0001262039-17-000034 | 10-Q | XBRL Viewer

Business Combination (Tables)

9 Months Ended

Sep. 30, 2017

Total allocation of the purchase price was (in thousands):



Cash and cash equivalents	$	171
Accounts receivable	1,126
Prepaid expenses and other assets	430
Property and equipment	203
Deferred tax assets	3,435
Finite-lived intangible assets	14,900
Indefinite-lived intangible assets in process research and development	1,600
Goodwill	9,861
Total assets acquired	31,726
Deferred revenue	4,400
Accounts payable and accrued liabilities	3,348
Other liabilities	1,694
Total liabilities assumed	9,442
Total purchase price allocation	$	22,284

Schedule of Acquired Finite-Lived Intangible Assets

The estimated useful life and fair values of the acquired finite-lived intangible assets were as follows (in thousands, except for estimated useful life):



	Estimated Useful Life (in years)	Fair Values
Developed technologies	4	$	12,400
Customer relationships	3	2,300
Other	2	200
Total		$	14,900

Investments in Privately-Held Companies	9 Months Ended
Investments in Privately-Held Companies	Sep. 30, 2017
Investments, All Other Investments [Abstract]
INVESTMENTS IN PRIVATELY-HELD COMPANIES	INVESTMENTS IN PRIVATELY HELD COMPANIES Our investments in the equity securities of privately held companies totaled $12.1 million and $10.3 million as of September 30, 2017 and December 31, 2016, respectively. These investments are accounted for as cost-basis investments, as we own less than 20% of the voting securities in each of these investments and do not have the ability to exercise significant influence over operating and financial policies of the respective entities. These investments are carried at historical cost and are recorded as other assets on our condensed consolidated balance sheets and would be measured at fair value if indicators of impairment existed. As of September 30, 2017, no events have occurred that would adversely affect the carrying value of these investments. As of September 30, 2017, we determined that we had a variable interest in these privately held companies. However, we determined that we were not the primary beneficiary as we did not have the power to direct their activities that most significantly affect their economic performance. The variable interest entities are not required to be consolidated in our condensed consolidated financial statements.

Segment Information (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
Segment Information (Details) $ in Thousands	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) reportable_segment Segment_Managers business_activity operating_segment	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Segment Reporting Information [Line Items]
Business activity (in business activities) \| business_activity			1
Segment managers responsible for operations (in segment managers) \| Segment_Managers			0
Number of operating segments (in operating segments) \| operating_segment			1
Number of reportable segments (in reportable segments) \| reportable_segment			1
Revenue	$ 374,217	$ 316,646	$ 1,078,262	$ 912,613
Property and equipment - net	239,891		239,891		$ 137,249
Total Americas
Segment Reporting Information [Line Items]
Revenue	161,153	133,874	468,230	386,566
Property and equipment - net	213,673		213,673		109,902
U.S.
Segment Reporting Information [Line Items]
Revenue	123,646	108,142	367,124	309,041
Property and equipment - net	112,210		112,210		96,414
CANADA
Segment Reporting Information [Line Items]
Revenue	13,135	10,118	36,539	30,675
Property and equipment - net	101,103		101,103		12,881
Latin America (“LATAM”)
Segment Reporting Information [Line Items]
Revenue	24,372	15,614	64,567	46,850
Property and equipment - net	360		360		607
EMEA
Segment Reporting Information [Line Items]
Revenue	138,335	116,967	394,214	336,911
Property and equipment - net	18,088		18,088		19,632
France
Segment Reporting Information [Line Items]
Property and equipment - net	12,185		12,185		13,241
Other EMEA
Segment Reporting Information [Line Items]
Property and equipment - net	5,903		5,903		6,391
APAC
Segment Reporting Information [Line Items]
Revenue	74,729	$ 65,805	215,818	$ 189,136
Property and equipment - net	$ 8,130		$ 8,130		$ 7,715
Exclusive Networks Group \| Customer Concentration Risk \| Sales Revenue
Segment Reporting Information [Line Items]
Customer concentration (percent)	29.00%	19.00%	23.00%		19.00%
Exclusive Networks Group \| Customer Concentration Risk \| Accounts Receivable
Segment Reporting Information [Line Items]
Customer concentration (percent)			31.00%		26.00%
Ingram Micro \| Customer Concentration Risk \| Sales Revenue
Segment Reporting Information [Line Items]
Customer concentration (percent)	11.00%	10.00%	10.00%
Fin Tec Computers \| Customer Concentration Risk \| Accounts Receivable
Segment Reporting Information [Line Items]
Customer concentration (percent)					10.00%

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2017	Oct. 27, 2017
DEI [Abstract]
Entity Registrant Name	FORTINET INC
Entity Central Index Key	0001262039
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Well Known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Common Stock, Shares Outstanding		173,900,211

Business Combination - Narrative (Details) - USD ($) $ in Thousands		9 Months Ended
	Jun. 07, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Business Acquisition [Line Items]
Payments made in connection with business acquisition, net of cash acquired		$ 0	$ 22,087
Goodwill		$ 14,553		$ 14,553
AccelOps, Inc. [Member]
Business Acquisition [Line Items]
Payments made in connection with business acquisition, net of cash acquired	$ 22,100
Goodwill	$ 9,861

Defined Contribution Plans (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Retirement Benefits [Abstract]
Matching contribution on employee contributions, Percent			50.00%
Maximum contribution percentage of each employee's eligible earnings, Percent			4.00%
Matching contributions to the RRSP and 401(k) Plans	$ 1.2	$ 1.2	$ 3.8	$ 3.4

Investments in Privately-Held Companies (Details) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 31, 2016
Investments, All Other Investments [Abstract]
Investments in equity securities of privately-held companies	$ 12.1	$ 10.3

Goodwill and Other Intangible Assets - Net

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS - Net

GOODWILL AND OTHER INTANGIBLE ASSETS—NET

Goodwill

As of September 30, 2017, we had goodwill of $14.6 million. There were no impairments to goodwill during the three and nine months ended September 30, 2017 or during prior periods.

