Fortinet shares plunge 25% despite earnings beat
Investors looked past stronger-than-expected quarterly revenue and earnings as billings narrowly beat forecasts and the services division missed estimates. The sell-off is also dragging down Palo Alto Networks, CrowdStrike and Zscaler.
Will Fortinet lose a quarter of its value? Shares of the cybersecurity company plunged 25% in premarket trading on Nasdaq after it reported quarterly results that beat analysts’ expectations but apparently failed to impress investors. Its services division also fell short of forecasts.
Fortinet, which closed Wednesday with a market capitalization of $127.7 billion after a 120% surge since the start of the year, reported third-quarter revenue of $2.08 billion and adjusted earnings of 91 cents per share. Analysts had expected revenue of $2.06 billion and adjusted earnings of 86 cents per share.
Billings, a metric that includes amounts invoiced to customers but not yet recognized as revenue, rose 29% to $2.336 billion, slightly above the $2.308 billion analysts had forecast. However, the services division generated $1.31 billion in revenue, missing the $1.33 billion estimate. Fortinet also slightly lowered its full-year revenue guidance for the division.
Wells Fargo analysts attributed the sharp sell-off to the narrower-than-usual gap between Fortinet’s results and market expectations. Billings, for example, exceeded forecasts by about 2%, compared with an 11% beat in the second quarter. Growth in the products division also slowed, reaching 37% year over year, down from 52% in the previous quarter.
Fortinet released its results Wednesday after the close of trading in New York. The sell-off is also weighing on competitors, with Palo Alto Networks, CrowdStrike and Zscaler all falling more than 5% in premarket trading Thursday.
