Fortinet (FTNT) 10-K risk factor changes: FY2022 vs FY2021

- component shortages, including chips and other components, and product inventory shortages, including those caused by factors outside of our control, such as the COVID-19 pandemic, 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, [added: terrorism, wars,] such as the [removed: conflict between Russia and] [added: war in] Ukraine, [removed: terrorism, wars] and critical infrastructure attacks;

- the timing of channel partner and end-customer orders, market acceptance of our price [removed: increases,] [added: increases] and our reliance on a concentration of shipments at the end of each quarter;

- 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 the COVID-19 [removed: pandemic;][added: pandemic, increased inflation or possible stagflation in certain geographies, rising interest rates, the war in Ukraine and other factors;]

- the timing of shipments, which may depend on factors such as inventory levels, logistics, manufacturing or shipping delays, our ability to ship products on schedule and our ability to accurately forecast inventory requirements and our [removed: suppliers] [added: suppliers’] ability to deliver components and finished goods;

- the mix of products sold, such as the mix between [removed: FortiGate] [added: Core Platform] and [removed: non-FortiGate] [added: Enhanced Platform Technology] solutions, and the mix of revenue between products and services, as well as the degree to which products and services are bundled and sold together for a package price;

- any decreases in demand by channel partners or end-customers, including any such decreases caused by factors outside of our control such as natural disasters and health emergencies, including earthquakes, [added: droughts, fires, power outages, typhoons, floods, pandemics or epidemics such as the COVID-19 pandemic and manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts, terrorism, wars, such as the war in Ukraine, and critical infrastructure attacks;]

[removed: droughts,] [added: Lead times for components may be adversely impacted by factors outside of our control such as global chip shortages, natural disasters and health emergencies such as earthquakes,] fires, power outages, typhoons, floods, [added: health] pandemics [removed: or] [added: and] epidemics such as the COVID-19 [removed: pandemic] [added: pandemic,] and manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts, terrorism, [removed: wars and] [added: wars, such as the war in Ukraine,] critical infrastructure [removed: attacks;][added: attacks and other factors.]

- the effectiveness of our sales organization, generally or in a particular geographic region, [added: including] the time it takes to hire sales [removed: personnel and] [added: personnel,] the timing of [removed: hiring,] [added: hiring] and our ability to hire and retain effective sales personnel;

- sales execution risk related to effectively selling to all segments of the market, including enterprise and small- and medium-sized businesses, government organizations and service providers, and to selling our broad security product and services portfolio, including, among other execution risks, risks associated with the complexity and distraction in selling to all [removed: segments and] [added: segments,] increased competition and unpredictability of timing to close larger enterprise and large organization [removed: deals;][added: deals, and the risk that our sales representatives do not effectively sell our Enhanced Platform Technology products;]

- the timing of revenue recognition for our sales, including any impacts resulting from extension of payment terms to distributors and [added: fluctuations in] backlog [removed: levels;][added: levels, which could result in more variability and less predictability in our quarter-to-quarter revenue and operating results;]

- the deferral of orders from distributors, resellers or end-customers in anticipation of new products or product enhancements announced by us or our [removed: competitors;] [added: competitors,] or the acceleration of orders in response to our announced or expected price list increases;

- our ability to obtain and maintain permits, [removed: clearances,] [added: clearances] and certifications that are applicable to our ability to conduct business with the public sector, including the U.S. federal government, and other sectors;

- changes in the timing of our [removed: billings and collections] [added: billings, collection] for [removed: service] [added: our] contracts or the contractual term of service [removed: contracts] sold;

- political, economic and social instability, including geo-political instability and uncertainty, such as that caused by the [removed: conflict] [added: war] in [removed: Ukraine] [added: Ukraine,] and any disruption [removed: and] [added: or] negative impact on our ability to sell to, ship product [removed: to,] [added: to] and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions;

In addition, a significant percentage of our operating expenses are [added: fixed in nature over the near term.]

The COVID-19 pandemic, including its ongoing variants, [removed: could] [added: may] adversely affect our [removed: business in a material way, based on,] [added: business,] for example, [added: through product and] component [removed: shortages or negative impact on demand.][added: shortages.]

The COVID-19 pandemic, including its ongoing variants, has negatively impacted the global economy, disrupted global supply [removed: chains and] [added: chains, reduced] demand for certain solutions and created significant volatility in, and disruption of, global markets.

The extent of the future impact of the COVID-19 pandemic on our operational and financial [removed: performance, including on demand for our products and services, our ability to source components and our ability] [added: performance is unpredictable, adds uncertainty] to [removed: execute] our business [removed: strategies] and [removed: initiatives in the expected time frame,] will depend on future developments, including the duration and spread of the COVID-19 pandemic and related restrictions on, and disruptions [removed: of, business] [added: of business, supply chain] and world economies, all of which are uncertain and difficult to predict.

We [removed: are experiencing] [added: continue to experience] ongoing [added: product and] component shortages, which have resulted [removed: in] [added: in, and which we expect will continue to result in,] extended lead times of certain products and significant disruption to our production [removed: schedule.][added: schedule and predictability.]

We also have experienced and expect to continue to experience increased component costs, which [removed: may] have [removed: a negative impact on] [added: negatively impacted] our gross margins.

If the [added: effects of the] COVID-19 pandemic [removed: continues] [added: continue] to limit the availability of our products, either by limiting components available, the actual manufacture and assembly or by limiting or restricting shipping of components and products, this could continue to result in increased product backlog, and result in lower billings, lower revenue and decreased profitability, and would negatively impact, and may materially negatively impact, our operating results and business.

In addition, we may [removed: also] face personnel-related risks as [removed: restrictions related to the COVID-19 pandemic begin to ease] [added: certain departments] and [removed: we] [added: locations continue to] transition back to an in-person working model, including that [removed: our] “return to office” [removed: plan] [added: plans] may be viewed negatively by employees and lead to attrition [removed: or to] [added: and] difficulty in hiring.

The COVID-19 pandemic may adversely affect certain of our partners’ and customers’ ability or willingness to purchase our products and services, delay certain customers’ purchasing decisions and increase customer attrition rates, all of which will adversely affect our future [removed: sales] [added: sales, billings] and operating results, possibly in a material way.

In addition, the COVID-19 pandemic has caused an increase in certain of our expenses, including increased shipping costs, increased cancellation charges and [removed: reduced attendance fees due to the cancellation of several of our 2021 Accelerate sales conferences, and has resulted in] increased component and product manufacturing costs.

While we continue to monitor developments and the potential effect on our business, it is clear that the COVID-19 pandemic [removed: will] [added: may] negatively impact certain sales and may have a material negative impact on our operating results in the near term and longer term.

Adverse economic [removed: conditions] [added: conditions, such as a possible recession and possible impacts of inflation] or [added: stagflation, rising interest rates or] reduced information technology [removed: spending] [added: spending,] may adversely impact our business.

Weak global and regional economic conditions and spending environments, [added: based on a downturn in the economy, a possible recession and the effects of ongoing or increased inflation or possible stagflation in certain geographies, rising interest rates,] geopolitical instability and uncertainty, [removed: weak economic conditions in certain regions or] a reduction in information technology spending regardless of [removed: macro-economic] [added: macroeconomic] conditions, [removed: including] the effects of the COVID-19 pandemic [removed: on] [added: and] the [removed: foregoing issues,] [added: impact of the war in Ukraine each] could have [added: a material] adverse impacts on our business, financial condition and results of operations, including longer sales cycles, lower prices for our products and services, [added: increased component costs,] higher default rates among our channel partners, reduced unit sales and slower or declining growth.

Our billings, [removed: revenue,] [added: revenue] and free cash flow growth may slow or may not continue, and our operating margins may decline.

[added: We may experience slowing growth or a decrease] in [added: billings, revenue, operating margin and free cash flow for a number of reasons, including as a result of the COVID-19 pandemic, a slowdown in] demand [added: for our products or services, a shift in demand] from products to services, [added: decrease in services revenue growth,] increased competition, [added: worldwide or regional economic challenges based on inflation or possible stagflation,] a [added: regional recession or a recession in the global economy, rising interest rates, the war in Ukraine, a] decrease in the growth of our overall market or softness in demand in certain geographies or industry verticals, such as the service provider industry, changes in our strategic opportunities, execution risks and our failure for any reason to continue to capitalize on sales and growth opportunities due to other risks identified in the risk factors described in this periodic report.

Additionally, a small number of distributors represents a large percentage of our revenue and gross accounts receivable, and one distributor accounted for [removed: 33%] [added: 32%] of our total net accounts receivable as of December 31, [removed: 2021.][added: 2022.]

[removed: Exclusive] [added: Six distributor customers] accounted for [removed: 33%, and 34% of our total net accounts receivable as of December 31, 2021 and 2020, respectively,] [added: 69%] and [removed: six distributors accounted for] 68% [removed: and 70%] of our total net accounts receivable in the aggregate as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively.

[removed: Additionally, Exclusive] [added: Our largest distributors] may [added: experience financial difficulties,] face liquidity risk or other financial challenges, which may harm our ability to collect on our accounts receivable.

Moreover, many of our channel partners are privately held, including our largest [removed: distributor Exclusive,] [added: distributor,] and we may not have sufficient information to assess their financial condition.

[removed: They may also have incentives to promote our] competitors’ products to the detriment of our own, or they may cease selling our products altogether.

Our channel partner sales structure could subject us to lawsuits, potential liability and reputational harm if, for example, any of our channel partners misrepresent the functionality of our products or services to end-customers, our service provider customers suffer a cyber event impacting [removed: end users,] [added: end-users,] or our channel partners violate laws or our corporate policies.

Reliance on a concentration of shipments at the end of the quarter could cause our billings and revenue to fall below expected [removed: levels.][added: levels or delay collections and the related increase in free cash flow.]

As a result of [removed: customer-buying] [added: customer buying] patterns and the efforts of our sales force and channel partners to meet or exceed quarterly quotas, we have historically received a substantial portion of each quarter’s sales orders and generated a substantial portion of each quarter’s billings and revenue during the last two weeks of the quarter.

[removed: Revenue from the sale of new, or from the renewal of existing,] FortiGuard and other security subscription and FortiCare technical support service contracts may decline and fluctuate as a result of a number of factors, including fluctuations in purchases of [removed: FortiGate] [added: Core Platform] appliances or our [removed: Fortinet Security Fabric cybersecurity mesh platform] [added: Enhanced Platform Technology] products, changes in the sales mix between products and services, end-customers’ level of satisfaction with our products and services, the prices of our products and services, the prices of products and services offered by our competitors, reductions in our customers’ spending levels and the timing of revenue recognition with respect to these arrangements.

Furthermore, we recognize FortiGuard and other security subscription and FortiCare technical support services revenue [removed: monthly] [added: ratably] over the term of the relevant service period, which is typically from one to five years.

Our FortiGuard and other security subscription and FortiCare technical support services revenue also makes it difficult for us to rapidly increase our revenue through additional service sales in any period, as revenue from new and renewal support services contracts must be recognized over the applicable service [removed: period.][added: term.]

- 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, rising interest rates, the war in Ukraine, the COVID-19 pandemic or other factors;

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- the effects of our reduction of operations in Russia;

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

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We may be adversely affected by the effects of inflation or stagflation, rising interest rates or any economic downturn or recession.

Inflation or possible stagflation, rising interest rates and any economic downturn or recession in certain regions or worldwide each have the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall product cost structure or decreasing demand.

These can negatively impact our business by putting downward pressure on growth or if we are unable to achieve the increases in product prices necessary to appropriately offset the additional costs sufficient to maintain margins.

The existence of inflation in certain economies has resulted in, and may continue to result in, rising interest rates and capital costs, increased shipping costs, increased costs of labor, weakening exchange rates and other similar effects.

As a result of inflation, we have experienced and may continue to experience component, product and shipping cost increases.

Inflation, stagflation and any economic downturn or a recession may

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

materially adversely affect our business, financial condition, results of operations and liquidity.

