Wednesday is shaping up to be a good day to own cybersecurity stocks: Powerful fourth-quarter earnings from network security company Fortinet (FTNT 0.23%) sent its stock up by 3%, and provided a tailwind to shares of peers CrowdStrike (CRWD 2.03%), and Palo Alto Networks (PANW 0.91%). Through 11:45 a.m. ET, those two stocks were up 5.8% and 7%, respectively.

Reporting its fourth-quarter results Tuesday after the close, Fortinet beat expectations on both the top and bottom lines. Instead of the $0.43 per share (adjusted) profit on $1.41 billion in sales it was expected to report, the company earned $0.51 per share on sales of $1.42 billion.

Fortinet Q4 sales and earnings

TheFly.com has counted no fewer than 16 analysts raising their price targets on Fortinet in response to its report. And yet, how good was Fortinet's news, actually?

You might be surprised to learn that it actually wasn't all that great. True, sales for the quarter grew by a respectable 10% year over year. But billings -- which foreshadow future revenue growth -- grew by only 8.5%, implying a slowdown may lurk just around the corner.

Non-GAAP profits exceeded expectations, and were up a strong 16%. But earnings as calculated according to generally accepted accounting principles were only $0.40 per share for the quarter -- flat year over year. Worst of all, free cash flow plummeted by 67% to just $165 million.

Most of these numbers, by the way, reflected a significant slowdown in growth compared to Fortinet's performance earlier in the year. Over the course of 2023, Fortinet scored sales growth of 20%, billings growth of 14%, non-GAAP profits growth of 37% -- and GAAP earnings growth of 38%. (To give credit where credit is due, however, its free cash flow for the year did grow 19%.)

What does Fortinet's earnings beat mean for CrowdStrike and Palo Alto Networks?

So yes, Fortinet "beat earnings." And yes, investors in peer cybersecurity companies CrowdStrike and Palo Alto Networks have reason to breathe a sigh of relief ... for now. All that being said, as an investor in one of these three stocks (Palo Alto), Fortinet's performance in Q4 actually has me feeling just a tiny bit nervous. Consider this:

On top of the slowdown seen in Q4, Fortinet's guidance for the first quarter -- and for 2024 as a whole -- holds reasons for worry. Management is predicting that sales in Q1 will land in the $1.3 billion to $1.36 billion range. The entirety of this range falls short of Wall Street's consensus expectation of $1.37 billion. Similarly, for the year, Fortinet predicts revenues between $5.72 billion and $5.82 billion -- but Wall Street wants to see $5.93 billion.

Granted, on earnings, the near term looks a bit better. Fortinet's Q1 guidance for non-GAAP earnings per share of $0.37 to $0.39 implies the company thinks it could beat Wall Street's forecast for $0.37 per share. But the midpoint of the company's earnings guidance for the year implies the company might struggle to earn the $1.67 per share that analysts are expecting it to earn -- and Fortinet gave no guidance at all for GAAP profits, nor for free cash flow.

Now, look ahead to the upcoming earnings reports from Palo Alto Networks (due Feb. 20) and CrowdStrike (due March 5). In each case, Wall Street has its expectations set high, predicting that Palo Alto will report 24% quarterly earnings growth in Q4 ... and that CrowdStrike will grow its profits by 75%. Those are aggressive targets. Even more worrisome is the fact that analysts will want to see both companies express similarly high hopes for 2024. To avoid disappointing investors, Palo Alto must promise to keep on growing its earnings at 24% for another year. CrowdStrike, meanwhile, must promise an accelerating growth rate: 92% growth.

With both of these stocks already trading at extremely high multiples to forward earnings -- 64.5 for Palo Alto and 81.3 for CrowdStrike -- they look priced for perfection. Any stumble on earnings day -- be it in the actual results they report or the future earnings they predict -- could send either or both stocks plummeting.

Caveat investor.