All right, good afternoon everyone. Thank you for joining us today. My name is Anthony Lee. I'm the vice president of investor relations at Fortinet. It's my pleasure to welcome you here at Accelerate 2026 in our investor briefing session today. You'll hear about Fortinet's vision for cybersecurity and how our strategic positioning drives sustained, durable, and profitable growth. Before we begin, I'd like to remind everyone that we will be making forward-looking statements during today's presentation. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to our SEC filings, in particular the risk factors in our most recent form 10-K and form 10-Q for additional information on factors that could cause our actual results to differ materially from current expectations. Also, the presentations from today's event will be available on our investor relations website within 24 hours after the event concludes. So in terms of agenda, it's a fairly simple one today. We'll start off things with Ken Xie, our founder, chairman, and CEO. He'll talk about some of the innovations at Accelerate this year, as well as our longer-term competitive advantages. Then Cristiano Olgard and I will provide a financial overview of the business. The primary purpose of the prepared remarks is just to tee up the Q&A session where we'll be joined by John Whittle, our COO, Robert May, EVP of product management, and Joe Cerno, Trevor Gara, and Pedro Po are sales leaders across international, US, and Latin America/Canada, respectively. And with that, I'd like to introduce Ken Xie.
Yes, good afternoon. Thank you for joining. I probably only have five to ten minutes. Just quickly for some highlights from this morning. Basically, you can see AI definitely will accelerate the convergence because whether edge computing or most traffic increased by agents or robots is more east-west traffic. So we see this really matches our vision quite well. We have some unique advantages whether on the convergence or the SASE side, which I will cover. But basically AI is a tailwind for us. We feel it will be keeping our strategy converging and keeping the company long and growing. And this operating system, which we introduced today, is also very important. Actually, this is the only operating system with five Gartner Magic Quadrant leaders, whether in the traditional network security or in the one-line management which has a built-in controller for Wi-Fi, the whole networking controller for all the switches with all the FortiLink technology, and also the leader in SASE, in SSE, and also in SD-WAN. So you can see this is the only OS with a single OS having five Gartner Magic Quadrant leaders, which never happened before. There are so many functions, about 30 functions integrated, and about half of that actually using ASIC to accelerate. So that's a differentiation we have compared to other competitors. They have to acquire different companies, separate SD-WAN OS, separate secure OS, separate SASE OS. So we have a single OS with ASIC as a huge advantage. ASIC accelerates half the functions there, which gives each function five to ten times better performance, lower cost, and also more functions integrated together. And also for the ASIC, it's not only taking billions of dollars to invest but also economy of scale. Working with Fortinet, a lot of people ask me why other companies don't want to do ASIC. They need big investment, minimum five to ten years, cost billions of dollars. But once we have the economy scale, we have about 60% market share on unit shipment. That's also more benefit for us because not only the big per chip but also each chip cost will be lower when they have quantity. So we already reached the threshold where we start to see the benefit, making other competitors more difficult to catch up because of the quantity we have. And also you can see this shows up on the right side about last eight years, you see the product revenue growth, unit shipment growth. So we feel with the supply chain issues coming up now, the story we had five years ago may be repeating again because we have much better inventory management, we have better control on the manufacturing production operation. A lot of competitors are starting to be out of stock of products. So we are the only one still shipping. That gives us an advantage to get into a lot of white space to replace a lot of competitors. So this is a time we feel we are gaining market share and we can grow faster than competitors. And also SD-WAN, we are the number one most deployed, most validated SD-WAN, and it's a single OS compared to network security, compared to SASE. And also the only SD-WAN now using ASIC to accelerate gives us better performance, better cost, and easy to manage. This is also a huge advantage. The SD-WAN market is growing a little bit slow now, but we do see we are gaining market share very quickly because a lot of other SD-WAN players, because they are being acquired by other companies, they kind of slow down on the R&D side, they also start behind on the new functions needed. That's also why we not only launch SD-WAN but also the new bundle service very easy to transition to SASE. So that's for the SASE advantage we have. Yeah, this using the number three kind of more easy, it's one-third cost and the three in one basically network security, SD-WAN, and SASE in the same OS, in the same system, and three times size of total addressable market which none of our competitors currently address, whether on-premise SASE, sovereign SASE, and also in the cloud SASE. So that's where we see a much bigger total addressable market for us, probably three times larger than competitors, one-third cost, and very easy to migrate, much shorter sales cycle. That's the reason last quarter unified SASE grew 40% year-over-year, more than double the market growth rate. And this is the investment we have not only for SASE but also for AI. We also have invested billions of dollars in all this infrastructure including AI, all these things. So we have our GPU farm, we have our own AI model, we have our own