SD-WAN, SASE, and SecOps, while creating significant opportunities to upsell integrated solutions across enterprise customers.
Christiane Ohlgart: Thank you, Ken, and good afternoon, everyone. As Ken mentioned, we are very pleased with our strong fourth quarter performance, exceeding the high end of guidance across billings, total revenue, and operating margins. This outperformance reflects solid global execution and broad-based demand for our solutions, with product revenue growth accelerating in the second half of the year. We are well positioned to deliver durable, long-term growth as a leader in large and rapidly expanding cybersecurity markets, including secure networking, Unified SASE, and security operations. This opportunity is supported by strong secular tailwinds, such as vendor consolidation, the convergence of security and networking, ongoing technology upgrades, and the expansion of enterprise attack surfaces across cloud, OT, and AI. Our strong network security foundation drives adoption of SD-WAN, SASE, and SecOps, while creating significant opportunities to upsell integrated solutions across enterprise customers.
Speaker #4: This outperformance reflects solid global execution and broad-based demand for our solutions, with product revenue growth accelerating in the second half of the year. We are well positioned to deliver durable, long-term growth as a leader in large and rapidly expanding cybersecurity markets.
Speaker #4: Including secure networking, unified SASE, and security operations. This opportunity is supported by strong secular tailwinds such as vendor consolidation, the convergence of security and networking, ongoing technology upgrades, and the expansion of enterprise attack surfaces across cloud, OT, and AI.
Speaker #4: Our strong network security foundation drives adoption of SD-WAN, SASE, and SecOps, while creating significant opportunities to upsell integrated solutions across enterprise customers. Building on these market dynamics, our leadership in Secure Networking, combined with our unified Fortinet OS operating system and broad platform, enables customers to deploy security anywhere across private, public, and hybrid multi-cloud environments.
Christiane Ohlgart: Building on these market dynamics, our leadership in secure networking, combined with our unified FortiOS operating system and broad platform, enables customers to deploy security anywhere across private, public, and hybrid multi-cloud environments, and in any form factor, including hardware, software, and SaaS. As a result, our platform approach drives strong customer expansion, increases wallet share, and supports growth across both existing and new markets. In addition, we benefit from durable competitive advantages through our proprietary ASIC technology and single integrated operating system, which delivers superior performance, lower total cost of ownership, and meaningful differentiation versus peers. At the same time, continued investment in R&D across custom silicon, OS convergence, AI-driven security, quantum readiness, and Fortinet-owned cloud infrastructure supports rapid innovation and organic growth. Finally, our highly diversified business across geographies, customer segments, and industry verticals reduces volatility and enhances resilience across economic cycles.
Christiane Ohlgart: Building on these market dynamics, our leadership in secure networking, combined with our unified FortiOS operating system and broad platform, enables customers to deploy security anywhere across private, public, and hybrid multi-cloud environments, and in any form factor, including hardware, software, and SaaS. As a result, our platform approach drives strong customer expansion, increases wallet share, and supports growth across both existing and new markets. In addition, we benefit from durable competitive advantages through our proprietary ASIC technology and single integrated operating system, which delivers superior performance, lower total cost of ownership, and meaningful differentiation versus peers. At the same time, continued investment in R&D across custom silicon, OS convergence, AI-driven security, quantum readiness, and Fortinet-owned cloud infrastructure supports rapid innovation and organic growth. Finally, our highly diversified business across geographies, customer segments, and industry verticals reduces volatility and enhances resilience across economic cycles.
Speaker #4: And in any form factor, including hardware, software, and SaaS. As a result, our platform approach drives strong customer expansion, increases wallet share, and supports growth across both existing and new markets.
Speaker #4: In addition, we benefit from durable, competitive advantages through our proprietary ASIC technology and single integrated operating system, which deliver superior performance, lower total cost of ownership, and meaningful differentiation versus peers.
Speaker #4: At the same time, continued investment in R&D across custom silicon OS convergence, AI-driven security, quantum readiness, and Fortinet-owned cloud infrastructure supports rapid innovation and organic growth.
Speaker #4: Finally, our highly diversified geographies, customer segments, and industry verticals reduce volatility and enhance resilience across economic cycles. Complementing this diversification, we operate a strong and balanced model with a Rule of 45-plus profile, robust recurring revenues, strong free cash flow generation, a solid balance sheet, and a disciplined, shareholder-focused capital allocation strategy.
Christiane Ohlgart: Complementing this diversification, we operate a strong and balanced model with a Rule of 45+ profile, robust recurring revenues, strong free cash flow generation, a solid balance sheet, and a disciplined, shareholder-focused capital allocation strategy. This balanced model supports our confidence in our 2026 guidance and continued long-term shareholder value creation. Now, moving to an overview of our strong fourth quarter results. Total billings grew by 18% to $2.37 billion, driven by strong growth in Unified SASE, OT security, and success in large enterprises in the US and Europe. Unified SASE billings grew 40%, driven by growth in cloud security solutions. Furthermore, SASE adoption momentum has remained strong, as 16% of our large enterprise customers have purchased FortiSASE, an increase of over 50%, highlighting our continued expansion of FortiSASE in our customer base.
Christiane Ohlgart: Complementing this diversification, we operate a strong and balanced model with a Rule of 45+ profile, robust recurring revenues, strong free cash flow generation, a solid balance sheet, and a disciplined, shareholder-focused capital allocation strategy. This balanced model supports our confidence in our 2026 guidance and continued long-term shareholder value creation. Now, moving to an overview of our strong fourth quarter results. Total billings grew by 18% to $2.37 billion, driven by strong growth in Unified SASE, OT security, and success in large enterprises in the US and Europe. Unified SASE billings grew 40%, driven by growth in cloud security solutions. Furthermore, SASE adoption momentum has remained strong, as 16% of our large enterprise customers have purchased FortiSASE, an increase of over 50%, highlighting our continued expansion of FortiSASE in our customer base.
Speaker #4: This balanced model supports our confidence in our 2026 guidance and continued long-term shareholder value creation. Now, moving to an overview of our strong fourth quarter results.
Speaker #4: Total billings grew by 18% to $2.37 billion, driven by strong growth in unified SASE, OT security, and success in large enterprises in the US and Europe.
Speaker #4: Unified SASE billings grew 40%, driven by growth in cloud security solutions. Furthermore, SASE adoption momentum has remained strong, as 16% of our large enterprise customers have purchased Fortinet SASE—an increase of over 50%—highlighting our continued expansion of Fortinet SASE in our customer base.
Speaker #4: Operational technology use cases continued to contribute strong growth to our success, with billings growth of over 25%, with broad-based demand for both our hardware and software solutions.
Christiane Ohlgart: Operational technology use cases continue to contribute strong growth to our success, with billings growth of over 25%, with broad-based demand for both our hardware and software solutions. Our continued momentum in large enterprise drove growth in the fourth quarter, as the number of deals greater than $1 million increased by over 30%, while the total deal value grew by over 40%. The US and Europe were the largest contributors to growth in $1 million-plus deals, each delivering more than 30% growth. In addition, we continue to expand our customer base. 7,200 new organizations selected our unified FortiOS platform, reinforcing our strong position across all market segments.
Christiane Ohlgart: Operational technology use cases continue to contribute strong growth to our success, with billings growth of over 25%, with broad-based demand for both our hardware and software solutions. Our continued momentum in large enterprise drove growth in the fourth quarter, as the number of deals greater than $1 million increased by over 30%, while the total deal value grew by over 40%. The US and Europe were the largest contributors to growth in $1 million-plus deals, each delivering more than 30% growth. In addition, we continue to expand our customer base. 7,200 new organizations selected our unified FortiOS platform, reinforcing our strong position across all market segments.
Speaker #4: And our continued momentum in large enterprise growth in the fourth quarter, as the number of deals greater than $1 million increased by over 30%.
Speaker #4: While the total deal value grew by over 40%. The US and Europe were the largest contributors to growth in 1 million dollar plus deals, each delivering more than 30% growth.
Speaker #4: In addition, we continue to expand our customer base. 7,200 new organizations selected our unified Fortinet OS platform, reinforcing our strong position across all market segments.
Speaker #4: With regards to ARR, unified SASE increased by 11% to $1.28 billion, which included an increase of over 90% for Fortinet SASE ARR, while SecOps ARR increased by 21% to $491 million.
Christiane Ohlgart: With regards to ARR, Unified SASE increased by 11% to $1.28 billion, which included an increase of over 90% for FortiSASE ARR, while SecOps ARR increased by 21% to $491 million. Total revenue grew 15% to $1.91 billion. Product revenue increased by over 20% to $691 million, reflecting broad-based growth driven by strong performance across our product portfolio as we continued to gain market share. Both hardware and software grew 20%, supported by technology upgrades, upselling, and expansion into new use cases. Service revenue grew 12% to $1.21 billion, reflecting lower product revenue in 2024, while service billings growth was strong at 18% in Q4.
Christiane Ohlgart: With regards to ARR, Unified SASE increased by 11% to $1.28 billion, which included an increase of over 90% for FortiSASE ARR, while SecOps ARR increased by 21% to $491 million. Total revenue grew 15% to $1.91 billion. Product revenue increased by over 20% to $691 million, reflecting broad-based growth driven by strong performance across our product portfolio as we continued to gain market share. Both hardware and software grew 20%, supported by technology upgrades, upselling, and expansion into new use cases. Service revenue grew 12% to $1.21 billion, reflecting lower product revenue in 2024, while service billings growth was strong at 18% in Q4.
Speaker #4: Total revenue grew 15% to $1.91 billion. Product revenue increased by over 20% to $691 million, reflecting broad-based growth driven by strong performance across our product portfolio, as we continue to gain market share.
Speaker #4: Both hardware and software grew 20%, supported by technology upgrades, upselling, and expansion into new use cases. Service revenue grew 12% to $1.21 billion, reflecting lower product revenue in 2024, while service billings growth was strong at 18% in Q4.
Speaker #4: As a reminder, we view product revenue growth as a leading indicator of future service revenue growth, as shown on slide 20 of the earnings presentation.
Christiane Ohlgart: As a reminder, we view product revenue growth as a leading indicator of future service revenue growth, as shown on slide 20 of the earnings presentation. Now, I'd like to highlight some key deals that demonstrated our market leadership and customer expansion. In the competitive seven-figure upsell deal, a large consumer services company, an existing FortiGate SD-WAN customer, selected FortiSASE to secure more than 10,000 users as part of its next generation access and security transformation. The win was driven by our single OS approach that tightly integrates SD-WAN and SASE, enabling rapid expansion to SASE and delivering strong performance at a meaningfully lower total cost of ownership. The customer chose Fortinet for our unified FortiOS operating system, which reduces complexity by enabling a single, consistent security policy across FortiSASE and FortiGate devices, while leveraging our globally distributed POPs.
Christiane Ohlgart: As a reminder, we view product revenue growth as a leading indicator of future service revenue growth, as shown on slide 20 of the earnings presentation. Now, I'd like to highlight some key deals that demonstrated our market leadership and customer expansion. In the competitive seven-figure upsell deal, a large consumer services company, an existing FortiGate SD-WAN customer, selected FortiSASE to secure more than 10,000 users as part of its next generation access and security transformation. The win was driven by our single OS approach that tightly integrates SD-WAN and SASE, enabling rapid expansion to SASE and delivering strong performance at a meaningfully lower total cost of ownership. The customer chose Fortinet for our unified FortiOS operating system, which reduces complexity by enabling a single, consistent security policy across FortiSASE and FortiGate devices, while leveraging our globally distributed POPs.
Speaker #4: Now, I'd like to highlight some key deals that demonstrated our market leadership and customer expansion. In the competitive seven-figure upsell deal, a large consumer services company and existing Fortinet SD-WAN customer selected Fortinet SASE to secure more than $10,000 users as part of its next-generation access and security transformation.
Speaker #4: The win was driven by our single OS approach that tightly integrates SD-WAN and SASE, enabling rapid expansion to SASE and delivering strong performance at a meaningfully lower total cost of ownership.
Speaker #4: The customer chose Fortinet for our unified Fortinet OS operating system, which reduces complexity by enabling a single consistent security policy across Fortinet SASE and Fortinet Gate devices, while leveraging our globally distributed PoPs.
Speaker #4: By integrating our PoPs into their existing SD-WAN fabric, the customer has simplified centralized policy management and enabled secure private access at scale, which highlights our platform model.
Christiane Ohlgart: By integrating our POPs into their existing SD-WAN fabric, the customer has simplified centralized policy management and enabled secure private access at scale, which highlights our platform model. Next, a leading global data center provider supporting AI and cloud workloads signed an eight-figure deal with Fortinet to support its rapid global expansion. The customer selected Fortinet for a predictable, scalable investment model that aligns security growth with its accelerated data center build-out. As the company standardizes on our FortiGates, FortiSwitches, and FortiAPs, our solutions will streamline operations across IT and OT environments, including critical power, cooling, and physical security systems. This strategic partnership enables the customer to scale securely and consistently, supporting its long-term global growth strategy. In another key win, a major utility company expanded its partnership with us through a high seven-figure agreement to secure its operational technology environment.
Christiane Ohlgart: By integrating our POPs into their existing SD-WAN fabric, the customer has simplified centralized policy management and enabled secure private access at scale, which highlights our platform model. Next, a leading global data center provider supporting AI and cloud workloads signed an eight-figure deal with Fortinet to support its rapid global expansion. The customer selected Fortinet for a predictable, scalable investment model that aligns security growth with its accelerated data center build-out. As the company standardizes on our FortiGates, FortiSwitches, and FortiAPs, our solutions will streamline operations across IT and OT environments, including critical power, cooling, and physical security systems. This strategic partnership enables the customer to scale securely and consistently, supporting its long-term global growth strategy. In another key win, a major utility company expanded its partnership with us through a high seven-figure agreement to secure its operational technology environment.
Speaker #4: Next, a leading global data center provider supporting AI and cloud workloads signed an eight-figure deal with Fortinet, to support its rapid global expansion. The customer selected Fortinet for a predictable scalable investment model that aligns security growth with its accelerated data center build-out.
Speaker #4: As the company standardizes on our Fortinet gates, Fortinet switches, and Fortinet APs, our solutions will streamline operations across IT and OT environments, including critical power, cooling, and physical security systems.
Speaker #4: This strategic partnership enables the customer to scale securely and consistently, supporting its long-term global growth strategy. In another key win, a major utility company expanded its partnership with us through a high seven-figure agreement to secure its operational technology environment.
