The cybersecurity business is rapidly adopting AI solutions. Statista estimates AI-focused cybersecurity spending at $24 billion last year and approximately $134 billion in 2030. Therefore, investors should buy shares of cybersecurity companies that aggressively integrate AI capabilities into their platforms immediately. One example is Fortinet (NASDAQ: FTNT), which uses AI to grow.
Fortinet's revenue pipeline is increasing with AI. Fortinet earned $5.3 billion in 2023, up 20% from 2022. But its delayed revenue grew 24% faster to $5.74 billion. Deferred revenue is money a corporation collects in advance for future services. Revenue is only recognized after services are rendered.
Thus, quicker deferred revenue growth indicates strong demand for the company's subscription-based cybersecurity services. In 2023, Fortinet's services revenue rose 28% to $3.38 billion, 64% of its top line.
Fortinet attributed its strong services business development to strong demand for security operations and secure access service edge (SASE) subscriptions. Remember that the corporation has integrated AI into both platforms. For instance, Fortinet's AI-focused security operations platform detects and responds to threats swiftly. Fortinet management also notes that it has long used AI to improve its products
Better yet, the company is employing generative AI to improve its cybersecurity platform. In December, it unveiled a generative AI cybersecurity assistant to help enterprises "make better decisions, rapidly respond to threats, and save time on even the most complex tasks."
This explains why Fortinet is signing more cybersecurity deals. The corporation made 13 $10 million deals in 2023, up 160% from the year before. It also closed 474 agreements for $500,000 or more in the fourth quarter of 2023, up from 367 in the third quarter.
Fortinet forecasts its total addressable market to grow to $208 billion in 2027 from $150 billion this year, boosting its deal momentum, especially as it uses AI to improve its services. As expected, analysts expect its bottom-line growth to quicken in 2025 and 2026 after this year's 4% leap from $1.63 per share in 2023.
Fortinet stock is up 16% in 2024. The stock trades at 46 times earnings, below its five-year average of 56. Its projected earnings multiple of 42 indicates a profit increase this year, lower than its five-year average of 44.
Fortinet's earnings growth is predicted to improve in 2025 and 2026, hence the market may be overvaluing it. Analysts expect $2.47 per share in earnings for Fortinet in 2026, which could push its stock price to $99 after three years at 40 times earnings. It would rise 45% from present prices, so investors should buy this cybersecurity stock today
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