Item 1. Financial Statements

FORTINET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except per share amounts)

			March 31, 2025						December 31, 2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	3,596.6					$	2,875.9
Short-term investments			1,183.9						1,190.6
Accounts receivable—net			1,174.0						1,463.4
Inventory			362.7						315.5
Prepaid expenses and other current assets			125.4						126.1
Total current assets			6,442.6						5,971.5
LONG-TERM INVESTMENTS			35.2						—
PROPERTY AND EQUIPMENT—NET			1,403.8						1,349.5
DEFERRED CONTRACT COSTS			636.2						622.9
DEFERRED TAX ASSETS			1,411.6						1,335.6
GOODWILL			236.2						235.4
OTHER INTANGIBLE ASSETS—NET			121.2						115.0
OTHER ASSETS			120.2						133.2
TOTAL ASSETS			$	10,407.0					$	9,763.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable			$	224.5					$	190.9
Accrued liabilities			415.0						337.9
Accrued payroll and compensation			250.2						255.7
Current portion of long-term debt			498.7						—
Deferred revenue			3,339.4						3,276.2
Total current liabilities			4,727.8						4,060.7
DEFERRED REVENUE			3,079.0						3,084.7
LONG-TERM DEBT			496.2						994.3
OTHER LIABILITIES			141.1						129.6
Total liabilities			8,444.1						8,269.3
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value—1,500.0 shares authorized; 769.2 and 767.0 shares issued and outstanding on March 31, 2025 and December 31, 2024, respectively			0.8						0.8
Additional paid-in capital			1,668.7						1,636.2
Accumulated other comprehensive loss			(22.9)						(26.1)
Retained earnings (accumulated deficit)			316.3						(117.1)
Total stockholders’ equity			1,962.9						1,493.8
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	10,407.0					$	9,763.1

See notes to condensed consolidated financial statements.

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions, except per share amounts)

			Three Months Ended
March 31, 2025						March 31, 2024
REVENUE:
Product			$	459.1					$	408.9
Service			1,080.6						944.4
Total revenue			1,539.7						1,353.3
COST OF REVENUE:
Product			149.9						182.8
Service			143.2						121.9
Total cost of revenue			293.1						304.7
GROSS PROFIT:
Product			309.2						226.1
Service			937.4						822.5
Total gross profit			1,246.6						1,048.6
OPERATING EXPENSES:
Research and development			198.6						173.0
Sales and marketing			542.7						501.1
General and administrative			57.8						54.4
Gain on intellectual property matters			(6.3)						(1.1)
Total operating expenses			792.8						727.4
OPERATING INCOME			453.8						321.2
INTEREST INCOME			44.3						32.2
INTEREST EXPENSE			(4.9)						(5.1)
OTHER INCOME (EXPENSE)—NET			26.1						(2.9)
INCOME BEFORE INCOME TAXES AND GAIN (LOSS) FROM EQUITY METHOD INVESTMENTS			519.3						345.4
PROVISION FOR INCOME TAXES			96.5						39.5
GAIN (LOSS) FROM EQUITY METHOD INVESTMENTS			10.6						(6.6)
NET INCOME			$	433.4					$	299.3
Net income per share (Note 8):
Basic			$	0.56					$	0.39
Diluted			$	0.56					$	0.39
Weighted-average shares outstanding:
Basic			768.3						762.4
Diluted			776.8						770.5

See notes to condensed consolidated financial statements.

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in millions)

			Three Months Ended
			March 31, 2025						March 31, 2024
Net income			$	433.4					$	299.3
Other comprehensive income (loss):
Change in foreign currency translation			3.4						(5.2)
Change in unrealized gains (losses) on investments			(0.3)						(0.9)
Less: tax benefit related to items of other comprehensive income (loss)			(0.1)						(0.2)
Other comprehensive income (loss)			3.2						(5.9)
Comprehensive income			$	436.6					$	293.4

See notes to condensed consolidated financial statements.

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited, in millions)

			Three Months Ended March 31, 2025
			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings (Accumulated Deficit)						Total Stockholders’ Equity
Shares						Amount
BALANCE—December 31, 2024			767.0						$	0.8					$	1,636.2					$	(26.1)					$	(117.1)					$	1,493.8
Issuance of common stock in connection with equity incentive plans - net of tax withholding			2.2						—						(33.6)						—						—						(33.6)
Stock-based compensation expense			—						—						66.1						—						—						66.1
Net unrealized loss on investments - net of tax			—						—						—						(0.2)						—						(0.2)
Foreign currency translation adjustment			—						—						—						3.4						—						3.4
Net income			—						—						—						—						433.4						433.4
BALANCE—March 31, 2025			769.2						$	0.8					$	1,668.7					$	(22.9)					$	316.3					$	1,962.9
			Three Months Ended March 31, 2024
			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Accumulated Deficit						Total Stockholders’ Deficit
Shares						Amount
BALANCE—December 31, 2023			761.0						$	0.8					$	1,416.4					$	(18.9)					$	(1,861.7)					$	(463.4)
Issuance of common stock in connection with equity incentive plans - net of tax withholding			2.2						—						(29.8)						—						—						(29.8)
Stock-based compensation expense			—						—						62.3						—						—						62.3
Net unrealized loss on investments - net of tax			—						—						—						(0.7)						—						(0.7)
Foreign currency translation adjustment			—						—						—						(5.2)						—						(5.2)
Net income			—						—						—						—						299.3						299.3
BALANCE—March 31, 2024			763.2						$	0.8					$	1,448.9					$	(24.8)					$	(1,562.4)					$	(137.5)

See notes to condensed consolidated financial statements.

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

			Three Months Ended
			March 31, 2025						March 31, 2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	433.4					$	299.3
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation			66.1						62.3
Amortization of deferred contract costs			78.0						72.0
Depreciation and amortization			35.8						28.6
Amortization of investment discounts			(10.3)						(12.2)
Other			(35.5)						9.9
Changes in operating assets and liabilities, net of impact of business combinations:
Accounts receivable—net			303.9						405.6
Inventory			(34.1)						36.5
Prepaid expenses and other current assets			3.4						(0.1)
Deferred contract costs			(91.3)						(66.5)
Deferred tax assets			(30.0)						(73.9)
Other assets			1.5						(6.2)
Accounts payable			24.6						(61.6)
Accrued liabilities			63.7						105.0
Accrued payroll and compensation			(8.2)						(27.4)
Deferred revenue			57.0						54.8
Other liabilities			5.3						4.3
Net cash provided by operating activities			863.3						830.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments			(503.0)						(436.1)
Sales of investments			2.8						—
Maturities of investments			466.9						393.4
Purchases of property and equipment			(66.5)						(221.9)
Payments made in connection with business combinations, net of cash acquired			(11.2)						(5.7)
Other			0.2						—
Net cash used in investing activities			(110.8)						(270.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock			20.2						13.4
Taxes paid related to net share settlement of equity awards			(52.9)						(42.9)
Other			—						(0.8)
Net cash used in financing activities			(32.7)						(30.3)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			0.9						(1.4)
NET INCREASE IN CASH AND CASH EQUIVALENTS			720.7						528.4
CASH AND CASH EQUIVALENTS—Beginning of period			2,875.9						1,397.9
CASH AND CASH EQUIVALENTS—End of period			$	3,596.6					$	1,926.3
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes—net			$	26.8					$	31.1
Operating lease liabilities arising from obtaining right-of-use assets			$	6.7					$	15.0
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfers of evaluation units and equipment from inventory to property and equipment			$	6.2					$	6.5
Liability for purchase of property and equipment			$	25.1					$	27.6

See notes to condensed consolidated financial statements.

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation—The unaudited condensed consolidated financial statements of Fortinet, Inc. and its subsidiaries (collectively, “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2024, contained in our Annual Report on Form 10-K filed with the SEC on February 21, 2025. In the opinion of management, all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation, have been included. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full year or for any future periods. The condensed consolidated balance sheet as of December 31, 2024 is derived from the audited consolidated financial statements for the year ended December 31, 2024.

Amounts previously reported as marketable equity securities are included in short-term investments in prior periods to conform with current period presentation in our condensed consolidated balance sheets. Amounts previously reported as gain on bargain purchase are included in other income (expense)—net in prior periods to conform with current period presentation in our condensed consolidated statements of income. Amounts previously reported as loss from equity method investments and gain on bargain purchase are included in other in prior periods to conform with current period presentation in section of net cash provided by operating activities in our condensed consolidated statements of cash flows.

The condensed consolidated financial statements include the accounts of Fortinet, Inc. and its subsidiaries. We consolidate all legal entities in which we have an absolute controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

There have been no material changes to our significant accounting policies as of and for the three months ended March 31, 2025, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC.

Recent Accounting Standards Not Yet Effective

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for our annual period beginning fiscal year 2025, with early adoption permitted, and should be applied prospectively. We are currently evaluating the ASU to determine its impact on our disclosures.

Income Statement

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), and in January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. ASU 2024-03 enhances the disclosures required for expense disaggregation in our annual and interim consolidated financial statements. The amendments are effective for our annual reporting period beginning fiscal year 2027, with early adoption permitted, and can be applied prospectively or retrospectively. We are currently evaluating the ASU to determine its impact on our disclosures.

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents our revenue disaggregated by major product and service lines (in millions):

			Three Months Ended
			March 31, 2025						March 31, 2024
Product			$	459.1					$	408.9
Service:
Security subscription			623.1						536.9
Technical support and other			457.5						407.5
Total service revenue			1,080.6						944.4
Total revenue			$	1,539.7					$	1,353.3

Deferred Revenue

During the three months ended March 31, 2025 and 2024, we recognized $972.5 million and $851.1 million in revenue that was included in the deferred revenue balance as of December 31, 2024 and 2023, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $6.49 billion, which was substantially comprised of deferred security subscription and technical support services revenue as well as unbilled contract revenue from non-cancellable contracts that will be recognized in future periods. We expect to recognize approximately $3.38 billion as revenue over the next 12 months, $2.55 billion in years two and three, and the remainder thereafter.

Deferred Contract Costs

Amortization of deferred contract costs during the three months ended March 31, 2025 and 2024 were $78.0 million and $72.0 million, respectively.

3. FINANCIAL INSTRUMENTS AND FAIR VALUE

Short-Term and Long-Term Investments

Our short-term and long-term investments comprised of available-for-sale investments and marketable equity securities. The following tables summarize our short-term and long-term investments (in millions):

			March 31, 2025
			Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value
U.S. government and agency securities			$	486.5					$	0.2					$	—					$	486.7
Commercial paper			432.8						0.1						(0.1)						432.8
Corporate debt securities			158.2						—						(0.1)						158.1
Certificates of deposit and term deposits			73.9						—						—						73.9
Total available-for-sale investments			1,151.4						0.3						(0.2)						1,151.5
Marketable equity securities																					67.6
Total short-term and long-term investments			$	1,151.4					$	0.3					$	(0.2)					$	1,219.1

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

			December 31, 2024
			Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value
U.S. government and agency securities			$	469.1					$	0.4					$	—					$	469.5
Commercial paper			428.7						0.2						(0.2)						428.7
Corporate debt securities			166.4						0.1						(0.1)						166.4
Certificates of deposit and term deposits			61.8						—						—						61.8
Total available-for-sale investments			1,126.0						0.7						(0.3)						1,126.4
Marketable equity securities																					64.2
Total short-term and long-term investments			$	1,126.0					$	0.7					$	(0.3)					$	1,190.6

The following tables show the gross unrealized losses and the related fair values of our available-for-sale investments that have been in a continuous unrealized loss position (in millions):

			March 31, 2025
			Less Than 12 Months												12 Months or Greater												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
U.S. government and agency securities			$	119.7					$	—					$	—					$	—					$	119.7					$	—
Commercial paper			260.5						(0.1)						—						—						260.5						(0.1)
Corporate debt securities			83.8						(0.1)						—						—						83.8						(0.1)
Certificates of deposit and term deposits			9.5						—						—						—						9.5						—
Total available-for-sale investments			$	473.5					$	(0.2)					$	—					$	—					$	473.5					$	(0.2)

			December 31, 2024
			Less Than 12 Months												12 Months or Greater												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
U.S. government and agency securities			$	27.8					$	—					$	—					$	—					$	27.8					$	—
Commercial paper			149.4						(0.2)						—						—						149.4						(0.2)
Corporate debt securities			63.5						(0.1)						—						—						63.5						(0.1)
Certificates of deposit and term deposits			10.9						—						—						—						10.9						—
Total available-for-sale investments			$	251.6					$	(0.3)					$	—					$	—					$	251.6					$	(0.3)

The contractual maturities of our available-for-sale investments were (in millions):

			March 31, 2025						December 31, 2024
Due within one year			$	1,116.3					$	1,126.4
Due within one to three years			35.2						—
Total			$	1,151.5					$	1,126.4

Available-for-sale investments are reported at fair value, with unrealized gains and losses and the related tax impact included as a separate component of stockholders’ equity and in comprehensive income. We do not intend to sell any of the securities in an unrealized loss position and it is not more likely than not that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity.

Realized gains and losses on available-for-sale investments were insignificant in the periods presented.

Our marketable equity securities were $67.6 million and $64.2 million as of March 31, 2025 and December 31, 2024. The changes in fair value of our marketable equity securities are recorded in other income (expense)—net on the condensed

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

consolidated statements of income. We recognized a $14.7 million loss and $0.3 million gain during the three months ended March 31, 2025 and 2024, respectively.

Assets Measured at Fair Value on a Recurring Basis

The following tables present the fair value of our financial assets measured at fair value on a recurring basis (in millions):

			March 31, 2025																								December 31, 2024
			Aggregate Fair Value						Quoted Prices in Active Markets For Identical Assets						Significant Other Observable Remaining Inputs						Significant Other Unobservable Remaining Inputs						Aggregate Fair Value						Quoted Prices in Active Markets For Identical Assets						Significant Other Observable Remaining Inputs						Significant Other Unobservable Remaining Inputs
									(Level 1)						(Level 2)						(Level 3)												(Level 1)						(Level 2)						(Level 3)
Cash equivalents:
Money market funds			$	260.3					$	260.3					$	—					$	—					$	296.1					$	296.1					$	—					$	—
Commercial paper			86.5						—						86.5						—						59.7						—						59.7						—
Total cash equivalents			346.8						260.3						86.5						—						355.8						296.1						59.7						—
Short-term investments:
U.S. government and agency securities			451.5						446.5						5.0						—						469.5						464.5						5.0						—
Commercial paper			432.8						—						432.8						—						428.7						—						428.7						—
Corporate debt securities			158.1						—						158.1						—						166.4						—						166.4						—
Certificates of deposit and term deposits			73.9						—						73.9						—						61.8						—						61.8						—
Marketable equity securities			67.6						67.6						—						—						64.2						64.2						—						—
Total short-term investments			1,183.9						514.1						669.8						—						1,190.6						528.7						661.9						—
Long-term investments:
U.S. government and agency securities			35.2						35.2						—						—						—						—						—						—
Total			$	1,565.9					$	809.6					$	756.3					$	—					$	1,546.4					$	824.8					$	721.6					$	—

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2025 and year ended December 31, 2024.

4. INVENTORY

Inventory, net of reserves, consisted of (in millions):

			March 31, 2025						December 31, 2024
Raw materials			$	80.7					$	90.9
Work in process			5.3						4.1
Finished goods			276.7						220.5
Inventory			$	362.7					$	315.5

The excess and obsolete inventory reserve was $147.8 million and $144.8 million as of March 31, 2025 and December 31, 2024, respectively. Inventory write-downs related to excess and obsolete inventory were not material during the three months ended March 31, 2025. Inventory write-downs were $18.1 million during the three months ended March 31, 2024. These were recorded in cost of product revenue on the condensed consolidated statements of income.

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. PROPERTY AND EQUIPMENT—Net

Property and equipment—net consisted of (in millions):

			March 31, 2025						December 31, 2024
Land			$	517.6					$	500.6
Buildings and improvements			842.9						801.4
Computer equipment and software			295.5						279.1
Leasehold improvements			63.5						64.3
Evaluation units			31.9						31.8
Furniture and fixtures			36.8						36.4
Construction-in-progress			48.6						52.0
Total property and equipment			1,836.8						1,765.6
Less: accumulated depreciation			(433.0)						(416.1)
Property and equipment—net			$	1,403.8					$	1,349.5

During the first quarter in 2025, we purchased certain real estate property in Frankfurt, Germany totaling $54.5 million, to be used predominantly for data center operations and as office space. The purchase was accounted for under the asset acquisition method. The costs of the assets allocated to land and building and improvements were $16.8 million and $37.7 million, respectively, based on their relative fair values.