Speaker #4: The deal includes a comprehensive set of solutions, covering network segmentation, identity and access management, and zero-day threat detection across the utility's advanced distribution management system.
Christiane Ohlgart: The deal includes a comprehensive set of solutions covering network segmentation, identity and access management, and zero-day threat detection across the utility's advanced distribution management system, along with the adoption of FortiAI. This competitive win was driven by our ability to automate critical security operations, our proven expertise in protecting critical national infrastructure, and a compelling price for performance advantage. Lastly, in a competitive displacement win, a Fortune 100 company signed an eight-figure multi-year agreement for Unified SASE, selecting our virtual firewall solution to secure approximately 1,800 store locations. The customer chose FortiGate VM through our FortiFlex points-based consumption program, which supports flexible hybrid firewall deployments and a broad set of security solutions.
Christiane Ohlgart: The deal includes a comprehensive set of solutions covering network segmentation, identity and access management, and zero-day threat detection across the utility's advanced distribution management system, along with the adoption of FortiAI. This competitive win was driven by our ability to automate critical security operations, our proven expertise in protecting critical national infrastructure, and a compelling price for performance advantage. Lastly, in a competitive displacement win, a Fortune 100 company signed an eight-figure multi-year agreement for Unified SASE, selecting our virtual firewall solution to secure approximately 1,800 store locations. The customer chose FortiGate VM through our FortiFlex points-based consumption program, which supports flexible hybrid firewall deployments and a broad set of security solutions.
Speaker #4: Along with the adoption of Fortinet AI, this competitive win was driven by our ability to automate critical security operations, our proven expertise in protecting critical national infrastructure, and a compelling price-for-performance advantage.
Speaker #4: Lastly, in the competitive displacement win, a Fortinet 100 company signed an eight-figure, multi-year agreement for unified SASE, selecting our virtual firewall solution to secure approximately 1,800 store locations.
Speaker #4: The customer chose Fortinet Gate VM through our Fortinet Flex Point Space consumption program, which supports flexible, hybrid firewall deployments and a broad set of security solutions.
Speaker #4: Fortinet was selected after a highly competitive evaluation due to the flexibility of the program and our ability to meet demanding technical requirements at scale, enabling the customer to consolidate security on a single architecture while gaining deployment flexibility, centralized management, and long-term cost efficiency to support future growth.
Christiane Ohlgart: Fortinet was selected after a highly competitive evaluation due to the flexibility of the program and our ability to meet demanding technical requirements at scale, enabling the customer to consolidate security on a single architecture while gaining deployment flexibility, centralized management, and long-term cost efficiency to support future growth. Turning to margins and cash flow. Total gross margin of 80.3% was better than expected, which is especially impressive given the strong product revenue growth and related mix shift. Operating margin of 37.3% exceeded the high end of the guidance, mainly due to stronger than expected revenue growth and cost management. Free cash flow was very strong at $577 million, and adjusted free cash flow was $589 million, up $130 million, and represented a margin of 31%.
Christiane Ohlgart: Fortinet was selected after a highly competitive evaluation due to the flexibility of the program and our ability to meet demanding technical requirements at scale, enabling the customer to consolidate security on a single architecture while gaining deployment flexibility, centralized management, and long-term cost efficiency to support future growth. Turning to margins and cash flow. Total gross margin of 80.3% was better than expected, which is especially impressive given the strong product revenue growth and related mix shift. Operating margin of 37.3% exceeded the high end of the guidance, mainly due to stronger than expected revenue growth and cost management. Free cash flow was very strong at $577 million, and adjusted free cash flow was $589 million, up $130 million, and represented a margin of 31%.
Speaker #4: Turning to margins and cash flow, total gross margin of 80.3% was better than expected, which is especially impressive given the strong product revenue growth and related mix shift.
Speaker #4: Operating margin of 37.3% exceeded the high end of the guidance, mainly due to stronger-than-expected revenue growth and cost management. Pre-cash flow was very strong at $577 million, and adjusted pre-cash flow was $589 million, up $130 million, and represented a margin of 31%.
Speaker #4: We repurchased approximately 730,000 shares of common stock for $57 million during the fourth quarter, and an additional 4.6 million shares for $356 million quarter to date.
Christiane Ohlgart: We repurchased approximately 730,000 shares of common stock for $57 million during Q4, and an additional 4.6 million shares for $356 million quarter to date. In January, our board of directors approved a $1 billion increase in the authorized stock repurchase amount, and the remaining share repurchase authorization as of today is approximately $1.4 billion. Turning to our full-year 2025 results, where we once again exceeded the rule of 45 for the 6th consecutive year. Billings grew 16% to $7.55 billion. Our faster-growing pillars of Unified SASE and SecOps grew a combined 24%, representing a 2-point mix shift year-over-year and 6 points over the past 2 years.
Christiane Ohlgart: We repurchased approximately 730,000 shares of common stock for $57 million during Q4, and an additional 4.6 million shares for $356 million quarter to date. In January, our board of directors approved a $1 billion increase in the authorized stock repurchase amount, and the remaining share repurchase authorization as of today is approximately $1.4 billion. Turning to our full-year 2025 results, where we once again exceeded the rule of 45 for the 6th consecutive year. Billings grew 16% to $7.55 billion. Our faster-growing pillars of Unified SASE and SecOps grew a combined 24%, representing a 2-point mix shift year-over-year and 6 points over the past 2 years.
Speaker #4: In January, our board of directors approved a $1 billion increase in the authorized stock repurchase amount, and the remaining share repurchase authorization as of today is approximately $1.4 billion.
Speaker #4: Turning to our full-year 2025 results, where we once again exceeded the rule of 45 for the six consecutive years. Billings grew 16% to $7.55 billion, our faster-growing pillars of unified SASE and SecOps grew a combined 24%, representing a two-point mix shift year over year and six points over the past two years.
Speaker #4: The two pillars now make up 36% of total billings, reflecting the value of our integrated platform approach and the convergence of security and networking, and success in cross-selling our other solutions.
Christiane Ohlgart: The two pillars now make up 36% of total billings, reflecting the value of our integrated platform approach and the convergence of security and networking, and success in cross-selling our other solutions. Total revenue grew 14% to $6.8 billion, driven by strong product revenue growth of 16%. Service revenue grew 13% to $4.58 billion, representing 67% of total revenue. Gross margin of 81.3% was flat, despite the shift to product revenue and investments in the build-out of our data center infrastructure. Operating margin increased 50 basis points to a record of 35.5%, resulting in operating income of $2.41 billion, which is up 16%. Our GAAP operating margin of 30.7% continues to be one of the highest in the industry.
Christiane Ohlgart: The two pillars now make up 36% of total billings, reflecting the value of our integrated platform approach and the convergence of security and networking, and success in cross-selling our other solutions. Total revenue grew 14% to $6.8 billion, driven by strong product revenue growth of 16%. Service revenue grew 13% to $4.58 billion, representing 67% of total revenue. Gross margin of 81.3% was flat, despite the shift to product revenue and investments in the build-out of our data center infrastructure. Operating margin increased 50 basis points to a record of 35.5%, resulting in operating income of $2.41 billion, which is up 16%. Our GAAP operating margin of 30.7% continues to be one of the highest in the industry.
Speaker #4: Total revenue grew 14% to $6.8 billion, driven by strong product revenue growth of 16%. Service revenue grew 13% to $4.58 billion, representing 67% of total revenue.
Speaker #4: Gross margin of 81.3% was flat despite a shift to product revenue and investments in the build-out of our data center infrastructure. Operating margin increased 50 basis points to a record 35.5%, resulting in operating income of $2.41 billion, which is up 16%.
Speaker #4: Our GAAP operating margin of 30.7% continues to be one of the highest in the industry. Earnings per share increased 16% to $2.76. Free cash flow was a record $2.21 billion, representing a margin of 33%, while adjusted free cash flow was $2.5 billion, representing a margin of 37%.
Christiane Ohlgart: Earnings per share increased 16% to $2.76. Free cash flow was a record of $2.21 billion, representing a margin of 33%, while adjusted free cash flow was $2.5 billion, representing a margin of 37%. Our adjusted free cash flow CAGR of greater than 20% over the past 5 years demonstrates the strength of our business model. Now, moving on to guidance. As a reminder, our Q1 and full-year outlooks, which are summarized on slides 24 and 25, are subject to the disclaimers regarding forward-looking information that Anthony provided at the beginning of the call. For the Q1, we expect billings in the range of $1.77 to 1.87 billion, which at the midpoint, represents growth of 14%.
Christiane Ohlgart: Earnings per share increased 16% to $2.76. Free cash flow was a record of $2.21 billion, representing a margin of 33%, while adjusted free cash flow was $2.5 billion, representing a margin of 37%. Our adjusted free cash flow CAGR of greater than 20% over the past 5 years demonstrates the strength of our business model. Now, moving on to guidance. As a reminder, our Q1 and full-year outlooks, which are summarized on slides 24 and 25, are subject to the disclaimers regarding forward-looking information that Anthony provided at the beginning of the call. For the Q1, we expect billings in the range of $1.77 to 1.87 billion, which at the midpoint, represents growth of 14%.
Speaker #4: Our adjusted pre-cash flow CAGR of greater than 20% of the past five years demonstrates the strength of our business model. Now, moving on to guidance.
Speaker #4: As a reminder, our first quarter and full-year outlooks, which are summarized on slides 24 and 25, are subject to the disclaimers regarding forward-looking information that Anthony provided at the beginning of the call.
Speaker #4: For the first quarter, we expect billings in the range of $1.77 billion to $1.87 billion, which at the midpoint represents growth of 14%. Revenue in the range of $1.7 billion to $1.76 billion, which at the midpoint represents growth of 12%.
Christiane Ohlgart: Revenue in the range of $1.7 billion to 1.76 billion, which at the midpoint represents growth of 12%. Non-GAAP gross margin of 80% to 81%. Non-GAAP operating margin of 30% to 32%. Non-GAAP earnings per share of $0.59 to $0.63, which assumes a share count between 746 and 750 million. Infrastructure investments of $80 to $120 million. A non-GAAP tax rate of 18%. Cash taxes of $45 to $50 million. For the full year, we expect to achieve the Rule of 45 for the seventh consecutive year and expect billings in the range of $8.4 billion to 8.6 billion, which at the midpoint represents growth of 13%.
Christiane Ohlgart: Revenue in the range of $1.7 billion to 1.76 billion, which at the midpoint represents growth of 12%. Non-GAAP gross margin of 80% to 81%. Non-GAAP operating margin of 30% to 32%. Non-GAAP earnings per share of $0.59 to $0.63, which assumes a share count between 746 and 750 million. Infrastructure investments of $80 to $120 million. A non-GAAP tax rate of 18%. Cash taxes of $45 to $50 million. For the full year, we expect to achieve the Rule of 45 for the seventh consecutive year and expect billings in the range of $8.4 billion to 8.6 billion, which at the midpoint represents growth of 13%.
Speaker #4: Non-GAAP gross margin of 80 to 81%, non-GAAP operating margin of 30 to 32%. Non-GAAP earnings per share of $0.59 to $0.63, which assumes a share count between 746 and 750 million.
Speaker #4: Infrastructure investments of 80 to 120 million, a non-GAAP tax rate of 18%, cash taxes of 45 to 50 million. For the full year, we expect to achieve the rule of 45 for the seventh consecutive year and expect billings in the range of $8.4 billion to $8.6 billion, which at the midpoint represents growth of 13%.
Speaker #4: Revenue in the range of $7.5 billion to $7.7 billion, which at the midpoint represents growth of 12%. Service revenue in the range of $5.05 billion to $5.15 billion, which at the midpoint represents growth of 11%.
Christiane Ohlgart: Revenue in the range of $7.5 billion to $7.7 billion, which at the midpoint represents growth of 12%. Service revenue in the range of $5.05 billion to $5.15 billion, which at the midpoint represents growth of 11%. We expect service revenue growth to pick up in the second half of 2026, driven by accelerating product revenue growth in 2025 as a key leading indicator. Non-GAAP gross margin of 79% to 81%. Non-GAAP operating margin of 33% to 36%. Non-GAAP earnings per share of $2.94 to $3, which assumes a share count of between 747 million and 753 million. Infrastructure investments of $350 million to $450 million. Non-GAAP tax rate of 18%.
Christiane Ohlgart: Revenue in the range of $7.5 billion to $7.7 billion, which at the midpoint represents growth of 12%. Service revenue in the range of $5.05 billion to $5.15 billion, which at the midpoint represents growth of 11%. We expect service revenue growth to pick up in the second half of 2026, driven by accelerating product revenue growth in 2025 as a key leading indicator. Non-GAAP gross margin of 79% to 81%. Non-GAAP operating margin of 33% to 36%. Non-GAAP earnings per share of $2.94 to $3, which assumes a share count of between 747 million and 753 million. Infrastructure investments of $350 million to $450 million. Non-GAAP tax rate of 18%.
Speaker #4: We expect service revenue growth to pick up in the second half of 2026, driven by accelerating product revenue growth in 2025 as a key leading indicator.
Speaker #4: Non-GAAP gross margin of 79% to 81%, non-GAAP operating margin of 33% to 36%, and non-GAAP earnings per share of $2.94 to $3.00, which assumes a share count of between 747 million and 753 million.
Speaker #4: Infrastructure investments of $350 to $450 million, non-GAAP tax rate of 18%, cash taxes of $350 million to $400 million. Before we open it up for Q&A, I just wanted to share a few modeling considerations.
Christiane Ohlgart: Cash taxes of $350 million to 400 million. Before we open it up for Q&A, I just wanted to share a few modeling considerations. As a reminder, the majority of our service revenue is recognized ratably on a daily basis, and the first quarter this year has two fewer days than Q4. From a margin perspective, our first quarter operating margin guidance reflects the timing of several marketing events. Additionally, the recent weakness of the US dollar may create a modest headwind in the first quarter. And finally, we plan to repay the first tranche in the amount of $500 million of our senior debt at maturity at the end of the first quarter. This, alongside lower market interest rates, will reduce net interest income for the year.
Christiane Ohlgart: Cash taxes of $350 million to 400 million. Before we open it up for Q&A, I just wanted to share a few modeling considerations. As a reminder, the majority of our service revenue is recognized ratably on a daily basis, and the first quarter this year has two fewer days than Q4. From a margin perspective, our first quarter operating margin guidance reflects the timing of several marketing events. Additionally, the recent weakness of the US dollar may create a modest headwind in the first quarter. And finally, we plan to repay the first tranche in the amount of $500 million of our senior debt at maturity at the end of the first quarter. This, alongside lower market interest rates, will reduce net interest income for the year.
