Financial Analysis

BUSINESS COMBINATIONS 2025 Acquisitions Linksys Holdings, Inc. In 2021, we invested $160.0 million in cash for shares of the Series A Preferred Stock of Linksys for a 50.8% ownership interest in the outstanding equity of Linksys. On January 31, 2025 ( Linksys Acquisition Date ) , we acquired all of the remaining outstanding Series A Preferred Stock of Linksys for $20.8 million in cash and now own 100% of the outstanding equity of Linksys. Our pre-existing equity method investment in Linksys of 50.8% ownership interest was remeasured to the fair value of $21.5 million at the Linksys Acquisition Date, which resulted in a $10.8 million gain recorded in gain (loss) from equity method investments on the condensed consolidated statements of income. Therefore, the aggregate purchase consideration for Linksys equity equaling the fair value of the previously owned stock and the purchase price for the remaining stock acquired was $42.3 million. This acquisition was accounted for as a business combination using the acquisition method of accounting. Of the aggregate purchase price, $17.5 million was allocated to identifiable intangible assets acquired, and $64.7 million was allocated to other net assets acquired which predominantly included deferred tax asset of $45.8 million, inventory of $21.4 million, and cash of $8.8 million, offset by $11.3 million of net other assets and liabilities assumed. The excess of the fair values of the net assets acquired over the net purchase consideratio …

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COMMITMENTS AND CONTINGENCIES The following table summarizes our inventory purchase commitments as of June 30, 2026 (in millions): Total 2026 Thereafter Inventory purchase commitments $ 1,667.1 $ 1,337.5 $ 329.6 Inventory Purchase Commitments We purchase components of our inventory from certain suppliers and use several independent contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, non-cancelable and unconditional commitments. Certain of these inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to reschedule and adjust our requirements based on our business needs prior to firm orders being placed. As of June 30, 2026, we had $1.67 billion of non-cancelable inventory purchase commitments with our independent contract manufacturers. We recorded a liability for these purchase commitments for quantities in excess of our future estimated demand forecasts …

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DEBT 2026 and 2031 Senior Notes On March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the Senior Notes), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the 2026 Senior Notes) and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the 2031 Senior Notes), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. Upon maturity on March 15, 2026, we repaid the full $500.0 million aggregate principal amount of the 2026 Senior Notes. We may redeem the 2031 Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. The Senior Notes were recorded net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method. The total outstanding debt is summarized below (in millions, except percentages): Maturity Coupon Rate Effective Interest Rate June 30, 2026 December 31, 2025 Debt 2026 Senior Notes March 2026 1.0% 1.3% $ …

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The following table presents our revenue disaggregated by major product and service lines (in millions): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Product $ 773.0 $ 508.9 $ 1,418.1 $ 968.0 Service: Security subscription 729.7 644.4 1,423.7 1,267.5 Technical support and other 545.2 476.7 1,055.7 934.2 Total service revenue 1,274.9 1,121.1 2,479.4 2,201.7 Total revenue $ 2,047.9 $ 1,630.0 $ 3,897.5 $ 3,169.7

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EQUITY PLANS AND SHARE REPURCHASE PROGRAM Stock-Based Compensation Plans We maintain the Amended and Restated Fortinet, Inc. 2009 Equity Incentive Plan (the Amended Plan) pursuant to which we have granted RSUs, stock options and PSUs. As of June 30, 2026, there were a total of 45.4 million shares of common stock available for grant under the Amended Plan. Restricted Stock Units and Market/Performance-Based PSUs The following table summarizes the activity and related information for RSUs for the periods presented below (in millions, except per share amounts): RSUs Outstanding Number of Shares Weighted-Average Grant Date Fair Value per Share BalanceDecember 31, 2025 7.6 $ 81.51 Granted 3.2 88.90 Forfeited (0.4) 81.59 Vested (1.9) 79.97 BalanceJune 30, 2026 8.5 $ 84.61 We grant RSUs under the Amended Plan to employees and non-employees. Subject to certain exceptions, RSUs vest generally over four years subject to continued service. We grant market/performance-based PSUs under the Amended Plan to certain of our executives. Based on the achievement of the market/performance-based vesting conditions during the applicable performance period for such PSUs, the final settlement of the PSUs will range between 0% and 200% of the target shares underlying the PSUs based on the percentile ranking of our total stockholder return over one -, two -, three - and four-year periods among companies included in the S&P 500 Index. 20%, 20%, 20% and 40% of the PSUs vest over one -, two -, three …

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GOODWILL AND OTHER INTANGIBLE ASSETSNet Goodwill As of June 30, 2026 and December 31, 2025, we had goodwill of $257.4 million. There were no impairments to goodwill during the six months ended June 30, 2026 or during prior periods. Other Intangible AssetsNet The following tables present other intangible assetsnet (in millions, except years): June 30, 2026 Weighted-Average Useful Life (in Years) Gross Accumulated Amortization Net Other intangible assetsnet: Finite-lived intangible assets: Developed technologies 4.3 $ 159.1 $ 106.0 $ 53.1 Customer relationships 5.3 66.9 48.3 18.6 Trade names 4.2 11.3 8.1 3.2 Backlog 2.5 13.5 11.3 2.2 Total other intangible assetsnet $ 250.8 $ 173.7 $ 77.1 December 31, 2025 Weighted-Average Useful Life (in Years) Gross Accumulated Amortization Net Other intangible assetsnet: Finite-lived intangible assets: Developed technologies 4.3 $ 159.1 $ 96.0 $ 63.1 Customer relationships 5.3 66.9 42.4 24.5 Trade names 4.2 11.3 5.4 5.9 Backlog 2.5 13.5 9.7 3.8 Total other intangible assetsnet $ 250.8 $ 153.5 $ 97.3 Amortization expense was $9.9 million and $13.2 million during the three months ended June 30, 2026 and 2025, respectively. Amortization expense was $20.2 million and $25.0 million during the six months ended June 30, 2026 and 2025, respectively. The following table summarizes estimated future amortization expense of finite-lived intangible assetsnet (in millions): Amount Years: 2026 (the remainder of 2026) $ 17.0 2027 27.5 2028 20.0 2029 9.3 203 …

