Fortinet Foresees SD-WAN Dominance, Post Q4 Earnings Beat

Fortinet beat Wall Street’s expectations and reported double-digit fourth quarter and full-year 2020 revenue growth. On an earnings call with investors, Fortinet founder and CEO Ken Xie said his company’s secure networking approach drove its Q4 success, and he expects the company’s Secure SD-WAN to become a market leader “within a few years.” Fortinet beat Wall Street’s expectations and reported double-digit fourth quarter and full-year 2020 revenue growth. On an earnings call with investors, Fortinet founder and CEO Ken Xie said his company’s secure networking approach drove its Q4 success, and he expects the company’s Secure SD-WAN to become a market leader “within a few years.” This will require it to win deals against the current leaders, VMware and Cisco, but later on the call Xie said this won’t be a problem. Fortinet Secure SD-WAN accounted for 16 deals over $1 million during Q4 compared to 11 such deals a year ago. And for the full year, SD-WAN comprised about 11 % of the company’s total billings, doubling year over year. “We have a unique advantage in that we build SD-WAN with security together,” Xie said. “And we also leverage ASICs to increase computing power, lower computing costs, so none of our competitors have that.” Xie also noted that both VMware and Cisco acquired their SD-WAN technology compared to Fortinet’s in-house development, “so going forward, they will probably be slower on innovating.” For Q4, Fortinet total revenue ($748.0 million), product revenue ($288.4 million), and service revenue ($459.6 million) all increase 21%. The company also said its billings for the quarter grew 20% to $960.9 million. Fortinet also reported its third full year of consecutive double-digit growth across product revenue, services revenue, and total revenue. For the full year 2020, Fortinet’s total revenue reached $2.59 billion for 2020, an increase of 19.9% compared to 2019. Product revenue was $916.4 million, up 16.2%. And service revenue of $1.68 billion grew 22.1% compared to 2019. Looking ahead, Fortinet expects first-quarter 2021 revenue in the range of $670 million to $685 million, and billings in the range of $765 million to $780 million. For the full year 2021, the security vendor forecasts revenue in the range of $3.025 billion to $3.075 billion and billings in the range of $3.560 billion to $3.640 billion. “Given the many opportunities ahead, we plan to shift our focus mode to growth for the next few quarters,” Xie said. Organizations want to consolidate their security tools and adopt a platform approach instead of using separate point products across endpoints, networks and clouds, he added. “The Fortinet Security Fabric is a cybersecurity platform built on a broad and deep set of networking and security technology from endpoint network to cloud, organically built to seamlessly communicate and anchor together this consolidation,” Xie said. “We estimate our total addressable market will grow at an annual compound rate of 10% over the next four years to reach $93 billion by 2024.” Also today, the vendor added more than 300 new features to its FortiOS operating system including firewall-based zero trust network access and extending secure access service edge (SASE) to off-network remote workers. These new features further stretch the Fortinet Security Fabric across networks, endpoints, and clouds, Xie said. A couple of the biggest updates focus on securing remote access, which has been a major pain point for organizations over the past 12 months struggling to adjust to newly remote workforces because of the COVID-19 pandemic. One of these updates lets every FortiGate customer use zero trust network access (ZTNA) capabilities out of the box. “With this release of FortiOS, we are the only leading cybersecurity vendor to offer firewall-based real trust network access,” Xie said, adding that this approach “will replace the traditional VPN.” This capability also aims to simplifies management by using the same access policy whether users are on or off network. Additionally, FortiOS 7.0 includes tighter integration with Fortinet’s SASE platform. The updated OS, via cloud-based SASE, now provides the same enterprise-grade security to off-network remote users that they get on premises with Fortinet’s security platform. It also offers video filtering, which Fortinet says is another industry first, to provide more granular protection for the video-intense content consumption patterns driven by the increase in work-from-home. In addition to securing remote workers, the updates also seek to improve application to support users working from anyway. And to this end, Fortinet added self-healing capabilities to its Secure SD-WAN through adaptive WAN remediations, and it also expanded its passive application monitoring for SaaS and multi-cloud applications. Some of the other updates include extending network connectivity and security beyond the WAN edge with 5G and LTE. And FortiOS 7.0 enabled central management for hybrid clouds with auto-scaling of resources, dynamic load-balancing, and application user experience visibility. All of these features target improved performance and resiliency. The FortiOS updates come less than a week after Fortinet launched its extended detection and response (XDR) product, FortiXDR. It’s an extension of Fortinet’s endpoint detection and response (EDR) platform, and it uses artificial intelligence (AI) not only for threat response, but threat investigation as well. The vendor claims the new offering can fully automate security operations processes from detection to investigation and remediation.