Speaker #4: As a reminder, the majority of our service revenue is recognized ratably on a daily basis, and the first quarter this year has two fewer days than Q4.
Speaker #4: From a margin perspective, our first quarter operating margin guidance reflects the timing of several marketing events. Additionally, the recent weakness of the US dollar may create a modest headwind in the first quarter.
Speaker #4: And finally, we plan to repay the first tranche in the amount of $500 million of our senior debt at maturity at the end of the first quarter.
Speaker #4: This alongside lower market interest rates will reduce net interest income for the year. As we look to 2026 and beyond, we are confident in our growth strategy, driven by significant secular tailwinds such as rising cybersecurity spend, the convergence of security and networking, vendor consolidation, and the increasing need to secure AI and OT environments.
Christiane Ohlgart: As we look to twenty twenty-six and beyond, we are confident in our growth strategy, driven by significant secular tailwinds, such as rising cybersecurity spend, the convergence of security and networking, vendor consolidation, and the increasing need to secure AI and OT environments. We believe we can sustain product revenue growth of 10 to 15% over the midterm on average, and reaffirm the midterm target shared at our Analyst Day, including delivering billings and revenue CAGR above 12% and achieving the Rule of 45, reinforcing our commitment to continued growth beyond that of the overall market. Our leadership in innovation and price for performance enables the lower total cost of ownership across secure networking, Unified SASE and SecOps, positioning us to outperform the overall market. We are well positioned to deliver durable, long-term growth, considering our highly diversified, cash generative and profitable business.
Christiane Ohlgart: As we look to twenty twenty-six and beyond, we are confident in our growth strategy, driven by significant secular tailwinds, such as rising cybersecurity spend, the convergence of security and networking, vendor consolidation, and the increasing need to secure AI and OT environments. We believe we can sustain product revenue growth of 10 to 15% over the midterm on average, and reaffirm the midterm target shared at our Analyst Day, including delivering billings and revenue CAGR above 12% and achieving the Rule of 45, reinforcing our commitment to continued growth beyond that of the overall market. Our leadership in innovation and price for performance enables the lower total cost of ownership across secure networking, Unified SASE and SecOps, positioning us to outperform the overall market. We are well positioned to deliver durable, long-term growth, considering our highly diversified, cash generative and profitable business.
Speaker #4: We believe we can sustain product revenue growth of 10 to 15% over the midterm on average and reaffirm the midterm target shared at our analyst day.
Speaker #4: Including delivering billings and revenue CAGR above 12%, and achieving the rule of 45, reinforcing our commitment to continued growth beyond that of the overall market.
Speaker #4: Our leadership in innovation and price for performance enables a lower total cost of ownership across secure networking, unified SASE, and SecOps. Positioning us to outperform the overall market.
Speaker #4: We are well positioned to deliver durable, long-term growth considering our highly diversified cash-generative and profitable business. I will now hand the call back over to Anthony to begin the Q&A
Christiane Ohlgart: I will now hand the call back over to Anthony to begin the Q&A session.
Christiane Ohlgart: I will now hand the call back over to Anthony to begin the Q&A session.
Speaker #4: session. Thank you, Christiana.
Anthony Luscri: Thank you, Christiane. As a reminder, during the Q&A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate. Operator, please open the line for questions.
Anthony Luscri: Thank you, Christiane. As a reminder, during the Q&A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate. Operator, please open the line for questions.
Speaker #2: As a reminder, during the Q&A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate.
Speaker #2: Operator, please open the line for questions.
Speaker #3: Thank you. If you would like to ask a question, please click on the Raise Hand button at the bottom of your screen. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself.
Operator: Thank you. If you would like to ask a question, please click on the Raise Hand button at the bottom of your screen. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself. We will allow a moment for the queue to form. Our first question comes from Shaul Eyal at TD Cowen. Shaul, your line is open. You may unmute and ask your question.
Operator: Thank you. If you would like to ask a question, please click on the Raise Hand button at the bottom of your screen. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself. We will allow a moment for the queue to form. Our first question comes from Shaul Eyal at TD Cowen. Shaul, your line is open. You may unmute and ask your question.
Speaker #3: We will allow a moment for the queue to form. Our first question comes from Shal Ayal at TD Cowen. Shal, your line is open.
Speaker #3: You may unmute and ask your question.
Speaker #3: question. Thank
Shaul Eyal: ...Thank you so much. Good afternoon, everybody. Congrats! Ken, I'm interested in what drove the strength or the change that you've seen during the quarter, specifically the Unified SASE billings and the strong guide. What gives you confidence into 2026?
Shaul Eyal: ...Thank you so much. Good afternoon, everybody. Congrats! Ken, I'm interested in what drove the strength or the change that you've seen during the quarter, specifically the Unified SASE billings and the strong guide. What gives you confidence into 2026?
Speaker #4: Thank you so much. Good afternoon, everybody, and congrats. Ken, I'm interested in what drove the strength or the change that you've seen during the quarter, specifically the unified SASE billings and the strong guide.
Speaker #4: What gives you confidence into
Speaker #4: 2026? Yeah, that's a great
Ken Xie: Yeah, that's a great question, Shaul. Thank you. Actually, you can see the unified SASE grow 40%. That's where we see probably the fastest growing unified SASE vendor on scale. Because the three unique advantage I mentioned, first, actually, the sovereign SASE, we see very strong growth. I believe the sovereign SASE market probably even bigger than the current public SASE, that's all other vendor doing right now. But we don't see any of them try to get in the sovereign SASE or have the function to support in sovereign SASE, which we kind of designed the SASE in the beginning, try to supporting our service provider and all these things, which is all kind of sovereign SASE approach. That have a huge growth.
Ken Xie: Yeah, that's a great question, Shaul. Thank you. Actually, you can see the unified SASE grow 40%. That's where we see probably the fastest growing unified SASE vendor on scale. Because the three unique advantage I mentioned, first, actually, the sovereign SASE, we see very strong growth. I believe the sovereign SASE market probably even bigger than the current public SASE, that's all other vendor doing right now. But we don't see any of them try to get in the sovereign SASE or have the function to support in sovereign SASE, which we kind of designed the SASE in the beginning, try to supporting our service provider and all these things, which is all kind of sovereign SASE approach. That have a huge growth.
Speaker #5: Question, Shal. Thank you. Actually, you can see the unified SASE growth—40%. That's where we see probably the fastest growth in unified SASE vendor and scale.
Speaker #5: Because the three unique advantages I mentioned, first, actually the sovereign SASE receiver was strong growth. I believe the sovereign SASE market probably even bigger than the current public SASE.
Speaker #5: That's all the other vendor doing right now. But we don't see any of them try to get in the sovereign SASE or have the function to support in sovereign SASE.
Speaker #5: Which we kind of designed the SASE in the beginning and try to support in our service provider and all these things, which is all kind of sovereign SASE approach.
Speaker #5: That has a huge growth. And the sovereign SASE usually buy the product first, then deploy in the customer or service provider data center, and then what we're keeping supporting with additional service.
Ken Xie: The Sovereign SASE, you only buy the product first, then deploy in the customer or service provider data center, and then what we'll keep supporting with additional service. So that's a huge market opportunity. We believe we are the only leader in the space, for the Sovereign SASE. Second, like, we have three function into single OS, network security, SD-WAN, and the SASE. That's actually give us a huge advantage lever, a huge customer base. And none of competitor have this advantage, and that's making us grow very quickly, both our sales and the partner see the huge advantage, and they're starting to ramp up very quickly. And then also long term, because our investment in the infrastructure, so we do see, we have a cost advantage.
Ken Xie: The Sovereign SASE, you only buy the product first, then deploy in the customer or service provider data center, and then what we'll keep supporting with additional service. So that's a huge market opportunity. We believe we are the only leader in the space, for the Sovereign SASE. Second, like, we have three function into single OS, network security, SD-WAN, and the SASE. That's actually give us a huge advantage lever, a huge customer base. And none of competitor have this advantage, and that's making us grow very quickly, both our sales and the partner see the huge advantage, and they're starting to ramp up very quickly. And then also long term, because our investment in the infrastructure, so we do see, we have a cost advantage.
Speaker #5: So, that's a huge market opportunity. We believe we're the only leader in the space for the sovereign SASE. Second, we have three functions in a single OS.
Speaker #5: Network security, SD-WAN, and the SASE. That's actually give us a huge advantage level or huge customer base. And I'm a competitor had this advantage.
Speaker #5: And quickly, both our sales and the partner see the huge advantage, and suddenly ramp up rather quickly. And then also, long-term, because of our investment in the infrastructure.
Speaker #5: So we do see we have a cost advantage. So our cost is about one-third compared to some other competitors, right? So that's also—we can pass all this kind of cost saving to the customer and play the long-term game.
Ken Xie: So our cost is about 1/3 compared to some of our competitors, right? So that's also we can pass all this, this kind of a cost saving to customer and play the long-term game. That we see very strong growth of our Unified SASE. Maybe Christiane and John have some other points.
Ken Xie: So our cost is about 1/3 compared to some of our competitors, right? So that's also we can pass all this, this kind of a cost saving to customer and play the long-term game. That we see very strong growth of our Unified SASE. Maybe Christiane and John have some other points.
Speaker #5: That's what we see drive our strong growth of our unified SASE. Maybe Christiana and Shal have some other
Speaker #5: points. Yeah.
Christiane Ohlgart: Yeah, so I think we saw really good traction on our execution in Q4, and it was very broad-based. So, as you heard from me, I mean, we were great in enterprise. We executed well on the OT side. We had successes in SASE. AI was a big driver. So, that gives us significant confidence for 2026 that these growth drivers are going to continue because the demand is definitely there.
Christiane Ohlgart: Yeah, so I think we saw really good traction on our execution in Q4, and it was very broad-based. So, as you heard from me, I mean, we were great in enterprise. We executed well on the OT side. We had successes in SASE. AI was a big driver. So, that gives us significant confidence for 2026 that these growth drivers are going to continue because the demand is definitely there.
Speaker #6: So, I think we saw really good traction on our execution in Q4, and it was very broad-based. So, as you heard from me, I mean, we were great in enterprise.
Speaker #6: We executed well on the OT side. We had successes in SASE; AI was a big driver. So that gives us significant confidence for 2026 that these growth drivers are going to continue because the demand is definitely
Speaker #6: there. Yeah.
Speaker #7: And I would just say, obviously, the cybersecurity market is growing really nicely. As Ken highlighted, we have a lot of competitive advantages where we feel like we can grow faster than the market and faster than each of the three pillars that we focus on.
John Whittle: Yeah, and I would just say, you know, obviously, the cybersecurity market is growing really nicely. As Ken highlighted, we have a lot of competitive advantages where we feel like we can grow faster than the market and faster than each of the three pillars that we focus on, as we did throughout 2025. We see a lot of different growth drivers, you know, amongst the three pillars: the OT momentum. We see opportunities with AI and with quantum. When you look at our business, it's really diversified in a number of ways, geographically, based on customer segments, and also industry verticals. Then if you look at our solution sets as well, it's diversified amongst the three pillars that we focus on. When we focus, we have a track record of doing really, really well.
John Whittle: Yeah, and I would just say, you know, obviously, the cybersecurity market is growing really nicely. As Ken highlighted, we have a lot of competitive advantages where we feel like we can grow faster than the market and faster than each of the three pillars that we focus on, as we did throughout 2025. We see a lot of different growth drivers, you know, amongst the three pillars: the OT momentum. We see opportunities with AI and with quantum. When you look at our business, it's really diversified in a number of ways, geographically, based on customer segments, and also industry verticals. Then if you look at our solution sets as well, it's diversified amongst the three pillars that we focus on. When we focus, we have a track record of doing really, really well.
Speaker #7: As we did throughout 2025. And we see a lot of different growth drivers, most of the three pillars. The OT momentum—we see opportunities with AI and with quantum.
Speaker #7: And when you look at our business, it's really diversified in a number of ways, geographically based on customer segments, and also industry verticals. And then if you look at our solution sets as well, it's diversified amongst the three pillars that we focus on.
Speaker #7: And when we focus, we have a track record of doing really, really well. If you look at what we did in SD-WAN, we focused starting around 2018 or so and really grew that business.
John Whittle: If you look at what we did in SD-WAN, we focused and did really, really well, starting around, you know, 2018 or so, and really grew that business. We're really focused on the unified SASE in these other areas as well, and expect to do well, just like we've done in the past.
John Whittle: If you look at what we did in SD-WAN, we focused and did really, really well, starting around, you know, 2018 or so, and really grew that business. We're really focused on the unified SASE in these other areas as well, and expect to do well, just like we've done in the past.
Speaker #7: And we're really focused on unified SASE and these other areas as well, and expect to do well just like we've done in the past.
Speaker #7: And we're really focused on unified SASE and these other areas as well. And we expect to do well, just like we've done in the past.
Speaker #4: Got it. Thanks for this color. Maybe just a brief follow-up. Ken or team, what are your views on AI eating software, specifically as it relates to cybersecurity?
Shaul Eyal: Got it. Thanks for this color. Maybe just a brief follow-up. You know, Ken or team, what are your views on AI eating software, specifically as it relates to cybersecurity? We have seen, you know, we're sitting here in front of the screens, but probably everyone, everyone else of my peers here, seeing, you know, software's demise. Cyber has been holding a little better, but I think, you know, today, the past few days, it hasn't been fun at all. Just curious as to your views, whether security actually augments AI or maybe it's the other way around.
Shaul Eyal: Got it. Thanks for this color. Maybe just a brief follow-up. You know, Ken or team, what are your views on AI eating software, specifically as it relates to cybersecurity? We have seen, you know, we're sitting here in front of the screens, but probably everyone, everyone else of my peers here, seeing, you know, software's demise. Cyber has been holding a little better, but I think, you know, today, the past few days, it hasn't been fun at all. Just curious as to your views, whether security actually augments AI or maybe it's the other way around.
Speaker #4: We've seen—we're sitting here in front of the screens with probably everyone else, my peers here, seeing software demise. Cyber has been holding a little better, but I think today, and the past few days, it hasn't been fun at all.
Speaker #4: Just curious as to your views whether security actually augments AI or maybe it's the other way
Speaker #4: around. Yeah, definitely
Ken Xie: Yeah, AI definitely changing the especially enterprise landscape. Some software probably also need to be changing to see whether they take advantage of the AI or they're kind of falling behind, which let AI to eat some of the software. But on the other side, we do see AI as an opportunity in the cybersecurity space, because also how to control some of the AI. We do see in the enterprise environment some strong demand in whether internal segmentation to kind of control some of agentic AI or some other data leakage prevention. So on the other side, the AI data center also we see some huge opportunity there. I think we, we'll present more detail in the next month's Accelerate.