kind of SASE data center, we have our own kind of FortiStack to make it more secure. And there's also email security using this, web content security using this. So a lot of services behind this infrastructure, much broader benefit for Fortinet on SASE. That's also one of the differentiations. I don't see any of our competitors investing billions of dollars into this infrastructure. So besides the buyback stock, which probably close to $10 billion, we also spent a few billion dollars on building the infrastructure in the last 15 years. And secure operation, we cover more than half the product. Secure operation is all AI-enabled. And the other thing really because we have about 40 products in the secure operation side, it's more a very fragmented market, but for us most products are all homegrown, all internal development, so that's making day one integrate and automate together. That's also making it easier to use AI to enable all this and working together with other products, especially the FortiGate, FortiOS. Yeah, the benefits are very easy to understand: responsive, second, shrinking the attack surface, and a much better easy operation and lower cost. And then quantum computing, we actually are leading the market. We already started shipping five years ago. So compared to some competitors just announcing some quantum, we already shipping and we are the biggest market share. For us really it's the government, the finance service, they all leverage the quantum computing technology we have. So FortiOS has been shipping five years ago. So we believe we dominate this market. The other part probably will be good growth also leverage new ASIC chips coming up this year is the secure AI infrastructure. So we are able to secure all the five layers of our AI, and besides we also secure the biggest AI company. And at the same time, whether from OT security covering the energy and also the chip-level security, the infrastructure side, AI model we also develop our own model, and also a lot of applications. So that's where we feel we are in the best position to secure the AI infrastructure itself. Besides, we are the company we believe mostly leveraging using it internally. So every department, every function, every position we want people to use AI. So feel free to talk to some of the people here and they will give you examples of how we use AI whether internally or helping partners. We feel the company will keep up all this innovation and keep up all this long-term investment will drive the company long-term growth going forward. With that, let me transfer to.
All right. Thank you, Ken. So the next section of our short presentation here is just to walk over the business attributes of Fortinet mainly around our fast-growing market opportunity, our sustainable competitive advantages, a diversified business model as well as the customer journey and then of course our strong business model that drives significant free cash flow. So first up, large and fast-growing addressable market. So you've all seen this slide before. These are the strategic and go-to-market focus of Fortinet. We're focused on three primary pillars: secure networking, unified SASE, and SecOps. Secure networking remains the foundation of our business driven by FortiGate firewalls and the convergence of networking and security. Unified SASE, this is a high-growth opportunity where we're integrating SD-WAN and cloud security into a single platform providing consistent security, flexible deployment across hybrid, multicloud, and lower TCO. And then finally, SecOps. This pillar focuses on AI-driven security operations to detect, investigate, and respond to threats. And as you saw in 2025, we outgrew each of these markets. And as we outlaid in our reaffirmed three to five year model, we expect to grow 12% or above, continuing to outgrow these markets. These are large opportunities totaling over 300 billion. And even as a leader within these spaces, we currently hold less than 20% of the market share in these highly fragmented segments. So this provides an enormous opportunity for us to upsell and cross-sell our customer base. Now let's talk a little bit about secular tailwinds to our business. As you all know, security spending remains a high priority amongst organizations worldwide. But beyond that, Fortinet also has some particular attributes that we find valuable in calling out. One is convergence of security and networking. As Ken pointed out this morning, demand for security networking is rapidly growing, has overtaken the traditional networking segment. As of 2026, we hold a 55% unit market share in firewalls and we're outperforming the broader secure networking market. Then you've got consolidation trends. Basically, customers are looking to reduce complexity. They are replacing disparate point products with our integrated platform. And then finally, an evolving threat landscape. And this is an important point that helps drive durable growth. The move toward multicloud and hybrid infrastructures and work from home has created a highly fragmented environment, but there are some particular opportunities that Fortinet has with our differentiated approach. So again, the threat landscape is evolving. Attackers are increasing their speed, scale, and sophistication of attacks against an increasingly distributed enterprise environment. A couple of these opportunities we want to highlight is OT. We've been in the OT market for a while. Beyond that, we have some early innings opportunities such as sovereign SASE, AI, quantum, and then finally, as Ken pointed out, the edge is becoming increasingly important as well. So these are unique opportunities for Fortinet's platform to address, and we're taking advantage of these opportunities by leveraging our strong differentiation versus peers, and I would consider them to be greenfield opportunities. So let's walk you through a couple of them. Versus OT. There's a couple of secular tailwinds within the secular tailwind that we could go over. There's the surge in connected devices. This is the proliferation