What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-25 compared with 2025-02-21 · 373 added, 318 removed, 999 unchanged (41% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 202 4 and 202 3

Consolidated Statements of Income for the years ended December 31, 202 4 , 202 3 and 202 2

Consolidated Statements of Comprehensive Income for the years ended December 31, 202 4 , 202 3 and 202 2

Consolidated Statements of Equity (Deficit) for the years ended December 31, 202 4 , 202 3 and 202 2

Consolidated Statements of Cash Flows for the years ended December 31, 202 4 , 202 3 and 202 2

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Fortinet, Inc.

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue – Refer to Note 1 and Note 2 to the Financial Statements

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• We selected a sample of certain contracts and performed the following:

• Obtained and read the related contract documents and evaluated whether management had properly identified the contract terms and conditions.

• Obtained and read the related contract documents and evaluated whether management had properly identified the performance obligations.

• Assessed management’s evaluation of the impact of the performance obligations on the pattern and timing of revenue recognition.

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Short-term investments 1,087.2 1,190.6

Marketable equity securities 64.2 21.0

Accounts receivable—Net of allowance for credit losses of $ 7.4 million and $ 5.9 million at December 31, 2025 and 2024, respectively

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Total current assets 5,900.2 5,971.5

LONG-TERM INVESTMENTS 339.7 —

PROPERTY AND EQUIPMENT—NET 1,619.0 1,349.5

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TOTAL ASSETS $ 10,389.2 $ 9,763.1

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

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Accrued payroll and compensation 312.9 255.7

Current portion of long-term debt 499.7 —

Deferred revenue 3,636.0 3,276.2

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COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ EQUITY (DEFICIT):

STOCKHOLDERS’ EQUITY:

Common stock, $ 0.001 par value— 1,500.0 shares authorized;

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Accumulated deficit ( 507.9 ) ( 117.1 )

Total stockholders’ equity (deficit)

Total stockholders’ equity

1,237.5 1,493.8

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 10,389.2 $ 9,763.1

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General and administrative 233.4 237.8 211.3

Gain on intellectual property matter ( 4.6 ) ( 4.6 ) ( 4.6 )

Gain on intellectual property matters

( 10.4 ) ( 4.6 ) ( 4.6 )

Total operating expenses 3,386.0 2,994.8 2,826.5

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INTEREST EXPENSE ( 20.1 ) ( 20.0 ) ( 21.0 )

GAIN ON BARGAIN PURCHASE

OTHER INCOME (EXPENSE)—NET

55.3 119.9 ( 6.1 )

INCOME BEFORE INCOME TAXES AND LOSS FROM EQUITY METHOD INVESTMENTS

INCOME BEFORE INCOME TAXES AND GAIN (LOSS) FROM EQUITY METHOD INVESTMENTS

2,282.2 2,058.5 1,333.7

PROVISION FOR INCOME TAXES 439.1 283.9 143.8

LOSS FROM EQUITY METHOD INVESTMENTS

GAIN (LOSS) FROM EQUITY METHOD INVESTMENTS

10.3 ( 29.4 ) ( 42.1 )

NET INCOME INCLUDING NON-CONTROLLING INTERESTS 1,745.2 1,147.8 856.6

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, NET OF TAX

NET INCOME ATTRIBUTABLE TO FORTINET, INC.

$ 1,853.4 $ 1,745.2 $ 1,147.8

Net income per share attributable to Fortinet, Inc.

Net income per share (Note 8):

Basic $ 2.45 $ 2.28 $ 1.47

Diluted $ 2.42 $ 2.26 $ 1.46

Weighted-average shares used to compute net income per share attributable to Fortinet, Inc.:

Weighted-average shares used to compute net income per share:

Basic 758.0 764.4 778.6

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2025 2024 2023

Net income including non-controlling interests $ 1,745.2 $ 1,147.8 $ 856.6

$ 1,853.4 $ 1,745.2 $ 1,147.8

Other comprehensive income (loss):

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Change in unrealized gains (losses) on investments 1.0 0.4 8.8

tax provision (benefit) related to items of other comprehensive income (loss)

0.1 2.0 ( 1.4 )

tax provision related to items of other comprehensive income (loss)

Other comprehensive income (loss)

0.7 ( 7.2 ) 1.3

Comprehensive income including non-controlling interests 1,738.0 1,149.1 842.1

comprehensive income attributable to non-controlling interests

Comprehensive income attributable to Fortinet, Inc.

Comprehensive income

$ 1,854.1 $ 1,738.0 $ 1,149.1

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FORTINET, INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in millions)

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Capital Accumulated

Comprehensive Income (Loss) Accumulated Deficit

Non-Controlling Interests Total Equity (Deficit)

Comprehensive Loss

Accumulated Deficit

Total Stockholders’ Equity (Deficit)

Shares Amount

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( 27.2 ) — ( 37.4 ) — ( 1,463.1 ) ( 1,500.5 )

Excise tax on net stock repurchases — — ( 10.9 ) — — ( 10.9 )

Stock-based compensation expense — — 249.0 — — 249.0

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

Net unrealized loss on investments - net of tax — — — ( 4.8 ) — — ( 4.8 )

Net unrealized gain on investments - net of tax

— — — 6.8 — 6.8

Foreign currency translation adjustment — — — ( 5.5 ) — ( 5.5 )

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— — — — ( 0.6 ) ( 0.6 )

Excise tax on net stock repurchases — — ( 10.9 ) — — — ( 10.9 )

Stock-based compensation expense — — 257.9 — — 257.9

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Repurchase and retirement of common stock ( 28.7 ) ( 0.1 ) ( 45.5 ) — ( 2,244.2 ) ( 2,289.8 )

Excise tax on net stock repurchases — — ( 18.3 ) — — ( 18.3 )

Stock-based compensation expense — — 279.5 — — 279.5

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— — — 0.7 — 0.7

Foreign currency translation adjustment — — — ( 7.5 ) — — ( 7.5 )

Net income — — — — 1,853.4 1,853.4

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net income including non-controlling interests $ 1,745.2 $ 1,147.8 $ 856.6

$ 1,853.4 $ 1,745.2 $ 1,147.8

Adjustments to reconcile net income to net cash provided by operating activities:

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Depreciation and amortization 152.0 122.8 113.4

Amortization of investment premiums (discounts) ( 48.8 ) ( 27.7 ) 4.4

Loss from equity method investments

Amortization of investment discounts

( 33.7 ) ( 48.8 ) ( 27.7 )

Gain on bargain purchase ( 106.3 ) — —

Other ( 52.7 ) ( 92.1 ) 60.6

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Accrued payroll and compensation 55.0 — 23.4

Other liabilities ( 8.3 ) ( 21.7 ) 23.5

Deferred revenue 754.2 577.8 1,095.3

Other liabilities 6.8 ( 8.3 ) ( 21.7 )

Net cash provided by operating activities 2,590.6 2,258.1 1,935.5

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Other 0.1 0.1 0.3

Net cash provided by (used in) investing activities ( 727.4 ) ( 649.3 ) 763.9

Net cash used in investing activities

( 599.1 ) ( 727.4 ) ( 649.3 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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All intercompany transactions and balances have been eliminated in consolidation.

Amounts previously reported as marketable equity securities are included in short-term investments in prior periods to conform with current period presentation in our 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 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 consolidated statements of cash flows.

The reclassification had no impact on our previously reported total assets, net income or cash flows from operating or investing activities and did not result in a restatement of prior period consolidated financial statements.