Other Intangible Assets—net

The following tables present other intangible assets—net as of September 30, 2017 and December 31, 2016 (in thousands, except years):



	September 30, 2017
	Weighted-Average Useful Life (in Years)	Gross		Accumulated Amortization		Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies and other	3.8	$	23,984	$	12,501	$	11,483
Customer relationships	4.7	14,500		9,292		5,208
		38,484		21,793		16,691

Indefinite-lived intangible assets:
In-process research and development		1,600		—		1,600
Total other intangible assets—net		$	40,084	$	21,793	$	18,291



	December 31, 2016
	Weighted-Average Useful Life (in Years)	Gross		Accumulated Amortization		Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies and other	3.8	$	23,984	$	8,750	$	15,234
Customer relationships	4.7	14,500		6,506		7,994
		38,484		15,256		23,228

Indefinite-lived intangible assets:
In-process research and development		1,600		—		1,600
Total other intangible assets—net		$	40,084	$	15,256	$	24,828

The in-process research and development intangible asset of $1.6 million is expected to be completed in the fourth quarter of 2017. Upon completion, the cost will be transferred to developed technology and will be amortized over the remaining estimated useful life of the asset.

Amortization expense was $2.0 million and $2.8 million during the three months ended September 30, 2017 and September 30, 2016, respectively. Amortization expense was $6.5 million and $6.3 million during the nine months ended September 30, 2017 and September 30, 2016, respectively. The following table summarizes estimated future amortization expense of finite-lived intangible assets—net (in thousands):



	Amount
Years:
2017 (remainder)	$	2,037
2018	6,885
2019	5,406
2020	2,363
Total	$	16,691

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Stock-Based Compensation Plans

We have stock-based compensation plans pursuant to which we have granted stock options and RSUs. We also have an ESPP for all eligible employees. As of September 30, 2017, there were a total of 49,841,761 shares of common stock available for grant under our stock-based compensation plans.

Restricted Stock Units

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



	Restricted Stock Units Outstanding
	Number of Shares		Weighted-Average Grant Date Fair Value per Share
Balance—December 31, 2016	9,509		$	31.01
Granted	3,630		37.29
Forfeited	(928	)	34.07
Vested	(3,153	)	29.02
Balance—September 30, 2017	9,058		$	34.01

As of September 30, 2017, total compensation expense related to unvested RSUs granted to employees and non-employees under the 2009 Plan, but not yet recognized, was $266.4 million. This expense is expected to be amortized on a straight-line basis over a weighted-average 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 minimum statutory employee withholding taxes. Total payment for the employees’ tax obligations to the taxing authorities is reflected as a financing activity within the condensed consolidated statements of cash flows.

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



	Nine Months Ended
	September 30, 2017		September 30, 2016
Shares withheld for taxes	995		937
Amount withheld for taxes	$	35,869	$	29,886

Employee Stock Options

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



	Three months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Expected term in years	4.4		4.3		4.4		4.3
Volatility	33	%	38	%	36	%	42	%
Risk-free interest rate	1.8	%	1.1	%	1.9	%	1.1	%
Dividend rate	—	%	—	%	—	%	—	%

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



	Options Outstanding
	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance—December 31, 2016	6,187		$	23.79
Granted	536		37.26
Forfeited	(164	)	30.84
Exercised	(1,569	)	18.04
Balance—September 30, 2017	4,990		$	26.82
Options vested and expected to vest—September 30, 2017	4,990		$	26.82	3.2	$	48,315
Options exercisable—September 30, 2017	3,418		$	24.74	2.0	$	39,413

The aggregate intrinsic value represents the pre-tax difference between the exercise price of stock options and the quoted market price of our common stock on September 30, 2017, for all in-the-money stock options. As of September 30, 2017, total compensation expense related to unvested stock options granted to employees but not yet recognized was $15.3 million. This expense is expected to be amortized on a straight-line basis over a weighted-average period of 2.6 years.