Although we take measures to mitigate risks such as those associated with inflation, the mitigating measures may not be effective or their impact may not offset the increased cost of inflation in a timely manner.

Inflation, an economic downturn, a recession and any other economic challenges may also adversely impact spending patterns by our distributors, resellers and end-customers.

In fact, certain of our contract manufacturers and component suppliers have de-committed from their scheduled delivery dates and product and component delivery commitments.

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See Note 16.

Segment Information in Part II, Item 8 of this Annual Report on Form 10-K for distributor customers that accounted for 10% or more of our revenue or net accounts receivable.

They may also have incentives to promote our

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

Revenue from the sale of new, or from the renewal of existing,

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

indebtedness, sell selected assets or reduce or delay planned capital, operating or investment expenditures.

- 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;

- economic or political instability in foreign markets, such as any economic or political instability caused by economic downturns and wars or other foreign conflicts, such as the war in Ukraine, tensions between China and Taiwan and any expansions thereof;

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

Such

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

There is significant competition for sales personnel with the

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

These sales subject us to a number of regulatory requirements, challenges and risks.

We derive a portion of our revenue from sales to government organization in the US (federal, state, local and education markets) and in foreign markets.

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.

- policies, laws or regulations have in the past, and may in the future, require us to hold certain third-party and government security certifications in order to sell our products and services and to make organizational and operational changes in order to sell into specific government agencies or programs, and such certifications may be costly to obtain and maintain;

In addition, government certifications and requirements may restrict our ability to sell to certain government customers until we have obtained certain certifications or meet other applicable requirements, which we are not guaranteed to do.

For example, certain of our competitors may be certified under the U.S. Federal Risk and Authorization Management Program (“FedRAMP”) and until such a time that are also certified under FedRAMP, we risk losing sales to certain government customers to certified competitors.

For example, government organizations may have contractual or other legal rights to terminate contracts with our

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

- changes in the timing of our billings and collections for our contracts;

fixed in nature over the near term.

Moreover, the COVID-19 pandemic has created a reduction in certain business activity and demand for certain solutions, which we believe has negatively impacted our billings and may in the future materially and negatively affect the rate and amount of our billings.

The COVID-19 pandemic has limited certain demand generation activities, such as conferences and in-person sales meetings, which may reduce our costs, but also may reduce leads that could result in closed sales.

We may experience slowing growth, or a decrease, in billings, revenue, operating margin and free cash flow for a number of reasons, including as a result of the COVID-19 pandemic, a slowdown in demand for our products or services, a shift

During 2021, 2020 and 2019, Exclusive accounted for 31%, 30% and 31% of our total revenue, respectively.

In addition to other risks associated with the concentration of accounts receivable and revenue from these distributors, Exclusive is a private equity-backed company and we may not have sufficient information to assess its financial condition and, accordingly, if Exclusive were to experience financial difficulties, we might not have advance notice.

The COVID-19 pandemic may also decelerate our hiring and increase the challenge of recruiting qualified personnel to leave their current positions to join us.

If our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our unsecured revolving credit facility may increase.

In addition, any downgrades in our credit ratings may affect our ability to obtain additional financing in the future and may negatively impact the terms of any such financing.

- economic or political instability in foreign markets;

- changes in foreign currency exchange rates;

recognition and expect greater payment flexibility from vendors.

In addition, mitigation and containment measures adopted by government authorities to contain the spread of COVID-19 in the United States and internationally, including travel restrictions and other requirements that limit in-person meetings, could limit our ability to establish and maintain relationships with new and existing customers, which may exacerbate the risks described above.

We are also limited in our marketing efforts as a result of the COVID-19 pandemic, as mitigation and containment measures adopted by government authorities to contain the spread of COVID-19, including travel restrictions and other requirements that limit in-person meetings, could limit our ability to establish and maintain relationships with new and existing customers and negatively affect our sales and marketing efforts.

Sales to U.S. and foreign federal, state and local governmental agency end-customers have accounted for a portion of our revenue in past periods.

Selling to government organizations can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense, with long sales cycles and without any assurance of winning a sale.

- public sector budgetary cycles;

- the government has and in the future may require them to make operational changes in order to obtain the necessary approvals to sell into the government;

- rules and regulations applicable to certain government sales, including U.S. General Service Administration regulations and certain third-party security certifications, and changes to such rules and regulations that may require us to make operational changes in order to obtain the necessary approvals to sell to government agencies.

Government spending may also be negatively impacted by the COVID-19 pandemic.

To date, we have had limited traction in sales to U.S. government agencies, and any future sales to government organizations is uncertain.

or malfeasance, inaccurate information or otherwise, may adversely affect our results of operations.

COVID-19 pandemic impacts on global supply chains are impacting our ability to procure parts required for our hardware appliances.

Extended lead times have been introduced in delivering products for customer orders in a timely fashion.

The COVID-19 pandemic has continued to impact global supply chains for many organizations, including us, resulting in shortages of and delays in both raw materials and electronic components such as computer chips.

Events in upstream supplies and component shortages are negatively impacting our ability to plan and deliver upon orders received in a timely fashion, and supply chain disruption, component shortages and shipping challenges are increasing our costs.

These increased costs have resulted in us increasing the prices of our products in turn; such price increases may result in our products being less price-competitive in the market.

If our price increases do not offset our increased costs based on COVID-19, our margins will be negatively impacted.

Our reliance on our third-party manufacturers reduces our

Further, approximately 83% of our hardware is manufactured in Taiwan.

Lead times for components may be adversely impacted by factors outside of our control such as global chip shortages, natural disasters and health emergencies such as earthquakes, fires, power outages, typhoons, floods, health pandemics and epidemics such as the COVID-19 pandemic, and manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts, terrorism, wars, critical infrastructure attacks and other factors.

reliability of our web filtering function.

disputes with customers and adversely affect market acceptance or perception of our products.

Any breach of our

In addition, due to the COVID-19 pandemic, a substantial majority of our employees are temporarily working remotely, which may pose additional data security risks.

For example, there has been an increase in phishing attempts and spam emails as well as social engineering attempts from hackers hoping to use the recent COVID-19 pandemic to their advantage.

The risks described above could therefore be exacerbated by the COVID-19 pandemic.

Additionally, if any of our internal

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.

[removed: *•the effects of supply] [added: *•supply] chain [removed: constraints and] [added: constraints,] the global chip and component [removed: shortages] [added: shortages,] and other factors affecting our manufacturing capacity, delivery, cost and inventory management;*

[removed: *•the] [added: - *the] duration and impact of the COVID-19 pandemic, including various COVID-19 [removed: variants,] [added: variants] and [removed: the implementation of] “return to office” plans;*

*•variability in sales in certain product [added: and service] categories from year to year and between quarters;*

[removed: *•the impact of macro-economic,] [added: *•macroeconomic,] geopolitical factors and other disruption on our manufacturing or sales, including the impact of the COVID-19 pandemic and other public health [removed: issues] [added: issues, wars] and natural disasters;*

- [removed: *the effects of government] [added: *government] regulation, tariffs and other policies;*

- *drivers of long-term growth and operating leverage, such as sales productivity and capacity, functionality and value in our [removed: subscription] service offerings;*

- *growing our [added: solution] sales [added: through channel partners] to businesses, service providers and government organizations, our ability to execute these sales and the complexity of [removed: selling] [added: providing solutions] to all segments (including the increased competition and unpredictability of timing associated with sales to larger enterprises), the impact of sales to these organizations on our long-term growth, expansion and operating results, and the effectiveness of our sales organization;*

*•risks and expectations related to acquisitions and equity interests in private and public companies, including integration issues related to [added: go-to-market plans,] product [removed: plans] [added: plans, employees of such companies, controls] and [added: processes and] the acquired technology, and risks of negative impact by such acquisitions and equity investments on our financial results;*

*•expectations that our operating expense will increase in absolute dollars during [removed: 2022;*][added: 2023;*]

[removed: - *expectations] [added: *•expectations] regarding uncertain tax benefits and our effective domestic and global tax rates, and the impact of the Tax Cuts and Jobs [removed: Act* *and] [added: Act of 2017 (“TCJA”),] the Coronavirus Aid, Relief, and Economic Security Act [removed: (the “CARES Act”);*][added: of 2020 and the Inflation Reduction Act of 2022 (*“*IRA”);*]

- *estimates of a range of [removed: 2022] [added: 2023] spending on capital expenditures;*

Our cybersecurity solutions are designed to provide broad visibility and segmentation of the digital attack surface through our integrated [removed: Fortinet Security Fabric] cybersecurity [added: platform products and services providing a] mesh [removed: platform,] [added: architecture,] which [removed: features] [added: feature] automated protection, detection and response along with consolidated visibility across both [removed: Fortinet developed] [added: Fortinet-developed] solutions and a broad ecosystem of third-party solutions and technologies.

[removed: The Fortinet Security Fabric] [added: Our] cybersecurity [removed: mesh] platform [added: portfolio] leverages a common operating system or integration to this operating system across our product offerings and helps organizations better secure their environments and reduce their security and network complexities.

The Fortinet [removed: Security Fabric] [added: operating system] has an open architecture designed to [removed: connect] [added: integrate] Fortinet solutions [removed: and] [added: with] third-party solutions in a single ecosystem, enabling [removed: holistic] [added: automated] detection and [removed: coordinated] response across the attack [removed: cycle and surface through integration and automation.][added: surface.]

Our cloud- and hosted- [added: Enhanced Platform Technology] products and services include sandboxing, endpoint detection and response (“EDR”), email security, web application and [removed: API security and] [added: application programming interface (“API”) security,] cloud networking security [added: and cloud-native protection] as well as [removed: Fortinet Security Fabric] management and analytics.

Our FortiGuard security [added: subscription] services are enabled by FortiGuard Labs, which provides threat research and artificial intelligence capabilities from a cloud network to deliver coordinated protection for the ever-expanding attack surface through [removed: FortiGate] [added: Core Platform] appliance and virtual machine as well as all [removed: Fortinet Security Fabric] [added: Enhanced Platform Technology] products that are registered by the end-customer.

Our proprietary [removed: Security Processing Units (“SPUs”) are] Application-Specific Integrated Circuits [removed: that] [added: (“ASIC”)] are implemented in our physical [removed: FortiGate] [added: Core Platform] appliances and are designed to enhance the security processing capabilities implemented in software by accelerating computationally intensive tasks such as firewall policy enforcement, software-defined wide-area network (“SD-WAN”), network address translation, Intrusion Prevention Systems (“IPS”), threat detection and encryption.

[removed: We also provide] virtualized [removed: Security Processing Units (“vSPUs”)] [added: Application-Specific Integrated Circuits (“vASICs”)] across our [removed: FortiGate] [added: Core Platform] virtual appliances to deliver similar accelerated capabilities when run in virtualized environments.

Our FortiOS operating system provides the foundation for the operation of [removed: all FortiGate network security appliances,] [added: Core Platform and Enhanced Platform Technology products,] whether physical, virtual, private- or public-cloud based.

FortiOS directs the operations of processors and [removed: SPUs] [added: ASICs] and provides system management functions.

This approach to security [removed: ties] [added: combines] discrete security solutions together into an integrated [removed: whole that] [added: operating system which] provides centralized [removed: management and] [added: management,] visibility, automation and intelligence sharing to simplify [removed: network and security] operations and [removed: rapid response] [added: respond rapidly] to threats.

- [removed: Security-Driven] [added: Secure] Networking—Our Security-Driven Networking solutions enables the convergence of networking and security across all edges to provide next-generation firewall (“NGFW”), [removed: software-defined wide area network (“SD-WAN”),] [added: SD-WAN,] LAN Edge (Wi-Fi and switch) and secure access service edge (“SASE”).

We derive a majority of product sales from our [removed: FortiGate] [added: Core Platform] network security appliances.

