Hello, and welcome to Fortinet's 1st quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. Please be advised that this call is being recorded. I would now like to hand over the call to Anthony Luscri, Vice President of Investor Relations. Please go ahead. Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Fortinet's first quarter 2026 financial results. Joining me on today's call are Ken Xie, Fortinet's Founder, Chairman, and CEO; Christiane Ohlgart, our CFO; and John Whittle, our COO. Ken will begin our call today providing high-level perspective on our business. Christiane will review our financial results for the first quarter of 2026 before providing guidance. During the Q&A session, we will ask that you please limit yourself to one question and one follow-up question to allow others to participate. Before we begin, I'd like to remind everyone that on today's call, we will be making forward-looking statements. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Please refer to our SEC filings, in particular the risk factors in our most recent Form 10-K and Form 10-Q for more information. All forward-looking statements reflect our opinions only as of the date of this presentation. We undertake no obligation and specifically disclaim any obligation to update forward-looking statements. All references to financial metrics that we make on today's call are non-GAAP unless stated otherwise. Our GAAP results and GAAP to non-GAAP reconciliations are located in our press release and in the presentation that accompany today's remarks, both of which are posted on our investor relations website. As a reminder, this is a live call that will be available for replay via webcast on our investor relations website. The prepared remarks will also be posted on the quarterly earnings section of our investor relations website following today's call. Lastly, all references to growth are on a year-over-year basis unless noted otherwise. I will now turn the call over to Ken. Thank you, Anthony, and thank you to everyone for joining our call. We are well pleased with our excellent first quarter result, exceeding our guidance through strong execution and broader-based demand. Billing growth 31%, total revenue increased 20%, and the product revenue grew 41%. Non-GAAP and GAAP operating margin were very strong at 36% and 31%, with GAAP operating margin and revenue growth total together 51%, one of the highest in the industry. We also generate a record $1 billion free cash flow, highlighting the strength and durability of our business model. GAAP earnings per share increased 29%, demonstrating our commitment to strong shareholder return. The convergence of networking and security approach Fortinet has led for 26 years is accelerating in the AI era. Customers are adopting Fortinet platform with Secure Networking, Unified SASE, secure operation built on a single FortiOS operating system, enabling expanding across many use cases. By delivering all core SASE capability natively integrated in one operating system, our SASE firewall significantly reduce complexity for customers. Innovations such as FortiOS 8.0 with its rich integrated functionality, our FortiASIC technology, which deliver higher secure computing performance at a significantly lower cost, and our direct supply chain management continue to differentiate Fortinet and supporting market share gain as AI drive strong demand for SASE firewalls. Secure Networking billings growth 32%, outperforming the broad market. Today, we announced the FortiGate 3500G and 400G deliver significant performance improvement over previous generations, further strengthening Fortinet's leadership. OT security accelerated in the quarter with OT billing growth over 70% as customers prioritized on protecting critical infrastructure amid heightened threats. Unified SASE billing growth 31%. Our differentiation is powered by three key advantages: single operating system across next-gen firewall, SD-WAN, and SASE. Our own global cloud infrastructure delivers better security and performance at roughly one-third total cost of ownership of peers and a much larger total addressable market, especially in sovereign and private SASE, which allow customers to deploy SASE in their own environment to meet data sovereignty and regulatory requirements. Beyond Secure Networking and SASE, AI is rapidly expanding opportunity in security operation as AI-driven security operation billing growth 23%, supported by more than 20 AI-enabled solutions on our platform as customers consolidate vendors and simplify operations. Given our strong results and confidence in the business, we are raising our 2026 guidance. We continue to expect balanced growth, strong cash generation, recurring revenue, and shareholder-focused long-term growth capital allocation strategy while consistently deliver GAAP profitability since IPO. As AI increase the demand for security, our platform approach continue to differentiate, supported by a strong direct operation model that enable us to turn supply chain challenges into opportunity to gain market share. I would like to thank our employees, customers, partners, and suppliers worldwide for their continuous support and hard work. I will now turn the call over to Christiane. Thank you, Ken, and good afternoon, everyone. As Ken noted, we delivered a strong first quarter, exceeding the high end of our guidance across billings, total revenue, operating margin, and earnings per share. The success reflects broad-based demand and strong execution across customer types, industry verticals, our geos, and all three pillars. Total billings grew 31% to $2.09 billion, driven by broad strength across Secure Networking and Unified SASE. Our large enterprise segment was particularly strong. Secure Networking billings grew 32%, driven by robust FortiGate demand as customers expanded protection across operational technology environments, contributing to OT billings growth of over 70%. Unified SASE adoption continued to build during the quarter, with billings growing 31%, driven by strength in SD-WAN and FortiSASE. FortiSASE expansion within our customer base also remains strong, with 18% of our large enterprise customers now having purchased FortiSASE, an