What happened
Shares of Fortinet (FTNT 0.23%) were down 24.3% at 10:45 a.m. EDT Friday, according to data provided by S&P Global Market Intelligence, after the cybersecurity specialist announced mixed second-quarter 2023 results relative to Wall Street's expectations. The company also lowered its full-year revenue and billings guidance.
So what
At a glance, Fortinet's results didn't look terrible; revenue climbed 25.5% year over year (YOY) to $1.29 billion, translating to adjusted net income of $300.4 million, or $0.38 per share. Most analysts were looking for adjusted net income of only $0.34 per share on slightly higher revenue of $1.3 billion.
Free cash flow also remained healthy, climbing 54.6% YOY to $438.3 million.
"As a leading cybersecurity platform and secure networking vendor, we remain well positioned for strong long-term growth as companies increasingly look to consolidate vendors and point products," stated Fortinet founder, chairman, and CEO Ken Xie.
Now what
Looking forward, however, Fortinet also noted billings -- a key industry metric used to help model future revenue growth -- climbed 18% YOY to $1.54 billion. And for the full year of 2023, Fortinet lowered its guidance to call for revenue of $5.35 billion to $5.45 billion (down from $5.425 billion to $5.485 billion previously) and billings of $6.49 billion to $6.59 billion (compared with $6.75 billion to $6.81 billion before). At the same time, given its relative earnings beat this quarter, Fortinet raised its outlook for 2023 adjusted net income per share to be in the range of $1.49 to $1.53, up from $1.44 to $1.48 per share previously.
During the subsequent conference call, Fortinet CFO Keith Jensen elaborated:
We believe macro-uncertainty impacted our billings performance through average contract durations and, in the second half of June, and elevated level of enterprise deals pushing to future quarters. ... Having some level of enterprise deals push to future quarters is not unusual. In Q2'23, however, an unusually large volume of deals that we expected to close in June instead pushed to future periods.
Jensen added that the cybersecurity industry "remains highly relevant as CIOs prioritize cyber spending within their overall IT budgets," and suggested revenue trends should return to a "more normal seasonality" toward the back half of 2023.
In the meantime, however, given this macro uncertainty and with with shares of Fortinet up nearly 60% year to date leading into this report, it's hard to blame some investors for taking profits off the table today.