[removed: FortiGate] [added: Core Platform] network security appliances include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, secure sockets layer (“SSL”) inspection, [removed: software-defined wide area network (“SD-WAN”),] [added: SD-WAN,] Intrusion Prevention system (“IPS”), sandboxing, data leak prevention, virtual private network (“VPN”), switch and wireless controller and wide area network (“WAN”) edge.

Our network security appliances are managed by our FortiOS network operating system, which provides the foundation for [removed: FortiGate] [added: Core Platform] security functions.

We enhance the performance of our network security appliances from branch to data center by designing and implementing [removed: Security Processing Units (“SPUs”)] [added: ASICs] technology within our appliances, enabling us to add security and network functionality with minimal impact to network throughput performance.

Along with our secure [removed: Wi-fi] [added: Wi-Fi] access points and switches, [removed: Fortinet helps] [added: we help] organizations secure their networks across campuses, [removed: branches,] [added: branches] and [removed: work-from-home] [added: work from anywhere (“WFA”)] deployments.

- Zero Trust [removed: Access—The Fortinet Security Fabric cybersecurity mesh platform extends] [added: Access—Fortinet’s Enhanced Platform Technology products and services extend] beyond the network to [added: create a cybersecurity mesh architecture to] cover other attack vectors.

[removed: Our Zero Trust Access solutions enable] customers to know and control who and what is on their network, in addition to providing security for [removed: work from anywhere (“WFA”).][added: WFA.]

Additionally, the proliferation of [added: OT and] internet of things (“IoT”) [removed: and operational technology (“OT”)] devices has generated new opportunities for us to grow our business.

Our network access control solutions provide visibility, control and automated event responses in order to secure [removed: IoT and] OT [added: and IoT] devices.

- [removed: Adaptive] Cloud Security—We help customers connect securely to and across their individual, hybrid cloud, [removed: multi-cloud,] [added: multi-cloud] and virtualized data center environments by offering security through our virtual firewall and other software products and through integrated [added: cloud-native] capabilities with major cloud platforms.

Our public and private cloud security solutions, including virtual appliances and hosted solutions, [removed: extend the core capabilities of the Fortinet Security Fabric cybersecurity mesh platform in] [added: bring our Enhanced Platform Technology products] and [added: services into and] across cloud environments, delivering security that follows their applications and data.

Fortinet cloud security offerings are available for deployment in major public and private cloud environments, including [removed: Alibaba Cloud,] Amazon Web Services, Google Cloud, IBM Cloud, Microsoft Azure, Oracle Cloud and VMWare Cloud.

We also offer managed [removed: IPS and] web application firewall (“WAF”) rules delivered by FortiGuard Labs as an overlay service to native security offerings offered by Amazon Web Services.

- [removed: AI-Driven] Security Operations—We develop and provide a range of products and services that enable the security operations center (“SOC”) teams to identify, investigate and remediate potential incidents in which cybercriminals bypass prevention-oriented controls.

Given the breadth of the attack surface to monitor, as well as the volume and sophistication of cyber threats, artificial intelligence [removed: (“AI”)] is a key part of these offerings, which include: FortiGuard and other security subscription services, modern endpoint security with EDR, a range of breach-protection technologies plus our security information and event management (“SIEM”) and security orchestration, automation and response (“SOAR”), all of which can be applied across the entire [removed: Fortinet Security Fabric cybersecurity mesh platform.][added: set of Platform Extension products and services.]

- Security as a Service—Our customers purchase our natively integrated FortiGuard security subscription services as an add-on to products and solutions across [added: many of] the [removed: Fortinet Security Fabric] [added: Enhanced Platform Technology products and services] with the goal of receiving real-time threat intelligence and protection updates.

The rich set of FortiGuard [added: security subscription] services is built from the ground up to provide comprehensive protection for users and applications, including market leading offerings for IPS, Web, video and DNS filtering, AV and cloud sandbox as well as [removed: IoT and] OT [added: and IoT] Security.

The FortiGuard security [added: subscription] services are provided from our FortiGuard Labs and cloud-delivered to provide real-time unified protection across network endpoint and cloud.

*•increased inflation or stagflation, and rising interest rates in many geographies and changes in currency exchange rates and currency regulations;*

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Our product offerings consist of our Core Platform (previously referred to as FortiGate network security) and our Enhanced Platform Technologies (previously referred to as Platform Extension).

The Enhanced Platform includes Secure Networking (Secure Switching, Access Points, 5G and Network Access Control), Network and Security Operations (Management, Analytics, Security Information and Event Management, Security Operations, Orchestration and Response and Email Security), Endpoint Security (Enhanced Detection and Response and Identity) and Cloud Security (Web Application Firewall, Cloud Network Security and Cloud-native Application Protection).

Our FortiCare support services provide both technical support and professional services to help our customers deploy, maintain, and operationalize our Core Platform and Enhanced Platform Technology products and services.

We also provide Fortinet

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Networking functionality and security capabilities are integrated into the FortiOS operating system to run both the Core Platform and Enhanced Platform Technology capabilities of our cybersecurity mesh architecture (“Fortinet Security Fabric”).

For the Japanese market, we also offer high performance network switches marketed under Alaxala for data center switching.

FortiOS supports many more secure networking markets and applications than just Firewall.

These include:

- Network Firewall (“NFW”)

- Software-Defined Wide Area Network (“SD-WAN”)

- Secure LAN/WLAN (Wi-Fi and Switch) (SD-Branch/Campus)

- Secure Access Service Edge (“SASE”)

- Universal Zero Trust Network Access (“ZTNA”)

- Encryption Applications (SSL Inspection, Virtual Private Network (“VPN”), and IPsec Connectivity)

Further each security application has number of customer use cases.

For example, Network Firewall has the following use cases:

- Data Center Perimeter NGFW

- North–South Internal Segmentation Firewall

- Distributed Network Edge Firewall

- East–West Micro Segmentation Firewall

- Virtual Firewall (“VM”)

- Cloud Native Firewall (“CNF”)

- Firewall as a Service (“FWaaS”)

- Containerized Firewall

- Endpoint Firewall

- SMB Firewall

- Home Firewall

Our Zero Trust Access solutions enable

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Our solutions include network security, web application firewall and API protection, cloud-native security and workload protection.

Our cloud security portfolio also includes securing applications in all environments in which they can be deployed, including physical and virtual data centers, clouds, and edge compute instances.

Our advanced support service offerings include technical account managers that act as a single point of contact and customer advocate within Fortinet.

- Operating income was $969.6 million in 2022, an increase of 49% compared to $650.4 million in 2021.

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- Deferred revenue was $4.64 billion as of December 31, 2022, an increase of $1.19 billion, or 34%, from December 31, 2021.

- In October 2022, we acquired the remaining 25% of equity interests in Alaxala for $13.5 million in cash, and Alaxala became a wholly owned subsidiary.

- Our loss related to our equity method investment in Linksys Holdings, Inc. (“Linksys”) in fiscal 2022 totaled $68.1 million, which comprised of our proportionate share of Linksys’ financial results as well as the amortization of the basis differences of $45.9 million, which included a $17.5 million charge in connection with a valuation allowance established on deferred tax assets at Linksys, and the other-than-temporary impairment (“OTTI”) charge of $22.2 million.

- *the proportion of our revenue that consists of product and service revenue, and the mix of billings between products and services, and the duration of service contracts;*

- *the impact of our product innovation strategy;*

Our product offerings consist of our FortiGate network security physical and virtual products and our non-FortiGate physical and virtual, software, and cloud-hosted products.

In addition to high performing security and networking features, we offer a rich set of cloud-delivered security services that can be added to different products across the Fortinet Security Fabric and customized to the organization’s use cases.

FortiOS, its associated security and networking functions and products that run or are integrated with FortiOS are combined to form the Fortinet Security Fabric cybersecurity mesh platform.

Our Cloud Security portfolio also includes securing applications, including email and web.

FortiCare technical support services and the support of technical account managers, resident engineers and professional service consultants for implementations or training services.

Operating income for 2021 included gains on an IP matter of $4.6 million.

- In March 2021, we issued $1.0 billion of Senior Notes.

There was no such debt outstanding at December 31, 2020.

We received $50.0 million of proceeds from an IP matter in the first quarter of 2020.

- Total bookings were $4.33 billion for 2021, an increase of 40.2% compared to $3.09 billion in 2020.

We define bookings as the total value of all orders received during the fiscal period.

- Backlog was $161.9 million as of December 31, 2021, an increase of $149.7 million compared to $12.2 million as of December 31, 2020.

Backlog represents orders received but not fulfilled and excludes backlog related to Alaxala Networks Corporation's (“Alaxala”) products and services of $26.0 million.

- On August 31, 2021, we closed an acquisition of 75% of the equity interests in Alaxala, a privately-held network hardware equipment company in Japan, to help broaden our offering of secure switches integrated with FortiGate Firewalls and Security Fabric functionality, and, over time, to innovate and rebrand certain of Alaxala’s switches to offer a broader suite of secure switches globally.

From September 1, 2021 to December 31, 2021, Alaxala’s revenue was $44.4 million, or 1.3% of total revenue during the year ended December 31, 2021.

During the first quarter of 2021 and subsequently in the third quarter, we made an equity method investment in Linksys which provides router connectivity solutions to the consumer and small business markets.

FortiGate products accounted for more than half of the product revenue growth in 2021.

The impact of the increase in backlog was largely seen in certain fabric platform products.

Service revenue growth of 24% in 2021 was driven by the strength

In 2021 and 2020, we recognized gains of $4.6 million and $40.2 million, respectively, on an IP matter in connection with a mutual covenant-no-to-sue and release agreement with a competitor in the network security industry.

Excluding the gains on the IP matter, operating expenses as a percentage of revenue decreased by approximately 1.9 percentage points compared to 2020.

The United States and the global community we serve are facing unprecedented challenges posed by the COVID-19 pandemic, including the various COVID-19 variants.

- In most countries, our employees’ ability to travel has been reduced.

- In order to mitigate supply chain disruption and other supply chain risks and in anticipation of future demand, we worked to increase our on-hand stock of certain products.

- In accordance with the CARES Act, we have deferred the deposit and payment of our employer’s share of Social Security taxes.

This did not materially affect net cash provided by operating activities during the period.

Similarly, customers may purchase such a license from us and deploy in third-party clouds or in their private cloud.

Deferred revenue was $3.45 billion as of December 31, 2021, an increase of $847.6 million, or 33%, from December 31, 2020.

FortiCare technical support services over the contractual service period.

During 2021, product gross margin benefited from gains in average selling price, as well as lower direct and indirect product costs as a percentage of product revenue.

It also benefited from product mix, software revenue growth and a stable product transition environment.

Service gross margin benefited from renewals and continued sales of services and subscriptions, growing faster than related expenses.

competitor party paid us a lump sum of $50.0 million for a seven-year mutual covenant-not-to-sue for patent claims.

We have elected to account for Global Intangible Low-Taxed Income (“GILTI”), which was introduced in the 2017 Tax Act, as a current period expense.

Our investments in privately held companies primarily consist of investments in common stock or in-substance common stock of entities that provide us with the ability to exercise significant influence over the operating and financial policies of the investee, but not an absolute controlling financial interest, and are accounted for under the equity method of accounting.

| Product | | | $ | 1,255.0 | | | | | 38 | | % | | | | $ | 916.4 | | | | | 35 | | % | | | | $ | 338.6 | | | | | 37 | | % |

| Service | | | 2,087.2 | | | | | | 62 | | | | | | 1,678.0 | | | | | | 65 | | | | | | 409.2 | | | | | | 24 | | |

| Americas | | | $ | 1,358.8 | | | | | 41 | | % | | | | $ | 1,077.2 | | | | | 42 | | % | | | | $ | 281.6 | | | | | 26 | | % |

To minimize this risk, we maintain our portfolio of cash, cash equivalents, investments and marketable equity securities in a variety of securities, including commercial paper, corporate debt securities, U.S. government and agency securities, certificates of deposit and term deposits, money [added: market]

[removed: market] funds, municipal bonds and marketable equity securities.