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INCOME TAXES Our effective tax rate was 16% for the three months ended June 30, 2026, compared to an effective tax rate of 15% for the same period last year. Our effective tax rate was 17% for the six months ended June 30, 2026, compared to an effective tax rate of 17% for the same period last year. The tax rates for the three months ended June 30, 2026 and 2025 were comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that amounted to $166.6 million and $114.6 million, respectively. The tax rate for the three months ended June 30, 2026 included a tax benefit of $33.9 million from the Foreign- Derived Deduction Eligible Income (FDDEI) deduction and excess tax benefits from stock-based compensation expense of $17.7 million. The tax rate for the three months ended June 30, 2025 included a tax benefit of $25.1 million from the FDDEI deduction and excess tax benefits from stock-based compensation expense of $12.4 million. The tax rates for the six months ended June 30, 2026 and 2025 were comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that amounted to $332.0 million and $243.2 million, respectively. The tax rate for the six months ended June 30, 2026 included a tax benefit of $68.0 million from the FDDEI deduction and excess tax benefits from stock-based compensation expense of $27.1 million. The tax rate for the six months ended June 30, 2025 included a tax provision of $30.6 million related to the derecognition of deferre …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Recent Adopted Accounting Standards Credit Losses In July 2025, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2025-05Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (ASU 2025-05), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Revenue from Contracts with Customers (Topic 606). The amendments are effective for our annual reporting periods beginning with fiscal year 2026 and interim reporting periods within those annual reporting periods on a prospective basis, with early adoption permitted. We adopted ASU 2025-05 on January 1, 2026 and the adoption of this standard did not have a material impact on our condensed consolidated financial statements. Recent Accounting Standards Not Yet Effective Expense Disaggregation Disclosures In November 2024, the FASB issued ASU 2024-03, Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), and in January 2025, the FASB issued ASU No. 2025-01, Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. ASU 2024-03 enhances the disclosures required for expense disaggre …

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REVENUE RECOGNITION Disaggregation of Revenue The following table presents our revenue disaggregated by major product and service lines (in millions): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Product $ 773.0 $ 508.9 $ 1,418.1 $ 968.0 Service: Security subscription 729.7 644.4 1,423.7 1,267.5 Technical support and other 545.2 476.7 1,055.7 934.2 Total service revenue 1,274.9 1,121.1 2,479.4 2,201.7 Total revenue $ 2,047.9 $ 1,630.0 $ 3,897.5 $ 3,169.7 Deferred Revenue During the three and six months ended June 30, 2026, we recognized $996.9 million and $2.09 billion in revenue that was included in the deferred revenue balance as of December 31, 2025, respectively. During the three and six months ended June 30, 2025, we recognized $876.8 million and $1.85 billion in revenue that was included in the deferred revenue balance as of December 31, 2024, respectively. Transaction Price Allocated to the Remaining Performance Obligations As of June 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was $7.73 billion, which was substantially comprised of deferred security subscription and technical support services revenue as well as unbilled contract revenue from non-cancellable contracts that will be recognized in future periods. We expect to recognize approximately $3.86 billion as revenue over the next 12 months, $3.08 billion in years two and three, and the remainder thereafter. De …

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SEGMENT INFORMATION Operating segments are determined based on the financial information that is regularly reviewed by the Chief Operating Decision Maker (CODM) to allocate resources and assess performance. The Companys CODM is our Chief Executive Officer, who reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. We have one operating and reportable segment. The following table reflects certain financial data for our reportable segment (in millions): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Total revenue $ 2,047.9 $ 1,630.0 $ 3,897.5 $ 3,169.7 Less: Cost of product revenue 233.8 165.9 442.1 315.8 Cost of service revenue 170.9 149.0 327.1 292.2 Research and development expenses 225.0 209.5 439.0 408.1 Adjusted sales and marketing expenses (1) 537.8 483.7 1,052.6 923.4 Commission expense 131.3 108.3 252.8 211.3 General and administrative expenses 61.1 56.9 117.3 114.7 Provision for income taxes 115.0 77.1 237.0 173.6 Add: Other segment items (2) 33.3 60.5 111.2 142.9 Net income $ 606.3 $ 440.1 $ 1,140.8 $ 873.5 (1) Excludes commission expense. (2) Includes gain on intellectual property matters, interest income, interest expense, other incomenet and gain (loss) from equity method investments. Revenue by geographic region is based on the billing address of our customers. The following …

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Preparation The unaudited condensed consolidated financial statements of Fortinet, Inc. and its subsidiaries (collectively, we, us or our) have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information, as well as the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2025, contained in our Annual Report on Form 10-K filed with the SEC on February 25, 2026. In the opinion of management, all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation, have been included. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the full year or for any future periods. The condensed consolidated balance sheet as of December 31, 2025 is derived from the audited consolidated financial statements for the year ended December 31, 2025. The condensed consolidated financial statements include the accounts of Fortinet, Inc. and its subsidiaries. We consolidate all legal entities in which we have an absolut …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing