Fortinet (NASDAQ:FTNT) shares dropped sharply by more than 19% in early U.S. trading on Thursday, following the cybersecurity company’s cautious revenue guidance for the third quarter. Investors reacted to worries about slowing business spending tied to tariff-related economic uncertainty and challenges in the ongoing firewall refresh cycle.
Several companies have recently adjusted or tightened their spending plans, citing the broader economic uncertainty stemming from U.S. President Donald Trump’s aggressive trade policies.
Despite these concerns, Fortinet executives, who offer integrated cybersecurity products including firewalls and cloud threat protection, emphasized in their post-earnings call that the unclear economic outlook had not yet impacted their business. They also noted the overall cybersecurity market remains robust and resilient against current headwinds.
However, analysts expressed particular concern over Fortinet’s firewall refresh cycle, a key driver of revenue, as many customers’ firewall devices approach their end-of-service dates.
KeyBanc Capital Markets analysts pointed out that Fortinet’s management revealed they are already “40% to 50% of the way through its 2026 end-of-service refresh cohort,” while also “downticked” the same cohort for 2027.
“The progression through the refresh was more than we anticipated, and the underlying product revenue growth excluding the refresh benefit of flat-to-down year-on-year in the first half is worse than we expected,” the analysts stated. They further warned the refresh opportunity “may not be as large as” the initial $400 million to $450 million projection Fortinet shared during its November analyst day.
Due to these factors, KeyBanc downgraded their stock rating from “overweight” to “sector weight,” cautioning that Fortinet faces a “challenging setup going forward as the refresh tailwind diminishes in 2026.”
In a separate note, Piper Sandler analysts acknowledged that Fortinet’s results “appeared to be a step in the right direction,” but warned that the comment on the refresh cohort “will likely do much to shake investor confidence.” They also lowered their rating to “neutral.”
For the quarter ending June 30, Fortinet posted revenue of $1.63 billion, meeting analyst estimates, and adjusted earnings per share of $0.64, beating expectations.
Yet, the company’s revenue forecast for Q3, ranging from $1.67 billion to $1.73 billion, came in slightly below analyst consensus at the midpoint, according to data from LSEG cited by Reuters.
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