A 10% decrease in interest rates in [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] would have resulted in an insignificant decrease in our interest income in each of these periods.

However, a substantial portion of our operating expenses incurred outside the United States are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the [added: Euro (“EUR”), the Japanese yen (“JPY”), the] Canadian dollar [removed: (“CAD”), the Euro (“EUR”)] [added: (“CAD”)] and the British pound (“GBP”).

We recognized an expense of [removed: $8.2] [added: $4.6] million in [removed: 2021] [added: 2022] due to foreign currency transaction losses.

Long-term material changes in the value of the U.S. dollar against other foreign currencies, such as the [removed: EUR] [added: EUR, JPY] and GBP, could adversely impact our operating expenses in the future.

For foreign currency exchange rate risk, a 10% increase or decrease of foreign currency exchange rates against the U.S. dollar with all other variables held constant would have resulted in a [removed: $8.3] [added: $16.4] million change in the value of our foreign currency cash balances as of December 31, [removed: 2021.][added: 2022.]

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- [removed: Convergence / Security-Driven] [added: Secure] Networking—Our [removed: Security-Driven] [added: Secure] Networking solutions enable the convergence of networking and security across all edges to provide next-generation firewall (“NGFW”), software-defined wide area network (“SD-WAN”), LAN Edge (Wi-Fi and switch) and secure access service edge (“SASE”).

A [removed: security-driven] [added: secure] networking approach converges networking and security into a single, accelerated solution.

A specially designed operating system and security processors work in concert to [removed: greatly] improve network performance and security posture while decreasing footprint and power consumption.

We derive a majority of product sales from our [removed: FortiGate] [added: Core Platform (previously referred to as FortiGate)] network security appliances.

[removed: FortiGate] [added: Core Platform] network security appliances include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, secure sockets layer (“SSL”) inspection, [removed: software-defined wide area network (“SD-WAN”),] [added: SD-WAN,] intrusion prevention system (“IPS”), sandboxing, data leak prevention, virtual private network (“VPN”), switch and wireless controller and wide area network (“WAN”) edge.

Our network security appliances are managed by our FortiOS network operating system, which provides the foundation for [removed: FortiGate] [added: Core Platform] security functions.

We enhance the performance of our network security appliances from branch to data center by designing and implementing [removed: security processing units (“SPUs”)] [added: Application-Specific Integrated Circuits (“ASIC”)] technology within our appliances, enabling us to add security and network functionality with minimal impact to network throughput performance.

Zero Trust Access solutions include FortiNAC, [removed: FortiAuthenticator, FortiClient/EDR and FortiToken.]

Our network access control solutions provide visibility, control and automated event responses in order to secure internet of things (“IoT”) and [removed: operational technology (“OT”)] [added: OT] devices.

- [removed: Adaptive] Cloud Security—We help customers connect securely to and across their individual, [removed: hybrid cloud,] [added: hybrid-cloud,] multi-cloud and virtualized data center environments by offering security through our virtual firewall and other software products and through integrated capabilities with major cloud platforms.

Our public and private cloud security solutions, including virtual appliances and hosted solutions, extend the core capabilities of [removed: the Fortinet Security Fabric] [added: Fortinet’s] cybersecurity mesh [removed: platform] [added: architecture (“Fortinet Security Fabric”)] in and across cloud environments, delivering security that follows their applications and data.

Our cloud security portfolio also includes securing [removed: applications,] [added: applications in all environments in which they can be deployed,] including [removed: email] [added: physical] and [removed: web.][added: virtual data centers, cloud and edge compute instances.]

Fortinet cloud security offerings are available for deployment in major public and private cloud environments, including [removed: Alibaba Cloud,] Amazon Web Services, Google Cloud, IBM Cloud, Microsoft Azure, Oracle Cloud and VMWare Cloud.

We also offer managed [removed: IPS and] web application firewall (“WAF”) rules delivered by FortiGuard Labs as an overlay service to native security offerings offered by Amazon Web Services.

Given the breadth of the attack surface to monitor, as well as the volume and sophistication of cyber threats, artificial intelligence (“AI”) is a key part of these offerings, which include: FortiGuard and other security subscription services, endpoint security with endpoint detection and response (“EDR”), a range of breach-protection technologies plus our security information and event management (“SIEM”) and security orchestration, automation and response (“SOAR”), all of which can be applied across the Fortinet Security [removed: Fabric cybersecurity mesh platform.][added: Fabric.]

During our year ended December 31, [removed: 2021,] [added: 2022,] we generated total revenue of [removed: $3.34] [added: $4.42] billion and net income of [removed: $606.8] [added: $857.3] million.

See Part II, Item 8 of this Annual Report on Form 10-K for more information on our consolidated balance sheets as of December 31, [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] and our consolidated statements of income, comprehensive income, [removed: equity,] [added: equity (deficit),] and cash flows for each of the three years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019.][added: 2020.]

A Fortinet Security Fabric [removed: cybersecurity mesh platform] approach consolidates point products into a platform, allowing for much tighter integration, increased automation and a more rapid, [removed: coordinated,] [added: coordinated] and effective response to threats across the network.

Our product offerings consist of our [removed: FortiGate] [added: Core Platform] network security products and our [removed: non-FortiGate] [added: Enhanced Platform Technology (previously referred to as Platform Extension)] products, which are offered in a broad range of form factors spanning physical appliances, virtual appliances, software and cloud-hosted services.

This enables [removed: Fortinet] [added: us] to protect customers across all edges and deployment scenarios including users, devices, networks, [removed: cloud,] [added: cloud] and virtual data center.

Our cloud- and hosted- products and services include sandboxing, [removed: endpoint detection and response (“EDR”),] [added: EDR,] email security, web application and API security, [removed: and] cloud networking security [added: and cloud-native protection] as well as Fortinet Security Fabric management and analytics.

Our FortiGuard security services are enabled by FortiGuard Labs, which provides threat research and artificial intelligence capabilities from a cloud network to deliver protection through [removed: FortiGate] [added: Core Platform] appliance and virtual machine as well as Fortinet Security Fabric products that are registered by the end-customer.

All these are combined to form the Fortinet Security [removed: Fabric cybersecurity mesh platform,] [added: Fabric,] which is an approach to security that consolidates discrete security solutions together into an integrated offering.

This integrated approach to security extends across both [removed: Fortinet developed] [added: Fortinet-developed] solutions and a broad ecosystem of technology partner solutions and technologies.

The use of [removed: SPUs] [added: ASICs] allows our appliances to consolidate security functionality and converge security with a minimal impact to network throughput performance, which we believe delivers a lower total cost of ownership (“TCO”) to our customers.

As the security needs and technologies of our end-customers increase, we believe our TCO-driven [removed: SPU] [added: ASIC] approach give our products a competitive advantage against other architectural approaches.

FortiOS, its associated security and networking functions and products that run or are integrated with FortiOS are combined to form the Fortinet Security [removed: Fabric cybersecurity mesh platform.][added: Fabric.]

Our proprietary FortiOS operating system provides the foundation for the operation of [removed: FortiGate] [added: Core Platform] network security appliances, whether physical, virtual, private- or public-cloud based.

The convergence of security and networking capabilities provided by the Fortinet Security Fabric [removed: cybersecurity mesh platform] are powered and controlled through FortiOS.

FortiOS provides (i) multiple layers of security, including a hardened kernel layer providing protection for the [removed: FortiGate] [added: Core Platform] system, (ii) a network security layer, providing security for end-customers’ network infrastructures and (iii) application content protection, providing security for end-customers’ workstations and applications.

FortiOS directs the operations of processors and [removed: SPUs] [added: ASICs] and provides system management functions such as command line, graphical user interfaces, multiple network and security topology views.

FortiOS also enables advanced, integrated routing and switching, allowing end-customers to deploy [removed: FortiGate] [added: Core Platform] devices within a wide variety of networks, as well as providing a direct replacement solution option for legacy switching and routing equipment.

FortiOS implements a suite of commonly used standards-based routing protocols as well as network address translation technologies, allowing the [removed: FortiGate] [added: Core Platform] appliance to integrate and operate in a wide variety of network environments.

FortiOS also provides [added: traffic-logging] capabilities for [removed: the logging of traffic for] forensic analysis purposes.

Our core product offerings consist of our [removed: FortiGate] [added: Core Platform] firewall product family and our [removed: non-FortiGate products] [added: Enhanced Platform Technology products,] which may be purchased to integrate and expand security architectures.

Our [removed: non-FortiGate] [added: Enhanced Platform Technology] products include the Fortinet Security [removed: Fabric cybersecurity mesh platform,] [added: Fabric,] email security, cloud security, endpoint protection and other products.

Our [removed: FortiGate] [added: Core Platform] hardware and software licenses are sold with a set of [removed: FortiGate] [added: Core Platform] broad security services.

[removed: These] security services are enabled by FortiGuard Labs, which provides threat research and artificial intelligence capabilities from a global cloud network to deliver protection services.

[removed: FortiGate] [added: Core Platform] converges a broad set of security and networking functions, including firewall, intrusion prevention, anti-malware, VPN, application control, web filtering, anti-spam and WAN acceleration.

[removed: FortiGate] [added: Core Platform] is available as a hardware appliance or as a virtual appliance.

For the Japanese market, we also offer high performance network switches marketed under Alaxala Networks Corporation for data center switching.

FortiOS supports many more secure networking markets and applications than just firewall.

These include:

- Network Firewall (“NFW”)

- Software-Defined Wide Area Network (“SD-WAN”)

- Secure LAN/WLAN (Wi-Fi and Switch) (SD-Branch/Campus)

- Secure Access Service Edge (“SASE”)

- Universal Zero Trust Network Access (“ZTNA”)

- Encryption Applications (SSL Inspection, Virtual Private Network (“VPN”), and IPsec Connectivity)

Further each security application has number of customer use cases.

For example, Network Firewall has the following use cases:

- Data Center Perimeter NGFW

- North–South Internal Segmentation Firewall

- Distributed Network Edge Firewall

- East–West Micro Segmentation Firewall

- Virtual Firewall (“VM”)

- Cloud Native Firewall (“CNF”)

- Firewall as a Service (“FWaaS”)

- Containerized Firewall

- Endpoint Firewall

- SMB Firewall

- Home Firewall

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FortiAuthenticator, FortiClient/EDR and FortiToken.

Our solutions include network security, web application firewall and application programming interface (“API”) protection, cloud-native security and workload protection.

- FortiGuard Security Services—FortiGuard security services counter threats in real time with AI-powered, coordinated protection.

All of our security services are natively integrated into the Fortinet Security Fabric.

This enables fast detection and enforcement across the entire attack surface.

Risk is continually assessed and the Security Fabric automatically adjusts to counter the latest known and unknown threats in real time.

It is able to close security gaps with context-aware, consistent security policies for users and applications in hybrid deployments across the network, endpoints and clouds.

- Support and Professional Services—FortiCare Technical Support Service is a per-device support service, which provides customers access to experts to ensure efficient and effective operations and maintenance of their Fortinet capabilities.

Global technical support is offered 24x7 with flexible add-ons, including enhanced service level agreements (“SLAs”) and premium hardware replacement through in-country depots.

Organizations have the flexibility to procure different levels of service for different devices based on their availability needs.

We offer three per-device support options tailored to the needs of our enterprise customers: FortiCare Premium, FortiCare Elite and FortiCare Essential.

The newly launched FortiCare Elite service provides 15-minute response times for key product families.

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*ASIC*

Our proprietary FortiASIC technology family consists of three processors.

First, a Network Processor Generation 7, FortiNP 7 (“NP 7”), which accelerates the processing of firewall traffic and offloads this function from the central processing unit (“CPU”).

Second, a Content Processor Generation 9, FortiCP (“CP 9”), helps the CPU with deep packets inspection functions, such as intrusion prevention and antivirus.

- Security as a Service—Our customers purchase our FortiGuard security subscription services as an add-on to products and solutions across the Fortinet Security Fabric to receive threat intelligence and protection updates.