Ken Xie: Yeah, AI definitely changing the especially enterprise landscape. Some software probably also need to be changing to see whether they take advantage of the AI or they're kind of falling behind, which let AI to eat some of the software. But on the other side, we do see AI as an opportunity in the cybersecurity space, because also how to control some of the AI. We do see in the enterprise environment some strong demand in whether internal segmentation to kind of control some of agentic AI or some other data leakage prevention. So on the other side, the AI data center also we see some huge opportunity there. I think we, we'll present more detail in the next month's Accelerate.
Speaker #5: changing the especially enterprise landscape. Some software probably also need to be changing to see whether they take advantage of the AI or they kind of falling behind, which let AI to eat some of the software.
Speaker #5: But on the other side, we do see AI as an opportunity in the cybersecurity space because also how to control some of the AI, we do see in the enterprise environment is a kind of a see some strong demand whether internal segmentation to kind of control some of edging AI or some other data leakage prevention.
Speaker #5: data center also we see some huge So on the other side, the AI opportunity there. I think we're present more detail in the next months accelerate if you see some of the presentation I did in the last few accelerate.
Ken Xie: If you see some of the presentation I did in the last few Accelerate, like six years ago, I do see the, the edge will eat the cloud and the mobile. So that's where I think some of these, like, edge AI solution or edge, and the immersive technology with AI, I think will be, kind of changing some of the traditional, whether software infrastructure, which we keeping, invest, we keeping kind of prepared this, in the last 5 to 10 years. So we see this as a opportunity to, to both leverage AI and also helping enterprise to secure AI.
Ken Xie: If you see some of the presentation I did in the last few Accelerate, like six years ago, I do see the, the edge will eat the cloud and the mobile. So that's where I think some of these, like, edge AI solution or edge, and the immersive technology with AI, I think will be, kind of changing some of the traditional, whether software infrastructure, which we keeping, invest, we keeping kind of prepared this, in the last 5 to 10 years. So we see this as a opportunity to, to both leverage AI and also helping enterprise to secure AI.
Speaker #5: Like a six years ago, I do see the edge will eat the cloud and the sometime some of mobile. So that's where I think these edge AI solution or and the immersive technology with AI, I think it will be kind of a changing some of the traditional whether software infrastructure.
Speaker #5: Which we're keeping invested, we're keeping kind of prepared this in the last 5 to 10 years. So we see this is an opportunity to both leverage AI and also helping enterprise to secure AI.
Speaker #4: Thank you so much.
Rob Owens: Thank you so much.
Shaul Eyal: Thank you so much.
Speaker #5: Thank
Ken Xie: Thank you.
Ken Xie: Thank you.
Speaker #1: Our next question comes
Operator: Our next question comes from Saket Kalia at Barclays. Saket, your line is open. You may unmute yourself and ask your question.
Operator: Our next question comes from Saket Kalia at Barclays. Saket, your line is open. You may unmute yourself and ask your question.
Speaker #1: from Saket Kalya at Barclays. Saket, your line is you. open. You may unmute yourself and ask your question.
Saket Kalia: Okay, great. Hey, guys, thanks for taking my questions here. Ken, maybe, maybe first for you, can you just talk a little bit about how you're navigating the current environment in memory? And maybe as part of that, Christiane, can you just talk about how you're thinking about the impact of higher memory prices as part of your guide in 2026?
Saket Kalia: Okay, great. Hey, guys, thanks for taking my questions here. Ken, maybe, maybe first for you, can you just talk a little bit about how you're navigating the current environment in memory? And maybe as part of that, Christiane, can you just talk about how you're thinking about the impact of higher memory prices as part of your guide in 2026?
Speaker #8: questions here. Ken, maybe first for Okay, great. Hey guys, thanks for taking my how you're navigating the current environment in memory? And maybe as part of that, Christiana, can you just talk about of higher memory prices how you're thinking about the impact as part of your guide in 2026?
Ken Xie: That's another great question. Actually, we prepare for this kind of supply chain since you can see 5 years ago when there's a supply chain issue during the COVID. We're doing quite a well because we do have a inventory on average about 6 months, which try to buffer during this kind of time. And also, we keeping mention during analyst day, we're maintain a healthy margin, so we're adjust by some of the price based on our margin. And because even we are adjust recent price, we still have a huge advantage, like, leverage our technology, whether the ASIC give a 5 to 10x better performance for the same function, same cost. At the same time, the OS offer much more function than other competitors.
Speaker #3: That's another great question. Actually, we prepare for this kind of supply chain since you can see five years ago when there's supply chain issue during the COVID.
Ken Xie: That's another great question. Actually, we prepare for this kind of supply chain since you can see 5 years ago when there's a supply chain issue during the COVID. We're doing quite a well because we do have a inventory on average about 6 months, which try to buffer during this kind of time. And also, we keeping mention during analyst day, we're maintain a healthy margin, so we're adjust by some of the price based on our margin. And because even we are adjust recent price, we still have a huge advantage, like, leverage our technology, whether the ASIC give a 5 to 10x better performance for the same function, same cost. At the same time, the OS offer much more function than other competitors.
Speaker #3: because we do have inventory on average about six We're doing quite well months. We try to buffer during this kind of time. And also we're keeping mentioning during the end of the day, we're maintaining a healthy margin.
Speaker #3: adjusted by some of the price based on our So we're own margin. And even we are adjusted by recent price, we still have a huge advantage like leverage our technology, whether the ASIC gave a 5 to 10x better performance for the same function, same cost.
Speaker #3: And the same time, the OS offered much more function than other competitors. So even with a little bit of recent price to maintain our margin, we still feel we are very, very competitive compared to any other competitors.
Ken Xie: So that even with a little bit recent price to maintain our margin, we still feel we are very competitive, compare any other competitors. So we view this just like five years ago as an opportunity to gain a market share. So that's where we're well prepared with good inventory and also managed operation manufactured directly with our own operation center worldwide. And also with the technology, we feel we even little bit price raise, we still very competitive, will not reduce our growth or market share. Christiane, I think you want to add?
Ken Xie: So that even with a little bit recent price to maintain our margin, we still feel we are very competitive, compare any other competitors. So we view this just like five years ago as an opportunity to gain a market share. So that's where we're well prepared with good inventory and also managed operation manufactured directly with our own operation center worldwide. And also with the technology, we feel we even little bit price raise, we still very competitive, will not reduce our growth or market share. Christiane, I think you want to add?
Speaker #3: So we view this just like five years ago as an opportunity to gain a market share. So that's where we're well prepared with good inventory and also managed operation manufacturer directly with our own operation center worldwide.
Speaker #3: And also with the technology, we feel we even a little bit price raise, we still very, very competitive, will not reduce our growth or market
Speaker #3: share. Christiana, I understand you want
Speaker #5: to add.
Speaker #2: Yeah, as Ken mentioned, we are planning to maintain our kind of profitability and gross margins on our products. In two ways, right? One is by negotiating and making sure we get the components early, but also we've already raised some prices where we have some component cost pressures, and we will potentially continue to do so throughout the year depending on
Speaker #2: Yeah, as Ken mentioned, we are planning to maintain our kind of profitability and gross margins on our products. In two ways, right? One is by negotiating and making sure we get the components early, but also we've already raised some prices where we have some component cost pressures, and we will potentially continue to do so throughout the year depending on do.
Christiane Ohlgart: Yeah. As Ken mentioned, we are planning to maintain our kind of profitability and gross margins on our products in two ways, right? One is by negotiating and making sure we get the components early, but also, we've already raised some prices where we have some component cost pressures, and we will potentially continue to do so throughout the year, depending on what the components prices do.
Christiane Ohlgart: Yeah. As Ken mentioned, we are planning to maintain our kind of profitability and gross margins on our products in two ways, right? One is by negotiating and making sure we get the components early, but also, we've already raised some prices where we have some component cost pressures, and we will potentially continue to do so throughout the year, depending on what the components prices do.
Speaker #2: what the components prices
Ken Xie: Yeah, the other part that can help in the margin is, we're starting to see the service revenue will be turn around, probably during 2026 this year. And also, when we're shifting more, like, sales into, like, whether Unified SASE or the AI-driven SecOps, which has the most service, we feel the margin also will be kind of improving from that angle, which has the most service. So that's also helping. But there's other things we also kind of measure, whether the currency issue or some other. But we kind of feel we are prepared, and with all the diversification we have, whether by vertical, by geo, we feel we kind of can maintain the margin and keeping the rule of 45.
Ken Xie: Yeah, the other part that can help in the margin is, we're starting to see the service revenue will be turn around, probably during 2026 this year. And also, when we're shifting more, like, sales into, like, whether Unified SASE or the AI-driven SecOps, which has the most service, we feel the margin also will be kind of improving from that angle, which has the most service. So that's also helping. But there's other things we also kind of measure, whether the currency issue or some other. But we kind of feel we are prepared, and with all the diversification we have, whether by vertical, by geo, we feel we kind of can maintain the margin and keeping the rule of 45.
Speaker #3: starting to see the service revenue will Yeah, the other part can help in the margin is we're be turnaround probably during 2026 this year.
Speaker #3: also when we're shifting And more like sales into whether unified SASE or the AI-driven secure op, which has the most service, we feel the margin also will be kind of improving from that angle, which has the most service.
Speaker #3: So that's also helping but there's other things we also kind of measure, whether the currency issue or some other. But we kind of feel we are prepared and without all the diversification we have, whether by vertical, by geo, we feel we kind of can maintain the margin and keeping the rule of 45.
Speaker #4: Got it. Got it. Christiana, maybe for my follow-up for you, it was a great billings result in the quarter and good to see the guide can you just and apologies if I missed it, but can you just remind us what billings duration was this quarter?
Saket Kalia: Got it. Got it. Christiane, maybe for my follow-up for you. It was a great billings result in the quarter, and good to see the guide. Can you just... And apologies if I missed it, but can you just remind us what billings duration was this quarter? And to Ken's point, just as we think about that driving services revenue for next year, is there a way that you just have us think about the shape of services revenue for next year through the year?
Saket Kalia: Got it. Got it. Christiane, maybe for my follow-up for you. It was a great billings result in the quarter, and good to see the guide. Can you just... And apologies if I missed it, but can you just remind us what billings duration was this quarter? And to Ken's point, just as we think about that driving services revenue for next year, is there a way that you just have us think about the shape of services revenue for next year through the year?
Speaker #4: about that driving services revenue for And to Ken's point, just as we think next year, is there a way that you just have us think about the shape of services revenue for next year through the year?
Speaker #2: So from a billings duration perspective, because of all the enterprise deals, it was slightly up. It's around two and a half years. And so, yeah, not too much different than it is normally in a Q4.
Christiane Ohlgart: So from a billings duration perspective, because of all the enterprise deals, it was slightly up. It's around two and a half years. And so, not too much different than it is normally in a Q4.
Christiane Ohlgart: So from a billings duration perspective, because of all the enterprise deals, it was slightly up. It's around two and a half years. And so, not too much different than it is normally in a Q4.
Speaker #4: Got it. Very helpful. Thanks.
Saket Kalia: Got it. Very helpful. Thanks.
Saket Kalia: Got it. Very helpful. Thanks.
Speaker #1: Our next question comes from Rob Owens at Piper Sandler. Rob, excuse me, your line is open. You may unmute and ask your
Operator: Our next question comes from Rob Owens at Piper Sandler. Rob, excuse me, your line is open. You may unmute and ask your question.
Operator: Our next question comes from Rob Owens at Piper Sandler. Rob, excuse me, your line is open. You may unmute and ask your question.
Speaker #1: question.
Speaker #4: Great. Thank you
Rob Owens: Great. Thank you for taking my question. I know you highlighted the sovereign versus public SASE as one of the strengths. Curious if you can give us a sense of what your actual revenue mix looks like, sovereign versus public, number one. And then number two, to kind of follow up on Saket's, I think it was his third question, but I'm not going to call him out. When you look at the shape of services revenue and the recovery there, and I know you talked about the second half being stronger, but it doesn't seem to track with where you've been historically in terms of a recovery, given what you saw with product revenue this year.
Rob Owens: Great. Thank you for taking my question. I know you highlighted the sovereign versus public SASE as one of the strengths. Curious if you can give us a sense of what your actual revenue mix looks like, sovereign versus public, number one. And then number two, to kind of follow up on Saket's, I think it was his third question, but I'm not going to call him out. When you look at the shape of services revenue and the recovery there, and I know you talked about the second half being stronger, but it doesn't seem to track with where you've been historically in terms of a recovery, given what you saw with product revenue this year.
Speaker #4: for taking my question. I know you highlighted the sovereign versus public SASE as one of the strengths. Curious if you can give us a sense of what your actual revenue makes and looks like sovereign versus public, number one.
Speaker #4: And then number two, to kind of follow up on Sockets, I think it was his third question, but I'm not going to call him out.
Speaker #4: shape of services revenue and When you look at the the recovery there, and I know you talked about the second half being stronger, but it doesn't seem to track with where you've been historically in terms of a recovery, given what you saw with product revenue this year.
Speaker #4: So is there something unique in 2026, or something unique going on that's causing that to lag just a little bit more than maybe you've seen historically?
Rob Owens: Is there something unique in 2026 or something unique going on that's causing that to lag just a little bit more than maybe you've seen historically? Thanks.
Rob Owens: Is there something unique in 2026 or something unique going on that's causing that to lag just a little bit more than maybe you've seen historically? Thanks.
Speaker #4: Thanks.
Ken Xie: For the service or product revenue, actually, you can refer to the page 20 on the presentation. We gave out the last 16 years since IPO, the growth between the service revenue and the product revenue. You can see the, the sense change in the product revenue, leading indicator of a service revenue. So we do believe this year, with the, the last few quarter, with the product revenue in the last few quarter grow stronger, that's what helping drive the service revenue turn around, starting to grow, faster. On the first question, sorry, sorry, what's the first question?
Speaker #3: For the service or product revenue, actually, you can refer to page 20 on the presentation. We gave out the last 16 years since IPO.
Ken Xie: For the service or product revenue, actually, you can refer to the page 20 on the presentation. We gave out the last 16 years since IPO, the growth between the service revenue and the product revenue. You can see the, the sense change in the product revenue, leading indicator of a service revenue. So we do believe this year, with the, the last few quarter, with the product revenue in the last few quarter grow stronger, that's what helping drive the service revenue turn around, starting to grow, faster. On the first question, sorry, sorry, what's the first question?