Depreciation expense was $24.0 million and $25.6 million during the three months ended March 31, 2025 and 2024, respectively.

6. BUSINESS COMBINATIONS

Linksys Holdings, Inc.

In 2021, we invested $160.0 million in cash for shares of the Series A Preferred Stock of Linksys for a 50.8% ownership interest in the outstanding equity of Linksys. On January 31, 2025 (“Linksys Acquisition Date”), we acquired all of the remaining outstanding Series A Preferred Stock of Linksys for $20.8 million in cash and now own 100% of the outstanding equity of Linksys. Our pre-existing equity method investment in Linksys of 50.8% ownership interest was remeasured to the fair value of $21.5 million at the Linksys Acquisition Date, which resulted in a $10.8 million gain recorded in gain (loss) from equity method investments on the condensed consolidated statements of income. Therefore, the aggregate purchase consideration for Linksys’ equity equaling the fair value of the previously owned stock and the purchase price for the remaining stock acquired was $42.3 million.

This acquisition was accounted for as a business combination using the acquisition method of accounting. Of the aggregate purchase price, $17.5 million was allocated to identifiable intangible assets acquired, and $64.7 million was allocated to other net assets acquired which predominantly included deferred tax asset of $45.8 million, inventory of $21.4 million, and cash of $8.8 million, offset by $11.3 million of net other assets and liabilities assumed. The excess of the fair values of the net assets acquired over the net purchase consideration was recorded as a gain on bargain purchase of $39.9 million within other income (expense)—net on the condensed consolidated statements of income. The gain on bargain purchase occurred primarily due to the recognition of the deferred tax assets. The deferred tax assets were comprised primarily of pre-acquisition federal net operating loss carryforwards with an indefinite carryforward period. In addition, we had previously recorded a deferred tax asset of $30.6 million for an outside basis difference in our investment in Linksys when it was accounted for under the equity method. As a result of the acquisition of the remaining shares, we now account for our investment in Linksys under the consolidation method, and therefore we have derecognized this deferred tax asset. The charge is included in the provision for income taxes on the condensed consolidated statements of income. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Perception Point Ltd.

On December 5, 2024, we acquired certain assets and liabilities of Perception Point Ltd., a business specializing in advanced collaboration and email security paid in cash. This acquisition was accounted for as a business combination using the

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

acquisition method of accounting. Of the $33.7 million purchase price, $24.5 million was allocated to goodwill, $9.5 million was allocated to developed technology intangible asset, $6.5 million was allocated to customer relationships intangible asset, and $6.8 million was allocated to other net liabilities assumed, which predominantly include deferred revenue. Goodwill recorded in connection with this acquisition is primarily attributable to the assembled workforce acquired and the anticipated operational synergies. All acquired goodwill is expected to be deductible for tax purposes. Acquisition-related costs were not material and were recorded as general and administrative expense.

Next DLP Holdings Limited

On August 5, 2024 (“Next DLP Acquisition Date”), we acquired Next DLP Holdings Limited (“Next DLP”), a privately held insider risk and data loss prevention (“DLP”) company, for approximately $105.0 million in cash. We acquired Next DLP in an effort to improve our position in the standalone enterprise DLP market and strengthen our leadership in integrated DLP markets within endpoint and unified Secure Access Service Edge (“SASE”).

This acquisition was accounted for as a business combination using the acquisition method of accounting. The total preliminary purchase price was allocated to Next DLP’s identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. Of the total preliminary purchase price, $82.6 million was allocated to goodwill, $13.5 million was allocated to developed technology intangible asset, $10.5 million was allocated to customer relationships intangible asset, offset by $1.6 million of net liabilities assumed, which predominantly included deferred revenue and deferred tax liabilities. Goodwill recorded in connection with this acquisition represents the value we expect to be created through expansion into markets within our existing business, and the anticipated operational synergies, and goodwill is not expected to be deductible for tax purposes. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Our estimates and assumptions are subject to change within the measurement period, which is up to 12 months after the Next DLP Acquisition Date. The allocation of the purchase price has been prepared on a preliminary basis and changes to the allocation of certain assets and liabilities may occur as additional information becomes available. The primary areas of the purchase price that are not yet finalized are related to income taxes and the valuation of acquired assets and assumed liabilities.

Lacework Inc.

On August 1, 2024 (“Lacework Acquisition Date”), we acquired Lacework Inc. (“Lacework”), a privately held data-driven cloud security company, for $152.3 million in cash. We acquired Lacework with a goal of offering its Cloud-Native Application Protection Platform solution separately as well as integrated with our existing portfolio, forming a comprehensive, artificial intelligence (“AI”)-driven cloud security platform available from a single vendor, which will help customers identify, prioritize, and remediate risks and threats in complex cloud-native infrastructure from code to cloud.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The total preliminary purchase price was allocated to Lacework’s identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. Of the total preliminary purchase price, $244.4 million was allocated to deferred tax assets, $61.3 million allocation to identifiable intangible assets, and $6.2 million cash, offset by net other assets and liabilities assumed of $53.3 million, which predominantly included deferred revenue and other current liabilities. The excess of the fair values of the net assets acquired over the net purchase consideration was recorded as a gain on bargain purchase of $106.3 million within other income (expense)—net on the condensed consolidated statements of income. The gain on bargain purchase occurred primarily due to the recognition of the deferred tax assets. The deferred tax assets were comprised primarily of pre-acquisition federal net operating loss carryforwards with an indefinite carryforward period. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Of the total identified intangible assets acquired $39.5 million was developed technology, $10.0 million was backlog, $7.5 million was customer relationships and $4.3 million was trade name.