FortiGuard services are designed to provide protection for users and applications, including offerings for IPS, web, video and domain name system (“DNS”) filtering, audio/visual (“AV”) and cloud sandbox along with IoT and OT Security.

The

FortiGuard security services are provided from our FortiGuard Labs and cloud-delivered to provide real-time unified protection across network endpoint and cloud.

- Support and Professional Services—Fortinet offers technical support, FortiOS updates, and extended product warranty through our FortiCare support services.

In addition to our technical support services, we offer a range of advanced services, including premium support, professional services and expedited warranty replacement.

Our professional service offerings include resident engineers and professional service consultants for implementations or trainings.

*SPU*

Our proprietary SPUs are application-specific integrated circuits (“ASICs”) that include (i) the content processor (“SPU CP”), (ii) the network processor (“SPU NP”) and (iii) the system-on-a-chip (“SPU SoC”).

Our SPUs are embedded in our physical FortiGate appliances and are designed to enhance the security processing capabilities of our operating system by accelerating computationally intensive tasks such as firewall policy enforcement, SD-WAN, network address translation, IPS, threat detection and encryption while also converging security capabilities with networking functionality.

We also provide virtualized security processing units (“vSPUs”) across our FortiGate virtual appliances.

Entry-level FortiGate products often use the SPU SoC to provide the necessary acceleration at this level.

Mid-range FortiGate products use a central processing unit (“CPU”) and include the SPU NP and SPU CP hardware acceleration.

The high-end FortiGate products use multiple CPUs, SPU CPs and SPU NPs.

*FortiGate*

email security.

In the third quarter of 2021, we closed an acquisition of 75% of equity interests in Alaxala Networks Corporation (“Alaxala”), a privately held network hardware equipment company in Japan, to help address the increasing need for secure switches integrated with FortiGate firewalls and Security Fabric functionality, and, over time, to innovate and rebrand certain of Alaxala’s switches to offer a broader suite of secure switches globally.

In the first quarter of 2021, we acquired ShieldX Networks Inc. (“ShieldX”), a provider of a security platform focusing on protecting multi-cloud data centers from the risk of lateral movement that can lead to attacks such as ransomware, data loss and service disruption.

During 2021, Exclusive Networks Group (“Exclusive”) and Ingram Micro Inc. (“Ingram Micro”) accounted for 31% and 12% of total revenue, respectively.

During 2020, Exclusive and Ingram Micro accounted for 30% and 10% of total revenue, respectively.

During 2019, Exclusive and Ingram Micro accounted for 31% and 11% of total revenue, respectively.

proprietary information.

Early in the COVID-19 pandemic, our Chief Executive Officer committed to having no COVID-related layoffs, and, throughout the pandemic, not only have we kept that promise, we have continued hiring at a fast pace and have continued to help support our employees and their families through this challenging time.

During the pandemic, we have taken a flexible approach to help our employees manage their work and personal responsibilities, with a focus on employee wellbeing, health and safety.

Environmental. We recognize climate change is a global crisis and are committed to doing our part to reduce negative environmental impact by setting clear goals, engaging in coalitions and collaborating across our value chain.

We have engaged with a consultancy to measure our Scope 1 and Scope 2 emissions and developed reduction plans based on science-based targets pathways.

We also have begun to conduct an inventory of our Scope 3 emissions to look at the decarbonization of our broader value chain.

Those actions align with our roadmap on helping do our part to mitigate climate change, with the aim of implementing a framework that aligns with the Task Force on Climate Related Financial Disclosures (“TCFD”).

In November 2021, we publicly committed to a target of carbon neutrality on our Scope 1 and Scope 2 emissions by 2030 and announcing the completion of our new, net-zero building on our Sunnyvale headquarters campus, which was designed to be LEED-Gold certified.

Social. As discussed above, we prioritized the health and safety of our employees during the COVID-19 pandemic.

Through our Global Supplier Code of Conduct and Contract Manufacturer agreement, we continued to reach across our supply chain to communicate our expectations regarding human rights, labor standards, business practices and workplace health and safety conditions.

In line with that commitment, we are focused on diversity, equity and inclusion as part of our mission to close the cybersecurity skills gap.

Last year, we formalized our Education Outreach Program, which focuses on partnerships across the industry, academia, government and nonprofits to ensure we are helping train women, veterans and other under-represented groups.

To support the creation of a cybersecurity-aware society, we published a children’s book designed to further increase cyber awareness among children and extended our free cybersecurity training courses empowering over 100,000 people from over 200 countries and territories to learn from our cyber-security training courses in 2021.

We also made a public pledge to train one million people in cybersecurity by 2026.

Governance. Our culture is defined by our commitment to ethics and integrity.

We stress the importance of ethical business practices in multiple ways, such as through our Code of Business Conduct and Ethics, regular compliance training programs and ongoing communications.

Reinforcing the importance of our ESG contributions, our board of directors established its Social Responsibility Committee to oversee our objectives, strategy and execution relating to sustainability and CSR, including ESG matters.

We are subject to various claims, complaints and legal actions that arise from time to time in the [removed: normal] [added: ordinary] course of business.

In December 2021, we entered into an agreement that provided for settlement and dismissal of an existing patent infringement lawsuit and a mutual covenant-not-to-sue for a defined duration of time.

Please refer to Note 13.

Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

For the year ended December 31, [removed: 2021][added: 2022]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the [added: Exchange] Act).

The aggregate market value of voting stock held by non-affiliates of the registrant, as of June 30, [removed: 2021,] [added: 2022,] the last business day of the registrant’s most recently completed second quarter, was [removed: $25,503,578,291] [added: $25,621,924,666] (based on the closing price for shares of the registrant’s common stock as reported by The Nasdaq Global Select Market on that date).

As of February [removed: 18, 2022,] [added: 17, 2023,] there were [removed: 160,815,446] [added: 784,066,289] shares of the registrant’s common stock outstanding.

Portions of the registrant’s definitive Proxy Statement relating to its [removed: 2022] [added: 2023] Annual Meeting of Stockholders (“Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

| | | | [Risk Factor [removed: Summary](#iebf4bf97a0d04753801601bc721cb1d4_1581)] [added: Summary](#i90327120283244798f2956555b82bd30_10)] | | | [removed: [1](#iebf4bf97a0d04753801601bc721cb1d4_1581)] [added: [1](#i90327120283244798f2956555b82bd30_10)] | | |

| Item 1. | | | [removed: [Business](#iebf4bf97a0d04753801601bc721cb1d4_13)] [added: [Business](#i90327120283244798f2956555b82bd30_16)] | | | [removed: [3](#iebf4bf97a0d04753801601bc721cb1d4_13)] [added: [3](#i90327120283244798f2956555b82bd30_16)] | | |

| Item 1A. | | | [Risk [removed: Factors](#iebf4bf97a0d04753801601bc721cb1d4_16)] [added: Factors](#i90327120283244798f2956555b82bd30_19)] | | | [removed: [13](#iebf4bf97a0d04753801601bc721cb1d4_16)] [added: [13](#i90327120283244798f2956555b82bd30_19)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#iebf4bf97a0d04753801601bc721cb1d4_19)] [added: Comments](#i90327120283244798f2956555b82bd30_22)] | | | [removed: [45](#iebf4bf97a0d04753801601bc721cb1d4_19)] [added: [48](#i90327120283244798f2956555b82bd30_22)] | | |

| Item 2. | | | [removed: [Properties](#iebf4bf97a0d04753801601bc721cb1d4_22)] [added: [Properties](#i90327120283244798f2956555b82bd30_25)] | | | [removed: [45](#iebf4bf97a0d04753801601bc721cb1d4_22)] [added: [48](#i90327120283244798f2956555b82bd30_25)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#iebf4bf97a0d04753801601bc721cb1d4_25)] [added: Proceedings](#i90327120283244798f2956555b82bd30_28)] | | | [removed: [46](#iebf4bf97a0d04753801601bc721cb1d4_25)] [added: [48](#i90327120283244798f2956555b82bd30_28)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#iebf4bf97a0d04753801601bc721cb1d4_28)] [added: Disclosures](#i90327120283244798f2956555b82bd30_31)] | | | [removed: [46](#iebf4bf97a0d04753801601bc721cb1d4_28)] [added: [48](#i90327120283244798f2956555b82bd30_31)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#iebf4bf97a0d04753801601bc721cb1d4_34)] [added: Securities](#i90327120283244798f2956555b82bd30_37)] | | | [removed: [46](#iebf4bf97a0d04753801601bc721cb1d4_34)] [added: [48](#i90327120283244798f2956555b82bd30_37)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#iebf4bf97a0d04753801601bc721cb1d4_40)] [added: Operations](#i90327120283244798f2956555b82bd30_43)] | | | [removed: [49](#iebf4bf97a0d04753801601bc721cb1d4_40)] [added: [51](#i90327120283244798f2956555b82bd30_43)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#iebf4bf97a0d04753801601bc721cb1d4_52)] [added: Risk](#i90327120283244798f2956555b82bd30_55)] | | | [removed: [66](#iebf4bf97a0d04753801601bc721cb1d4_52)] [added: [71](#i90327120283244798f2956555b82bd30_55)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#iebf4bf97a0d04753801601bc721cb1d4_55)] [added: Data](#i90327120283244798f2956555b82bd30_58)] | | | [removed: [68](#iebf4bf97a0d04753801601bc721cb1d4_55)] [added: [73](#i90327120283244798f2956555b82bd30_58)] | | |

| Item 9. | | | [Changes in and [removed: Disagreements With] [added: Disagreements](#i90327120283244798f2956555b82bd30_148) [w](#i90327120283244798f2956555b82bd30_148)[ith] Accountants on Accounting and Financial [removed: Disclosure](#iebf4bf97a0d04753801601bc721cb1d4_142)] [added: Disclosure](#i90327120283244798f2956555b82bd30_148)] | | | [removed: [106](#iebf4bf97a0d04753801601bc721cb1d4_142)] [added: [112](#i90327120283244798f2956555b82bd30_148)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#iebf4bf97a0d04753801601bc721cb1d4_145)] [added: Procedures](#i90327120283244798f2956555b82bd30_151)] | | | [removed: [106](#iebf4bf97a0d04753801601bc721cb1d4_145)] [added: [112](#i90327120283244798f2956555b82bd30_151)] | | |

| Item 9B. | | | [Other [removed: Information](#iebf4bf97a0d04753801601bc721cb1d4_148)] [added: Information](#i90327120283244798f2956555b82bd30_154)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_148)] [added: [114](#i90327120283244798f2956555b82bd30_154)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevents [removed: Inspections](#iebf4bf97a0d04753801601bc721cb1d4_1593)] [added: Inspections](#i90327120283244798f2956555b82bd30_160)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_1593)] [added: [114](#i90327120283244798f2956555b82bd30_160)] | | |

| Item 10. | | | [Directors, Executive Officers and Corporate [removed: Governance](#iebf4bf97a0d04753801601bc721cb1d4_157)] [added: Governance](#i90327120283244798f2956555b82bd30_166)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_157)] [added: [114](#i90327120283244798f2956555b82bd30_166)] | | |

| Item 11. | | | [Executive [removed: Compensation](#iebf4bf97a0d04753801601bc721cb1d4_160)] [added: Compensation](#i90327120283244798f2956555b82bd30_169)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_160)] [added: [114](#i90327120283244798f2956555b82bd30_169)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#iebf4bf97a0d04753801601bc721cb1d4_163)] [added: Matters](#i90327120283244798f2956555b82bd30_172)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_163)] [added: [114](#i90327120283244798f2956555b82bd30_172)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#iebf4bf97a0d04753801601bc721cb1d4_166)] [added: Independence](#i90327120283244798f2956555b82bd30_175)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_166)] [added: [114](#i90327120283244798f2956555b82bd30_175)] | | |

| Item 14. | | | [Principal Accounting Fees and [removed: Services](#iebf4bf97a0d04753801601bc721cb1d4_169)] [added: Services](#i90327120283244798f2956555b82bd30_178)] | | | [removed: [108](#iebf4bf97a0d04753801601bc721cb1d4_169)] [added: [114](#i90327120283244798f2956555b82bd30_178)] | | |

| Item 15. | | | [removed: [Exhibits](#iebf4bf97a0d04753801601bc721cb1d4_175) [and](#iebf4bf97a0d04753801601bc721cb1d4_175) [Financial] [added: [Exhibits and Financial] Statement [removed: Schedules](#iebf4bf97a0d04753801601bc721cb1d4_175)] [added: Schedules](#i90327120283244798f2956555b82bd30_184)] | | | [removed: [109](#iebf4bf97a0d04753801601bc721cb1d4_175)] [added: [115](#i90327120283244798f2956555b82bd30_184)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#iebf4bf97a0d04753801601bc721cb1d4_1621)] [added: Summary](#i90327120283244798f2956555b82bd30_196)] | | | [removed: [112](#iebf4bf97a0d04753801601bc721cb1d4_1621)] [added: [118](#i90327120283244798f2956555b82bd30_196)] | | |

Some of the [removed: principle] [added: principal] risks and uncertainties [removed: include the following:][added: include:]

- Adverse economic [removed: conditions] [added: conditions, such as a possible economic downturn] or [added: recession, and possible impacts of inflation or stagflation, rising interest rates or] reduced information technology spending may adversely impact our business.