Use of Estimates —The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

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We maintain our cash equivalents and investments in money market funds, corporate debt securities, U.S.

government and agency securities, commercial paper, certificates of deposit and term deposits and municipal bonds with major financial institutions that our management believes are financially sound.

government and agency securities, commercial paper and certificates of deposit and term deposits with major financial institutions that our management believes are financially sound.

Our accounts receivable are derived from our customers in various geographic locations.

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Segment Information for distributor customers accounted for 10% or more of our revenue or net accounts receivable.

We rely on a small number of manufacturing partners, with approximately 88 % of manufacturing in Taiwan and U.S., to manufacture our products, and some of the chips and other components of our products used by the contract manufacturers are available from limited or sole sources of supply.

We rely on a small number of manufacturing partners, with the majority of manufacturing in Taiwan and U.S., to manufacture our products, and some of the chips and other components of our products used by the contract manufacturers are available from limited or sole sources of supply.

We do not own manufacturing activities in China.

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When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which to transact and the market-based risk.

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

Due to their short-term nature, the carrying amounts reported in the consolidated financial statements approximate the fair value for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and accrued payroll and compensation.

Comprehensive Income —Comprehensive income includes certain changes in equity from non-owner sources that are excluded from net income, specifically, cumulative foreign currency translation adjustments, unrealized gains and losses on available-for-sale investments and the related tax impacts.

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

financial statements on a recurring basis.

Foreign Currency and Transaction Gains and Losses —The functional currency for most of our foreign subsidiaries is the U.S.

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dollars using the exchange rates in effect at the balance sheet dates for assets and liabilities, and average monthly exchange rates for revenues, costs, and expenses.

We record translation gains and losses in accumulated other comprehensive income as a component of equity (deficit).

We record translation gains and losses in accumulated other comprehensive income as a component of stockholders’ equity (deficit).

We reflect net forei gn exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense)—net.

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Available-for-Sale Investments —We hold investment grade securities consisting of corporate debt securities, U.S.

government and agency securities, commercial paper, certificates of deposit and term deposits and municipal bonds that our management believes are financially sound.

government and agency securities, commercial paper and certificates of deposit and term deposits.

We classify our investments as available-for-sale (“AFS”) at the time of purchase, since it is our intent that these investments are available for current operations.

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Investments with remaining maturities greater than one year from the consolidated balance sheet date are classified as long-term investments.

Our AFS investments in debt securities are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive income (loss) in the consolidated statements of equity (deficit).

AFS debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses.

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If the fair value of an investment is less than its amortized cost basis at the balance sheet date and if we do not intend to sell the investment, we consider available evidence to assess whether it is more likely than not that we will be required to sell the investment before the recovery of its amortized cost basis.

We consult with our investment managers and consider available quantitative and qualitative evidence in evaluating, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our ability to hold the investment.

Once an impairment is determined to be attributable to credit-related factors, allowance for credit losses (i.e., the credit loss component) on AFS debt securities is recognized as credit loss expense, a charge in other income (expense)—net, on our consolidated statements of income, and any remaining unrealized losses (i.e., the non-credit loss component), net of taxes, are included in accumulated other comprehensive income (loss) on our consolidated statements of equity (deficit).

We consider relevant quantitative and qualitative information, including general market conditions and the duration of the unrealized loss, in assessing whether a decline in fair value below amortized cost is attributable to credit related factors and whether we intend to sell, or will be required to sell, the security before recovery of its amortized cost basis.

We consider whether unrealized losses have resulted from a credit loss or other factors.

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We have elected to not record an allowance for credit losses for accrued interest for AFS investments in debt securities and will reverse the accrued interest against interest income in the period in which we determine the accrued interest to be uncollectible.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Marketable Equity Securities —Our marketable equity investments with readily determinable fair values are accounted for at fair value through net income.

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These investments are accounted for under the equity method of accounting and were initially recorded at cost.

Subsequently, we recognize our proportionate share of the

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

entity’s net profit or loss, the amortization of any basis differences, as well as any OTTI as gain or loss from these equity method investments in the consolidated statements of income and as an adjustment to the investment balance.

Subsequently, we recognize our proportionate share of the entity’s net profit or loss, the amortization of any basis differences, as well as any other-than-temporary impairment (“OTTI”) as gain or loss from these equity method investments in the consolidated statements of income and as an adjustment to the investment balance.

We record our proportionate share of the results of these equity method investments on a three-month lag basis.

We evaluate whether there are material transactions or events that occur during the intervening period that materially affect the financial position or results of operations.

As of December 31, 2024 and 2023, we had two equity method investments, including our investment in Linksys Holdings, Inc.

As of December 31, 2025, we had one equity method investment, and as of December 31, 2024, we had two equity method investments, including the investment in Linksys Holdings, Inc.

As of December 31, 2025 and 2024, our equity method investments were recorded in other assets.

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The expense related to such accrued liability for inventory purchase commitments is recorded in cost of product revenue on the consolidated statements of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Property and Equipment —Property and equipment are stated at cost less accumulated depreciation.

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We allocate the fair value of the purchase price of our business acquisitions to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

The excess of the purchase price over the fair

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Our estimates and assumptions are subject to change based on information existing at acquisition date but unknown to us, which may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, and if we make changes to the amounts recorded, such amounts are recorded in the period in which they are identified.

The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

The excess of the fair values of the net assets acquired over the net purchase consideration is recorded as a gain on bargain purchase within other income (expense) —net on the consolidated statements of income.

We often continue to gather additional information throughout the measurement period, not to exceed one year from the acquisition date.

Measurement period adjustments that relate to facts and circumstances that existed as of the acquisition date are generally recorded with a corresponding adjustment to goodwill, as if the accounting had been completed at the acquisition date.

Adjustments identified after the measurement period are recognized in the consolidated statements of income in the period identified.

Impairment of Long-Lived Assets —We evaluate events and changes in circumstances that could indicate carrying amounts of long-lived assets, including intangible assets, may not be recoverable.

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Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions in which we operate.

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We recognize tax benefits from an uncertain tax position only if it is more likely than not, based on the technical merits of the position, that the tax position will be sustained on examination by the tax authorities.

The tax benefits recognized

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

We have elected to account for the tax effect of the GILTI as a current period expense.

On July 4, 2025, H.R.

1, an Act to Provide for Reconciliation Pursuant to Title II of House Concurrent Resolution 14 (the “Act”) commonly referred to as the One Big Beautiful Bill Act, was enacted.

The Act makes permanent certain elements of the Tax Cuts and Jobs Act, including immediate expensing of U.S.

research and development expenditures, immediate expensing of certain eligible assets, and various modifications to the international tax framework.

As a result of the Act, our income tax liability in 2025 decreased by $ 120.0 million and our GAAP effective tax rate for 2025 increased by one percentage point.

Stock-Based Compensation —The fair value of restricted stock units (“RSUs”) is based on the closing market price of our common stock on the date of grant.

We have elected to use the Black-Scholes-Merton (“Black-Scholes”) pricing model to determine the fair value of our employee stock options and the Monte Carlo simulation pricing model to determine the fair value of our performance stock units (“PSUs”).

We have elected to use the Black-Scholes-Merton (“Black-Scholes”) pricing model to determine the fair value of our stock options and the Monte Carlo simulation pricing model to determine the fair value of our performance stock units (“PSUs”).

Stock-based compensation expense of our RSUs and options is amortized on a straight-line basis over the service period and stock-based compensation expense of our PSUs is amortized using a graded vesting method over the vesting period.

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We do not allocate the contract consideration for operating lease contracts with lease and non-lease components, and account for the lease and non-lease components as a single lease component.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Payments under our lease arrangements are primarily fixed;

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Our advertising expenses were not material for any periods presented.

Research and Development Costs —Research and development costs are expensed as incurred.

Research and Development Costs —Research and development costs are expensed as incurred, and primarily consist of personnel costs.

Research and development costs also include ASIC and system prototype and certification-related expenses, depreciation of property and equipment and facility-related expenses.

The majority of our research and development is focused on software and hardware development.

Software Development Costs —The costs to develop software that is marketed have not been capitalized as we believe our current software development process is essentially completed concurrently with the establishment of technological feasibility.

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Internal use software development costs capitalized were not material for any periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred Contract Costs and Commission Expense —Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer.

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Commission costs for initial contracts that are not commensurate with commissions on renewal contracts are amortized on a straight-line basis over the period of benefit, which we have determined to be five years and which is typically longer than the initial contract term.

The amortization of deferred contract costs is included in sales and marketing expense in our consolidated statements of income.

The amortization of deferred contract costs is included in sales and marketing expenses in our consolidated statements of income.

Amortization of deferred contract costs during 2025, 2024 and 2023 was $ 336.3 million, $ 293.7 million and $ 266.3 million, respectively.

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• recognition of revenue when, or as, we satisfy a performance obligation.

We derive a majority of product sales from FortiGate, other secure networking hardware which include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, SSL inspection, software-defined wide-area network, intrusion prevention, SSL data leak prevention, virtual private network, switch and wireless controller and wide area network edge.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We derive a significant amount of product sales from FortiGate, a secure networking hardware which include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, SSL inspection, software-defined wide-area network, intrusion prevention, SSL data leak prevention, virtual private network, switch and wireless controller and wide area network edge.

We recognize product revenue upon shipment when control of the promised goods is transferred to the customer.

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We generally recognize revenue from these services ratably over the service term because of continuous transfer of control to the customer.

We also generate a portion of our revenue from other services consisting of professional services, training and SaaS which is either hosted by us or provided through cloud providers.

We also generate a portion of our revenue from other services consisting of professional services and training.

Security subscription include SaaS which is either hosted by us or provided through cloud providers.

We recognize revenue from professional and training services as the services are provided.

We recognize revenue from SaaS as the subscription service is delivered over the term, which is typically one year, or on a monthly usage basis.

To date, SaaS revenue has not represented a significant percentage of our total revenue.

Our sales contracts typically contain performance obligations, such as hardware, software license, security subscription, technical support services, cloud and other services, which are generally capable of being distinct and accounted for as separate performance obligations.

We recognize revenue from SaaS as the subscription service is delivered over the term, or on a monthly usage basis.

Our sales contracts typically contain performance obligations, such as hardware, software license, security subscription, technical support services, SaaS and other services, which are generally capable of being distinct and accounted for as separate performance obligations.

Our hardware and software licenses have significant standalone functionalities and capabilities.

Accordingly, the hardware and software licenses are distinct from the security subscription and technical support services, as a customer can benefit from the product without the services and the services are separately identifiable within a contract.

We allocate a transaction price to each performance obligation based on relative standalone selling price.

We allocate the transaction price to each performance obligation based on relative standalone selling price.

We establish standalone selling price using the prices charged for a deliverable when sold separately.

If not observable through past transactions, we determine standalone selling price by considering multiple historical factors including, but not limited to, cost

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of products, gross margin objectives, pricing practices, geographies and the term of a service contract.

If not observable through past transactions, we determine standalone selling price by considering multiple historical factors including, but not limited to, cost of products, gross margin objectives, pricing practices, geographies and the term of a service contract.

Revenue is reported net of sales tax.

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We include estimated amounts in the transaction price to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Our estimate for refund liabilities, which include sales returns reserve and customer rebates, was $ 71.8 million and $ 92.7 million as of December 31, 2024 and 2023, respectively, and is included in current liabilities in our consolidated balance sheet.

Our estimate for refund liabilities, which include sales returns reserve and customer rebates, was $ 52.0 million and $ 71.8 million as of December 31, 2025 and 2024, respectively, and is included in accrued liabilities in our consolidated balance sheet.

We generally invoice at the time of our sale for the total price of the hardware, software licenses, security subscription and technical support and other services.

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Warranty costs related to extended warranties sold under support agreements are recognized as cost of service revenue as incurred.

In the event we change our warranty reserve estimates, the resulting charge against future cost of revenue or reversal of previously recorded charges may materially affect our gross margins and operating results.

Accrued warranty liability was not material as of December 31, 2025 and 2024.

Contingent Liabilities —From time to time, we are involved in disputes, litigation, and other legal actions.

There are many uncertainties associated with any disputes, litigation and other legal actions, 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, which are inherently difficult to estimate and could adversely affect our results of operations.

There are many uncertainties associated with any disputes, litigation and other legal actions, and these actions or other third-party claims

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

against us may cause us to incur costly litigation fees, costs and substantial settlement charges, and possibly subject us to damages and other penalties, which are inherently difficult to estimate and could adversely affect our results of operations.

In addition, the resolution of any IP litigation may require us to make royalty payments, which could adversely affect our gross margins in future periods.

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Recently Adopted Accounting Standards

Segment Reporting

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.

We adopted ASU 2023-07 for our annual period beginning fiscal year 2024 on a retrospective basis to all periods presented.

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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.

We adopted ASU 2023-09 for our annual period beginning fiscal year 2025 on a prospective basis.

Refer to Note 13.

Segment Information.

Income Taxes.

Recent Accounting Standards Not Yet Effective

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

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We are currently evaluating the ASU to determine its impact on our disclosures.

Credit Losses

In July 2025, the FASB issued ASU 2025-05—Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Revenue from Contracts with Customers (Topic 606).

The amendments are effective for our annual reporting period beginning with fiscal year 2026 and interim reporting periods within those annual reporting periods on a prospective basis, with early adoption permitted.

We are currently evaluating ASU 2025-05 to determine its impact on our consolidated financial statements and related disclosures.

Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which amends the cost capitalization criteria for internal-use software development costs by removing all references to prescriptive and sequential software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met.

The amendments are effective for our annual period beginning fiscal year 2028 and interim reporting periods within those annual reporting periods and can be applied prospectively, retrospectively, or via a modified prospective transition method, with early adoption permitted.

We are currently assessing adoption timing and the method of adoption.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

REVENUE RECOGNITION

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As of December 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 7.18 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 $ 3.31 billion as revenue over the next 12 months and the remainder thereafter.

We expect to recognize approximately $ 3.66 billion as revenue over the next 12 months, $ 2.80 billion in years two and three, and the remainder thereafter.

FORTINET, INC.

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FINANCIAL INSTRUMENTS AND FAIR VALUE

Available-for-Sale Investments

The following tables summarize our available-for-sale investments (in millions):

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):

December 31, 2025

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government and agency securities $ 513.7 $ 0.9 $ — $ 514.6

Commercial paper 428.7 0.2 ( 0.2 ) 428.7

Corporate debt securities 368.5 0.4 ( 0.1 ) 368.8

Commercial paper 354.8 0.1 — 354.9

Certificates of deposit and term deposits 90.3 0.1 — 90.4

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1,327.3 1.5 ( 0.1 ) 1,328.7

Marketable equity securities 98.2

Total short-term and long-term investments $ 1,327.3 $ 1.5 $ ( 0.1 ) $ 1,426.9

December 31, 2024

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government and agency securities $ 469.1 $ 0.4 $ — $ 469.5

Commercial paper 401.7 0.2 ( 0.1 ) 401.8

Corporate debt securities 166.4 0.1 ( 0.1 ) 166.4

Commercial paper 428.7 0.2 ( 0.2 ) 428.7

Certificates of deposit and term deposits 61.8 — — 61.8

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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):

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government and agency securities $ 514.5 $ — $ — $ — $ 514.5 $ —

Commercial paper 149.4 ( 0.2 ) — — 149.4 ( 0.2 )

Corporate debt securities 368.9 ( 0.1 ) — — 368.9 ( 0.1 )

Commercial paper 354.9 — — — 354.9 —

Certificates of deposit and term deposits 90.4 — — — 90.4 —

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$ 1,328.7 $ ( 0.1 ) $ — $ — $ 1,328.7 $ ( 0.1 )

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2024

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government and agency securities $ 27.8 $ — $ — $ — $ 27.8 $ —

Commercial paper 200.8 ( 0.1 ) — — 200.8 ( 0.1 )

Corporate debt securities 63.5 ( 0.1 ) — — 63.5 ( 0.1 )

Commercial paper 149.4 ( 0.2 ) — — 149.4 ( 0.2 )

Certificates of deposit and term deposits 10.9 — — — 10.9 —

Total available-for-sale investments

$ 251.6 $ ( 0.3 ) $ — $ — $ 251.6 $ ( 0.3 )

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The contractual maturities of our investments were (in millions):

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

2025 December 31,

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Total $ 1,328.7 $ 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 (deficit) 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.

Marketable Equity Securities

Our marketable equity securities were $ 64.2 million and $ 21.0 million as of December 31, 2024 and December 31, 2023, respectively.

The changes in fair value of our marketable equity securities are recorded in other income (expense)—net on the consolidated statements of income.

We recognized $ 26.4 million gain, $ 4.4 million and $ 13.1 million of losses in 2024, 2023 and 2022, respectively.

We recognized $ 10.8 million and $ 26.4 million gain and $ 4.4 million loss in 2025, 2024 and 2023, respectively.

Fair Value of Financial Instruments

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The fair value of all other financial instruments was based on quoted prices for similar assets in active markets, or model-driven valuations using significant inputs derived from or corroborated by observable market data.

We classify investments within Level 1 if quoted prices are available in active markets for identical securities.

We classify items within Level 2 if the investments are valued using model-driven valuations using observable inputs such as quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.

Investments are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.

FORTINET, INC.

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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):

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

December 31, 2025 December 31, 2024

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(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)

government and agency securities $ 469.5 $ 464.5 $ 5.0 $ — $ 501.4 $ 433.3 $ 68.1 $ —

Cash equivalents:

Money market funds $ 174.4 $ 174.4 $ — $ — $ 296.1 $ 296.1 $ — $ —

Corporate debt securities 1.1 — 1.1 — — — — —

Commercial paper 38.1 — 38.1 — 59.7 — 59.7 —

Total cash equivalents 213.6 174.4 39.2 — 355.8 296.1 59.7 —

Short-term investments:

government and agency securities 383.5 381.5 2.0 — 469.5 464.5 5.0 —

Corporate debt securities 160.2 — 160.2 — 166.4 — 166.4 —

Commercial paper 354.9 — 354.9 — 428.7 — 428.7 —

Certificates of deposit and term deposits 90.4 — 90.4 — 61.8 — 61.8 —

Money market funds 296.1 296.1 — — 277.1 277.1 — —

Marketable equity securities 98.2 98.2 — — 64.2 64.2 — —

Total $ 1,546.4 $ 824.8 $ 721.6 $ — $ 1,449.5 $ 731.4 $ 718.1 $ —

Cash equivalents $ 355.8 $ 407.0

Marketable equity securities 64.2 21.0

Short-term investments 1,126.4 1,021.5

Total short-term investments 1,087.2 479.7 607.5 — 1,190.6 528.7 661.9 —

Long-term investments:

government and agency securities 131.1 121.8 9.3 — — — — —

Corporate debt securities 208.6 — 208.6 — — — — —

Total long-term investments 339.7 121.8 217.9 — — — — —

Total $ 1,640.5 $ 775.9 $ 864.6 $ — $ 1,546.4 $ 824.8 $ 721.6 $ —

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The excess and obsolete inventory reserve was $ 137.5 million and $ 144.8 million as of December 31, 2025 and 2024, respectively.

Inventory write-downs related to excess and obsolete inventory were $ 37.1 million and $ 35.8 million for the year ended December 31, 2024 and 2023, respectively, and not material for the year ended December 31, 2022.

They were recorded in cost of product revenue on the consolidated statements of income.

Inventory write-downs related to excess and obsolete inventory were not material for the year ended December 31, 2025, and were $ 37.1 million and $ 35.8 million for the years ended December 31, 2024 and 2023 respectively.

These were recorded in cost of product revenue on the consolidated statements of income.

FORTINET, INC.

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Property and equipment—net $ 1,619.0 $ 1,349.5

During 2025, we purchased certain real estate properties in California, United States;

Burnaby, Canada;

Frankfurt, Germany;

Almere, the Netherlands;

and London, the United Kingdom, totaling $ 255.8 million.

The purchases were accounted for under the asset acquisition method.

The costs of the assets allocated to land and buildings and improvements were $ 97.3 million and $ 158.5 million, respectively, based on their relative fair values.

During 2024, we purchased certain real estate in California, Georgia and New York, United States, and Alberta, Canada, totaling $ 295.8 million.

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Depreciation expense was $ 101.3 million, $ 99.7 million and $ 94.5 million in 2025, 2024 and 2023, respectively.

INVESTMENTS IN PRIVATELY HELD COMPANIES

BUSINESS COMBINATIONS

2025 Acquisitions

Linksys Holdings, Inc.

During 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 outstanding equity of Linksys.

As of December 31, 2024 and 2023, our ownership interest remained the same.

Linksys provides router connectivity solutions to the consumer and small business markets.

We have concluded that our investment in Linksys is an in-substance common stock investment and that we do not hold an absolute controlling financial interest in Linksys, but that we have the ability to exercise significant influence over the operating and financial policies of Linksys.

Therefore, we determined to account for this investment using the equity method of accounting.

We record our share of Linksys’ financial results on a three-month lag basis, with the exception of material transactions or events that occur during the intervening period that materially affect the financial position or results of operations.

We determined that there was a basis difference between the cost of our investment in Linksys and the amount of underlying equity in net assets of Linksys.

Our share of loss of Linksys’ financial results, as well as our share of the amortization of the basis differences, totaled $ 29.0 million in 2024, which comprised of our proportionate share of Linksys’ financial results and the amortization of the basis differences of $ 21.0 million, as well as an OTTI charge of $ 8.0 million recognized in the second quarter of 2024.

Our share of loss of Linksys’ financial results and our share of the amortization of the basis differences totaled $ 42.1 million in 2023.

Our loss related to Linksys in 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 OTTI charge of $ 22.2 million recorded during the three months ended December 31, 2022.

The loss related to Linksys is recorded in loss from equity method investments on the consolidated statements of income.

Due to the presence of impairment indicators, such as a series of operating losses, we evaluated our equity method investment for an OTTI during 2024, 2023 and 2022.

We considered various factors in determining whether an OTTI has occurred, including Linksys’ financial results, operating history, our ability and intent to hold the investment until its fair value recovers, the implied revenue valuation multiples compared to guideline public companies, the discounted cash flows analysis, Linksys’ ability to achieve milestones and any notable operational and strategic changes.

In connection with our evaluation as of June 30, 2024 and December 31, 2022, we noted that certain factors were present that indicated that the equity method investment’s decline in value was OTTI, primarily driven by Linksys’ continuous losses, decrease in revenue and operating

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 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 consolidated statements of income.

The gain on bargain purchase occurred primarily due to the recognition of the deferred tax assets, which 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 consolidated statements of income.

Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expenses.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

results, then current forecasted results for the foreseeable future as compared to the expected performance at the time of the investments, and the results of a discounted cash flows analysis.

To determine the fair value of our investment in Linksys, we utilized a market approach referencing revenue multiples from publicly traded peer companies and concluded that the estimated fair value of the investment was lower than its carrying value.

During the three months ended June 30, 2024 and December 31, 2022, we recorded non-cash impairment charge of $ 8.0 million and $ 22.2 million, respectively, on our equity method investment in Linksys.

In connection with our evaluation as of December 31, 2024 and 2023, we determined that an additional OTTI has not occurred.

The carrying amount of our Linksys investment was $ 13.2 million and $ 42.2 million as of December 31, 2024 and 2023, respectively, and the investment was included in other assets on our consolidated balance sheets.

Refer to Note 17 .

Subsequent Events, for additional information on our acquisition of Linksys.

BUSINESS COMBINATIONS

Other Acquisitions

In 2025 , we completed other acquisitions for total purchase consideration of $ 38.3 million in cash.

We have accounted for the transactions as business combinations and recorded goodwill of $ 21.9 million, among which $ 8.6 million of goodwill is expected to be deductible and $ 13.3 million of goodwill is not deductible for income tax purposes.

Acquisition-related costs were not material and were recorded as general and administrative expenses.

2024 Acquisitions

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, for which we paid in cash.

This acquisition was accounted for as a business combination using the 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 deductible for U.S.

tax purposes.

Acquisition-related costs were not material and were recorded as general and administrative expenses.

Next DLP Holdings Limited

On August 5, 2024, 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.

T he total 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 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.

The goodwill is deductible for U.S.

tax purposes.

Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expenses.

Lacework Inc.

On August 1, 2024, we closed an acquisition of 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, 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.

Under the acquisition method of accounting in accordance with ASC 805, 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.

The following table provides the assets acquired and liabilities assumed as of the date of acquisition:

(in millions)

Estimated Fair Value

Accounts receivable—net 14.8

Prepaid expenses and other current assets 9.6

Deferred tax assets

Other intangible assets 61.3

TOTAL ASSETS $ 336.3

Accounts payable $ 2.5

Deferred revenue

Accrued payroll and compensation

Accrued and other current liabilities 25.5

Other liabilities

TOTAL LIABILITIES $ 77.7

Gain on bargain purchase

Net purchase consideration $ 152.3

The excess of the fair values of the net assets acquired over the net purchase consideration was recorded as a gain on bargain purchase within other income, net on the consolidated statements of income.

This acquisition was accounted for as a business combination using the acquisition method of accounting.

T he total 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 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 consolidated statements of income.

The gain on bargain purchase occurred primarily due to the recognition of the deferred tax assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Identified intangible assets acquired and their estimated useful lives (in years) as of August 1, 2024, were as follows (in millions, except years) :

Fair Value Estimated Useful Life (in years)

Developed technology (1)

Customer relationships 7.5 5.0

Trade name 4.3 5.0

Backlog 10.0 3.0

Total identified intangible assets:

(1) Developed technology is Lacework’s CNAPP solution.

We valued the developed technology using the relief-from-royalty method under the income approach.

This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology.

The economic useful life was determined based on the technology cycle as well as the cash flows over the forecast period.

Our estimates and assumptions are subject to change within the measurement period, which is up to 12 months after the 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.

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.

The operating results of the acquired company were included in our consolidated financial statements from the date of acquisition, which was August 1, 2024.

For the period from August 2, 2024 through December 31, 2024 , Lacework contributed $ 31.1 million of revenue and $ 45.8 million of a net loss.

Acquisition-related costs for this acquisition were not material and were recorded as general and administrative expense .

Next DLP Holdings Limited

On August 5, 2024, we completed the acquisition of Next DLP Holdings Limited (“Next DLP”), a privately held insider risk and data loss prevention company, for approximately $ 105.0 million in cash.

We acquired Next DLP to improve our position in the standalone enterprise DLP market and strengthen our leadership in integrated DLP markets within endpoint and 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 acquisition date.

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.

Acquisit ion-related costs related to this acquisition were not material and were recorded as general and administrative expenses.

Pro Forma Financial Information

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The following unaudited pro forma financial information for all periods presented includes purchase accounting adjustments for amortization of acquired intangible assets, the gain on bargain purchase, and various related tax impacts (in millions):

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Year Ended December 31,

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$ 1,468.2 $ 1,017.5

Perception Point Ltd.

On December 5, 2024, we closed an acquisition of certain assets and liabilities of Perception Point Ltd., a business specializing in advanced collaboration and email security, for $ 33.7 million in cash.

This acquisition was accounted for as a business combination using the acquisition method of accounting.

Of the 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 related to this acquisition were not material and were recorded as general and administrative expense.

2022 Acquisitions

Network Detection and Response Business

On December 22, 2022, we closed an acquisition of certain assets and liabilities of a business specializing in network detection and response for $ 18.0 million in cash.

This acquisition was accounted for as a business combination using the acquisition method of accounting.

Of the purchase price, $ 5.8 million was allocated to goodwill, $ 10.5 million was allocated to developed technology intangible asset, $ 10.0 million was allocated to customer relationships intangible asset and $ 8.3 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 related to this acquisition were not material and were recorded as general and administrative expense.

Additional Acquisition-Related Information

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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, except for Lacework as disclosed above.

Pro forma information has not been presented, except for Lacework and Next DLP as disclosed above, as the impact of these acquisitions, individually and in the aggregate, in each year were not material to our consolidated financial statements.

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Customer relationships 5.3 66.9 42.4 24.5

Trade name 7.5 8.8 1.8 7.0

4.2 11.3 5.4 5.9

Backlog 2.5 13.5 9.7 3.8

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Customer relationships 5.5 53.9 23.0 30.9

Trade name 10.0 5.0 1.2 3.8

7.5 8.8 1.8 7.0

Backlog 2.5 13.5 4.6 8.9

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Thereafter 2.3

Total $ 115.0

NET INCOME PER SHARE

Basic net income per share is computed by dividing net income attributable to Fortinet, Inc., 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 attributable to Fortinet, Inc.

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 PSUs.

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 PSUs.

Dilutive shares of common stock are determined by applying the treasury stock method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share attributable to Fortinet, Inc.

is (in millions, except per share amounts):

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):

Year Ended December 31,

2025 2024 2023

Net income including non-controlling interests $ 1,745.2 $ 1,147.8 $ 856.6

Net loss attributable to non-controlling interests — — ( 0.7 )

Net income attributable to Fortinet, Inc.

$ 1,853.4 $ 1,745.2 $ 1,147.8

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Stock options 3.8 4.7 6.2

Weighted-average shares used to compute diluted net income per share attributable to Fortinet, Inc.

Weighted-average shares used to compute diluted net income per share

764.6 771.9 788.2

Net income per share attributable to Fortinet, Inc.:

Net income per share:

Basic $ 2.45 $ 2.28 $ 1.47

Diluted $ 2.42 $ 2.26 $ 1.46

The following weighted-average shares of common stock were excluded from the computation of diluted net income per share attributable to Fortinet, Inc.

for the periods presented, as their effect would have been antidilutive (in millions):

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):

Year Ended December 31,

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We have operating leases for offices, research and development facilities and data centers.

Our leases have remaining terms that range from less than one year to approximately five years , some of which include one or more options to renew, with renewal terms of up to seven years .

Our leases have remaining terms that range from less than one year to approximately four years , some of which include one or more options to renew, with renewal terms of up to six years .

Unless and until we are reasonably certain we will exercise these renewal options, we do not include renewal options in our lease terms for calculating our lease liability, as the renewal options allow us to maintain operational flexibility.

Our finance leases were not material to our consolidated financial statements.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of lease expense were (in millions):

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(1) Variable lease expense for the years ended December 31, 2025, 2024 and 2023 predominantly included common area maintenance charges, real estate taxes, certain parking expense, utilities based on actual usage and insurance costs.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental balance sheet information related to our operating leases was (in millions, except lease term and discount rate):

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Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021.

As of December 31, 2024, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.

The 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 December 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 December 31,

2025 December 31,

2026 Senior Notes March 2026 1.0 % 1.3 % $ 500.0 $ 500.0

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Unamortized discount and debt issuance costs 3.7 5.7

Current portion of long-term debt $ 499.7 $ —

Total long-term debt $ 496.6 $ 994.3

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

Total 2026 Thereafter

Inventory purchase commitments $ 810.6 $ 720.9 $ 89.7

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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 December 31, 2024, we had $ 591.1 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 December 31, 2024 and December 31, 2023, the liability for these inventory purchase commitments was $ 54.0 million and $ 84.7 million,

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

respectively, and was recorded in accrued liabilities on our consolidated balance sheets.

The expense related to such accrued liability for inventory purchase commitments was $ 3.5 million and $ 85.9 million for the year ended December 31, 2024 and 2023, and not material for the year ended December 31, 2022, and was recorded in cost of product revenue on the consolidated statements of income.

As of December 31, 2025, we had $ 810.6 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 December 31, 2025 and December 31, 2024, the liability for these inventory purchase commitments was $ 26.7 million and $ 54.0 million, respectively, and was recorded in accrued liabilities on our consolidated balance sheets.

The expense related to such accrued liability for inventory purchase commitments were not material for the year ended December 31, 2025 and 2024, respectively, and $ 85.9 million for the year ended December 31, 2023, and was recorded in cost of product revenue on the 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.

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As of December 31, 2025, we had $ 118.3 million in other contractual commitments having a remaining term in excess of one year that are non-cancelable.

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 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 December 31, 2024 and 2023.

Litigation —We are subject to legal proceedings arising in the ordinary course of business.

We record accruals for litigation contingencies when a loss is probable and reasonably estimable, based on management’s assessment of the expected outcome and currently available information.

As of December 31, 2025 and 2024, litigation loss contingency accruals associated with outstanding matters were not material.

On September 22, 2025, a securities class action was filed against us, our chief executive officer, our chief technology officer, our current chief financial officer and our former chief financial officer in the United States District Court, Northern District of California, captioned Oklahoma Firefighters Pension and Retirement System v.

Fortinet, Inc., et al., Case No.

5:25-cv-08037.

On October 16, 2025, a securities class action was filed against us, our chief executive Officer, our current chief financial officer and our former chief financial officer in the same court, captioned State of Rhode Island Office of the General Treasurer v.

Fortinet, Inc., et al., Case No.

3:25-cv-08888.

These suits are brought on behalf of an alleged class of stockholders who purchased or acquired shares of our common stock between November 8, 2024 through August 6, 2025.

The complaints allege that defendants made false or misleading statements about our business, operations and prospects, including regarding the 2026 firewall refresh cycle, and purport to assert claims under Sections 10(b) and 20(a) of the Exchange Act.

These suits seek damages, attorneys fees and costs, and other relief that the court may deem appropriate.

The time to respond to the complaints has not yet passed.

We believe these cases are without merit and defendants intend to defend the suits vigorously.

Based on the preliminary nature of the proceedings in these cases, the outcome of these matters remains uncertain and we cannot estimate the potential impact, if any, on its business or financial statements at this time.

Accordingly, no loss accrual was recorded as of December 31, 2025 related to these litigations.

On October 8, 2025, Plaintiff Jack Pittrof filed a stockholder derivative complaint against us as a nominal defendant and certain of our current and former directors and officers in the United States District Court for the Northern District of California, captioned Pittrof v.

Xie, et al., Case No.

3:2025-cv-08592 (“Pittrof”).

The complaint alleges claims based on events similar to those in the securities class action and asserts causes of action against the individual defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, and for violations of Section 10(b) of the Exchange Act.

The time to respond to the complaint has not yet passed.

On November 5, 2025, Plaintiff Michael J.

Marrinan filed a stockholder derivative complaint against us as a nominal defendant and certain of our current and former directors and officers in the United States District Court for the Northern District of California, captioned Marrinan v.

Xie, et al., Case No.

3:25-cv-09546 (“Marrinan”).

The complaint alleges claims based on events similar to those in the securities class action and asserts causes of action against the individual defendants for breach of fiduciary duty, unjust enrichment, insider trading, gross mismanagement, waste of corporate assets, violations of California Corporations Code §§ 24400, 25500, et.

seq., and violations of Section 10(b) of the Exchange Act.

The time to respond to the complaint has not yet passed.

On November 6, 2025, Plaintiff Bryan Foster filed a stockholder derivative complaint against us as a nominal defendant and certain of our current and former directors and officers in the United States District Court for the Northern District of California, captioned Foster v.

Xie, et al., Case No.

3:25-cv-09611 (“Foster”).

The complaint alleges claims based on events similar to those in the securities class action and asserts causes of action against the individual defendants for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, for violations of Section 10(b), 14(a), and 20(a) of the Exchange Act, and for contribution under Section 21D of the Exchange Act.

The time to respond to the complaint has not yet passed.

On December 2, 2025, Plaintiff LR Trust filed a stockholder derivative complaint against us as a nominal defendant and certain of our current and former directors and officers in the United States District Court for the Northern District of California, captioned LR Trust v.

Xie, et al., Case No.

3:25-cv-10350 (“LR Trust,” together with Pittrof, Marrinan, and Foster, the “Derivative Actions”).

The complaint alleges claims based on events similar to those in the securities class action and asserts causes of action against the individual defendants for breach of fiduciary duty, unjust enrichment, insider trading, aiding and abetting, violations of Sections 10(b) and 14(a) of the Exchange Act, and for contribution under

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Section 21D of the Exchange Act.

The time to respond to the complaint has not yet passed.

On behalf of the Company, the Derivative Actions seek damages, disgorgement, remedial actions, restitution, and attorneys’ fees and costs.

On March 21, 2019, we were sued by Alorica Inc.

in Santa Clara County Superior Court in California.

(“Alorica”) in Santa Clara County Superior Court in California.

Alorica alleged breach of warranty and misrepresentation claims, which we denied.

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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.

Periodically we, like other security companies and companies in other industries, have experienced, and may experience in the future, cybersecurity threats, malicious activity directed against our information technology infrastructure and unauthorized attempts to gain access to our and our customers’ sensitive information and systems.

For example, in the third quarter of 2024, we discovered that an individual gained unauthorized access to a limited number of files stored on Fortinet’s instance of a third-party cloud-based shared file drive, which included limited data related to a small number of Fortinet customers.

We have completed our investigation of this incident and we do not currently believe that it had a material impact on our business or that of any of our customers.

We are currently not aware of any significant claims arising from this matter.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

EQUITY PLANS AND SHARE REPURCHASE PROGRAM

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As of December 31, 2025, there were a total of 48.1 million shares of common stock available for grant under the 2009 EIP.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Restricted Stock Units

17 unchanged sentences

As of December 31, 2025, total compensation expense related to unvested RSUs granted to employees and non-employees under the 2009 EIP, but not yet recognized, was $ 537.2 million, with a weighted-average remaining vesting period of 2.7 years.

RSUs settle into shares of common stock upon vesting.

Upon the vesting of the RSUs, we net-settle the RSUs and withhold a portion of the shares to satisfy employee withholding tax requirements.

The payment of the withheld taxes to the tax authorities is reflected as a financing activity within the consolidated statements of cash flows.

Market/Performance-Based PSUs

We grant market/performance-based PSUs under the 2009 EIP to certain of our executives.

Based on the achievement of the market/performance-based vesting conditions during the performance period, the final settlement of the PSUs will range between 0 % and 200 % of the target shares underlying the PSUs based on the percentile ranking of our total stockholder return over one -, two -, three - and four-year periods among companies included in the S&P 500 Index.

20 %, 20 %, 20 % and 40 % of the PSUs vest over one -, two -, three - and four-year service periods, respectively.

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

Year Ended December 31,

2025 2024 2023

Expected term in years 2.7 2.7 2.7

Volatility 41.7 % 45.4 % 47.5 %

Risk-free interest rate 4.1 % 4.5 % 4.6 %

Dividend rate — % — % — %

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Performance Stock Units Outstanding

Number of Shares Weighted-Average Grant Date Fair Value per Share

Balance—December 31, 2022

Granted 0.3 90.96

Forfeited — —

Balance—December 31, 2023

Granted 0.3 97.40

Forfeited ( 0.1 ) 93.84

Vested ( 0.1 ) 88.10

Balance—December 31, 2024

Granted 0.2 163.23

Forfeited ( 0.1 ) 116.82

Vested ( 0.1 ) 91.19

Balance—December 31, 2025

As of December 31, 2025, total compensation expense related to unvested PSUs that were granted to certain of our executives, but not yet recognized, was $ 21.2 million.

This expense is expected to be amortized on a graded vesting method over a weighted-average vesting period of 2.1 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 consolidated statements of cash flows.

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

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Amount withheld for taxes $ 126.5 $ 101.0 $ 112.5

Employee Stock Options

In determining the fair value of our employee stock options, we use the Black-Scholes model, which employs the following assumptions.

Stock Options

In determining the fair value of our stock options, we use the Black-Scholes model, which employs the following assumptions.

Expected Term —The expected term represents the period that our stock-based awards are expected to be outstanding.

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Treasury zero-coupon issues with an equivalent remaining term.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Expected Dividend —The expected dividend weighted-average assumption is zero .

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

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

Year Ended December 31,

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Dividend rate — % — % — %

FORTINET, INC.

NOTES TO 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):

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5.7 $ 39.53 2.3 $ 228.6

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 balance sheet for all in-the-money stock options.

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.

22 unchanged sentences

0.9 6.3 101.44 — 100.88

Market/Performance-Based PSUs

In 2023, we granted market/performance-based PSUs under the 2009 EIP to certain of our executives.

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 for the year ended December 31, 2024 and 2023:

Year Ended December 31,

Expected term in years 2.7 2.7

Volatility 45.4 % 47.5 %

Risk-free interest rate 4.5 % 4.6 %

Dividend rate — % — %

We granted approximately 0.3 million shares of PSU awards with a weighted-average grant date fair value of $ 97.40 per share and $ 90.96 per share to certain of our executives during the year ended December 31, 2024 and December 31, 2023, respectively.

The grant date fair value of these awards was determined using a Monte Carlo simulation pricing model.

Approximately 0.1 million shares of PSU awards were vested and approximately 0.1 million shares of PSU awards were forfeited during the year ended December 31, 2024.

None of these PSU awards were vested and PSU awards forfeited were immaterial during the year ended December 31, 2023.

As of December 31, 2024, total compensation expense related to unvested PSUs that were granted to certain of our executives, but not yet recognized, was $ 20.9 million.

This expense is expected to be amortized on a graded vesting method over a weighted-average vesting period of 2.2 years.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Shares Reserved for Future Issuances

18 unchanged sentences

Stock options 26.9 28.2 28.8

15.4 14.8 11.0

Total stock-based compensation expense $ 282.1 $ 260.2 $ 251.6

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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In January 2016, our board of directors approved the Repurchase Program, which authorized the repurchase of up to $ 200.0 million of our outstanding common stock through December 31, 2017.

From 2016 through 2022, our board of directors approved increases to our Repurchase Program by various amounts and extended the term to February 28, 2023, bringing the aggregated amount authorized to $ 5.25 billion.

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

In April 2023 and July 2023, our board of directors approved $ 1.0 billion and $ 500.0 million increases in the authorized stock repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $ 6.75 billion.

In January 2024, our board of directors approved a $ 500.0 million increase in the authorized stock repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $ 7.25 billion of our outstanding common stock.

In February 2024, our board of directors approved an extension of the Repurchase Program to February 28, 2025.

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.

Under the Repurchase Program, share repurchases may be made by us from time to

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

time in privately negotiated transactions or in open market transactions.

From 2016 through 2024, our board of directors approved increases to our Repurchase Program by various amounts and extended the term of the Repurchase Program to February 28, 2026.

In August 2025, 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, 2027, bringing the aggregate amount authorized for repurchases to $ 9.25 billion of our outstanding common stock through February 28, 2027.

Under the Repurchase Program, we may repurchase common stock 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.

In 2024, we repurchased less than 0.1 million shares of common stock under the Repurchase Program in open market transactions for an aggregate purchase price of $ 0.6 million.

As of December 31, 2024, $ 2.03 billion remained available for future share repurchases under the Repurchase Program.

Refer to Note 16 , Subsequent Events, for information regarding the approved $ 1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program in January 2026.

In 2025, we repurchased 28.7 million shares of common stock under the Repurchase Program in open market transactions for an aggregate purchase price of $ 2.29 billion, which excludes an $ 18.3 million accrual related to the 1% excise tax imposed by the Inflation Reduction Act of 2022.

As of December 31, 2025, $ 738.6 million remained available for future share repurchases under the Repurchase Program.

Income before income taxes and loss from equity method investments consisted of (in millions):

17 unchanged sentences

Provision for income taxes $ 439.1 $ 283.9 $ 143.8

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The foreign tax provision included the tax impacts from U.S.

GAAP to local tax return book to tax differences that create a permanent addback including but not limited to stock compensation, meals and entertainment, and settlement of prior year tax audits with foreign jurisdiction adjustments.

We adopted ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” on a prospective basis beginning with the year ended December 31, 2025.

The following table reconciles the U.S.

federal statutory tax amount and rate to our actual global effective amount and rate for the year ended December 31, 2025 (in millions, except percentages):

Year Ended December 31, 2025

Federal Statutory Tax Rate $ 479.3 21.0 %

State and Local Income Taxes, Net of Federal Income Tax Effect (1)

Foreign Tax Effects (2)

Effect of Changes in Tax Laws or Rates Enacted in the Current Period — — %

Effect of Cross-Border Tax Laws

Foreign-Derived Intangible Income deduction

( 84.3 ) ( 3.7 ) %

Branch income

Other 1.5 0.1 %

Foreign tax credit

( 101.8 ) ( 4.5 ) %

Other ( 15.4 ) ( 0.7 ) %

Changes in Valuation Allowances — — %

Nontaxable or Nondeductible Items

Stock-based compensation expense 32.5 1.4 %

Excess tax benefit from stock-based compensation

( 60.9 ) ( 2.7 ) %

Other ( 4.4 ) ( 0.2 ) %

Changes in Unrecognized Tax Benefits 16.5 0.7 %

Other Adjustments

Acquisition-related effects

Other ( 1.3 ) ( 0.1 ) %

Effective Tax Rate

$ 439.1 19.2 %

(1) In 2025, State and local income taxes in California, Illinois, New Jersey, New York and Pennsylvania made up the majority (greater than 50%) of the tax effect in this category.

(2) Presented on an aggregated basis as no individual foreign jurisdiction and no individual reconciling item by nature within any jurisdiction met the disaggregation threshold.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate (in millions):

The following represents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the U.S.

federal statutory income tax rate to the actual global effective tax rate for the years ended December 31, 2024 and 2023 (in millions):

Year Ended December 31,

2024 2023 2022

Tax at federal statutory tax rate $ 432.3 $ 280.1

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In December 2021, the Organisation for Economic Co-operation and Development 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.

For the tax year 2024, all of our foreign jurisdictions have either not implemented BEPS Pillar Two or satisfied the transitional Country-by Country Reporting safe harbor requirements, and as such, are not subject to top-up tax.

We do not expect any material tax impact for 2024 and will continue to evaluate the impact of these tax law changes for future periods.

For the tax year 2025, BEPS Pillar Two has no impact to our effective tax rate or cash flows.

We will continue to evaluate the impact of these tax law changes for future periods.

FORTINET, INC.

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Our gross unrecognized tax benefits increased approximately $ 14.5 million during the year ended December 31, 2025.

The net increase was primarily due to the normal buildup of reserves related to the Federal R&D credit and transfer pricing.

The net increase was primarily due to the normal buildup of reserves related to the Federal Research & Development credit and transfer pricing.

Our policy is to include accrued interest and penalties related to uncertain tax benefits in income tax expense.

As of December 31, 2025, 2024 and 2023, accrued interest and penalties were $ 12.5 million, $ 8.8 million and $ 6.4 million, respectively.

It is reasonably possible that our gross unrecognized tax benefits will decrease up to $ 0.9 million in the next 12 months, primarily due to the lapse of the statute of limitations.

These adjustments, if recognized, would favorably impact our effective tax rate, and would be recognized as additional tax benefits.

We file income tax returns in the U.S.

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The focus of these audits is the inter-company profit allocation.

The Act makes permanent certain elements of the Tax Cuts and Jobs Act, including immediate expensing of U.S.

research and development expenditures, immediate expensing of certain eligible assets, and various modifications to the international tax framework.

The income tax effects of the Act have been recognized in our provision for income taxes as of December 31, 2025.

As a result of the Act, our income tax liability in 2025 decreased by $ 120.0 million and our GAAP effective tax rate for 2025 increased by one percentage point.

We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025 (in millions):

Year Ended December 31, 2025

US state and local (1)

(1) Jurisdiction below the disaggregation threshold

DEFINED CONTRIBUTION PLANS

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Our matching contributions to our 401(k) Plan and the RRSP for 2025, 2024 and 2023 were $ 20.6 million, $ 19.3 million and $ 17.1 million, respectively.

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 including revenue, expenses and net income 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.

Our chief executive officer assesses financial performance of the reportable segment and decides how to allocate resources based on net income that also is reported as net income attributable to Fortinet, Inc.

on the consolidated statements of income.

Net income is also used by our chief operating decision maker to monitor actual results versus budget and prior periods amounts of our reportable segment and decide whether to reinvest net income into the reportable segment or to expand business through business combinations or to return value to shareholders.

The measure of the segment assets is reported on the balance sheet as total assets.

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SEGMENT INFORMATION

Operating segments are determined based on the financial information that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) to allocate resources and assess performance.

The Company’s Chief Operating Decision Maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region.

We have one operating and reportable segment.

Our CODM uses consolidated net income as a measure to monitor actual results versus budget and historical performance of our reportable segment.

The measure of the segment assets is reported on the consolidated balance sheets as total consolidated assets.

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

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Cost of service revenue 603.5 505.6 473.6

Research and development expense

Research and development expenses

815.5 716.8 613.8

Other sales and marketing expense (1)

Adjusted sales and marketing expenses (1)

1,900.9 1,654.9 1,635.3

Commission expense 446.6 389.9 370.7

General and administrative expense

General and administrative expenses

233.4 237.8 211.3

Provision for income taxes 439.1 283.9 143.8

Other segment items (2)

218.2 230.3 55.1

Provision for income taxes 283.9 143.8 30.8

$ 1,853.4 $ 1,745.2 $ 1,147.8

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2025 2024 2023

Gain on intellectual property matter $ 4.6 $ 4.6 $ 4.6

Gain on intellectual property matters

$ 10.4 $ 4.6 $ 4.6

Interest income

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( 20.1 ) ( 20.0 ) ( 21.0 )

Gain on bargain purchase 106.3 — —

Other income (expense)—net

55.3 119.9 ( 6.1 )

Loss from equity method investments ( 29.4 ) ( 42.1 ) ( 68.1 )

Net loss attributable to non-controlling interests, net of tax

Gain (loss) from equity method investments

10.3 ( 29.4 ) ( 42.1 )

Total other segment items

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SUBSEQUENT EVENTS

Real Property Purchase

In February 2025, we signed a definitive agreement subject to regulatory approval to purchase real property in Frankfurt, Germany, totaling approximately 540,000 square feet for $ 49.1 million in cash, excluding acquisition costs.

Share repurchase program

In January 2026, our board of directors approved a $ 1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $ 10.25 billion of our outstanding common stock through February 28, 2027.

Subsequent to December 31, 2025 and through the filing of this Annual Report on Form 10-K, we repurchased 6.1 million shares of our common stock at an average price of $ 76.68 per share, for an aggregate purchase price of

FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On January 31, 2025, we acquired all of the remaining outstanding Series A Preferred Stock of Linksys for $ 22.0 million in initial consideration and now own 100 % of the outstanding equity of Linksys.

We are currently in the process of evaluating the business combination accounting, including the consideration transferred and the initial purchase price allocation.

$ 470.5 million, under the Repurchase Program.

As of the filing of this Annual Report on Form 10-K, approximately $ 1.27 billion remained available for future share repurchases through February 28, 2027 under the Repurchase Program.

Real Property Purchases

In January 2026, we signed a definitive agreement to purchase real property in Sunnyvale, California, totaling approximately 5.3 acres for $ 47.0 million in cash, excluding acquisition costs.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data