Fortinet’s sales took a major hit in its most recent quarter as enterprise customers postponed a significant number of deals amid the uncertain economic environment, executives said Thursday.
While delays for a certain number of enterprise deals is not uncommon in any given quarter, there were an “unusually large volume of deals that we expected to close in June [that] instead pushed to future periods,” Fortinet CFO Keith Jensen said during the company’s quarterly call with analysts.
Fortinet reported $1.29 billion in revenue for the second quarter, ended June 30. That was up 25 percent year-over-year, but came in just below the consensus estimate from Wall Street analysts for the quarter.
The network security vendor also reduced its full-year 2023 revenue guidance to a range of $5.35 billion and $5.45 billion, down from the previously shared guidance of $5.43 billion and $5.49 billion.
Fortinet’s stock price plunged 17.1 percent in after-hours trading Thursday, to $62.75 a share.
Key competitors of the company that have yet to report their latest quarterly results, including Palo Alto Networks, also dropped in after-hours trading of their shares after Fortinet’s report. Palo Alto Networks’ stock price fell about 7 percent, to $220.99 a share, in after-hours trading Thursday. The vendor’s next quarterly earnings release is scheduled for Aug. 18.
For Fortinet, a major factor in Q2 was the effect of “large enterprise concerns with the macro environment,” said Fortinet Co-Founder and CEO Ken Xie during the quarterly call Thursday.
Xie also cited the impact of “increased digestion” by customers during the quarter — suggesting that surging product growth over the past two years, in key areas such as SD-WAN, has led some customers to slow down their purchasing of late.
One vertical where this has particularly been the case is in retail, Jensen said.
There had been a “lot of purchasing around SD-WAN technologies and implementations a year ago — you saw very, very high growth a year ago,” he said. However, it’s “now going through a digestion period — [to] the point that there’s actually negative growth in the retail vertical.”
At the same time, Fortinet executives pointed to a number of positive signs in the business and suggested that the longer-term opportunity remains strong.
For its SASE (secure access service edge) platform, FortiSASE, Fortinet closed its largest deal to date during the second quarter, with a major bank as the customer, Jensen said.
On the whole in SASE — which combines cybersecurity and networking technologies to secure distributed workforces — “we see our single-vendor SASE solution opening a large new market, and one where our sizable SD-WAN install base can be leveraged as a significant market access point,” he said.
Fortinet is considered a “single-vendor” SASE provider because it offers the full suite of capabilities, across both security and networking, that are considered essential to enable a SASE deployment.
In the case of the banking industry customer, for instance, the bank chose Fortinet as it “was searching for a single-vendor SASE solution for its hybrid workforce,” Jensen said.