of IoT and connection of previously air-gapped industrial assets. Then there's IT/OT convergence where organizations are increasingly moving toward converged architectures underneath the CISO. Then there's regulatory compliance with increasing standards. They are needing to adopt more robust OT security controls. And then finally, there's just modernization cycles where there's legacy equipment that can't handle software or is either unsecured that needs to be updated. So this is as we've talked about, over a billion dollars for us in terms of growth. It's been growing 20% or more. And so we distinguish our OT platform through a combination of proprietary hardware, a unified operating system, and a long-term investment that peers have yet to match. So we feel good about this opportunity. Next is sovereign SASE. It's a key driver of our SASE pillar. This model is entirely built on FortiOS. It enables providers to deliver localized high-performance security services at approximately one-third the cost of competing solutions. We believe the TAM for this opportunity increases the SASE market opportunity, making it much larger when you include sovereign deployments because they address a segment in which organizations increasingly need full control of data residency and routing. So we've been particularly successful here in the public sector and service provider markets where data localization is a mandate, namely Europe and Middle East as of today. Next up is the topic of the day which is artificial intelligence. So we view this as a multi-factor, multi-vector tailwind to our business that spans infrastructure where AI is built, protecting the applications that use it, and leveraging AI to automate global security operations. So again, the tailwinds to this business are infrastructure upgrades to accommodate for LLMs and AI, new AI attack surface, faster, more sophisticated threats from lower level actors, and then just increasing east-west traffic related to AI traffic. So how are we addressing this? Well, this is an early innings opportunity, but at the same time, we're securing the AI data center. This focuses on the infrastructure. We believe this is a significant opportunity in providing the throughput and low latency required to secure lateral east-west traffic. We're securing AI applications. This focuses on the software and logic layer where we're protecting organizations from risks associated to LLMs. Finally, our AI-enabled solutions. This involves using AI to automate the detection, investigation, or remediation of threats. Our AI-driven SecOps pillar or opportunity is currently probably the largest near-term AI revenue driver with billions for AI-driven SecOps pillar growing 22% for the full year 2025. So this is a unique opportunity where we feel the tailwinds far outweigh any risks in this segment, and we're addressing that through our AI patent portfolio as well as getting out in the market in terms of our ASIC development which provides a high throughput opportunity. With that, I'll pass it over to our CFO, Cristiano.
Thank you. Thank you for coming. I think it's a great opportunity for everybody to see our tech in action in the tech expo and I hope you will make good use of it and talk to our engineers because it's a lot of exciting stuff that we are announcing here. So, what are our sustainable competitive advantages? Ken has talked about it. It's the ASIC and we've built it into our products and consolidated functions. Why does it matter to our customers? Because it makes our products more affordable. So that's a key advantage that we continue to develop on, and Ken already mentioned we will have a launch this year. We announced today FortiOS 8.0. 8.0 comes with a lot of new AI-related security features and the benefit is across our portfolio because FortiOS spans across our products. We also have improvements for SASE and integration with SSE, and we have some new SD-WAN features that we are bringing out with 8.0. So a lot of innovation for our existing customers and of course new customers that they can use. And there are also some features for operational technology. So very important that we continue to innovate with our FortiOS that is so integral to our products. Then you've seen this slide, we talked about it this morning. Why is it so important? Because Fortinet has a unique approach to how we deliver cloud solutions, whether it's SASE or other cloud solutions that Ken talked about, and the fact that we have a multi-delivery strategy with our own data centers, with colos, and with cloud providers gives us the ability to be fast when we need to spin up something for customers that are buying in regions where we don't have our own data centers yet. But it also allows us to manage the economics of our delivery through our own infrastructure that is purpose-built and of course more efficient than going through cloud providers. So very important for us and we continue to build out our own data centers and colos. You've seen this slide. Why is this so important to continue to talk about diversification? Because it gives us a lot of benefits. I talked about this morning about financial stability. We have a lot of different customer sizes that we need to cater to. So it means we need to have very complex scenarios that we can address for our customers. But we also need to have simple ways of operating our solutions. This is where we are successful in large enterprises, in small enterprises, in public sector. We sell into over 100 countries, or over 200 countries. We have customers in over 200 countries and to many industries that are regulated, that have a lot of retail or other outlets. And of course public sector is a big one for us which is highly regulated and very important so that we have all our products certified. This diversification gives us a lot of intel and it also gives us a lot of financial stability because these markets may go at different speeds. So one area that we've been focused on is to move up market. Over the last three years we've grown with a 14% CAGR for