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目錄
美國
證券交易委員會
華盛頓特區20549

表格 10-Q 
（標記一）
☒根據1934年證券交易法第13或15(d)節的季度報告
截至季度結束日期的財務報告2024年9月30日
or
☐根據1934年證券交易法第13或15(d)節的轉型報告書
 過渡期從            至            
委託文件號碼：001-34511
______________________________________
FORTINET，INC.
(根據其章程規定的註冊人準確名稱)
______________________________________

特拉華州77-0560389
（國家或其他管轄區的
公司成立或組織）		（IRS僱主
唯一識別號碼）

909 Kifer Road
Sunnyvale, 加利福尼亞州 94086
（總部地址，包括郵政編碼）

(408) 235-7700
(註冊人電話號碼，包括區號)
本2.02條款和附件99.1中含有的信息，除非在此類申報文件中通過具體引用註明，否則將不被視爲根據《證券交易法》或修正件（以下簡稱「交易所法」的章程18條的目的出於遞交該等申報文件或遞交《證券法》或修正件的申報文件中的任何一份而被歸入參考文件之列。
每一類的名稱交易代碼在其上註冊的交易所的名稱
普通股，面值0.001美元FTNT納斯達克證券交易所 LLC

請勾選，以指示註冊人（1）在過去12個月內（或註冊人需要提交此類報告的較短期限）是否已向美國證券交易所法（《證券交易法》）第13或15（d）條的規定進行了所有要求報告的提交，並（2）過去90天一直要求提交此類報告。Yes  ☒    否  ☐
請勾選以下內容。申報人是否已在過去12個月內（或申報人需要提交此類文件的時間較短的期間內）逐個以電子方式提交了根據規則405提交的互動數據文件。這章的交易中規定。    Yes  ☒沒有☐ 
請勾選標記以說明註冊人是大型快速申報人、加速申報人、非加速申報人、較小的報告公司還是新興成長型公司。請查看《交易所法》第120億.2條中「大型快速申報人」、「加速申報人」、「較小的報告公司」和「新興成長型公司」的定義。 

目錄
大型加速報告人☒加速文件申報人☐
非加速文件提交人☐更小的報告公司☐
新興成長公司☐
如果是新興成長型公司，請勾選是否已選擇不使用根據交易所法案第13(a)條款提供的任何新的或修訂的財務會計準則的延長過渡期來遵守。 ☐ 
在檢查標記上打勾，表示註冊者是一個空殼公司（根據法案規則12b-2定義）。    是  ☐     沒有☒
截至2024年11月7日， 766,452,698 股。



FORTINET，INC.
10-Q表格季度報告
2024年9月30日季度結束
目錄
 
  頁面
第一部分—財務信息
第 1 項。
第 2 項。
第 3 項。
第 4 項。
第二部分——其他信息
第 1 項。
第 1A 項。
第 2 項。
第 5 項。
第 6 項。





風險因素摘要

我們的業務受到許多風險和不確定性的影響，包括《表格10-Q季度報告》中第II部分第1A項目「風險因素」中描述的那些。在投資我們的普通股時，您應該仔細考慮這些風險和不確定性。一些主要的風險和不確定性包括：

•我們的營運業績可能會有顯著的波動，並且難以預測。

•不利的經濟狀況，如可能的經濟衰退或經濟衰退，通貨膨脹或滯脹的可能影響，利率期貨的增加或減少，政府支出或監管變化或減少科技支出，包括防火牆支出，可能對我們的業務產生不利影響。

•我們過去及可能在未來會受到供應鏈限制、供應短缺和中斷、開多或不太可預測的元件和成品交貨時間長，以及供應變更的影響，因爲我們產品的一些關鍵元件來自有限的供應來源。

•由於之前供應鏈中斷的影響，我們在之前的時期增加了採購訂單承諾，並在某些情況下被要求接受或支付元件和成品，未來可能繼續需要無論特定時期的銷售水平如何進行支付，這可能會對我們的營運結果和財務狀況造成負面影響。

•我們的賬單、營業收入和自由現金流增長可能會放緩或停止增長，我們的營運利潤率可能會下降。

•我們的房地產業資產包括施工、收購、租賃活動，以及辦公樓、倉庫、idc概念和業務點的持續維護和管理，以及數據中心的擴建或增強，可能會對我們的業務造成重大風險。

•我們的積壓訂單可能會在各個季度出現波動。減少積壓訂單會增加我們在交付時的總結算和營業收入。如果我們遇到供應鏈短缺，無法滿足訂單，或者客戶取消或推遲訂單交付，我們的積壓訂單可能會受到影響，這將對當季的總積壓訂單到賬單轉化率和營業收入產生負面影響。

•隨着供應鏈挑戰的正常化，我們的產品營業收入增長率可能會較之前季度更低，因爲來自積壓訂單的交付對賬單貢獻更多。我們預計賬單增長將趨於正常化，減少積壓訂單波動對其的影響。2024年前三個季度，相比之前較低的積壓訂單對賬單的貢獻已導致同比季度增長率下降。

•銷售策略、生產力、人員和執行方面的任何弱點都可能對我們的運營結果產生負面影響。

•我們依賴高級管理人員繼續提供服務和表現，以及我們僱傭、留住和激勵合格人員的能力。

•我們幾乎完全依賴第三方渠道合作伙伴進行賬單、營業收入的大部分，而少數分銷商卻佔據了我們營業收入和應收賬款的很大比例。

•依賴於季度末集中發貨或運輸條款的變化可能導致我們的賬單和營業收入低於預期水平。

•我們在很大程度上依賴於FortiGuard安防-半導體訂閱和FortiCare技術支持服務的營業收入，這些服務的營業收入可能會下降或波動。

•我們在市場上面臨激烈的競爭，我們可能無法保持或改善我們的競爭地位。

•我們的產品或服務容易出現缺陷或漏洞，以及因產品或服務的故障或濫用而造成聲譽損害，以及在我們的產品或服務中存在實際或被視爲的缺陷或漏洞，產品或服務無法檢測或防止安防-半導體事件，或導致業務中斷，客戶未能實施諸如更新我們其中一種部署解決方案或未能幫助客戶確保安全等預防措施的情況下，可能導致我們的產品或服務允許未經授權訪問客戶網絡，對我們的業務結果和聲譽造成比其他更顯著的影響
1

公司。我們的產品安防-半導體事件響應團隊會在我們的FortiGuard實驗室網站上公開已知的產品漏洞，包括關鍵漏洞，以及客戶減輕漏洞風險的方法。但是，不能保證此類帖子會及時、準確或完整，或者這些客戶會採取措施來減輕漏洞風險，某些客戶可能會受到負面影響。

•如果我們的內部企業IT網絡、運營網絡、研發網絡、後端實驗室以及託管在數據中心、聯合託管供應商或公共雲提供商的雲堆棧遭到破壞，公衆對我們產品和服務的看法可能會受到影響，我們的客戶可能會受到侵害，我們可能會面臨責任，我們的業務、運營結果和股票價格可能會受到負面影響。

•我們已經負債，將來可能會繼續負債，這可能會對我們的財務狀況和未來財務業績產生不利影響。

•我們大部分賬單、營業收入和現金流來自美國境外銷售。

•我們可能無法成功執行我們的策略，以增加對中大型最終客戶的銷售。

•我們一部分的營業收入來自於對政府組織和其他客戶的銷售，這些銷售受到許多監管要求、他們自己供應鏈和合同要求、挑戰和風險的限制。

•我們根據未來需求和目標庫存水平的預測，向第三方製造商訂購元件，從而使我們面臨產品短缺的風險，可能導致銷售損失和成本上升，以及庫存過剩可能導致庫存費用以及與未來採購承諾相關的成本，並可能要求我們以折扣銷售產品或提供各種其他激勵措施。

•我們依賴第三方爲我們的產品提供各種元件並製造我們的產品，容易受到製造延遲、產能限制、成本上漲和地緣政治環境變化的影響。

•我們未能成功收購和整合其他企業、產品或技術，或成功投資並與其他企業建立成功的戰略聯盟，可能會嚴重損害我們的競爭地位，進而對我們的財務控件和運營結果產生負面影響。

•投資者和監管機構對我們在環保母基、社會和治理因素方面的表現的預期可能會產生額外成本，並使我們面臨新的風險。

•我們面臨匯率波動的風險，可能對我們的財務狀況和經營業績產生負面影響。

•我們的專有權可能難以強制執行，我們可能會受到他人聲稱我們侵犯其專有技術的指控。

•我們普通股的交易價格可能會波動，這種波動可能會因我們股票回購計劃（「回購計劃」）下的股份回購而加劇。

•我公司的章程、公司法和特拉華州法律中包含的條款可能會對試圖接管的企圖造成影響。

•全球貨幣經濟的不確定性可能會削弱和損害我們的財務狀況。

•由於政治不穩定、貿易協議變化、戰爭和國外衝突（例如烏克蘭戰爭、以色列-哈馬斯戰爭或中國與臺灣之間的緊張關係）導致的產品需求疲軟，可能對我們的業務和財務表現產生不利影響。
2
目錄
第一部分——財務信息

項目 1. 財務報表
FORTINET，INC.
簡明合併資產負債表
（未經審計，數額爲百萬，除每股金額外）
 9月30日,
2024		2023年12月31日,
2023
資產
流動資產：
現金及現金等價物$2,489.3 $1,397.9 
短期投資1,162.4 1,021.5 
可變現股份49.0 21.0 
應收賬款淨額 1,044.1 1,402.0 
存貨354.3 484.8 
預付費用及其他流動資產121.5 101.1 
總流動資產5,220.6 4,428.3 
房地產和設備淨值1,273.4 1,044.4 
遞延簽約成本599.4 605.6 
遞延所得稅資產1,300.4 868.8 
商譽212.8 126.5 
其他無形資產淨值111.6 35.3 
其他資產133.8 150.0 
資產總計$8,852.0 $7,258.9 
負債和股東權益（赤字）
流動負債：
應付賬款$177.9 $204.3 
應計負債376.6 423.7 
應計工資和薪酬248.2 242.3 
遞延收入3,081.2 2,848.7 
總流動負債3,883.9 3,719.0 
遞延收入2,930.5 2,886.3 
長期債務993.8 992.3 
其他負債135.7 124.7 
總負債7,943.9 7,722.3 
承諾和或可能負債（注11）
股東權益 (赤字) ：
普通股，每股面值爲 $0.0001；0.001 面值——1,500.0 授權股份數; 765.7 和 761.0 於2024年9月30日和2023年12月31日分別發行和流通的股份數
0.8 0.8 
追加實收資本1,568.6 1,416.4 
累計其他綜合損失(18.0)(18.9)
累積赤字(643.3)(1,861.7)
股東權益（赤字）
908.1 (463.4)
負債和股東權益（赤字）總計
$8,852.0 $7,258.9 
請參閱附註的簡明合併財務報表。
3
目錄

FORTINET，INC.
簡明合併利潤表
（未經審計，數額爲百萬，除每股金額外）
 截至三個月截至九個月
9月30日,
2024		9月30日,
2023		9月30日,
2024		9月30日,
2023
營業收入：
產品$473.9 $465.9 $1,334.7 $1,439.2 
服務 1,034.2 868.7 2,961.0 2,450.5 
總營業收入1,508.1 1,334.6 4,295.7 3,889.7 
營業收入成本:
產品136.1 198.3 474.0 566.4 
服務 127.3 119.4 369.1 354.9 
總成本費用263.4 317.7 843.1 921.3 
毛利潤:
產品337.8 267.6 860.7 872.8 
服務 906.9 749.3 2,591.9 2,095.6 
總毛利潤1,244.7 1,016.9 3,452.6 2,968.4 
營業費用：
研發187.3 156.9 525.7 461.3 
銷售和營銷515.9 504.4 1,518.3 1,498.6 
一般和行政71.7 53.5 182.7 156.2 
知識產權事項的收益(1.1)(1.1)(3.4)(3.4)
總營業費用773.8 713.7 2,223.3 2,112.7 
營業收入470.9 303.2 1,229.3 855.7 
利息收入42.4 37.0 112.9 89.2 
利息支出(5.0)(5.4)(15.1)(15.6)
購股的收益
106.3 — 106.3 — 
其他收入（費用）-淨
11.8 (7.0)6.7 (11.2)
稅前收入和權益法投資的淨虧損
626.4 327.8 1,440.1 918.1 
所得稅計提爲(受益於)
81.2 (0.3)197.2 48.6 
權益法投資的淨虧損
(5.3)(5.2)(23.9)(32.6)
淨利潤
$539.9 $322.9 $1,219.0 $836.9 
每股淨利潤（註釋9）：
基本$0.71 $0.41 $1.60 $1.07 
攤薄$0.70 $0.41 $1.58 $1.05 
​
基本765.0 781.2 763.7 783.1 
攤薄771.9 791.2 770.8 793.5 
請參閱附註的簡明合併財務報表。
4
目錄
FORTINET，INC.
綜合收益簡明合併報表
(未經審計，單位：百萬)
 截至三個月截至九個月
 9月30日,
2024		9月30日,
2023		9月30日,
2024		9月30日,
2023
淨利潤
$539.9 $322.9 $1,219.0 $836.9 
其他全面收益（損失）：
匯兌收益變動9.1 (2.4)(0.3)(9.9)
 million and $2.5 1.6 1.6 7.5 
減少：與其他綜合收益（損失）相關的稅項撥備
0.6 0.4 0.4 1.7 
其他綜合收益（損失）
11.0 (1.2)0.9 (4.1)
綜合收益
$550.9 $321.7 $1,219.9 $832.8 
請參閱附註的簡明合併財務報表。
5
目錄
FORTINET，INC.
股東權益（赤字）基本彙總報表
(未經審計，單位：百萬)
截至2024年9月30日的三個月
 普通股額外
已付款
資本		累積
其他
綜合損失		累計赤字
股東權益總額
股票金額
餘額——2024 年 6 月 30 日
764.2 $0.8 $1,499.0 $(29.0)$(1,182.6)$288.2 
發行與股權激勵計劃相關的普通股——扣除預扣稅1.5 — 3.7 — — 3.7 
普通股的回購和退休
— — — — (0.6)(0.6)
股票薪酬支出— — 65.9 — — 65.9 
未實現的投資淨收益——扣除稅款
— — — 1.9 — 1.9 
外幣折算調整— — — 9.1 — 9.1 
淨收入— — — — 539.9 539.9 
餘額——2024 年 9 月 30 日
765.7 $0.8 $1,568.6 $(18.0)$(643.3)$908.1 
截至2023年9月30日的三個月
 普通股額外
已付款
資本		累積
其他
綜合損失		累計赤字
股東權益總額
股票金額
餘額 — 2023 年 6 月 30 日
785.6 $0.8 $1,375.9 $(23.1)$(1,032.4)$321.2 
發行與股權激勵計劃相關的普通股——扣除預扣稅1.1 — (25.1)— — (25.1)
普通股的回購和退休
(10.4)— (15.3)— (589.9)(605.2)
淨股票回購的消費稅
— — (2.8)— — (2.8)
股票薪酬支出— — 64.3 — — 64.3 
未實現的投資淨收益——扣除稅款
— — — 1.2 — 1.2 
外幣折算調整— — — (2.4)— (2.4)
淨收入
— — — — 322.9 322.9 
餘額——2023 年 9 月 30 日
776.3 $0.8 $1,397.0 $(24.3)$(1,299.4)$74.1 
請參閱附註的簡明合併財務報表。
6
目錄
截至2024年9月30日的九個月
普通股額外
已付款
資本		累積
其他
綜合損失		累計赤字總計
股東權益（赤字）
股票金額
餘額——2023 年 12 月 31 日
761.0 $0.8 $1,416.4 $(18.9)$(1,861.7)$(463.4)
發行與股權激勵計劃相關的普通股——扣除預扣稅4.7 — (39.9)— — (39.9)
普通股的回購和退休
— — — — (0.6)(0.6)
股票薪酬支出— — 192.1 — — 192.1 
未實現的投資淨收益——扣除稅款
— — — 1.2 — 1.2 
外幣折算調整— — — (0.3)— (0.3)
淨收入— — — — 1,219.0 1,219.0 
餘額——2024 年 9 月 30 日
765.7 $0.8 $1,568.6 $(18.0)$(643.3)$908.1 
截至2023年9月30日的九個月
普通股額外
已付款
資本		累積
其他
綜合損失		累計赤字總計
股東權益（赤字）
股票金額
餘額 — 2022 年 12 月 31 日
781.5 $0.8 $1,284.2 $(20.2)$(1,546.4)$(281.6)
發行與股權激勵計劃相關的普通股——扣除預扣稅5.2 — (54.7)— — (54.7)
普通股的回購和退休(10.4)— (15.3)— (589.9)(605.2)
淨股票回購的消費稅
— — (2.8)— — (2.8)
股票薪酬支出— — 185.6 — — 185.6 
未實現的投資淨收益——扣除稅款
— — — 5.8 — 5.8 
外幣折算調整— — — (9.9)— (9.9)
淨收入
— — — — 836.9 836.9 
餘額——2023 年 9 月 30 日
776.3 $0.8 $1,397.0 $(24.3)$(1,299.4)$74.1 
請參閱附註的簡明合併財務報表。
7
目錄
FORTINET，INC.
現金流量表簡明綜合報表
(未經審計，單位：百萬)
 九個月已結束
 九月三十日
2024		九月三十日
2023
來自經營活動的現金流：
淨收入
$1,219.0 $836.9 
爲使淨收入與經營活動提供的淨現金保持一致而進行的調整：
基於股票的薪酬192.1 185.6 
遞延合同成本的攤銷218.3 195.9 
折舊和攤銷87.6 83.2 
投資折扣的攤銷
(37.3)(16.1)
權益法投資的虧損
23.9 32.6 
特價購買的收益
(106.3)— 
其他 (3.3)13.7 
扣除業務合併影響後的運營資產和負債的變化：
應收賬款——淨額376.5 243.4 
庫存104.9 (231.0)
預付費用和其他流動資產(9.0)(29.3)
遞延合同費用(212.2)(247.5)
遞延所得稅資產(187.6)(221.7)
其他資產(8.8)13.5 
應付賬款(32.0)10.4 
應計負債(72.3)253.7 
應計工資和薪酬(7.9)(8.0)
其他負債0.5 (17.7)
遞延收入234.4 646.2 
經營活動提供的淨現金1,780.5 1,743.8 
來自投資活動的現金流：
購買投資(1,485.3)(1,327.6)
投資的銷售
— 4.0 
投資的到期日1,382.7 931.5 
購買財產和設備(281.3)(177.2)
收購對私人控股公司的投資
— (8.5)
與企業合併有關的付款，扣除獲得的現金
(247.0)— 
購買有價股權證券
(16.7)— 
其他0.1 0.1 
用於投資活動的淨現金
(647.5)(577.7)
來自融資活動的現金流量:
普通股的回購和退休
(0.6)(604.3)
普通股發行的收益39.7 36.0 
與股權獎勵淨股結算相關的已繳稅款(79.6)(90.8)
其他(0.8)(1.2)
用於融資活動的淨現金(41.3)(660.3)
匯率變動對現金和現金等價物的影響
(0.3)(1.9)
現金和現金等價物的淨增長
1,091.4 503.9 
現金和現金等價物——期初1,397.9 1,682.9 
現金和現金等價物——期末$2,489.3 $2,186.8 
現金流信息的補充披露：
爲所得稅支付的現金——淨額 $423.0 $84.9 
因獲得使用權資產而產生的經營租賃負債$29.4 $14.3 
非現金投資和融資活動：
將評估單位和設備從庫存轉移到財產和設備
$26.1 $24.5 
購買財產和設備的責任$29.1 $24.7 
回購普通股所產生的負債
$— $0.9 
請參閱附註的簡明合併財務報表。
8
目錄
FORTINET，INC.
附註-簡明合併財務報表註釋
(未經審計)

1.     重要會計政策摘要

報告的基礎及編制方法根據美國通用會計準則（「GAAP」）的公司彙編的未經審計的Fortinet, Inc.及其附屬公司的基本合併財務報表是爲了提供中期財務信息，並根據美國證券交易委員會（「SEC」）的規則規定和10-Q表格的指示編制的。因此，這些財務報表不包括GAAP爲完整財務報表所要求的所有信息和腳註，應與我們截至2023年12月31日的審計合併財務報表一起閱讀，這些財務報表包含在我們於2024年2月26日向SEC提交的10-k表格中。管理層認爲，已包括了所有調整（包括正常的重複調整），以便公正呈現。截至2024年9月30日的三個月和九個月的運營結果未必能體現出整個年度或未來期間預期的結果。截至2023年12月31日的基本合併資產負債表來源於截至2023年12月31日的審計合併財務報表。

簡明合併財務報表包括Fortinet及其子公司的賬目。我們對所有具有絕對控制金融利益的法人實體進行合併。合併中已消除所有公司間餘額和交易。

根據通用會計準則（GAAP），編制簡明合併財務報表需要管理層作出影響報表金額的估計和假設。實際結果可能與這些估計有實質差異。

截至2024年9月30日止的三個月和九個月期間，我們的重要會計政策沒有實質性變化，與我們在提交給美國證券交易委員會的2023財年10-K表格的年度報告中描述的重要會計政策相比。

最新會計準則尚不生效

分部報告

2023年11月，財務會計準則委員會（"FASB"）發佈了會計準則更新（"ASU"）2023-07，細分報告（主題280）：可報告細分信息披露的改進，旨在改善可報告細分的信息披露要求，主要通過增強對重大費用的披露。修訂自2024財年的年度報告生效，自2025財年起對我們的中期報告追溯適用，允許提前採納。我們目前正在評估該ASU以判斷其對我們披露的影響。

所得稅

在2023年12月，FASB發佈了ASU 2023-09，所得稅（主題740）：所得稅披露的改進，其中包含進一步增強所得稅披露的修訂，主要通過標準化和細分稅率調節類別以及各司法管轄區的所繳稅款。這些修訂適用於我們2025財政年度開始的年度期間，允許提前採用，並應按前瞻性應用。我們目前正在評估該ASU，以判斷其對我們披露的影響。



9
目錄
FORTINET，INC.
簡明財務報表附註—（續）

2.     收入確認。

收入分解

下表以主要產品和服務線爲基礎呈現了我們的收入細分（單位：百萬美元）：
截至三個月截至九個月
9月30日,
2024		9月30日,
2023		9月30日,
2024		9月30日,
2023
產品$473.9 $465.9 $1,334.7 $1,439.2 
服務：
安全訂閱595.8 494.6 1,691.4 1,373.6 
技術支持和其他438.4 374.1 1,269.6 1,076.9 
總服務收入1,034.2 868.7 2,961.0 2,450.5 
總營業收入$1,508.1 $1,334.6 $4,295.7 $3,889.7 

遞延收入

截至2024年9月30日的三個月和九個月期間，我們確認了$660.3百萬美元和$2.28十億的營業收入，該營業收入被包含在截至2023年12月31日的遞延收入餘額中。514.3百萬美元和$1.80截至2023年9月30日的三個月和九個月期間，我們確認了$

分配給未履行履約義務的剩餘業績的交易價格

截至2024年9月30日，分配給剩餘績效義務的交易價格總額爲$6.08 億美元，主要由延期安防訂閱和技術支持服務營業收入組成，將在未來期間確認。我們預計將確認約$3.12 xx年內預計將認定約$xx億美元的收入。 12以下表格總結了以公平價值爲基礎在公平價值層次結構內定期計量的資產類型（以千美元爲單位）:

應收賬款

交易應收賬款以發票金額記錄，扣除預期信用損失的準備金。我們以集體（彙總）方式衡量應收賬款的預期信用損失，將當前或逾期不超過的應收賬款歸爲一類， 60 預計信用損失是一般和行政費用在我們的綜合損益表中。 60 預計信用損失是一般和行政費用在我們的綜合損益表中。 60 天數逾期的應收賬款繼續展現與其他應收賬款相似的風險特徵。如果我們判斷它不符合，我們會單獨評估其預期信用損失。預期信用損失作爲一般和管理費用記錄在我們簡明的合併損益表中。

信貸損失準備金爲$4.7 百萬和$8.2截至2024年9月30日和2023年12月31日分別爲 百萬。在截至2024年和2023年9月30日的九個月內，準備金、覈銷和回收均不重要。

遞延合同成本
    
截至2024年9月30日和2023年9月30日的三個月期間，遞延合同成本的攤銷爲$73.6 百萬和$68.0 截至2024年9月30日和2023年9月30日的九個月期間，遞延合同成本的攤銷爲$218.3 百萬和$195.9 百萬，分別爲。

10
目錄
FortiNet, INC.
簡明合併財務報表附註—（續）

3.     金融工具與公允價值

可供出售的投資

以下表格總結了我們可售投資的情況（以百萬計）：
 
 2024年9月30日
 攤餘
成本		未實現
收益		未實現
虧損		公平
價值
美國政府及機構證券$536.7 $0.8 $— $537.5 
商業票據434.8 0.5 — 435.3 
企業債務證券123.5 0.3 — 123.8 
定期存款和定期存款證明65.7 0.1 — 65.8 
可供出售投資總額
$1,160.7 $1.7 $— $1,162.4 
 2023年12月31日
 攤餘
成本		未實現
收益		未實現
虧損		公平
價值
美國政府及機構證券$461.5 $0.2 $(0.3)$461.4 
商業票據401.7 0.2 (0.1)401.8 
企業債務證券70.0 0.1 (0.1)70.0 
定期存款和定期存款證88.2 0.1 — 88.3 
可供出售投資總額
$1,021.4 $0.6 $(0.5)$1,021.5 
以下表格顯示了我們的可供出售投資中處於持續未實現損失狀態的總未實現損失及相關公允價值（以百萬計）：
2024年9月30日
 少於12個月12個月或更長總計
公平
價值		未實現
虧損		公平
價值		未實現
虧損		公平
價值		未實現
虧損
美國政府及機構證券$40.2 $— $— $— $40.2 $— 
商業票據60.8 — — — 60.8 — 
企業債務證券15.8 — — — 15.8 — 
可供出售的投資總額
$116.8 $— $— $— $116.8 $— 

2023年12月31日
 少於12個月12個月或更長總計
 公平
價值		未實現
虧損		公平
價值		未實現
虧損		公平
價值		未實現
虧損
美國政府及機構證券$47.1 $— $11.7 $(0.3)$58.8 $(0.3)
商業票據200.8 (0.1)— — 200.8 (0.1)
企業債務證券21.8 — 26.9 (0.1)48.7 (0.1)
可供出售的投資總額
$269.7 $(0.1)$38.6 $(0.4)$308.3 $(0.5)

11
目錄
FortiNet, INC.
簡明合併財務報表附註—（續）

我們投資的合同到期日爲（以百萬計）：
 九月三十日
2024		12月31日
2023
一年內到期$1,162.4 $1,021.5 
在一到三年內到期— — 
總計$1,162.4 $1,021.5 

可供出售投資按公允價值報告，未實現的盈虧及相關稅務影響作爲股東權益（虧損）和綜合收益的單獨組成部分進行列示。我們並不打算賣出任何處於未實現虧損狀態的證券，並且不太可能在其攤銷成本基礎恢復之前被要求出售這些證券，這可能是在到期時。

在所呈現的期間內，可供出售投資的已實現收益和損失微不足道。

可交易股票證券

我們的可交易股權證券爲 $49.0 百萬和$21.0 百萬 截至2024年9月30日和2023年12月31日。可交易股權證券的公允價值變化記錄在合併簡報的其他收入（費用）—淨上 收益中。我們在 $11.1百萬和$11.2期間確認了一項 百萬的收益以及 截至2024年9月30日的九個月。 我們確認了一個 $2.3百萬和$5.7百萬的損失發生在 三個月和 截至2023年9月30日的九個月。

金融工具的公允價值

公允價值會計—我們應用以下公允價值等級框架來披露用於測量公允價值的輸入。這一等級框架將輸入分爲三個廣泛的層次：

一級—輸入是活躍市場中相同資產或負債的未調整報價。

第2級——輸入是活躍市場中類似資產和負債的報價，或通過市場證明直接或間接可觀察的資產或負債的輸入，持續覆蓋金融工具的整個期限。

第三級——基於我們自己假設的不可觀察輸入，用於按公允價值衡量資產和負債。這些輸入需要管理層進行重大判斷或估計。

我們使用活躍市場中相同資產的報價價格來評估貨幣市場基金、某些美國政府和機構證券以及可交易股票的公允價值。所有其他金融工具的公允價值基於活躍市場中類似資產的報價價格，或使用源自可觀察市場數據或得到確認的顯著輸入進行模型驅動的估值。

如果在活躍市場中可以獲得相同證券的報價，則我們將投資歸入第1級。

如果投資的估值是使用可觀察輸入（如報價市場價格、基準收益率、已報告交易、經紀商/交易商報價或具有合理價格透明度的其他定價源）進行模型驅動的估值，我們將這些項目歸類於第2級。投資由保管人持有，他們從第三方定價提供商獲取投資價格，該提供商在各種資產價格模型中採用標準輸入。