Speaker #3: The growth between the service revenue and the product revenue, you can see since changing the product revenue lead indicator of a service revenue. So we do believe this year, with the last few quarters, with the product revenue in the last few quarters, growth stronger.
Speaker #3: That's what's helping drive the service revenue turnaround, starting growth faster. On the first question, sorry. Sorry,
Speaker #3: what's the first question? Sovereign versus
Rob Owens: Sovereign versus public SASE mix.
Rob Owens: Sovereign versus public SASE mix.
Ken Xie: Oh, sorry. Yeah, I believe the sovereign SASE market is probably even bigger than the current public SASE market, but kind of approach is different. The sovereign SASE market, the service provider enterprise tend to buy the product first, which also we see the product growth very, very strong in Q4, and also believe will helping drive this year product revenue growth with sovereign SASE. We have not compared the sovereign and the public yet, but I believe probably pretty close to each other right now. But sovereign SASE, we see more strong growth, because we don't see any of our competitor offer this sovereign SASE approach. And also, with the product, with the ASIC acceleration is a huge advantage for us.
Ken Xie: Oh, sorry. Yeah, I believe the sovereign SASE market is probably even bigger than the current public SASE market, but kind of approach is different. The sovereign SASE market, the service provider enterprise tend to buy the product first, which also we see the product growth very, very strong in Q4, and also believe will helping drive this year product revenue growth with sovereign SASE. We have not compared the sovereign and the public yet, but I believe probably pretty close to each other right now. But sovereign SASE, we see more strong growth, because we don't see any of our competitor offer this sovereign SASE approach. And also, with the product, with the ASIC acceleration is a huge advantage for us.
Speaker #3: Oh, service public SASE mix? revenue. Yeah, I believe is probably even bigger than the current public SASE market. But kind of approach is different.
Speaker #3: SASE market, the service provider The sovereign enterprise tend to buy the product first, which also we see the product growth very, very strong. In Q4, and also believe we're helping drive this year.
Speaker #3: Product revenue growth with sovereign SASE. We have not compared the sovereign and also the public yet, but I believe probably pretty close to each other right now, but sovereign SASE we see more strong growth because we don't see any of our competitors offer this sovereign SASE approach.
Speaker #3: the product, with the ASIC acceleration, it's a huge advantage for us. So that's why I do believe we have probably doubled the total addressable market in the SASE market with the sovereign SASE supporting the service provider enterprise with their own kind of SASE
Ken Xie: So that's, I do believe, we have probably doubled the total addressable market in the SASE market with the sovereign SASE supporting the service provider enterprise with their own kind of SASE approach.
Ken Xie: So that's, I do believe, we have probably doubled the total addressable market in the SASE market with the sovereign SASE supporting the service provider enterprise with their own kind of SASE approach.
Speaker #3: approach. All right.
Rob Owens: All right. Thank you.
Rob Owens: All right. Thank you.
Speaker #4: Thank
Speaker #4: you. Our next question comes
Operator: Our next question comes from...
Operator: Our next question comes from...
Speaker #1: Excuse me. Go ahead. Our next question comes from Gabriella Borgas at Goldman Sachs. Gabriella, your line is open. You may unmute and ask your question.
Christiane Ohlgart: Oh, go ahead.
Christiane Ohlgart: Oh, go ahead.
Operator: Excuse me. Our next question comes from Gabriela Borges at Goldman Sachs. Gabriela, your line is open. You may unmute and ask your question.
Operator: Excuse me. Our next question comes from Gabriela Borges at Goldman Sachs. Gabriela, your line is open. You may unmute and ask your question.
Speaker #5: Hey, good afternoon. Thank you. I know last year we shifted the conversation away from refresh tight and of support and more towards refresh tight to technology upgrade cycles.
Gabriela Borges: Hey, good afternoon. Thank you. I know last year we shifted the conversation away from refresh type end of support, and more towards refresh types of technology upgrade cycles. Tell us a little bit, Ken and Christiane, on what you're seeing in the pipeline from the 2020 and 2021 refresh cohorts, their willingness to engage across the platform, and, and do those cohorts look more meaningful or notable than the cohort that you had refreshed last year? Thank you.
Gabriela Borges: Hey, good afternoon. Thank you. I know last year we shifted the conversation away from refresh type end of support, and more towards refresh types of technology upgrade cycles. Tell us a little bit, Ken and Christiane, on what you're seeing in the pipeline from the 2020 and 2021 refresh cohorts, their willingness to engage across the platform, and, and do those cohorts look more meaningful or notable than the cohort that you had refreshed last year? Thank you.
Speaker #5: Tell us a little bit, Ken and Christian, what you're seeing in the pipeline from the 2020 and 2021 refresh cohorts. Their willingness to engage across the platform and do those cohorts look more meaningful or notable than the cohort that you had refresh last year?
Speaker #5: Thank you.
Ken Xie: Yeah, I think, there, there's two things. One is really, we mentioned on SASE is end of service, which, we say there's an 11 product, 11, 12 product will be end of this year, end of the service. But actually, doing some communication with the customers, some of them still want to, are supporting beyond end of service. So I think we kind of found some solution, probably win-win. We may extend end of service instead of try to force customer to buy the new product. We may give them extra extended service, but we do charge more service fee, both hardware fee, and also the, the maintenance software fee. So that is a win-win situation.
Ken Xie: Yeah, I think, there, there's two things. One is really, we mentioned on SASE is end of service, which, we say there's an 11 product, 11, 12 product will be end of this year, end of the service. But actually, doing some communication with the customers, some of them still want to, are supporting beyond end of service. So I think we kind of found some solution, probably win-win. We may extend end of service instead of try to force customer to buy the new product. We may give them extra extended service, but we do charge more service fee, both hardware fee, and also the, the maintenance software fee. So that is a win-win situation.
Speaker #3: think there's a two things. One is really we mentioned on Yeah, I our state is an end-of-a-service, which we say there's an 1112 product that will be end of this year.
Speaker #3: May end of the service. But actually, doing some communication with the customers, some of them still want to support in beyond end-of-a-service. So I think we kind of found some solution probably win-win.
Speaker #3: We may extend end-of-service instead of trying to force customers to buy the new product. We may give them extra extended service, but we do charge more service fees—both hardware RMA fee and also the software maintenance fee.
Speaker #3: So that's the win-win situation. And then also, like I said, that's not a major drive, not of this growth, because the growth is more coming from the new function, coming from all these kind of new demand in the market.
Ken Xie: And then also, like I said, that's not a major drive, not of this growth, because the growth more come from the new function, come from all these kind of, like, like a new demand in the market. The second refresh is, that's where, in the past, probably the average hardware product, whether network security, networking, even server, probably after 5 to 6 years, they may have to get a new thing, a new one. So we do see 5 years ago, during the supply chain COVID time, there's a strong growth of product revenue. You can see on page 20, 21, 22, there's a pretty strong product revenue growth, like over 40%.
Ken Xie: And then also, like I said, that's not a major drive, not of this growth, because the growth more come from the new function, come from all these kind of, like, like a new demand in the market. The second refresh is, that's where, in the past, probably the average hardware product, whether network security, networking, even server, probably after 5 to 6 years, they may have to get a new thing, a new one. So we do see 5 years ago, during the supply chain COVID time, there's a strong growth of product revenue. You can see on page 20, 21, 22, there's a pretty strong product revenue growth, like over 40%.
Speaker #3: The second refresh is that's where in the past, probably the average hardware product, whether network security, networking, even server, probably after 5 to 6 years, they may have to get a new one.
Speaker #3: So, we do see five years ago, during the supply chain COVID time, there's a strong growth of product revenue. You can see on page 20, then 21, 22, there's a pretty strong product revenue growth, like over 40%.
Ken Xie: Some of that one probably will help in the next couple years, but like, like I said, the better driver will be new function, like how to support in the SASE, in the ZTNA Zero Trust Network environment, how to go internal segmentation, supporting enterprise, to convert from the traditional network into the, to the network security, and, and, like, like helping to protect the data level, whether the data center or some kind of AI agent. That I feel is the one to drive the strong growth. Just like the strong growth come from the unified SASE, it's 40% in Q4.
Speaker #3: Some of that one probably will help in the next couple of years, but like I said, the better driver will be new function like how to support in the SASE in the ZTNA Zero Trust network environment, how to go internal segmentation, supporting enterprise, to convert from the traditional networking to the network security and helping the protect the data level, whether the data leakage or some kind of AI agent.
Ken Xie: Some of that one probably will help in the next couple years, but like, like I said, the better driver will be new function, like how to support in the SASE, in the ZTNA Zero Trust Network environment, how to go internal segmentation, supporting enterprise, to convert from the traditional network into the, to the network security, and, and, like, like helping to protect the data level, whether the data center or some kind of AI agent. That I feel is the one to drive the strong growth. Just like the strong growth come from the unified SASE, it's 40% in Q4.
Speaker #3: That's, I feel, the one to drive the strong growth. Just like the strong growth comes from the unified SASE. It's at 40% in Q4.
Ken Xie: I feel customers definitely more interested in, if you have a better function and also kind of, they can see the future of a long-term advantage, that's what more drive a customer to buy. Otherwise, they may replace the product with some other different vendor. So that I see is more important. We more focus on how the strong function, how the future kind of advantage we have, and also how to leverage the long-term investment we have, whether in the AI, in the quantum, in the infrastructure. That give the customer confidence and also keeping or partner with the Fortinet.
Speaker #3: I feel customers definitely more interested in if you have a better function and also kind of they can see the future of a long-term advantage, that's what will drive customers to buy it.
Ken Xie: I feel customers definitely more interested in, if you have a better function and also kind of, they can see the future of a long-term advantage, that's what more drive a customer to buy. Otherwise, they may replace the product with some other different vendor. So that I see is more important. We more focus on how the strong function, how the future kind of advantage we have, and also how to leverage the long-term investment we have, whether in the AI, in the quantum, in the infrastructure. That give the customer confidence and also keeping or partner with the Fortinet.
Speaker #3: Otherwise, they may replace the product with some other different vendor. So that's, I see, is more important with more focus on the how the strong function and how the future kind of advantage we have and also how to leverage long-term investment we have, whether in the AI, in the quantum, in the infrastructure.
Speaker #3: That gives the customer confidence and also keeping or partner with the
Speaker #3: Fortinet.
Speaker #2: Yeah. Thank you for
Christiane Ohlgart: Yeah, I would-
Christiane Ohlgart: Yeah, I would-
Gabriela Borges: Thank you for the detail. Ken, please. Christiane.
Gabriela Borges: Thank you for the detail. Ken, please. Christiane.
Speaker #2: Yeah. the detail.
Christiane Ohlgart: Yeah, I would confirm what Ken said. Based on the customer conversations we are having, the driver is that they need additional security. And so when they look at FortiSASE or similar, they upgrade their underlying technology at the edge as well.
Christiane Ohlgart: Yeah, I would confirm what Ken said. Based on the customer conversations we are having, the driver is that they need additional security. And so when they look at FortiSASE or similar, they upgrade their underlying technology at the edge as well.
Speaker #2: Yeah, Ken, this is Christian. I would confirm what Ken said. Based on the customer conversations we're having, the driver is that they need additional security.
Speaker #2: And so as they look at 40 SASE or similar, they upgrade their underlying technology at the edge as well.
Speaker #5: Yeah, that makes sense. Thank you. Ken, my follow-up is on how to think about the second derivative So more on the inference side, how does that impact what you see from a network security standpoint and a network traffic standpoint in particular?
Gabriela Borges: Yeah, that, that makes sense. Thank you. Ken, my follow-up is on how to think about the second derivative of AI compute demand, so, so more on the inference side. How does that impact what you see from a network security standpoint and a network traffic standpoint in particular?
Gabriela Borges: Yeah, that, that makes sense. Thank you. Ken, my follow-up is on how to think about the second derivative of AI compute demand, so, so more on the inference side. How does that impact what you see from a network security standpoint and a network traffic standpoint in particular?
Ken Xie: That's everybody still kind of because the space changing so quick with AI, we, we're definitely tried working closely with our customer with our engineer, try to, try to develop all this technology, try to, try to do better protection. But in general, I think we, we kind of are more into to whether like the edge computing and also how the broad infrastructure protection, instead of too much weight on the on certain cloud or certain software. That's where we, we kind of a lot of long-term investment we have, whether in the ASIC chip, in, in, in all this kind of system level, in the infrastructure level, and also in the support.
Speaker #3: That's everybody still kind of because the space changes so quick with AI. We're definitely trying to our customer, with our engineer, try to develop all this technology, try to do better protection.
Ken Xie: That's everybody still kind of because the space changing so quick with AI, we, we're definitely tried working closely with our customer with our engineer, try to, try to develop all this technology, try to, try to do better protection. But in general, I think we, we kind of are more into to whether like the edge computing and also how the broad infrastructure protection, instead of too much weight on the on certain cloud or certain software. That's where we, we kind of a lot of long-term investment we have, whether in the ASIC chip, in, in, in all this kind of system level, in the infrastructure level, and also in the support.
Speaker #3: But in general, I think we kind of are more leaning to whether the edge computing and also how the broad infrastructure protection instead of too much weight on the uncertain cloud or certain software.
Speaker #3: That's where we kind of a lot of long-term investment we have whether in the ASIC chip, in all this kind of system level, in the infrastructure level, and also in the support.
Speaker #3: And I feel it's kind of a more broad approach that will help better, instead of just focusing too much on one single thing.
Ken Xie: I feel it's a kind of more broader approach will be helping better instead of just too much focus in one single area.
Ken Xie: I feel it's a kind of more broader approach will be helping better instead of just too much focus in one single area.
Speaker #3: area. Thank you for the thank you.
Fatima Boolani: Thank you for the detail.
Gabriela Borges: Thank you for the detail.
Speaker #1: detail. Our next question
Ken Xie: Thank you.
Ken Xie: Thank you.
Speaker #3: you.
Operator: Our next question comes from Fatima Boolani at Citi. Fatima, your line is open. You may unmute and ask your question.
Operator: Our next question comes from Fatima Boolani at Citi. Fatima, your line is open. You may unmute and ask your question.
Speaker #1: comes from Fatima Boulani at City. Fatima, your line is open. You may unmute and ask your
Speaker #1: question. Oh, good afternoon.