deals greater than $1 million, which shows you that we are getting traction in the enterprise in the G2000 segment, and we continue to put a big focus on that. How do we do that? First of all, we have our expanding platform approach. We start typically, and you see this with our customer journeys in unified networking. We add endpoint, cloud solution, ZTNA on top, and now we are also launching a simplified licensing to make it easier for customers to adopt more of our platform. So let me talk about a couple of customer journeys. We've talked about the upsell from firewall to SD-WAN to SASE for a long time. We see that happen more and more. SD-WAN is still super relevant for us because this is where customers can benefit from the advantages and also simplify their network, get more visibility and save a lot of money because most of the SD-WAN providers are added on top of their infrastructure and Fortinet is embedded. So it's an efficient way for customers to improve their network infrastructure. As a result of our upsell opportunities, our billings mix has shifted a little bit away from secure networking towards unified SASE and security operations over the last couple of years. Typically, unified SASE and security operations would be more service centric and we have a ton of services that we sell in these growth engines. But what we also see is that at Fortinet, many of our customers benefit from the various form factors that we have. So while we started with unified SASE and the FortiSASE solution, now we have significant success with sovereign SASE as well. So our customers really embrace our products, not always our service bundles. But I talked about it this morning, key services are important to enable the products for full security. So we do sell FortiCare and FortiGuard services with almost all our products. Let me talk about a couple of customer wins. This one is about a major league sports franchise owner and we didn't start on the firewall side. We actually started with a mobile IP solution and then they added more of our products like ZTNA, SD-WAN to get full visibility for the network and protect the IP from all the scouts in the stadium. This is another example of a customer which is similar from a solution set and a journey of the customer I talked about this morning. But it's not the same customer. It's a national government who needed to modernize their MPLS infrastructure, purchased SD-WAN and FortiSASE and created a unified management console for seamless security integration and management. So they had significant cost savings and that's the typical benefit we see for our customers that when they go to Fortinet, they can save a lot of money because it's fully integrated. It reduces their cost of operations and it's fewer vendors. So the consolidation theme also plays a big role. Back to some numbers. We want to make sure you are all aware of the targets that we have for the next three to five years. We believe we will outgrow the market. Based on our weighted averages of the markets we are playing in, we believe it's greater than 12% CAGR. We continue to have good margins and follow the rule of 45. And we continue to expect to deliver high mid-teens adjusted free cash flows based on our business model which is generating a lot of cash flows. So here is the rule of 45 that we've pledged for and targeting for this year and also for the future. So where are we for the last couple of years? Our CAGR was 13%, so right in the wheelhouse of what we are estimating for the future from a total revenue perspective. Our adjusted free cash flow was a little bit higher, 16%, and we believe our business model supports these types of growth rates for the future. I know a lot of analysts think we should not grow that fast or we will not grow that fast. So why do we believe we are super comfortable that we are growing faster than the market? Secure networking TAM is not growing as fast, but we have unique benefits that allow us to grow faster. First of all, we have two other segments, unified SASE and SecOps, which are big TAMs that we can upsell our customer base on. We have an expanding attack surface that allows us to capture more market, and we believe our technology is superior which allows us to capture market share gains. So from that perspective, we have confidence that our product revenue mid-term growth is going to be between 10 and 15%. These are some updated numbers on share repurchases through our 10-K filing. So this quarter we've already repurchased $471 million. We still have $1.3 billion of buyback authorization, but since our IPO we've returned $9 billion which is quite significant, and we still have a good cash balance. So I think shareholders should be happy with how we allocate our capital between innovation and shareholders. So what are the key takeaways? We are operating in a growing TAM. We continue to innovate and you can see this here at the event and you can ask our innovators in a second in the Q&A as well. Our foundations for growth have been the same. It's our ASIC for our product which optimizes the use cases for the product. It is our FortiOS which stands across multiple solutions. It's our cloud delivery as well as our constant innovation and investments whether it's in AI, whether it's in quantum, whether it's in OT. We understand what the market requires, where the risks are, and where we can benefit our customers. So really innovative and always customer-oriented, customer value outcome based. As we said, we have a large customer base on the firewall side. So we have tremendous upsell opportunities for all our products, not only for FortiGate because we have a significant product portfolio and we are constantly innovating in all our products. You know we have strong growth and profitability for the past and we assume that we will follow the rule of 45 in the future. So that's a good setup for investors. Now, let's get to the Q&A because I'm sure that with all the information you can get here, you want to hear from all the executives as well. And welcome. Come on.