12
目錄
飛塔信息公司
關於簡明合併基本報表的附註—（續）

以公允價值計量的定期持有的資產

以下表格顯示了我們定期按公允價值計量的金融資產的公允價值（以百萬計）：
 2024年9月30日2023年12月31日
 合計
公平
價值		報價
價格在
活躍
市場
相同的
資產		顯著
其他
可觀察的
剩餘
輸入		顯著
其他
不可觀察
剩餘
輸入		合計
公平
價值		報價
價格在
活躍
市場中
相同的
資產		顯著
其他
可觀察的
剩餘
輸入		顯著
其他
不可觀察
剩餘
輸入
  (一級)（二級）(三級) (一級)（二級）(三級)
資產:
美國政府及機構證券$545.0 $530.2 $14.8 $— $501.4 $433.3 $68.1 $— 
商業票據473.0 — 473.0 — 472.2 — 472.2 — 
企業債務證券123.8 — 123.8 — 73.0 — 73.0 — 
定期存款和定期存款證明67.6 — 67.6 — 104.8 — 104.8 — 
貨幣市場基金256.0 256.0 — — 277.1 277.1 — — 
可交易股票49.0 49.0 — — 21.0 21.0 — — 
總計$1,514.4 $835.2 $679.2 $— $1,449.5 $731.4 $718.1 $— 
報告爲：
現金等價物$303.0 $407.0 
可交易股票49.0 21.0 
短期投資1,162.4 1,021.5 
總計$1,514.4 $1,449.5 

截至2024年9月30日的九個月及截至2023年12月31日的年度，公允價值層次的一級和二級之間沒有轉移。

4.     庫存

庫存淨額（扣除儲備後）爲（百萬）：
 九月三十日
2024		12月31日
2023
原材料$99.2 $92.1 
在製品5.4 7.7 
成品249.7 385.0 
庫存$354.3 $484.8 

過剩和過時庫存儲備爲$132.8百萬和$89.2截至2024年9月30日和2023年12月31日，分別爲百萬美元。與過剩和過時庫存相關的庫存減值爲$8.8百萬和$37.6截至2024年9月30日的三個月和九個月，分別爲百萬美元，截至2023年9月30日的三個月和九個月爲$10.0百萬和$22.3百萬美元。這些在合併的簡明損益表中列爲產品收入的成本。
13
目錄
飛塔信息公司
關於簡明合併基本報表的附註—（續）

5.     物業和設備—淨值

物業和設備——淨值（以百萬計）：
 
 九月三十日
2024		12月31日
2023
土地$462.6 $351.7 
建築物及改善738.4 595.5 
計算機設備和軟體278.7 261.1 
租賃改善65.5 61.4 
評估單位32.7 30.8 
傢具和固定裝置36.5 33.6 
在建工程72.5 63.3 
總物業及設備1,686.9 1,397.4 
減：累計折舊(413.5)(353.0)
物業及設備——淨值$1,273.4 $1,044.4 

在2024年前三個季度，我們在美國加利福尼亞州和加拿大阿爾伯塔省購買了一些房地產業，總購買價格爲$229.3百萬，主要用於研究和開發、倉儲、數據中心運營以及銷售和支持功能。這些購買按資產收購法進行覈算。分配給土地、建築物和改善及傢具的資產成本分別爲$111.0百萬，$117.4百萬，以及$0.9百萬，基於其相對公允價值。

折舊費用爲$24.5 百萬和 $23.9 截至2024年和2023年9月30日的三個月期間分別爲百萬。折舊費用爲$76.0 百萬和 $69.6 在截至2024年9月30日和2023年9月30日的九個月內分別爲百萬。

6.     對私營公司的投資

Linksys控股公司

在2021年，我們投資了$160.0百萬現金購買了私營公司Linksys Holdings, Inc.（「Linksys」）的A系列優先股，獲得了 50.8%的Linksys已發行股權的所有權。截至2024年9月30日和2023年12月31日，我們的所有權保持不變。Linksys爲消費者和小型企業市場提供路由器連接解決方案。

我們已得出結論，投資於Linksys本質上是一項普通股投資，並且我們並不持有對Linksys的絕對控制性財務利益，但我們能夠對Linksys的經營和財務政策施加重要影響。因此，我們決定採用權益法來覈算這項投資。我們以三個月的滯後數據錄入Linksys的財務結果，除非在此期間發生重大交易或事件，導致財務狀況或經營結果發生重大影響。我們確定我們的Linksys投資成本與Linksys淨資產的基礎權益之間存在差異。

由於存在減值因數，例如一系列經營損失，我們在2024年第三季度評估了我們的權益法投資是否存在臨時以外減值（「OTTI」）。在確定是否發生OTTI時，我們考慮了多種因素，包括Linksys的財務結果、經營歷史、我們持有投資直到其公允價值恢復的能力和意圖，與指導性上市公司的隱含營業收入估值倍數，折現現金流分析，Linksys達到里程碑的能力，以及任何顯著的運營和戰略變化。經過評估，我們確定截至2024年9月30日，並未發生額外的OTTI。然而，如果未來對上述因素的評估表明對Linksys的投資被認定爲臨時以外減值，我們可能需要在未來的報告期間確認減值損失。這樣的認定將基於當時的現行事實和情況，包括Linksys的結果和披露。

我們在Linksys財務結果中所承擔的損失，以及我們對基礎差異的攤銷份額，總計$5.2 百萬，在截至2024年9月30日的三個月內。我們在Linksys投資中的損失總計$23.4百萬，
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關於簡明合併基本報表的附註—（續）

截至2024年9月30日的九個月，包括我們對Linksys財務結果的按比例份額和$的基礎差異攤銷。15.4百萬，以及在2024年第二季度確認的OTTI費用$。8.0截至2023年9月30日的三個月和九個月，我們對Linksys財務結果的損失份額以及基礎差異的攤銷份額，總計$。5.2 百萬和$32.6 百萬。

這些損失和其他-than-temporary impairment（OTTI）費用在凝縮合並損益表的權益法投資損失中記錄。我們Linksys投資的賬面價值爲$18.8百萬和$42.2百萬美元截至2024年9月30日和2023年12月31日，投資被納入我們的凝縮合並資產負債表中的其他資產。

7.     BUSINESS COMBINATIONS

Lacework公司

我們在2024年8月1日關閉了對Lacework Inc.（「Lacework」）的收購，這是一傢俬營的數據驅動的雲安防公司，收購價爲$152.3 百萬現金。我們收購Lacework的目標是提供其雲原生應用保護平台（「CNAPP」）解決方案，作爲獨立產品以及與我們現有產品組合集成，形成一個全面的、由人工智能驅動的雲安防平台，提供單一供應商可用的服務，幫助客戶識別、優先排序和修復從代碼到雲的複雜雲原生基礎設施中的風險和威脅。

根據ASC 805的收購會計方法，初步總購買價格被分配給Lacework所收購的可識別有形和無形資產以及根據管理層的最佳估計和假設，以評估收購日期的公允價值的方式所承擔的負債。 以下表格提供了在收購日期所獲得的資產和所承擔的負債：
(單位：百萬)
預計公允價值
資產
現金
$6.2 
應收賬款—淨額14.8 
預付款項及其他流動資產
9.6 
遞延稅款資產
244.4 
其他無形資產61.3 
總資產$336.3 
負債
應付賬款
$2.5 
遞延收入
37.5 
應計工資和補償
12.0 
應計及其他流動負債
25.5 
其他負債
0.2 
總負債$77.7 
低價收購收益
$106.3 
淨購置對價$152.3 

收購淨資產的公允價值超過淨購入對價的部分在綜合損益表中的其他收入淨額中記錄爲盈利購置利得。這一盈利購置利得的發生主要是由於確認了遞延稅資產。這些遞延稅資產主要由收購前的聯邦淨經營損失結轉組成，能夠無限期結轉。

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關於簡明合併基本報表的附註—（續）

識別的無形資產及其預估的使用壽命（以年計）截至 2024年8月1日，如下所示 （以百萬計，年份除外）:

公允價值預計使用年限（年）
開發的科技 (1)
$39.5 5.0
客戶關係7.5 5.0
交易名稱4.3 5.0
訂單積壓10.0 3.0
已識別的無形資產總額：$61.3 
(1) 開發的科技是 Lacework的CNAPP解決方案。我們利用收益法中的免除特許權使用費法對開發的科技進行了評估。該方法反映了預計由開發的科技產生的現金流的現值。經濟使用壽命是根據科技週期以及預測期內的現金流確定的。

我們的估算和假設在測量期內可能會發生變化，測量期爲收購日期後的12個月內。此次收購的購買價格分配是初步編制的，隨着額外信息的披露，某些資產和負債的分配可能會發生變化。尚未最終確定的購買價格主要與 所得稅。

自收購之日起，即2024年8月1日起，被收購公司的經營成果已計入我們的簡明合併基本報表中。在2024年8月2日至2024年9月30日期間，Lacework貢獻了營業收入爲$12.9百萬，淨虧損爲$21.6與此次收購相關的成本不重要 並作爲一般及行政費用記錄.

下一步DLP控股有限公司

在2024年8月5日，我們完成了對Next DLP Holdings Limited（「Next DLP」）的收購，這是一傢俬營的內部風險和數據丟失防護（「DLP」）公司，金額約爲 $105.0 百萬 現金。我們收購Next DLP是爲了提升我們在獨立企業DLP市場的地位，並加強我們在終端和SASE集成DLP市場的領導地位。

此次收購按收購會計方法作爲業務組合進行覈算。總的初步購買價格根據管理層的最佳估算和假設，將其分配給Next DLP的可識別有形和無形資產以及所承擔的負債，基於其估計的公允價值，並以收購日期的公允價值爲基礎。 在總的初步購買價格中， $82.6 百萬 被分配給商譽， $13.5 百萬 被分配給開發的科技無形資產， $10.5 百萬 被分配到客戶關係無形資產，抵消了 $1.6 百萬 所假定的淨負債，主要包括遞延收入和遞延所得稅負債。與本次收購相關的商譽代表了我們預期通過進入現有業務內的市場和預期的運營協同效應創造的價值，商譽預計不能用於稅收抵扣。與本次收購相關的費用並不重大，記錄爲一般和行政開支。

我們的估計和假設在測量期間內可能會發生變化，該期間最長爲收購日期後的12個月。此次收購的購買價格分配是按初步基礎準備的，隨着額外信息的獲得，某些資產和負債的分配可能會發生變化。購買價格中還未最終確定的主要領域與 所得稅以及已收購資產和承擔負債的評估相關。

形式財務信息

以下未經審計的備考財務信息展示了飛塔信息公司、Lacework和Next DLP的合併營業結果，假設Lacework和Next DLP於2023年1月1日營業開始時已被收購。未經審計的備考財務信息僅供參考，並不一定反映如果收購在2023年1月1日營業開始時發生，我們合併業務的綜合營業結果，或我們未來合併業務的運營結果。
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關於簡明合併基本報表的附註—（續）

以下未經審計的所有時期的財務信息，包括購買會計調整，用於 amortization 的獲得無形資產，洽購交易的收益及各種相關的稅務影響（以百萬爲單位）：

截至三個月截至九個月
九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
未經審計的合併收入數
$1,517.8 $1,358.9 $4,357.4 $3,964.2 
表面凈利潤
$349.6 $267.0 $928.7 $758.3 

8.     商譽和其他無形資產—淨額

商譽

下表展示了商譽賬面價值的變化（單位：百萬）：
金額
餘額——2023年12月31日
$126.5 
因業務合併而增加的項目
86.5 
外幣翻譯調整(0.2)
餘額——2024年9月30日
$212.8 

截至2024年11月14日，註冊人的普通股總共有 無 截至2024年9月30日的九個月內或之前期間的商譽減值。

其他無形資產—淨值

以下表格展示了其他無形資產——淨額（以百萬計，除年份外）：
2024年9月30日
 加權平均使用壽命（年）總計累計攤銷淨
其他無形資產—淨值：
有限壽命無形資產：
發達的技術4.4$134.4 $68.5 $65.9 
客戶關係5.849.0 20.7 28.3 
交易名稱7.79.2 1.6 7.6 
訂單積壓2.413.9 4.1 9.8 
總其他無形資產—淨值$206.5 $94.9 $111.6 
2023年12月31日
 加權平均使用壽命（年）總計累計攤銷淨
其他無形資產—淨值：
有限壽命無形資產：
發達的技術4.4$79.4 $60.6 $18.8 
客戶關係7.130.4 17.7 12.7 
交易名稱10.05.0 1.2 3.8 
訂單積壓1.03.9 3.9 — 
總其他無形資產—淨值$118.7 $83.4 $35.3 

攤銷費用爲$5.3 百萬和$4.4 截至2024年和2023年9月30日的三個月內，金額爲百萬美元。攤銷費用爲$11.6 百萬和$13.6 在截至2024年9月30日和2023年9月30日的九個月內分別爲百萬。
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關於簡明合併基本報表的附註—（續）


下表總結了有限壽命無形資產——淨額的預計未來攤銷費用（以百萬計）：
 金額
年份：
2024年（2024年的剩餘部分）
$9.6 
202534.2 
202623.6 
202719.0 
202813.3 
之後11.9 
總計$111.6 

9.     每股凈利潤

基本每股凈利潤是通過將凈利潤除以期間內流通在外的普通股的加權平均數量來計算的。稀釋每股凈利潤是通過將凈利潤除以期間內流通在外的普通股的加權平均數量，加上限制性股票單位（「RSUs」）、期權和表現股票單位（「PSUs」）的稀釋影響來計算的。稀釋股數是通過應用庫藏股法來確定的。

基本和稀釋每股凈利潤計算中使用的分子和分母的 reconciliation 是（以百萬計，除每股金額外）：
 截至三個月截至九個月
 九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
分子:
凈利潤
$539.9 $322.9 $1,219.0 $836.9 
分母:
基本股份：
加權平均普通股基本流通股765.0 781.2 763.7 783.1 
攤薄股份：
加權平均普通股基本流通股765.0 781.2 763.7 783.1 
潛在稀釋證券的影響：
限制性股票單位 2.0 3.5 2.1 3.8 
股票期權4.4 6.2 4.7 6.4 
PSU0.5 0.3 0.3 0.2 
計算稀釋後每股凈利潤所用的加權平均股數
771.9 791.2 770.8 793.5 
每股凈利潤
基本$0.71 $0.41 $1.60 $1.07 
稀釋$0.70 $0.41 $1.58 $1.05 

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FORTINET, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):
 Three Months EndedNine Months Ended
 September 30,
2024		September 30,
2023		September 30,
2024		September 30,
2023
RSUs 0.4 — 0.2 0.6 
Stock options3.1 3.0 3.3 2.8 
PSUs— — 0.1 — 
Total 3.5 3.0 3.5 3.4 

10.     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. We may redeem the 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 2026 Senior Notes on or after February 15, 2026, or 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. As of September 30, 2024 and December 31, 2023, the Senior Notes were recorded as long-term debt, 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):
 MaturityCoupon RateEffective Interest RateSeptember 30,
2024		December 31,
2023
Debt
2026 Senior NotesMarch 20261.0%1.3%$500.0 $500.0 
2031 Senior NotesMarch 20312.2%2.3%500.0 500.0 
Total debt1,000.0 1,000.0 
Less: Unamortized discount and debt issuance costs6.2 7.7 
Total long-term debt$993.8 $992.3 

As of September 30, 2024 and December 31, 2023, we accrued interest payable of $0.7 million and $4.7 million, respectively, and there are no financial covenants with which we must comply. During the three months ended September 30, 2024 and 2023, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the nine months ended September 30, 2024 and 2023, we recorded $13.5 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the nine months ended September 30, 2024 and 2023, as the costs that qualified for capitalization were not material.

The total estimated fair value of the outstanding Senior Notes was approximately $912.8 million, including accrued and unpaid interest, as of September 30, 2024. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.

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FORTINET, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.     COMMITMENTS AND CONTINGENCIES

下表總結了截至2024年9月30日我們的庫存採購承諾（以百萬計）：
總計2024
之後
庫存採購承諾$550.0 $393.7 $156.3 

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 September 30, 2024, we had $550.0 million 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, consistent with the valuation of our excess and obsolete inventory. As of September 30, 2024 and December 31, 2023, the liability for these inventory purchase commitments was $76.3 million and $84.7 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets. The cost of product revenue related to such liabilities was a $27.4 million benefit and a $36.9 million cost during the three months ended September 30, 2024 and 2023, respectively. The cost of product revenue related to such accrued liability for inventory purchase commitments was $11.2 million and $59.3 million during the nine months ended September 30, 2024 and 2023, respectively.

Other Contractual Commitments and Open Purchase Orders—In addition to commitments with contract manufacturers, we have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. A significant portion of our reported purchase commitments consist of non-cancelable commitments. In certain instances, contractual commitments allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed. As of September 30, 2024, we had $116.5 million in other contractual commitments having a remaining term in excess of one year that are non-cancelable.

As of September 30, 2024, we had $83.1 million in contractual commitments related to payments for operating leases.

Litigation—We are involved in disputes, litigation, and other legal actions. For lawsuits where we are the defendant, we are in the process of defending these litigation matters, and while there can be no assurances and the outcome of certain of these matters is currently not determinable and not predictable, we currently are unaware of any existing claims or proceedings that we believe are likely to have a material adverse effect on our financial position. There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation fees, costs and substantial settlement charges, and possibly subject us to damages and other penalties. In addition, the resolution of any intellectual property (“IP”) litigation may require us to make royalty payments, which could adversely affect our gross margins in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. Litigation is unpredictable and the actual liability in any such matters may be materially different from our current estimates, which could result in the need to adjust any accrued liability and record additional expenses. We accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. These accruals are generally based on a range of possible outcomes that require significant management judgement. If no amount within a range is a better estimate than any other, we accrue the minimum amount. Litigation loss contingency accruals associated with outstanding cases were not material as of September 30, 2024, and December 31, 2023.

On March 21, 2019, we were sued by Alorica Inc. (“Alorica”) in Santa Clara County Superior Court in California. Alorica alleged breach of warranty and misrepresentation claims, which we denied. After trial, a jury returned a verdict fully in favor of us and against Alorica on October 4, 2024. The time for Alorica to appeal the verdict has not yet expired. We believe that the ultimate outcome of this matter will not materially impact our financial position, results of operations or cash flows. However, if Alorica appeals, any legal proceedings would be subject to inherent uncertainties, and a future unfavorable ruling could occur. No loss accrual had been recorded as of September 30, 2024 or December 31, 2023 related to this litigation.

Indemnification and Other Matters—We enter into indemnification provisions in the ordinary course of business with other companies such as partners, customers, and vendors, where we agree to indemnify, hold harmless, and reimburse the
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飛塔信息公司
關於簡明合併基本報表的附註—（續）

對於因我們活動而導致的被 indemnified party 某些損失，包括對抗聲稱產品缺陷、違反聲明或契約以及侵犯某些知識產權（可能包括專利、版權、商標或商業祕密）的第三方索賠的辯護， indemnified party 有權獲得賠償，並支付此類索賠所作出的判決。在某些合同中，我們在這些賠償條款下的責任受限於合同條款定義的特定限額，例如客戶在協議下支付的總金額。然而，某些協議包括契約、罰款和賠償條款，包括並超出對第三方知識產權侵權索賠的賠償，這可能使我們面臨超過協議下獲得的金額的損失，以及在某些情況下面臨未在合同中限制的潛在責任。儘管不時會對我們提出賠償索賠，目前也有待處理的賠償索賠，但迄今爲止，根據此類賠償條款尚未作出實質性裁決。

Periodically we, like other security companies and companies in other industries, have experienced, and may experience in the future, cybersecurity threats, malicious activity directed against our information technology infrastructure and unauthorized attempts to gain access to our and our customers’ sensitive information and systems. For example, in the third quarter of 2024, we discovered that an individual gained unauthorized access to a limited number of files stored on Fortinet’s instance of a third-party cloud-based shared file drive, which included limited data related to a small number of Fortinet customers. We have completed our investigation of this incident and we do not currently believe that it had a material impact on our business or that of any of our customers. We are currently not aware of any significant claims arising from this matter.

12.     EQUITY PLANS AND SHARE REPURCHASE PROGRAM

Stock-Based Compensation Plans

我們維護修訂後的飛塔信息公司2009年股權激勵計劃（「修訂計劃」），根據該計劃我們已授予限制性股票單位（RSUs）、股票期權和業績股票單位（PSUs）。截至2024年9月30日，總共有 50.8 百萬普通股可根據修訂計劃授予。

限制性股票單位

下表總結了所提供的各個期間內RSU的活動及相關信息（以百萬爲單位，除每股金額外）：
 未限制股票單位餘額
 股票數量每股加權平均授予日公允價值
餘額——2023年12月31日
9.1 $53.61 
授予4.0 67.49 
被註銷(0.7)58.64 
Vested(3.6)49.14 
餘額—2024年9月30日
8.8 $61.38 

股票補償費用按每個限制性股票單位的歸屬期以直線法確認。截至2024年9月30日，尚未確認的與未歸屬限制性股票單位相關的總補償費用爲$483.5 百萬，剩餘的加權平均歸屬期爲 2.7 年。

RSUs settle into shares of common stock upon vesting. Upon the vesting of the RSUs, we net-settle the RSUs and withhold a portion of the shares to satisfy employee withholding tax requirements. The payment of the withheld taxes to the tax authorities is reflected as a financing activity within the condensed consolidated statements of cash flows.

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FORTINET, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following summarizes the number and value of the shares withheld for employee taxes (in millions):
Three Months EndedNine Months Ended
September 30,
2024		September 30,
2023		September 30,
2024		September 30,
2023
Shares withheld for taxes0.3 0.4 1.2 1.5 
Amount withheld for taxes$16.5 $31.0 $79.6 $90.7 

Employee Stock Options

The following table summarizes the weighted-average assumptions relating to our employee stock options: 
 Three Months EndedNine Months Ended
 September 30,
2024		September 30,
2023		September 30,
2024		September 30,
2023
Expected term in years4.54.44.54.4
Volatility41.7 %42.8 %42.8 %42.0 %
Risk-free interest rate3.7 %4.5 %4.3 %4.2 %
Dividend rate— %— %— %— %

The following table summarizes the stock option activity and related information for the periods presented below (in millions, except exercise prices and contractual life):
 Options Outstanding
 Number
of Shares		Weighted-
Average
Exercise
Price 		Weighted-
Average
Remaining
Contractual
Life (Years)		Aggregate
Intrinsic
Value
Balance—December 31, 2023
11.2 $31.14 3.3$315.8 
Granted0.7 65.94 
Forfeited(0.2)54.28 
Exercised(2.2)17.71 
Balance—September 30, 2024
9.5 $36.56 
Options vested and expected to vest—September 30, 2024
9.5 $36.56 3.2$391.3 
Options exercisable—September 30, 2024
7.3 $29.39 2.5$350.3 

The aggregate intrinsic value represents the difference between the exercise price of stock options and the quoted market price of our common stock for all in-the-money stock options. Stock compensation expense is recognized on a straight-line basis over the vesting period of each stock option. As of September 30, 2024, total compensation expense related to unvested stock options granted to employees but not yet recognized was $49.9 million, with a weighted-average remaining vesting period of 2.4 years.

Additional information related to our stock options is summarized below (in millions, except per share amounts):
Three Months EndedNine Months Ended
September 30,
2024		September 30,
2023		September 30,
2024		September 30,
2023
Weighted-average fair value per share granted $29.86 $23.67 $27.05 $24.37 
Intrinsic value of options exercised $42.6 $13.9 $112.5 $110.9 
Fair value of options vested$6.4 $6.1 $25.0 $23.5 

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FORTINET, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Market/Performance-Based PSUs

We granted 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 performance period, 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- and four-year service periods, respectively.

The following table summarizes the weighted-average assumptions relating to our PSUs:
 截至三個月截至九個月
 九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
預期期限（年）2.72.72.72.7
波動性45.4 %47.5 %45.4 %47.5 %
無風險利率4.5 %4.6 %4.5 %4.6 %
股息率— %— %— %— %

我們授予了大約 0.3百萬股PSU獎勵，帶權平均授予日期公允價值爲$97.40 每股，期間爲 百萬的收益以及 截至2024年9月30日的九個月期間。我們授予了大約 0.3百萬股PSU獎勵，帶權平均授予日期公允價值爲$90.96 每股，期間爲 百萬的收益以及 截至2023年9月30日的九個月。這些獎勵的授予日期公平價值是使用蒙特卡洛模擬定價模型確定的。大約 0.1百萬股PSU獎勵在2024年第一季度歸屬。 否 PSU獎勵在2024年第二和第三季度或截至2023年9月30日的九個月歸屬。大約 0.1百萬股PSU獎勵在截至2024年9月30日的三個月和九個月期間被註銷。 無 這些PSU獎勵在截至2023年9月30日的九個月期間被註銷。

截至2024年9月30日，已授予某些高管但尚未確認的未歸屬PSU相關的總補償費用爲$27.0百萬美元。這項費用預計將在加權平均歸屬期內按分級歸屬方法攤銷。 2.3 年。

基於股票的薪酬費用

與股票相關的薪酬費用，包括與被歸類爲負債的獎勵相關的股票薪酬費用，包含在成本和費用中（以百萬計）：
 截至三個月截至九個月
 九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
產品營業成本$0.5 $0.4 $1.4 $1.3 
服務成本6.3 6.1 19.0 17.2 
研究和開發21.9 20.0 63.0 57.0 
銷售和市場營銷27.0 28.5 79.6 84.1 
一般管理費用10.7 9.9 30.7 28.0 
股票薪酬總費用$66.4 $64.9 $193.7 $187.6 

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目錄
飛塔信息公司
關於簡明合併基本報表的附註—（續）

下表總結了以股票爲基礎的補償費用，包括與歸類爲負債的獎勵相關的股票補償費用，按獎勵類型（以百萬計）：
 截至三個月截至九個月
 九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
RSUs$54.8 $54.2 $160.8 $158.4 
股票期權6.9 7.5 21.3 21.5 
PSU4.7 3.2 11.6 7.7 
股票薪酬總費用$66.4 $64.9 $193.7 $187.6 

與在簡明合併損益表中確認的基於股票的補償相關的所得稅總收益（以百萬計）：
截至三個月截至九個月
九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
與股票基薪酬相關的所得稅福利 $14.7 $14.3 $42.9 $41.4 

分享回購計劃

在2024年1月，我們的董事會批准將股票回購計劃中授權的回購金額增加到$500.0百萬，從而將總授權回購金額提高到$7.25十億股的流通普通股。2024年2月，我們的董事會批准將回購計劃延長至2025年2月28日。我們可能會不時在私下協商的交易或公開市場交易中進行股票回購。回購計劃並不要求我們購買最低數量的股票，並且可以在任何時候暫停、修改或終止，而無需提前通知。

截至2024年9月30日的三個月和九個月期間，我們在公開市場交易中根據回購計劃回購了少於 0.1萬股普通股，平均回購價格爲$54.99 每股，累計購買價格爲$0.6 百萬。截至2024年9月30日，$1.03 十億仍可用於根據回購計劃進行未來的股票回購。有關2024年10月批准$1.0十億增加授權股票回購金額以及將回購計劃延長至2026年2月28日的信息，請參見第16項註釋，後續事件。

13.    所得稅

我們的有效稅率爲 13%截至2024年9月30日的三個月，相比之下有效稅率爲0% 與去年同期相比，我們的有效稅率爲 14截至2024年9月30日的九個月有效稅率爲 5與去年同期相比， 2023 截至2024年9月30日的三個月的稅率包括美國聯邦和州稅、預扣稅及外稅，總額爲 $123.6 百萬 和 $50.2 百萬分別。截止2024年9月30日的三個月稅率受了一項稅收優惠的影響， $33.1 百萬 來自於外國衍生無形收入（「FDII」）扣除，以及來自股票薪酬費用的過剩稅收優惠 $9.3百萬. 稅率 截止2023年9月30日的三個月稅率受了一項稅收優惠的影響 $41.9百萬 來自FDII扣除的股票報酬費用的額外稅收福利 $8.6百萬。

截至2024年9月30日的九個月的稅率以及 2023 由美國聯邦和州稅、預扣稅和外國稅組成，總額爲 $315.0百萬和美元220.9分別爲百萬。截至2024年9月30日的九個月的稅率受到美元稅收優惠的影響84.0來自外國直接投資扣除額的百萬美元，以及來自股票薪酬支出的超額稅收優惠33.8百萬。截至2023年9月30日的九個月的稅率受到美元稅收優惠的影響105.9百萬美元來自外國直接投資扣除，股票薪酬支出產生的超額稅收優惠爲美元48.3百萬，以及釋放的儲備金18.1百萬美元，用於不確定的稅收狀況及其應計利息 到期 直到時效到期。

