A pair of recently filed class-action lawsuits accuses Fortinet of violating federal securities laws by making misleading statements about a highly promoted “record” firewall refresh cycle. Pension funds from Oklahoma and Rhode Island allege Fortinet deceived investors by touting, in late 2024, a major refresh opportunity for a quarter of its installed base, predicting it would yield over $400 million. Executives, including former CFO Keith Jensen, told investors the largest volume of products reaching their end-of-support life cycle would begin refreshing in 2025 and extend into 2026, creating a massive sales opportunity. The lawsuits contend that Fortinet knew the refresh was actually built around older products that represented a small percentage of overall business value, and that a large portion of the refresh was pushed through earlier than investors were told.
At the center of the complaints is the company’s aggressive promotion of a supposedly “by far the largest” refresh opportunity in its history for its FortiGate firewalls, which analysts and investors initially received favorably, causing the stock price to jump nearly $9 overnight. Fortinet executives repeatedly described the cycle as “10 times larger” than prior opportunities and forecasted strong activity, with Jensen noting in February 2025 that the company was seeing “early upgrade movement” with large enterprises and expected the momentum to build through the rest of the year. However, according to the lawsuits, Fortinet was aware the refresh cycle was materially less impactful than promised because it was primarily composed of legacy models with a small value percentage of the business. Additionally, executives allegedly knew many customers would not upgrade because they still had “excess capacity” from firewalls purchased during the pandemic.
The alleged deception came to a head during an August 2025 earnings call, when executives revealed that 40 to 50% of the refresh cycle was already complete as of June 30. Crucially, they stated that a significant portion of these early upgrades involved older, lower-value devices that would not materially affect current revenues, blindsiding investors who had expected a major revenue boost in the second half of 2025 and throughout 2026. CEO Ken Xie acknowledged during the call that the “end of service” products were 12 to 15 years old and represented a “pretty small percentage of our total business.” The call triggered a wave of skepticism from analysts, who immediately downgraded the stock and criticized the company’s previous statements about the cycle’s potential.
This revelation caused Fortinet’s stock price to drop by more than 22%, according to the lawsuits, leading to substantial losses for investors. Plaintiffs also allege evidence of insider trading, pointing out that CEO Ken Xie sold $15 million and CTO Michael Xie sold $47 million worth of stock just two days before the damaging August earnings call. The lawsuits argue that these sales occurred while the executives possessed non-public knowledge about the true, disappointing financial impact of the firewall refresh cycle. Fortinet did not respond to multiple requests for comment regarding the litigation and the allegations of securities fraud.
The lawsuits ultimately contend that by artificially inflating Fortinet’s stock price through misleading statements about the refresh cycle, the defendants deceived investors. The suit filed by the Rhode Island Retirement System states that this deception caused the plaintiffs and the class to suffer “substantial losses” when the truth about the low-impact refresh was finally revealed to the public. The core claim is that executives leveraged the promised “record” refresh to maintain a high stock valuation while knowing the actual revenue generated would not live up to the outsized market expectations they had set.
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