FTNT, Fortinet, Inc.
Fortinet is a leader in cybersecurity, driving the convergence of networking and security.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is Security subscription (39%), Products (33%) and Technical support and other (29%).
- What moves the needle
- Volume against price, and shelf position. What decides it: whether it can raise prices without losing the customer, and whether the brand still commands its margin.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Revenue spreads across 3 lines, the largest Security subscription at 39%.
- Security subscription39%$2.6B
- Products33%$2.2B
- Technical support and other29%$1.9B
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2017–2025
realized figures from each filing, no estimates| 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $1.5B | $1.8B | $2.2B | $2.6B | $3.3B | $4.4B | $5.3B | $6.0B | $6.8B | $7.1B |
| Gross marginGross mgn | 74% | 75% | 77% | 78% | 77% | 75% | 77% | 81% | 80% | 80% |
| Operating marginOp. mgn | 7.3% | 13.0% | 16.2% | 20.5% | 19.5% | 21.9% | 23.4% | 30.3% | 30.7% | 31.1% |
| Net incomeNet inc. | $31M | $335M | $332M | $489M | $607M | $857M | $1.1B | $1.7B | $1.9B | $2.0B |
| EPS (diluted)EPS | $0.04 | $0.40 | $0.40 | $0.58 | $0.73 | $1.06 | $1.46 | $2.26 | $2.42 | $2.63 |
| Owner earningsOwner earn. | $459M | $586M | $716M | $958M | $1.2B | $1.4B | $1.7B | $1.9B | $2.2B | $2.4B |
| ROICROIC | — | — | 252% | — | 141% | — | — | — | — | — |
| Cash & investmentsCash+inv | $1.3B | $1.6B | $2.1B | $1.8B | $2.5B | $2.2B | $2.4B | $4.1B | $3.6B | $3.6B |
| Net debt / (cash)Net debt | ($1.3B) | ($1.6B) | ($2.1B) | ($1.8B) | ($1.5B) | ($1.2B) | ($1.4B) | ($3.1B) | ($2.6B) | ($3.1B) |
| Book value / shareBVPS | $0.71 | $1.23 | $1.60 | $1.02 | $0.94 | $-0.35 | $-0.59 | $1.94 | $1.62 | $1.33 |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? 103.7×ComfortableOperating income $2.1B ÷ interest expense $20M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- ConservativeTotal debt $996M ÷ operating income $2.1B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash +$2.6BNet cashCash $2.5B + ST investments $1.1B − debt $996M
Cash and short-term investments exceed every dollar of debt by $2.6B, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Capital-hungryDSO 91 + DIO 110 − DPO 63 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Not meaningful hereInvested capital ($262M) = debt $996M + equity $1.2B − cash
Invested capital is near zero or negative, usually years of buybacks pulling equity down. ROIC explodes or flips sign and stops meaning anything. Judge this one on Owner Earnings instead.
- Cash machineOwner Earnings $2.2B = operating cash $2.6B − capex $365M
What an owner could take out without starving the business. That's 33% of revenue. Treating stock comp as the real expense it is (less $280M of SBC) leaves $1.9B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $2.6B ÷ net income $1.9B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns most of itDividends + buybacks $2.3B ÷ Owner Earnings $2.2B
Of $2.2B Owner Earnings, $2.3B (103%) went back to shareholders, $0 dividends, $2.3B buybacks. Net of $280M stock comp, the real buyback was about $2.0B. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 2.40×ExpandingCapex $365M ÷ depreciation $152M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2017–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 9 of 9
Never lost money over the record, the earnings stability Graham insisted on.
- Operating margin 7% (FY2017) → 31% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC returns capital
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
- Owner earnings growth +19%/yr
Free cash to owners grew about 19% a year over the record.
- Worst year 2017 · 7.3% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2017–2025
Over the record, the business generated $13.1B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a mature cash machine, most of what it earns goes straight back to owners.