- Reliance on a concentration of shipments at the end of the quarter could cause our billings and revenue to fall below expected [removed: levels.][added: levels or delay collections and the related addition to free cash flow.]

- A portion of our revenue is generated by sales to government [removed: organizations,] [added: organizations and customers,] which are subject to a number of [added: regulatory requirements,] challenges and risks.

- Insufficient inventory or components, including finished goods, chips and other components, and including component or inventory shortages related to the COVID-19 pandemic, manufacturer’s capacity, shipping challenges, [added: delays in timing of receipts of inventory,] or other factors affecting the global supply chain, may result in lost sales opportunities or delayed billings and revenue and increased costs, and may harm our gross margins and our product price increases designed to help mitigate lower gross margins may not be acceptable to customers.

- We depend on third-party manufacturers to provide [added: various] components for our products and build our products and are susceptible to manufacturing [removed: delays] [added: delays, capacity constraints] and cost increases.

- We are susceptible to defects or vulnerabilities in our products or services, as well as reputational harm from the failure or misuse of our products or [removed: services.][added: services, and any actual or perceived defects or vulnerabilities in our products or services or the failure of our products or services to detect or prevent a security breach could harm our operational results and reputation more significantly as compared to certain other companies given we are a security company.]

- Global economic uncertainty and weakening product demand caused by political instability, changes in trade [removed: agreements] [added: agreements, wars] and [added: foreign] conflicts, such as the [removed: conflict] [added: war in Ukraine or tensions] between [removed: Russia] [added: China] and [removed: Ukraine,] [added: Taiwan,] could adversely affect our business and financial performance.

If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

For the Year Ended December 31, 2022

| Item 6. | | | [\[Reserved\]](#i90327120283244798f2956555b82bd30_40) | | | [50](#i90327120283244798f2956555b82bd30_40) | | |

| | | | [Exhibit Index](#i90327120283244798f2956555b82bd30_193) | | | [116](#i90327120283244798f2956555b82bd30_193) | | |

| | | | [Signatures](#i90327120283244798f2956555b82bd30_199) | | | [119](#i90327120283244798f2956555b82bd30_199) | | |

- The effects of the COVID-19 pandemic, including its ongoing variants, will likely continue to adversely affect our business, for example, through product and component shortages, longer product lead times, changes in customer buying-behavior, including delays in service contract registrations, accelerating or delaying purchases, changes in the mix of backlog and the related margins.

- The war in Ukraine, its related macroeconomic effects and our decision to reduce operations in Russia have affected and may continue to affect our business.

- 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 addition, any potential future impairment of the value of our investment in Linksys Holdings, Inc. (“Linksys”) could negatively affect our financial condition and results of operations.

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

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

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

| Item 6. | | | [\[](#iebf4bf97a0d04753801601bc721cb1d4_37)[R](#iebf4bf97a0d04753801601bc721cb1d4_37)[eserved](#iebf4bf97a0d04753801601bc721cb1d4_37)[\]](#iebf4bf97a0d04753801601bc721cb1d4_37) | | | [48](#iebf4bf97a0d04753801601bc721cb1d4_37) | | |

| | | | [Exhibit Index](#iebf4bf97a0d04753801601bc721cb1d4_184) | | | [110](#iebf4bf97a0d04753801601bc721cb1d4_184) | | |

| | | | [Signatures](#iebf4bf97a0d04753801601bc721cb1d4_187) | | | [113](#iebf4bf97a0d04753801601bc721cb1d4_187) | | |

- The COVID-19 pandemic, including its ongoing variants, could adversely affect our business in a material way, based on, for example, component shortages or negative impact on demand.

Our corporate headquarters is located in Sunnyvale, California and comprises approximately [removed: 390,000] [added: 395,000] square feet of building space on [removed: twenty] [added: 20] acres of land.

Along with our corporate headquarters, as of December 31, [removed: 2021,] [added: 2022,] we own approximately 290,000 square feet in Union City, California, used for manufacturing assembly and operations; approximately [removed: 460,000] [added: 560,000] square feet of office space in Burnaby and Ottawa, Canada, used for operations, support and research and development work; approximately 100,000 square feet of office space in [added: Chicago; approximately 100,000 square feet of office space in] Florida; approximately 90,000 square feet of office space in Texas; and approximately 70,000 square feet of office space in Valbonne, France, predominantly used for sales and support.

We also own additional building space in Sunnyvale and Union City, California, for future development of approximately [removed: 140,000] [added: 470,000] square feet.

We maintain additional leased offices throughout the world, predominantly used as sales and support [removed: offices.][added: offices, and leased data center spaces throughout the world operated under co-location arrangements.]

We intend to expand our facilities or add new facilities to support our future growth and enter new [removed: geographic] markets, and we believe that suitable additional or alternative space will be available or can be developed as needed to accommodate ongoing operations and any such growth.

For information regarding the geographical location of our property and equipment, refer to Note [removed: 17] [added: 16] to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

*All share and per share amounts presented in this Part II have been retroactively adjusted to reflect the five-for-one forward stock split of our common stock effective June 22, 2022.*

As of February [removed: 18, 2022,] [added: 17, 2023,] there were 43 holders of record of our common stock.

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission (the “SEC”) within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Such returns are based on historical results and are not [added: intended to suggest future performance.]

[removed: ][added: ]

| | | | | | | December [removed: 2016] [added: 2017] * | | | | | | December [removed: 2017] [added: 2018] | | | | | | December [removed: 2018] [added: 2019] | | | | | | December [removed: 2019] [added: 2020] | | | | | | December [removed: 2020] [added: 2021] | | | | | | December [removed: 2021] [added: 2022] | | |

| * Assumes that $100 was invested on December 31, [removed: 2016] [added: 2017] in stock or index, including reinvestment of dividends. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

From 2016 through [removed: 2020,] [added: 2021,] our board of directors approved increases to our Repurchase Program by various [removed: amounts,] [added: amounts and extended the term to February 28, 2023,] bringing the aggregated amount authorized to [removed: $3.0] [added: $4.25] billion.

In [removed: October 2021,] [added: July 2022,] our board of directors approved a [removed: $1.25] [added: $1.0] billion [removed: increase and extended the term to February 28, 2023,] [added: increase,] bringing the aggregate amount authorized to be repurchased to [removed: $4.25] [added: $5.25] billion.

Since its inception, we have repurchased [removed: 35.1] [added: 211.4] million shares of our common stock under the Repurchase Program for an aggregate purchase price of [removed: $2.73] [added: $4.72] billion.

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

| Fortinet, Inc. | | | | | | $ | 100 | | | | | $ | 161 | | | | | $ | 244 | | | | | $ | 340 | | | | | $ | 823 | | | | | $ | 560 | |

| S&P 500 Index | | | | | | $ | 100 | | | | | $ | 94 | | | | | $ | 121 | | | | | $ | 140 | | | | | $ | 178 | | | | | $ | 144 | |

| NASDAQ Computer | | | | | | $ | 100 | | | | | $ | 96 | | | | | $ | 145 | | | | | $ | 217 | | | | | $ | 299 | | | | | $ | 192 | |

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

In February 2023, our board of directors approved an extension of the Repurchase Program to February 29, 2024.

There were no repurchases of common stock during the three months ended December 31, 2022.

As of December 31, 2022, $529.6 million remained available for future share repurchases under the Repurchase Program.

intended to suggest future performance.

| Fortinet, Inc. | | | | | | $ | 100 | | | | | $ | 145 | | | | | $ | 234 | | | | | $ | 354 | | | | | $ | 493 | | | | | $ | 1,193 | |

| S&P 500 Index | | | | | | $ | 100 | | | | | $ | 119 | | | | | $ | 112 | | | | | $ | 144 | | | | | $ | 168 | | | | | $ | 213 | |

| NASDAQ Computer | | | | | | $ | 100 | | | | | $ | 139 | | | | | $ | 134 | | | | | $ | 201 | | | | | $ | 301 | | | | | $ | 415 | |

The following table provides information with respect to the shares of common stock we repurchased during the three months ended December 31, 2021 (in millions, except per share amounts):

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | Total Number of Shares Purchased | | | | | | Average Price Paid per Share | | | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | |

| October 1 - October 31, 2021 | | | | | | 0.2 | | | | | | $ | 291.82 | | | | | 0.2 | | | | | | $ | 2,005.4 | |

| November 1 - November 30, 2021 | | | | | | 0.1 | | | | | | 325.05 | | | | | | 0.1 | | | | | | 1,963.7 | | |

| December 1 - December 31, 2021 | | | | | | 1.5 | | | | | | 308.77 | | | | | | 1.5 | | | | | | 1,520.9 | | |

| Total | | | | | | 1.8 | | | | | | | | | | | | 1.8 | | | | | | | | |

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

| [Report of Independent Registered Public Accounting [removed: Firm](#iebf4bf97a0d04753801601bc721cb1d4_58)] [added: Firm](#i90327120283244798f2956555b82bd30_61)] (PCAOB ID No.34) | | | [removed: [69](#iebf4bf97a0d04753801601bc721cb1d4_58)] [added: [74](#i90327120283244798f2956555b82bd30_61)] | | |

| [Consolidated Balance Sheets as of December 31, [removed: 202](#iebf4bf97a0d04753801601bc721cb1d4_61)[1](#iebf4bf97a0d04753801601bc721cb1d4_61) [and](#iebf4bf97a0d04753801601bc721cb1d4_61) [20](#iebf4bf97a0d04753801601bc721cb1d4_61)[20](#iebf4bf97a0d04753801601bc721cb1d4_61)] [added: 202](#i90327120283244798f2956555b82bd30_64)[2](#i90327120283244798f2956555b82bd30_64) [and](#i90327120283244798f2956555b82bd30_64) [2021](#i90327120283244798f2956555b82bd30_64)] | | | [removed: [71](#iebf4bf97a0d04753801601bc721cb1d4_61)] [added: [77](#i90327120283244798f2956555b82bd30_64)] | | |

| [Consolidated Statements of Income for the year ended December 31, [removed: 202](#iebf4bf97a0d04753801601bc721cb1d4_64)[1](#iebf4bf97a0d04753801601bc721cb1d4_64)[, 20](#iebf4bf97a0d04753801601bc721cb1d4_64)[20](#iebf4bf97a0d04753801601bc721cb1d4_64) [and 20](#iebf4bf97a0d04753801601bc721cb1d4_64)[19](#iebf4bf97a0d04753801601bc721cb1d4_64)] [added: 202](#i90327120283244798f2956555b82bd30_67)[2](#i90327120283244798f2956555b82bd30_67)[, 202](#i90327120283244798f2956555b82bd30_67)[1](#i90327120283244798f2956555b82bd30_67) [and](#i90327120283244798f2956555b82bd30_67) [2020](#i90327120283244798f2956555b82bd30_67)] | | | [removed: [72](#iebf4bf97a0d04753801601bc721cb1d4_64)] [added: [78](#i90327120283244798f2956555b82bd30_67)] | | |