截至2024年9月30日和2023年12月31日，未確認的稅收利益爲 $72.3 百萬 和 $65.8 百萬，分別。如果確認， $61.0 百萬 截至2024年9月30日的未確認稅收利益將對我們的
24
目錄
飛塔信息公司
關於簡明合併基本報表的附註—（續）

有效稅率。我們的政策是將與未確認稅收收益相關的應計利息和罰款納入所得稅費用。截止到2024年9月30日和2023年12月31日，應計利息和罰款爲$8.4 百萬和$6.4 百萬，分別。我們合理預期，在接下來的12個月內，由於各個司法管轄區的時效性限制，我們的未確認稅收收益總額可能會減少達$1.4 百萬。如果確認，這一減少將對我們的有效稅率產生積極影響，並將被確認爲額外的稅收收益。

截至2024年9月30日，我們的遞延稅務資產爲$1.30十億，較上一個季度增加$301.9百萬。這一增長主要是由於收購Lacework，其開盤資產負債表中包含遞延稅務資產$244.4百萬，主要與收購前的聯邦淨營業損失結轉有關，且具無限期結轉期限。

我們在美國聯邦管轄區和各個美國州及外國管轄區提交所得稅申報表。一般來說，我們不再受2015年前美國聯邦所得稅當局的審查。對於2010年前的稅年，我們不再受美國州和外國所得稅當局的審查。我們目前在英國、加拿大以及其他幾個外國管轄區正在進行稅務審計。這些審計的重點是公司間利潤分配。

2022年1月4日，美國財政部發佈了另一批關於外國稅收抵免的最終法規。這些最終法規對外國稅收必須滿足的新要求，以便可以抵扣美國所得稅，通常適用於2021年12月28日或之後開始的稅務年度。2022年7月26日，美國財政部發佈了對最終法規的更正。2023年7月21日，國稅局發佈了一份通知，暫停了與外國稅收抵免相關的最終法規中重要部分的應用，適用於2022年和2023年的稅務年度。2023年7月發佈的通知有利於我們在美國申報某些由特定外國法域徵收的外國稅收抵免。2023年12月11日，國稅局發佈了一份通知，延長了對最終法規中重要部分的暫停，直到2023年12月31日之後，直至發佈進一步的指導。

在2021年12月，經合組織（「OECD」）制定了新的全球最低稅收框架（「BEPS支柱二」）的模型規則，世界各地的政府已經實施或正在實施相關立法。OECD繼續發佈關於這些規則的額外指導。根據已生效的法律，BEPS支柱二對截至2024年9月30日的九個月期間我們的有效稅率或現金流沒有影響。我們將繼續評估這些稅法變更對未來報告期的影響。

14.     確定性貢獻計劃

我們的401(k)計劃下的稅前儲蓄計劃允許符合條件的美國員工貢獻一部分稅前或稅後收入。在加拿大，我們有一個團體註冊養老金儲蓄計劃（「RRSP」），允許參與者進行稅前貢獻。我們的董事會批准了 50%的匹配貢獻，員工貢獻最高達到 4%的每位員工的合格收入。我們在2024年9月30日止的三個月內對我們的401(k)計劃和RRSP的匹配貢獻分別爲 2023 爲 $4.6 百萬和$3.8 百萬美元。我們在2024年9月30日止的九個月內對我們的401(k)計劃和RRSP的匹配貢獻分別爲 2023年的匹配貢獻爲$15.2百萬和$13.9百萬，分別爲。

15.     分部門信息

運營分部被定義爲企業中的元件，關於這些元件有獨立的財務信息可供評估，該信息由首席運營決策者定期評估，以決定如何分配資源和評估績效。我們的首席運營決策者是我們的首席執行官。我們的首席執行官審查以合併方式呈現的財務信息，並附有有關地域板塊營業收入的信息，以便進行資源分配和評估財務績效。我們有 一個 業務活動，並且有 無 分部經理對低於合併單元級別的運營、運營結果和計劃負責。因此，我們已確定我們有 一個 運營分部，因此， 一個 可報告的分部。

25

按地域板塊劃分的營業收入基於我們客戶的賬單地址。以下表格列出了各地域板塊的營業收入及淨值設備（單位：百萬）。
截至三個月截至九個月
營業收入九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
美洲：
美國$455.1 $400.8 $1,297.9 $1,189.6 
其他美洲168.9 144.8 478.4 416.5 
美洲總計624.0 545.6 1,776.3 1,606.1 
歐洲、中東和非洲（「EMEA」）599.3 512.2 1,703.9 1,497.3 
亞太（「APAC」）284.8 276.8 815.5 786.3 
總營業收入$1,508.1 $1,334.6 $4,295.7 $3,889.7 

物業及設備—淨
九月三十日
2024		12月31日
2023
美洲：
美國$921.6 $701.6 
加拿大213.7 212.8 
拉丁美洲4.0 2.3 
美洲總計1,139.3 916.7 
歐洲、中東和非洲70.9 65.5 
亞太63.2 62.2 
總資產和設備—淨值$1,273.4 $1,044.4 

以下分銷商的營業收入佔我們總營業收入的10%或以上：
 截至三個月截至九個月
九月三十日
2024		九月三十日
2023		九月三十日
2024		九月三十日
2023
分銷商A27 %28 %29 %28 %
分銷商B15 %15 %15 %15 %
經銷商C12 %13 %13 %14 %


以下經銷商佔淨應收賬款的10%或更多：
九月三十日
2024		12月31日
2023
分銷商A27 %33 %
分銷商B13 %14 %
分銷商C10 %10 %

26
目錄
飛塔信息公司
關於簡明合併基本報表的附註—（續）

16.     後續事件

房地產購買

在2024年11月，我們以現金購買了位於喬治亞州亞特蘭大的房地產，價格爲$15.8 百萬。

股份回購計劃

在2024年10月，我們的董事會批准了增加至$1.0十億美元的股份回購授權金額，並將回購計劃的期限延長至2026年2月28日，授權的回購總額達到$8.25十億美元的我們未償還的普通股，直到2026年2月28日。截止到2024年11月8日，約有$2.03十億美元可用於未來的股份回購。
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項目2.     管理層的財務狀況和經營成果的討論與分析

除了歷史信息之外，本季度報告（表格10-Q）包含根據1933年證券法第27A節及1934年證券交易法第21E節（「交易所法」）的定義的前瞻性陳述。這些陳述包括但不限於關於我們預期的陳述：

•持續增長和市場份額的提升;

•某些產品和服務類別的銷售在年份之間以及季度之間的變動性；

•預期某些產品和服務的銷售影響；

•在許多地區，通貨膨脹的增加或減少、滯漲，以及利率的變化和匯率及貨幣法規的變化;

•我們市場中的競爭；

•宏觀經濟、地緣政治因素以及其他對我們製造業或銷售的干擾，包括政府更替、公共健康問題、戰爭、自然災害和經濟增長；

•政府監管、關稅和其他政策;

•長期增長和運營槓桿的驅動因素，例如我們產品和服務的定價、銷售效率、銷售渠道和產能、功能性、價值以及我們服務產品中的科技改進。

•通過渠道合作伙伴向企業、服務提供商和政府組織擴大我們的解決方案銷售，我們執行這些銷售的能力以及爲所有細分市場提供解決方案的複雜性（包括向大型企業銷售時增加的競爭和時間的不確定性），這些組織的銷售對我們長期增長、擴展和經營結果的影響，以及我們銷售組織的有效性；

•我們成功預測市場變化的能力，包括與基於雲的解決方案相關的那些變化，以及賣出、壓力位並滿足與基於雲的解決方案相關的服務水平協議；

•安全網絡市場的增長預期;

•供應鏈限制、組件可用性和其他因素影響我們的製造業能力、交付、成本和庫存管理；

•未來需求和目標庫存水平的預測，包括市場驅動因素和需求的變化；

•當前或之前季度的積壓效應，包括其對當季賬單和營業收入增長的影響；

•我們招聘合格且有效的銷售、壓力位和工程員工的能力；

•與收購和對私營及上市公司的股權投資相關的風險和期望，包括與市場推廣計劃、產品計劃、這些公司的員工、控制和流程以及所收購的科技相關的整合問題，以及這些收購和股權投資對我們財務業績的負面影響風險;

•營業收入、成本和毛利率的趨勢，包括對產品收入、服務收入增長和庫存相關費用的預期；
 
•我們的運營費用趨勢，包括銷售和營銷費用、研發費用、管理費用，以及對這些費用的預期；

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目錄
•預計加快我們分佈點（「PoP」）部署的計劃和策略的影響；

•預計我們在2024年剩餘時間內的運營費用將以絕對金額逐年增加；

•對未來幾年行使期權所產生的收益的預期將受到限制性股票單位和業績股票單位相較於授予的期權增多的負面影響，或是我們的股票價格下跌導致的。

•不確定的稅收利益以及我們有效的國內和 全球貨幣 稅率，稅法解釋或變更的影響，以及稅款支付的時機；

•關於房地產業資產、收購和開發的支出預期，包括數據中心和接入點、辦公樓和倉庫投資，以及其他資本支出，對自由現金流和開支的影響;

•2024年資本支出區間的估算;

•訴訟中的預期結果和責任；

•我們關於股份回購的意圖，以及我們現有現金、現金等價物和投資是否足夠滿足我們的現金需求，包括我們未來至少12個月的債務服務要求；

•關於我們未來運營、財務控制項和前景及業務策略的其他聲明；以及

•新會計準則的採用與影響。

這些前瞻性陳述受到某些風險和不確定性的影響，這可能導致我們的實際結果與前瞻性陳述中反映的結果有重大差異。可能導致或促成這些差異的因素包括但不限於在本季度報告（表格10-Q）中討論的因素，特別是在該季度報告（表格10-Q）第二部分，項目1A下的「風險因素」標題下討論的風險，以及我們向美國證券交易委員會提交的其他文件中討論的風險。我們不承擔修訂這些前瞻性陳述或任何其他前瞻性陳述的結果的義務，並明確聲明不承擔公開發佈這些修訂結果的義務。考慮到這些風險和不確定性，我們提醒讀者不要對這些前瞻性陳述寄予過度信任。

業務概況

飛塔信息是網絡安全領域及網絡與安防融合的領導者。我們的使命是保護人、設備和數據的安全。我們的集成平台——飛塔信息安全架構，涵蓋了安全網絡、統一的SASE以及基於人工智能的安全操作。截至2024年9月30日，我們的終端客戶遍佈100多個國家，包括金融服務、零售、醫療保健和運營技術等行業的企業，通信和安防服務提供商，以及政府組織。目前，我們的客戶中約有77%的《財富》100公司和約71%的全球2000公司。作爲一家總部位於加利福尼亞州陽光谷的全球公司，我們的研究與開發主要集中在美國和加拿大，支持和卓越中心遍佈全球。截至2024年9月30日，我們持有1,027項美國專利和1,371項全球專利，並在超過130份企業分析師報告中獲得認可，展現出我們在網絡安全和網絡產品方面的願景與執行力。

•安全網絡—我們的安全網絡解決方案專注於通過飛塔信息操作系統（FortiOS）實現網絡與安防的融合，飛塔信息操作系統是我們飛塔信息安全架構平台的基礎，支持超過30項功能，可以通過物理、虛擬、雲端或Saas-雲計算解決方案提供。當通過我們的網絡防火牆設備提供時，功能通過我們的專有ASIC科技加速。這些專有ASIC使我們的系統能夠擴展，運行多個高性能的應用程序，降低能耗，並執行更多處理器密集型操作，例如檢查加密流量，包括流媒體視頻。飛塔信息的網絡防火牆產品包括FortiGate IDC概念、防火牆、超大規模和分佈式防火牆，以及加密應用程序（SSL檢查、虛擬私人網絡和IPsec連接）。我們將網絡與安全融合的能力也使以太網成爲一個擴展。
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通過飛塔信息和飛塔連接來增強我們客戶的安防基礎設施。我們的無線局域網解決方案利用安全網絡爲企業局域網邊緣提供安全的無線訪問。飛塔擴展器保護5G概念/LTE和遠程以太網擴展器，以連接和保護任何分支環境。飛塔信息的安全連接解決方案包括飛塔信息安全以太網交換機、飛塔AP無線局域網接入點和飛塔擴展器5G連接網關。

•統一安全訪問服務邊緣（SASE）隨着應用程序遷移至雲端，以及遠程工作已成爲常態，雲交付能夠在任何雲上安全地訪問應用程序。飛塔信息的統一SASE解決方案包括行業領先的單廠商SASE解決方案，涵蓋防火牆、SD-WAN、安全網頁網關、雲訪問服務代理、數據丟失防護（DLP）和零信任網絡訪問。飛塔信息是少數能夠在安全SD-WAN和SSE之間提供一致的融合和人工智能驅動安全的廠商之一，以實現獨特的以云爲中心的單廠商SASE框架，由FortiOS提供支持。基於這一點，飛塔信息在支持客戶從SD-WAN過渡到單廠商SASE平台方面處於良好位置。此外，飛塔信息還提供全套雲安全產品，使客戶能夠從代碼到雲保護其應用程序，包括網頁應用防火牆、虛擬化防火牆和雲原生防火牆等其他產品。

•人工智能驅動的安防操作（SecOps）—飛塔信息的人工智能驅動安防操作組合提供了廣泛的網絡安全概念解決方案，能夠識別、保護、檢測、響應及從網絡威脅中恢復，這些都緊密集成在飛塔信息的安防 Fabric 中。飛塔信息的SecOps解決方案包括FortiAnalyzer， FortiSIEm安全信息和事件管理，FortiSOAR安全編排、自動化和響應，SOC分析和自動化，FortiEDR端點檢測和響應，FortiXDR擴展檢測和響應，FortiMDR管理檢測和響應服務，FortiNDR網絡檢測和響應，FortiSandbox沙盒，FortiDeceptor欺騙技術用於行爲檢測和響應，FortiRecon作爲數字風險保護。FortiGuard服務包括SOCaaS和事件響應，以有效應對人員短缺，提供專家監督和快速響應。爲了進一步提升運營效率，FortiAI生成式人工智能助手確保組織能夠很好地應對不斷變化的威脅環境。

FortiGuard實驗室是我們的網絡安全概念威脅情報和研究組織，由經驗豐富的威脅獵手、研究人員、分析師、工程師和數據科學家組成，他們開發並利用機器學習和人工智能技術，提供及時的防護更新和可操作的威脅情報，以造福我們的客戶。 FortiGuard安防服務是一套基於人工智能的安全能力，作爲Fortinet安全管理平台的本地集成部分，提供全攻擊面協調檢測和執行。該產品組合包括FortiGuard應用安全服務、內容安全服務、設備安全服務、NOC/SOC安全服務和網絡安全服務。

FortiCare技術支持服務是一種按設備計費的技術支持服務，爲客戶提供訪問專家的機會，以確保其飛塔信息能力的高效和有效的操作與維護。全球技術支持提供24小時7天服務，靈活的附加服務，包括增強的服務水平協議和通過本地倉庫提供的優質硬件更換。組織可以根據其可用性需求靈活採購不同設備的不同服務級別。我們提供三種按設備計費的支持期權，以滿足我們企業客戶的需求：FortiCare優質版、FortiCare精英版和FortiCare基礎版。FortiCare精英服務旨在爲關鍵產品系列提供15分鐘的響應時間。

此外，我們致力於通過爲客戶、合作伙伴和員工提供培訓和認證項目來解決網絡安全概念技能短缺的問題。飛塔信息培訓學院在全球範圍內建立的公共和私人合作伙伴關係覆蓋了行業、學術界、政府和非營利組織，以確保我們能夠接觸到並增加所有人群對我們網絡安全概念認證和培訓的獲取。到目前爲止，飛塔信息培訓學院已經發放了超過100萬個認證。

財務亮點

•總營業收入在截至2024年9月30日的三個月和九個月分別爲15.1億和43億，比去年同期的13.3億和38.9億分別增長了13%和10%。我們的營業收入增長主要得益於服務收入的增長。產品收入在截至2024年9月30日的三個月和九個月分別爲47390萬和133億，比去年同期的46590萬和14.4億分別增長了2%和減少了7%。服務收入在截至2024年9月30日的三個月和九個月分別爲10.3億和29.6億，比去年同期的86870萬和24.5億分別增長了19%和21%。

•截至2024年9月30日，三個月和九個月的總毛利潤分別爲12.4億和34.5億，同比增加22%和16%，而去年同期爲10.2億和29.7億。

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•截至2024年9月30日的三個月和九個月，總毛利率分別爲82.5%和80.4%，相比去年同期的76.2%和76.3%，分別提高了6.3和4.1個百分點。

•截至2024年9月30日的三個月和九個月期間，營業收入分別爲47090萬和12.3億，較去年同期的30320萬和85570萬分別增長了55%和44%。

•截至2024年9月30日的三個月和九個月內，營業利潤率分別爲31.2%和28.6%，較去年同期的22.7%和22.0%分別提高了8.5和6.6個百分點。

•截至2024年9月30日，現金、現金等價物、開空和開多投資以及可交易權益證券總計爲37億美元。

•截至2024年9月30日，遞延收入爲60.1億元，其中短期遞延收入爲30.8億美元。

•截至2024年9月30日的九個月內，經營活動產生的現金流爲17.8億美金，比去年同期增加3670萬美金，增幅爲2%。

•在2024年8月1日，我們完成了對Lacework的收購，這是一傢俬人持有的數據驅動的雲安防公司，目的是將其CNAPP解決方案作爲獨立產品以及與我們現有產品組合集成，形成一個全面的、基於人工智能的雲安全平台，提供單一供應商服務，這將幫助客戶識別、優先處理以及修復在複雜的雲原生基礎設施中從代碼到雲的風險和威脅。 在2024年8月5日，我們完成了對Next DLP的收購，這是一傢俬人持有的內部風險和數據泄露防護公司。 從2024年8月到2024年9月，這兩家收購公司的營業收入爲 $1380萬，佔截至2024年9月30日的三個月和九個月總營業收入的0.9%和0.3%。

從地理上看，營業收入繼續在全球範圍內多元化，這仍然是我們業務的一大優勢。在截至2024年9月30日的三個月期間，美洲地域板塊、歐洲、中東和非洲（"EMEA"）地域板塊和亞太（"APAC"）地域板塊分別貢獻了41%、40%和19%的總體營業收入，較去年同期分別增長了14%、17%和3%。在截至2024年9月30日的九個月期間，美洲、EMEA和APAC地域板塊分別貢獻了41%、40%和19%的總體營業收入，較去年同期分別增長了11%、14%和4%。

P產品營業收入增長 在截至2024年9月30日的三個月期間，與去年同期相比增長2%。P產品營業收入 在截至2024年9月30日的九個月期間，與去年同期相比下降了7%，主要由於硬件營業收入的減少，部分被軟體許可證營業收入的增長所抵消。硬件營業收入的下降受到了之前期間已發運硬件的積壓變化和宏觀經濟條件的影響。當我們在一個季度內滿足、發運和開票以處理積壓時，這會增加我們在特定季度的總開票額和營業收入。隨着供應鏈挑戰的正常化，我們的產品營業收入增長率可能會低於之前季度，因爲來自積壓的配送對開票的貢獻更大。

與去年同期相比，截至2024年9月30日的三個月和九個月中，服務收入增長分別爲19％和21％，這主要是由我們的證券訂閱收入的強勁推動的，分別增長了20％和23％。增長主要是由於我們與FortiGuard和向本地和基於雲環境交付的其他安全訂閱相關的遞延收入餘額不斷增長的服務收入以及統一的SASE和SecOps的實力，確認了服務收入。我們預計，在2024年剩餘時間內，我們的服務收入將繼續增長，增長機會包括統一的SASE和SecOps產品。儘管服務收入預計將增長，但我們預計，由於延期收入放緩，2024年剩餘時間的增長率將有所放緩 過去幾個季度。

我們的賬單在地理上是多樣化的。在截至2024年9月30日的三個月內，六個國家大約佔我們賬單的50%，其餘50%來自於超過100個國家，每個國家對我們的賬單貢獻不足3%。

截至2024年9月30日的三個月和九個月，毛利率分別增加了6.3和4.1個百分點，與去年同期相比，主要是由於產品和服務的毛利率提高以及營業收入結構向毛利率更高的服務收入轉變。我們預計2024年全年毛利率將比2023年全年有所增加。

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目錄
營業費用佔營業收入的比例在截至2024年9月30日的三個月和九個月期間，分別下降了2.2和2.5個百分點，主要原因是我們的營業收入增長超過了員工人數的增長。員工人數增加至 13,986 e截至2024年9月30日的員工和承包商數量，較2023年12月31日增加了3% 13,568 我們預計，2024年全年營業費用佔營業收入的比例將較2023年全年下降。

營業利潤率在截至2024年9月30日的三個月和九個月期間分別改善了8.5和6.6個百分點，這得益於毛利率的改善和營業費用佔營業收入比例的下降。我們預計2024年的營業利潤率將比2023年全面增長。

宏觀經濟和地緣政治發展的影響

我們的整體表現部分取決於全球經濟和地緣政治狀況，例如GDP增長、烏克蘭戰爭、以色列與哈馬斯的戰爭或中國與臺灣之間的緊張關係，以及這些因素對客戶行爲的影響。惡化的經濟狀況，包括通貨膨脹、利率變化、增長放緩、任何經濟衰退、匯率波動和其他經濟狀況的變化，可能導致銷售生產力和增長的下降，並對我們的運營和財務業績產生不利影響。我們已經看到了某些對我們業務、運營結果、財務狀況、現金流、流動性和資本及財務資源的影響，例如銷售週期延長、採購延遲、與某些供應商增加的承諾以及增加的庫存和庫存採購承諾儲備。

日益惡化的經濟控制項可能會對我們未來期間的業績產生重大負面影響，並可能對我們的開票、營業收入和成本產生負面影響，還可能減少增長和盈利能力。經濟控制項對我們的運營和財務表現的影響程度將取決於正在進行的發展，包括上述討論的內容以及本10-Q表格第II部分，第1A項「風險因素」中識別的其他因素。鑑於這些情況的動態性質，我們目前無法合理估計惡化經濟控制項對我們業務和運營、經營業績、財務狀況、現金流、流動性以及資本和財務資源的全部影響。

商業模式

我們通常將安防解決方案賣給分銷商，這些分銷商再賣給專注於網絡安防的轉售商，以及某些服務提供商和託管安防服務提供商（"MSSPs"），這些服務提供商又將其賣給最終客戶或使用我們的產品和服務爲其他企業提供託管解決方案。有時，我們也會直接向企業客戶、服務提供商和系統集成商出售。此外，我們通過不同的雲服務提供商平台直接和通過渠道合作伙伴銷售我們的軟體許可證和服務。我們的最終客戶位於100多個國家，包括小型、中型和大型企業及政府組織，涉及衆多行業，包括金融服務、政府、醫療保健、製造業、零售、科技和電信。最終客戶的部署可以涉及從一個到數千個安全網絡、統一SASE和安防技術產品，具體取決於最終客戶的規模和安防需求。

我們的客戶購買我們的硬件產品、軟體許可證和雲交付解決方案，包括我們的FortiGuard安防訂閱、FortiCare技術支持服務、統一的SASE和SecOps服務。我們通常在銷售時就會開具產品和服務的總價發票。標準付款條款通常不超過60天，儘管我們可能會向某些分銷商或某些交易提供延長的付款條款。

我們提供在自己的數據中心、接入點以及通過共址和主要雲服務提供商（包括微軟 Azure、亞馬遜網絡服務和谷歌雲）託管的產品。

關鍵指標

我們監測多個關鍵指標，包括以下列出的關鍵財務指標，以幫助我們評估增長趨勢、制定預算、衡量銷售和營銷工作的有效性以及評估運營效率。以下表格總結了營業收入、遞延收入、賬單（非GAAP）、經營活動提供的淨現金流以及自由現金流（非GAAP）。我們在「運營結果」部分下討論營業收入，並討論淨現金流。
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目錄
在「—流動性和資本資源」下面提供的經營活動數據。遞延收入、賬單（非GAAP）和自由現金流（非GAAP）在下表後面進行了討論：
 截至三個月或截至
2024年9月30日2023年9月30日
(單位：百萬)
營業收入$1,508.1 $1,334.6 
遞延收入$6,011.7 $5,285.3 
賬單（非公認會計原則）$1,582.2 $1,491.3 
經營活動提供的淨現金$608.1 $551.2 
自由現金流（非GAAP）$571.8 $481.1 

遞延收入。 我們的遞延收入包括已經開具發票但尚未確認的收入。我們的遞延收入餘額大部分是來自FortiGuard和其他安防訂閱以及FortiCare技術支持服務合同中未被確認的服務收入部分，這部分收入將在服務期限內按比例確認。我們監控遞延收入餘額、短期和總遞延收入增長，以及短期和長期遞延收入的結構，因爲遞延收入在自由現金流和未來期間待確認的營業收入中佔據重要部分。到2024年9月30日，遞延收入爲60.1億美金，比2023年12月31日增加了27670萬美金，增長了5%。到2024年9月30日，短期遞延收入爲30.8億美金，比2023年12月31日增加了23250萬美金，增長了8%。

賬單（非GAAP）。 我們將賬單定義爲根據GAAP確認的營業收入加上從期初到期末的遞延收入變化，減去在期間內通過業務組合獲得的任何遞延收入餘額。我們認爲賬單是管理層和投資者一個有用的指標，因爲賬單驅動當前和未來的營業收入，這是評估我們業務健康和可行性的重要指標。使用賬單而不是GAAP營業收入存在一些侷限性。首先，賬單包含尚未確認的營業收入，並受到安防和壓力位協議期限的影響。其次，我們可能以與報告類似財務指標的同行公司不同的方式計算賬單。管理層通過提供關於GAAP營業收入的具體信息並將賬單與GAAP營業收入進行評估來應對這些侷限性。截至2024年9月30日的三個月，總賬單爲15.8億，與去年同期的14.9億相比增長了6%。

我們的積壓訂單可能會在每個季度之間波動。積壓訂單的減少會在交付時增加我們的總賬單和營業收入。如果我們遇到供應鏈短缺而無法完成訂單，或者客戶取消或推遲訂單的交付，我們的積壓訂單可能會受到影響，這將對該季度的總積壓到賬單的轉換和營業收入產生負面影響。隨着供應鏈挑戰的正常化，我們的產品營業收入增長率可能會低於以前的季度，因爲以前的季度中，從積壓訂單交付的部分對賬單的貢獻更大。

以下提供了根據GAAP計算和呈現的最直接可比財務指標——營業收入與開票的調節：
 截至三個月
2024年9月30日2023年9月30日
(單位：百萬)
賬單：
營業收入$1,508.1 $1,334.6 
加：遞延營業收入的變動115.5 156.7 
減：在業務合併中獲得的遞延營業收入餘額
(41.4)— 
總賬單（非公認會計原則）$1,582.2 $1,491.3 

Free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus purchases of property and equipment. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes investing activities other than
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capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the condensed consolidated statements of cash flows and under “—Liquidity and Capital Resources” and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow is provided below:
 Three Months Ended
September 30, 2024September 30, 2023
(in millions)
Free Cash Flow:
Net cash provided by operating activities$608.1 $551.2 
Less: Purchases of property and equipment(36.3)(70.1)
Free cash flow (non-GAAP)$571.8 $481.1 
Net cash used in investing activities
$(327.1)$(111.2)
Net cash provided by (used in) financing activities
$3.0 $(628.9)

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, cost of revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

There were no material changes to our critical accounting policies and estimates as of and for the three and nine months ended September 30, 2024, as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K filed with the SEC on February 26, 2024 (the “Form 10-K”).

See Note 1 of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements.

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Results of Operations

Three Months Ended September 30, 2024 and 2023

Revenue
 Three Months Ended  
September 30,
2024		September 30,
2023		  
Amount% of
Revenue		Amount% of
Revenue		Change% Change
(in millions, except percentages)
Revenue:
Product$473.9 31 %$465.9 35 %$8.0 2 %
Service1,034.2 69 868.7 65 165.5 19 
Total revenue$1,508.1 100 %$1,334.6 100 %$173.5 13 %
Revenue by geography:
Americas$624.0 41 %$545.6 41 %$78.4 14 %
EMEA599.3 40 512.2 38 87.1 17 
APAC284.8 19 276.8 21 8.0 3 
Total revenue$1,508.1 100 %$1,334.6 100 %$173.5 13 %

Total revenue increased $173.5 million, or 13%, during the three months ended September 30, 2024 compared to the same period last year. We continued to experience diversification of revenue geographically, and across customer and industry segments. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Product revenue increased $8.0 million, or 2%, during the three months ended September 30, 2024 compared to the same period last year due to the increase in software license revenue.