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Weighted-average fair value per share granted	$	11.09	$	10.62	$	12.17	$	9.08
Intrinsic value of options exercised	3,432		9,340		30,333		35,593
Fair value of options vested	1,562		1,706		6,691		4,583

Employee Stock Purchase Plan

In determining the fair value of the ESPP, we use the Black-Scholes option pricing model that employs the following weighted-average assumptions:



	Nine Months Ended
	September 30, 2017		September 30, 2016
Expected term in years	0.5		0.5
Volatility	29	%	39	%
Risk-free interest rate	0.9	%	0.4	%
Dividend rate	—	%	—	%

Additional information related to the ESPP is provided below (in thousands, except per share amounts):



	Nine Months Ended
	September 30, 2017		September 30, 2016
Weighted-average fair value per share granted	$	8.73	$	7.68
Shares issued under the ESPP	1,135		1,151
Weighted-average price per share issued	$	29.52	$	21.01

Stock-based Compensation Expense

Stock-based compensation expense is included in costs and expenses as follows (in thousands):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Cost of product revenue	$	314	$	309	$	1,039	$	887
Cost of service revenue	2,371		2,238		7,154		6,495
Research and development	7,976		7,648		24,127		22,249
Sales and marketing	19,609		17,378		58,380		50,183
General and administrative	4,037		3,520		12,029		10,528
Total stock-based compensation expense	$	34,307	$	31,093	$	102,729	$	90,342

The following table summarizes stock-based compensation expense by award type (in thousands):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
RSUs	$	29,904	$	27,342	$	89,807	$	79,244
Stock options	1,811		1,516		5,581		5,062
ESPP	2,592		2,235		7,341		6,036
Total stock-based compensation expense	$	34,307	$	31,093	$	102,729	$	90,342

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Income tax benefit associated with stock-based compensation	$	6,722	$	8,223	$	21,111	$	22,961

Share Repurchase Program

In January 2016, our board of directors approved the Share Repurchase Program (the “Repurchase Program”), which authorized the repurchase of up to $200.0 million of our outstanding common stock through December 31, 2017. In October 2016 and July 2017, our board of directors approved the increases in the aggregate authorized repurchase amount under the Repurchase Program by $100.0 million and $300.0 million, respectively. Under the Repurchase Program, share repurchases may be made by us from time to time in privately negotiated transactions or in open-market transactions. The Repurchase Program does not require us to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time without prior notice.

During the three months ended September 30, 2017, we repurchased 2.4 million shares of common stock under the Repurchase Program in open market transactions at an average price of $37.19 per share, for an aggregate purchase price of $90.8 million. During the nine months ended September 30, 2017, we repurchased 3.3 million shares of common stock under the Repurchase Program in open market transactions at an average price of $37.67 per share, for an aggregate purchase price of $124.0 million. As of September 30, 2017, $365.2 million remained available for future share repurchases under the Repurchase Program. See Note 17 to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding the Repurchase Program.

Property and Equipment—Net

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT—Net

PROPERTY AND EQUIPMENT—NET

Property and equipment—net consisted of the following (in thousands):



	September 30, 2017			December 31, 2016
Building and building improvements	$	131,054		$	49,783
Computer equipment and software	76,872			65,323
Land	62,226			35,079
Leasehold improvements	20,690			18,699
Evaluation units	20,169			20,173
Furniture and fixtures	13,892			13,995
Construction-in-progress	2,971			4,669
Total property and equipment	327,874			207,721
Less: accumulated depreciation	(87,983		)	(70,472		)
Property and equipment—net	$	239,891		$	137,249

In April 2017, we purchased certain real estate in Burnaby, Canada for $84.8 million. The purchase was accounted for under the asset acquisition method. The cost of the assets acquired was allocated to land and buildings based on their relative fair values. The amounts allocated to land and buildings were $12.7 million and $72.1 million, respectively.

Depreciation expense was $11.7 million and $10.2 million during the three months ended September 30, 2017 and September 30, 2016, respectively. Depreciation expense was $34.7 million and $28.6 million during the nine months ended September 30, 2017 and September 30, 2016, respectively.

Subsequent Event	9 Months Ended
Subsequent Event	Sep. 30, 2017
Subsequent Events [Abstract]
SUBSEQUENT EVENT	SUBSEQUENT EVENT In October 2017, our board of directors approved a $400.0 million increase to authorized stock repurchases under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $1.0 billion.

Stockholders' Equity , Additional Information Related To ESPP (Details) - Employee Stock Purchase Plan [Member] - $ / shares shares in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average fair value per share granted (in dollars per share)	$ 8.73	$ 7.68
Shares issued under the ESPP (in shares)	1,135	1,151
Weighted-average price per share issued (in dollars per share)	$ 29.52	$ 21.01

Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory, Net [Abstract]
Raw materials	$ 13,733	$ 18,924
Finished goods	59,862	87,963
Inventory	73,595	106,887
Distributors Holding Inventory [Member]
Inventory, Net [Abstract]
Finished goods	$ 1,000	$ 1,000

Subsequent Event (Details) - Share Repurchase Program [Member] - USD ($) $ in Millions	1 Months Ended
	Oct. 31, 2017	Jul. 31, 2017	Oct. 31, 2016	Jan. 31, 2016
Subsequent Event [Line Items]
Additional shares authorized		$ 300.0	$ 100.0
Stock repurchase program, authorized amount				$ 200.0
Subsequent Event
Subsequent Event [Line Items]
Additional shares authorized	$ 400.0
Stock repurchase program, authorized amount	$ 1,000.0

Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Net income	$ 26,610	$ 6,291	$ 60,360	$ 7,021
Other comprehensive income (loss):
Change in unrealized gains (losses) on investments	172	(879)	506	1,670
Tax provision (benefit) related to change in unrealized gains (losses) on investments	65	(308)	157	584
Other comprehensive income (loss)	107	(571)	349	1,086
Comprehensive income	$ 26,717	$ 5,720	$ 60,709	$ 8,107

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Restricted Stock Units Award Activity

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



	Restricted Stock Units Outstanding
	Number of Shares		Weighted-Average Grant Date Fair Value per Share
Balance—December 31, 2016	9,509		$	31.01
Granted	3,630		37.29
Forfeited	(928	)	34.07
Vested	(3,153	)	29.02
Balance—September 30, 2017	9,058		$	34.01

Schedule of Share-based Compensation, Shares Withheld for Taxes

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



	Nine Months Ended
	September 30, 2017		September 30, 2016
Shares withheld for taxes	995		937
Amount withheld for taxes	$	35,869	$	29,886

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

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



	Three months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Expected term in years	4.4		4.3		4.4		4.3
Volatility	33	%	38	%	36	%	42	%
Risk-free interest rate	1.8	%	1.1	%	1.9	%	1.1	%
Dividend rate	—	%	—	%	—	%	—	%

Schedule of Share-based Compensation, Stock Options, Activity

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



	Options Outstanding
	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance—December 31, 2016	6,187		$	23.79
Granted	536		37.26
Forfeited	(164	)	30.84
Exercised	(1,569	)	18.04
Balance—September 30, 2017	4,990		$	26.82
Options vested and expected to vest—September 30, 2017	4,990		$	26.82	3.2	$	48,315
Options exercisable—September 30, 2017	3,418		$	24.74	2.0	$	39,413

Schedule of Share-based Compensation, Stock Options, Activity, Additional Information

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Weighted-average fair value per share granted	$	11.09	$	10.62	$	12.17	$	9.08
Intrinsic value of options exercised	3,432		9,340		30,333		35,593
Fair value of options vested	1,562		1,706		6,691		4,583

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions

In determining the fair value of the ESPP, we use the Black-Scholes option pricing model that employs the following weighted-average assumptions:



	Nine Months Ended
	September 30, 2017		September 30, 2016
Expected term in years	0.5		0.5
Volatility	29	%	39	%
Risk-free interest rate	0.9	%	0.4	%
Dividend rate	—	%	—	%

Schedule of Share-based Payment Award Employee Stock Purchase Plan Additional Information

Additional information related to the ESPP is provided below (in thousands, except per share amounts):



	Nine Months Ended
	September 30, 2017		September 30, 2016
Weighted-average fair value per share granted	$	8.73	$	7.68
Shares issued under the ESPP	1,135		1,151
Weighted-average price per share issued	$	29.52	$	21.01

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

Stock-based compensation expense is included in costs and expenses as follows (in thousands):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Cost of product revenue	$	314	$	309	$	1,039	$	887
Cost of service revenue	2,371		2,238		7,154		6,495
Research and development	7,976		7,648		24,127		22,249
Sales and marketing	19,609		17,378		58,380		50,183
General and administrative	4,037		3,520		12,029		10,528
Total stock-based compensation expense	$	34,307	$	31,093	$	102,729	$	90,342

Schedule of Employee Service Share based Compensation Allocation of Recognized Period Costs by Award Type

The following table summarizes stock-based compensation expense by award type (in thousands):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
RSUs	$	29,904	$	27,342	$	89,807	$	79,244
Stock options	1,811		1,516		5,581		5,062
ESPP	2,592		2,235		7,341		6,036
Total stock-based compensation expense	$	34,307	$	31,093	$	102,729	$	90,342

Income Tax Benefit from Stock Option Plans

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Income tax benefit associated with stock-based compensation	$	6,722	$	8,223	$	21,111	$	22,961

Property and Equipment—Net (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		$ 327,874		$ 327,874		$ 207,721
Less: accumulated depreciation		(87,983)		(87,983)		(70,472)
Property and equipment - net		239,891		239,891		137,249
Real estate properties acquired	$ 84,800			121,641	$ 50,319
Depreciation expense		11,700	$ 10,200	34,700	$ 28,600
Building and building improvements [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		131,054		131,054		49,783
Computer equipment and software [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		76,872		76,872		65,323
Land [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		62,226		62,226		35,079
Real estate properties acquired	12,700
Leasehold improvements and tooling [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		20,690		20,690		18,699
Evaluation units [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		20,169		20,169		20,173
Furniture and fixtures [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		13,892		13,892		13,995
Construction-in-progress [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Total property and equipment		$ 2,971		$ 2,971		$ 4,669
Building [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Real estate properties acquired	$ 72,100

Net Income Per Share , Calculation of Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Line Items]
Net income	$ 26,610	$ 6,291	$ 60,360	$ 7,021
Basic shares:
Weighted-average common shares outstanding-basic (in shares)	175,519	173,335	175,253	172,212
Diluted shares:
Weighted-average common shares outstanding-basic (in shares)	175,519	173,335	175,253	172,212
Effect of potentially dilutive securities:
Weighted-average shares used to compute diluted net income per share (in shares)	178,973	177,938	178,987	176,046
Basic (in dollars per share)	$ 0.15	$ 0.04	$ 0.34	$ 0.04
Diluted (in dollars per share)	$ 0.15	$ 0.04	$ 0.34	$ 0.04
Restricted Stock Units (RSUs) [Member]
Effect of potentially dilutive securities:
Employee stock options and purchase rights (in shares)	2,091	2,513	2,249	1,891
Stock Options [Member]
Effect of potentially dilutive securities:
Employee stock options and purchase rights (in shares)	1,327	2,009	1,446	1,867
ESPP [Member]
Effect of potentially dilutive securities:
Employee stock options and purchase rights (in shares)	36	81	39	76