increase of over 45%. AI-driven security operations billings grew 23%, highlighting our continued platform expansion within our installed base. Turning to revenue. Total revenue grew 20% to $1.85 billion, with product revenue increasing 41% to $645 million as customers shifted toward higher performance products. This included a number of AI-related deployments where customers invested in FortiGates to support increased throughput, segmentation, and security requirements across AI infrastructure. Technology upgrades, upselling, and expansion into new use cases drove strong growth in both hardware and software. We again benefited from our strong supply chain execution. Recent pricing changes had a low- single digit impact on product revenue growth. Service revenue grew 11% to $1.21 billion, while service billings growth re-accelerated to 27% and deferred revenue increased 15%, driven in part by SecOps ARR growth. We view service billings growth, deferred revenue, and SecOps ARR growth together with accelerating product revenue as leading indicators of future services revenue. Stepping back, these results reflect both strong execution in the quarter and durable demand drivers that continue to shape customer priorities as customers invest in and upgrade their network security solutions to defend against sophisticated attacks that are growing in both speed and complexity due to the availability of AI tools. AI is expanding the attack surface and increasing performance requirements, which is driving higher and more durable security spend across networking, SASE, and security operations. Our strong product revenue and service billing strengths and outlook continue to be driven by key tailwinds, including the ongoing convergence of security and networking, rising customer investments and demand to secure AI infrastructure as traffic, segmentation, and performance requirements increase, and accelerating IT and OT convergence as customers recognize growing exposure across critical infrastructure. These drivers translated into strong demand this quarter, particularly in large enterprises, where both the number of deals greater than $1 million and total deal value grew over 60%. We saw strong growth in both Europe and the U.S. Looking ahead, we can see these dynamics reinforced by durable tailwinds that support continued platform adoption over time. Tailwinds include vendor consolidation, ongoing technology upgrade cycles, and the continued expansion of enterprise attack surfaces across cloud, OT, and AI environments. In OT specifically, we are seeing strong demand driven by heightened ransomware and nation-state activity alongside rapid digitalization as organizations seek to deploy AI. These same dynamics are extending into SASE, where customers increasingly require flexibility to meet data privacy, sovereignty, and regulatory requirements. We support both cloud-based SASE and sovereign SASE, enabling enterprises and service providers to deploy SASE within their own data centers when required. Demand for our sovereign SASE continues to be strong. No major SASE competitor currently offers a comparable solution. Rising cyber risk, heightened regulatory scrutiny, growing data sovereignty requirements while dealing with economic pressures are further accelerating customers to adopt platform-based approaches. At the same time, rapid AI adoption and increased geopolitical uncertainty are expanding the cybersecurity TAM as organizations prioritize resilience, sovereignty, and consistent protection across increasingly complex and distributed global infrastructures. Importantly, these trends align with our platform approach continues to resonate. Fortinet's platform approach is differentiated because Secure Networking, Unified SASE, and AI-driven security operations are all built on the single operating system, FortiOS. This unified architecture enables customers to deploy security consistently across private, public, and hybrid multi-cloud environments, as well as across hardware, software, and SaaS form factors, while supporting seamless expansion across use cases. As AI rapidly expands the attack surface, customers are prioritizing integrated platforms that share telemetry and reduce operational complexity, accelerating vendor consolidation. Against this backdrop, our strong network security foundation remains a core differentiator, driving adoption of SD-WAN, SASE, and security operations, and supporting continued wallet share expansion as customers simplify architectures and consolidate vendors. This contributed to growth of 28% in Unified SASE and SecOps combined, with momentum continuing across our more services-rich pillars. We are also introducing a new SD-WAN and SASE services bundle designed to broaden adoption and further support services revenue over time. We also benefit from durable competitive advantages, particularly as performance requirements increase. Our proprietary ASIC technology and integrated operating system deliver superior performance and lower total cost of ownership, which is increasingly important in high throughput environments as customers scale AI-driven traffic inspection. Finally, customer demand remained broad-based across segments demonstrating the durability of our platform strategy, with over 6,600 new organizations selecting our FortiOS platform during the quarter, reinforcing the breadth of demand across SMB, mid-market, and enterprise customers. Overall, these results reflect consistent demand drivers and durable long-term trends. As the market continues to evolve toward platform-based security architectures, we believe Fortinet remains well-positioned to take share and deliver sustained growth and long-term shareholder value. I would like to highlight some key 7-figure deals that demonstrate our market leadership and customer expansion. A cloud infrastructure provider focused on GPU compute for AI workloads selected Fortinet to secure a new AI data center as part of its continued expansion. The customer chose our FortiGates to deliver high-performance perimeter protection, segmentation, and secure connectivity for a new production environment. The win was driven by Fortinet's ability to provide scalable, high-throughput