This Cybersecurity Stock Just Had Its Worst Day in Years. Is It a Buying Opportunity?

Fortinet reported better-than-expected third-quarter results on Wednesday, with revenue up 20% year over year to $2.08 billion and adjusted earnings per share at $0.91, surpassing analysts' expectations of $0.86. Despite this positive outlook, the company's stock declined roughly 25% following the announcement. Fortinet generates income through two primary avenues: hardware sales, reported as product revenue, and recurring subscriptions and support contracts, categorized as services revenue.

Services revenue, which accounts for a larger portion of the business, rose 13% in the quarter to $1.31 billion. However, the company lowered its full-year services revenue forecast to $5.15 billion to $5.17 billion from the previously projected $5.18 billion to $5.22 billion, citing potential timing issues. CFO Christiane Ohlgart explained that some large enterprise deals include services that begin later, after the hardware is deployed, and that certain customers might postpone service payments.

Moreover, the company clarified that it anticipates services revenue to grow more rapidly in 2027 than it did in 2026. Evidence supporting this projection includes a surge in deferred revenue to $7.93 billion at the end of September, up from $7.12 billion at the end of 2025. While the short-term decline could be attributed to investor concerns about weaker attach rates, long-term investors who believe the gap will narrow and that cybersecurity trends will remain positive might view this as a potential buying opportunity. Cautious investors, however, may prefer to wait for further confirmation before committing.