| [Consolidated Statements of Comprehensive Income for the year ended December 31, [removed: 202](#iebf4bf97a0d04753801601bc721cb1d4_67)[1](#iebf4bf97a0d04753801601bc721cb1d4_67)[, 20](#iebf4bf97a0d04753801601bc721cb1d4_67)[20](#iebf4bf97a0d04753801601bc721cb1d4_67) [and 20](#iebf4bf97a0d04753801601bc721cb1d4_67)[19](#iebf4bf97a0d04753801601bc721cb1d4_67)] [added: 202](#i90327120283244798f2956555b82bd30_70)[2](#i90327120283244798f2956555b82bd30_70)[, 202](#i90327120283244798f2956555b82bd30_70)[1](#i90327120283244798f2956555b82bd30_70) [and](#i90327120283244798f2956555b82bd30_70) [2020](#i90327120283244798f2956555b82bd30_70)] | | | [removed: [73](#iebf4bf97a0d04753801601bc721cb1d4_67)] [added: [79](#i90327120283244798f2956555b82bd30_70)] | | |

| [Consolidated Statements [removed: of Consolidated Statements of](#iebf4bf97a0d04753801601bc721cb1d4_70) [Equity for] [added: of](#i90327120283244798f2956555b82bd30_73) [Equity](#i90327120283244798f2956555b82bd30_73) [(Deficit)](#i90327120283244798f2956555b82bd30_73) [for] the year ended December 31, [removed: 202](#iebf4bf97a0d04753801601bc721cb1d4_70)[1](#iebf4bf97a0d04753801601bc721cb1d4_70)[, 20](#iebf4bf97a0d04753801601bc721cb1d4_70)[20](#iebf4bf97a0d04753801601bc721cb1d4_70) [and 20](#iebf4bf97a0d04753801601bc721cb1d4_70)[19](#iebf4bf97a0d04753801601bc721cb1d4_70)] [added: 202](#i90327120283244798f2956555b82bd30_73)[2](#i90327120283244798f2956555b82bd30_73)[, 202](#i90327120283244798f2956555b82bd30_73)[1](#i90327120283244798f2956555b82bd30_73) [and](#i90327120283244798f2956555b82bd30_73) [2020](#i90327120283244798f2956555b82bd30_73)] | | | [removed: [74](#iebf4bf97a0d04753801601bc721cb1d4_70)] [added: [80](#i90327120283244798f2956555b82bd30_73)] | | |

| [Consolidated Statements of Cash Flows for the year ended December 31, [removed: 202](#iebf4bf97a0d04753801601bc721cb1d4_73)[1](#iebf4bf97a0d04753801601bc721cb1d4_73)[, 20](#iebf4bf97a0d04753801601bc721cb1d4_73)[20](#iebf4bf97a0d04753801601bc721cb1d4_73) [and 20](#iebf4bf97a0d04753801601bc721cb1d4_73)[19](#iebf4bf97a0d04753801601bc721cb1d4_73)] [added: 202](#i90327120283244798f2956555b82bd30_76)[2](#i90327120283244798f2956555b82bd30_76)[, 202](#i90327120283244798f2956555b82bd30_76)[1](#i90327120283244798f2956555b82bd30_76) [and](#i90327120283244798f2956555b82bd30_76) [2020](#i90327120283244798f2956555b82bd30_76)] | | | [removed: [75](#iebf4bf97a0d04753801601bc721cb1d4_73)] [added: [81](#i90327120283244798f2956555b82bd30_76)] | | |

| [Notes to Consolidated Financial [removed: Statements](#iebf4bf97a0d04753801601bc721cb1d4_76)] [added: Statements](#i90327120283244798f2956555b82bd30_79)] | | | [removed: [76](#iebf4bf97a0d04753801601bc721cb1d4_76)] [added: [82](#i90327120283244798f2956555b82bd30_79)] | | |

We have audited the accompanying consolidated balance sheets of Fortinet, Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the related consolidated statements of income, comprehensive income, [removed: equity,] [added: equity (deficit),] and cash flows, for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 25, 2022,] [added: 23, 2023,] expressed an unqualified opinion on the Company’s internal control over financial reporting.

Litigation – Refer to [removed: Note 13] [added: Notes 1 and 12] to the financial statements

Claims from third parties may result in a requirement to pay substantial damages and could prevent the Company from selling certain of [removed: their] [added: its] products.

Given the inherent uncertainty of the outcome of identified current matters, auditing [removed: the valuation assertion of] litigation contingencies required a high degree of auditor judgment and an increased extent of effort when performing audit procedures.

Our audit procedures related to [removed: the] litigation contingencies included the following, among others:

- We tested the effectiveness of controls over management’s litigation contingency accrual analysis and assessment of matters [added: with potential impact.]

- We made inquiries with management to obtain an understanding of litigation matters that the Company is currently [removed: undergoing.]

In fiscal year 2021, the Company invested $160 million in cash for shares of [removed: the] Series A Preferred Stock of Linksys Holdings, Inc. (“Linksys”), for a 50.8% ownership interest.

Determining that [removed: the Company does not control but exercises] [added: we have] significant influence [added: but not control] over the operating and financial policies of Linksys required significant [removed: management] judgement [removed: when considering] [added: of] many factors, including but not limited [removed: to,] [added: to] the ownership interest in Linksys, board representation, participation in policy-making [removed: processes,] [added: processes] and participation rights in certain significant financial and operating decisions of Linksys in the ordinary course of business.

| | | | December 31, [removed: 2021] [added: 2022] | | | | | | December 31, [removed: 2020] [added: 2021] | | |

| Cash and cash equivalents | | | $ | [removed: 1,319.1] [added: 1,682.9] | | | | | $ | [removed: 1,061.8] [added: 1,319.1] | |

| Short-term investments | | | [removed: 1,194.0] [added: 502.6] | | | | | | [removed: 775.5] [added: 1,194.0] | | |

| Marketable equity securities | | | [removed: 38.6] [added: 25.5] | | | | | | [removed: —] [added: 38.6] | | |

| Accounts receivable—Net of allowance for credit losses of [removed: $2.4] [added: $3.6] million and [removed: $2.5] [added: $2.4] million at December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively | | | [removed: 807.7] [added: 1,261.7] | | | | | | [removed: 720.0] [added: 807.7] | | |

| Inventory | | | [removed: 175.8] [added: 264.6] | | | | | | [removed: 139.8] [added: 175.8] | | |

| Prepaid expenses and other current assets | | | [removed: 65.4] [added: 73.1] | | | | | | [removed: 43.3] [added: 65.4] | | |

| Total current assets | | | [removed: 3,600.6] [added: 3,810.4] | | | | | | [removed: 2,740.4] [added: 3,600.6] | | |

| LONG-TERM INVESTMENTS | | | [removed: 440.8] [added: 45.5] | | | | | | [removed: 118.3] [added: 440.8] | | |

| PROPERTY AND EQUIPMENT—NET | | | [removed: 687.6] [added: 898.5] | | | | | | [removed: 448.0] [added: 687.6] | | |

| DEFERRED CONTRACT COSTS | | | [removed: 423.3] [added: 518.2] | | | | | | [removed: 304.8] [added: 423.3] | | |

| DEFERRED TAX ASSETS | | | [removed: 342.3] [added: 569.4] | | | | | | [removed: 245.2] [added: 342.3] | | |

| GOODWILL | | | [removed: 125.1] [added: 128.0] | | | | | | [removed: 93.0] [added: 125.1] | | |

| OTHER INTANGIBLE ASSETS—NET | | | [removed: 63.6] [added: 56.0] | | | | | | [removed: 31.6] [added: 63.6] | | |

| OTHER ASSETS | | | [removed: 235.8] [added: 202.0] | | | | | | [removed: 63.2] [added: 235.8] | | |

| TOTAL ASSETS | | | $ | [removed: 5,919.1] [added: 6,228.0] | | | | | $ | [removed: 4,044.5] [added: 5,919.1] | |

| LIABILITIES AND [removed: EQUITY] [added: EQUITY (DEFICIT)] | | | | | | | | | | | |

| Accounts payable | | | $ | [removed: 148.4] [added: 243.4] | | | | | $ | [removed: 141.6] [added: 148.4] | |

| Accrued liabilities | | | [removed: 197.3] [added: 266.3] | | | | | | [removed: 149.2] [added: 197.3] | | |

| Accrued payroll and compensation | | | [removed: 195.0] [added: 219.4] | | | | | | [removed: 145.9] [added: 195.0] | | |

| Deferred revenue | | | [removed: 1,777.4] [added: 2,349.3] | | | | | | [removed: 1,392.8] [added: 1,777.4] | | |

| Total current liabilities | | | [removed: 2,318.1] [added: 3,078.4] | | | | | | [removed: 1,829.5] [added: 2,318.1] | | |

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

This investment is accounted for under the equity method of accounting and is evaluated for events or changes in business circumstances that indicate that it’s carrying value might not be recoverable and whether any estimated decline in value is considered to be other-than-temporary.

Evaluating whether the investment is other-than-temporarily impaired requires management to evaluate several qualitative and quantitative factors including, among others, Linksys financial results and operating history, the Company’s 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 (collectively, “impairment indicators”).

In the fourth quarter of fiscal year 2022, management concluded that such investment was other-than-temporarily impaired and recorded an impairment charge.

Concluding on whether the presence of impairment indicators indicates that an investment is other-than-temporarily impaired, involves significant and complex management judgment.

Therefore, a high degree of auditor judgment and an increased extent

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

of effort was required when performing audit procedures to evaluate the appropriateness of management’s assessment of identified impairment indicators and the conclusions reached around whether these impairment indicators result in an other-than-temporary impairment.

Our audit procedures related to management’s assessment of identified impairment indicators and the conclusions reached around whether these impairment indicators result in an other-than-temporary impairment included, among others:

- We tested the effectiveness of controls over management’s assessment of identified impairment indicators and the conclusions reached around whether these impairment indicators result in an other-than-temporary impairment.

- We evaluated management’s other-than-temporary impairment analysis of its Linksys investment by assessing whether certain indicators were present and whether those indications implied an other-than-temporary loss of value.

These procedures included but were not limited to:

◦We evaluated the reasonableness of the estimated cash flows by comparing such estimated cash flows to historical results and other internal and external information.

◦With the assistance of our fair value specialists, we evaluated the discount rates and revenue valuation multiples by testing the source information used in determining discount rates and revenue valuation multiples.

◦We tested the mathematical accuracy of the discounted cash flows analysis and the resulting estimated fair value of Linksys.

◦We compared Linksys’ estimated undiscounted cash flows and estimated fair value to Fortinet’s carrying amount.

◦We performed inquiries with relevant members of management to obtain an understanding of their current and expected performance for Linksys, including their understanding of any operational and strategic changes.

◦We performed a retrospective review of Linksys’ performance by comparing actual Linksys results to the performance expected by management when the Company initially invested in Linksys.

◦We evaluated the length of time Linksys has incurred losses.

◦We evaluated Linksys’ performance relative to its peers and to the economy by performing a comparison to peer company results and macro-economic trends.

- We tested the mathematical accuracy of the Linksys impairment as the excess of the investment’s carrying value over its estimated fair value.

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

undergoing.