Our estimates and assumptions are subject to change within the measurement period, which is up to 12 months after the Lacework Acquisition Date. The allocation of the purchase price for this acquisition has been prepared on a preliminary basis and changes to the allocation of certain assets and liabilities may occur as additional information becomes available. The primary area of the purchase price that is not yet finalized is related to income taxes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Additional acquisition-related information

The operating results of the acquired companies are included in our condensed consolidated statements of income from the respective dates of acquisition. Acquisition-related costs related to each acquisition were not material. The operating results of the acquired companies were not material in the years of acquisition. Pro forma information has not been presented, as the impact of these acquisitions, individually and in the aggregate, in each period were not material to our condensed consolidated financial statements.

7. GOODWILL AND OTHER INTANGIBLE ASSETS—Net

Goodwill

The following table presents the changes in the carrying amount of goodwill (in millions):

			Amount
Balance—December 31, 2024			$	235.4
Foreign currency translation adjustments			0.8
Balance—March 31, 2025			$	236.2

There were no impairments to goodwill during the three months ended March 31, 2025 or during prior periods.

Other Intangible Assets—Net

The following tables present other intangible assets—net (in millions, except years):

			March 31, 2025
			Weighted-Average Useful Life (in Years)						Gross						Accumulated Amortization						Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies			4.3						$	149.3					$	79.8					$	69.5
Customer relationships			5.4						62.7						27.8						34.9
Trade name			7.0						11.5						2.3						9.2
Backlog			2.5						13.7						6.1						7.6
Total other intangible assets—net									$	237.2					$	116.0					$	121.2

			December 31, 2024
			Weighted-Average Useful Life (in Years)						Gross						Accumulated Amortization						Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies			4.4						$	141.9					$	73.7					$	68.2
Customer relationships			5.5						53.9						23.0						30.9
Trade name			7.5						8.8						1.8						7.0
Backlog			2.5						13.5						4.6						8.9
Total other intangible assets—net									$	218.1					$	103.1					$	115.0

Amortization expense was $11.8 million and $3.0 million during the three months ended March 31, 2025 and 2024, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes estimated future amortization expense of finite-lived intangible assets—net (in millions):

			Amount
Years:
2025 (the remainder of 2025)			$	33.1
2026			31.0
2027			24.9
2028			18.5
2029			9.5
Thereafter			4.2
Total			$	121.2

8. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, plus the dilutive effects of restricted stock units (“RSUs”), stock options and performance stock units (“PSUs”). Dilutive shares of common stock are determined by applying the treasury stock method.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share is (in millions, except per share amounts):

			Three Months Ended
			March 31, 2025						March 31, 2024
Numerator:
Net income			$	433.4					$	299.3
Denominator:
Basic shares:
Weighted-average common stock outstanding-basic			768.3						762.4
Diluted shares:
Weighted-average common stock outstanding-basic			768.3						762.4
Effect of potentially dilutive securities:
RSUs			3.3						2.7
Stock options			4.6						5.1
PSUs			0.6						0.3
Weighted-average shares used to compute diluted net income per share			776.8						770.5
Net income per share
Basic			$	0.56					$	0.39
Diluted			$	0.56					$	0.39

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):

			Three Months Ended
			March 31, 2025						March 31, 2024
RSUs			0.8						—
Stock options			0.4						3.1
Total			1.2						3.1

9. DEBT

2026 and 2031 Senior Notes

On March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the “Senior Notes”), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the “2026 Senior Notes”) and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the “2031 Senior Notes”), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. The 2026 Senior Notes were recorded as current portion of long-term debt and the 2031 Senior Notes were recorded as long-term debt as of March 31, 2025 and both of the Senior Notes were recorded as long-term debt as of December 31, 2024, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.

The total outstanding debt is summarized below (in millions, except percentages):

			Maturity						Coupon Rate						Effective Interest Rate						March 31, 2025						December 31, 2024
Debt
2026 Senior Notes			March 2026						1.0%						1.3%						$	500.0					$	500.0
2031 Senior Notes			March 2031						2.2%						2.3%						500.0						500.0
Total debt																					1,000.0						1,000.0
Less: Unamortized discount and debt issuance costs																					5.1						5.7
Less: Current portion of long-term debt																					$	498.7					$	—
Total long-term debt																					$	496.2					$	994.3

As of March 31, 2025 and December 31, 2024, we accrued interest payable of $0.7 million and $4.7 million, respectively, and there are no financial covenants with which we must comply. During the three months ended March 31, 2025 and 2024, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the three months ended March 31, 2025 and 2024, as the costs that qualified for capitalization were not material.

The total estimated fair value of the outstanding Senior Notes was approximately $919.6 million, including accrued and unpaid interest, as of March 31, 2025. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. COMMITMENTS AND CONTINGENCIES

The following table summarizes our inventory purchase commitments as of March 31, 2025 (in millions):

			Total						2025						Thereafter
Inventory purchase commitments			$	689.0					$	686.1					$	2.9

Inventory Purchase Commitments—We purchase components of our inventory from certain suppliers and use several independent contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, non-cancelable and unconditional commitments. Certain of these inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to reschedule and adjust our requirements based on our business needs prior to firm orders being placed.

