Shares in Fortinet Inc. fell 5% in late trading today despite the cybersecurity company exceeding expectations on revenue and earnings in its fiscal third quarter.

For the quarter ended Sept. 30, Fortinet reported adjusted earnings per share of 70 cents, up from 41 cents in the same quarter of 2023, on revenue of $1.51 billion, up 13% year-over-year. Both were ahead of the 52 cents and $1.48 billion expected by analysts.

Product revenue in the quarter came in at $473.9 million, up 1.7% year-over-year, while service revenue was up a very healthy 19%, to $1.03 billion. Fortinet saw total billings in the quarter of $1.58 billion, up 6% year-over-year and, as of the end of the quarter, deferred revenue was $6.01 billion, up 14%.

Fortinet reported cash flow in the quarter of $608.1 million, up from $551.2 million in the third quarter of 2023 and ended September with $2.49 billion in cash and cash equivalents on hand, up from $1.4 billion a year prior.

Business highlights in the quarter included Fortinet announcing updates to its secure access service edge solution, introducing new sovereign SASE options and the integration of generative artificial intelligence capabilities to provide improved flexibility in managing hybrid networks in August. The updates addressed the issue wherein existing SASE solutions are claimed to be fragmented and often require multiple management consoles and agents while providing limited visibility and security enforcement.

“Our investments in the fast-growing markets of Unified SASE and Security Operations generated strong results as we continued to gain market share in secure networking,” Ken Xie, founder, chairman and chief executive officer of Fortinet, said in the company’s earnings release. “With our expertise in converging networking and security, a proven track record of innovation and seamless product integration within our FortiOS and FortiASIC, we are well-positioned to lead in our three core growth areas and drive sustained growth.”

For its fiscal fourth quarter, Fortinet expects to see adjusted earnings per share of 58 to 62 cents on revenue of $1.56 billion to $1.62 billion. For the full year, the company expects adjusted earnings per share of $2.20 to $2.28 on revenue of $5.856 billion to $5.916 billion.

The earnings release comes after Fortinet earlier today announced the expansion of generative artificial intelligence capabilities across its product portfolio with the launch of two new integrations with FortiAI, its AI-powered security assistant.

The new integrations include FortiAI for FortiNDR Cloud, which enables threat hunters to quickly assess detections and coverage of emerging threats, tactics and vulnerabilities. The second integration, FortiAI for Lacework FortiCNAPP, helps security operations teams interpret alerts with enhanced speed and accuracy, offering guidance on assessing risks and step-by-step instructions for investigating potential compromises. The tools aim to streamline threat management and improve analysts’ efficiency.

Photo: Fortinet