Service revenue increased $165.5 million, or 19%, during the three months ended September 30, 2024 compared to the same period last year. Security subscription revenue increased $101.2 million, or 20%, and technical support and other services revenue increased $64.3 million, or 17%, during the three months ended September 30, 2024 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps.

Of the service revenue recognized during the three months ended September 30, 2024, 88% was included in the deferred revenue balance as of June 30, 2024. Of the service revenue recognized during the three months ended September 30, 2023, 88% was included in the deferred revenue balance as of June 30, 2023.

Cost of revenue and gross margin
 Three Months Ended  
September 30,
2024		September 30,
2023		Change% Change
(in millions, except percentages)
Cost of revenue:
Product$136.1 $198.3 $(62.2)(31)%
Service127.3 119.4 7.9 7 
Total cost of revenue$263.4 $317.7 $(54.3)(17)%
Gross margin (%):
Product71.3 %57.4 %
Service87.7 86.3 
Total gross margin82.5 %76.2 %

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Total gross margin increased 6.3 percentage points during the three months ended September 30, 2024 compared to the same period last year, primarily driven by increased product and service gross margin and a shift in the revenue mix to higher margin service revenue, partially offset by the impact of the acquisitions in the current quarter. Revenue mix shifted by 3.5 percentage points from product revenue to service revenue, as a percentage of total revenue.

Product gross margin increased 13.9 percentage points during the three months ended September 30, 2024 compared to the same period last year, primarily due to a reduction in our liability related to renegotiation of supplier contractual commitments which resulted in a reduction to cost of sales during the period, lower expedite fees, a shift in revenue mix from hardware to software and lower freight costs, partially offset by increased direct cost. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs, costs of materials used in production and inventory reserves related to excess inventory and contractual delivery commitments.

Service gross margin increased 1.4 percentage points during the three months ended September 30, 2024 compared to the same period last year, because service revenue growth outpaced labor cost increase and benefited from a revenue mix shift towards higher margin security subscription services, partially offset by the impact of the acquisitions in the current quarter. Cost of service revenue was comprised primarily of personnel-related costs, third-party repair and contract fulfillment, data center costs, colocation and cloud provider fees, supplies and facility-related costs.

Operating expenses
 Three Months EndedChange% Change
September 30,
2024		September 30,
2023
Amount% of
Revenue		Amount% of
Revenue
(in millions, except percentages)
Operating expenses:
Research and development$187.3 12 %$156.9 12 %$30.4 19 %
Sales and marketing515.9 34 504.4 38 11.5 2 
General and administrative71.7 5 53.5 4 18.2 34 
Gain on intellectual property matter
(1.1)— (1.1)— — — 
Total operating expenses$773.8 51 %$713.7 53 %$60.1 8 %
Percentages have been rounded for presentation purposes and may differ from unrounded results.
Research and development

Research and development expense increased $30.4 million, or 19%, during the three months ended September 30, 2024 compared to the same period last year, primarily due to an increase of $26.6 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products and the impact of the acquisitions in the current quarter. We currently intend to continue investing in our research and development organization, and expect research and development expense to increase in absolute dollars year over year during the remainder of 2024.

Sales and marketing

Sales and marketing expense increased $11.5 million, or 2%, during the three months ended September 30, 2024 compared to the same period last year, primarily due to an increase of $19.9 million in personnel-related costs and $2.6 million in cloud hosting services costs related to sales demonstrations. The increases were partially offset by a decrease of $10.4 million in marketing program and related expenses. We currently intend to continue making investments in sales and marketing resources critical to support our future growth and expect our sales and marketing expense to increase in absolute dollars year over year during the remainder of 2024.

General and administrative

General and administrative expense increased $18.2 million, or 34%, during the three months ended September 30, 2024 compared to the same period last year, primarily due to an increase of $12.0 million in legal related fees and other professional services fees and $3.8 million in personnel-related costs. We currently expect general and administrative expense to increase in absolute dollars year over year during the remainder of 2024.

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Operating income and margin

We generated operating income of $470.9 million during the three months ended September 30, 2024, an increase of $167.7 million, or 55%, compared to $303.2 million in the same period last year. Operating margin was 31.2% during the three months ended September 30, 2024, compared to 22.7% in the same period last year. The increase in operating margin was primarily due to 6.3 percentage points increase in gross margin and 3.6 percentage points decrease in sales and marketing expense as a percentage of revenue, partially offset by 0.7 percentage points and 0.7 percentage points increases in general and administrative expense and research and development expense as a percentage of revenue, respectively. Excluding the acquisitions in the current quarter, operating margin was 33.6% during the three months ended September 30, 2024.

Interest income, interest expense, gain on bargain purchase and other income (expense)—net
 Three Months Ended  
September 30,
2024		September 30,
2023		Change% Change
(in millions, except percentages)
Interest income$42.4 $37.0 $5.4 15 %
Interest expense$(5.0)$(5.4)$0.4 (7)%
Gain on bargain purchase
$106.3 $— $106.3 100 %
Other income (expense)—net
$11.8 $(7.0)$18.8 (269)%

Interest income increased $5.4 million during the three months ended September 30, 2024 compared to the same period last year, primarily as a result of higher investment balances. Interest income varies depending on our average investment balances during the period, types and mix of investments, and market interest rates. Interest expense remained comparatively flat during the three months ended September 30, 2024 compared to the same period last year. Gain on bargain purchase was $106.3 million during the three months ended September 30, 2024 and is related to our acquisition of Lacework. The $18.8 million change in other income (expense)—net during the three months ended September 30, 2024 compared to the same period last year, was primarily due to an increase of $13.4 million gain on marketable equity securities and a $5.7 million decrease in foreign currency exchange losses.

Provision for (benefit from) income taxes
 Three Months EndedChange% Change
September 30,
2024		September 30,
2023
(in millions, except percentages)
Provision for (benefit from) income taxes
$81.2 $(0.3)$81.5 (27,167)%
Effective tax rate (%)13 %— %

Our effective tax rate was 13% for the three months ended September 30, 2024 compared to an effective tax rate of 0% for the same period last year. The provision for income taxes for the three months ended September 30, 2024 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes totaling $123.6 million, which were favorably affected by a tax benefit of $33.1 million from the foreign-derived intangible income deduction (the “FDII deduction”) and excess tax benefits from stock-based compensation expense of $9.3 million.

The provision for income taxes for the three months ended September 30, 2023 was comprised of U.S. federal and state taxes, withholding taxes, and foreign taxes totaling $50.2 million, which were favorably affected by a tax benefit of $41.9 million from the FDII deduction, excess tax benefits from stock-based compensation expense of $8.6 million.

Loss from Equity Method Investments
 Three Months EndedChange% Change
September 30,
2024		September 30,
2023
(in millions, except percentages)
Loss from equity method investments
$(5.3)$(5.2)$(0.1)2 %

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Loss from equity method investments remained comparatively flat during the three months ended September 30, 2024 compared to the same period last year.

Nine Months Ended September 30, 2024 and 2023

Revenue
 Nine Months Ended  
September 30,
2024		September 30,
2023		  
Amount% of
Revenue		Amount% of
Revenue		Change% Change
(in millions, except percentages)
Revenue:
Product$1,334.7 31 %$1,439.2 37 %$(104.5)(7)%
Service2,961.0 69 2,450.5 63 510.5 21 
Total revenue$4,295.7 100 %$3,889.7 100 %$406.0 10 %
Revenue by geography:
Americas$1,776.3 41 %$1,606.1 41 %$170.2 11 %
EMEA1,703.9 40 1,497.3 39 206.6 14 
APAC815.5 19 786.3 20 29.2 4 
Total revenue$4,295.7 100 %$3,889.7 100 %$406.0 10 %

Total revenue increased $406.0 million, or 10%, during the nine months ended September 30, 2024 compared to the same period last year. We continued to experience diversification of revenue geographically, and across customer and industry segments. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Product revenue decreased $104.5 million, or 7%, during the nine months ended September 30, 2024 compared to the same period last year, due to the decrease in hardware revenue, partially offset by the increase in software license revenue. The decrease in hardware revenue was impacted by the change in backlog from hardware shipped in the prior periods and macroeconomic conditions. When we fulfill, ship and bill during a quarter to satisfy backlog, this increases our aggregate billings and revenue during any particular quarter. As the supply chain challenges normalize, our product revenue growth rate may be lower versus prior quarters where delivery from backlog contributed more to billings.

Service revenue increased $510.5 million, or 21%, during the nine months ended September 30, 2024 compared to the same period last year. Security subscription revenue increased $317.8 million, or 23%, and technical support and other services revenue increased $192.7 million, or 18%, during the nine months ended September 30, 2024 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps.

Of the service revenue recognized during the nine months ended September 30, 2024, 77% was included in the deferred revenue balance as of December 31, 2023. Of the service revenue recognized during the nine months ended September 30, 2023, 73% was included in the deferred revenue balance as of December 31, 2022. We expect service revenue growth rates to ease for the remainder of 2024 due to slowing deferred revenue over the past several quarters, partially offset by increases in SaaS revenue.

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Cost of revenue and gross margin
 Nine Months Ended  
September 30,
2024		September 30,
2023		Change% Change
(in millions, except percentages)
Cost of revenue:
Product$474.0 $566.4 $(92.4)(16)%
Service369.1 354.9 14.2 4 %
Total cost of revenue$843.1 $921.3 $(78.2)(8)%
Gross margin (%):
Product64.5 %60.6 %
Service87.5 85.5 
Total gross margin80.4 %76.3 %

Total gross margin increased 4.1 percentage points during the nine months ended September 30, 2024 compared to the same period last year, primarily driven by a shift in the revenue mix to higher margin service revenue and increased product and service gross margin. Revenue mix shifted by 5.9 percentage points from product revenue to service revenue, as a percentage of total revenue.

Product gross margin increased 3.9 percentage points during the nine months ended September 30, 2024 compared to the same period last year, primarily due to decrease in inventory related reserves expense, lower expedite fees, a shift in revenue mix from hardware to software and lower freight costs, partially offset by reduced prices on certain products. During the first quarter of 2024, we lowered list prices on select products. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs, costs of materials used in production and inventory reserves related to excess inventory and contractual delivery commitments.

Service gross margin increased 2.0 percentage points during the nine months ended September 30, 2024 compared to the same period last year, because service revenue growth outpaced labor cost increase and benefited from pricing actions in earlier periods and a revenue mix shift towards higher margin security subscription services. Cost of service revenue was comprised primarily of personnel-related costs, third-party repair and contract fulfillment, data center costs, colocation and cloud provider fees, supplies and facility-related costs.

Operating expenses
 Nine Months EndedChange% Change
September 30,
2024		September 30,
2023
Amount% of
Revenue		Amount% of
Revenue
(in millions, except percentages)
Operating expenses:
Research and development$525.7 12 %$461.3 12 %$64.4 14 %
Sales and marketing1,518.3 35 1,498.6 39 19.7 1 
General and administrative182.7 4 156.2 4 26.5 17 
Gain on intellectual property matter
(3.4)— (3.4)— — — 
Total operating expenses$2,223.3 52 %$2,112.7 54 %$110.6 5 %
Percentages have been rounded for presentation purposes and may differ from unrounded results.
Research and development

Research and development expense increased $64.4 million, or 14%, during the nine months ended September 30, 2024 compared to the same period last year, primarily due to an increase of $51.2 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products. In addition, depreciation expense and other occupancy-related expense increased $6.5 million.

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Sales and marketing

Sales and marketing expense increased $19.7 million, or 1%, during the nine months ended September 30, 2024 compared to the same period last year, primarily due to an increase of $30.2 million in personnel-related costs. In addition, travel expense increased $4.4 million and depreciation expense and other occupancy-related expense increased $2.4 million. The increases were partially offset by a decrease of $21.3 million in marketing program and related expenses.

General and administrative

General and administrative expense increased $26.5 million, or 17%, during the nine months ended September 30, 2024 compared to the same period last year, primarily due to an increase of $22.1 million in legal related fees and other professional services fees.

Operating income and margin

We generated operating income of $1.23 billion during the nine months ended September 30, 2024, an increase of $373.6 million, or 44%, compared to $855.7 million in the same period last year. Operating margin was 28.6% during the nine months ended September 30, 2024, compared to 22.0% in the same period last year. The increase in operating margin was primarily due to 4.1 percentage points increase in gross margin and 3.2 percentage points decrease in sales and marketing expense as a percentage of revenue, partially offset by 0.4 percentage points and 0.3 percentage points increases in research and development expense and general and administrative expense as a percentage of revenue, respectively.

Interest income, interest expense, gain on bargain purchase and other income (expense)—net
 Nine Months Ended
September 30,
2024		September 30,
2023		Change% Change
(in millions, except percentages)
Interest income$112.9 $89.2 $23.7 27 %
Interest expense$(15.1)$(15.6)$0.5 (3)%
Gain on bargain purchase
$106.3 $— $106.3 100 %
Other income (expense)—net
$6.7 $(11.2)$17.9 (160)%

Interest income increased $23.7 million during the nine months ended September 30, 2024 compared to the same period last year, primarily as a result of higher interest rates and investment balances. Interest income varies depending on our average investment balances during the period, types and mix of investments, and market interest rates. Interest expense remained comparatively flat during the nine months ended September 30, 2024 compared to the same period last year. Gain on bargain purchase was $106.3 million during the nine months ended September 30, 2024 and is related to our acquisition of Lacework. The $17.9 million change in other income (expense)—net during the nine months ended September 30, 2024 compared to the same period last year, was primarily due to an increase of $16.9 million gain on marketable equity securities and a $1.7 million decrease in foreign currency exchange losses.

Provision for income taxes
 Nine Months EndedChange% Change
September 30,
2024		September 30,
2023
(in millions, except percentages)
Provision for income taxes
$197.2 $48.6 $148.6 306 %
Effective tax rate (%)14 %5 %

Our effective tax rate was 14% for the nine months ended September 30, 2024 compared to an effective tax rate of 5% for the same period last year. The provision for income taxes for the nine months ended September 30, 2024 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that were $315.0 million. This provision for income taxes was favorably affected by a tax benefit of $84.0 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $33.8 million.

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The provision for income taxes for the nine months ended September 30, 2023 was comprised of U.S. federal and state taxes, withholding taxes, and foreign taxes that were $220.9 million, which were offset by a tax benefit of $105.9 million from the FDII deduction, excess tax benefits from stock-based compensation expense of $48.3 million, and the release of reserves of $18.1 million on uncertain tax positions and the accrued interest thereon due to the expiration of statutes of limitations.

Loss from Equity Method Investments
 Nine Months EndedChange% Change
September 30,
2024		September 30,
2023
(in millions, except percentages)
Loss from equity method investments
$(23.9)$(32.6)$8.7 (27)%

Loss from equity method investments decreased $8.7 million during the nine months ended September 30, 2024 compared to the same period last year, primarily driven by our proportionate share of Linksys’ financial results including our share of the amortization of the basis differences improved over the same period last year, partially offset by the OTTI charge of $8.0 million recorded in the second quarter of 2024.

Liquidity and Capital Resources
 As of
 September 30,
2024		December 31,
2023
 (in millions)
Cash and cash equivalents$2,489.3 $1,397.9 
Short-term and long-term investments1,162.4 1,021.5 
Marketable equity securities49.0 21.0 
Total cash, cash equivalents, investments and marketable equity securities$3,700.7 $2,440.4 
Working capital$1,336.7 $709.3 
 Nine Months Ended
 September 30,
2024		September 30,
2023
 (in millions)
Net cash provided by operating activities$1,780.5 $1,743.8 
Net cash used in investing activities(647.5)(577.7)
Net cash used in financing activities(41.3)(660.3)
Effect of exchange rate changes on cash and cash equivalents(0.3)(1.9)
Net increase in cash and cash equivalents
$1,091.4 $503.9 

Liquidity and capital resources are primarily impacted by our operating activities, as well as real estate purchases, other capital expenditures and business acquisitions, payment of taxes in connection with the net settlement of equity awards and proceeds from the issuance of common stock and repurchases of our common stock.

In recent years, we have received significant capital resources from our billings to customers, issuance of investment grade debt and, to some extent, from the exercise of stock options by our employees. Additional increases in billings may depend on a number of factors, including demand for and availability of our products and services, competition, pricing actions, market or industry changes, macroeconomic events such as rising inflation and changing interest rates, economic strength, supply chain capacity and disruptions, international conflicts, including the war in Ukraine and the Israel-Hamas war, and our ability to execute. We expect proceeds from the exercise of stock options in future years to be impacted by the increased mix of restricted stock units and performance stock units versus stock options granted to our employees and to vary based on our share price.

In January 2024, our board of directors approved a $500.0 million increase in the authorized share repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $7.25 billion of our outstanding common stock. In February 2024, our board of directors approved an extension of the Repurchase Program to February 28, 2025. During the nine months ended September 30, 2024, we repurchased less than 0.1 million shares of common stock under
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the Repurchase program for an aggregate purchase price of $0.6 million. As of September 30, 2024, approximately $1.03 billion remained available for future share repurchases. In October 2024, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2026, bringing the aggregate amount authorized to be repurchased to $8.25 billion of our outstanding common stock through February 28, 2026. As of November 8, 2024, approximately $2.03 billion remained available for future share repurchases.

We expect to continue to increase our data centers, PoPs, office and warehouse capacity to support growth and the expansion of existing services or introduction of new services. As we purchase new properties, we will work to incorporate these properties into the environmental goals we have established. We estimate capital expenditures to be between approximately $100.0 million and $120.0 million for the fourth quarter of 2024.

We believe that our cash provided by operating activities, together with our existing cash, cash equivalents and investments will be sufficient to meet our anticipated cash needs and do not currently intend to retire our Senior Notes early. Refer to Note 10, Debt, in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Senior Notes. As of September 30, 2024, the long-term debt, net of unamortized discount and debt issuance costs, was $993.8 million.

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.

These inventory purchase commitments as of September 30, 2024 totaled $550.0 million, a decrease of $87.3 million compared to $637.3 million as of December 31, 2023 due to fulfillment of customer demand as our supply availability improved and our continued efforts to work with contract manufacturers and suppliers to optimize our inventory and purchase commitment position. We record a liability for inventory purchase commitments in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of September 30, 2024 and December 31, 2023, the liability for these inventory purchase commitments was $76.3 million and $84.7 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets.

We increased our purchase commitments in prior years to address significant supply constraints seen industry-wide due to component shortages. Our agreements secured supply and pricing for certain product components with contract manufacturers to meet customer demand and to address extended lead times.

Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory obsolescence because of supply constraints, rapidly changing technology, and customer requirements. We believe the amount of our inventory and purchase commitments is appropriate for our current and expected customer demand and revenue levels.

We also have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. As of September 30, 2024, we had $116.5 million in other contractual commitments having a remaining term in excess of one year that are non-cancelable.

There have been no significant changes to our leases as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of September 30, 2024, our cash, cash equivalents and short-term and long-term investments of $3.65 billion were invested primarily in deposit accounts, commercial paper, corporate debt securities, U.S. government and agency securities, certificates of deposit and term deposits and money market funds. It is our investment policy to invest excess cash in a manner that preserves capital, provides liquidity, and generates return without significantly increasing risk. We do not enter into investments for trading or speculative purposes.

The amount of cash, cash equivalents and investments held by our international subsidiaries was $192.8 million as of September 30, 2024 and $199.9 million as of December 31, 2023.

We believe that our existing cash and cash equivalents and cash flow from operations will be sufficient for at least the next 12 months to meet our requirements and plans for cash, including meeting our working capital requirements and capital expenditure requirements. In the long term, our ability to support our requirements and plans for cash, including our working
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capital and capital expenditure requirements will depend on many factors, including our growth rate; the timing and amount of our share repurchases; the expansion of sales and marketing activities, pricing actions, the introduction of new and enhanced products and services offerings; the continuing market acceptance of our products; the timing and extent of spending to support development efforts; our investments in purchasing, developing or leasing real estate; cash paid for taxes and macroeconomic impacts such as rising inflation and changing interest rates; and the war in Ukraine and the Israel-Hamas war. Historically, we have required capital principally to fund our working capital needs, share repurchases, capital expenditures and acquisition activities. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

As of September 30, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Operating Activities

Cash generated by operating activities is our primary source of liquidity. It is primarily comprised of net income, as adjusted for non-cash items and changes in operating assets and liabilities. Non-cash adjustments consist primarily of amortization of deferred contract costs, stock-based compensation and depreciation and amortization. Changes in operating assets and liabilities consist primarily of changes in accounts receivable—net, deferred revenue, deferred contract costs, deferred tax assets, inventory, accounts payable and accrued liabilities.

Our operating activities during the nine months ended September 30, 2024 provided cash flows of $1.78 billion as a result of the continued growth of our business, improved profitability and our ability to successfully manage our working capital. Changes in operating assets and liabilities primarily resulted from an increase in sales of our security subscription services and technical support services to new and existing customers, as reflected by an increase of $234.4 million in our deferred revenue during the nine months ended September 30, 2024. In addition, changes in operating assets and liabilities were driven by a decrease of $376.5 million in accounts receivable—net, an increase of $212.2 million in deferred contract costs, an increase of $187.6 million in deferred tax assets, a decrease of $104.9 million in inventory, a decrease of $72.3 million in accrued liabilities and a decrease of $32.0 million in accounts payable.

Investing Activities

The changes in cash flows from investing activities primarily relate to timing of purchases, maturities and sales of investments, purchases of property and equipment, investments in various companies and business acquisitions. Historically, in making a lease-versus-ownership decision related to warehouse, office or data center space, we have considered various factors including financial metrics, expected long-term growth rates, time to market and changes in asset values. In certain cases, we have elected to own a facility if we believe that purchasing or developing buildings rather than leasing is more closely aligned with our long-term strategy. We expect to make similar decisions in the future. We may also make cash payments in connection with future business combinations.

During the nine months ended September 30, 2024, cash used in investing activities was $647.5 million, primarily driven by $281.3 million used for the purchases of property and equipment, $247.0 million used for the acquisitions of Lacework and Next DLP, net of cash and $102.6 million spent for purchases of investments, net of maturities and sales of investments.

Financing Activities

The changes in cash flows from financing activities primarily relate to repurchase and retirement of common stock, and taxes paid related to net share settlement of equity awards, net of proceeds from the issuance of common stock under our Amended and Restated Fortinet, Inc. 2009 Equity Incentive Plan.

During the nine months ended September 30, 2024, cash used in financing activities was $41.3 million, primarily driven by $39.9 million used to pay tax withholding, net of proceeds from the issuance of common stock.

ITEM 3.     Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in our market risk during the nine months ended September 30, 2024 compared to the disclosures in Part II, Item 7A of the Form 10-K.

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ITEM 4.     Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act as of September 30, 2024. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

In accordance with the Internal Controls Guidance, management has excluded Lacework, a privately held data-driven cloud security company, and Next DLP, a privately held data security company, from its assessment of internal control over financial reporting as of September 30, 2024, because Lacework and Next DLP were acquired by us in business combinations during the quarter ended September 30, 2024. Lacework and Next DLP assets represented approximately 3.5% and 1.3% of our consolidated total assets, respectively, excluding the effects of purchase accounting, as of September 30, 2024, and their revenues represented approximately 0.9% and 0.1% of our consolidated total revenue, respectively, for the quarter ended September 30, 2024.

There were no other changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1.     Legal Proceedings

We are subject to various claims, complaints and legal actions that arise from time to time. We accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows. Refer to Note 11. Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

ITEM 1A.     Risk Factors

Investing in our common stock involves a high degree of risk. Investors should carefully consider the following risks and all other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition and results of operations could be materially harmed. In that case, the trading price of our common stock could decline substantially, and investors may lose some or all of their investment. We have summarized risks immediately below and encourage investors to carefully read the entirety of this Risk Factors section.

Risks Related to Our Business and Financial Position

Our operating results are likely to vary significantly and be unpredictable.
 
Our operating results have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control or may be difficult to predict, including:
 
•economic conditions, including macroeconomic and regional economic challenges resulting, for example, from a recession or other economic downturn, increased inflation or possible stagflation in certain geographies, changing interest rates, the war in Ukraine, the Israel-Hamas war, tensions between China and Taiwan, or other factors;

•sales strategy, productivity and execution, and our ability to attract and retain new end-customers or sell additional products and services to our existing end-customers, including customer demand for platform solutions like ours versus point solutions;

•our ability to successfully anticipate market changes related to cloud-based solutions and to sell, support and meet service level agreements related to cloud-based solutions;

•component shortages, including chips and other components, and product inventory shortages, including those caused by factors outside of our control, such as epidemics and pandemics, supply chain disruptions, inflation and other cost increases, international trade disputes or tariffs, natural disasters, health emergencies, power outages, civil unrest, labor disruption, international conflicts, terrorism, wars, such as the war in Ukraine and the Israel-Hamas war, and critical infrastructure attacks;

•inventory management, including future inventory purchase commitments;

•the level of demand for our products and services, which may render forecasts inaccurate, increase backlog or future inventory purchase commitments and lead to price decreases;

•our backlog may fluctuate over quarters. A reduction to backlog increases our aggregate billings and revenue during the quarter when delivered. If we experience supply chain shortages and cannot fulfill orders or if customers cancel or delay delivery of orders, our backlog may be affected, which will negatively impact our aggregate backlog to billings conversion and revenue in such quarter;

•as the supply chain challenges normalize, our product revenue growth rate may be lower versus prior quarters where delivery from backlog contributed more to billings. We expect billings growth to normalize and lower the impact from backlog fluctuations. For the first three quarters of 2024, the comparably lower backlog contribution to billings has resulted in decreased year-over-year quarterly growth rates;

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•supplier cost increases and any lack of market acceptance of our price increases designed to help offset any supplier cost increases;

•the timing of channel partner and end-customer orders and our reliance on a concentration of shipments at the end of each quarter or changes in shipping terms;

•the impact to our business, the global economy, disruption of global supply chains and creation of significant volatility and disruption of the financial markets due to factors such as increased inflation or possible stagflation in certain geographies, increasing or decreasing interest rates, the war in Ukraine and the Israel-Hamas war and other factors;

•我們產品或服務中的缺陷或漏洞，以及由於產品或服務的失敗或誤用而造成的聲譽損害，以及我們產品或服務中任何實際或感知到的缺陷或漏洞，產品或服務未能檢測或防止安防事件或導致運營中斷，客戶未能實施預防措施，如對我們已部署解決方案的更新，或未能幫助保護我們的客戶。

•妥協我們的內部企業IT網絡、運營網絡、研發網絡、後端實驗室以及託管在我們的數據中心、聯合設施供應商或公共雲提供商中的雲堆棧，並對我們產品和服務的公衆認知造成傷害；
 
•發貨的時機可能取決於庫存水平、物流、製造業或船舶延遲、我們按時發貨的能力以及我們準確預測庫存需求的能力，還有我們供應商提供元件和成品的能力。

•增加的費用、不可預見的負債或減記，以及任何來自收購或股權投資對經營結果的負面影響，以及與產品計劃和產品相關的會計風險、整合風險，以及此類收購和股權投資對我們財務結果的負面影響風險；

•投資者對我們在環保母基（「ESG」）方面的表現及對碳中和的承諾的期望；

•某些客戶協議中包含服務水平協議，根據這些協議，我們保證我們的平台和解決方案的特定可用性；

•在某些司法轄區內，數據安防要求和執行不一致；

•由於某些事件或情況變化導致的損害；

•銷售的產品組合以及產品和服務之間的營業收入組合，以及產品和服務被打包在一起以一個套餐價格銷售的程度；

•我們的渠道合作伙伴和最終客戶的採購習慣和預算週期，包括產品生命週期結束、換新週期或降價的影響;

•渠道合作伙伴或最終客戶的需求減少，包括因我們無法控制的因素導致的任何此類減少，如自然災害和健康緊急情況，包括地震、乾旱、火災、停電、颱風、洪水、疫情或流行病，以及人爲事件，如社會動盪、勞動中斷、國際貿易糾紛、國際衝突、恐怖主義、戰爭，例如烏克蘭戰爭和以色列-哈馬斯戰爭，以及關鍵製造行業的攻擊;

•我們銷售組織的有效性，包括在特定地域板塊內，招聘銷售人員所需的時間、招聘的時機以及我們招聘和保留有效銷售人員的能力，努力使我們的銷售能力與市場需求相一致，以及基於銷售薪酬或銷售薪酬計劃的變更對我們的銷售和銷售團隊的有效性產生的任何負面影響；

