01—Abstract
Summary
Summary of the 10-K filed February 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Fortinet, Inc. reported robust financial performance for the fiscal year ended December 31, 2023, with total revenue reaching $5.30 billiona, marking a significant 20% increase year-over-year.
This growth was primarily driven by a strong 28% surge in service revenue, which now constitutes the majority of the company's revenue at 64%, outperforming product revenue growth of 8%. The company's net income also saw a substantial increase of 34% to $1.15 billionb. The company continues to focus on its integrated "Fortinet Security Fabric" which spans secure networking, unified SASE, and AI-driven security operations.
Fortinet highlighted its expanding customer base and its ongoing investments in research and development, particularly in areas like AI, to maintain its competitive edge in the cybersecurity market. Despite macroeconomic headwinds and increased competition, Fortinet demonstrated resilience, with expanding gross margins and operating income, reflecting efficient operations and strategic execution.
02—Key points
Key Highlights
- Total revenue increased by 20% to $5.30 billion in 2023.
- Service revenue grew by 28% to $3.38 billion, now representing 64% of total revenue.
- Net income increased by 34% to $1.15 billion.
- Operating income grew by 28% to $1.24 billion, with an operating margin of 23.4%.
- Billings (a non-GAAP measure) increased by 14% to $6.40 billion.
- Deferred revenue increased by 24% to $5.74 billion.
- Fortinet repurchased $1.50 billion of common stock in 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Fortinet, Inc. kept $0.22.
- Revenue$5.30B100.0%
- Cost of revenue−$1.24B23.3%
- Gross profit$4.07B76.7%
- Operating costs−$2.83B53.3%
- Operating income$1.24B23.4%
- Interest, other & tax−$93.3M1.8%
- Net income$1.15B21.6%
Where FY2023 revenue went
$5.30B- Other operating costs: $2.21B, 42% of revenue
- Cost of revenue: $1.24B, 23% of revenue
- Net income: $1.15B, 22% of revenue
- R&D: $613.8M, 12% of revenue
- Interest, other & tax: $93.3M, 1.8% of revenue
Kept 22% as net incomeInterest, other & tax $93.3M · 1.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 26, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $5.30B$4.42B | +20.1% |
| Cost of Revenue | $1.24B$1.08B | +14.0% |
| Gross Profit | $4.07B$3.33B | +22.1% |
| R&D Expenses | $613.80M$512.40M | +19.8% |
| Operating Expenses | $2.83B$2.36B | +19.6% |
| Operating Income | $1.24B$969.60M | +28.0% |
| Interest Expense | $21.00M$18.00M | +16.7% |
| Net Income | $1.15B$857.30M | +33.9% |
| EPS (Basic) | $1.47$1.08 | +36.1% |
| EPS (Diluted) | $1.46$1.06 | +37.7% |
| Shares Outstanding (Basic) | 778.60M791.40M | −1.6% |
| Shares Outstanding (Diluted) | 788.20M805.30M | −2.1% |
05—Questions
Frequently Asked Questions
What was Fortinet's revenue growth in 2023?
Fortinet's total revenue increased by 20% to $5.30 billion in 2023 compared to $4.42 billion in 2022. This growth was primarily driven by an increase in service revenue, which grew by 28%.
How did Fortinet's profitability perform in 2023?
Fortinet demonstrated strong profitability growth. Operating income increased by 28% to $1.24 billion, resulting in an operating margin of 23.4%, up from 21.9% in 2022. Net income also saw a significant increase of 34% to $1.15 billion.
What is the company's strategy regarding its product and service mix?
Fortinet is strategically shifting its focus and resources towards the faster-growing Security Operations (SecOps) and Unified Secure Access Service Edge (SASE) markets. While maintaining its leadership in secure networking, the company anticipates limited near-term growth in that specific segment and is doubling down on services, which have higher gross margins and are outpacing product revenue growth.
How is Fortinet managing its cash and capital?
Fortinet generated $1.94 billion in cash flow from operating activities in 2023, a 12% increase from the prior year. The company ended the year with $2.44 billion in cash, cash equivalents, investments, and marketable equity securities. Fortinet also continued its share repurchase program, buying back $1.50 billion of common stock in 2023.
06—Continue