Fortinet Inc. saw an “unusually large volume of deals” pushed out beyond the June quarter, its chief financial officer said Thursday, and that commentary was weighing on the broader cybersecurity sector.
Chief Financial Officer Keith Jensen said on the company’s earnings call that “macro uncertainty impacted our billings performance” in the form of shorter contract durations, while Fortinet FTNT, +1.94% also observed an “elevated level of enterprise deals” that were pushed out into future quarters.
While Fortinet’s adjusted earnings per share of 38 cents topped the 34-cent FactSet consensus and its $ 1.29 billion in revenue essentially matched the consensus view, the company came up shy on billings in the second quarter. That metric came in at $ 1.54 billion, while analysts had been modeling $ 1.59 billion.
Fortinet also whiffed on its outlook, calling for $ 1.315 billion to $ 1.375 billion in third-quarter revenue along with $ 1.560 billion to $ 1.620 billion in billings, a measure meant to capture both current and future revenue. Analysts were modeling $ 1.382 billion in revenue and $ 1.678 billion in billings.
Shares of the company fell nearly 16% in after-hours trading Thursday, while peer names logged steep drops as well. Palo Alto Networks Inc. shares PANW, +0.54% were off more than 6%, while CrowdStrike Holdings Inc. CRWD, +1.82% and Zscaler Inc. ZS, +0.15% shares each declined more than 2%.
Jensen said that cybersecurity continues to be a priority for corporate IT departments, though he also expects “a return to more normal seasonality for Fortinet in the back half of the year” as the company laps price increases from the prior period and sees some other former tailwinds wane.
“While it’s a little early to be providing guidance for next year, we would expect our near-term performance to represent a short-term trough given our confidence in our solutions, our offerings and taking into account that growth comparisons will ease as we move through 2024,” he added, according to a transcript provided by AlphaSense/Sentieo. “At this early stage, we would expect billings growth to approach high teens by the fourth quarter of 2024.”