Fatima Boolani: Oh, good afternoon. Thank you so much for taking my question. My first question is for you, Ken. The strength in Unified SASE at 40%, your product growth this quarter in excess of 20%, that paints a really interesting picture that maybe is in contrast to some fears around SASE or FortiSASE rather, being maybe a force of cannibalization of the product refresh opportunity. And I know you alluded to Sovereign SASE specifically, but I'd be curious to get your perspective on how you are independently driving strong growth in SASE, and independently driving strong growth from a product refresh perspective, that doesn't seem to be, you know, affirming fears of cannibalization, especially for branch and branch location environments. And then I have a follow-up for Christiane, please.
Fatima Boolani: Oh, good afternoon. Thank you so much for taking my question. My first question is for you, Ken. The strength in Unified SASE at 40%, your product growth this quarter in excess of 20%, that paints a really interesting picture that maybe is in contrast to some fears around SASE or FortiSASE rather, being maybe a force of cannibalization of the product refresh opportunity. And I know you alluded to Sovereign SASE specifically, but I'd be curious to get your perspective on how you are independently driving strong growth in SASE, and independently driving strong growth from a product refresh perspective, that doesn't seem to be, you know, affirming fears of cannibalization, especially for branch and branch location environments. And then I have a follow-up for Christiane, please.
Speaker #4: Thank you so much for taking my question. My first question is for you, Ken. The strength in unified SASE at 40%, your product growth this quarter, and excess of 20%, that paints a really interesting picture that maybe is in contrast to some fears around SASE or Fortis SASE rather being maybe a force of cannibalization of the product refresh opportunity.
Speaker #4: And I know you alluded to sovereign SASE specifically, but I'd be curious to get your perspective on how you are independently driving strong growth in SASE and independently driving strong growth from a product refresh perspective that doesn't seem to be affirming fears of cannibalization, especially for branch and branch follow-up for Christiana, location environments.
Speaker #4: And then I have a please.
Ken Xie: I have to say that that's the same SASE cannibalize the some of the network and security come from some competitor. I never think SASE will be cannibalize all this network security, even a branch. I feel will be complement and also will be add on additional business opportunity. That's what we do in both in the networking and then, like, traditional network security, and also SD-WAN and SASE for many, many years. So from our, our angle, we do see SASE to offer additional business opportunity, additional product service both in the customer level, in the service provider level, and also in some other, like, a branch approach. And eventually may even try to supporting working remotely, working from home, all this kind of approach.
Ken Xie: I have to say that that's the same SASE cannibalize the some of the network and security come from some competitor. I never think SASE will be cannibalize all this network security, even a branch. I feel will be complement and also will be add on additional business opportunity. That's what we do in both in the networking and then, like, traditional network security, and also SD-WAN and SASE for many, many years. So from our, our angle, we do see SASE to offer additional business opportunity, additional product service both in the customer level, in the service provider level, and also in some other, like, a branch approach. And eventually may even try to supporting working remotely, working from home, all this kind of approach.
Speaker #3: I have to say that's the same SASE may security come from some cannibalize some of the network and competitor. I never think SASE will be cannibalize all these network security, even the branch.
Speaker #3: I feel it will be complement and also will be add-on. Additional business opportunity. That's what we're doing both in the networking and traditional network security and also SD-WAN and SASE for many, many years.
Speaker #3: So from all angles, we do see SASE do offer additional business opportunity, additional product service both at the customer level, at the service provider level, and also in some other branch approach.
Speaker #3: try to support working And eventually, may even remotely, working from home, all these kind of approach. And also, we'll be leveraged both the infrastructure in the public cloud, in the colo, and also in our own kind of infrastructure.
Ken Xie: And also will be leveraged both the infrastructure in the public cloud, in the colo, and also in, you know, own kind of infrastructure. So that's where we see there's a lot of different approach to SASE and the different customer, different region may have a kind of different need. So that's where we, we kind of... In the very beginning, when we developed SASE technology, probably like 6, 7 years ago, we more believe the sovereign SASE service provider, kind of SASE will be, will be, will be, will be the future. That's where we're kind of keeping investing in this area.
Ken Xie: And also will be leveraged both the infrastructure in the public cloud, in the colo, and also in, you know, own kind of infrastructure. So that's where we see there's a lot of different approach to SASE and the different customer, different region may have a kind of different need. So that's where we, we kind of... In the very beginning, when we developed SASE technology, probably like 6, 7 years ago, we more believe the sovereign SASE service provider, kind of SASE will be, will be, will be, will be the future. That's where we're kind of keeping investing in this area.
Speaker #3: So that's where we see there's a lot of different approach to SASE and the different customer, different region may have a kind of different need.
Speaker #3: So that's where we kind of in the very beginning, when we developed SASE technology, probably like six, seven years ago, we more believe the sovereign SASE service provider kind of SASE will be the future.
Speaker #3: That's where we kind of keep investing in this area. But also, when we launch our own kind of SASE, a little bit over two years ago, we also feel kind of working side by side with service provider of our own SASE and even some more infrastructure also where we're important.
Ken Xie: But also, like, when we launched our own kind of SASE, maybe over two years ago, we also feel kind of a working side-by-side with service provider, offer our own SASE and even some more infrastructure, also very, very important. So that's where we see the SASE actually will be complement, also will be a additional business opportunity to add beyond the traditional networking and network security. In the branch office, you still need a physical device. That's the advantage we have. We have, like, we call three-in-one. You took at a networking device, network security device, and a SASE device into one solution, 140 or 140 40 gig box, in the branch office. That's probably not our competitor offer this kind of a solution, and that's where we see the huge opportunity.
Ken Xie: But also, like, when we launched our own kind of SASE, maybe over two years ago, we also feel kind of a working side-by-side with service provider, offer our own SASE and even some more infrastructure, also very, very important. So that's where we see the SASE actually will be complement, also will be a additional business opportunity to add beyond the traditional networking and network security. In the branch office, you still need a physical device. That's the advantage we have. We have, like, we call three-in-one. You took at a networking device, network security device, and a SASE device into one solution, 140 or 140 40 gig box, in the branch office. That's probably not our competitor offer this kind of a solution, and that's where we see the huge opportunity.
Speaker #3: So that's where we see the SASE actually will be complement also will be additional business opportunity add beyond the traditional networking and network security.
Speaker #3: In the branch office, you still need a physical device. That's an advantage we have. We have what we call three-in-one. You do get a networking device, network security device, and a SASE device into one solution.
Speaker #3: One for the OS, one for the 40K box in the branch office. That's probably not our competitor offer this kind of solution. And that's what we see is a huge opportunity.
Ken Xie: So we don't see SASE will be replaced branch office and network security solution. And you can see the unified shipment, even in the branch office solution, in the low-end and in the retail grow very, very strong. Some was because of SASE, but some also they try to buy, deploy, or believe the future, they can enable whether the SASE or the SD-WAN, some other additional security service they needed. But they do need to have a device in the branch office. They do need some kind of a edge solution to handle all the both security and networking.
Speaker #3: So we don't see SASE will be replaced, branch office, and network security solution. And you can see the unit shipment, even in the branch office solution in the lower end and in the retail, growth are very strong.
Ken Xie: So we don't see SASE will be replaced branch office and network security solution. And you can see the unified shipment, even in the branch office solution, in the low-end and in the retail grow very, very strong. Some was because of SASE, but some also they try to buy, deploy, or believe the future, they can enable whether the SASE or the SD-WAN, some other additional security service they needed. But they do need to have a device in the branch office. They do need some kind of a edge solution to handle all the both security and networking.
Speaker #3: Some are because of SASE, but some also they try to buy deploy I believe the future they can enable whether the SASE or the SD-WAN, some other additional security service they needed.
Speaker #3: But they do need to have a device in the branch office. They do need some kind of edge solution to handle both security and networking.
Speaker #4: I really appreciate that detail. Thank you, Ken. Christiana, I wanted to go back to some of your comments with respect to pricing actions in response to an earlier question and something you mentioned, the prepared remarks.
Fatima Boolani: I really appreciate that detail. Thank you, Ken. Christiane, I wanted to go back to some of your comments with respect to pricing actions in response to an earlier question and something you mentioned in the prepared remarks. Was hoping you could quantify what degree of pricing, gross pricing increases you've been able to roll out in the base, and to the extent there's a net pricing yield associated with that, and how that's influencing your guidance. And maybe just to take that a step further, is that one of the reasons why we're maybe seeing a slower ramp in the services trajectory of the business? Because you are seeing a price action yield on the product, which may not necessarily be translating to services. I'd love for you to just explain that for all of us.
Fatima Boolani: I really appreciate that detail. Thank you, Ken. Christiane, I wanted to go back to some of your comments with respect to pricing actions in response to an earlier question and something you mentioned in the prepared remarks. Was hoping you could quantify what degree of pricing, gross pricing increases you've been able to roll out in the base, and to the extent there's a net pricing yield associated with that, and how that's influencing your guidance. And maybe just to take that a step further, is that one of the reasons why we're maybe seeing a slower ramp in the services trajectory of the business? Because you are seeing a price action yield on the product, which may not necessarily be translating to services. I'd love for you to just explain that for all of us. Thank you very much.
Speaker #4: I was hoping you could quantify what degree of pricing, gross pricing increases you've been able to roll out in the base and to the extent there's a net pricing yield associated with that and how that's influencing your guidance.
Speaker #4: And maybe just to take that a step further, is that one of the reasons why we're maybe seeing a slower ramp in the services trajectory of the business because you are seeing a price action yield on the product, which may not necessarily be translating to services?
Speaker #4: I'd love for you to just explain that for all of us. Thank you very much.
Fatima Boolani: Thank you very much.
Speaker #5: So the products are, of course, dependent on the components that go into it. Overall, I think it's between 5% and 20%. But that also positively impacts services, because our service pricing is a percent of list price. But, of course, it's going to take longer until that materializes in the service revenue, right?
Ken Xie: So, the pricing actions are on specific products and, of course, dependent on the components that go into it. Overall, it's I think it's between 5% and 20%.
Christiane Ohlgart: So, the pricing actions are on specific products and, of course, dependent on the components that go into it. Overall, it's I think it's between 5% and 20%. But that also positively impacts services because our service pricing is a percent of list price. But of course, it's gonna take longer until that materializes in service revenue, right? So, for product, you will see it in the next couple of quarters. For service revenue, it's gonna take a bit.
Christiane Ohlgart: ... but that also positively impacts services because our service pricing is a percent of list price. But of course, it's gonna take longer until that materializes in service revenue, right? So, for product, you will see it in the next couple of quarters. For service revenue, it's gonna take a bit.
Speaker #5: So for a product, you will see it in the next couple of quarters for service revenue. It's going to take a bit.
Speaker #4: Thank you.
Rob Owens: Thank you.
Fatima Boolani: Thank you.
Speaker #6: Our next question comes from Junaid Siddiqui at Truist. Junaid, your line is open. You may unmute and ask your question.
Operator: Our next question comes from Junaid Siddiqui at Truist. Junaid, your line is open. You may unmute and ask your question.
Operator: Our next question comes from Junaid Siddiqui at Truist. Junaid, your line is open. You may unmute and ask your question.
Speaker #7: Great. Thank you for taking my question. I just had a question on your software firewall business. As AI transformation across enterprises accelerates growth and cloud workloads do you feel that your software firewall business, which has been growing at a nice rate could inflect even further?
Rob Owens: Great. Thank you for taking my question. I just had a question on your software firewall business. As AI transformation across enterprises accelerate growth and cloud workloads, do you feel that your software firewall business, which has been growing at a nice rate, could inflect even further? And, how do you think about that hardware, software firewall mix going forward?
Junaid Siddiqui: Great. Thank you for taking my question. I just had a question on your software firewall business. As AI transformation across enterprises accelerate growth and cloud workloads, do you feel that your software firewall business, which has been growing at a nice rate, could inflect even further? And, how do you think about that hardware, software firewall mix going forward?
Speaker #7: And how do you think about that hardware-software firewall mix going forward?
Speaker #3: I think Q4 we see that software firewall and the hardware firewall grow almost the same pace, about 20%. So the partnership with NVIDIA, the blue field 3DPU, that's probably more leveraged software approach and also with working with some kind of some other service provider cloud provider.
Ken Xie: I think Q4, we see the software firewall and the hardware firewall grow almost the same pace, about 20%. So the partnership with NVIDIA, the BlueField-3 DPU, that's probably more leverage the software approach, and also with working with some kind of, some other service provider, cloud provider, to offer some software. But I do believe we, we have, also more advantage, leverage our own kind of, secure ASIC, which kind of, give a 5 to 10 times better performance, compared to some software approach and with lower cost. And, that, that's probably... But, but I see so far, it's, it's almost the same, same, same growth pace.
Ken Xie: I think Q4, we see the software firewall and the hardware firewall grow almost the same pace, about 20%. So the partnership with NVIDIA, the BlueField-3 DPU, that's probably more leverage the software approach, and also with working with some kind of, some other service provider, cloud provider, to offer some software. But I do believe we, we have, also more advantage, leverage our own kind of, secure ASIC, which kind of, give a 5 to 10 times better performance, compared to some software approach and with lower cost. And, that, that's probably... But, but I see so far, it's, it's almost the same, same, same growth pace.
Speaker #3: To offer some software but I do believe we have also more advantage leverage our own kind of secure ASIC. Which kind of gave a 5 to 10 times better performance compared to some software approach and with lower cost and that's probably but I see so far it's almost the same growth
Speaker #3: pace. And for most of
Christiane Ohlgart: For most of our enterprise customers, I would say they, they have hybrid models, and so they, they buy our hardware, but they also buy virtual firewalls.
Christiane Ohlgart: For most of our enterprise customers, I would say they, they have hybrid models, and so they, they buy our hardware, but they also buy virtual firewalls.
Speaker #5: our enterprise customers, I would say they have hybrid models. And so they buy our hardware, but they also buy virtual
Speaker #5: firewalls. Great.
Rob Owens: Great. Thank you. I just want to follow up as well. You know, great to see the billings number, but just wanted to ask about specifically billings for SecOps. It seems like it decelerated from Q3. Could you maybe just unpack that in terms of what were some of the drivers there?
Junaid Siddiqui: Great. Thank you. I just want to follow up as well. You know, great to see the billings number, but just wanted to ask about specifically billings for SecOps. It seems like it decelerated from Q3. Could you maybe just unpack that in terms of what were some of the drivers there?
Speaker #7: Thank you. I just want to follow up as well. Great to see the billings number, but just wanted to ask specifically about billings for SecOps.
