Shares of cybersecurity firm Fortinet (FTNT) plunged Friday on its third-quarter results. The company’s 2024 outlook for FTNT stock disappointed amid slowing growth in the market for network “firewall” appliances.
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Palo Alto Networks (PANW), also a player in the network firewall market, reports earnings on Nov. 15.
On the stock market today, FTNT stock plunged 18% to 47.26 in early trading. PANW stock fell 2.7% to 293.50.
Shares in Check Point Software Technologies (CHKP) dipped 0.4% to near 136. CHKP stock retreated Oct. 30 on its September quarter earnings report.
Despite its exposure to the network firewall market, PANW stock has climbed 79% in 2023. Palo Alto Networks has expanded into cloud-based services through acquisitions.
Network firewall appliances block unauthorized traffic and check web applications for malware. Demand for these on-premise devices has slowed amid a shift to cybersecurity services delivered via remote cloud computing platforms.
FTNT Stock: Firewall Market In Cyclical Downswing
Fortinet late Thursday reported EPS of 41 cents, up 24% from a year earlier. That topped estimates for 36-cent adjusted profit.
Revenue for FTNT stock came in at $1.334 billion, up 16%, below estimates of $1.35 billion.
“For the first time since FTNT went public, revenue in its appliances business contracted on a year-over-year basis,” said TD Cowen analyst Shaul Eyal in a report. “The slowdown was broad-based across its two major regions as the networking firewall market has entered a cyclical downswing.”
Billings, a sales growth metric, missed in Q3. Fortinet reported billings of $1.49 billion, up 6%, missing estimates for 12% growth.
“More importantly, management guided for billings to decline 5% year over year in Q4,” said Wells Fargo analyst Andrew Nowinski in a report. “They do not expect growth to return to double digits until the back half of 2024.”
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