•銷售生產力和銷售執行風險與有效銷售所有板塊市場相關，包括企業和中小型企業、政府機構和服務提供商，以及銷售我們廣泛的安防產品和服務組合，包括其他執行風險、與銷售所有板塊的複雜性和干擾相關的風險、增加的競爭和關閉較大企業及大型組織交易的不確定時機的風險，以及我們的銷售代表未能有效銷售產品和服務的風險；
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•與我們努力捕捉識別的增長驅動因素相關的執行風險，例如與我們能夠利用網絡與安防的融合、各種網絡安全解決方案的供應商整合、SD-WAN、製造行業安全、安防運營、SASE 以及其他雲安全解決方案、端點保護，以及物聯網和OT安全機會相關的風險；

•我們終端客戶的季節性購買模式；

•我們在銷售和市場營銷方面投資的時機和水平，以及這些投資對我們的營業費用、營業利潤率以及銷售和市場營銷團隊的生產力、能力、任期和執行效果的影響；
 
•我們銷售的營業收入確認時機，包括由於延長付款期限和積壓水平波動而產生的任何影響，這可能導致我們的季度營業收入和運營結果的變動性增加和可預測性降低；
 
•網絡安全感知威脅的級別可能會因時期而變化;
 
•對我們分銷商、轉售商或最終客戶的需求、市場需求或購買習慣和模式的變化;
 
•網絡安防市場的增長率變化，尤其是其他安防和網絡市場，例如SD-WAN、Ot、交換機、接入點、安全運營、SASE以及我們和競爭對手出售產品和服務的其他雲解決方案；
 
•我們或競爭對手推出或改善新產品和服務的時機及成功，或我們行業板塊內競爭環境的任何其他變化，包括競爭對手、合作伙伴或最終客戶之間的整合；
 
•經銷商、轉售商或終端客戶因期待我們或競爭對手發佈的新產品或產品升級、價格下降或註冊政策的變化而推遲訂單，或因我們發佈或預期的價格表上漲而加速訂單的情況；
 
•由於外幣匯率波動或美元升值導致我方賬單、營業收入和費用的增加或減少，因爲我們的大部分費用是以非美元貨幣發生和支付的，此外，這種波動可能對我們的合作伙伴和客戶願意爲我們的產品和服務支付的實際價格產生影響；

•遵守現有的法律法規;

•我們獲取和維持許可、證明和認證的能力，這些都是我們與美國聯邦政府、其他外國和地方政府，以及其他行業和部門開展業務的必要條件；

•訴訟、訴訟費用和成本、和解、判決及與訴訟相關的其他公平和法律救濟;

•基於雲和託管的安防解決方案對我們的賬單、營業收入、運營利潤率和自由現金流的影響；
 
•潛在最終客戶對於從新的科技提供商、較大且更成熟的安防供應商或其主要網絡設備供應商購買網絡安防解決方案的決策；
 
•價格競爭和我們市場中競爭力的提升，包括產品更新週期和庫存水平帶來的競爭壓力；

•我們在增加營業收入和管理控制營業費用方面的能力，以保持或提高我們的營業利潤率；
 
•我們服務的客戶續訂率或附加率的變化；
 
•我們賬單、合同款項的收取時間或所售服務的合同期限的變化；

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•我們對預計的年度有效稅率的變化、研究和開發費用的稅務處理以及現金流動的相關影響。

•由於情況的變化和業務環境中的挑戰，包括需求下降，這可能會對我們的渠道合作伙伴賣出他們持有的現有庫存的能力產生負面影響，並對他們未來向我們購買產品的能力產生負面影響；

•對基於雲的和託管服務需求的增加，以及轉型爲提供此類服務所帶來的不確定性；

•潛在的轉變或遷移，從提供本地網絡安全的物理設備轉向雲和Saas-雲計算基礎的安全服務;
 
•我們的渠道合作伙伴缺乏足夠的資金來應對商業環境的變化和挑戰；
 
•與重要渠道合作伙伴的關係中斷或終止，包括因安防解決方案的分銷商和轉售商之間的整合所致；
 
•我們主要供應商和渠道合作伙伴面臨的破產、信貸或其他困難，這可能影響他們購買或支付產品和服務的能力，也可能擾亂我們的供應或分銷鏈。

•關於移民法律、交易政策和關稅的政策變更和不確定性，包括適用於我們製造產品的國家的關稅增加、外國進口以及與國際貿易相關的稅法;

•政治、經濟和社會不穩定，包括地緣政治不穩定和不確定性, 例如，烏克蘭戰爭、以色列-哈馬斯戰爭、中國與臺灣之間的緊張關係，以及基於貿易限制、禁運和出口管制法律限制，對我們在特定地區的賣出、船舶和支持客戶能力的任何干擾或負面影響；

•國內和國際市場的一般經濟狀況；

•未來的會計公告或我們會計政策的變化，以及可能爲採納和遵守這些新公告而產生的重大成本;

•由於我們當前的房地產業投資和未來的收購與開發計劃，可能會影響我們現有房地產業的減值或折舊加速；以及

•立法或監管變更，例如與隱私、信息和網絡安全、出口、環境、區域型組件禁令以及當地製造要求相關的變更。

上述任一因素或上述某些因素的累積效應可能導致我們季度財務和其他經營結果的重大波動。這種可變性和不可預測性可能導致我們未能達到內部營業計劃或證券分析師或投資者對任何時期的預期。如果因這些或其他原因未能滿足或超出這些預期，我們的股票市場價格可能會大幅下跌，我們可能面臨昂貴的訴訟，包括證券集體訴訟。此外，短期內我們營業費用的很大一部分是固定的。因此，在營業收入不足的情況下，我們通常無法在短期內減輕對利潤率的負面影響。

不利的經濟環境，如可能的經濟衰退和通貨膨脹或滯漲的可能影響，增加或減少的利率期貨，減少的信息科技支出，包括防火牆和其他安防支出，或者任何經濟下行或衰退，可能對我們的業務產生不利影響。
 
我們的業務依賴於對科技的整體需求以及我們當前和潛在客戶的經濟健康。此外，我們產品的購買通常是有選擇性的，並可能涉及大量資金和其他資源的投入。由於經濟下滑、可能的衰退和某些地區持續或加劇的通貨膨脹或可能的滯脹、利率的上升或下降、地緣政治的不穩定和不確定性、無論宏觀經濟條件如何的信息技術支出降低、疫情和流行病的影響以及烏克蘭戰爭和以色列-哈馬斯戰爭的影響，每一種都可能對我們的財務狀況和業績產生重大不利影響。
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我們的運營和業務，包括導致更長的銷售週期、產品和服務價格下降、組件成本增加、渠道合作伙伴的違約率上升、單位銷售減少、價格降低以及增長緩慢或下降。這些因素如果我們無法實現必要的產品價格上漲，來適當地抵消額外成本並維持利潤率，就可能對我們的業務產生負面影響，給增長帶來下行壓力。任何這些影響可能會對我們的業務、財務狀況、運營結果和流動性產生重大不利影響。

某些經濟體中通脹的存在導致了並可能繼續導致利率期貨和資本成本的增加或減少、組件或交通成本的增加、勞動成本的上升、匯率的削弱以及其他類似的影響。儘管我們採取措施來降低與通脹相關的風險，但這些減輕措施可能無效，或其影響可能無法及時抵消通脹帶來的成本增加。通脹、經濟下滑、衰退以及其他經濟挑戰也可能對我們的分銷商、經銷商和最終客戶的消費模式產生負面影響。

我們的賬單、營業收入和自由現金流的增長可能會減緩或可能不會繼續, 而我們的運營利潤率可能會下降。
 
由於多種原因，我們可能會經歷增長減緩或賬單、營業收入、營業利潤率和自由現金流的下降，包括管道增長或我們產品或服務的整體需求減緩、需求從產品轉向服務、服務營業收入增長下降、競爭加劇、執行挑戰，包括銷售執行挑戰和最佳銷售生產力不足、基於通貨膨脹或可能的滯脹的全球或區域經濟挑戰、區域衰退或全球經濟衰退、利率變化、烏克蘭戰爭和以色列-哈馬斯戰爭、我們的整體市場增長下降或某些地理區域或行業板塊（如服務提供商行業）需求的疲軟、戰略機會的變化、執行風險、銷售生產力下降以及由於其他風險（在本定期報告中描述的風險因素中確定）導致我們未能繼續利用銷售和增長機會。我們的費用佔總營業收入的百分比可能會高於預期，如果我們的營業收入低於預期。如果我們在銷售和營銷及其他職能領域的投資未能帶來預期的賬單和營業收入增長，我們可能會經歷利潤下降。此外，如果我們未能增加賬單、營業收入或遞延收入，並且未能適度管理我們的成本結構、自由現金流，或面臨意外的負債，我們可能無法在未來的時期維持歷史盈利水平。因此，我們未能維持盈利能力和利潤率並持續增加賬單、營業收入和自由現金流的任何失敗，可能導致我們普通股的價格大幅下降。

我們的房地產業投資，包括施工、新建IDC概念的收購或租賃、IDC概念的擴展或辦公樓，可能對我們的業務帶來重大風險。

爲了在我們現有和新市場中維持增長，我們可能會擴大現有數據中心，租賃新設施或購買合適的土地，無論是否有建築物，以建立新的數據中心或辦公樓。這些項目使我們面臨的風險可能對我們的運營結果和財務狀況產生不利影響。目前的全球供應鏈和通貨膨脹問題加劇了許多這類施工風險，併爲我們的業務創造了額外風險。與施工項目相關的一些風險包括：

•施工延誤;

•數據中心設備的供應不足和延遲，包括發電機和開關設備等物品；

•意外的預算變化；

•建築材料、原材料和IDC概念設備的價格上漲及獲取延遲；

•勞動可用性、勞動爭議以及與承包商、分包商和其他第三方的停工情況;

•意想不到的環保母基問題和地質問題;

•與公共機構和公用事業公司相關的許可和批准延遲；

•意外的電力接入不足;

•因任何原因未能滿足客戶要求和服務水平協議，以及由此產生的任何罰款或責任；

•投資者對ESG的期望；

•現場準備的延遲導致我們無法履行對客戶的承諾；和
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•未預期的客戶需求可能需要替代的IDC概念設計，這會使我們的站點變得不那麼有吸引力，或者導致增加成本以進行必要的修改或改造。

所有施工相關項目要求我們在設計和施工過程中仔細選擇並依賴一名或多名設計師、總承包商和相關分包商的經驗。如果設計師、總承包商、重要分包商或關鍵供應商在設計或施工過程中遇到財務問題或其他問題，我們可能會面臨重大延誤、完成項目的成本增加和/或對我們預期回報的其他負面影響。

我們有覆蓋我們財產和運營活動的廣泛保險計劃，責任限制、免賠額和自保保留金的水平我們認爲與同類公司相當。我們相信，這些保單的條款和保險限額是足夠和適當的。然而，某些類型的特別損失可能未能得到我們保險計劃的充分覆蓋。此外，我們可能會因保險免賠額、自保保留金、未保險索賠或超出適用保險範圍的損失而遭受損失。如果發生未保險損失或超出保險限額的損失，我們可能會失去我們在某項財產上投資的全部或部分資本，以及該財產的預期未來營業收入。在這種情況下，我們仍然可能對與該財產相關的任何抵押貸款債務或其他財務義務負責。未來可能會發生超出保險賠償的重大損失。這些事件可能會對我們的財務狀況和經營成果產生重大不利影響。

此外，根據各種聯邦、州和地方的環保母基法律、法令和規定，當前或以前的房地產業主或運營商可能對該房產上、下或內的有害或有毒物質的清除或修復費用承擔責任。這些法律通常會施加責任，即使業主或運營商並沒有導致或知道有害或有毒物質的存在，甚至如果這些物質的儲存違反了客戶的租約。此外，有害或有毒物質的存在，或業主未能處理這些物質在該房產上的存在，可能會對業主使用該房產作爲抵押貸款的能力產生不利影響。與我們房地產業務相關的任何環保母基問題可能會實質性和不利地影響我們的財政控制項和運營結果。

我們依賴於高層管理的持續服務和表現，失去任何一位管理人員都可能對我們的業務、運營結果和財務控制項產生不利影響。

我們的未來表現依賴於高級管理層的持續服務和貢獻，以執行我們的業務計劃，並識別和追求新的機會和產品創新。失去高級管理層成員的服務，特別是我們的聯合創始人、首席執行官和董事長Ken Xie，或聯合創始人、總裁和首席科技官Michael Xie，或我們的任何高級銷售領導者或職能區領導者，可能會顯著延遲或阻礙我們開發和戰略目標的實現。由於任何原因失去高級管理層的服務或分心，都可能對我們的業務、財務狀況和經營結果產生不利影響。

我們依賴第三方渠道合作伙伴來實現幾乎所有的營業收入。如果我們的合作伙伴未能履行職責，我們銷售產品和服務的能力將受到限制；如果我們未能優化渠道夥伴模式，我們的運營業績可能會受到損害。此外，少數分銷商佔據了我們營業收入和應收賬款的很大比例，其中一名分銷商佔據了截至2024年9月30日，我們總淨應收賬款的27%。
 
我們銷售的很大一部分來自有限數量的分銷商，絕大多數營業收入來自我們的渠道合作伙伴，包括分銷商和經銷商。我們依靠渠道合作伙伴來創造大量銷售機會並管理銷售過程。如果我們的渠道合作伙伴未能成功銷售我們的產品，或者如果我們無法與每個銷售地區的足夠高質量渠道合作伙伴達成合作及保持其合作，無法激勵他們銷售我們的產品，或我們的渠道合作伙伴轉向其他供應商和/或我們的競爭對手，我們的產品銷售能力和運營結果可能會受到影響。與任何重要的渠道合作伙伴終止關係可能會對我們的銷售和運營結果產生負面影響。如果我們改變合作伙伴策略，比如如果我們開始更多地直接與客戶進行銷售，且如果我們終止合作伙伴或由於策略變化或其他任何原因導致合作伙伴終止或減少對我們銷售的支持，這可能會損害我們的業績。

此外，少數渠道合作伙伴佔我們營業收入和應收賬款的很大比例。我們面臨某些渠道合作伙伴的信用和流動性風險，以及在疲軟市場中存在的信用風險，這可能導致重大損失。我們對有限數量的關鍵渠道合作伙伴的依賴意味着，如果這些關鍵渠道合作伙伴無法成功銷售我們的產品和服務，或如果這些關鍵渠道合作伙伴無法或不願意支付我們，終止與我們的關係或破產，我們的賬單、營業收入和運營結果可能受到損害。儘管我們已經設立了旨在監控和降低信用和流動性風險的項目，但我們無法保證這些項目能夠有效降低我們的信用風險。
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這些風險可能對我們的業務、經營成果和財務控制項造成損害。如果渠道合作伙伴未能根據我們的協議向我們付款，或者我們無法從這些渠道合作伙伴那裏收回應收賬款，我們可能會受到不利影響，既包括無法收回到期款項的影響，也包括實施合同條款的費用，包括訴訟。我們的渠道合作伙伴可能會尋求破產保護或其他類似救濟，未能向我們支付到期款項，或者支付這些款項的速度變慢，任一情況都可能對我們的經營成果、財務狀況和現金流產生不利影響。合併現有的渠道合作伙伴可能對我們進一步產生影響。在這種情況下，由於需要與更大型的合併實體打交道，我們的整體業務和運營關係可能會發生變化，我們在有利合同條款下維持這些關係的能力可能會受到限制。由於合併增加了每個渠道合作伙伴所負責的相對業務比例，我們可能還會對更有限數量的渠道合作伙伴變得日益依賴，這可能放大前面段落中描述的風險。

六 截至2024年9月30日，分銷商客戶的總淨應收賬款佔我們總淨應收賬款的65%。請參見本季度報告10-Q表格第I部分第1項中的註釋15。有關佔我們營業收入或淨應收賬款10%或以上的分銷商客戶的信息。我們最大的分銷商可能會面臨財務困難、流動性風險或其他財務挑戰，這可能會影響我們收回應收賬款的能力。

我們爲渠道合作伙伴提供具體的項目，以幫助他們銷售我們的產品，並激勵他們銷售我們的產品，但不能保證這些項目會有效。此外，我們的渠道合作伙伴在市場營銷、銷售和支持我們的產品和服務方面可能會失敗，並可能購買超過他們能夠銷售的庫存。我們的渠道合作伙伴通常沒有最低購買要求。我們的某些渠道合作伙伴可能沒有足夠的財務資源來應對業務環境的變化和挑戰。此外，我們的許多渠道合作伙伴是私人持有的，包括一些最大的合作伙伴，我們可能沒有足夠的信息來評估他們的財務狀況。如果我們的渠道合作伙伴的財務狀況或運營減弱，他們銷售我們的產品和服務的能力可能會受到負面影響。我們的渠道合作伙伴還可能會營銷、銷售和支持與我們產品競爭的產品和服務，並可能將更多資源投入到這些產品的營銷、銷售和支持中，或者可能決定完全停止銷售我們的產品和服務，轉而選擇競爭對手的產品和服務。他們也可能有動力去推廣競爭對手的產品，從而對我們自身構成不利，或者他們可能完全停止銷售我們的產品。我們無法保證我們能保留這些渠道合作伙伴，或者我們能否獲得額外或替代的合作伙伴，或現有的渠道合作伙伴將繼續履行其職責。失去一個或多個重要的渠道合作伙伴，或未能通過他們獲得和交付每季度的大額訂單，可能會對我們的運營結果造成傷害。

任何新的銷售渠道合作伙伴都需要進行廣泛的培訓，可能需要幾個月或更長時間才能實現生產力。如果我們的渠道合作伙伴在向最終客戶誤報我們產品或服務的功能，或者我們的服務提供商客戶遭遇影響最終用戶的網絡事件，或者我們的渠道合作伙伴違反法律或我們的公司政策，這可能會使我們面臨訴訟、潛在責任和聲譽損害。我們依賴我們的全球渠道合作伙伴遵守適用的法律和監管要求。如果他們未能做到這一點，可能會對我們的業務、運營結果和財務狀況產生重大不利影響。如果我們未能優化我們的渠道合作伙伴模型或未能管理現有銷售渠道，我們的業務將受到嚴重損害。

對季度末集中出貨或交通條款變化的依賴可能導致我們的賬單和營業收入低於預期水平.

由於客戶購買模式以及我們的銷售團隊和渠道合作伙伴努力滿足或超過季度配額，我們歷史上在每個季度的最後兩週接收了相當一部分銷售訂單，併產生了相當一部分的開票和營業收入。我們通常會安排一個 物流 合作伙伴在季度結束前幾小時取走我們產品的最後一件貨物，而 物流 合作伙伴的到達延遲或其他因素如停電可能會導致我們無法發貨和開票大量有訂單的產品。此外，計劃在季度最後一天晚些時候發貨的這些產品的美元價值可能是相當可觀的。此外，我們的服務開票依賴於我們內部業務管理系統完成某些自動化流程，其中一些流程必須在相關產品發貨後才能進行。如果在發貨後我們沒有足夠的時間讓我們的系統在季度結束前執行這些流程，或我們的系統出現問題導致無法及時處理以在季度內實現服務開票，或交易關閉延遲或交易丟失，我們將無法爲這些服務進行開票，並且可能直到下一季度才能實現開票，這可能會對我們特定季度的開票產生顯著的負面影響。我們實施了一種基於雲的 報價 工具，幫助我們的銷售團隊更快生成 報價，減少 報價 錯誤並提高銷售生產力。我們將這個工具的數據集成到我們的訂單處理中的能力可能會導致訂單處理延遲，這可能會影響我們的財務結果。我們任何一季度的開票和營業收入可能會低於我們的預期或證券分析師和投資者的預期，如果任何季度末的預期訂單因任何原因延遲或交易丟失，或我們在任何季度末的履行訂單能力因任何原因受到阻礙，包括，但不限於，:

•預期的採購訂單未能實現的失敗；
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•我們物流合作伙伴未能或無法在季度結束前發貨，以滿足接近季度末收到的採購訂單；

•基於電力中斷、系統故障、勞資爭議或限制、過度需求、自然災害或廣泛公共衛生問題（包括大流行和流行病）的製造業或交通中斷；

•我們未能準確預測庫存需求，並適當管理庫存以滿足需求；

•我們無法按計劃發佈新產品;

•我們系統在訂單審核和處理方面的任何故障；以及

•由於貿易合規要求、勞資糾紛或交通港口的物流變化、航空公司罷工、惡劣天氣或其他原因導致的任何發貨延遲。

我們在很大程度上依賴於來自FortiGuard和其他安防訂閱以及FortiCare技術支持服務的營業收入，這些服務的營業收入可能會下降或波動。因爲我們在相關服務期間內確認這些服務的營業收入，所以FortiGuard和其他安防訂閱以及FortiCare技術支持服務的銷售下滑或回升不會立即在我們的運營結果中完全反映出來。

我們的FortiGuard及其他安防訂閱和FortiCare技術支持服務的營業收入在歷史上佔據了我們總營業收入的顯著比例。由於多種因素，包括我們安全網絡、統一SASE和安全運營產品和服務的銷售組合的波動和變化、終端客戶對我們產品和服務的滿意度、我們產品和服務的價格、競爭對手提供的產品和服務的價格、我們客戶支出水平的減少以及與此類銷售相關的收入確認時間的變動，新銷售或現有FortiGuard和其他安防訂閱及FortiCare技術支持服務合同的營業收入可能會下降和波動。如果我們新銷售或續訂的FortiGuard和其他安防訂閱及FortiCare技術支持服務合同下降，我們的營業收入和收入增長可能會減少，並且我們的業務可能會受到影響。此外，如果主要客戶要求延遲支付FortiGuard和其他安防訂閱及FortiCare技術支持服務的條款，或提供的支付時間短於年度，例如按月或按季度支付，這可能會對我們的賬單和收入產生負面影響。此外，我們在服務期間的整個期限內均勻地確認FortiGuard及其他安防訂閱和FortiCare技術支持服務的營業收入，服務期通常從一到五年。因此，我們每個季度報告的許多FortiGuard和其他安防訂閱及FortiCare技術支持服務的營業收入是之前幾個季度或年度簽訂的FortiGuard和其他安防訂閱及FortiCare技術支持服務合同的遞延收入確認。因此，任何一季度新或續訂的FortiGuard和其他安防訂閱及FortiCare技術支持服務合同的下降不會在該季度的收入中完全反映，但會對我們未來幾個季度的收入產生負面影響。因此，新銷售或續訂的FortiGuard和其他安防訂閱及FortiCare技術支持服務的銷售顯著下降的影響在未來期間之前不會在我們的收入報表中完全反映。我們的FortiGuard和其他安防訂閱及FortiCare技術支持服務的營業收入也使我們難以在任何時期通過額外服務銷售迅速提高我們的營業收入，因爲新支持服務合同和續訂合同的收入必須在適用的服務期內確認。

我們在市場中面臨激烈的競爭，可能無法維持或改善我們的競爭地位。
 
網絡安全產品的市場競爭激烈且動態，我們預計競爭將繼續加劇。我們在不同的網絡安全市場面臨許多競爭者。我們的競爭對手包括Aruba Networks, LLC、Check Point軟件技術有限公司、思科-T（「Cisco」）、CrowdStrike Holdings, Inc.（「CrowdStrike」）、F5 Networks, Inc.、華爲技術有限公司、瞻博網絡（Juniper Networks, Inc.）、Palo Alto Networks, Inc.、SonicWALL, Inc.、Sophos Group Plc和Zscaler, Inc.（「Zscaler」）。
 
一些現有和潛在競爭對手享有競爭優勢，例如：
 
•更高的知名度和/或更長的運營歷史；
 
•更大的銷售和市場預算和資源；
 
•更廣泛的分銷和與分銷合作伙伴及終端客戶建立的關係；
 
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目錄
•接觸更大的客戶群體;
 
•更強的客戶壓力位資源;
 
•更多資源用於進行收購；

•更強大的美國政府關係;
 
•降低勞動力和開發成本；以及
 
•大量增加的財務、技術和其他資源。
 
此外，我們的一些較大競爭對手擁有更廣泛的產品組合，並利用他們與其他產品的關係或將功能納入現有產品，以此來阻止客戶購買我們的產品。這些較大競爭對手通常擁有更廣泛的產品線和市場重點，並且在應對這些市場終端客戶資本支出的重大減少時處於更有利的位置。因此，這些競爭對手對特定市場的低迷不會過於敏感。此外，許多我們較小的競爭對手專注於提供針對單一安全威脅的保護，通常能夠比我們更快地將這些專門的安防產品投放市場。

我們市場的條件可能因爲技術進步或市場整合的持續而迅速且顯著地改變。我們的競爭對手和潛在競爭對手也可能能夠開發出與我們的產品或服務相同或更優秀的產品或服務，並利用新的業務模式，實現更大的市場接受度，顛覆我們的市場，通過與我們不同的分銷渠道增加銷售。例如，某些競爭對手正在專注於從雲端提供安防服務，其中包括雲安全提供商，如CrowdStrike和Zscaler。此外，當前或潛在的競爭對手可能會被擁有更多可用資源的第三方收購，新的競爭對手可能會因收購網絡安全公司或部門而出現。由於這些收購，我們市場的競爭可能會持續增加，當前或潛在的競爭對手可能能夠更快適應新技術和客戶需求，投入更多資源以推廣或銷售他們的產品和服務，發起或承受實質性的價格競爭，更容易利用收購或其他機會，或比我們更快地開發和擴展他們的產品和服務。並且，我們的競爭對手可能將與我們的競爭產品和服務捆綁在一起，與其他產品和服務銷售。客戶可能會選擇這些捆綁的產品和服務，而不是單獨購買我們的產品和服務。隨着我們的客戶更新之前幾年購買的安防產品，他們可能會尋求整合供應商，這可能導致當前客戶選擇持續從我們的競爭對手那裏購買產品。由於預算限制或經濟衰退，組織可能更願意逐步增加來自競爭對手的解決方案，以補充他們現有的網絡安全製造行業，而不是用我們的解決方案替換它。這些市場中的競爭壓力或我們未能有效競爭，可能導致價格降低、客戶訂單減少、營業收入和毛利減少以及市場份額的損失。

如果我們無法招聘、留住和激勵合格的人員，我們的業務將會受到影響。
 
我們未來的成功在一定程度上取決於我們繼續吸引和留住高技能人才的能力。任何關鍵人員的服務流失、吸引或留住合格人員的能力不足、未能爲關鍵高管制定並執行有效的繼任計劃，或在招聘所需人員（尤其是工程、銷售和營銷方面）上出現延誤，都可能嚴重損害我們的業務、財務狀況和經營成果。我們管理層人員有時會出現人員流動。例如，在2023年12月，我們的首席營業收入官在飛塔信息工作19年後宣佈即將退休。我們所有關鍵員工都沒有特定期限的僱傭協議，任何員工都可以隨時終止其僱傭關係。我們繼續吸引和留住高技能人才的能力對我們未來的成功至關重要。

高技能人員的競爭通常非常激烈，特別是在網絡安全領域，尤其是在我們有 substantial presence 的地方，以及在需要高技能人員的地區，比如舊金山灣區和加拿大溫哥華地區。我們可能無法成功吸引、整合或留住合格人員，以滿足我們當前或未來的需求。此外，如果我們從競爭對手那裏招聘人員，可能會面臨他們被不當招攬或泄露專有或其他機密信息的指控。移民法的變化，包括關於 H1-b 簽證規則的變化，可能也會影響我們吸引其他國家人員的能力。我們無法招聘到合格和有效的銷售、支持和工程員工，可能會對我們的增長及有效支持增長的能力造成傷害。

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我們已經承擔了債務，並可能在未來產生其他債務，這可能會對我們的財務控制項和未來財務業績產生不利影響。

截至2024年9月30日，我們的高級票據下尚有99380萬美元的債務未償還。在管理我們債務的協議下，我們被允許增加額外的債務。這些債務，以及我們未來可能產生的任何債務，可能會對我們的財務狀況和未來財務業績產生不利影響，包括但不限於以下幾點：

•增加我們對業務下滑、競爭壓力以及不利經濟和行業板塊條件的脆弱性;

•這要求我們將預期運營現金的一部分用於償還債務，從而減少可用於其他目的的預期現金流，包括資本支出、股份回購和收購；並且

•限制了我們在規劃或應對我們業務和行業變化時的靈活性。

如果我們在未來無法從運營中生成足夠的現金流來償還我們的債務，我們可能需要在其他事項中，尋求在債務或股權市場上獲得額外融資，重新融資或重組我們所有或部分債務，賣出精選資產，或減少或推遲計劃中的資本、運營或投資支出。這些措施可能不足以使我們能夠償還債務。

此外， governing我們債務的協議對我們施加了限制，並要求我們遵守某些契約。如果我們違反任何這些契約而未能獲得票據持有人的豁免，則在適用的補救期內，任何或所有我們未償還的債務可能會被立即宣佈到期並可支付。不能保證任何再融資或額外融資會以對我們有利或可接受的條款提供，甚至可能根本無法提供。

Under the terms of our outstanding Senior Notes, we may be required to repurchase the notes for cash prior to their maturity in connection with the occurrence of certain changes of control that are accompanied by certain downgrades in the credit ratings of the notes. The repayment obligations under the notes may have the effect of discouraging, delaying or preventing a takeover of our company. If we were required to pay the notes prior to their scheduled maturity, it could have a negative impact on our cash position and liquidity and impair our ability to invest financial resources in other strategic initiatives.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as affect our ability to obtain additional financing in the future and may negatively impact the terms of any such financing.