Speaker #7: It seems like it decelled from Q3. Could you maybe just unpack that in terms of what were some of the drivers there?
Speaker #5: Yeah, I don't want to call it a driver. I would say, if you look at the annual growth, billings growth for SecOps, it's very compelling.
Christiane Ohlgart: Yeah, I don't want to call it a driver. I would say if you look at the annual billings growth for SecOps, it's very compelling. ARR growth is compelling, revenue is compelling. So billings is always a little bit of a more volatile number, yeah? And in Q4, we had a lot of success in secure networking and unified SASE, but our SecOps portfolio is solid, and we continue to see interest and demand, and so I wouldn't take this one quarter as a trend.
Christiane Ohlgart: Yeah, I don't want to call it a driver. I would say if you look at the annual billings growth for SecOps, it's very compelling. ARR growth is compelling, revenue is compelling. So billings is always a little bit of a more volatile number, yeah? And in Q4, we had a lot of success in secure networking and unified SASE, but our SecOps portfolio is solid, and we continue to see interest and demand, and so I wouldn't take this one quarter as a trend.
Speaker #5: AIR growth is compelling. Revenue is compelling. So Billings is always a little bit of a more volatile number. And in Q4, we had a lot of success in secure networking and unified SASE, but our SecOps portfolio is solid and we continue to see interest and demand.
Speaker #5: And so I wouldn't take this one quarter as a trend.
Speaker #3: Yeah. Also, the secure networking and the unified leading indicator for some future secure op, because they tend to buy the third product first and then eventually will also handle the additional operation service.
Ken Xie: Yeah, also, the secure networking and unified SASE can be a leading indicator for some future secure, because they tend to buy the Forti product first, and then eventually will also handle the additional, like, operation service. I have to say, because a lot of our sales and the partner see the unified SASE demand so strong, they're probably shifting more focus in that, and they can see that's more easy win. But secure ops is rather long tail, and we have so many different product with AI. If you probably look, an annual number will be more kind of reasonable instead of some quarterly number.
Ken Xie: Yeah, also, the secure networking and unified SASE can be a leading indicator for some future secure, because they tend to buy the Forti product first, and then eventually will also handle the additional, like, operation service. I have to say, because a lot of our sales and the partner see the unified SASE demand so strong, they're probably shifting more focus in that, and they can see that's more easy win. But secure ops is rather long tail, and we have so many different product with AI. If you probably look, an annual number will be more kind of reasonable instead of some quarterly number.
Speaker #3: I have to say because a lot of our sales and the partners see the unified SASE demand so strong, they probably shifted more focus in that and they can see that's more easy win.
Speaker #3: But security is a very, very secure op is very, very long tail. We have so many different products with AI, I feel, probably looking at annual number will be more kind of a reasonable instead of some quarter.
Speaker #3: Quarterly
Speaker #3: number. Great.
Rob Owens: Great. Thank you.
Junaid Siddiqui: Great. Thank you.
Speaker #7: Thank
Speaker #7: you.
Speaker #6: Our next question comes
Operator: Our next question comes from Patrick Colville at Scotiabank. Patrick, your line is open. You may unmute and ask your question.
Operator: Our next question comes from Patrick Colville at Scotiabank. Patrick, your line is open. You may unmute and ask your question.
Speaker #6: from Patrick Colville at Scotiabank. Patrick, your line is open. You may unmute and ask your question.
Speaker #8: Thank you so much for taking my question and nice end to 2025. Could I just get a clarification on the was interesting and fortunate as a company that over the years has clearly demonstrated pricing power we saw that most evidently in 2021, 2022.
Patrick Colville: Thank you so much for taking my question, and nice end to 2025. Could I just get a clarification on the pricing comments? 'Cause I thought that was interesting, and Fortinet is a company that over the years has clearly demonstrated pricing power. You know, we saw that most evidently in 2021, 2022. Good to see that lever being pulled again. Christiane, did you say that expect pricing for appliances in 2026 to go up between 5 and 20 percent on average?
Patrick Colville: Thank you so much for taking my question, and nice end to 2025. Could I just get a clarification on the pricing comments? 'Cause I thought that was interesting, and Fortinet is a company that over the years has clearly demonstrated pricing power. You know, we saw that most evidently in 2021, 2022. Good to see that lever being pulled again. Christiane, did you say that expect pricing for appliances in 2026 to go up between 5 and 20 percent on average?
Speaker #8: Good to see that lever being pulled again. Christiana, did you say that expect appliances in 2026 to go up pricing for between 5 and 20 percent on
Speaker #8: average? It
Christiane Ohlgart: It depends on the appliance, but that's what we are targeting, yes.
Christiane Ohlgart: It depends on the appliance, but that's what we are targeting, yes.
Speaker #5: But that's what we depend on—the appliance we are targeting, yes.
Ken Xie: Yeah, we can actually just by the price monthly; we usually give a distributor like a 30-day notification. So some of them already see we probably will increase the price next month. But on the other side, we do have a buffer. That's where we feel we can kind of react this kind of situation better than other competitors. And we also have a good, like, a global operation with own operation center. We manage manufacturer directly.
Ken Xie: Yeah, we can actually just by the price monthly; we usually give a distributor like a 30-day notification. So some of them already see we probably will increase the price next month. But on the other side, we do have a buffer. That's where we feel we can kind of react this kind of situation better than other competitors. And we also have a good, like, a global operation with own operation center. We manage manufacturer directly.
Speaker #3: price monthly. We usually give a distributor like a 30-day notification so some of them already see we probably will raise the price next month.
Speaker #3: But on the other side, we do have a buffer that's where we feel we can kind of react this kind of situation better than other competitors.
Speaker #3: And we also have a good global operation with our own operation center. We manage manufacturing directly.
Speaker #8: Okay. Okay. And I guess I just want to ask maybe just a kind of a question zooming out. I mean, we've seen your peers really accelerate the pace of M&A.
Patrick Colville: Okay. Okay. And, and I guess I just want to ask maybe just a kind of question zooming out. I mean, we've seen your peers, really accelerate the pace of M&A. You know, you saw that at your kind of endpoint peer. You saw that at your firewall peer, both for tuck-ins and for larger deals. Fortinet hasn't done that over the last few quarters. What, what's your thinking in terms of, M&A philosophy and whether, Like, how we should think about that into 2026, whether the tuck-in deals are needed, in certain areas? Thank you.
Patrick Colville: Okay. Okay. And, and I guess I just want to ask maybe just a kind of question zooming out. I mean, we've seen your peers, really accelerate the pace of M&A. You know, you saw that at your kind of endpoint peer. You saw that at your firewall peer, both for tuck-ins and for larger deals. Fortinet hasn't done that over the last few quarters. What, what's your thinking in terms of, M&A philosophy and whether, Like, how we should think about that into 2026, whether the tuck-in deals are needed, in certain areas? Thank you.
Speaker #8: You saw that at your kind of endpoint peer. You saw that at your firewall peer. Both for Tuckins and for larger deals. Fortunate, hasn't done that over the last few quarters?
Speaker #8: of M&A philosophy What's your thinking in terms and whether how we should think about that into 2026, whether they're tucking deals and need it in certain areas?
Speaker #8: Thank you.
Ken Xie: I think, like, the technology we developed, whether the FortiOS, FortiASIC, and integrate all these functions together, sometime probably, more, you see internal innovation will be, will be better. But we do open for merger acquisition, and also, we do look in the different opportunities, especially in the secure operation area. But on the other side, we have a discipline, whether the Rule of 45 or some healthy margin, and also we try to plan the integration before the acquisition. I think with the multiple, the market a little bit more reasonable now, I think that definitely there's some more opportunity, we will look at the merger acquisition.
Speaker #3: I think the technology we develop, whether the 40 OS, 40 ASIC, and integrate all these functions together, sometime probably more using internal innovation will be better.
Ken Xie: I think, like, the technology we developed, whether the FortiOS, FortiASIC, and integrate all these functions together, sometime probably, more, you see internal innovation will be, will be better. But we do open for merger acquisition, and also, we do look in the different opportunities, especially in the secure operation area. But on the other side, we have a discipline, whether the Rule of 45 or some healthy margin, and also we try to plan the integration before the acquisition. I think with the multiple, the market a little bit more reasonable now, I think that definitely there's some more opportunity, we will look at the merger acquisition.
Speaker #3: But we do open for merger acquisition, and also we do look into different opportunities, especially in the secure operation area. But on the other side, we have a discipline, whether the rule of 45 or some healthy margin, and also we try to plan the integration before the acquisition.
Speaker #3: I think with the multiple the market a little bit more reasonable now, I think definitely there's more opportunity when we're looking at the merge acquisition.
Speaker #3: But we do have the discipline. We should maintain the last 25 years kind of tend to acquire the technology or some talent instead of try to buy some market or customer base.
Ken Xie: But we do have the discipline, which we maintain the last 25 years, kind of, try to buy some market or customer base.
Ken Xie: But we do have the discipline, which we maintain the last 25 years, kind of, try to buy some market or customer base.
Brian Essex: Crystal clear. Thank you so much, Ken.
Patrick Colville: Crystal clear. Thank you so much, Ken.
Speaker #8: Christopher, thank you
Speaker #8: so much, Ken.
Speaker #3: Thank you. Our
Ken Xie: Thank you.
Ken Xie: Thank you.
Operator: Our next question comes from Adam Borg at Stifel. Adam, your line is open. You may unmute and ask your question.
Operator: Our next question comes from Adam Borg at Stifel. Adam, your line is open. You may unmute and ask your question.
Speaker #6: Next question comes from Adam Borg at Stifel. Adam, your line is open. You may unmute and ask your question.
Speaker #8: Excellent. And thanks so much for taking the question. Maybe just thinking about your ASIC chips, I don't want to front-run anything from accelerate, but we've been talking about the opportunity for ASIC chips this year.
Adam Borg: Excellent, and, thanks so much for taking the question. Maybe just thinking about, your, your ASIC chips. I don't want to front run anything from Accelerate, but, you know, we've been talking about the opportunity for ASIC chips this year. And just remind us, you know, what kind of opportunity there is when those chips come out? How long after an announcement do you typically see those being adopted by customers? Obviously, it goes into the test first and ultimately production. But any color there in terms of that and the ability to drive, you know, innovation and, and additional attached on both? Thanks.
Adam Borg: Excellent, and, thanks so much for taking the question. Maybe just thinking about, your, your ASIC chips. I don't want to front run anything from Accelerate, but, you know, we've been talking about the opportunity for ASIC chips this year. And just remind us, you know, what kind of opportunity there is when those chips come out? How long after an announcement do you typically see those being adopted by customers? Obviously, it goes into the test first and ultimately production. But any color there in terms of that and the ability to drive, you know, innovation and, and additional attached on both? Thanks.
Speaker #8: And just remind us what kind of opportunity there is when those chips come out, how long after an announcement do you typically see those being adopted by customers?
Speaker #8: Obviously, it goes into the test first and ultimately production. But any color there in terms of that and the ability to drive innovation and additional attached going forward.
Speaker #8: Thanks.
Ken Xie: We see the new ASIC chip will come out this year, but we tend to announce together with the product. But also usually the new ASIC chip also takes some time and to build into the product. That's where, like, the next months, Accelerate is more focused on the FortiOS first. And the ASIC, we try not get excited too early, put it this way. But definitely it's a good technology. We're improving the performance. We'll add more function there. But we usually announce the product after we deliver, instead of some competitor try to announce ahead of the time. So that's we want to keep in the same way, same culture.
Speaker #3: We see the
Ken Xie: We see the new ASIC chip will come out this year, but we tend to announce together with the product. But also usually the new ASIC chip also takes some time and to build into the product. That's where, like, the next months, Accelerate is more focused on the FortiOS first. And the ASIC, we try not get excited too early, put it this way. But definitely it's a good technology. We're improving the performance. We'll add more function there. But we usually announce the product after we deliver, instead of some competitor try to announce ahead of the time. So that's we want to keep in the same way, same culture.
Speaker #3: new ASIC chip will come out this year, but we tend to announce together with the product but also usually the new ASIC chip also takes some time.
Speaker #3: And to build into the product. That's where the next month our accelerate is more focused on the 40 OS first. And the ASIC, we try not to get excited too early, put it this way.
Speaker #3: But definitely, it's a good technology. It will improve in the performance, will add more function there. But we usually announce the product after we deliver instead of some competitor try to announce ahead of the time.
Speaker #3: So that's what we want to keep in the same way, same culture. Once we have the related product or we are very sure we can deliver to the customer partner, then we announce
Ken Xie: Once we have the related product or we are very sure we can deliver to the customer partner, then we announce it.
Ken Xie: Once we have the related product or we are very sure we can deliver to the customer partner, then we announce it.
Speaker #3: it. That's
Adam Borg: That's, that's incredibly helpful. And maybe just as a quick follow-up, as a clarifying question. When we talk about the refresh opportunity, be it COVID or otherwise, when those boxes typically come up, and I'm sure the answer is it depends, but do you typically see like a one for one box refresh, or they come back and buy more boxes? And I guess the follow-up to that would be, what is the kind of the sales motion about cross-selling and upselling SASE and SecOps as part of those refreshes? Thanks so much.
Adam Borg: That's, that's incredibly helpful. And maybe just as a quick follow-up, as a clarifying question. When we talk about the refresh opportunity, be it COVID or otherwise, when those boxes typically come up, and I'm sure the answer is it depends, but do you typically see like a one for one box refresh, or they come back and buy more boxes? And I guess the follow-up to that would be, what is the kind of the sales motion about cross-selling and upselling SASE and SecOps as part of those refreshes? Thanks so much.
Speaker #8: incredibly helpful. And maybe just as a quick follow-up, as a clarifying question, when we talk about the refresh opportunity via COVID or otherwise, when those boxes typically come up, and I'm sure the answer is it depends, but do you typically see a one-for-one box refresh where they come by come back and buy more boxes?
Speaker #8: And I guess the follow-up to that would be, what is kind of the sales motion about cross-selling and upselling SASE and SecOps as part of those refreshes?
Speaker #8: Thanks so much.
Ken Xie: We do see there's a more kind of a, what do we call, attack surface, or there's a more area can deploy the network security and also the convergence also starting to kind of take more effects. So now that we see a lot of network security deployed inside the company through the segmentation, replacing some traditional network gear, even our own kind of demand for FortiSwitch, FortiAP, which has a FortiLink technology, can link to FortiGate. There's more like a hardware agent as a SASE, also see pretty good growth. On the other side, there's like OT security, there's some other provider can support work from home. Eventually, the network security can expand into the consumer space.
