MW Why Fortinet's stock could see its worst drop on record

By Emily Bary

The cybersecurity company just shared that it's 40% to 50% done with an upgrade cycle for firewalls - but some analysts think that limits future opportunities

Fortinet's stock could book a record decline Thursday on concerns about its firewall upgrade cycle.

Cybersecurity company Fortinet Inc. has gotten many of its customers to upgrade their firewalls - but Wall Street seems both concerned that the progress hasn't led to better financial outcomes thus far and worried that future growth will be harder to come by.

Fortinet $(FTNT)$ disclosed on its Wednesday earnings call that it's about 40% to 50% through an upgrade cycle for units that are scheduled to reach end of service by the end of next year.

"This progress raised worries that much of the near-term growth catalyst may be behind us, despite management's confidence and ongoing strength in cross- and up-selling," Rosenblatt Securities analyst Catharine Trebnick said in a note to clients.

Shares of Fortinet were off 25.7% in afternoon trading Thursday. That could mark their worst one-day slide on record if losses of such magnitude hold through the close.

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Bernstein's Peter Weed said the progress update has investors questioning some past and future financial trends. "With half of that upside gone, a couple realizations emerged: Product revenue may have been negative over the last year had it not been for refresh that already happened, and the forward-looking models needed to be brought downby a couple hundred million [dollars]," he wrote.

The number is "driving confusion about why Fortinet is not seeing stronger product revenue growth and billings materialize," William Blair's Jonathan Ho added.

Over at Bernstein, Weed was previously modeling an "upper-teens" rate of revenue growth next year, but his new model has quarterly revenue growth rates moving from low-teens to single-digit rates over the course of 2026.

Looking beyond the 2026 refresh cycle, there's opportunity for Fortinet to refresh some 350,000 customers whose service will conclude by the end of 2027 - but those are using "low-end" units, in the company's terms, with lower price points and "less significant" product revenue opportunities, he noted.

William Blair's Ho thinks the company has struggled to measure where it is in the refresh cycle, leading to "mismatched" expectations on Wall Street.

"We believe investors want greater transparency and clarity on the pace of refresh as well as what this will mean in terms of future quarterly comparisons," he wrote.

Despite what seem to be some Fortinet-specific issues, other cybersecurity stocks were falling sharply as well in Thursday's action. Shares of Okta Inc. (OKTA) and CrowdStrike Holdings Inc. (CRWD) were each down more than 6%, while Palo Alto Networks Inc.'s stock (PANW) was down roughly 4%.

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-Emily Bary

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August 07, 2025 14:52 ET (18:52 GMT)

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