security aligned with the customer's standardized architecture, enabling rapid deployment of new capacity as demand for accelerated compute continues to grow. In another AI-related deal, Fortinet was selected for the initial phase of an AI data center project in the Middle East for a leading generative AI company. This win positions Fortinet as a key security partner for next-generation AI data center infrastructure, which demands significant scale, performance, and architectural flexibility. The customer selected Fortinet for the strength of our security architecture to address the complexity of securing high-performance AI environments. This deployment also reinforces the importance of standardizing Fortinet security solutions to enable consistent, scalable, and efficient protection as AI data center deployments continue to expand. Next, a multinational energy company selected Fortinet to standardize and secure its network through the deployment of our full SD-Branch solutions across more than 3,000 locations, alongside OT security for an additional 300 global sites. The win reflects strong customer confidence in our ability to support large-scale distributed infrastructure environments with a unified approach to networking and security. By consolidating networking and security onto a single platform, the customer simplified operations while improving resilience and highlights Fortinet's ability to scale securely within complex mission-critical infrastructure environments. The customer is also exploring an expansion into FortiSASE, highlighting the opportunity to further extend secure access and capabilities across the enterprise. A global manufacturer selected our FortiSASE solution to secure approximately 40,000 users as part of a strategic initiative to modernize its remote access environment. The win was driven by our lower total cost of ownership and commitment to ongoing feature development, positioning us ahead of the competition. The customer chose FortiSASE for its unified FortiOS platform, which provides a single security policy across FortiSASE and FortiGates with globally distributed POPs for simpler, consistent protection across on-premises and cloud environments enabling them to build a scalable security architecture. Turning to margins and cash flow. Non-GAAP gross margin of 81% was better than expected, which is impressive given the strong product revenue growth of 41% and the related mix shift towards product. Our GAAP gross margin was also strong at 80.3%. Non-GAAP operating margin of 35.8% was a first quarter record, up 160 basis points and exceeded the high end of the guidance range, mainly due to better than expected revenue growth and continued cost management. Our GAAP operating margin of 31.4% continues to be one of the highest in the industry. Non-GAAP earnings per share increased 41% to $0.82, while GAAP earnings per share grew 29% to $0.72, significantly outpacing our top line growth, reflecting high quality earnings supported by disciplined stock-based compensation and continued return of capital over the past year. Free cash flow was a record of $1.01 billion, and adjusted free cash flow was $1.07 billion, up 27%, and represented a margin of 58%. We repurchased 10.6 million shares of common stock for $827 million during the first quarter and an additional 1.9 million shares for $146 million quarter- to- date. The remaining share repurchase authorization as of today is approximately $766 million. Moving on to guidance. As a reminder, our second quarter and full year outlooks, which are summarized on slides 30 and 31, are subject to the disclaimers regarding forward-looking information that Anthony provided at the beginning of the call. Consistent with our disciplined and prudent approach to guidance, our strong first quarter execution supports a higher second quarter and full year outlook. We are raising our full year guidance across all top line metrics, including billings, revenue and service revenue, while managing the second half of the year on a quarter-by-quarter basis. For the second quarter, we expect billings in the range of $2.09 billion-$2.19 billion, which at the midpoint represents growth of 20%. Revenue in the range of $1.83 billion-$1.93 billion, which at the midpoint represents growth of 15%. Non-GAAP gross margin of 79.5%-80.5%. Non-GAAP operating margin of 33%-35%. Non-GAAP earnings per share of $0.72-$0.76, which assumes a share count between 736 million and 740 million. Infrastructure investments of $50 million-$100 million. A non-GAAP tax rate of 18% and cash taxes of $160 million-$180 million. For the full year, we expect billings in the range of $8.8 billion-$9.1 billion, which at the midpoint represents growth of 18%. Revenue in the range of $7.71 billion-$7.87 billion, which at the midpoint represents growth of 15%. Service revenue in the range of $5.09 billion-$5.15 billion, which at the midpoint represents growth of 12%. We continue to expect services revenue growth to pick up in the second half of the year, driven by accelerating product revenue growth, a key leading indicator. Non-GAAP gross margin of 79%-81%. Non-GAAP operating margin of 33%-36%. Non-GAAP earnings per share of $3.10- $3.16, which assumes a share count of between 743 and 749 million. Infrastructure investments of $350 million-$550 million. non-GAAP tax rate of 18% and cash taxes of $400 million-$450 million. I will now hand the call back over to Anthony to begin the Q&A session. Thank you, Christiane. As a reminder, during the Q&A session, we ask that you please limit yourself to one question and one follow-up question to allow others to participate. Operator, please open the line for questions. Thank you. If you would like to ask a question, please click on the raise hand button at the bottom of your screen. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself. We will allow one moment for the queue to form. Our first question comes from Shaul Eyal at TD Cowen. Your line is open. Please unmute and ask your question. Thank you. Good afternoon, guys. Congrats on quarter and the guidance. Ken or Christiane, what drove the strength this quarter? Probably more so, what provides you with the confidence in this strong guidance? It would appear that even second quarter could be prudent to put it very mildly. Just curious as to your thoughts about it. Shaul, it's a great question. Thank you. I feel, first, definitely AI is a tailwind to drive the growth. For us, we can also invest in AI for 15 years with over 500 patent and a lot of internal usage and also like building the product. That's where kind of we prepare for this growth also from the operation side, which with whether direct manufacturer operation, inventory, all these things. That's where we see it's an opportunity. Also AI, I keep saying AI accelerate the convergence of our network and network security. Like I mentioned, like, two months ago, in the forum, this accelerates, which is really, a lot of company need to secure their internal network, their server data center, all these things. That's where we see is that this growth probably will be more long-term. At the same time, we kind of, differentiate ourself a lot, with other competitors. I actually put a slide on the investor presentation, slide 10. Go back almost 30 years with all these, different point solution compared to all this integrated solution. Fortinet probably the only company in every major, like new demand for network security, we kind of, in-house develop a solution, including the right now the SASE. The same time, we kind of, also integrate well with all the previous function, and we also keeping improving on all this with our ASIC acceleration, with our own infrastructure, to better security, lower cost. I think all this drive the company keeping gaining market share in the last, like 20+ years. That's I feel this time is that we definitely want to leverage this opportunity and, whether AI also or kind of supply chain, and we just feel we gaining market share very quickly right now. Thank you. Our next question comes from Saket Kalia at Barclays. Your line is open. Please unmute and ask your question. Okay, great. Hey, guys, thanks for taking my questions here and great start to the year. Ken, maybe for you know, the security environment feels different after Mythos. Maybe the question is, because I know you spend a lot of time with customers, what are customers saying to you about how they're reacting, and what parts of Fortinet's portfolio do you think could benefit most? I think I keep on telling customer, you need to use your AI to secure AI. All this right there. It's interesting definitely AI expose a lot of vulnerability and also you have to react very quickly and leverage AI to react all this operation. That's where for long term, definitely secure operation, which we have over 20 product using AI, building AI. That's really helping the customer. On the other side, we also feel the AI also building I mean, to meet all this AI demand, also a lot of infrastructure build up. That's why we see especially we're the only leader in the OT security area. We see the OT grow like 70%. It's very strong growth because OT really like secure pretty much the bottom few layer of the AI 5-layer cake, right? Whether the energy level, infrastructure level, all need to leverage OT security. That's. We are probably the only leader in that space. Give us a lot of strong growth there. On the other side, we also see kind of a customer see the value, starting to realize the value, whether this integrate more function into the single OS and also the ASIC advantage and also the supply chain operation model we have. It's all kind of a long-term investment, but starting paying off now. Makes sense. Christiane, maybe for you for my follow-up. I'd love to get a little bit of a historical perspective. You know, I think back in the early 2020s, post-COVID, we had the benefit of some early ordering, which then created a bit of an air pocket in later quarters. Maybe the question is, how do you think about how much early ordering maybe helped this quarter? What gives you the confidence that this also doesn't create an air pocket at some point in the future? Saket, I think the situation in 2026 is a little bit different from COVID because the threat landscape is accelerating significantly. During COVID, I think there were some new requirements by the companies where they needed to secure remote access and digitize their business a little bit more. Now it's about really a lot of significantly more threat. I think the demand for our product is gonna continue as the AI data centers are gonna be built out as customers are deploying AI internally. We see significant tailwinds for our business and for our product specifically. Yeah, Saket, also we put a presentation on the slide 25. You can see during the COVID, we're the one gaining a lot of market share compared to all the other peer, right? It's, we feel this is an opportunity because we feel our operation model, our kind of a long-term investment, has much more advantage than any other competitors. We feel this is the same like last time. I don't feel anybody can predict how long this supply chain things will last, we feel we have a strong direct cooperation model, which much better than pretty much all the other competitors. The same time, a lot of long-term investments starting to show the advantage right now. That you can see the slide 25 showing during the COVID five, six years ago, we're the one gaining a lot of market share. Even there are some kind of, we call it a digestion in the 2024, early 2025, but we still keeping gaining share. That we feel, this is the hard opportunity, we feel is, works better for us than other competitors. Super helpful. Thanks, guys. Thank you. Our next question comes from Rob Owens with Piper Sandler. Please go ahead with your question. Thank you guys for taking my question. Ken, I appreciate the throughput and segmentation arguments relative to AI, but I want to dovetail a little bit more on Saket's question just around when you mentioned the 20 or so products that use AI within your portfolio. Are there a couple of things that customers are honing in on that are driving kind of that sense of urgency for them right now? Actually, Christiane gave a few case about supporting some AI data center build out all these things. I think initially they probably just like the 5-layer