Fortinet's Strong FY2025 Billings Growth Clashes with Service Revenue Skepticism in DeepValue Report

What happened

A Forbes article from February 2026 portrays Fortinet as entering a new growth phase, highlighting FY2025 revenue of $6.80 billion (up 14% year-over-year) and billings of $7.55 billion (up 16%). However, the DeepValue master report tempers this optimism by noting that service revenue growth is decelerating to around 11% for FY2026, lagging behind billings momentum due to slowing short-term deferred revenue growth. Critical filings reveal that 70% of 2024 service revenue came from deferred revenue already on the balance sheet, raising durability concerns beyond the headline numbers. The stock's current valuation at ~35x P/E leaves little cushion if services fail to accelerate, with management expecting margin pressure from SASE-related cloud costs. Investors must now watch for evidence in deferred revenue and RPO trends over the next two quarters to validate the promised second-half 2026 services rebound.

Implication

The positive spin in recent media coverage does not alter the core investment thesis: Fortinet's stock is priced for durable growth, but filings show service revenue growth is slowing due to deferred revenue dynamics and margin pressures from cloud investments. Without acceleration in short-term deferred revenue and next-12-month RPO—key indicators of future service conversion—the disconnect between billings and reported revenue could lead to multiple compression. Monitoring Q1 2026 billings against guidance and SASE mix above 27% is critical, but chasing billings alone is risky without proof of deferred revenue buildup. Long-term, the company must demonstrate that SASE scaling can improve profitability while sustaining ARR growth, or face competitive erosion from peers like Palo Alto Networks. Until these conversion metrics improve, the attractive entry point remains near $78, with downside risk to $70 if service lag proves structural.

Thesis delta

The Forbes article confirms Fortinet's robust FY2025 billings and revenue performance, which is already factored into the DeepValue report's analysis. However, it does not address the critical service revenue disconnect or margin pressures flagged in filings, so the WAIT rating and cautious outlook remain unchanged. Investors should view this as reinforcement of known data rather than a shift, with the thesis hinging on upcoming deferred revenue and RPO prints for validation.