February 23, 2023

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

| Basic | | | $ | 1.08 | | | | | $ | 0.74 | | | | | $ | 0.60 | |

| Diluted | | | $ | 1.06 | | | | | $ | 0.73 | | | | | $ | 0.58 | |

| Basic | | | 791.4 | | | | | | 816.1 | | | | | | 821.0 | | |

| Diluted | | | 805.3 | | | | | | 835.3 | | | | | | 838.3 | | |

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

| Acquisition of the non-controlling interests | | | — | | | | | | — | | | | | | 3.4 | | | | | | — | | | | | | — | | | | | | (16.9) | | | | | | (13.5) | | |

| Foreign currency translation adjustment | | | — | | | | | | — | | | | | | — | | | | | | (10.6) | | | | | | — | | | | | | 0.9 | | | | | | (9.7) | | |

| Net income | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 857.3 | | | | | | (0.7) | | | | | | 856.6 | | |

| BALANCE—December 31, 2022 | | | 781.5 | | | | | | $ | 0.8 | | | | | $ | 1,284.2 | | | | | $ | (20.2) | | | | | $ | (1,546.4) | | | | | $ | — | | | | | $ | (281.6) | |

[Table o](#i90327120283244798f2956555b82bd30_7)[f](#i90327120283244798f2956555b82bd30_7) [Contents](#i90327120283244798f2956555b82bd30_7)

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| Net income including non-controlling interests | | | $ | 856.6 | | | | | $ | 606.7 | | | | | $ | 488.5 | |

On April 14, 2022, our board of directors approved a five-for-one forward stock split of our common stock (the “Forward Stock Split”), which was conditioned upon obtaining stockholder approval for the Forward Stock Split, and to increase the number of our authorized shares of common stock.

with potential impact.

The Company accounts for its investment in Linksys using the equity method of accounting based on its determination that it does not hold an absolute controlling financial interest but has the ability to exercise significant influence over the operating and financial policies of Linksys.

We identified the Company’s conclusion to account for its investment in Linksys using the equity method of accounting as a critical audit matter because of the complex judgments involved in determining that the Company does not hold a controlling financial interest but exercises significant influence.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals with expertise in the accounting for equity method investments and consolidation accounting, when performing audit procedures to evaluate the appropriateness of the accounting conclusion.

Our audit procedures related to the Company’s conclusion to account for its investment in Linksys using the equity method of accounting included the following, among others:

- We tested the effectiveness of controls over management’s assessment of the appropriateness of the accounting conclusion for the investment in Linksys under the equity method of accounting.

- We obtained and read the executed Linksys investment agreement to evaluate the accuracy and completeness of the terms used in management’s assessment that the Company does not control but has significant influence over Linksys.

- With the assistance of professionals in our firm having expertise in accounting for equity method investments and consolidation accounting, we evaluated management’s conclusion to account for the investment in Linksys as an equity method investment, including the appropriateness of the accounting policies applied and the determination that the Company does not control, but has significant influence over the operating and financial policies of Linksys.

February 25, 2022

| Basic | | | $ | 3.72 | | | | | $ | 2.98 | | | | | $ | 1.94 | |

| Diluted | | | $ | 3.63 | | | | | $ | 2.91 | | | | | $ | 1.90 | |

| Basic | | | 163.2 | | | | | | 164.2 | | | | | | 171.0 | | |

| Diluted | | | 167.1 | | | | | | 167.7 | | | | | | 175.0 | | |

| BALANCE—December 31, 2018 | | | 169.8 | | | | | | $ | 0.2 | | | | | $ | 1,068.3 | | | | | $ | (0.8) | | | | | $ | (42.2) | | | | | $ | — | | | | | $ | 1,025.5 | |

| Cumulative-effect adjustment from adoption of ASU 2018-02 | | | — | | | | | | — | | | | | | — | | | | | | (0.1) | | | | | | 0.1 | | | | | | — | | | | | | — | | |

| Net income | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 331.7 | | | | | | — | | | | | | 331.7 | | |

| Cash paid to settle liability incurred for repurchase of common stock | | | $ | — | | | | | $ | — | | | | | $ | 4.2 | |

As of December 31, 2021, Exclusive Networks Group (“Exclusive”), TD Synnex and Ingram Micro Inc. (“Ingram Micro”) accounted for 33%, 13% and 13% of total net accounts receivable, respectively.

As of December 31, 2020, Exclusive and Ingram Micro accounted for 34% and 11% of total net accounts receivable, respectively.

During 2021, Exclusive and Ingram Micro accounted for 31% and 12% of total revenue, respectively.

During 2020, Exclusive and Ingram Micro accounted for 30% and 10% of total revenue, respectively.

During 2019, Exclusive and Ingram Micro accounted for 31% and 11% of total revenue, respectively.

Prior to 2020, we followed the guidance in Accounting Standards Codification (“ASC”) 320 Investments—Debt and Equity Securities in determining whether unrealized losses were other than temporary.

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”).

securities and will reverse the accrued interest against interest income in the period in which we determine the accrued interest to be uncollectible.

On January 1, 2020, we adopted Topic 326, which provides guidance on how to measure credit losses on financial instruments, including accounts receivable.

Prior to our adoption of Topic 326, our accounts receivable balance was reduced by an allowance for doubtful accounts that we determined based on our assessment of the collectability of customer accounts.

values of these identifiable assets and liabilities is recorded as goodwill.

We have elected to account for Global Intangible Low-Taxed Income (“GILTI”), which was introduced in the 2017 Tax Act, as a current period expense.

*Income Taxes*

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12—Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes.

The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application and simplification of GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

ASU 2019-12 was effective for us beginning on January 1, 2021.

The adoption of this guidance did not have any impact on our consolidated financial statements and accompanying disclosures.

In October 2021, the FASB issued ASU 2021-08—Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The amendments in ASU 2021-08 require that an entity recognizes and measures contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (“Topic 606”).

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The amendments improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination.

We early adopted ASU 2021-08 on January 1, 2021 on a retrospective basis for all business combinations for which the acquisition date occurred subsequent to January 1, 2021.

Based on that evaluation, our [removed: Chief Executive Officer] [added: chief executive officer] and [removed: Chief Financial Officer] [added: chief financial officer] concluded that our disclosure controls and procedures were effective as of December 31, [removed: 2021] [added: 2022] 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.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2021.][added: 2022.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2021] [added: 2022] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report, which appears in this Item under the heading “Report of Independent Registered Public Accounting Firm.”

There were no [removed: other] changes in our internal [removed: control] [added: controls] over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during [removed: 2021] [added: 2022] that have materially affected, or are reasonably likely to materially affect, our internal [removed: control] [added: controls] over financial reporting.

We have audited the internal control over financial reporting of Fortinet, Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, [removed: 2021,] [added: 2022,] of the Company and our report dated February [removed: 25, 2022,] [added: 23, 2023] expressed an unqualified opinion on those financial statements.

February 23, 2023

In accordance with the Internal Controls Guidance, management has excluded Alaxala Networks Corporation (“Alaxala”), a privately-held network hardware equipment company in Japan, from its assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a business combination during the fiscal year ended December 31, 2021.

Alaxala assets represented approximately 1.5% of the Company’s consolidated total assets, excluding the effects of purchase accounting, as of December 31, 2021 and its revenues represented approximately 1.3% of the Company's consolidated total revenues for the year ended December 31, 2021.

As described in “Management’s Report on Internal Control over Financial Reporting”, management excluded from its assessment the internal control over financial reporting at Alaxala Networks Corporation (“Alaxala”), which was acquired on August 31, 2021, and whose financial statements constitute approximately 1.5% of the Company’s consolidated total assets, excluding the effects of purchase accounting, as of December 31, 2021 and approximately 1.3% of the Company’s consolidated total revenues for the year ended December 31, 2021.

Accordingly, our audit did not include the assessment of the internal controls over financial reporting for Alaxala.

February 25, 2022

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Our code of business conduct and ethics is available on our website at www.fortinet.com under “Corporate—Investor Relations—Corporate Governance.” We will post on this section of our website any amendment to our code of business conduct and ethics, as well as any waivers of our code of business conduct and ethics, [removed: that] [added: which] are required to be disclosed by the rules of the SEC or the Nasdaq Stock Market.

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

[removed: Financial] [added: *2.Financial] Statement Schedule:* Financial statement schedules have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the consolidated financial statements or notes thereto.

| [removed: [3.1](http://www.sec.gov/Archives/edgar/data/1262039/000126203918000023/exhibit31-amendedandrestat.htm)] [added: [3.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000023/ex31ftnt-amendedandrestate.htm)] | | | | | | Amended and Restated Certificate of Incorporation | | | | | | Current Report on Form 8-K (File No. 001-34511) | | | | | | June [removed: 28, 2018] [added: 22, 2022] | | | | | | 3.1 | | |

| [removed: [3.2](https://www.sec.gov/Archives/edgar/data/1262039/000110465921056360/tm2114350d1_ex3-1.htm)] [added: [3.2](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000006/ftnt-amendedandrestatedbyl.htm)] | | | | | | Amended and Restated Bylaws | | | | | | Current Report on Form 8-K (File No. 001-34511) | | | | | | [removed: April 28, 2021] [added: February 8, 2023] | | | | | | 3.1 | | |

| [removed: [4.2](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000008/ftnt-ex42_20211231xk.htm)*] [added: [4.2](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-ex42_20221231xk.htm)*] | | | | | | Description of Securities Registered Pursuant to Section 12 of the Exchange Act | | | | | | | | | | | | | | | | | | | | |

| [removed: [21.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000008/ftnt-ex211_20211231xk.htm)*] [added: [21.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-ex211_20221231xk.htm)*] | | | | | | List of subsidiaries | | | | | | | | | | | | | | | | | | | | |

| [removed: [23.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000008/ftnt-ex231_20211231xk.htm)*] [added: [23.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-ex231_20221231xk.htm)*] | | | | | | Consent of Independent Registered Public Accounting Firm | | | | | | | | | | | | | | | | | | | | |

| [removed: [24.1](#iebf4bf97a0d04753801601bc721cb1d4_187)*] [added: [24.1](#i90327120283244798f2956555b82bd30_199)*] | | | | | | Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K) | | | | | | | | | | | | | | | | | | | | |

| [removed: [31.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000008/ftnt-ex311_20211231xk.htm)*] [added: [31.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-ex311_20221231xk.htm)*] | | | | | | 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 | | |

| [removed: [31.2](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000008/ftnt-ex312_20211231xk.htm)*] [added: [31.2](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-ex312_20221231xk.htm)*] | | | | | | 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 | | |

| [removed: [32.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203922000008/ftnt-ex321_20211231xk.htm)] [added: [32.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-ex321_20221231xk.htm)] | | | | | | 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 | | |

| 104* | | | | | | Cover Page Interactive Data File - the cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, [removed: 2021] [added: 2022] is formatted in inline XBRL. | | |

| [10.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/patricepercheemploymentagr.htm)[7](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/patricepercheemploymentagr.htm)* | | | | | | Employment Agreement, dated as of January 24, 2018, between Fortinet UK Limited and Patrice Perche | | | | | | | | | | | | | | | | | | | | |

| [10.1](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-pperchechangeofctrlse.htm)[8](https://www.sec.gov/Archives/edgar/data/1262039/000126203923000010/ftnt-pperchechangeofctrlse.htm)* | | | | | | Change of Control Severance Agreement, effective as of February 21, 2023, between the Company and Patrice Perche | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

*2.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly [removed: authorized, on February 25, 2022.][added: authorized.]

| /s/ Ken Xie | | | | | | Chief Executive Officer and Chairman | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Keith Jensen | | | | | | Chief Financial Officer | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Michael Xie | | | | | | President, Chief Technology Officer and Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Kenneth A. Goldman | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Ming Hsieh | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Jean Hu | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ William H. Neukom | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Judith Sim | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| /s/ Admiral James Stavridis | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 23, 2023] | | |

| Date: February 23, 2023 | | | | | | | | |

| Date: February 23, 2023 | | | | | | | | |

| | | | | | | | | | | | | | | |

| /s/ Kelly Ducourty | | | | | | Director | | | | | | February 25, 2022 | | |

| Kelly Ducourty | | | | | | | | | | | | | | |