Fortinet Expands via Cross-Selling: A Path to More Profitability?

Fortinet FTNT is using its vast customer base to fuel growth, with cross-selling emerging as a key driver of profitability.By offering a broad range of complementary security solutions, Fortinet encourages existing customers to adopt additional products and services beyond their initial purchase, such as expanding from a FortiGate firewall to SD-WAN and then to a single-vendor SASE solution. This strategy not only increases overall revenues but also boosts recurring revenues through subscription-based services, which typically have higher profit margins.The company’s first-quarter 2025 results highlighted how this strategy — centered on selling Secure Access Service Edge (SASE) and Security Operations (SecOps) solutions to existing SD-WAN and firewall customers — is delivering strong results. In the quarter, 91% of SASE billings and 97% of SecOps billings came from existing clients.Unified SASE annual recurring revenues (ARR) climbed 26% year over year, while SecOps ARR surged 30%, bringing combined ARR to $1.6 billion. Notably, its large enterprise customers contributed 48% of SASE and 40% of SecOps revenues, far outpacing mid- and small-sized customers, which highlights Fortinet’s ability to deepen penetration within its most lucrative customer segment.These gains are translating into stronger profitability, with non-GAAP operating margin reaching a record 34.2% and adjusted free cash flow climbing to $839 million, nearly 54% of total revenues. Together, these results reflect how Fortinet’s cross-selling model enhances operating efficiency and margin leverage.With RPO up 12% year over year to $6.49 billion, the company anticipates double-digit SASE and SecOps growth in 2025, sustaining profitability through cross-selling.Fortinet's Competitors in the Cybersecurity MarketPalo Alto Networks PANW is accelerating growth through strategic alliances with VMware and Aruba Networks under its NextWave program, and key acquisitions such as LightCyber, Morta Security and Cyvera. PANW's innovative next-generation security platforms classify traffic by application, user and content, providing deep visibility and reducing reliance on multiple security tools. By reducing the total cost of ownership and increasing enterprise security, PANW solidifies its competitive edge in today’s mission-critical cybersecurity landscape.CrowdStrike Holdings CRWD is strengthening its competitive edge with its Falcon platform, now featuring 29 AI-driven modules for cloud-native endpoint protection and XDR across on-prem, cloud and IoT environments. CRWD’s real-time threat intelligence, rapid incident response and enhanced Falcon XDR capabilities position it as a top choice for enterprises and federal agencies. With rising demand for cybersecurity, CRWD’s product innovation, acquisitions and partnerships continue driving growth and rivalry with Fortinet.FTNT’s Share Price Performance, Valuation & EstimatesFTNT shares have gained 13.4% in the year-to-date period, underperforming the Zacks Security industry’s growth of 20.1%. However, FTNT has outperformed the Zacks Computer and Technology sector’s return of 9.5%.FTNT’s YTD Price PerformanceImage Source: Zacks Investment ResearchFrom a valuation standpoint, Fortinet currently trades at a premium with a Price/Book ratio of 41.7X, higher than the industry’s 24.34X. FTNT has a Value Score of F.FTNT’s ValuationImage Source: Zacks Investment ResearchThe consensus mark for 2025 earnings is pegged at $2.48 per share, which remains unchanged over the past 30 days and has been revised upward by a cent over the past 60 days. The estimate indicates 4.64% year-over-year growth.Image Source: Zacks Investment ResearchFortinet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fortinet, Inc. (FTNT): Free Stock Analysis Report Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report CrowdStrike (CRWD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks