Fortinet (FTNT) Navigates Choppy Waters Ahead of Earnings: Is a Rebound on the Horizon?

Fortinet Inc. (FTNT) finds itself under some pressure as it prepares to release its next earnings report today, after market close. Trading at $85.22 per share in today's pre-market,having fallen 2.63% in yesterday's session, the cybersecurity giant is attempting to regain its footing after a tumultuous quarter. The question on everyone's mind: can Fortinet overcome recent headwinds and deliver results that reignite confidence?

Analysts expect Fortinet to deliver an EPS of about $0.63, which is virtually flat compared with the prior year, suggesting little to no earnings growth in the upcoming quarter. On the revenue side, consensus sees roughly US$1.70 billion, representing around 13.1% year-over-year growth.

The seeds of the current uncertainty were sown with the release of Fortinet's Q2 2025 financial results on August 6th. While the company reported a 14% year-over-year revenue increase to $1.63 billion and a 15% rise in billings to $1.78 billion, a crucial revelation spooked the markets.

Fortinet announced that it was already 40-50% through its 2026 firewall refresh cycle, much earlier than anticipated. This accelerated pace raised concerns that the overall upgrade opportunity might be smaller than initially projected, triggering a significant stock decline of over 26%.

The market's reaction was swift and unforgiving. Several analysts downgraded Fortinet's stock in the wake of the Q2 report. KeyBanc downgraded from ‘Buy' to ‘Hold,' citing concerns over flat or declining product revenue growth (excluding upgrade-related sales) in the first half of 2025.

Morgan Stanley followed suit, also downgrading to ‘Hold' and slashing its price target to $78 from $110, expressing disappointment over weaker subscription revenue and its impact on free cash flow. These downgrades underscore the market's apprehension about Fortinet's near-term growth prospects.

Compounding Fortinet's woes are a series of class action lawsuits filed against the company. These lawsuits allege that Fortinet and certain officers made false and misleading statements about the revenue potential and timing of its FortiGate unit refresh cycle between November 8, 2024, and August 6, 2025. The legal actions introduce material legal and reputational risks at a sensitive time, potentially diverting management's attention and resources.

Despite the challenges, Fortinet hasn't stood still. The company has continued to innovate, announcing significant updates to its cloud security portfolio, including enhancements to Lacework FortiCNAPP and expanded availability of solutions in AWS Marketplace. The unveiling of new AI-powered workspace security suites aimed at protecting modern enterprises from both external and insider threats demonstrates Fortinet's commitment to staying ahead of the curve.

While the prevailing narrative surrounding Fortinet is cautious, a contrarian perspective suggests the market might be overreacting. The accelerated firewall refresh cycle, while initially perceived negatively, could ultimately benefit Fortinet by locking in customers earlier and creating a more predictable revenue stream in the long run.

Moreover, Fortinet's continued investment in innovation, particularly in AI-powered security solutions, positions it well to capitalize on the growing demand for advanced cybersecurity protection. The legal challenges, while concerning, are not uncommon in the tech industry and may not ultimately have a significant impact on the company's financial performance.

Fortinet's upcoming earnings report will be crucial in determining the stock's near-term trajectory. Analysts will be closely scrutinizing the company's revenue growth, billings, and guidance for the next quarter.

Any signs of stabilization or improvement could help to restore confidence and drive the stock higher. However, another disappointing report could further exacerbate the negative sentiment and lead to additional downside.