Risks Related to Our Sales and End-Customers

We generate a majority of revenue from sales to distributors, resellers and end-customers outside of the United States, and we are therefore subject to a number of risks associated with international sales and operations.
 
We market and sell our products throughout the world and have established sales offices in many parts of the world. Our international sales have represented a majority of our total revenue in recent periods. Therefore, we are subject to risks associated with having worldwide operations. We are also subject to a number of risks typically associated with international sales and operations, including:

•disruption in the supply chain or in manufacturing or shipping, or decreases in demand by channel partners or end-customers, including any such disruption or decreases caused by factors outside of our control such as natural disasters and health emergencies, including earthquakes, droughts, fires, power outages, typhoons, floods, pandemics or epidemics and manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts, terrorism, wars or other foreign conflicts, such as the war in Ukraine and the Israel-Hamas war or tensions between China and Taiwan, and critical infrastructure attacks;

•fluctuations in foreign currency exchange rates or a strengthening of the U.S. dollar, as a significant portion of our expenses is incurred and paid in currencies other than the U.S. dollar, and the impact such fluctuations may have on the actual prices that our partners and customers are willing to pay for our products and services;

•political instability, changes in trade agreements and conflicts such as the war in Ukraine and the Israel-Hamas war, tensions between China and Taiwan and any expansions thereof, could adversely affect our business and financial performance;
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•economic instability in foreign markets, such as any economic instability caused by economic downturns or recessions, could adversely affect our business and financial performance;

•greater difficulty in enforcing contracts and accounts receivable collection, including longer collection periods;

•longer sales processes for larger deals;

•changes in regulatory requirements;

•difficulties and costs of staffing and managing foreign operations;

•the uncertainty of protection for Intellectual Property (“IP”) rights in some countries;

•costs of compliance with foreign policies, laws and regulations and the risks and costs of non-compliance with such policies, laws and regulations;

•protectionist policies and penalties, and local laws, requirements, policies and perceptions that may adversely impact a U.S.-headquartered business’s sales in certain countries outside of the United States;
 
•costs of complying with, and the risks, reputational damage and other costs of non-compliance with, U.S. or other foreign laws and regulations for foreign operations, including the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, the General Data Protection Regulation (the “GDPR”), import and export control laws, trade laws and regulations, tariffs and retaliatory measures, trade barriers and economic sanctions;

•other regulatory or contractual limitations on our ability to sell our products in certain foreign markets, and the risks and costs of non-compliance;

•heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales or sales-related arrangements, such as sales “side agreements” to allow return rights, that could disrupt the sales team through terminations of employment or otherwise, and may adversely impact financial results as compared to those already reported or forecasted and result in restatements of financial statements and irregularities in financial statements;

•our ability to effectively implement and maintain adequate internal controls to properly manage our international sales and operations;

•political unrest, changes and uncertainty associated with terrorism, hostilities, war or natural disasters;
 
•management communication and integration problems resulting from cultural differences and geographic dispersion; and

•changes in tax, tariff, employment and other laws.
 
Product and service sales and employee and contractor matters may be subject to foreign governmental regulations, which vary substantially from country to country. Further, we may be unable to keep up to date with changes in government requirements as they change over time. Failure to comply with these regulations could result in adverse effects to our business. In many foreign countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us. Although we implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, channel partners and agents will comply with these laws and policies. Violations of laws or key control policies by our employees, contractors, channel partners or agents could result in litigation, regulatory action, costs of investigation, delays in revenue recognition, delays in financial reporting, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our products and services, any of which could have a material adverse effect on our business and results of operations.

We may undertake corporate operating restructurings or transfers of assets that involve our group of foreign country subsidiaries through which we do business abroad, in order to maximize the operational and tax efficiency of our group structure. If ineffectual, such restructurings or transfers could increase our income tax liabilities, and in turn, increase our global effective tax rate. Moreover, our existing corporate structure and intercompany arrangements have been implemented in a manner we believe reasonably ensures that we are in compliance with current prevailing tax laws. However, the tax authorities
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of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could impact our worldwide effective tax rate and harm our financial position and operating results.

If we are not successful in continuing to execute our strategy to increase our sales to large- and medium-sized end-customers, our results of operations may suffer.
 
An important part of our growth strategy is to increase sales of our products to large- and medium-sized businesses, service providers and government organizations. While we have increased sales in recent periods to large- and medium-sized businesses, our sales volume varies by quarter and there is a risk as to our level of success selling to these target customers. Such sales involve unique sales skillsets, processes and structures, are often more complex and feature a longer contract term and may be at higher discount levels. We also have experienced uneven traction selling to certain government organizations and service providers and MSSPs, and there can be no assurance that we will be successful selling to these customers. Sales to these organizations involve risks that may not be present, or that are present to a lesser extent, with sales to smaller entities. These risks include:

•increased competition from competitors that traditionally target large- and medium-sized businesses, service providers and government organizations and that may already have purchase commitments from those end-customers;
 
•increased purchasing power and leverage held by large end-customers in negotiating contractual arrangements;

•unanticipated changes in the capital resources or purchasing behavior of large end-customers, including changes in the volume and frequency of their purchases and changes in the mix of products and services, willingness to change to cloud delivery model and related payment terms;
 
•more stringent support requirements in our support service contracts, including stricter support response times, more complex requirements and increased penalties for any failure to meet support requirements;

•longer sales cycles and the associated risk that deals are delayed and that substantial time and resources may be spent on a potential end-customer that elects not to purchase our products and services;

•increased requirements from these customers that we have certain third-party security or other certifications, which we may not have, the lack of which may adversely affect our ability to successfully sell to such customers;

•uncertainty as to timing to close large deals and any delays in closing those deals; and

•longer ramp-up periods for enterprise sales personnel as compared to other sales personnel.
 
Large- and medium-sized businesses, service providers and MSSPs and government organizations often undertake a significant evaluation process that results in a lengthy sales cycle, in some cases longer than 12 months. Although we have a channel sales model, our sales representatives typically engage in direct interaction with end-customers, along with our distributors and resellers, in connection with sales to large- and medium-sized end-customers. We may spend substantial time, effort and money in our sales efforts without being successful in producing any sales. In addition, purchases by large- and medium-sized businesses, service providers and government organizations are frequently subject to budget constraints, multiple approvals and unplanned administrative, processing and other delays; in light of current economic conditions and regulations in place by various government authorities, some of these sales cycles are being further extended. Furthermore, service providers and MSSPs represent our largest industry vertical and consolidation or continued changes in buying behavior by larger customers within this industry could negatively impact our business. Large- and medium-sized businesses, service providers and MSSPs and government organizations typically have longer implementation cycles, require greater product functionality and scalability, expect a broader range of services, including design, implementation and post go-live services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead to a delay in revenue recognition and expect greater payment flexibility from vendors. In addition, large- and medium-sized businesses, service providers and government organizations may require that our products and services be sold differently from how we offer our products and services, which could negatively impact our operating results. Our large business and service provider customers may also become more deliberate in their purchases as they plan their next-generation network security architecture, leading them to take more time in making purchasing decisions or to purchase based only on their immediate needs. All these factors can add further risk to business conducted with these customers. In addition, if sales expected from a large- and medium-sized end-customer for a particular quarter are not realized in that quarter or at all, our business, operating results and financial condition could be materially and adversely affected.

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If we do not increase the effectiveness of our sales organization, we may have difficulty adding new end-customers or increasing sales to our existing end-customers and our business may be adversely affected.

Although we have a channel sales model, sales in our industry are complex and members of our sales organization often engage in direct interaction with our prospective end-customers, particularly for larger deals involving larger end-customers. Therefore, we continue to be substantially dependent on our sales organization to obtain new end-customers and sell additional products and services to our existing end-customers. There is significant competition for sales personnel with the skills and technical knowledge that we require, including experienced enterprise sales employees and others. Our ability to grow our revenue depends, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth and on the effectiveness of our sales strategy, sales execution, and sales personnel selling successfully in different contexts, each of which has its own different complexities, approaches and competitive landscapes, such as managing and growing the channel business for sales to small businesses and more actively selling to the end-customer for sales to larger organizations. New hires require substantial training and may take significant time before they achieve full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. Furthermore, hiring sales personnel in new countries requires additional setup and upfront costs that we may not recover if the sales personnel fail to achieve full productivity. If our sales employees do not become fully productive on the timelines that we have projected, our revenue may not increase at anticipated levels and our ability to achieve long-term projections may be negatively impacted. If we are unable to hire and train sufficient numbers of effective sales personnel, the sales personnel are not successful in obtaining new end-customers or increasing sales to our existing customer base or sales personnel do not effectively sell our extended security fabric, our business, operating results and prospects may be adversely affected. If we do not hire properly qualified and effective sales employees and organize our sales team effectively to capture the opportunities in the various customer segments we are targeting, our growth and ability to effectively support growth may be harmed.

In addition, in light of macroeconomic trends and in the event of sales execution challenges for any reason, we may face excess sales capacity, low sales productivity generally, and a decline in productivity in our sales organization. If we are not able to align our sales capacity and market demand, or if the productivity of our sales organization decreases, our operating results and financial condition could be harmed.

We periodically implement new sales compensation plans, which may change the method, amount and timing for sales-based compensation for our sales personnel. If we are not successful in implementing new sales compensation plans, or members of our sales team react negatively to such new plans, this may negatively impact our ability to execute and grow sales and we may be unable to hire, retain and motivate qualified sales personnel.

Unless we continue to develop better market awareness of our company and our products, and to improve lead generation and sales enablement, our revenue may not continue to grow.

Increased market awareness of our capabilities and products and increased lead generation are essential to our continued growth and our success in all of our markets, particularly the market for sales to large businesses, service providers and government organizations. While we have increased our investments in sales and marketing, it is not clear that these investments will continue to result in increased revenue. If our investments in additional sales personnel or our marketing programs are not successful in continuing to create market awareness of our company and products or increasing lead generation, in growing billings for our broad product suite or if we experience turnover and disruption in our sales and marketing teams, we may not be able to achieve sustained growth, and our business, financial condition and results of operations may be adversely affected.

Some of our sales are to government organizations, which subjects us to a number of regulatory requirements, their own supply chain and contractual requirements, challenges and risks.

Sales to U.S. and foreign federal, state and local government organizations are subject to a number of risks. Because of public sector budgetary cycles and laws or regulations governing public procurements, such sales often require significant upfront time and expense without any assurance of winning a sale.

Government demand, sales and payment for our products and services may be negatively impacted by numerous factors and requirements unique to selling to government agencies, such as:

•policies, laws and regulations have in the past, and may in the future, require us to obtain and maintain certain security and other certifications in order to sell our products and services into certain government organizations, and such certifications may be costly and time-consuming to obtain and maintain;

•funding authorizations and requirements unique to government agencies, with funding or purchasing reductions or delays adversely affecting public sector demand for our products; and
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•geopolitical matters, including tariff and trade disputes, government shutdowns, impact of the war in Ukraine and the Israel-Hamas war, tensions between China and Taiwan and trade protectionism and other political dynamics that may adversely affect our ability to sell in certain locations or obtain the requisite permits and clearances required for certain purchases by government organizations of our products and services.

In addition, if we do not have certain certifications, this may restrict our ability to sell to certain customers until we have obtained certain certifications and we may not obtain the certifications in a timely manner or at all. For example, certain of our competitors may have decided to become certified under the U.S. Federal Risk and Authorization Management Program (“FedRAMP”), and until the time that we also certify under FedRAMP, we risk losing deals to certified competitors for deals where FedRAMP certification is a requirement.

The rules and regulations applicable to sales to government organizations may also negatively impact sales to other organizations. For example, government organizations may have contractual or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a default, and any such termination may adversely impact our future results of operations. If the distributor receives a significant portion of its revenue from sales to government organizations, the financial health of the distributor could be substantially harmed, which could negatively affect our future sales to such distributor. Governments routinely investigate, review and audit government vendors’ administrative and other processes, and any unfavorable investigation, audit, other review or unfavorable determination related to any government clearance or certification could result in the government’s refusing to continue buying our products and services, a limitation and reduction of government purchases of our products and services, a reduction of revenue or fines, or civil or criminal liability if the investigation, audit or other review uncovers improper, illegal or otherwise concerning activities. Any such penalties could adversely impact our results of operations in a material way. Further, any refusal to grant certain certifications or clearances by one government agency, or any decision by one government agency that our products do not meet certain standards, may reduce business opportunities and cause reputational harm and cause concern with other government agencies, governments and businesses and cause them to not buy our products and services and/or lead to a decrease in demand for our products generally.

Finally, some governments, including the U.S. federal government, may require certain products to be manufactured in, and services to be provided from, certain identified countries which may be high-cost locations. We may not manufacture all products or provide all services in locations that meet such requirements and consequently our products and services may not be eligible for certain government purchases.

Risks Related to Our Products and Services, Industry and Customers

Actual, possible or perceived defects, errors or vulnerabilities in our products or services, the failure of our products or services to detect or prevent a security incident or the misuse of our products could harm our and our customers’ operational results and reputation.

Our products and services are complex, and they have contained and may contain defects, errors or vulnerabilities that are not detected until after their commercial release and deployment by our customers. Defects, errors or vulnerabilities may impede or block network traffic, cause our products or services to be vulnerable to electronic break-ins, cause them to fail to help secure our customers or cause our products or services to allow unauthorized access to our customers’ networks, or an unintended disruption to our customers’ operations. Following a review in accordance with our publicly available Product Security Incident Response Team policy, our Product Security Incident Response Team publicly posts on our FortiGuard Labs website known product vulnerabilities, including critical vulnerabilities, and methods for customers to mitigate the risk of vulnerabilities. For example, we recently discovered, and subsequently released to customers an advisory update and patch for, a critical vulnerability in our FortiManager product. We are subject to various risks due to the FortiManager vulnerability, including reputational harm, adverse impacts to customer relationships, potential litigation, and additional regulatory scrutiny, which could negatively impact our business, operating results and financial condition. There can be no assurance that posts on our FortiGuard Labs website, including with respect to the recently announced FortiManager vulnerability, will be sufficiently timely, accurate or complete or that those customers will take steps to mitigate the risk of vulnerabilities, and certain customers may be negatively impacted. Additionally, any perception that our products have vulnerabilities, whether or not accurate, and any actual vulnerabilities may harm our operational results and reputation, more significantly as compared to other companies in other industries. Our products are also susceptible to errors, defects, logic flaws, vulnerabilities and inserted vulnerabilities that may arise in, or be included in our products in, different stages of our supply chain, manufacturing and shipment processes, and a threat actor’s exploitation of these weaknesses may be difficult to anticipate, prevent, and detect. If we are unable to maintain an effective supply chain security risk management and products security program or we inadvertently release a product or an update to a product with a defect in it, then the security and integrity of our products and the updates to those products that our customers receive could be exploited by third parties or insiders, or our solutions or updates thereto could cause an unintended disruption to our customers’ operations. Different customers deploy and use our products in different ways, and certain deployments and usages may subject our products to adverse conditions that may negatively impact the effectiveness and useful lifetime of our products. Our networks and products, including cloud-based technology, could be targeted by attacks specifically designed to disrupt our business and harm our operational results and reputation. We cannot
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ensure that our products will prevent all adverse security events or not cause disruptions to our customers’ operations. Because the techniques used by malicious adversaries to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques. In addition, defects or errors in our FortiGuard and other security subscription or FortiCare updates or our Fortinet appliances and operating systems could result in a failure of our FortiGuard and other security subscription services to effectively or correctly update end-customers’ Fortinet appliances and cloud-based products and thereby leave customers vulnerable to attacks or to disruptions in operations. Furthermore, our solutions may also fail to detect or prevent viruses, worms, ransomware attacks or similar threats due to a number of reasons such as the evolving nature of such threats and the continual emergence of new threats that we may fail to anticipate or add to our FortiGuard databases in time to protect our end-customers’ networks. Our data centers and networks and those of our hosting vendors and cloud service providers may also experience technical failures and downtime, and may fail to distribute appropriate updates, or fail to meet the increased requirements of our customer base. Any such technical failure, downtime or failures in general may temporarily or permanently expose our end-customers’ networks, leaving their networks unprotected against the latest security threats.

An actual, possible or perceived security incident or infection of the network of one of our end-customers or a disruption to their operations, regardless of whether the incident is attributable to the failure of our products or services to prevent or detect the security incident or be the cause of such disruption, or any actual or perceived security risk in our supply chain, could adversely affect the market’s perception of our security products and services, cause customers and customer prospects not to buy from us and, in some instances, subject us to potential liability that is not contractually limited. We may not be able to correct any security flaws or vulnerabilities promptly, or at all. Our products may also be misused or misconfigured by end-customers or third parties who obtain access to our products. For example, our products could be used to censor private access to certain information on the internet. Such use of our products for censorship could result in negative press coverage and negatively affect our reputation, even if we take reasonable measures to prevent any improper shipment of our products or if our products are provided by an unauthorized third party. Any actual, possible or perceived defects, errors or vulnerabilities in our products, or misuse of our products, could result in:
 
•the expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors or defects or to address and eliminate vulnerabilities;
 
•the loss of existing or potential end-customers or channel partners;
 
•delayed or lost revenue;
 
•delay or failure to attain market acceptance;
 
•negative publicity and harm to our reputation; and
 
•disclosure requirements, litigation, regulatory inquiries or investigations that may be costly and harm our reputation and, in some instances, subject us to potential liability that is not contractually limited.

If our internal enterprise IT networks, on which we conduct internal business and interface externally, our operational networks, through which we connect to customers, vendors and partners systems and provide services, or our research and development networks, our back-end labs and cloud stacks hosted in our data centers, colocation vendors or public cloud providers, through which we research, develop and host products and services, are compromised, public perception of our products and services may be harmed, our customers may be breached and harmed, we may become subject to liability, and our business, operating results and stock price may be adversely impacted.

Our success depends on the market’s confidence in our ability to provide effective network security protection. Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, whether in our owned data centers, cloud providers or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether in our owned data centers, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether in our owned data centers, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving us may result in more harm to our reputation and brand than companies that do
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not sell network security solutions. Hackers and malicious parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat landscape continues to evolve as a result of new technologies, including artificial intelligence (“AI”), and malicious parties may use AI to help attack our solutions, systems, and our customers.

For example, from time to time, we have discovered that unauthorized parties have targeted us using sophisticated techniques, including by stealing technical data and attempting to steal private encryption keys, in an effort to both impersonate our products and threat intelligence update services and possibly attempt other attack methodologies. Using these techniques, these unauthorized parties have tried, and may in the future try, to gain access to certain of our and our customers’ systems. For example, recently, an individual gained unauthorized access to a limited number of files stored on our instance of a third-party cloud-based shared file drive, which included limited data related to a small percentage of our customers. We do not currently believe that this incident was material as a result of our assessment of various factors, including, but not limited to, because (i) our operations, products, and services have not been impacted, and (ii) we have identified no evidence of additional access to any other of our resources. As a result, we have not experienced, and do not currently believe that the incident is reasonably likely to have, a material impact to our financial condition, operating results or business. However, we remain subject to various risks due to the incident and its impact, including reputational harm, adverse impacts to customer relationships, potential litigation, and additional regulatory scrutiny. We have also, for example, discovered that unauthorized parties have targeted vulnerabilities in our product software and infrastructure in an effort to gain entry into our customers’ networks. In addition, in general threat actors use dark web forums to sell organizations’ stolen credentials. If threat actors sell valid credentials used by our customers to access our services, it is possible that unauthorized third parties may use such stolen credentials to try to gain access to our services. These and other hacking efforts against us and our customers may be ongoing and may happen in the future.

Although we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products, processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the future be, successful in improperly accessing our systems and our customers’ systems, which could negatively impact us and our customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and/or our customers’ supply chains, networks, systems or websites could adversely affect the market perception of our products and services and investor confidence in our company. Any breach of our networks, systems or websites could impair our ability to operate our business, including our ability to provide FortiGuard and other security subscription and FortiCare technical support services to our end-customers, lead to interruptions or system slowdowns, cause loss of critical data or lead to the unauthorized disclosure or use of confidential, proprietary or sensitive information. We could also be subject to liability and litigation and reputational harm and our channel partners and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal networks, systems or websites could have an adverse effect on our business, operating results and stock price.

In addition, there has been a general increase in phishing attempts and spam emails as well as social engineering attempts from hackers, and many of our employees continue to work remotely which may pose additional data security risks in the event remote work environments are not as secure as office environments. Any security incident could negatively impact our reputation and results of operations.

Managing inventory of our products and product components is complex. We order components from third-party manufacturers based on our forecasts of future demand and targeted inventory levels, which exposes us to the risk of both product shortages, which may result in lost sales and higher expenses, and excess inventory, which may require us to sell our products at discounts and lead to inventory charges or write-offs.

Managing our inventory is complex, especially in times of supply chain disruption. Our channel partners may increase orders during periods of product shortages, cancel orders or not place orders commensurate with our expectations if their inventory is too high, return products or take advantage of price protection (if any is available to the particular partner) or delay orders in anticipation of new products, and accurately forecasting inventory requirements and demand can be challenging. Our channel partners also may adjust their orders in response to the supply of our products and the products of our competitors that are available to them and in response to seasonal fluctuations in end-customer demand. If we cannot manufacture and ship our products due to, for example, global chip shortages, excessive demand on contract manufacturers capacity, natural disasters and health emergencies such as earthquakes, fires, power outages, typhoons, floods, health pandemics and epidemics or manmade events such as civil unrest, labor disruption, cyber events, international trade disputes, international conflicts, terrorism, wars or other foreign conflicts, such as the war in Ukraine and the Israel-Hamas war or tensions between China and Taiwan, and critical infrastructure attacks, our business and financial results could be materially and adversely impacted. The conflicts in the Middle East highlights potential risks associated with geopolitical instability in the region, including disruption to shipping routes,
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longer lead times for components and products, increased insurance costs for vessels passing through conflict zones, potential increased costs for shipping and products, and potential delays and interruptions in the supply chain. We may face challenges in sourcing materials, fulfilling orders and managing logistics efficiently, which could ultimately affect our operations, financial performance and overall business continuity.

In response to component shortages in previous periods, we increased our purchase order commitments. Our suppliers have in some instances and may in the future require us to accept or pay for components and finished goods regardless of our level of sales in a particular period, which may negatively impact our operating results and financial condition. For additional information and a further discussion of impacts and risks related to our purchase commitments with our suppliers, refer to Note 11. Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Inventory management remains an area of focus as we balance the need to maintain inventory levels that are sufficient to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology, product transitions, customer requirements or excess inventory levels. If we ultimately determine that we have excess inventory, we may have to reduce our prices, which may result in inventory charges and/or write-down of inventory, which in turn could result in lower gross margins. Alternatively, insufficient inventory levels may lead to shortages that result in delayed billings and revenue or loss of sales opportunities altogether as potential end-customers turn to competitors’ products that are readily available. For example, we have in the past experienced inventory shortages and excesses due to the variance in demand for certain products from forecasted amounts. Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to effectively manage inventory. If we are unable to effectively manage our inventory and that of our channel partners, our results of operations could be adversely affected.

If our new products, services and enhancements do not achieve sufficient market acceptance, our results of operations and competitive position will suffer.

We spend substantial amounts of time and money to develop internally and acquire new products and services and enhance versions of our existing products and services in order to incorporate additional features, improved functionality or other enhancements in order to meet our customers’ rapidly evolving demands for network security in our highly competitive industry. When we develop a new product or service, or an enhanced version of an existing product or service, we typically incur expenses and expend resources upfront to market, promote and sell the new offering. Therefore, when we develop and introduce new or enhanced products or services, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market.

Our new products, services or enhancements could fail to attain sufficient market acceptance for many reasons, including:
 
•actual or perceived defects, vulnerabilities, errors or failures;

•delays in releasing our new products, services or enhancements to the market;
 
•failure to accurately predict market demand in terms of product and service functionality and to supply products and services that meet this demand in a timely fashion;

•failure to have the appropriate research and development expertise and focus to make our top strategic products and services successful;
 
•failure of our sales force and partners to focus on selling new products and services;
 
•inability to interoperate effectively with the networks or applications of our prospective end-customers;
 
•inability to protect against new types of attacks or techniques used by hackers;
 
•negative publicity about their performance or effectiveness;
 
•introduction or anticipated introduction of competing products and services by our competitors;
 
•poor business conditions for our end-customers, causing them to delay IT purchases;
 
•changes to the regulatory requirements around security; and
 
•reluctance of customers to purchase products or services incorporating open source software.
 
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If our new products, services or enhancements do not achieve adequate acceptance in the market, our competitive position will be impaired, our revenue will be diminished and the effect on our operating results may be particularly acute because of the significant research, development, marketing, sales and other expenses we incurred in connection with the new product, service or enhancement.

The network security market is rapidly evolving and the complex technology incorporated in our products makes them difficult to develop. If we do not accurately predict, prepare for and respond promptly to technological and market developments, changing end-customer needs, and expanding regulatory requirements and standards, our competitive position and prospects may be harmed.

The network security market is expected to continue to evolve rapidly. Moreover, many of our end-customers operate in markets characterized by rapidly changing technologies and business plans, which require them to add numerous network access points and adapt increasingly complex networks, incorporating a variety of hardware, software applications, operating systems and networking protocols. In addition, computer hackers and others who try to attack networks employ increasingly sophisticated techniques to gain access to and attack systems and networks. The technology in our products is especially complex because of the requirements to effectively identify and respond to new and increasingly sophisticated methods of attack, while minimizing the impact on network performance. Additionally, some of our new products and enhancements may require us to develop new hardware architectures and ASICs that involve complex, expensive and time-consuming research and development processes. For example, we enter into development agreements with third parties. If our development projects are not successfully completed, or are not completed in a timely fashion, our product development could be delayed and our business generally could suffer. Costs for development can be substantial and our profitability may be harmed if we are unable to recover these costs. Although the market expects rapid introduction of new products or product enhancements to respond to new threats, the development of these products is difficult and the timetable for commercial release and availability is uncertain and there can be long time periods between releases and availability of new products. We have in the past and may in the future experience unanticipated delays in the availability of new products and services and fail to meet previously announced timetables for such availability. If we do not quickly respond to the rapidly changing and rigorous needs of our end-customers by developing, releasing and making available on a timely basis new products and services or enhancements that can respond adequately to new security threats, our competitive position and business prospects may be harmed.

Moreover, business models based on a subscription cloud-based software service have become increasingly in demand by our end-customers and adopted by other providers, including our competitors. While we have introduced additional cloud-based solutions and will continue to do so, most of our platform is currently deployed on premise, and therefore, as customers demand that solutions be provided through a subscription cloud-based business model, we are making additional investments in our infrastructure and personnel to be able to more fully provide our platform through a subscription cloud-based model in order to maintain the competitiveness of our platform. Such investments involve expanding our data centers, servers and networks, and increasing our technical operations and engineering teams and this results in added cost and risks associated with managing new business models, such as obligations to deliver certain functionality and features and to meet certain service level agreements related to cloud-based solutions. There is also a risk that we are slower to offer these solutions than competitors. The risks are compounded by the uncertainty concerning the future success of any of our particular subscription cloud-based business models and the future demand for our subscription cloud-based models by customers. Additionally, if we are unable to meet the demand to provide our services effectively through a subscription cloud-based model, we may lose customers to competitors.

Demand for our products may be limited by market perception that individual products from one vendor that provide multiple layers of security protection in one product are inferior to point products from multiple vendors.
 
Sales of many of our products depend on increased demand for incorporating broad security functionality into one appliance. If the market for these products fails to grow as we anticipate, our business will be seriously harmed. Target customers may view “all-in-one” network security solutions as inferior to security solutions from multiple vendors because of, among other things, their perception that such products of ours provide security functions from only a single vendor and do not allow users to choose “best-of-breed” defenses from among the wide range of dedicated security applications available. Target customers might also perceive that, by combining multiple security functions into a single platform, our solutions create a “single point of failure” in their networks, which means that an error, vulnerability or failure of our product may place the entire network at risk. In addition, the market perception that “all-in-one” solutions may be suitable only for small- and medium-sized businesses because such solution lacks the performance capabilities and functionality of other solutions may harm our sales to large businesses, service provider and government organization end-customers. If the foregoing concerns and perceptions become prevalent, even if there is no factual basis for these concerns and perceptions, or if other issues arise with our market in general, demand for multi-security functionality products could be severely limited, which would limit our growth and harm our business, financial condition and results of operations. Further, a successful and publicized targeted attack against us, exposing a “single point of failure”, could significantly increase these concerns and perceptions and may harm our business and results of operations.