Financial Instruments and Fair Value

9 Months Ended

Sep. 30, 2017

Financial Instruments and Fair Value [Abstract]

FINANCIAL INSTRUMENTS AND FAIR VALUE

The following tables summarize our investments (in thousands):



	September 30, 2017
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt securities	$	427,655	$	91	$	(619	)	$	427,127
Commercial paper	97,757		1		(23		)	97,735
U.S. government and agency securities	53,243		2		(118		)	53,127
Municipal bonds	39,854		22		(29		)	39,847
Total available-for-sale securities	$	618,509	$	116	$	(789	)	$	617,836

	December 31, 2016
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt securities	$	379,494	$	43	$	(925	)	$	378,612
Commercial paper	95,110		23		(25		)	95,108
U.S. government and agency securities	64,604		16		(79		)	64,541
Municipal bonds	59,257		3		(235		)	59,025
Certificates of deposit and term deposits ⁽¹⁾	4,219		—		—			4,219
Total available-for-sale securities	$	602,684	$	85	$	(1,264	)	$	601,505

⁽¹⁾ The majority of our certificates of deposit and term deposits are foreign deposits.

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



	September 30, 2017
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	294,479	$	(482	)	$	35,645	$	(137	)	$	330,124	$	(619	)
U.S. government and agency securities	43,187		(66		)	5,446		(52		)	48,633		(118		)
Municipal bonds	16,868		(14		)	3,180		(15		)	20,048		(29		)
Commercial paper	36,844		(23		)	—		—			36,844		(23		)
Total available-for-sale securities	$	391,378	$	(585	)	$	44,271	$	(204	)	$	435,649	$	(789	)



	December 31, 2016
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	311,980	$	(910	)	$	13,541	$	(15	)	$	325,521	$	(925	)
Municipal bonds	52,200		(235		)	—		—			52,200		(235		)
U.S. government and agency securities	33,430		(79		)	—		—			33,430		(79		)
Commercial paper	17,394		(25		)	—		—			17,394		(25		)
Total available-for-sale securities	$	415,004	$	(1,249	)	$	13,541	$	(15	)	$	428,545	$	(1,264	)

The contractual maturities of our investments were as follows (in thousands):



	September 30, 2017		December 31, 2016
Due within one year	$	369,961	$	376,522
Due between one and three years	247,875		224,983
Total	$	617,836	$	601,505

Available-for-sale securities are reported at fair value, with unrealized gains and losses and the related tax impact included as a separate component of stockholders’ equity and in comprehensive income. Realized gains and losses on available-for-sale securities are insignificant in the periods presented and are included in Other income (expense)—net in our condensed consolidated statements of operations. We use the specific identification method to determine the cost basis of investments sold.

The unrealized losses on our available-for-sale securities were caused by fluctuations in market value and interest rates as a result of the economic environment. As the decline in market value are attributable to changes in market conditions and not credit quality, and because we have concluded currently that we neither intend to sell nor is it more likely than not that we will be required to sell these investments prior to a recovery of par value, we do not consider these investments to be other-than temporarily impaired as of September 30, 2017.

Fair Value Accounting—We apply the following fair value hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3—Unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

We measure the fair value of money market funds and certain U.S. government and agency securities using quoted prices in active markets for identical assets. 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.

Fair Value of Financial Instruments

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 as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017								December 31, 2016
	Aggregate Fair Value		Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs		Aggregate Fair Value		Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
			(Level 1)		(Level 2)		(Level 3)				(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate debt securities	$	427,127	$	—	$	427,127	$	—	$	378,612	$	—	$	378,612	$	—
Commercial paper	111,726		—		111,726		—		105,097		—		105,097		—
U.S. government and agency securities	53,127		47,681		5,446		—		64,541		52,082		12,459		—
Municipal bonds	39,847		—		39,847		—		59,025		—		59,025		—
Money market funds	20,271		20,271		—		—		38,649		38,649		—		—
Certificates of deposit and term deposits ⁽¹⁾	55,424		—		55,424		—		59,479		—		59,479		—
Total	$	707,522	$	67,952	$	639,570	$	—	$	705,403	$	90,731	$	614,672	$	—

Reported as:
Cash equivalents	$	89,686							$	103,898
Short-term investments	369,961								376,522
Long-term investments	247,875								224,983
Total	$	707,522							$	705,403

⁽¹⁾ Subsequent to the issuance of our consolidated financial statements as of and for the year ended December 31, 2016, we determined that $55.3 million in 30-day term deposits, included within cash and cash equivalents in the consolidated balance sheet as of December 31, 2016, should have also been included as Level 2 investments in the fair value hierarchy table for financial assets and financial liabilities measured at fair value on a recurring basis. Accordingly, we have corrected the above table as of December 31, 2016, the effect of which is immaterial to the financial statements as a whole.

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, 2017.