Ask the exec team to step up and join us on the stage.
All right, with that we welcome the exec team up to the stage. I'd like to kick things off. I know everyone's excited to ask questions, but I'd like to tee one up for Robert May. Want to target him, but, yeah, like to pick on him. What are you most excited about today's announcements at Accelerate?
Well, I guess yeah, there's hundreds of things, right? I mean, even in the tech expo, there's over 60 Fortinet booths. So if you're there, you'll see there's just really hundreds of things that we're talking about. I think the top ones you can really look to the kind of the two press releases we issued this morning. Of course AI is a super big topic here across many different things, but if you want to summarize at the top level, there's AI for security which means that we use AI across the product portfolio, and you can see this reflected in many agentic AI agents throughout the product line. One of the most exciting ones is around really being able to replicate what the SOC analysts do in the SOC platform, so really providing a full ability to do a full analysis there. There's also several innovations around products and services that are helping customers secure their AI deployments. This includes the use of shadow AI or other AI tools in the enterprise. It also includes securing the AI infrastructure and also identifying and controlling those agentic AI communications in the network. Other areas that we announced this morning are around SASE and SD-WAN. There's a new SD-WAN bundle which has many different management components integrated together as well as including a SASE starter pack, so allowing customers to quickly and easily get SASE up and running. And then also a lot of innovation around bringing all of the capabilities from our public cloud SASE into the sovereign SASE lineup. A couple of other things to highlight: one would be around quantum. Really, we've had QKD and PQC for quite a long time already, whereas other vendors actually don't have one or both of those. We really also added in FortiOS 8.0 a lot of extension around securing both the management plane and further extension of the data plane that includes remote access which could be remote VPN access or even remote access to SASE. Also includes SSL deep inspection, so some things that a lot of our competitors actually don't have. On the SOC side, maybe a couple things to highlight would be some further consolidation as we know there's a lot of tools and different vendors within security operations. So on the SOC platform, bringing together some of the core features and making it more accessible to larger sets of customers, and also on the endpoint side, unifying further several of those standalone endpoint agents that you see in the market under a single license and single management plane. So these are some of the kind of top highlights there.
That's great. Let's go ahead and move to the crowd. Aaron's gonna pick it, pick it will here.
Hey, great. Hey, on. Yes. Okay. Hey, thanks everyone. Sacket Kelly from Barclays. Really appreciate you hosting this session and having us here at Accelerate. It's always a great event. Also great to have the whole team here. So I'm going to ask a couple of you the same question, but maybe to start with you, Christian. There's clearly a lot of noise right now just around higher memory input costs, right? Which then of course carries forward to pricing. And the question that I get, and I'm sure a lot of us get here in the room, is how customers could potentially change their purchase decisions around just kind of that higher pricing, right? That question comes up versus how you versus what was a very healthy product guide. So the question for you is how much flexibility do you feel like you've left in product in case that customer behavior changes? And since I've got Trevor, Pedro, and Joe on the stage, I'm going to ask, are you seeing any of that behavior change from customers given what are higher prices right now? A lot there. Does that make sense?
So to answer your question, I think there are two different scenarios. There is new projects that require new hardware or expansion, and customers won't be able to wait. And there's the ability for customers to maybe wait for price improvements when they have existing firewalls. So we don't really see yet a slowdown. And we believe that Fortinet, as Ken said earlier, is in a good place. We have good relationships on the supply chain on the component delivery side, and we are actively working through also changing our component setup to be a little bit more flexible. So I'm not seeing any difference right now. I think it's too early, frankly.
In Latin America and Canada, we're starting to see actually some customers asking us if we can deliver, and we can, so actually we're taking advantage of that.
Yeah. Same thing holds true in the US. It is a bit of a compelling event in some areas where companies can save a substantial amount of money from when we raised our prices on March 2nd by pulling opportunities in further, even if they don't need the firewalls today. They'll have it staged in a warehouse so they can save a material amount of money.
