Fortinet Stock Plunges As Wall Street Questions Firewall Refresh Momentum

Analysts questioned top Fortinet executives Wednesday about the results so far from the security vendor’s much-touted firewall refresh cycle, as the company’s stock price slid in after-hours trading.

Wall Street analysts questioned top Fortinet executives Wednesday about the results so far from the security vendor’s much-touted firewall refresh cycle, as the company’s stock price slid in after-hours trading.

The questions were aired during Fortinet’s quarterly call with analysts, following the release of the vendor’s financial report for the second quarter, ended June 30.

As of this writing, Fortinet’s stock price was down 16.5 percent in after-hours trading Wednesday, to $80.60 a share, after the company’s guidance fell short of Wall Street expectations.

During the call with analysts, Fortinet CFO Christiane Ohlgart disclosed that the company is estimated to be “approximately 40 to 50 percent of the way through the 2026 upgrade cycle at the end of the second quarter.”

Multiple analysts asked during the call why Fortinet has not been seeing stronger firewall revenue growth, particularly from customers whose firewall devices are reaching end-of-support dates, given that the firewall refresh cycle may already be as much as halfway completed.

Fortinet has been forecasting that 2025 would represent a “larger-than-normal refresh cohort,” said Goldman Sachs’ Gabriela Borges, during the call with Fortinet executives Wednesday. “I wanted to better understand — why are we not seeing more upside in the numbers this year from the refresh cohort?”

Borges said she wondered if one possible factor is that some customers may have excess firewall capacity in their networks, due to the elevated needs that many organizations had during the pandemic.

Responding to the question, Ohlgart said it is certainly possible that some of the replacement demand is being met by customers internally.

“There could be some excess capacity from prior years” that is effectively replacing the end-of-support devices for some customers, she said.

Ohlgart also noted that predicting replacement schedules for smaller firewalls can be more challenging than for enterprise devices, due to the limited visibility that Fortinet has into deployments of lower-end firewall devices.

At the same time, “we are comfortable with our guidance,” Ohlgart said. “The expectations by the street might have been a little bit higher — but [as] we've said, we are outperforming the market.”

Later during the call, another analyst posed a question about the demand level that Fortinet is seeing for firewalls, separate from replacements of end-of-support devices.

With the exception of firewall refresh activity in recent quarters, it appears that Fortinet's product revenue “has been flat to negative in the last couple quarters,” said Eric Heath of KeyBanc Capital Markets during the call. “So can you just help me understand why the underlying firewall demand isn't stronger?”

Fortinet co-founder and CEO Ken Xie answered that “I would not say we’ve been negative [on product revenue].”

In reality, the firewall refresh is “such a small percentage of the overall business” for the company and not the biggest opportunity right now, Xie said, noting that Fortinet is seeing substantial growth in its newer businesses including SASE (secure access service edge) and security operations technology.

Another question related to the firewall upgrade cycle came from Scotiabank’s Patrick Colville, who asked about growth drivers for Fortinet beyond the refresh.

“What should we be excited about beyond this upgrade cycle?” Colville said. “What is going to continue momentum when these tailwinds [subside]?”

In response, Xie pointed to the company’s “new SASE firewall” as holding major promise for future growth at Fortinet.

“It's very different than the traditional next-gen firewall,” he said. “So that's the huge opportunity — and not just [from] additional product, but also additional services on top of that.”

Later during the call, Xie suggested that Fortinet has “probably a little bit over-discussed this refresh upgrade.”

Ultimately, emphasizing the refresh cycle is “much less important than [focusing on] helping customers to upgrade to the new security infrastructure,” he said.

For the second quarter, Fortinet disclosed that revenue climbed 14 percent from the same period a year earlier, to reach $1.63 billion.

Annual recurring revenue for SASE grew at a faster pace — rising 22 percent year-over-year — as did security operations ARR, which generated 35-percent growth, the company reported.

In July, Gartner elevated Fortinet into the “leaders” category for the research firm’s 2025 SASE Magic Quadrant, with the vendor joining Palo Alto Networks, Netskope and Cato Networks in achieving the sought-after top ranking. For the 2024 SASE Magic Quadrant ranking, Fortinet had appeared in the “challengers” quadrant.

Gartner analysts wrote in the 2025 report that Fortinet’s Unified SASE platform is now poised to gain market share thanks to competitive pricing and “strong SD-WAN/branch firewall incumbency.”

“Fortinet’s overall viability is above average in the SASE platform market compared with other vendors in this research, based primarily on its corporate financial health,” the Gartner analysts wrote.