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If functionality similar to that offered by our products is incorporated into existing network infrastructure products, organizations may decide against adding our appliances to their network, which would have an adverse effect on our business.
 
Large, well-established providers of networking equipment, such as Cisco, offer, and may continue to introduce, network security features that compete with our products, either in standalone security products or as additional features in their network infrastructure products. The inclusion of, or the announcement of an intent to include, functionality perceived to be similar to that offered by our security solutions in networking products that are already generally accepted as necessary components of network architecture may have an adverse effect on our ability to market and sell our products. Furthermore, even if the functionality offered by network infrastructure providers is more limited than our products, a significant number of customers may elect to accept such limited functionality in lieu of adding appliances from an additional vendor such as us. Many organizations have invested substantial personnel and financial resources to design and operate their networks and have established deep relationships with other providers of networking products, which may make them reluctant to add new components to their networks, particularly from other vendors such as us. In addition, an organization’s existing vendors or new vendors with a broad product offering may be able to offer concessions that we are not able to match because we currently offer only network security products and have fewer resources than many of our competitors. If organizations are reluctant to add additional network infrastructure from new vendors or otherwise decide to work with their existing vendors, our business, financial condition and results of operations will be adversely affected.

Because we depend on several third-party manufacturers to build our products, we are susceptible to manufacturing delays that could prevent us from shipping customer orders on time, if at all, and may result in the loss of sales and customers, additionally third-party manufacturing cost increases and changes in the geopolitical environment could result in lower gross margins and free cash flow.

We outsource the manufacturing of our security appliance products to contract manufacturing partners and original design manufacturing partners, including manufacturers with facilities located in Taiwan and other countries outside the United States such as IBASE, Micro-Star, Senao and Wistron. Our reliance on our third-party manufacturers reduces our control over the manufacturing process, exposing us to risks, including reduced control over quality assurance, costs, supply and timing and possible tariffs. Any manufacturing disruption related to our third-party manufacturers or their component suppliers for any reason, including global chip shortages, natural disasters and health emergencies such as earthquakes, fires, power outages, typhoons, floods, health pandemics and epidemics and manmade events such as civil unrest, labor disruption, cyber events, international trade disputes, international conflicts, terrorism, wars or other foreign conflicts, such as the war in Ukraine and the Israel-Hamas war or tensions between China and Taiwan, and critical infrastructure attacks, could impair our ability to fulfill orders. If we are unable to manage our relationships with these third-party manufacturers effectively, or if these third-party manufacturers experience delays, increased manufacturing lead-times, disruptions, capacity constraints or quality control problems in their manufacturing operations, or fail to meet our future requirements for timely delivery, our ability to ship products to our customers could be impaired and our business would be seriously harmed. Further, certain components for our products come from Taiwan and approximately 90% of our hardware is manufactured in Taiwan. Any increase in tensions between China and Taiwan, including threats of military actions or escalation of military activities, could adversely affect our manufacturing operations in Taiwan.
 
These manufacturers fulfill our supply requirements on the basis of individual purchase orders. We have no long-term contracts or arrangements with our third-party manufacturers that guarantee capacity, the continuation of particular payment terms or the extension of credit limits. Accordingly, they are not obligated to continue to fulfill our supply requirements, and the prices we are charged for manufacturing services could be increased on short notice. If we are required to change third-party manufacturers, our ability to meet our scheduled product deliveries to our customers would be adversely affected, which could cause the loss of sales and existing or potential customers, delayed revenue or an increase in our costs, which could adversely affect our gross margins. Our individual product lines are generally manufactured by only one manufacturing partner. Any production or shipping interruptions for any reason, such as a natural disaster, epidemics, pandemics, capacity shortages, quality problems or strike or other labor disruption at one of our manufacturing partners or locations or at shipping ports or locations, would severely affect sales of our product lines manufactured by that manufacturing partner. Furthermore, manufacturing cost increases for any reason could result in lower gross margins.
 
Our proprietary ASIC, which are key to the performance of our appliances, are built by contract manufacturers including Renesas and Toshiba America. These contract manufacturers use foundries operated by TSMC or Renesas on a purchase-order basis, and these foundries do not guarantee their capacity and could delay orders or increase their pricing. Accordingly, the foundries are not obligated to continue to fulfill our supply requirements, and due to the long lead time that a new foundry would require, we could suffer inventory shortages of our ASIC as well as increased costs. In addition to our proprietary ASIC, we also purchase off-the-shelf ASICs or integrated circuits from vendors for which we have experienced, and may continue to experience, long lead times. Our suppliers may also prioritize orders by other companies that order higher volumes or more profitable products. If any of these manufacturers materially delays its supply of ASICs or specific product
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models to us, or requires us to find an alternate supplier and we are not able to do so on a timely and reasonable basis, or if these foundries materially increase their prices for fabrication of our ASICs, our business would be harmed.

In addition, our reliance on third-party manufacturers and foundries limits our control over environmental regulatory requirements such as the hazardous substance content of our products and therefore our ability to ensure compliance with the Restriction of Hazardous Substances Directive (the “EU RoHS”) adopted in the European Union (the “EU”) and other similar laws. It also exposes us to the risk that certain minerals and metals, known as “conflict minerals”, that are contained in our products have originated in the Democratic Republic of the Congo or an adjoining country. As a result of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the Securities and Exchange Commission (the “SEC”) adopted disclosure requirements for public companies whose products contain conflict minerals that are necessary to the functionality or production of such products. Under these rules, we are required to obtain sourcing data from suppliers, perform supply chain due diligence, and file annually with the SEC a specialized disclosure report on Form SD covering the prior calendar year. We have incurred and expect to incur additional costs to comply with the rules, including costs related to efforts to determine the origin, source and chain of custody of the conflict minerals used in our products and the adoption of conflict minerals-related governance policies, processes and controls. Moreover, the implementation of these compliance measures could adversely affect the sourcing, availability and pricing of materials used in the manufacture of our products to the extent that there may be only a limited number of suppliers that are able to meet our sourcing requirements, which would make it more difficult to obtain such materials in sufficient quantities or at competitive prices. We may also encounter customers who require that all of the components of our products be certified as conflict-free. If we are not able to meet customer requirements, such customers may choose to not purchase our products, which could impact our sales and the value of portions of our inventory.

Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages, long or uncertain lead times for components, and supply changes, each of which could disrupt or delay our scheduled product deliveries to our customers, result in inventory shortage, cause loss of sales and customers or increase component costs resulting in lower gross margins and free cash flow.

We and our contract manufacturers currently purchase several key parts and components used in the manufacture of our products from limited sources of supply. We are therefore subject to the risk of shortages and long or uncertain lead times in the supply of these components and the risk that component suppliers may discontinue or modify components used in our products. We have in the past experienced shortages and long or uncertain lead times for certain components. Our limited source components for particular appliances and suppliers of those components include specific types of CPUs from Intel and Advanced Micro Devices, Inc. (“AMD”), network and wireless chips from Broadcom, Marvell, Qualcomm and Intel, and memory devices from Intel, Micron, ADATA, Toshiba, Samsung and Western Digital. We also may face shortages in the supply of the capacitors and resistors that are used in the manufacturing of our products, which may persist for an indefinite period of time. The introduction by component suppliers of new versions of their products, particularly if not anticipated by us or our contract manufacturers, could require us to expend significant resources to incorporate these new components into our products. In addition, if these suppliers were to discontinue production of a necessary part or component, we would be required to expend significant resources and time in locating and integrating replacement parts or components from another vendor. Qualifying additional suppliers for limited source parts or components can be time-consuming and expensive.

If we are unable to obtain sufficient quantities of any of these components on commercially reasonable terms or in a timely manner, or if we are unable to obtain alternative sources for these components, shipments of our products could be delayed or halted entirely or we may be required to redesign our products. Any of these events could result in a cancellation of orders, lost sales, reduced gross margins or damage to our end customer relationships, which would adversely impact our business, financial condition, results of operations and prospects. Additionally, if actual demand does not directly match with our demand forecasts, due to our purchase order commitments, we in some instances have been required to and may in the future be required to accept or pay for components and finished goods. This may result in us discounting our products or excess or obsolete inventory, which we would be required to write down to its estimated realizable value, which in turn could result in lower gross margins. Our reliance on a limited number of suppliers involves several additional risks, including:

•a potential inability to obtain an adequate supply of required parts or components when required;

•financial or other difficulties faced by our suppliers;
 
•infringement or misappropriation of our IP;
 
•price increases;
 
•failure of a component to meet environmental or other regulatory requirements;
 
•failure to meet delivery obligations in a timely fashion;
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•failure in component quality; and

•inability to ship products on a timely basis.
 
The occurrence of any of these events would be disruptive to us and could seriously harm our business. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to meet our scheduled product deliveries to our distributors, resellers and end-customers. This could harm our relationships with our channel partners and end-customers and could cause delays in shipment of our products and adversely affect our results of operations. In addition, increased component costs could result in lower gross margins.

We offer retroactive price protection to certain of our major distributors in North America, and if we fail to balance their inventory with end-customer demand for our products, our allowance for price protection may be inadequate, which could adversely affect our results of operations.

We provide certain of our major distributors in North America with price protection rights for inventories of our products held by them. If we reduce the list price of our products, as we have recently done, certain distributors in North America receive refunds or credits from us that reduce the price of such products held in their inventory based upon the new list price. Future credits for price protection will depend on the percentage of our price reductions for the products in inventory and our ability to manage the levels of certain of our major distributors’ inventories in North America. If future price protection adjustments are higher than expected, our future results of operations could be materially and adversely affected.

The sales prices of our products and services may decrease, which may reduce our gross profits and operating margin and may adversely impact our financial results and the trading price of our common stock.
 
The sales prices for our products and services may decline for a variety of reasons or our product mix may change, resulting in lower growth and margins based on a number of factors, including competitive pricing pressures, discounts or promotional programs we offer, a change in our mix of products and services and anticipation of the introduction of new products and services. We have recently conducted such price decreases. Competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse product offerings may reduce the price of products and services that compete with ours in order to promote the sale of other products or services or may bundle them with other products or services. Additionally, although we price our products and services worldwide in U.S. dollars, currency fluctuations in certain countries and regions have in the past, and may in the future, negatively impact actual prices that partners and customers are willing to pay in those countries and regions. Additionally, while our U.S distribution agreements contain price protections, our international distribution agreements do not contain such protections. Furthermore, we anticipate that the sales prices and gross profits for our products or services will decrease over product life cycles. We cannot ensure that we will be successful in developing and introducing new offerings with enhanced functionality on a timely basis, or that our product and service offerings, if introduced, will enable us to maintain our prices, gross profits and operating margin at levels that will allow us to maintain profitability.
 
Our uniform resource locator (“URL”) database for our web filtering service may fail to keep pace with the rapid growth of URLs and may not categorize websites in accordance with our end-customers’ expectations.

The success of our web filtering service depends on the breadth and accuracy of our URL database. Although our URL database currently catalogs millions of unique URLs, it contains only a portion of the URLs for all of the websites that are available on the internet. In addition, the total number of URLs and software applications is growing rapidly, and we expect this rapid growth to continue in the future. Accordingly, we must identify and categorize content for our security risk categories at an extremely rapid rate. Our database and technologies may not be able to keep pace with the growth in the number of websites, especially the growing amount of content utilizing foreign languages and the increasing sophistication of malicious code and the delivery mechanisms associated with spyware, phishing and other hazards associated with the internet. Further, the ongoing evolution of the internet and computing environments will require us to continually improve the functionality, features and reliability of our web filtering function. Any failure of our databases to keep pace with the rapid growth and technological change of the internet could impair the market acceptance of our products, which in turn could harm our business, financial condition and results of operations.

In addition, our web filtering service may not be successful in accurately categorizing internet and application content to meet our end-customers’ expectations. We rely upon a combination of automated filtering technology and human review to categorize websites and software applications in our proprietary databases. Our end-customers may not agree with our determinations that particular URLs should be included or not included in specific categories of our databases. In addition, it is possible that our filtering processes may place material that is objectionable or that presents a security risk in categories that are
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generally unrestricted by our customers’ internet and computer access policies, which could result in such material not being blocked from the network. Conversely, we may miscategorize websites such that access is denied to websites containing information that is important or valuable to our customers. Any miscategorization could result in customer dissatisfaction and harm our reputation. Any failure to effectively categorize and filter websites according to our end-customers’ and channel partners’ expectations could impair the growth of our business.

False detection of vulnerabilities, viruses or security incidents or false identification of spam or spyware could adversely affect our business.

Our FortiGuard and other security subscription services may falsely detect, report and act on viruses or other threats that do not actually exist. This risk is heightened by the inclusion of heuristics, machine learning (“ML”) or artificial intelligence (“AI”) features in our products, which attempt to identify viruses and other threats not based on any known signatures but based on characteristics or anomalies that may indicate that a particular item is a threat. With these features in our products, the risk of falsely identifying viruses and other threats significantly increases. These false positives, while typical in the industry, may impair the perceived reliability of our products and may therefore adversely impact market acceptance of our products. Also, our FortiGuard and other security subscription services may falsely identify emails or programs as unwanted spam or potentially unwanted programs, or alternatively fail to properly identify unwanted emails or programs, particularly as spam emails or spyware are often designed to circumvent anti-spam or spyware products. Parties whose emails or programs are blocked by our products may seek redress against us for labeling them as spammers or spyware, or for interfering with their business. In addition, false identification of emails or programs as unwanted spam or potentially unwanted programs may reduce the adoption of our products. If our system restricts important files or applications based on falsely identifying them as malware or some other item that should be restricted, this could adversely affect end-customers’ systems and cause material system failures. In addition, our threat researchers periodically identify vulnerabilities in various third-party products, and, if these identifications are perceived to be incorrect or are in fact incorrect, this could harm our business. Any such false identification or perceived false identification of important files, applications or vulnerabilities could result in negative publicity, loss of end-customers and sales, increased costs to remedy any problem and costly litigation.

Our ability to sell our products is dependent on our quality control processes and the quality of our technical support services, and our failure to offer high-quality technical support services could have a material adverse effect on our sales and results of operations.

Once our products are deployed within our end-customers’ networks, our end-customers depend on our technical support services, as well as the support of our channel partners and other third parties, to resolve any issues relating to our products. If we, our channel partners or other third parties do not effectively assist our customers in planning, deploying and operational proficiency for our products, succeed in helping our customers quickly resolve post-deployment issues and provide effective ongoing support, our ability to sell additional products and services to existing customers could be adversely affected and our reputation with potential customers could be damaged. Many large end-customers, and service provider or government organization end-customers, require higher levels of support than smaller end-customers because of their more complex deployments and more demanding environments and business models. If we, our channel partners or other third parties fail to meet the requirements of our larger end-customers, it may be more difficult to execute on our strategy to increase our penetration with large businesses, service providers and government organizations. Our failure to maintain high-quality support services could have a material adverse effect on our business, financial condition and results of operations and may subject us to litigation, reputational damage, loss of customers and additional costs.

Our business is subject to the risks of warranty claims, product returns, product liability and product defects.

Our products are very complex and, despite testing prior to their release, have contained and may contain undetected defects or errors, especially when first introduced or when new versions are released. Product errors have affected the performance and effectiveness of our products and could delay the development or release of new products or new versions of products, adversely affect our reputation and our end-customers’ willingness to buy products from us, result in litigation and disputes with customers and adversely affect market acceptance or perception of our products. Any such errors or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in redesigning the products, cause us to lose significant end-customers, subject us to litigation, litigation costs and liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business, results of operations and financial condition. Our products must successfully interoperate with products from other vendors. As a result, when problems occur in a network, it may be difficult to identify the sources of these problems. The occurrence of hardware and software errors, whether or not caused by our products, could delay or reduce market acceptance of our products and have an adverse effect on our business and financial performance, and any necessary revisions may cause us to incur significant expenses. The occurrence of any such problems could harm our business, financial condition and results of operations.
 
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Although we generally have limitation of liability provisions in our standard terms and conditions of sale, they may not fully or effectively protect us from claims if exceptions apply or if the provisions are deemed unenforceable, and in some circumstances, we may be required to indemnify a customer in full, without limitation, for certain liabilities, including liabilities that are not contractually limited. The sale and support of our products also entail the risk of product liability claims. We maintain insurance to protect against certain claims associated with the use of our products, but our insurance coverage may not adequately cover any claim asserted against us, if at all, and in some instances may subject us to potential liability that is not contractually limited. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation and divert management’s time and other resources.

If the availability of our cloud-based subscription services does not meet our service-level commitments to our customers, our current and future revenue may be negatively impacted.

We typically commit to our customers that our cloud-based subscription services will maintain a minimum service-level of availability. If we are unable to meet these commitments, this could negatively impact our business. We rely on public cloud providers, such as Microsoft Azure, Amazon Web Services and Google Cloud co-location providers, such as Equinix, and our own data centers and PoPs, and any availability interruption in any of these cloud solutions could result in us not meeting our service-level commitments to our customers. In some cases, we may not have a contractual right with our public cloud or co-location providers that compensates us for any losses due to availability interruptions in our cloud-based subscription services. Further, any failure to meet our service-level commitments could damage our reputation and adoption of our cloud-based subscription services, and we could face loss of revenue from reduced future subscriptions and reduced sales and face additional costs associated with any failure to meet service-level agreements. Any service-level failures could adversely affect our business, financial condition and results of operations.

Risks Related to our Systems and Technology

If we do not appropriately manage any future growth, including through the expansion of our real estate facilities, or are unable to improve our systems, processes and controls, our operating results will be negatively affected.
 
We rely heavily on information technology to help manage critical functions such as order configuration, pricing and quoting, revenue recognition, financial forecasts, inventory and supply chain management and trade compliance reviews. In addition, we have been slow to adopt and implement certain automated functions, which could have a negative impact on our business. For example, our order processing relies on both manual data entry of customer purchase orders received through email and electronic data interchange (EDI). Due to the use of manual processes and the fact that we may receive a large amount of our orders in the last few weeks of any given quarter, an interruption in our email service or other systems could result in delayed order fulfillment and decreased billings and revenue for that quarter.

To manage any future growth effectively, we must continue to improve and expand our information technology and financial, operating, security and administrative systems and controls, and our business continuity and disaster recovery plans and processes. We must also continue to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement requisite improvements to these systems, controls and processes, such as system capacity, access, security and change management controls, in a timely or efficient manner. Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the significant growth of our business or otherwise, may result in our inability to manage the growth of our business and to accurately forecast our revenue, expenses and earnings, or to prevent certain losses. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting.

In addition, our systems, processes and controls may not prevent or detect all errors, omissions, malfeasance or fraud, such as corruption and improper “side agreements” that may impact revenue recognition or result in financial liability. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to ensure appropriate systems, processes and controls and to manage any future growth effectively could result in increased costs and harm our reputation and results of operations.

We have expanded our office real estate holdings to meet our projected growing need for office space. These plans will require significant capital expenditure over the next several years and involve certain risks, including impairment charges and acceleration of depreciation, changes in future business strategy that may decrease the need for expansion (such as a decrease in headcount or increase in work from home) and risks related to construction. Future changes in growth or fluctuations in cash flow may also negatively impact our ability to pay for these projects or free cash flow. Additionally, inaccuracies in our projected capital expenditures could negatively impact our business, operating results and financial condition.
 
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We may experience difficulties maintaining and expanding our internal business management systems.
 
The maintenance of our internal business management systems, such as our Enterprise Resource Planning (“ERP”) and Customer Relationship Management (“CRM”) systems, has required, and will continue to require, the investment of significant financial and human resources. In addition, we may choose to upgrade or expand the functionality of our internal systems, leading to additional costs. Deficiencies in our design or maintenance of our internal systems may adversely affect our ability to sell products and services, forecast orders, process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results or otherwise operate our business. Additionally, if any of our internal systems does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed. Further, we may expand the scope of our ERP and CRM systems. Our operating results may be adversely affected if these upgrades or expansions are delayed or if the systems do not function as intended or are not sufficient to meet our operating requirements.

We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.

AI presents new risks and challenges that may affect our business. We have made, and expect to continue to make investments to integrate AI and machine learning technology into our solutions, as evidenced by our acquisition of Lacework. AI presents risks, challenges, and potentially unintended consequences that could impact our ability to effectively use of AI successfully in our business. Given the nature of AI technology, we face an evolving regulatory landscape and significant competition from other companies. Our AI efforts may not be successful and our competitors may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our financial results. Data practices by us or others that result in controversy could also impair the acceptance of AI solutions. This in turn could undermine confidence in the decisions, predictions, analysis, and effectiveness of our AI-related initiatives. The rapid evolution of AI, including potential government regulation of AI, may require significant additional resources related to AI in our solutions. Our AI-related initiatives may result in new or enhanced governmental or regulatory scrutiny, including regarding the use of AI in our solutions and the marketing of products using AI, litigation, customer reporting or documentation requirements, ethical or social concerns, or other complications. For example, AI technologies, including generative AI, may create content that appears correct but is factually inaccurate (hallucinations) or flawed, or contains copyrighted or other protected material, and if our customers or others use this flawed content to their detriment, we may be exposed to brand or reputational harm, competitive harm, or legal liability. If customer data is used to train AI based systems and such data is not adequately anonymized, this may lead to breach of sensitive information and loss of customer trust. The use of AI also brings ethical issues related to privacy, surveillance and consent of use, as well as potential for bias and discrimination. Any of the foregoing could adversely affect our business, reputation, or financial results.

Risks Related to our Intellectual Property

Our proprietary rights may be difficult to enforce and we may be subject to claims by others that we infringe their propriety technology.
 
We rely primarily on patent, trademark, copyright and trade secrets laws and confidentiality procedures and contractual provisions to protect our technology. Valid patents may not issue from our pending applications, and the claims eventually allowed on any patents may not be sufficiently broad to protect our technology or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Patent applications in the United States are typically not published until at least 18 months after filing, or, in some cases, not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our pending patent applications or that we were the first to file for patent protection. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, recent changes to the patent laws in the United States may bring into question the validity of certain software patents and may make it more difficult and costly to prosecute patent applications. As a result, we may not be able to obtain adequate patent protection or effectively enforce our issued patents.
 
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. We generally enter into confidentiality or license agreements with our employees, consultants, vendors and customers, and generally limit access to and distribution of our proprietary information. However, we cannot guarantee that the steps taken by us will prevent misappropriation of our technology. Policing unauthorized use of our technology or products is difficult. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States. From time to time, legal action by us may be necessary to enforce our patents and other IP rights, to protect our trade secrets, to determine the validity and scope of the
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proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results and financial condition. If we are unable to protect our proprietary rights (including aspects of our software and products protected other than by patent rights), we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that have enabled us to be successful to date.

Our products contain third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict our ability to sell our products.
 
Our products contain software modules licensed to us by third-party authors under “open source” licenses, including but not limited to, the GNU Public License, the GNU Lesser Public License, the BSD License, the Apache License, the MIT X License and the Mozilla Public License. From time to time, there have been claims against companies that distribute or use open-source software in their products and services, asserting that open-source software infringes the claimants’ IP rights. We could be subject to suits by parties claiming infringement of IP rights in what we believe to be licensed open-source software. Use and distribution of open-source software may entail greater risks than use of third-party commercial software, as, for example, open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open-source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open-source software we use. If we combine our proprietary software with open-source software in a certain manner, we could, under certain open-source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of product sales for us.
 
Although we monitor our use of open source software to avoid subjecting our products to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that, for example, could impose unanticipated conditions or restrictions on our ability to commercialize our products. In this event, we could be required to seek licenses from third parties to continue offering our products, to make our proprietary code generally available in source code form, to re-engineer our products or to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, any of which requirements could adversely affect our business, operating results and financial condition.
 
Claims by others that we infringe their proprietary technology or other litigation matters could harm our business.
 
Patent and other IP disputes are common in the network security industry. Third parties are currently asserting, have asserted and may in the future assert claims of infringement of IP rights against us. Third parties have also asserted such claims against our end-customers or channel partners whom we may indemnify against claims that our products infringe the IP rights of third parties. As the number of products and competitors in our market increases and overlaps occur, infringement claims may increase. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business. In addition, litigation may involve patent holding companies, non-practicing entities or other adverse patent owners who have no relevant product revenue and against whom our own patents may therefore provide little or no deterrence or protection.
 
Although third parties may offer a license to their technology, the terms of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause our business, financial condition and results of operations to be materially and adversely affected. In addition, some licenses may be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us.
 
Alternatively, we may be required to develop non-infringing technology, which could require significant time, effort and expense, and may ultimately not be successful. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages (including treble damages if we are found to have willfully infringed such claimant’s patents or copyrights), royalties or other fees. Any of these events could seriously harm our business, financial condition and results of operations.

From time to time, we are subject to lawsuits claiming patent infringement. We are also subject to other litigation in addition to patent infringement claims, such as employment-related litigation and disputes, as well as general commercial litigation, such as the Alorica litigation, and could become subject to other forms of litigation and disputes, including stockholder litigation. If we are unsuccessful in defending any such claims, our operating results and financial condition and results may be materially and adversely affected. For example, we may be required to pay substantial damages and could be prevented from selling certain of our products. Litigation, with or without merit, could negatively impact our business, reputation and sales in a material fashion.

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We have several ongoing patent lawsuits, certain companies have sent us demand letters proposing that we license certain of their patents, and organizations have sent letters demanding that we provide indemnification for patent claims. Given this and the proliferation of lawsuits in our industry and other similar industries by both non-practicing entities and operating entities, and recent non-practicing entity and operating entity patent litigation against other companies in the security space, we expect that we will be sued for patent infringement in the future, regardless of the merits of any such lawsuits. The cost to defend such lawsuits and any settlement payment or adverse result in such lawsuits could have a material adverse effect on our results of operations and financial condition.

We rely on the availability of third-party licenses.

Many of our products include software or other IP licensed from third parties. It may be necessary in the future to renew licenses relating to various aspects of these products or to seek new licenses for existing or new products. Licensors may claim we owe them additional license fees for past and future use of their software and other IP or that we cannot utilize such software or IP in our products going forward. There can be no assurance that the necessary licenses would be available on acceptable terms, if at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms or for reasonable pricing, or the need to engage in litigation regarding these matters, could result in delays in product releases until equivalent technology can be identified, licensed or developed, if at all, and integrated into our products and may result in significant license fees and have a material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products of software or other IP licensed from third parties on a non-exclusive basis could limit our ability to differentiate our products from those of our competitors.

We also rely on technologies licensed from third parties in order to operate functions of our business. If any of these third parties allege that we have not properly paid for such licenses or that we have improperly used the technologies under such licenses, we may need to pay additional fees or obtain new licenses, and such licenses may not be available on terms acceptable to us or at all or may be costly. In any such case, or if we were required to redesign our internal operations to function with new technologies, our business, results of operations and financial condition could be harmed.

Other Risks Related to Our Business and Financial Position

Our inability to successfully acquire and integrate other businesses, products or technologies, or to successfully invest in and form successful strategic alliances with other businesses, could seriously harm our competitive position and could negatively affect our financial condition and results of operations.

In order to remain competitive, we may seek to acquire additional businesses, products, technologies or IP, such as patents, and to make equity investments in businesses coupled with strategic alliances. For any possible future acquisitions or investments, we may not be successful in negotiating the terms of the acquisition or investment or financing the acquisition or investment. For both our prior and future acquisitions, we may not be successful in effectively integrating the acquired business, product, technology, IP or sales force into our existing business and operations, and the acquisitions may negatively impact our financial results. We may have difficulty incorporating acquired technologies, IP or products with our existing product lines, integrating reporting systems and procedures, and maintaining uniform standards, controls, procedures and policies. For example, we may experience difficulties integrating an acquired company’s ERP or CRM systems, sales support, cyber risk management and compliance and other processes and systems, with our current systems and processes. We may also find that the personnel of the companies we acquire do not adequately adhere to our corporate policies and it may take time to bring them in line with our policies and standards. If we are unable to do so efficiently or effectively, our reputation and business, operating results and financial condition could be adversely impacted.

The results of certain businesses that we invest in, such as Linksys, are, or may in the future, be reflected in our operating results, and we depend on these companies to provide us financial information in a timely manner in order to meet our financial reporting requirements. We may experience difficulty in timely obtaining financial information from the companies in which we have invested in order to meet our financial reporting requirements. Further, we are required to record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges, which may adversely affect our financial condition and results of operations. Our due diligence for acquisitions and investments may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues with IP, product quality or product architecture, regulatory compliance practices, environmental and sustainability compliance practices, revenue recognition or other accounting practices or employee or customer issues. We also may not accurately forecast the financial impact of an acquisition or an investment and alliance. In addition, any acquisitions and significant investments we are able to complete may be dilutive to revenue growth and earnings and may not result in any synergies or other benefits we had expected to achieve, which could negatively impact our operating results and result in impairment charges that could be substantial. We may have to pay cash, incur debt or issue equity securities to pay for any acquisition, each of which could affect our financial condition or the value of our capital stock and could result in dilution to our stockholders. Acquisitions or investments during a quarter may result in increased operating expenses and adversely affect our cash flows or our results of operations for that period and future periods compared to the results that we
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have previously forecasted or achieved. Further, completing a potential acquisition or investment and alliance and integrating acquired businesses, products, technologies or IP are challenging to do successfully and could significantly divert management time and resources.

