Despite the backdrop of the “SaaSpocalypse” and a sharp derating across software, Fortinet has rallied 121% year to date. The performance reflects continued earnings delivery and growing recognition of a differentiated cybersecurity platform. Fortinet is a global leader in cybersecurity, serving over 900,000 customers through one of the industry’s most comprehensive and integrated security platforms. Founded in 2000 by brothers Ken and Michael Xie, the company has evolved from a firewall business into a broad security operating system.
Built for the Long Game
Ken and Michael Xie built Fortinet around the view that cybersecurity was fundamentally an infrastructure-engineering problem. Their leadership has been defined by long-term vision, organic innovation and an engineering-driven culture. While hardware was increasingly viewed as legacy, the Xie brothers doubled down on proprietary ASICs and a single FortiOS architecture. Over 25 years, that conviction has transformed Fortinet from a firewall vendor into an integrated platform spanning more than 50 enterprise-grade products, while delivering superior security performance at lower cost.
A Growing Need for Security
Fortinet operates across a large and expanding cybersecurity market exceeding US$184bn, including Secure Networking, Unified SASE and AI-driven Security Operations. Rising cyber complexity, AI-driven attack volumes and the convergence of networking and security are increasing the need for real-time, cost-efficient protection. At the same time, enterprises are increasingly consolidating fragmented security stacks, favouring integrated platforms such as Fortinet.
Architecture Advantage
Fortinet has built one of the industry’s most deeply integrated cybersecurity architectures, combining proprietary hardware, software and security intelligence under a single operating system. This reduces R&D duplication, improves deployment efficiency and enables ASIC-accelerated performance. FortiGate also provides a powerful entry point into customers – around 90% begin with the firewall before expanding into SASE, XDR, email and other security products. Evidently, Fortinet has delivered a 10-year revenue CAGR of 23%, including 26% growth in services.
Source: Company filings, Ziller expectations. Forecasts subject to change.
A Lesson in AI
Fortinet may also be an early example of a broader reappraisal now taking place across software. In that AI disruption will not affect every software business equally. As sentiment begins to recover across the sector, we believe the opportunity lies in distinguishing businesses with durable data, workflows, architecture and competitive advantages from those whose value can be more easily commoditised.
A Winner at a Fuller Valuation
Fortinet has been a strong investment for Ziller, with the underlying thesis playing out through continued market-share gains, earnings growth and platform expansion. That said, the significant share-price appreciation over the past year has reduced the prospective TRR from previous levels. We have therefore begun trimming the position, realising gains while still retaining exposure to a high-quality cybersecurity leader.