cake, right? You need to have all these, the lower layer build up first from all this energy infrastructure and then secure the data center. We see after they build out some kind of an AI infrastructure, then the security need to come in, especially when the application starting deploy. We see, one company when starting kind of leverage AI, we feel it's a lot of opportunity for secure company, to helping the company or customer to really, using AI to secure AI, we say. Which we feel is, we kind of ahead of most of our competitor with all this long-term investment, with all the patent, with all this, whether, you know, R&D side, in the G&A, in the customer supporting, and also in the product. We feel it's a like I said, I'm kind of with engineering background. I love all the new technology. That's why in the last, like, 30 years, like I said, in the slide 10. So we're the only one internally develop all this new technology, meet all the challenge, integrate together, and compared to most of competitor have to go through acquisition to meet all this new demand. That actually give us the confidence to continue grow faster, gaining market share. And then maybe to add. Great. To add to this. Go ahead, Christiane. Yeah. I think that what we hear from customers that are not building out their own AI infrastructure that are more on the AI use side, they are most afraid of traffic flows and shadow AI. I think that's where a lot of our products can help them as well, and also with the FortiOS improvements and upgrades. There's a lot of interest in what can our existing products do and which additional products like FortiAIGate can they deploy to have more visibility, more transparency, and monitoring of the traffic flows. Great. I appreciate the color. Thank you. Our next question comes from Brad Zelnick at Deutsche Bank. Your line is open. Please go ahead with your question. Oh, excellent. Thank you so much for taking the question. I actually wanted to follow up on what Rob had asked and Ken's comments about the AI data center opportunity and Christiane, what you shared that was very helpful about the win in the Middle East in securing AI infrastructure. What are you seeing specifically in this market for securing AI data centers? Like, who are you competing with? Who are you partnering with? How long are the cycles? Maybe how much of the pipeline for these opportunities is contributing to the strong guidance that you've given us for the year? Actually, if you look in the Fortinet technology, we are the only cybersecurity company build their own ASIC chip from day one. That give us much better performance and lower cost, both on the computing power cost and also energy cost, and also feed all this data center internal segmentation development quite well. None of competitor competing with us, whether on the performance, on cost, including the two product we just announced today. On average, all the top like 10 function, we usually like 3x-5x better performance for the same cost, same function, and much lower energy consumption. That's fitting quite well for a lot of bigger infrastructure data center build out, and also for a lot of internal segmentation. AI, especially the AI-generated traffic, definitely generate a lot of additional traffic, especially, we call it east-west traffic, and all the server or even like a different department, you do need additional security to protect that, for the internal segmentation. That's why we see a lot of strong demand in not just data center, but also internal segmentation, to protect all this, or get a better manageability or better visibility for all this agent traffic. Brad, maybe with that related to your question on what do we see with regards to pipeline building? I think my comments around the customer wins were also about reference architectures and scalability. Most of these providers that are starting to build out data centers, they're creating their kind of reference architecture to build out more as the demand increases for their services. I think we are confident that this creates a tailwind for us. Yeah. Yeah. Especially like, lot of technology like ASIC, like system, the hardware is more long-term investment, compared to some software, some other, which most other security company kind of more focus on that one, the software side. Which I feel, definitely now is the time to see all this long-term investment benefit, all the hardware ASIC benefit. That's customers starting to appreciate more in the hardware ASIC now. Thanks, Ken. Yeah, it reminds me very much of the heritage of Fortinet and all the early success that you had in the service provider market segment and why it's so important today in AI data centers. Maybe if I could just follow up with one quick follow-up for you, Christiane, just to get your latest thoughts on memory pricing and any further price increases that you might be contemplating throughout the year and maybe specifically what's actually baked into the guidance along those lines. Thanks again. Great job. From a guidance perspective, we have, we've baked in a low- single digit amount specifically into product. From what are our plans with regards to pricing, I mean, Ken has said it multiple times that we're trying to maintain gross margin. As our component costs increase, we are contemplating pricing actions. We will also bring it down again when we don't have the pressures anymore. Yeah, the policy. Great. No No problem. Yeah, the policy we have is not like some other company in using this opportunity to increase margin. We are not. We just wanna maintain the healthy margin. When our costs increase, we also do the monthly adjustment. When the costs coming down, we also won't adjust lower, just maintain the same margin. That's the policy, just like five years ago in the last supply chain, and also it's the same policy during this time, the supply chain memory shortage. For us also because we have a much bigger quantity than the other competitor. Like we have almost 60% market share on the unit shipment of the network security system, which we feel And also with direct manufacturer operation model, we feel we are, we prepare better, we kind of operate better. We also negotiate better, compared to other competitors. That's we feel is the chance to gain market share again like we did five years ago. Awesome. Thank you. Our next question comes from Tal Liani with Bank of America. Your line is open. Please unmute and ask your question. Hello. You got me back. You can't get rid of me. Hi, Tal. I have a question. Yeah, you're the. Okay. Few analysts stuck with the space for like 30 some years. It's fun to cover this space. I have everyone asked about AI. I'm gonna ask about the other thing. The most surprising part of your result is actually the billing growth of legacy. 32% year-over-year growth in Secure Networking. Check Point, when they reported, they said that their firewall went down or the growth decelerated and the market is weaker. The question I have for you is. You know, what are the firewall trends? What drives it? What drives this 32% growth in Secure Networking billing, and how sustainable is it? Thanks. Yeah. Actually, Tal, I prepared slide 10 in the presentation for you. You have to go back to 30 years. Actually, the most growth on Secure Networking come from FortiGate. You can see, for the network security, every year you need to meet a new function demand requirement. Basically, for us, we are probably the only company in-house keeping meet all this new function development, whether from early day UTM, next-gen firewall, to sandbox, to like SD-WAN, SASE, to today's AI quantum computing, right? Once you kind of come up all the innovation, you also need to integrate. Now the FortiOS 8.0 integrate about 30 function there. Without the 30 function, you also need to keep improvement. That's where the ASIC come in to improving the performance and additional secure computing. At the same time, we also invest in infrastructure to make it more secure and also kind of lower the cost. That's where I use, you know, three I's to describe what happened in the network security space in the last 30 years. I feel some of our competitor, they kind of cannot come up the new function quick enough or kind of cannot integrate. They have to go through acquisition to meet all this demand. End up, they become like a multi-point solution. That's the blue area you can see. There's a lot of company, including some of competitor, they have to using multiple solution to meet one FortiGate solution, FortiOS solution we have, whether the SD-WAN, the SASE, some other function there. There are also still a lot of point solution provider, including SASE. They just cannot offer customer the total security infrastructure security there. That's we see the benefit of this single OS with all this integration, with all this kind of the new function and improvement, ASIC, all these things. Get a more like advantage over other player. This supply chains, the opportunity is show the advantage we have. That's also the operation model we have. Yeah, that's I come up this slide, kind of using three I's to describe the advantage we have. Ken, like, 32% growth is very respectable. How sustainable is it? Is there a comparison thing that boost up the I don't have the slide in front of me, so I don't have the numbers in front of me. Is there an easy comp situation this year that boosts up this growth to 32%? Is it there's something more fundamental that could be sustained over time? You can look at slides 24 and 25, compared to five years ago. It's pretty comparable. Yeah. That time we also grow like a 40% some. Yeah. Tal, we can really see interest demand in network security and the drivers are not only AI. It is consolidation, it is simplicity. The products that are driving significant interest into that network security portfolio, yeah. Got it. Great. Thank you. Our next question comes from Fatima Boolani with Citi. Please go ahead with your question. Good afternoon, and thank you for taking my questions. Ken, I wanted to ask you my first question, and then I'll follow up with Christiane. We are at a very, very high level in one of the most consequential CapEx and infrastructure investment cycle across the board. You are clearly seeing the benefits of that, you know, based on the 7-figure precedent transactions you talked about related to AI infrastructure build-out and some of the responses to earlier questions. I wanted to ask you specifically what the impact is to your Secure Networking portfolio and specifically the higher-end FortiGate appliances. Should we expect the product mix of the business to trend towards some of the very, very high-end SKUs as you support the infrastructure build-out and the secure infrastructure build-out opportunities ahead? My follow-up for Christiane is, related to the product growth upswing and presumably the higher-end mix of product and appliance uptake from your FortiGate portfolio, why aren't we seeing maybe a more visible, bigger catch-up on the services side? I guess to ask it more simply, when I look at your services revenue guidance, you've only really tightened the range, bringing the low end of the services revenue up. I'm just wondering if, to the extent you are seeing a better product mix shift, why we wouldn't see an even better attach on the services revenue. Thank you so much. It's a great question. Definitely Fortinet has more advantage in the high end with our own ASIC solution. It's a much better performance, much lower cost, and both on the product, also on the energy cost there. That we see pretty strong growth in the high end. At the same time, you can look on the Unified SASE also grow, like, 31%, and also Q4 SASE grow 40%. That's more drive a lot of by the SD-WAN low end. That's also the reason we kind of launch a new bundled service to accelerate both the current customer and also the new customer adopt SD-WAN and SASE. I also put a slide on there, try to give the number there. Is one of slides also you can see the bundle is very, very attractive for the customer to adopt the new SASE and SD-WAN service. There is slide 14, actually. So that lists all these different incentive there for both current customer and also the new customer there. So that's why I feel the growth, like, both high and also low end, but low end more driven by the SD-WAN SASE side. High-end definitely more data center. Data