Linksys sells predominantly into the consumer Wi-Fi market, and its sales have declined since our investment. Because we are accounting for our Linksys investment using the equity method of accounting, we are required to assess the investment for other-than-temporary impairment (“OTTI”) when events or circumstances suggest that the carrying amount of the investment may be impaired. We analyze whether there should be an OTTI of the value of our investment in Linksys. In evaluating OTTI, we consider factors such as Linksys’ financial results and operating history, our ability and intent to hold the investment until its fair value recovers, the implied revenue valuation multiples compared to guideline public companies, Linksys’ ability to achieve milestones and any notable operational and strategic changes. We intend to continue to analyze our investment in Linksys to determine whether any further impairment is appropriate. If any further decline in fair value is determined to be other-than-temporary, we will adjust the carrying value of the investment to its fair value and record the impairment expense in our condensed consolidated statements of income. The cost basis of the investment is not adjusted for subsequent recoveries in fair value. We may experience additional volatility to our statements of operations due to the underlying operating results of Linksys, impairments of our Linksys investment or additional investments in Linksys. This volatility could be material to our results in any given quarter and may cause our stock price to decline.

Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose end-customers or negatively impact our ability to contract.

Our business is subject to regulation by various federal, state, regional, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety, product labeling, environmental laws, consumer protection laws, anti-bribery laws, data privacy laws, import and export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. Non-compliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages and civil and criminal penalties or injunctions. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results and financial condition.

For example, the GDPR imposes stringent data handling requirements on companies that operate in the EU or receive or process personal data about individuals in the EU in certain contexts. Non-compliance with the GDPR could result in data protection audits and significant penalties, heavy fines imposed on us and bans on other businesses’ use of our services. Compliance with, and the other burdens imposed by, the GDPR and local regulatory authorities may limit our ability to operate or expand our business in the EU and could adversely impact our operating results. In July 2020, the European Court of Justice issued a judgment declaring invalid the EU-U.S. Privacy Shield Framework (the “Privacy Shield”) as a mechanism for the transfer of GDPR-regulated personal data to recipients in the United States and calling into question the validity of certain popular alternative mechanisms for addressing GDPR restrictions on transfers to the United States and other areas where we operate. The Privacy Shield has now been replaced with the EU-U.S. Data Privacy Framework following certain changes to U.S. law intended to address the concerns underlying that court decision with respect to transfers of personal data to the United States. As of September 2024, we are an active participant in the Framework. However, there remains a possibility that our business could be negatively impacted by restrictions on transfers of GDPR-regulated personal data (including transfers made by our customers) to other areas we operate. In addition, it is possible that the updates to U.S. law may ultimately be deemed insufficient in a court case similar to the one that invalidated Privacy Shield. The mere possibility of this outcome, and our reliance on global data transfers within our corporate family and between us and our service providers, may create challenges for us to compete with companies that may be able to offer services in which personal data never exits the EU, thereby avoiding risks of noncompliance with GDPR data transfer restrictions.

Additionally, we may be subject to other legal regimes throughout the world governing data handling, protection and privacy. For example, in June 2018, California passed the California Consumer Privacy Act (the “CCPA”), which provides new data privacy rights for consumers and new operational requirements for companies and became effective on January 1, 2020. The CCPA was expanded pursuant to the California Privacy Rights Act, which was passed in 2020 and became effective in 2023. Other states have since passed similar laws, adding to the complexity of compliance with overlapping and sometimes conflicting requirements. The costs of compliance with and the penalties for violations of the GDPR, the CCPA and other laws, along with other burdens imposed by these regulations, may limit the use and adoption of our products and services and could have an adverse impact on our business. For example, our sales cycles may lengthen and face an increased risk of failure as customers take more time to vet our services for compliance with these legal requirements and to negotiate data-related contract terms with us, causing delays or loss of revenue.

Selling our solutions to governments, both within the U.S and internationally, whether directly or through channel partners, also subjects us to certain regulatory and contractual requirements, government permit and clearance requirements and
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other risks. Failure to comply with these requirements or to obtain and maintain government permits and clearances required to do certain business, by either us or our channel partners, could subject us to investigations, fines, suspension, limitations on business or debarment from doing business with such governments, as well as other penalties, damages and reputational harms, which could have an adverse effect on our business, operating results, financial condition and prospects. Any violations of regulatory and contractual requirements could result in us being suspended or debarred from future government contracting. Any of these outcomes could have an adverse effect on our revenue, operating results, financial condition and prospects.

The landscape of laws, regulations, and industry standards related to cybersecurity is evolving globally. We may be subject to increased compliance burdens by regulators and customers with respect to our products and services, as well as additional costs to oversee and monitor security risks. Additionally, this evolving global landscape could impact on our ability to conduct business in certain jurisdictions if the laws, regulation and industry standards in such jurisdictions changed in a manner that is adverse to our business. Many jurisdictions have enacted laws mandating companies to inform individuals, stockholders, regulatory authorities, and others of security incidents. For example, the SEC recently adopted cybersecurity risk management and disclosure rules, which require the disclosure of information pertaining to cybersecurity incidents and cybersecurity risk management, strategy, and governance. In addition, certain of our customer agreements may require us to promptly report security incidents involving their data on our systems or those of subcontractors processing such data on our behalf. This mandatory disclosure can be costly, harm our reputation, erode customer trust, reduce demand, and require significant resources to mitigate issues stemming from actual or perceived security incidents.

These laws, regulations and other requirements impose added costs on our business, and failure to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for damages from our channel partners, penalties, termination of contracts, loss of exclusive rights in our IP and temporary suspension, permanent debarment from government contracting, or other limitations on doing business. Any such damages, penalties, disruptions or limitations in our ability to do business could have an adverse effect on our business and operating results.

We are subject to governmental export and import controls that could subject us to liability or restrictions on sales, and that could impair our ability to compete in international markets.

Because we incorporate encryption technology into our products, certain of our products are subject to U.S. export controls and may be exported outside the United States only with the required export license or through an export license exception, or may be prohibited altogether from export to certain countries. If we were to fail to comply with U.S. export laws, U.S. Customs regulations and import regulations, U.S. economic sanctions and other countries’ import and export laws, we could be subject to substantial civil and criminal penalties, including fines for the company and incarceration for responsible employees and managers, and the possible loss of export or import privileges. In addition, if our channel partners fail to obtain appropriate import, export or re-export licenses or permits (e.g., for stocking orders placed by our partners), we may also be adversely affected through reputational harm and penalties and we may not be able to provide support related to appliances shipped pursuant to such orders. Obtaining the necessary export license for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities.

Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products to U.S. embargoed or sanctioned countries, governments and persons, such as the sanctions and trade restrictions that have been implemented against Russia and Belarus. Even though we take precautions to prevent our product from being shipped to U.S. sanctions targets, our products could be shipped to those targets by our channel partners, despite such precautions. Any such shipment could have negative consequences including government investigations and penalties and reputational harm. In addition, various countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries. Changes in our products or changes in export and import regulations may create delays in the introduction of our products in international markets, prevent our customers with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

Efforts to withdraw from or materially modify international trade agreements, to change tax provisions related to global manufacturing and sales or to impose new tariffs, economic sanctions or related legislation, any of which could adversely affect our financial condition and results of operations.

Our business benefits directly and indirectly from free trade agreements, and we also rely on various corporate tax provisions related to international commerce, as we develop, market and sell our products and services globally. Efforts to withdraw from or materially modify international trade agreements, or to change corporate tax policy related to international
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commerce, could adversely affect our financial condition and results of operations as could the continuing uncertainty regarding whether such actions will be taken.

Moreover, efforts to implement changes related to export or import regulations (including the imposition of new border taxes or tariffs on foreign imports), trade barriers, economic sanctions and other related policies could harm our results of operations. For example, in recent years, the United States has imposed additional import tariffs on certain goods from different countries and on most goods imported from China. As a result, China and other countries imposed retaliatory tariffs on goods exported from the United States and both the United States and foreign countries have threatened to alter or leave current trade agreements. While we do not currently expect these tariffs to have a significant effect on our raw material and product import costs, if the United States expands increased tariffs, or retaliatory trade measures are taken by other countries in response to the tariffs, the cost of our products could increase, our operations could be disrupted or we could be required to raise our prices, which may result in the loss of customers and harm to our reputation and operating performance.

Any modification in these areas, any shift in the enforcement or scope of existing regulations or any change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations and could result in increased costs. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

If we fail to comply with environmental requirements, our business, financial condition, operating results and reputation could be adversely affected.

We are subject to various environmental laws and regulations, including laws governing the hazardous material content of our products, laws relating to our real property and future expansion plans and laws concerning the recycling of Electrical and Electronic Equipment (“EEE”). The laws and regulations to which we are subject include the EU RoHS Directive, EU Regulation 1907/2006 – Registration, Evaluation, Authorization and Restriction of Chemicals (the “REACH” Regulation) and the EU Waste Electrical and Electronic Equipment Directive (the “WEEE Directive”), as well as the implementing legislation of the EU member states. Similar laws and regulations have been passed or are pending in China, South Korea, Taiwan, Japan, Norway, Saudi Arabia and the UAE and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations. These legal and regulatory regimes, including the laws, rules and regulations thereunder, evolve frequently and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the timing and effect of these laws and regulations on our business may be uncertain. To the extent we have not complied with such laws, rules and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results and financial condition. These laws and regulations may also impact our suppliers, which could have, among other things, an adverse impact on the costs of components in our products.

The EU RoHS Directive and the similar laws of other jurisdictions ban or restrict the presence of certain hazardous substances such as lead, mercury, cadmium, hexavalent chromium and certain fire-retardant plastic additives in electrical equipment, including our products. We have incurred costs to comply with these laws, including research and development costs and costs associated with assuring the supply of compliant components. We expect to continue to incur costs related to environmental laws and regulations in the future. With respect to the EU RoHS, we and our competitors rely on exemptions for lead and other substances in network infrastructure equipment. It is possible one or more of these use exemptions will be revoked in the future. Additionally, although some of the EU RoHS exemptions have been extended, it is possible that some of these exemptions may expire in the future without being extended. If this exemption is revoked or expires without extension, if there are other changes to these laws (or their interpretation) or if new similar laws are passed in other jurisdictions, we may be required to re-engineer our products to use components compatible with these regulations. This re-engineering and component substitution could result in additional costs to us and/or disrupt our operations or logistics.

As part of the Circular Economy Action Plan, the European Commission amended the EU Waste Framework Directive (“WFD”) to include a number of measures related to waste prevention and recycling, whereby we are responsible for submitting product data to a Substances of Concern In articles as such or in complex objects (Products) (“SCIP”) database containing information on Substances of Very High Concern (“SVHC”) in articles and in complex objects. The SCIP database is established under the WFD and managed by the European Chemicals Agency (“ECHA”). We have incurred costs in order to comply with this new requirement. Similar laws and regulations have been passed or are pending in the European Economic Area and the UK.

The EU’s WEEE Directive requires electronic goods producers to be responsible for the collection, recycling and treatment of such products. Although currently our EU international channel partners are responsible for the requirements of this directive as the importer of record in most of the European countries in which we sell our products, changes in
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interpretation of the regulations may cause us to incur costs or have additional regulatory requirements in the future to meet in order to comply with this directive, or with any similar laws adopted in other jurisdictions including the United States.

Our failure to comply with these and future environmental rules and regulations could result in decreased demand for our products and services resulting in reduced sales of our products, increased demand for competitive products and services that result in lower emissions than our products, increased costs, substantial product inventory write-offs, reputational damage, penalties and other sanctions, any of which could harm our business and financial condition. To date, our expenditures for environmental compliance have not had a material impact on our operating results or cash flows, and, although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs. New laws may result in increased penalties associated with violations or require us to change the content of our products or how they are manufactured, which could have a material adverse effect on our business, operating results and financial condition.

Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to ESG matters. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to corporate responsibility are inadequate. The growing investor demand for measurement of non-financial performance is addressed by third-party providers of sustainability assessment and ratings on companies. The criteria by which our corporate responsibility practices are assessed may change due to the constant evolution of the sustainability landscape, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. For example, in 2023, California passed three separate climate bills governing disclosure of greenhouse gas emissions data, climate-related financials risks and details around emissions-related claims and carbon offsets. If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies and/or actions with respect to corporate social responsibility are inadequate and we may be subject to fines from regulatory authorities. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies.

Furthermore, in the event that we communicate certain initiatives and goals regarding ESG matters, such as our commitment to target Net-Zero on Scope 1 and Scope 2 emissions resulting from our owned facilities worldwide by 2030 or our commitment to the Paris Agreement via the Science Based Targets Initiative, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope, target and timelines of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees, and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted. In addition, the SEC adopted a rule that requires climate disclosures in periodic and other filings with the SEC covering fiscal years beginning in 2025, which rule has been stayed pending the completion of a judicial review. To comply with this SEC rule, if such rule goes into effect in their current form, we will be required to establish additional internal controls, engage additional consultants and incur additional costs related to evaluating, managing and reporting on our environmental impact and climate-related risks and opportunities. If we fail to implement sufficient oversight or accurately capture and disclose on environmental matters, our reputation, business, operating results and financial condition may be materially adversely affected.

Risks Related to Finance, Accounting and Tax Matters

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in this Quarterly Report on Form 10-Q, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition, deferred contract costs and commission expense, accounting for business combinations, contingent liabilities and accounting for income taxes.

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We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

A significant portion of our operating expenses are incurred outside the United States. These expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese yen, Canadian dollar and British pound. A weakening of the U.S. dollar compared to foreign currencies would negatively affect our expenses and operating results, which are expressed in U.S. dollars. Additionally, fluctuations in the exchange rate of the Canadian dollar may negatively impact our development plans in Burnaby, Canada. While we are not currently engaged in material hedging activities, we have been hedging currency exposures relating to certain balance sheet accounts through the use of forward exchange contracts. If we stop hedging against any of these risks or if our attempts to hedge against these currency exposures are not successful, our financial condition and results of operations could be adversely affected. Our sales contracts are primarily denominated in U.S. dollars and therefore, while substantially all of our revenue is not subject to foreign currency risk, it does not serve as a hedge to our foreign currency-denominated operating expenses. In addition, a strengthening of the U.S. dollar may increase the real cost of our products to our customers outside of the United States, which may also adversely affect our financial condition and results of operations. 

We could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation, exposure to additional tax liabilities or impacts from the timing of tax payments.

We are subject to taxes in the United States and numerous foreign jurisdictions, where a number of our subsidiaries are organized. Our provision for income taxes is subject to volatility and could be adversely affected by several factors, many of which are outside of our control. These include:

•the mix of earnings in countries with differing statutory tax rates or withholding taxes;

•changes in the valuation of our deferred tax assets and liabilities;

•transfer pricing adjustments;

•increases to corporate tax rates;

•an increase in non-deductible expenses for tax purposes, including certain stock-based compensation expense;

•changes in availability of tax credits and/or tax deductions;

•the timing of tax payments;

•tax costs related to intercompany realignments;

•tax assessments resulting from income tax audits or any related tax interest or penalties that could significantly affect our provision for income taxes for the period in which the settlement takes place; and

•changes in accounting principles, court decisions, tax rulings, and interpretations of or changes to tax laws, and regulations by international, federal or local governmental authorities.

We have open tax years that could be subject to the examination by the Internal Revenue Service (the “IRS”) and other tax authorities. We currently have ongoing tax audits in the United Kingdom, Canada and several other foreign jurisdictions. The focus of all of these audits is the allocation of profits among our legal entities. We regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our condensed consolidated financial statements and may materially affect our financial results.

We may undertake corporate operating restructurings or transfers of assets that involve our group of foreign country subsidiaries through which we do business abroad, in order to maximize the operational and tax efficiency of our group structure. If ineffectual, such restructurings or transfers could increase our income tax liabilities, and in turn, increase our global effective tax rate. Moreover, our existing corporate structure and intercompany arrangements have been implemented in a manner we believe reasonably ensures that we are in compliance with current prevailing tax laws. However, the tax authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could impact our worldwide effective tax rate and harm our financial position and operating results.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of
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future taxable income and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates.

Forecasts of our income tax position and effective tax rate are complex, subject to uncertainty and periodic updates because our income tax position for each year combines the effects of a mix of profits earned and losses incurred by us in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules and tax laws, the results of examinations by various tax authorities, and the impact of any acquisition, business combination or other reorganization or financing transaction. To forecast our global tax rate, we estimate our pre-tax profits and losses by jurisdiction and forecast our tax expense by jurisdiction. If the mix of profits and losses, our ability to use tax credits or our effective tax rate in a given jurisdiction differs from our estimate, our actual tax rate could be materially different than forecasted, which could have a material impact on our results of business, financial condition and results of operations. Additionally, our actual tax rate may be subject to further uncertainty due to potential changes in U.S. and foreign tax rules.

As a multinational corporation, we conduct our business in many countries and are subject to taxation in many jurisdictions. The taxation of our business is subject to the application of multiple and sometimes conflicting tax laws and regulations, as well as multinational tax conventions. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or losses, the tax regulations in each geographic region, the availability of tax credits and carryforwards and the effectiveness of our tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations and court rulings. Consequently, tax authorities may impose tax assessments or judgments against us that could materially impact our tax liability and/or our effective income tax rate.

The Organisation for Economic Co-operation and Development (the “OECD”), an international association comprised of 38 countries, including the United States, has issued and continues to issue guidelines and proposals that change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business. Due to our extensive international business activities, any changes in the taxation of such activities could increase our tax obligations in many countries and may increase our worldwide effective tax rate.

Risks Related to Ownership of Our Common Stock

As a public company, we are subject to compliance initiatives that will require substantial time from our management and result in significantly increased costs that may adversely affect our operating results and financial condition.

The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), Dodd-Frank and other rules implemented by the SEC and The Nasdaq Stock Market impose various requirements on public companies, including requiring changes in corporate governance practices. These requirements, as well as proposed corporate governance laws and regulations under consideration, may further increase our compliance costs. If compliance with these various legal and regulatory requirements diverts our management’s attention from other business concerns, it could have a material adverse effect on our business, financial condition and results of operations. Sarbanes-Oxley requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually, and of our disclosure controls and procedures quarterly. Although our most recent assessment, testing and evaluation resulted in our conclusion that, as of December 31, 2023, our internal controls over financial reporting were effective, we cannot predict the outcome of our testing in 2024 or future periods and there can be no assurance that, in the future, our internal controls over financial reporting will be effective or deemed effective. We may incur additional expenses and commitment of management’s time in connection with further evaluations, both of which could materially increase our operating expenses and accordingly reduce our operating results.

If equity research or industry analysts stop publishing research or reports about our business, issue unfavorable commentary, downgrade our shares of common stock or publish inaccurate information, our stock price and trading volume could decline.

The trading market for our common stock is influenced in part by the research and reports that equity research and industry analysts publish about us or our business. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Furthermore, if one or more of these analysts downgrades our stock or issues unfavorable commentary about our business, the price of our stock could decline. We have in the past experienced downgrades and may in the future experience downgrades. In addition, these analysts may publish their own financial projections, which may vary widely and may not accurately predict the results we actually achieve, which in turn could cause our share price to decline if our
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actual results do not match their projections. If one of these analysts were to publish inaccurate negative information about us or our business, our stock price could decline. Moreover, if securities analysts publish inaccurate positive information, stockholders could buy our stock and the stock price may later decline.
 
The trading price of our common stock may be volatile, which may be exacerbated by share repurchases under our Share Repurchase Program.

The market price of our common stock may be subject to wide fluctuations in response to, among other things, the risk factors described in this periodic report, news about us and our financial results, news about our competitors and their results, and other factors such as rumors or fluctuations in the valuation of companies perceived by investors to be comparable to us. For example, during the nine months ended September 30, 2024, the closing price of our common stock ranged from $55.39 to $77.55 per share.

Furthermore, stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock.
 
In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

Share repurchases under the Repurchase Program could increase the volatility of the trading price of our common stock, could diminish our cash reserves, could occur at non-optimal prices and may not result in the most effective use of our capital.

In January 2024, our board of directors approved a $500.0 million increase in the authorized share repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $7.25 billion of our outstanding common stock. In February 2024, our board of directors approved an extension of the Repurchase Program to February 28, 2025. As of September 30, 2024, approximately $1.03 billion remained available for future share repurchases. In October 2024, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2026, bringing the aggregate amount authorized to be repurchased to $8.25 billion of our outstanding common stock through February 28, 2026. As of November 8, 2024, approximately $2.03 billion remained available for future share repurchases. Share repurchases under the Repurchase Program could affect the price of our common stock, increase stock price volatility and diminish our cash reserves. In addition, an announcement of the reduction, suspension or termination of the Repurchase Program could result in a decrease in the trading price of our common stock. Moreover, our stock price could decline, resulting in repurchases made at non-optimal prices. Our failure to repurchase our stock at optimal prices may be perceived by investors as an inefficient use of our cash and cash equivalents, which could result in litigation that may have an adverse effect on our business, operating results and financial condition. In addition, while our board of directors carefully considers various alternative uses of our cash and cash equivalents in determining whether to authorize stock repurchases, there can be no assurance that the decision by our board of directors to repurchase stock would result in the most effective uses of our cash and cash equivalents, and there may be alternative uses of our cash and cash equivalents that would be more effective, such as investing in growing our business organically or through acquisitions.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
 
Our certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

•authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
 
•limiting the liability of, and providing indemnification to, our directors and officers;
 
•requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

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•providing that certain litigation matters may only be brought against us in state or federal courts in the State of Delaware;
 
•controlling the procedures for the conduct and scheduling of board and stockholder meetings; and
 
•providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings.
 
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

In addition, our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This provision, as well as provisions providing that certain litigation matters may only be brought against us in state or federal courts in the State of Delaware, may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of a substantial majority of all of our outstanding common stock.
 
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

However, these anti-takeover provisions will not have the effect of preventing activist stockholders from seeking to increase short-term stockholder value through actions such as nominating board candidates and requesting that we pursue strategic combinations or other transactions. These actions could disrupt our operations, be costly and time-consuming and divert the attention of our management and employees. In addition, perceived uncertainties as to our future direction as a result of activist stockholder actions could result in the loss of potential business opportunities, as well as other negative business consequences. Actions of an activist stockholder may also cause fluctuations in our stock price based on speculative market perceptions or other factors that do not necessarily reflect our business. Further, we may incur significant expenses in retaining professionals to advise and assist us on activist stockholder matters, including legal, financial, communications advisors and solicitation experts, which may negatively impact our future financial results.

General Risks

Political instability, changes in trade agreements and conflicts such as the war in Ukraine and the Israel-Hamas war could adversely affect our business and financial performance.

Economic uncertainty in various global markets caused by political instability and conflict, such as the war in Ukraine and the Israel-Hamas war has resulted, and may continue to result in weakened demand for our products and services and difficulty in forecasting our financial results and managing inventory levels. Political developments impacting government spending and international trade, including potential government shutdowns and trade disputes and tariffs may negatively impact markets and cause weaker macroeconomic conditions. The effects of these events may continue due to potential U.S. government shutdowns and the transition in administrations, and the United States’ ongoing trade disputes with Russia, China and other countries. The continuing effect of any or all of these events could adversely impact demand for our products, harm our operations and weaken our financial results.

Global economic uncertainty, an economic downturn, the possibility of a recession, inflation, changing interest rates, changes to government spending and regulations, and weakening product demand could adversely affect our business and financial performance.

Economic challenges caused by the economic downturn, any resulting recession, inflation or change in interest rates can weaken and harm our financial position. The U.S. capital markets have experienced and continue to experience extreme volatility and disruption. Inflation rates in the United States significantly increased in 2022 resulting in federal action to increase interest rates, adversely affecting capital markets activity. Further deterioration of the macroeconomic environment and regulatory action may adversely affect our business, operating results and financial condition.
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Our business is subject to the risks of earthquakes, drought, fire, power outages, typhoon, floods, virus outbreaks and other broad health-related challenges, cyber events and other catastrophic events, and to interruption by manmade problems such as civil unrest, war, labor disruption, critical infrastructure attack and terrorism.

A significant natural disaster, such as an earthquake, drought, fire, power outage, flood, viral outbreak or other catastrophic event, could have a material adverse impact on our business, operating results and financial condition. Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity, and our research and development and data center in Burnaby, Canada, from which we deliver to customers our FortiGuard and other security subscription updates, is subject to the risk of flooding and is also in a region known for seismic activity. Any earthquake in the Bay Area or Burnaby, or flooding in Burnaby, could materially negatively impact our ability to provide products and services, such as FortiCare support and FortiGuard subscription services and could otherwise materially negatively impact our business. In addition, natural disasters could affect our manufacturing vendors, suppliers or logistics providers’ ability to perform services, such as obtaining product components and manufacturing products, or performing or assisting with shipments, on a timely basis, as well as our customers’ ability to order from us and our employees’ ability to perform their duties. For example, a typhoon in Taiwan could materially negatively impact our ability to manufacture and ship products and could result in delays and reductions in billings and revenue, or the effects of epidemics and pandemics may negatively impact our ability to manufacture and ship products, possibly in a material way, and could result in delays and reductions in billings and revenue, also possibly in a material way. The impact of climate change could affect economies in ways that negatively impact us and our results of operations. In the event our or our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of the events discussed above, shipments could be delayed, resulting in our missing financial targets, such as revenue and shipment targets, for a particular quarter. In addition, regional instability, international disputes, wars, such as the war in Ukraine and the Israel-Hamas war and any expansion thereof, and other acts of aggression, civil and political unrest, labor disruptions, rebellions, acts of terrorism and other geo-political unrest could cause disruptions in our business or the business of our manufacturers, suppliers, logistics providers, partners or end-customers, or of the economy as a whole. Given our typical concentration of sales at the end of each quarter, any disruption in the business of our manufacturers, logistics providers, partners or end-customers that impacts sales at the end of our quarter could have a significant adverse impact on our quarterly results. To the extent that any of the above results in security risks to our customers, delays or cancellations of customer orders, the delay of the manufacture, deployment or shipment of our products or interruption or downtime of our services, our business, financial condition and results of operations would be adversely affected.

Changes in financial accounting standards may cause adverse unexpected fluctuations and affect our reported results of operations.

A change in accounting standards or practices, and varying interpretations of existing or new accounting pronouncements, as well as significant costs incurred or that may be incurred to adopt and to comply with these new pronouncements, could have a significant effect on our reported financial results or the way we conduct our business. If we do not ensure that our systems and processes are aligned with the new standards, we could encounter difficulties generating quarterly and annual financial statements in a timely manner, which could have an adverse effect on our business, our ability to meet our reporting obligations and compliance with internal control requirements.

Management will continue to make judgments and assumptions based on our interpretation of new standards. If our circumstances change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock. Further, marketable equity investments are required to be measured at fair value (with subsequent changes in fair value recognized in net income), which may increase the volatility of our earnings.

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ITEM 2.     Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Share Repurchase Program

In August 2024, we repurchased less than 0.1 million shares of common stock as part of publicly announced plan or program in open-market transactions at a weighted-average price of $54.99 per share. As of August 31, 2024, $1.03 billion remained available for future share repurchases under the Repurchase Program. We had no stock purchase in July or September 2024.

In October 2024, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2026, bringing the aggregate amount authorized to be repurchased to $8.25 billion of our outstanding common stock through February 28, 2026. As of November 8, 2024, approximately $2.03 billion remained available for future share repurchases.

ITEM 5.     Other Information

Rule 10b5-1 Trading Plans

No director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, during the three months ended September 30, 2024.
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ITEM 6.     Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX
Incorporated by reference herein
FormDateExhibit Number
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File - the cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 is formatted in inline XBRL.

________________________________

* Filed herewith.
# Furnished herewith.


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SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: November 8, 2024
FORTINET, INC.
By:/s/    Ken Xie
Ken Xie, Chief Executive Officer and Chairman
(Duly Authorized Officer and Principal Executive Officer)
Date: November 8, 2024
FORTINET, INC.
By:/s/    Keith Jensen        
Keith Jensen, Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
Date: November 8, 2024
FORTINET, INC.
By:
/s/    Christiane Ohlgart        
Christiane Ohlgart, Chief Accounting Officer
(Duly Authorized Officer and Principal Accounting Officer)

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