Speaker #3: We do see there's a more kind of, what do we call, a tech service, or there's more area you can deploy the network security. And also, the convergence is also starting to kind of take more effects.
Ken Xie: We do see there's a more kind of a, what do we call, attack surface, or there's a more area can deploy the network security and also the convergence also starting to kind of take more effects. So now that we see a lot of network security deployed inside the company through the segmentation, replacing some traditional network gear, even our own kind of demand for FortiSwitch, FortiAP, which has a FortiLink technology, can link to FortiGate. There's more like a hardware agent as a SASE, also see pretty good growth. On the other side, there's like OT security, there's some other provider can support work from home. Eventually, the network security can expand into the consumer space.
Speaker #3: So now that we see the lot of company, do the segmentation, replacing some traditional network gear, even our own kind of demand for 40 switch, 40 AP, which has 40 link technology, can link to 40 gate as more like a hardware agent as a SASE.
Speaker #3: Also see pretty good growth. On the other side, there's OT security. There's some other supporting work from home; eventually, the network security can expand into the consumer space.
Speaker #3: That also could be the new opportunity. But I say, if you look at it, it probably depends on the vertical, also maybe depends on certain regions, how mature the networking and network security is.
Ken Xie: That also could be the new opportunity. But I say, if you look at this, probably depend on the vertical, also maybe depend on certain region, how mature the networking network security is. I have to say by vertical, like five years ago, the first strong growth come from some retail, right? So whether retail or some other online service. So that part we do see, they heavily use in the box, and then this kind of a, whether 3 to 1, like a networking, network security and also the SASE kind of into same box, that's where probably the only one can solve that issue. So we do see, that will be, continue to, will be continue the market for us, basically.
Ken Xie: That also could be the new opportunity. But I say, if you look at this, probably depend on the vertical, also maybe depend on certain region, how mature the networking network security is. I have to say by vertical, like five years ago, the first strong growth come from some retail, right? So whether retail or some other online service. So that part we do see, they heavily use in the box, and then this kind of a, whether 3 to 1, like a networking, network security and also the SASE kind of into same box, that's where probably the only one can solve that issue. So we do see, that will be, continue to, will be continue the market for us, basically.
Speaker #3: see they heavily use in the box. And then this kind of whether three to one, have a SASE kind of into same box. That's where probably the only one can solve that issue.
Speaker #3: So we do see that will be continue to will be continue the market for us, basically. On the other side, there's a lot of whether within the data center with some other kind of bigger infrastructure, that's probably the new ASIC chip or some other solution we will have like a 40 AI gate or some other thing maybe will help.
Ken Xie: On the other side, there's a lot of whether it's in the data center, with some other kind of bigger infrastructure, that's probably the new ASIC chip or some other solution we will have, like a full AI gate or some other thing. Maybe that will help. But it's, it depends on... I do see the market get definitely more broader, bigger, because there's more attack service to cover and also more function needed, both inside enterprise and also in the consumer and also in different regions.
Ken Xie: On the other side, there's a lot of whether it's in the data center, with some other kind of bigger infrastructure, that's probably the new ASIC chip or some other solution we will have, like a full AI gate or some other thing. Maybe that will help. But it's, it depends on... I do see the market get definitely more broader, bigger, because there's more attack service to cover and also more function needed, both inside enterprise and also in the consumer and also in different regions.
Speaker #3: But it's depend on I do see the market get definitely more broader bigger. And because there's more tech service to cover and also more function needed.
Speaker #3: Both inside enterprise and also in the consumer and also in different region.
John Whittle: To your other point, we do see any refresh opportunity as an opportunity to expand. When you look back 5 or 6 years, we didn't have a lot of the solutions that we have right now that are at the maturity level that they're at right now. You know, anytime we can have those conversations, whether through our partners or through our sales force, it's an opportunity for us to expand, to not only sell the firewall, but to sell beyond the firewall.
John Whittle: To your other point, we do see any refresh opportunity as an opportunity to expand. When you look back 5 or 6 years, we didn't have a lot of the solutions that we have right now that are at the maturity level that they're at right now. You know, anytime we can have those conversations, whether through our partners or through our sales force, it's an opportunity for us to expand, to not only sell the firewall, but to sell beyond the firewall.
Speaker #2: other point, we do And to your see any refresh opportunity as an opportunity to expand. And when you look back five or six years, we didn't have a lot of the solutions that we have right now that are at the maturity level that they're at right now.
Speaker #2: So anytime we can have those conversations, whether through our partners or through our Salesforce, it's an opportunity for us to expand not only sell the firewall, but to sell beyond the
Speaker #2: firewall. And I would say.
Adam Borg: I would say-
Christiane Ohlgart: I would say-
Ken Xie: May I say?
Ken Xie: May I say?
Speaker #8: Amazing. Any of the discussions
Christiane Ohlgart: Any of the discussions on with regards to firewall upgrades at the edge is combined with the FortiSASE discussion, because it's so compelling for our customers to expand.
Christiane Ohlgart: Any of the discussions on with regards to firewall upgrades at the edge is combined with the FortiSASE discussion, because it's so compelling for our customers to expand.
Speaker #3: on with regards to firewall upgrades at the edge is combined with the 40 SASE discussion. Because it's so compelling for our customers to expand.
Speaker #6: Our last question comes from Brian Essex at J.P. Morgan. Brian, your line is open. You may unmute and ask your question.
Operator: Our last question comes from Brian Essex at J.P. Morgan. Brian, your line is open. You may unmute and ask your question.
Operator: Our last question comes from Brian Essex at J.P. Morgan. Brian, your line is open. You may unmute and ask your question.
Speaker #4: Great. Thank you very much for taking the question. And congrats on some solid product growth this quarter. I guess I wanted to just maybe one question with regard to memory questions that were asked previously.
Brian Essex: Great. Thank you very much for taking the question, and congrats on some solid product growth this quarter. I guess I wanted to just maybe one question with regard to memory questions that were asked previously... Ken, I appreciate the fact that you have, you know, six months of inventory supply. Could you help us understand the dynamics there? Maybe what percentage of your bill of materials is exposed to memory? And then how your contractor agreements, you know, how long do you have those committed out? Just to understand that as we see, like, the acceleration in prices here, just want maybe a little bit more clarity in terms of how do you manage your supply chain.
Brian Essex: Great. Thank you very much for taking the question, and congrats on some solid product growth this quarter. I guess I wanted to just maybe one question with regard to memory questions that were asked previously... Ken, I appreciate the fact that you have, you know, six months of inventory supply. Could you help us understand the dynamics there? Maybe what percentage of your bill of materials is exposed to memory? And then how your contractor agreements, you know, how long do you have those committed out? Just to understand that as we see, like, the acceleration in prices here, just want maybe a little bit more clarity in terms of how do you manage your supply chain.
Speaker #4: Ken, just really I appreciate the fact that you have six months of inventory supply. Could you help us understand the dynamics there? Maybe what percentage of your bill of materials is exposed to memory?
Speaker #4: And then how your contractor agreements how long do you have those committed out just to understand it as we see the acceleration in prices here?
Speaker #4: Maybe a little bit more clarity in terms of how you manage your supply chain.
Ken Xie: I think we are very similar to any other system server tend to be 10 to 20% cost come from the memory. Because we also manage a lot of manufacturer component directly with the supplier instead of go through some third party. That's where we tend to have some direct contract. That also depend on the lead time. I think lead time probably a little bit different than 5 years ago. 5 years ago, you see that there's a like communication chip, there's some CPU, there's a lot of ... You know, this time, probably more related to memory. Actually, you can track the memory. There's a daily memory price tracker, actually. You can see somehow the last couple of days it's starting coming down.
Speaker #3: I think we are very similar to any other system server tend to be 10 to 20 percent cost come from the memory. Because we also manage a lot of manufactured component directly with the supplier instead of go through some third party.
Ken Xie: I think we are very similar to any other system server tend to be 10 to 20% cost come from the memory. Because we also manage a lot of manufacturer component directly with the supplier instead of go through some third party. That's where we tend to have some direct contract. That also depend on the lead time. I think lead time probably a little bit different than 5 years ago. 5 years ago, you see that there's a like communication chip, there's some CPU, there's a lot of ... You know, this time, probably more related to memory. Actually, you can track the memory. There's a daily memory price tracker, actually. You can see somehow the last couple of days it's starting coming down.
Speaker #3: where we tend to have some direct That's contract that's also depend on the lead time. I think lead time probably a little bit different than five years ago.
Speaker #3: Five years ago, you see that there's a communication chip, there's some CPU, there's a lot of issues. This time, probably more related to memory. Actually, you can track the memory.
Speaker #3: There's a daily memory price tracker, actually. You can see somehow the last couple of days since starting coming down. So it's kind of interesting.
Ken Xie: So it's kind of interesting. But for us, we, like I said, we do maintain six months inventory, and also based on the growth, based on the projection, sometimes we also kind of up and down, and also depend on the product. So we feel this is the opportunity, just like how we did it five years ago, it's the opportunity for us to gain market share, and also we well prepared for that.
Ken Xie: So it's kind of interesting. But for us, we, like I said, we do maintain six months inventory, and also based on the growth, based on the projection, sometimes we also kind of up and down, and also depend on the product. So we feel this is the opportunity, just like how we did it five years ago, it's the opportunity for us to gain market share, and also we well prepared for that.
Speaker #3: But for us, like I said, we do maintain six months inventory. And also based on the growth, based on the projection, sometimes we also kind of up and down and also depend on the product.
Speaker #3: So we feel this is the opportunity just like how we did five years ago. It's the opportunity for us to gain market share and also we well prepared for that.
Speaker #4: Right. Super helpful. Maybe quick follow-up for Christiana. On the security networking side, how much of that was networking, like switches and access points versus more firewall mix?
Brian Essex: Right. Super, super helpful. Maybe a quick follow-up for Christiane. On the security networking side, how much of that was networking, like, switches and access points versus, you know, more firewall mix? Just kind of curious to get the mix there and how that might influence what you're thinking in terms of software services acceleration the back half of the year.
Brian Essex: Right. Super, super helpful. Maybe a quick follow-up for Christiane. On the security networking side, how much of that was networking, like, switches and access points versus, you know, more firewall mix? Just kind of curious to get the mix there and how that might influence what you're thinking in terms of software services acceleration the back half of the year.
Speaker #4: Just kind of curious to get the mix there and how that might influence what you're thinking in terms of software services, acceleration of that half a year.
Speaker #3: So it was a broad-based mix across so pretty much similar growth rates across all components. So we had good firewall growth as well as APs and switches.
Christiane Ohlgart: So it was a broad-based mix across. So pretty much similar growth rates across all components. So we had good firewall growth as well as APs and switches.
Christiane Ohlgart: So it was a broad-based mix across. So pretty much similar growth rates across all components. So we had good firewall growth as well as APs and switches.
Ken Xie: Yeah, also the reason they buy the switch and AP is because we have this that we call FortiLink technology. They link-
Ken Xie: Yeah, also the reason they buy the switch and AP is because we have this that we call FortiLink technology. They link-
Speaker #1: Also, the reason they buy the switch and AP is because we have this thing we call 40 Link technology. They link all the switch and AP to the FortiGate.
Brian Essex: Mm.
Brian Essex: Mm.
Ken Xie: -for the switch, AP, to the FortiGate, and then using FortiGate to process certain traffic, like, if Wi-Fi, they identify there's a visitor, that traffic probably will go to the FortiGate. It's more like a kind of local SASE approach with the hardware agent, which is AP with the hardware agent, the same thing for the switch. That's actually go a lot of for the internal segmentation, so to kind of-
Ken Xie: -for the switch, AP, to the FortiGate, and then using FortiGate to process certain traffic, like, if Wi-Fi, they identify there's a visitor, that traffic probably will go to the FortiGate. It's more like a kind of local SASE approach with the hardware agent, which is AP with the hardware agent, the same thing for the switch. That's actually go a lot of for the internal segmentation, so to kind of-
Speaker #1: And then using 40 gate to process certain traffic, like if Wi-Fi, they identify there's a visitor, that traffic probably goes to the 40 gate.
Speaker #1: It's more like a kind of a local SASE approach with the hardware agent, which is AP with the hardware agent. The same thing for the switch.
Speaker #1: That's actually got a lot of use for the internal segmentation. So, to kind of broaden security inside the local area networking, that's where the convergence we see happening.
Brian Essex: Mm
Ken Xie: -broader security inside the local area networking, that's where the convergence we see happening. But I think that on the percentage, definitely the FortiGate is the key part. It's all leading by the FortiGate. The other part is pretty, pretty small, I have to say.
Brian Essex: Mm
Ken Xie: -broader security inside the local area networking, that's where the convergence we see happening. But I think that on the percentage, definitely the FortiGate is the key part. It's all leading by the FortiGate. The other part is pretty, pretty small, I have to say.
Speaker #1: But I think on the percentage, definitely the 40 gate is the key part. It's all leading by the 40 gate. The other part is pretty small, I have to say.
Brian Essex: All right. Really helpful color, Ken. Thank you so much.
Brian Essex: All right. Really helpful color, Ken. Thank you so much.
Speaker #4: you so much.
Speaker #1: Yeah. Thank
Ken Xie: Yes, thank you.
Ken Xie: Yes, thank you.
Speaker #1: You. We have no further questions.
Operator: We have no further questions at this time. I will now hand it back to Anthony Luscri for closing remarks.
Operator: We have no further questions at this time. I will now hand it back to Anthony Luscri for closing remarks.
Speaker #6: At this time, I will now hand it back to Anthony Luscri for closing.
Speaker #1: Thank you.
Anthony Luscri: Thank you. I'd like to thank everyone for joining today's call. We will be attending investor conferences hosted by Bernstein and Morgan Stanley during Q1. The Fireside Chat website links will be posted on the Events and Presentation section of our investor relations website. If you have any follow-up questions, please feel free to contact me, and have a great rest of your day.
Anthony Luscri: Thank you. I'd like to thank everyone for joining today's call. We will be attending investor conferences hosted by Bernstein and Morgan Stanley during Q1. The Fireside Chat website links will be posted on the Events and Presentation section of our investor relations website. If you have any follow-up questions, please feel free to contact me, and have a great rest of your day.
Speaker #1: I'd like to thank everyone for joining today's call. We will be attending investor conferences hosted by Bernstein and Morgan Stanley during the first quarter.
Speaker #1: The Fireside Chat website links will be posted on the events and presentation section of our investor relations website. If you have any follow-up questions, please feel free to contact me and have a great rest of your day.