And if you could say your name and firm name that would be great.
Am okay, great. Thank you very much. Greg Powell with BTIG. So this might just be me, but it sounds like you're more positive on the SD-WAN side of the market today than you were at least 6 months ago. Can you maybe just talk more about what's driving that optimism? And then on the secure service edge side of unified SASE, what are some of the main product gaps you've closed against the likes of Palo Alto and Zscaler? And just how should we think about the opportunity there over the next 12 months? Is that something that could accelerate within the portfolio?
On the SD-WAN front? So, I run US sales. I've been in this role running all the US since January 1st of 2025. And I will tell you that the momentum that we have with SD-WAN is off the charts across all customer sizes. Some of the most demanding banks in the world, some of the most demanding retailers in the world. I'm on the road a lot. I'm an executive sponsor for a handful of very large retailers as well as a company that processes a trillion dollars worth of transactions through their network. And guess what? They're betting on Fortinet on SD-WAN. And if you look at SD-WAN and our number one dominance as Ken said earlier, you can leverage that and leverage FortiOS. And if you look at SASE, I wasn't at Fortinet 5 to 6 years ago, but it's eerily similar to what SD-WAN is today. We will absolutely be number one in SASE in less than two years. It's the power of FortiOS. We have a massive install base to Cristiano's point to cross-sell into, and we're just seeing tremendous momentum. And if you can solve for SD-WAN in some of these very complex large accounts, you can go down market. So we're seeing great success with SD-WAN across all the segments inside the US.
And let me add to the SD-WAN momentum. We've been the leader in the Gartner Magic Quadrant for a while now, and that benefits us quite tremendously when we go into RFPs. There are still a ton of companies that have SD-WAN as a separate security component where it's on top of their firewall estate or their router estate. So understanding that with Fortinet they can combine it is still an extremely important selling point. And then when we go into EBCs with larger customers and explain how our FortiSASE works and they understand that it's an extension from SD-WAN and they can actually use the same policies, it's extremely powerful. So sometimes a SASE opportunity also pulls SD-WAN into the whole deal cycle.
Yeah. And just to echo what Cristiano just said, I've been talking to a number of customers who have two vendors for firewall and SD-WAN. And if you present and explain the cost benefit of our single OS solution, it's very compelling. Very compelling. And when you have the same OS with SASE as well, and talking with a number of the salespeople out there, it used to be that firewall was our wedge into customers. Now we've got multiple different wedges in terms of firewall, SD-WAN. I think you'll see SASE more and more as we have closed the gaps in functionality for enterprise. And so it just gives us more opportunities to get into customers and expand across that common OS in those three areas over time because the renewal for SD-WAN may be different than firewall or vice versa. But once we get in, it gives us an opportunity to expand across those three different offerings.
Yeah. Let me just one point on SD-WAN. SD-WAN actually is the first routing network protocol you can route traffic based on application. It's very different than our previous routing protocol. And what's unique about Fortinet is we have SD-WAN built with the Wi-Fi controller, FortiOS built with the security firewall OS, built with SASE also using FortiLink to control all the switches and Wi-Fi points. So it's not only applied to the LAN but also to the local area network, can also manage east-west traffic besides the north-south traffic. That's the one traffic. So that's a unique advantage that can easily expand both internally and externally. There's not much study about how SD-WAN or some other things there, but we believe the FortiOS super OS can manage not just networking but also security managed together. Robert May is a tech expert, I think, correct me if I'm wrong. So that's why you see it's a huge advantage that can go beyond the traditional SD-WAN market. And also the top five SD-WAN players all come from acquisition, which they kind of slow down and also keep losing market share. That's why we feel SD-WAN has a lot of potential going forward because not only manage the WAN traffic but also LAN traffic, which eventually a lot of AI traffic will also be in data center and using this SD-WAN or kind of software-defined networking to manage within the FortiOS.
Good afternoon, Fatima Bulani from Citi. Thank you for hosting us. Ken and Robert, maybe a jump ball for you with respect to the FortiOS 8.0 release. Clearly a significant and consequential amount of innovation as it relates to AI enabling and integrating rather AI and infusing it across the portfolio. So my question is just around the fact that this being a major operating system release, historically what have you seen with respect to customers upgrading to the newest OS release? And the related question to that is what type of a hardware refresh or an upgrade cycle is necessarily going to be a prerequisite for the average customer to enjoy the benefits of 8.0? And then I have a follow-up as well if you wouldn't mind.