center also I feel, once more AI data center build out, it's still in the very early stage. Also once the application starting leverage AI, that's, that will be very long-term growth going forward. It is just starting, kind of very early ramp-up stage. Definitely on the other side, we see also the growth very strong in the SD-WAN SASE area, and we believe this bundled service will also drive additional service revenue after customer have the hardware box. Fatima, to address your concern, so to speak, I'm super enthusiastic about our services billings, yeah. 27% growth. Deferred revenue grew 15%. I think it all trends in the right direction. The conversion from the balance sheet into revenue just takes longer, so you don't see it immediately. The trends are all positive. Our growth was really good. I'm very happy with the quarter results and also with the attach rates of services with hardware. Thank you. Our next question comes from Gabriela Borges at Goldman Sachs. Please go ahead with your question. Hi. Good afternoon. Thank you. Ken, if I'm hearing you right, it sounds like there has been a little bit of a step function change in the pipeline related to AI data center. My, my question for you, if I'm hearing that right, is why do you think that's happening now? I'm curious if there is a shift maybe happening with sovereign AI projects or if it has something to do with the mix from training to inference. Curious to get your thoughts. Actually both connect together. Both the AI data center combined with the sovereign SASE, sovereign AI, kind of drive some of the growth together. It's where It's interesting. It's the same FortiGate FortiOS to do both AI security and also the SASE, like, to protect all this, you know, Zero Trust environment. I think, kind of I feel it's both connect, driving the growth together. That's really interesting. The follow-up I have for you is Fortinet has been transparent on some of the vulnerabilities that you found in your own technology when you find them. How is your internal process for hardening your infrastructure changing as you get access to some of these leading-edge LLM models that can perhaps help you upgrade the quality of your own infrastructure? We working very closely with those leading AI company, whether handle the vulnerability or kind of, helping on the automate a lot of operation for our customer. At the same time, we also build our own infrastructure and which has a better security, more better performance than some other, like third-party infrastructure. We feel we do better than most competitor. At the same time, we kind of, keeping developing new technology, like we say, using AI to secure AI. Thank you for the thoughts. Congratulations on the quarter. Thank you. Our next question comes from Brian Essex with JP Morgan. Please go ahead with your question. Great. Thank you for taking the question, Congrats on the results for the quarter. Maybe just a quick one from me, I think I wanted to follow up on Fatima's question, because I wanted to make sure that I understood some of the dynamics here. With regard to the Unified SASE billings, could you maybe unpack that a little bit and help me understand, with regard to the growth, how much is SD-WAN? How much is SASE? Particularly if you can help us reconcile the deceleration in SASE ARR just so we can put the two together to understand, you know, what the primary drivers of that in the segments of the business at play are. Thank you. The slide four, we have the three pillar there. Yeah, definitely the Unified SASE, including SD-WAN the SSE is more like a FortiSASE, some other things there. Actually the FortiSASE also we see very, very strong growth on ARR on all the things there. And also we believe the new bundle will also accelerate the SD-WAN, which on slide 14, both SD-WAN, the SASE service going forward. It's, yeah, the Unified SASE grow like a 31%. It's pretty big. Yeah, it's about 25% of billing right now is coming from the Unified SASE. It's a pretty big number. I believe we are the top-three player in this space and also probably one of the fast-growing right now. That's helpful. How much was contribution from sovereign SASE? Certainly getting a lot of focus right now on both sovereign data centers and sovereign infrastructure. Would love to understand the contribution there. Sovereign SASE, I feel probably almost the same size as the cloud-based SASE, probably even bigger. Also sometime the sovereign SASE, because we're using the same OS, same FortiGate, sometime they just buy as a firewall, gradually turn on the SASE function and deploy internally in their data center or infrastructure. Also we see the service provider starting to run public sovereign SASE very quickly, especially in Europe. Right. Which there are a few big service, telecom service provider starting, kind of, launch all this sovereign SASE service with our product. That's also helping drive a lot of product revenue. Got it. Very helpful color. Thank you, Ken. Thank you. Our next question comes from Gray Powell with BTIG. Your line is open. Please go ahead. Okay, great. Thanks. I just want to make sure you can hear me okay? Yep, all good. This is perfect timing. I actually wanted to follow up on Brian's question. It kind of relates to what we've been hearing in our field work. Specifically, are you starting to see more of your branch office firewall customers turn on SD-WAN components and then convert to convert their firewall subscriptions to Secure Service Edge? If so, I guess, how should we think about the ballpark uplift to a customer's annual spending? Or just how should we directionally think about that opportunity? Just because it does seem like you have an installed advantage in the market that maybe you weren't thinking about six or 12 months ago. Yeah. It's definitely a very good survey, very good feedback. That's also the reason, on slide 14, we launched a new bundle service to helping accelerate the SD-WAN and the SASE. You can see we combine like a four, five different separate service into one bundle service, including some SASE license, based on the model of a product from like a FortiGate 60 up to like a middle range product. We all come with some kind of a