Please ensure Javascript is enabled for purposes of website accessibility

Up Over 90% So Far in 2021, Is Fortinet Stock Still a Buy After Q2 Earnings?

By Nicholas Rossolillo – Aug 3, 2021 at 9:05AM

Key Points

  • Fortinet's total revenue grew 30% year over year in the second quarter of 2021.
  • Product sales exploded 41% higher as a new data center upgrade cycle gets underway.
  • Though Fortinet has been around a couple of decades now, this is no "legacy" cybersecurity stock.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This isn't the trendiest cybersecurity stock, but it's one of the best investments within the industry.

Fortinet (FTNT 2.32%) recently announced its second-quarter 2021 earnings results, handily besting expectations and reinforcing the more than 90% return the cybersecurity stock has delivered so far this year. Fortinet is a "legacy" cybersecurity firm, rooted in a time that predates the cloud era that has dawned in recent years.

Nevertheless, this security company is a best-in-class vendor for the hardware that enables the cloud and has organically developed a suite of modern software services that are steadily growing at a more than respectable pace. Though it's up big so far in 2021, don't pass on this top cybersecurity play.

Someone pictured offscreen using a computer. An illustrated lock is in the foreground.

Image source: Getty Images.

Q2 2021 by the numbers

In spite of lockdowns last year in an attempt to stall the spread of the pandemic, Fortinet actually had a pretty good 2020. Even during the initial economic freeze last spring, the company reported an 18% year-over-year increase in sales. But Fortinet was nevertheless affected, and it got a big boost in Q2 2021 as it lapped the slightly depressed results from the year prior. Product sales rocketed 41% higher to $298 million (37% of revenue) and services were up by 24% to $503 million (63% of revenue).

It all added up to an impressive quarter with total sales and free cash flow up significantly during the spring. Revenue of $801 million absolutely crushed management's guidance provided three months ago for as much as $747 million in sales.  


Q2 2021

Q2 2020

YOY Change


$801 million

$618 million


Adjusted net income

$159 million

$137 million


Free cash flow

$395 million

$216 million


Data source: Fortinet. YOY = Year-over-year.  

The beat in financial results led to an upgrade for the full-year 2021 outlook. Management now expects revenue to be in the range of $3.21 billion to $3.25 billion (previously $3.08 billion to $3.13 billion), implying full-year growth of 25% at the midpoint.

A best-bet on cloud infrastructure

Fortinet harkens back to the day when firewalls -- devices that monitor and filter the data flowing into and out of a closed network -- were the gold standard in security. But with remote work and cloud computing now part of the "new normal," traditional firewalls don't always get the job done -- thus the rise of cloud-based security software firms that cast a wider net in protecting modern IT infrastructure. 

But Fortinet shouldn't be pigeonholed as a security firm of yesteryear. Its firewall hardware is among the best on the market for securing data centers, the computing units that enable cloud-based services and remote work in the first place. And with a new data center upgrade cycle getting underway in the wake of the pandemic, Fortinet's product sales growth could enjoy double-digit percentage expansion for years to come.  

As for its services segment, the company is constantly innovating new software to keep up with evolving customer needs. Fortinet now offers a well-rounded suite of security covering everything from traditional office-based protection to cloud software that keeps remote workers and connected devices safe. Unlike some of its peers, Fortinet has opted to develop most of these new services in-house rather than via acquisition of smaller peers. As a result, this is a consistently profitable firm (free cash flow profit margin has been over 30% for years) with a squeaky clean balance sheet (cash, equivalents, and long-term investments of $3.36 billion, offset by debt of just $988 million).

This has been one of the best cybersecurity stocks for years as it grows sales at a rate north of 20%, and that record is poised to continue this year. Fortinet stock currently trades for about 44 times trailing 12-month free cash flow after the Q2 update. This remains a top cybersecurity stock to buy for the long term.

Nicholas Rossolillo and his clients own shares of Fortinet. The Motley Fool recommends Fortinet. The Motley Fool has a disclosure policy.

Stocks Mentioned

Fortinet Stock Quote
$52.80 (2.32%) $1.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.