- Reinvested$1.9B · 15%
- Buybacks$8.4B · 64%
- Retained (debt / cash)$2.8B · 21%
It reinvested $1.9B (15%) back into the business and returned $8.4B (64%) to owners, $0 in dividends, $8.4B in buybacks.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$280M
The slice of the business handed to employees in shares this year, 4% of revenue, equal to 13% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
3 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $6.8B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 1.17×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt NearDebt ≤ working capital · $996M vs $866M WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (9-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record MissUninterrupted dividends · none paid
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +580%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $2.42/share and book value $1.62/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what Fortinet, Inc. has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $2.4B on 743M diluted shares; net cash $3.1B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationRisk Factors
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“Six distributor customers who purchase directly from us accounted for 67% and 69% of our total net accounts receivable in the aggregate as of December 31, 2025 and 2024, respectively.”
From the recordRevenue exposed (TTM)$7.1B - Pricing power & competitionRisk Factors
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“Competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures.”
From the recordOperating margin31.1% (TTM), near a 9-yr high - Supplier & input dependenceBusiness
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“("Western Digital"), are available from limited or sole sources of supply.”
From the recordGross-margin cushion (TTM)80% - Concentrated dependenceRisk Factors
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“A significant portion of our sales are generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers.”
From the recordOwner-earnings margin at stake (TTM)34% - Debt terms & refinancingRisk Factors
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required, among other things, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets or reduce or de…”
From the recordBalance sheet (TTM)+$2.6B net cash · interest covered 103.7× - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“We are also subject to other litigation in addition to patent infringement claims, such as employment-related litigation and disputes, as well as general commercial litigation, and could become subject to other forms of litigation and disputes, including stockholder litigation.”
A judgment, not a number, weigh it against the filing yourself. - DilutionRisk Factors
Whether your slice quietly shrinks. New shares fund the company at the existing owner's expense.
“We may have to pay cash, incur debt or issue equity securities to pay for any acquisition, each of which could affect our financial condition or the value of our capital stock and could result in dilution to our stockholders.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “Tariffs imposed by the United States, as well as any new or additional retaliatory tariffs that could be imposed by other countries in response, could have a material adver se impact on global trade, supply chains and other worldwide economic and geopolitical conditions, which could increase our pro…”
- “To mitigate increased hardware costs resulting from these shortages, we are implementing price increases, which may negatively impact demand for our products and may not be sufficient or timely to offset rising input costs, potentially resulting in margin compression and adversely affecting our busi…”
- “Gain (loss) from Equity Method Investments Year Ended December 31, Change % Change 2025 2024 (in millions, except percentages) Gain (loss) from equity method investments $ 10.3 $ (29.4) $ 39.7 (135) % The $39.7 million year over year change in gain (loss) from equity method investments was primarily…”
- “However, changes in trade policy, including increases in tariff rates, changes in customs or tariffs classifications, or modifications to tariff exemptions, could adversely affect our gross margin in the future, and we expect any resulting impact would primarily relate to our hardware sales to the U…”
- “Our billings, revenue and free cash flow growth, including our product and service billings and revenue, may slow, and our operating margins may decline, particularly if our billings and revenue do not improve or grow as anticipated, or if customer demand, renewal rates, pricing, competitive dynamic…”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Computer hardware
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| HPQHP Inc. | $55.3B | 21% | 5.7% | 53% | 5% |
| HPEHewlett Packard Enterprise Company | $34.3B | 59% | -1.3% | -1% | 2% |
| SMCISuper Micro Computer, Inc. | $22.0B | 11% | 5.7% | 77% | 7% |
| WDCWestern Digital Corporation | $9.5B | 39% | 24.5% | 14% | 13% |
| PANWPalo Alto Networks, Inc | $9.2B | 73% | 13.5% | 12% | 38% |
| STXSeagate Technology Holdings PLC | $9.1B | 35% | 20.8% | 50% | 9% |
| ANETArista Networks, Inc. | $9.0B | 64% | 42.8% | 30% | 47% |
| FTNTFortinet, Inc. | $6.8B | 80% | 30.7% | — | 33% |