SASE license together with all the SD-WAN, whether the underlay service or the application monitor, Yeah. It's a very good observation. Definitely customer starting more turn into the firewall into SD-WAN and also into the SASE Zero Trust environment now. It is a kind of helping us accelerate the additional service. Also, you can see we also have the slides that we're tracking the big enterprise. It's the slide 11. You can see the adoption of whether the SASE SD-WAN with the big enterprise we're tracking. I think last quarter, the SASE about 16%. About quarter-to-quarter is now 18%. It's a very strong growth. Yeah, definitely, that's the trend. Gray, let me add to that. As we upgrade our customer base, these features become more interesting, and so it allows us also to sell higher the next higher end model, typically for the edge, which is super beneficial for us as well. Okay. That's really helpful data points. I know we're tight on time, I'll leave it there. Thank you very much. Thank you. Our next question comes from Joe Gallo with Jefferies. Please go ahead with your question. Hey, guys. Thanks for the question. I just want to unpack the current service billing strength in one Q. It grew 13%, was a nice acceleration. You know, what was the driver there? Was that subscription? Was that more support? Was it just moving further away from prior year headwinds? And can we expect that line to further accelerate this year? I would say it's the strength in the quarter. We had good linearity that helped us a little bit in the current quarter already. With a strong overachievement, it helps for the rest of the year that we are now super confident our growth rates are picking up. As I said earlier, it takes time, right? This is where we've adjusted the low end of the range to bring up the midpoint, but it's not that you can get super fast acceleration of the balance sheet. Yeah. That we are confident with not only the this year, but also the benefits that the service billings give us for next year. Okay. Thank you. Then just as a quick follow-up, I appreciate the historical context you provided earlier on, you know, COVID versus now and the need for more cyber. Just more explicitly, did you see a change in buying behavior in 1Q related to people pulling forward because of higher memory costs? I'm just curious, if not, like, what are the metrics that you're tracking that give you confidence internally that you haven't really seen a change in buying behavior yet? Thank you. I think during the COVID, we do see some pull forward, especially like a retail, when they have, like a deployment, they schedule, like, for 12 months, they try to order ahead of time, make sure all the product available for them. This time we don't see much pull forward, but we do see the demand pretty strong. We kind of control the whether the channel inventory is modest in the market. We don't see increase there also. That's where we just try to manage better. At the same time, we just, tell customer we just want to maintain the margin. We don't want to raise the margin. Like some other supplier, once our cost higher, we'll raise the price, but also once come down, we also lower the price in real time. That's where I think we build some good trust with some of the partner, the customer, and also the direct model also help in there. It's difficult to judge how long this will be last. Could be longer, could be shorter. For us, we just operate based on our own kind of a healthy margin and also a more quick response and the direct operation manufacture model to get supporting better to the customer. That's really helpful. Thank you. Really nice quarter. Congrats. Thank you. Our last question comes from Junaid Siddiqui with Truist. Please go ahead with your question. Thank you, and good afternoon. Ken, you mentioned in the past how the edge is eating the cloud as customers move latency sensitive and cost-intensive workloads to the edge. My question is, how are you adapting your security architecture to support this shift to capture this demand redistribution? Does this shift meaningfully change the value proposition or monetization opportunities at the edge versus traditional data center deployments? Thank you. Yeah, the edge at the cloud is more, because I kind of built ASIC for like 20, 30 years, because we want to increase the computing power and also real-time processing on the appliance on edge. That's got a lot of criticized before, which why this kind of big long-term investment compared to whether the cloud. Definitely the AI and also kind of the new trend you see the edge, the hardware, starting has shown better value now. That's a few. We will continue keeping the same strategy we have, keeping investing in the ASIC, keeping investing in the hardware appliance. Also kind of, because a lot of a new, like, what do you call it? Physical AI or some module, they do need use the edge computing, do the real-time computing decision there instead of try to go to the cloud to do some kind of cloud more for the management side. That's we see the new trend, especially like OT. You see the strong growth in OT, over 70%. A lot of that have to deploy in the field and manage the traffic in real time on the edge. That's we see pretty strong growth. I have to say it's kind of hybrid approach. It's never 100% on the cloud, never 100% on the edge, but kind of both side has a value. I just feel like a few years ago, there's a too much talk emphasis on the cloud and some competitor even think it's a cloud only. I don't feel that's the case. That's where we keeping insist on investing the ASIC, invest in the system hardware side. Now the customer, the partner and, see the benefit of this hybrid approach. Great. Thank you. Thank you. We have no further questions at this time. I will now hand it back to Anthony Luscri for closing remarks. Thank you. I'd like to thank everyone for joining today's call. We will be attending investor conferences hosted by JP Morgan and Bank of America during the second quarter. The Fireside Chat webcast will be posted on the Events and Presentation sections of our investor website. If you have any follow-up questions, please feel free to contact me, and have a great day.