As of March 31, 2025, we had $689.0 million of non-cancelable inventory purchase commitments with our independent contract manufacturers. We recorded a liability for these purchase commitments for quantities in excess of our future estimated demand forecasts, consistent with the valuation of our excess and obsolete inventory. As of March 31, 2025 and December 31, 2024, the liability for these inventory purchase commitments was $47.5 million and $54.0 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets. The expense related to such accrued liability for inventory purchase commitments was $4.5 million benefit and a $31.6 million cost during the three months ended March 31, 2025 and 2024, respectively, and was recorded in cost of product revenue on the condensed consolidated statements of income.

Other Contractual Commitments and Open Purchase Orders—In addition to commitments with contract manufacturers, we have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. A significant portion of our reported purchase commitments consist of non-cancelable commitments. In certain instances, contractual commitments allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed. As of March 31, 2025, we had $94.7 million in other contractual commitments having a remaining term in excess of one year that are non-cancelable.

As of March 31, 2025, we had $81.6 million in contractual commitments related to payments for operating leases.

Litigation—We are involved in disputes, litigation, and other legal actions. For lawsuits where we are the defendant, we are in the process of defending these litigation matters, and while there can be no assurances and the outcome of certain of these matters is currently not determinable and not predictable, we currently are unaware of any existing claims or proceedings that we believe are likely to have a material adverse effect on our financial position. There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation fees, costs and substantial settlement charges, and possibly subject us to damages and other penalties. In addition, the resolution of any intellectual property (“IP”) litigation may require us to make royalty payments, which could adversely affect our gross margins in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. Litigation is unpredictable and the actual liability in any such matters may be materially different from our current estimates, which could result in the need to adjust any accrued liability and record additional expenses. We accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. These accruals are generally based on a range of possible outcomes that require significant management judgement. If no amount within a range is a better estimate than any other, we accrue the minimum amount. Litigation loss contingency accruals associated with outstanding cases were not material as of March 31, 2025, and December 31, 2024.

On March 21, 2019, we were sued by Alorica Inc. (“Alorica”) in Santa Clara County Superior Court in California. Alorica alleged breach of warranty and misrepresentation claims, which we denied. After trial, a jury returned a verdict fully in favor of us and against Alorica on October 4, 2024. Alorica has filed a notice of appeal. We believe that the ultimate outcome of this matter will not materially impact our financial position, results of operations or cash flows. However, any further legal proceedings, including Alorica’s appeal, would be subject to inherent uncertainties, and a future unfavorable ruling could occur. No loss accrual had been recorded as of March 31, 2025 or December 31, 2024 related to this litigation.

Indemnification and Other Matters—We enter into indemnification provisions in the ordinary course of business with other companies such as partners, customers, and vendors, where we agree to indemnify, hold harmless, and reimburse the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

indemnified party for certain losses suffered or incurred by the indemnified party as a result of our activities, including defending against third-party claims asserting various allegations such as product defects, breach of representations or covenants, and infringement of certain IP rights, which may include patents, copyrights, trademarks or trade secrets, and to pay judgments entered on such claims. In some contracts, our exposure under these indemnification provisions is limited by the terms of the contracts to certain defined limits, such as the total amount paid by our customer under the agreement. However, certain agreements include covenants, penalties and indemnification provisions including and beyond indemnification for third-party claims of IP infringement that could potentially expose us to losses in excess of the amount received under the agreement, and in some instances to potential liability that is not contractually limited. Although from time to time there are indemnification claims asserted against us and currently there are pending indemnification claims, to date there have been no material awards under such indemnification provisions.

Similar to other security companies and companies in other industries, we have experienced and may experience in the future, cybersecurity threats, malicious activity directed against our information technology infrastructure or unauthorized attempts to gain access to our and our customers’ sensitive information and systems. We currently are unaware of any claims or proceedings related to these types of matters that we believe are likely to have a material adverse effect on our financial position.

11. EQUITY PLANS AND SHARE REPURCHASE PROGRAM

Stock-Based Compensation Plans

We maintain the Amended and Restated Fortinet, Inc. 2009 Equity Incentive Plan (the “Amended Plan”) pursuant to which we have granted RSUs, stock options and PSUs. As of March 31, 2025, there were a total of 48.8 million shares of common stock available for grant under the Amended Plan.

Restricted Stock Units

The following table summarizes the activity and related information for RSUs for the periods presented below (in millions, except per share amounts):

			Restricted Stock Units Outstanding
			Number of Shares						Weighted-Average Grant Date Fair Value per Share
Balance—December 31, 2024			8.4						$	64.70
Granted			2.0						110.02
Forfeited			(0.3)						70.79
Vested			(1.4)						58.23
Balance—March 31, 2025			8.7						$	75.85

Stock compensation expense is recognized on a straight-line basis over the vesting period of each RSU. As of March 31, 2025, total compensation expense related to unvested RSUs granted to employees and non-employees under the Amended Plan, but not yet recognized, was $605.6 million, with a weighted-average remaining vesting period of 3.0 years.

Market/Performance-Based PSUs

We grant market/performance-based PSUs under the Amended Plan to certain of our executives. Based on the achievement of the market/performance-based vesting conditions during the performance period, the final settlement of the PSUs will range between 0% and 200% of the target shares underlying the PSUs based on the percentile ranking of our total

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

stockholder return over one-, two-, three- and four-year periods among companies included in the S&P 500 Index. 20%, 20%, 20% and 40% of the PSUs vest over one-, two-, three- and four-year service periods, respectively.

