Fortinet cut in service outlook hits cyber stocks

Fortinet’s latest quarterly update has unsettled the cybersecurity sector after the company paired better‑than‑expected results with a cut to its service revenue outlook. For full‑year 2026, Fortinet now expects total revenue of $8.125 billion to $8.215 billion, while guiding service revenue to a lower range of $5.150 billion to $5.170 billion. The shift reflects higher expectations for product sales and reduced expectations for recurring service revenue. The change comes even as overall revenue, billings, operating margin and non‑GAAP earnings per share forecasts were all raised in the latest update.

The updated guidance follows a period in which Fortinet had previously lifted both total revenue and service revenue ranges earlier in the year. In October, however, the company’s third raise to its 2026 revenue forecast added $70 million at the midpoint, while the service revenue forecast declined by $40 million at the midpoint. At the same time, the implied 2026 product revenue forecast rose by $110 million to about $3.01 billion at the midpoint, based on the company’s ranges.

For the third quarter, Fortinet reported revenue of $2.078 billion, inside its guidance range of $2.010 billion to $2.100 billion and above consensus estimates of $2.06 billion. Adjusted, or non‑GAAP, earnings per share came in at $0.91, above guidance of $0.83 to $0.87 and ahead of analyst expectations of $0.86. Third‑quarter revenue growth was 20% year over year, slower than the 26% growth rate reported in the prior quarter.

Service revenue remained a key component of the business in the period, accounting for 63% of third‑quarter revenue, or $1.31 billion out of $2.08 billion. Fortinet’s presentation highlighted that total service billings were up 26% from a year earlier, and security subscription revenue rose 12% in the quarter. The company reported spending no cash on share repurchases in the third quarter, leaving an existing authorization in place.

Despite the earnings and revenue beats and the higher overall revenue outlook, investors reacted negatively to the slower growth and service forecast cut. In after‑hours trading on October 28, FTNT shares traded at $129.77, down 25.5% from the regular‑session close of $174.08. Shares were indicated down 26% in premarket trading on October 29, reflecting a similar magnitude of decline.

The weakness in Fortinet quickly spilled over to other cybersecurity names. During the same after‑hours session, Palo Alto Networks (PANW) was down about 6.66%, CrowdStrike (CRWD) fell roughly 6.05%, and Zscaler declined about 6.40%. Okta, SentinelOne, Rubrik and SailPoint also traded lower, with moves ranging from about 5% to nearly 10%.

In early trading on October 29, Palo Alto Networks (PANW) shares were indicated down 7% and Zscaler shares were also down 7% alongside Fortinet’s 26% premarket drop, even though those companies had not issued new financial results at that time. The broad reaction underscored how closely investors are linking cybersecurity stocks to Fortinet’s outlook on growth and recurring service revenue.