Stockholders' Equity , ESPP Information (Details) - Employee Stock Purchase Plan [Member]	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term in years	6 months	6 months
Volatility	29.00%	39.00%
Risk-free interest rate	0.90%	0.40%
Dividend rate	0.00%	0.00%

Defined Contribution Plans	9 Months Ended
Defined Contribution Plans	Sep. 30, 2017
Retirement Benefits [Abstract]
DEFINED CONTRIBUTION PLANS	DEFINED CONTRIBUTION PLANS Our tax-deferred savings plan under our 401(k) Plan, permits participating employees to defer a portion of their pre-tax earnings. In Canada, we have a Group Registered Retirement Savings Plan Program (the “RRSP”), which permits participants to make tax deductible contributions. Our board of directors approved 50% matching contributions on employee contributions up to 4% of each employee’s eligible earnings. Our matching contributions to our 401(k) Plan and the RRSP for the three months ended September 30, 2017 and September 30, 2016 were $1.2 million and $1.2 million, respectively. Our matching contributions to our 401(k) Plan and the RRSP for the nine months ended September 30, 2017 and September 30, 2016 were $3.8 million and $3.4 million, respectively.

Condensed Consolidated Statements of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
REVENUE:
Product	$ 137,095	$ 127,972	$ 415,053	$ 389,185
Service	237,122	188,674	663,209	523,428
Total revenue	374,217	316,646	1,078,262	912,613
COST OF REVENUE:
Product	58,106	50,267	174,190	152,368
Service	35,543	34,532	105,675	94,578
Total cost of revenue	93,649	84,799	279,865	246,946
GROSS PROFIT:
Product	78,989	77,705	240,863	236,817
Service	201,579	154,142	557,534	428,850
Total gross profit	280,568	231,847	798,397	665,667
OPERATING EXPENSES:
Research and development	53,486	47,239	155,840	137,495
Sales and marketing	172,361	154,831	509,098	463,628
General and administrative	21,025	22,006	65,513	63,629
Restructuring charges	0	2,283	340	3,164
Total operating expenses	246,872	226,359	730,791	667,916
OPERATING INCOME (LOSS)	33,696	5,488	67,606	(2,249)
INTEREST INCOME	3,866	1,888	9,421	5,339
OTHER INCOME (EXPENSE)—NET	344	(787)	1,889	(3,449)
INCOME (LOSS) BEFORE INCOME TAXES	37,906	6,589	78,916	(359)
PROVISION FOR (BENEFIT FROM) INCOME TAXES	11,296	298	18,556	(7,380)
NET INCOME	$ 26,610	$ 6,291	$ 60,360	$ 7,021
Net income per share (Note 8):
Basic (in dollars per share)	$ 0.15	$ 0.04	$ 0.34	$ 0.04
Diluted (in dollars per share)	$ 0.15	$ 0.04	$ 0.34	$ 0.04
Weighted-average shares outstanding:
Basic (in shares)	175,519	173,335	175,253	172,212
Diluted (in shares)	178,973	177,938	178,987	176,046

Foreign Currency Derivatives (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

There were no outstanding forward exchange contracts as of September 30, 2017. The notional amount of forward exchange contracts to hedge balance sheet accounts December 31, 2016 were (in thousands):



	Buy/Sell	Notional
Balance Sheet Contracts:
Currency—As of December 31, 2016
CAD	Sell	$	2,615

Net Income Per Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

NET INCOME PER SHARE

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

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Numerator:
Net income	$	26,610	$	6,291	$	60,360	$	7,021

Denominator:
Basic shares:
Weighted-average common stock outstanding-basic	175,519		173,335		175,253		172,212
Diluted shares:
Weighted-average common stock outstanding-basic	175,519		173,335		175,253		172,212
Effect of potentially dilutive securities:
RSUs	2,091		2,513		2,249		1,891
Stock options	1,327		2,009		1,446		1,867
ESPP	36		81		39		76
Weighted-average shares used to compute diluted net income per share	178,973		177,938		178,987		176,046
Net income per share:
Basic	$	0.15	$	0.04	$	0.34	$	0.04
Diluted	$	0.15	$	0.04	$	0.34	$	0.04

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 thousands):



	Three Months Ended		Nine Months Ended
	September 30, 2017	September 30, 2016	September 30, 2017	September 30, 2016
RSUs	1,038	2,409	1,567	3,946
Stock options	1,081	836	1,108	1,067
ESPP	363	353	208	211
	2,482	3,598	2,883	5,224

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2017
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES Our effective tax rate was 30% for the three months ended September 30, 2017, compared to an effective tax rate of 5% for the same period last year. Our effective tax rate was 24% for the nine months ended September 30, 2017, compared to an effective tax rate of 2,053% for the same period last year. The effective tax rates for the periods presented are comprised of U.S. federal and state taxes, excess tax benefits from stock-based compensation, withholding taxes and foreign income taxes. The tax rates for the three months ended September 30, 2017 and September 30, 2016 were impacted by excess tax benefits of $1.8 million and $2.5 million, respectively, from stock-based compensation. The tax rates for the nine months ended September 30, 2017 and September 30, 2016 were impacted by excess tax benefits of $11.4 million and $8.7 million, respectively, from stock-based compensation. Our effective tax rates fluctuate based on the amount of pre-tax income or loss. The impact of discrete items, such as excess tax benefits from stock-based compensation, on our effective tax rate is greater when our pre-tax income is lower. As of September 30, 2017 and December 31, 2016, unrecognized tax benefits were $82.1 million and $65.5 million, respectively. The total amount of $80.4 million in unrecognized tax benefits, if recognized, would favorably affect our effective tax rate. It is our policy to classify accrued interest and penalties related to uncertain tax benefits in the provision for income taxes. As of September 30, 2017 and December 31, 2016, accrued interest and penalties were $12.9 million and $9.5 million, respectively. It is reasonably possible that our gross unrecognized tax benefits will decrease by up to $9.0 million in the next twelve months, primarily due to the lapse of the statute of limitations. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits. We file income tax returns in the U.S. federal jurisdiction and in various U.S. state and foreign jurisdictions. Generally, we are no longer subject to U.S. state and non-U.S. income tax examinations by tax authorities for tax years prior to 2009. We are no longer subject to examination by U.S federal income tax authorities for tax years prior to 2012. We are currently under examination by U.S federal income tax authorities for tax years 2012, 2013 and 2014. We have filed a waiver extending the statute of limitations to November 30, 2018 for U.S. federal income tax returns for tax years 2012, 2013 and 2014. In addition, the tax authorities in France are examining the inter-company relationship between Fortinet, Inc., Fortinet France and Fortinet Singapore. In May 2017, we received a notice from the French tax authorities that an audit was officially opened for tax years from 2007 to 2015.

Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Numerator:
Net income	$	26,610	$	6,291	$	60,360	$	7,021

Denominator:
Basic shares:
Weighted-average common stock outstanding-basic	175,519		173,335		175,253		172,212
Diluted shares:
Weighted-average common stock outstanding-basic	175,519		173,335		175,253		172,212
Effect of potentially dilutive securities:
RSUs	2,091		2,513		2,249		1,891
Stock options	1,327		2,009		1,446		1,867
ESPP	36		81		39		76
Weighted-average shares used to compute diluted net income per share	178,973		177,938		178,987		176,046
Net income per share:
Basic	$	0.15	$	0.04	$	0.34	$	0.04
Diluted	$	0.15	$	0.04	$	0.34	$	0.04

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share



	Three Months Ended		Nine Months Ended
	September 30, 2017	September 30, 2016	September 30, 2017	September 30, 2016
RSUs	1,038	2,409	1,567	3,946
Stock options	1,081	836	1,108	1,067
ESPP	363	353	208	211
	2,482	3,598	2,883	5,224

Financial Instruments and Fair Value (Tables)

9 Months Ended

Sep. 30, 2017

Financial Instruments and Fair Value [Abstract]

Summary of Investments

The following tables summarize our investments (in thousands):



	September 30, 2017
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt securities	$	427,655	$	91	$	(619	)	$	427,127
Commercial paper	97,757		1		(23		)	97,735
U.S. government and agency securities	53,243		2		(118		)	53,127
Municipal bonds	39,854		22		(29		)	39,847
Total available-for-sale securities	$	618,509	$	116	$	(789	)	$	617,836

	December 31, 2016
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt securities	$	379,494	$	43	$	(925	)	$	378,612
Commercial paper	95,110		23		(25		)	95,108
U.S. government and agency securities	64,604		16		(79		)	64,541
Municipal bonds	59,257		3		(235		)	59,025
Certificates of deposit and term deposits ⁽¹⁾	4,219		—		—			4,219
Total available-for-sale securities	$	602,684	$	85	$	(1,264	)	$	601,505

⁽¹⁾ The majority of our certificates of deposit and term deposits are foreign deposits.

Schedule of Unrealized Loss on Investments

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



	September 30, 2017
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	294,479	$	(482	)	$	35,645	$	(137	)	$	330,124	$	(619	)
U.S. government and agency securities	43,187		(66		)	5,446		(52		)	48,633		(118		)
Municipal bonds	16,868		(14		)	3,180		(15		)	20,048		(29		)
Commercial paper	36,844		(23		)	—		—			36,844		(23		)
Total available-for-sale securities	$	391,378	$	(585	)	$	44,271	$	(204	)	$	435,649	$	(789	)



	December 31, 2016
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	311,980	$	(910	)	$	13,541	$	(15	)	$	325,521	$	(925	)
Municipal bonds	52,200		(235		)	—		—			52,200		(235		)
U.S. government and agency securities	33,430		(79		)	—		—			33,430		(79		)
Commercial paper	17,394		(25		)	—		—			17,394		(25		)
Total available-for-sale securities	$	415,004	$	(1,249	)	$	13,541	$	(15	)	$	428,545	$	(1,264	)

Investments Classified by Contractual Maturity Date

The contractual maturities of our investments were as follows (in thousands):



	September 30, 2017		December 31, 2016
Due within one year	$	369,961	$	376,522
Due between one and three years	247,875		224,983
Total	$	617,836	$	601,505

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables present the fair value of our financial assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017								December 31, 2016
	Aggregate Fair Value		Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs		Aggregate Fair Value		Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
			(Level 1)		(Level 2)		(Level 3)				(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate debt securities	$	427,127	$	—	$	427,127	$	—	$	378,612	$	—	$	378,612	$	—
Commercial paper	111,726		—		111,726		—		105,097		—		105,097		—
U.S. government and agency securities	53,127		47,681		5,446		—		64,541		52,082		12,459		—
Municipal bonds	39,847		—		39,847		—		59,025		—		59,025		—
Money market funds	20,271		20,271		—		—		38,649		38,649		—		—
Certificates of deposit and term deposits ⁽¹⁾	55,424		—		55,424		—		59,479		—		59,479		—
Total	$	707,522	$	67,952	$	639,570	$	—	$	705,403	$	90,731	$	614,672	$	—

