Fortinet receives swath of downgrades on firewall refresh 'revelation'

Fortinet (NASDAQ:FTNT) received multiple downgrades following its second quarter 2025 financial results and outlook as new information on its firewall refresh cycle was revealed.

Shares plunged more than 20% during early market trading on Thursday.

KeyBanc downgraded the stock to Sector Weight from Overweight to Sector Weight. The firm did not assign a price target.

"We downgrade shares of FTNT to Sector Weight following a mixed 2Q and sobering comments on the refresh cycle going forward," said KeyBanc analysts, led by Eric Heath, in a investor note. "Management noted it is already 40-50% of the way through the 2026 end-of-service refresh cohort, while also downticking on the 2027 refresh cohort. The progression through the refresh was more than we anticipated, and the underlying product revenue growth excluding the refresh benefit of flat-to-down y/y in 1H25 is worse than we expected."

"We estimate that we are approximately 40% to 50% of the way through the 2026 upgrade cycle at the end of the second quarter based on the remaining active units and service contracts, and we expect continued upgrade activity for the remaining devices over the next six quarters," said Fortinet Chief Financial Officer Christiane Ohlgart during Wednesday's earnings call. "Our focus and open communication regarding the refresh allow us and our channel partners to have conversations with our customers around both the upgrade and the customers' overall security strategy, benefiting us longer term."

KeyBanc notes that the total refresh potential might also be less than previously expected, which was $400M to $450M. 

Similarly, Morgan Stanley downgraded the stock to Equal-weight from Overweight and reduced its price target to $78 from $110.

"While Q2 billings and outlook were better than expectations, revelation on earnings that firewall refresh was already 40-50% complete was disappointing, particularly as subscription revenue/free cash flow disappointed on weaker upsell," said Morgan Stanley analysts, led by Keith Weiss, in a Thursday note.

Piper Sandler also downgraded Fortinet to Neutral from Overweight and reduced its price target to $90 from $130.

"While results appeared to be a step in the right direction, the disclosure of FTNT being 40-50% of the way through the 2026 renewal cohort will likely do much to shake investor confidence," said Piper Sandler analysts, led by Rob Owens, in a note. "In our view, this newer and challenged narrative will result in a multi-quarter, show-me situation, especially as product comps get more difficult. Should the previously outlined 12% CAGR over the coming 3-5 years hold true shares  could represent a good value from here – but, it is difficult to endorse this proposition for now, in our view."

Stifel assigned Fortinet a Hold rating and reduced its price target to $85 from $95 following the second quarter results and earnings call.

"When looking past the firewall refresh noise, there were positive aspects to Fortinet's print that can serve as a positive read-thru to Palo Alto's (PANW) F4Q25 print on 8/18, especially around billings/product revenue strength and positive macro commentary," said Stifel analyst Adam Borg.

Fellow cybersecurity firms were showing mixed results. Check Point (CHKP) and Palo Alto Networks had slid 0.6% and 0.9%, respectively. Cisco Systems (CSCO) was up 0.9% and and Zscaler (ZS) had dropped 2%.