The following table summarizes the weighted-average assumptions relating to our PSUs:

			Three Months Ended
			March 31, 2025						March 31, 2024
Expected term in years			2.7						2.7
Volatility			41.5		%				45.5		%
Risk-free interest rate			4.2		%				4.5		%
Dividend rate			—		%				—		%

We granted approximately 0.1 million and 0.3 million shares of PSU awards with a weighted-average grant date fair value of $168.93 and $98.19 per share to certain of our executives during the three months ended March 31, 2025 and 2024, respectively. The grant date fair value of these awards was determined using a Monte Carlo simulation pricing model. Approximately 0.2 million and 0.1 million shares of PSU awards vested during the three months ended March 31, 2025 and 2024, respectively. None of these PSU awards were forfeited during the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, total compensation expense related to unvested PSUs that were granted to certain of our executives, but not yet recognized, was $40.0 million. This expense is expected to be amortized on a graded vesting method over a weighted-average vesting period of 2.4 years.

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

The following summarizes the number and value of the shares withheld for employee taxes (in millions):

			Three Months Ended
			March 31, 2025						March 31, 2024
Shares withheld for taxes			0.5						0.6
Amount withheld for taxes			$	53.8					$	42.9

Employee Stock Options

The following table summarizes the weighted-average assumptions relating to our employee stock options:

			Three Months Ended
			March 31, 2025						March 31, 2024
Expected term in years			4.5						4.5
Volatility			41.6		%				42.9		%
Risk-free interest rate			4.2		%				4.3		%
Dividend rate			—		%				—		%

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the stock option activity and related information for the periods presented below (in millions, except exercise prices and contractual life):

			Options Outstanding
			Number of Shares						Weighted- Average Exercise Price						Weighted- Average Remaining Contractual Life (Years)						Aggregate Intrinsic Value
Balance—December 31, 2024			8.7						$	37.81					3.1						$	493.8
Granted			0.5						110.02
Forfeited			—						65.88
Exercised			(1.1)						17.56
Balance—March 31, 2025			8.1						$	45.46
Options vested and expected to vest—March 31, 2025			8.1						$	45.46					3.4						$	418.1
Options exercisable—March 31, 2025			6.0						$	34.98					2.6						$	368.2

The aggregate intrinsic value represents the difference between the exercise price of stock options and the quoted market price of our common stock at the date of the balance sheet for all in-the-money stock options. Stock compensation expense is recognized on a straight-line basis over the vesting period of each stock option. As of March 31, 2025, total compensation expense related to unvested stock options granted to employees but not yet recognized was $61.3 million, with a weighted-average remaining vesting period of 2.8 years.

Additional information related to our stock options is summarized below (in millions, except per share amounts):

			Three Months Ended
			March 31, 2025						March 31, 2024
Weighted-average fair value per share granted			$	44.34					$	26.92
Intrinsic value of options exercised			$	102.3					$	51.8
Fair value of options vested			$	9.5					$	12.1

Stock-Based Compensation Expense

Stock-based compensation expense, including stock-based compensation expense related to awards classified as liabilities, is included in costs and expenses (in millions):

			Three Months Ended
			March 31, 2025						March 31, 2024
Cost of product revenue			$	0.5					$	0.5
Cost of service revenue			6.5						6.2
Research and development			23.0						19.8
Sales and marketing			26.5						26.7
General and administrative			10.4						9.8
Total stock-based compensation expense			$	66.9					$	63.0

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes stock-based compensation expense, including stock-based compensation expense related to awards classified as liabilities, by award type (in millions):

			Three Months Ended
			March 31, 2025						March 31, 2024
RSUs			$	56.3					$	52.0
Stock options			6.6						7.3
PSUs			4.0						3.7
Total stock-based compensation expense			$	66.9					$	63.0

Total income tax benefit associated with stock-based compensation that is recognized in the condensed consolidated statements of income is (in millions):

			Three Months Ended
			March 31, 2025						March 31, 2024
Income tax benefit associated with stock-based compensation			$	14.7					$	13.9

Share Repurchase Program

In October 2024, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2026, bringing the aggregate amount authorized to be repurchased to $8.25 billion of our outstanding common stock through February 28, 2026. Share repurchases may be made by us from time to time in privately negotiated transactions or in open-market transactions. The Repurchase Program does not require us to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time without prior notice.

There were no shares repurchased under the Repurchase Program during the three months ended March 31, 2025. As of March 31, 2025, approximately $2.03 billion remained available for future share repurchases under the Repurchase Program. Refer to Note 15. Subsequent Events for information regarding our repurchases of 4.6 million shares of our common stock for an aggregate purchase price of $401.1 million, under the Repurchase Program, subsequent to March 31, 2025 through the filing of this Quarterly Report on Form 10-Q.

12. INCOME TAXES

Our effective tax rate was 19% for the three months ended March 31, 2025, compared to an effective tax rate of 11% for the same period last year. The tax rates for the three months ended March 31, 2025 and 2024 were comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that amounted to $128.5 million and $81.7 million, respectively. The tax rate for the three months ended March 31, 2025 included a tax provision of $30.6 million related to the derecognition of deferred tax assets from the business combination with Linksys, a tax benefit of $25.8 million from the foreign-derived intangible income (“FDII”) deduction, and excess tax benefits from stock-based compensation expense of $36.8 million. The tax rate for the three months ended March 31, 2024 was impacted by a tax benefit of $24.0 million from the FDII deduction, excess tax benefits from stock-based compensation expense of $18.2 million.

As of March 31, 2025 and December 31, 2024, unrecognized tax benefits were $79.0 million and $75.9 million, respectively. If recognized, $64.0 million of the unrecognized tax benefits as of March 31, 2025 would favorably affect our effective tax rate. It is our policy to include accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of March 31, 2025 and December 31, 2024, accrued interest and penalties were $9.8 million and $8.8 million, respectively.