Okay. I can start maybe. So to answer the second part of your question first. There's no hardware prerequisite necessarily for 8.0 at this time. It's common features across existing platforms. In terms of the first part of your question, the upgrade process. There's always three phases: the early adopters that want to take advantage of the new features and we'll definitely see that as beneficial with things like the bundle options that have additional components in there, as well as of course the AI security. They want to get that visibility that they're missing today. The second part is when there are new hardware models coming out, they may adopt 8.0 earlier as part of that shipping version. So this would be a second wave that would come. And then of course other customers may take more time just based on their internal processes or their standard operating procedures for appropriate start.
I appreciate that, and it's a good segue into the follow-up that I wanted to get your perspective on. One of the themes in some of your opening remarks was just around more flexibility around licensing and pricing modalities in your customer engagement, as well as perhaps your engagement with some of your larger service provider partners. So I was hoping you could go into a little bit more granularity as it relates to the SASE starter packs for instance. How much of that is dramatically incremental and how you're seeing that show up positively in pipeline activity, conversion, and uplift realization? So any additional detail around some of the pivots or changes or refinements on pricing that you're rolling out over the course of this year? Thank you.
Well, I can let maybe the sales talk about the pipeline part, but from the technical side, what we try to do with the bundling is make it easier. There's a lot of different individual components, so we make it easier to adopt all of them together. And what we kind of see is that often times that starter pack is useful for the internal team to get going on SASE because often times it's the IT or those teams that need to get it POC'd and up and running first, and then they roll it to the company. So it's kind of a multi-stage rollout in that way.
From a pipeline perspective, I agree with what Trevor said earlier that it's eerily similar to the SD-WAN adoption we're seeing in SASE. In the past, customers would only have to enable a certain configuration and all of a sudden they have SD-WAN working.
And here we're doing the same thing, making it easier for the customers to adopt SASE without overhauling the whole thing, without introducing a new technology, without or leveraging the knowledge that they have of the FortiOS on the gates, on the Wi-Fi, on the switching, and all of the ecosystem. So the barrier of entry is getting lower and lower with these bundles, and obviously customers are reacting very positively to it.
I mean, maybe I can add that what we're seeing now with the maturity of our SASE products is that customers are coming to us to work on SD-WAN projects, right? Because there's still a big need to reduce total cost of ownership and ROI with respect to the MPLS backbones. And seeing that our SASE solution has matured so quickly in such a short time frame, they are asking us for both, integrated into one package, one RFP or whatever. But that's very interesting to see the quick adoption of the different bundles together.
Brian Essex from JP Morgan. So thank you again for doing all this. This is an amazing event to talk to customers and partners. And I just, based on some conversations that I had, Chris, John, I had a question on one of your favorite topics from a services perspective. So one of the things that we're hearing from customers and partners, or some customers coming back for end of service, saying, 'Look, you know, we want to extend these agreements,' and some partners talking about extending those one to two years. So I want to understand how you're managing those relationships, and I would imagine that the extended service agreements have a more expensive price tag associated with them. So would love to know, like, what's a typical uplift if you do decide to extend a service agreement, and how are you managing those relationships throughout that extended service cycle?
I think I need a clarification. Are you talking about extended services after end of support? I mean, in general, end of support is end of support, right? But there are customers that may ask for a long time before anything is end of support. They ask for a life cycle guarantee for certain years, right? And then if we do that, we sell a premium support because we need to guarantee a longer life cycle for these customers, independent of when we declare it end of support. So that's one aspect, which happens more often in OT because these investment life cycles are long, and customers want to make sure they secure their investment for five, seven, eight years. So that's one area. Other than that, upsell of services is dependent on the type of service. Yeah. And of course, any customer expects volume discount. So large customers may pay a little bit less or get higher discount than others.
Okay. So what you're saying is if something's coming up for end of support in say 2027, that's the date you can't push that back?
That, I mean, in general we don't, for certain customers we may have an extension in rare cases. Or it may be pre-negotiated that a customer has a pre-agreed time frame until we support them, even though for the rest of the business we may say it's end of support.
That's super helpful. Thank you.
Thanks for taking my question. Max Campl from Goldman Sachs. You've talked about one of the drivers of AI workloads being the growing need for internal segmentation. From what you're seeing with customers today, how meaningful has that been as a demand driver so far? And how meaningful do you think the need for network capacity tied to AI could become over the next few years?
Network capacity you mean internally?
I in my region I haven't seen a big requirement, but then Latin America is always behind in these things. Customers are not too worried about it. I think the worry around AI is how we can do it securely, how we can use it securely. Customers are still very reticent of using it. How are we going to control it? Those are the main questions. I haven't heard a customer come to us worried about his network capacity at this time. I don't know what you guys are doing.
Um, data center capacity.
Okay, okay, okay. Data center. I think again in my region we're seeing sort of a move away from the cloud. A lot of companies, because of what I just said about worrying about where my data is going, are heavily considering deploying their own models internally, and so they're looking at data center capacity again. It's very similar in the US.
Josh with Tilted Wolf Research. I actually want to follow up on that last question, but maybe a different lens and a little the bigger picture. I don't even know the right way to ask this, but I guess imagine five years from now, the agentic workforce is a reality and everyone you see sitting here is kind of replaced by a little cute little agent widget doing work for us. How does the baseline level of network traffic change from where it is today? Is network traffic going to 10x, going to 100x, going to 1000x? And what does that mean for a business like the firewall market that prices for throughput?
I just look at my Anthropic account and see the number of tokens going back and forth, and you'll see, you know, even mundane work that we do today, if you really look at what we're using, it's orders of magnitude more in the traffic and the tokens that we're moving back and forth. Now, if we're talking about an army of agents, every single one of them being able to communicate between themselves, right, acting at speed, I do think that that's going to scale and it's going to scale dramatically in terms of requirements. Yes.
I think maybe what you're trying to ask is around where the traffic shifts, right? Like traditional SaaS services, everything goes to the cloud, and so you need to keep building bigger and bigger data centers, right? But with the move towards agentic AI and, you know, with MCP and agent-to-agent communication, that data traffic actually shifts to the edge, right? Between the remote endpoints and inside the enterprise environment. So the need for scaling that up goes up. I think that's also kind of what a little bit was asking as well.
And then when we take the human out of the future, right? We check email every so often. The agent is going to check it real time, right? And so there's again a very different pattern of use when it's an agentic entity doing the thing rather than us, right? We have other things to go attend to. And if the agent is just doing that, it's going to continue to do that continuously, right? And so you'll see definitely an increase.
Maybe just a completely unrelated follow-up question. In the presentation today, or just being out on the floor, it's very clear that you guys have a ton of products, regardless of how you want to go to market with them. But you know, I think there was a stat that the SecOps has 40 offerings that you talk to when you're on the stage. So how do you ensure that your sellers, your partners, are really capable of selling such a broad swath of offerings? And like, why are so many offerings not capable of driving a CAGR above and beyond the 12% rate that you talk to long term?
So on the enablement side, we have specializations from a training perspective. So certain partners are specialized. Yeah. I think from a why are we not growing much faster? It's scale, right? So the partners have existing vendor relationships, and I think it's us driving customer awareness about our products that has to happen before we can grow faster.
Janates from True Securities. Regarding the Quantum Safe enhancements that you rolled out earlier today, I just had a question in terms of what are customers thinking, what are they asking? Because we've heard about Quantum for some time now, and how would you say you're distinguishing yourself versus some of the competitors?
Well, so for the distinguishing part, I mean, even what we've supported before the announcement today distinguishes us, just having the combination of QKD and PQC to secure basically the encryption. Now, what we added or what we announced today was kind of three things, right? One was that connection from the remote endpoint to where it's going could be SASE or could be remote access, right? So this is one part of the data plane traffic. Another part of the data plane traffic is that SSL deep inspection, right? So this is also now added as a secured. And the third one was around the management plane, full quantum safe encryption as well. These are three definite differentiators overall.
And then to your question, I mean, because of the strength in financial services and in public sector, quantum has been a topic for us for a longer time. We've had it and certain customers have deployed it. I think now there's more awareness because the ability to decrypt certain things is coming nearer. Yeah. So more customers in other industries are more aware and asking these questions, but we've had it in the FortiGate for a longer period and certain customers have been using it. Yeah.
Mita Marshall from Morgan Stanley. Just on the OT security business. You know, obviously a generational amount of building of data centers right now, and just ways in which you guys are finding avenues with expanding beyond enterprise customers to get into that market or to get into that opportunity. And then, you know, noted Armis is one of your major sponsors here. Just kind of any traction with that partnership or change, just given their pending sale.