We file income tax returns in the U.S. federal jurisdiction and in various U.S. state and foreign jurisdictions. Generally, we are no longer subject to examination by U.S federal income tax authorities for tax years prior to 2020 and by U.S. state and foreign tax authorities in our significant jurisdictions for tax years prior to 2016. We currently have ongoing tax audits in the United Kingdom, Canada, Germany and several other foreign jurisdictions. The focus of these audits is the inter-company profit allocation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On January 4, 2022, the U.S. Treasury published another tranche of final regulations regarding the foreign tax credit. These final regulations impose new requirements that a foreign tax must meet in order to be creditable against U.S. income taxes, and generally apply to tax years beginning on or after December 28, 2021. On July 26, 2022, the U.S. Treasury released corrections to the final regulations. On July 21, 2023, the Internal Revenue Service (“IRS”) released a notice that suspended the application of significant portions of the final regulations regarding the foreign tax credit for tax years 2022 and 2023. The notice released in July 2023 favorably impacted our ability to claim foreign tax credits in the United States for certain taxes imposed by certain foreign jurisdictions. On December 11, 2023, the IRS released a notice that extended the suspension of significant portions of the final regulations beyond December 31, 2023, until further guidance is issued.

In December 2021, the Organisation for Economic Co-operation and Development (the “OECD”) enacted model rules for a new global minimum tax framework (“BEPS Pillar Two”), and various governments around the world have enacted, or are in the process of enacting, legislation on this. The OECD continues to release additional guidance on these rules. Based on the enacted laws, BEPS Pillar Two has no impact to our effective tax rate or cash flows for the three months ended March 31, 2025. We will continue to evaluate the impact of these tax law changes on future reporting periods.

13. DEFINED CONTRIBUTION PLANS

Our tax-deferred savings plan under our 401(k) Plan permits participating U.S. employees to contribute a portion of their pre-tax or after-tax earnings. In Canada, we have a Group Registered Retirement Savings Plan Program (the “RRSP”), which permits participants to make pre-tax contributions. Our board of directors approved 50% matching contributions on employee contributions up to 4% of each employee’s eligible earnings. Our matching contributions to our 401(k) Plan and the RRSP for the three months ended March 31, 2025 and 2024 were $5.6 million and $6.3 million, respectively.

14. SEGMENT INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer. Our chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. We have one business activity, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, we have determined that we have one operating segment, and therefore, one reportable segment.

The following table reflects certain financial data for our reportable segment (in millions):

			Three Months Ended
March 31, 2025						March 31, 2024
Total revenue			$	1,539.7					$	1,353.3
Less:
Cost of product revenue			149.9						182.8
Cost of service revenue			143.2						121.9
Research and development expense			198.6						173.0
Other sales and marketing expense (1)			439.7						412.6
Commission expense			103.0						88.5
General and administrative expense			57.8						54.4
Other segment items (2)			82.4						18.7
Provision for income taxes			96.5						39.5
Net income			$	433.4					$	299.3

(1) Excludes commission expense.

(2) The following table presents other segment items (in millions):

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

			Three Months Ended
March 31, 2025						March 31, 2024
Gain on intellectual property matters			$	6.3					$	1.1
Interest income			44.3						32.2
Interest expense			(4.9)						(5.1)
Other income (expense)—net			26.1						(2.9)
Gain (loss) from equity method investments			10.6						(6.6)
Total other segment items			$	82.4					$	18.7

The following table presents other segment information (in millions):

			Three Months Ended
March 31, 2025						March 31, 2024
Significant non-cash items:
Stock‐based compensation expense			$	66.9					$	63.0
Depreciation and amortization expense			35.8						28.6
Total assets			$	10,407.0					$	7,662.1
Purchases of property and equipment			$	66.5					$	221.9

Revenue by geographic region is based on the billing address of our customers. The following tables set forth revenue and property and equipment—net by geographic region (in millions):

			Three Months Ended
Revenue			March 31, 2025						March 31, 2024
Americas:
United States			$	455.4					$	407.1
Other Americas			174.4						149.9
Total Americas			629.8						557.0
Europe, Middle East and Africa (“EMEA”)			628.4						539.4
Asia Pacific (“APAC”)			281.5						256.9
Total revenue			$	1,539.7					$	1,353.3

Property and Equipment—net			March 31, 2025						December 31, 2024
Americas:
United States			$	993.5					$	993.5
Canada			215.8						216.8
Latin America			2.4						4.4
Total Americas			1,211.7						1,214.7
EMEA			129.3						73.3
APAC			62.8						61.5
Total property and equipment—net			$	1,403.8					$	1,349.5

The following distributors accounted for 10% or more of our revenue:

			Three Months Ended
			March 31, 2025						March 31, 2024
Distributor A			28		%				31		%
Distributor B			14		%				15		%
Distributor C			12		%				13		%

The following distributors accounted for 10% or more of net accounts receivable:

			March 31, 2025						December 31, 2024
Distributor A			28		%				31		%
Distributor B			11		%				14		%
Distributor C			13		%				10		%

15. SUBSEQUENT EVENTS

Share Repurchase Program

Subsequent to March 31, 2025 through the filing of this Quarterly Report on Form 10-Q, we repurchased 4.6 million shares of our common stock at an average price of $87.89 per share, for an aggregate purchase price of $401.1 million, under the Repurchase Program. As of the filing of this Quarterly Report on Form 10-Q, approximately $1.63 billion remained available for future share repurchases through February 28, 2026 under the Repurchase Program.

Real Property Purchases

In April 2025, we purchased real property in Burnaby, Canada, totaling approximately 245,000 square feet, to be used for office space, for $99.9 million in cash.