Reported as:
Cash equivalents	$	89,686							$	103,898
Short-term investments	369,961								376,522
Long-term investments	247,875								224,983
Total	$	707,522							$	705,403

Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Expected term in years	4 years 5 months 9 days	4 years 3 months 29 days	4 years 5 months 9 days	4 years 3 months 18 days
Volatility	33.00%	38.00%	36.00%	42.00%
Risk-free interest rate	1.80%	1.10%	1.90%	1.10%
Dividend rate	0.00%	0.00%	0.00%	0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance - Beginning (in shares)			6,187,000
Granted (in shares)			536,000
Forfeited (in shares)			(164,000)
Exercised (in shares)			(1,569,000)
Balance - Ending (in shares)	4,990,000		4,990,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Balance - Beginning (in dollars per share)			$ 23.79
Granted (in dollars per share)			37.26
Forfeited (in dollars per share)			30.84
Exercised (in dollars per share)			18.04
Balance - Ending (in dollars per share)	$ 26.82		$ 26.82
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Options vested and expected to vest, Outstanding (in shares)	4,990,000		4,990,000
Options vested and expected to vest, Weighted average exercise price (in dollars per share)	$ 26.82		$ 26.82
Options vested and expected to vest, Weighted average remaining contractual life (in years)			3 years 1 month 26 days
Options vested and expected to vest, Aggregate intrinsic value	$ 48,315		$ 48,315
Options exercisable, Outstanding (in shares)	3,418,000		3,418,000
Options exercisable, Weighted average exercise price (in dollars per share)	$ 24.74		$ 24.74
Options exercisable, Weighted average remaining contractual life (in years)			2 years 9 days
Options exercisable, Aggregate intrinsic value	$ 39,413		$ 39,413
Compensation cost not yet recognized	$ 15,300		$ 15,300
Compensation cost not yet recognized period of recognition			2 years 6 months 29 days
Weighted-average fair value per share granted	$ 11.09	$ 10.62	$ 12.17	$ 9.08
Intrinsic value of options exercised	$ 3,432	$ 9,340	$ 30,333	$ 35,593
Total fair value of awards vested	$ 1,562	$ 1,706	$ 6,691	$ 4,583
Stock-based Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Remaining shares available for grant under the plans	49,841,761		49,841,761
Share Repurchase Program [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Treasury Stock Acquired, Average Cost Per Share	$ 37.19		$ 37.67
Stock repurchase program, remaining repurchase amount	$ 365,200		$ 365,200

Business Combination - Purchase Price Allocation (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Jun. 07, 2016
Business Acquisition [Line Items]
Goodwill	$ 14,553	$ 14,553
AccelOps, Inc. [Member]
Business Acquisition [Line Items]
Cash and cash equivalents			$ 171
Accounts receivable			1,126
Prepaid expenses and other assets			430
Property and equipment			203
Deferred tax assets			3,435
Finite-lived intangible assets			14,900
Indefinite-lived intangible assets in process research and development			1,600
Goodwill			9,861
Total assets acquired			31,726
Deferred revenue			4,400
Accounts payable and accrued liabilities			3,348
Other liabilities			1,694
Total liabilities assumed			9,442
Total purchase price allocation			$ 22,284

Financial Instruments and Fair Value , Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 618,509	$ 602,684
Unrealized Gains	116	85
Unrealized Losses	(789)	(1,264)
Fair Value	617,836	601,505
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less Than 12 Months, Fair Value	391,378	415,004
Less Than 12 Months, Unrealized Losses	(585)	(1,249)
12 Months or Greater, Fair Value	44,271	13,541
12 Months or Greater, Unrealized Losses	(204)	(15)
Total, Fair Value	435,649	428,545
Total, Unrealized Losses	(789)	(1,264)
Available-for-sale Securities [Abstract]
Due within one year	369,961	376,522
Due between one and three years	247,875	224,983
Fair Value	617,836	601,505
Corporate debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	427,655	379,494
Unrealized Gains	91	43
Unrealized Losses	(619)	(925)
Fair Value	427,127	378,612
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less Than 12 Months, Fair Value	294,479	311,980
Less Than 12 Months, Unrealized Losses	(482)	(910)
12 Months or Greater, Fair Value	35,645	13,541
12 Months or Greater, Unrealized Losses	(137)	(15)
Total, Fair Value	330,124	325,521
Total, Unrealized Losses	(619)	(925)
Available-for-sale Securities [Abstract]
Fair Value	427,127	378,612
Municipal bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	39,854	59,257
Unrealized Gains	22	3
Unrealized Losses	(29)	(235)
Fair Value	39,847	59,025
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less Than 12 Months, Fair Value	16,868	52,200
Less Than 12 Months, Unrealized Losses	(14)	(235)
12 Months or Greater, Fair Value	3,180	0
12 Months or Greater, Unrealized Losses	(15)	0
Total, Fair Value	20,048	52,200
Total, Unrealized Losses	(29)	(235)
Available-for-sale Securities [Abstract]
Fair Value	39,847	59,025
Certificates of deposit and term deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		4,219
Unrealized Gains		0
Unrealized Losses		0
Fair Value		4,219
Available-for-sale Securities [Abstract]
Fair Value		4,219
U.S. government and agency securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	53,243	64,604
Unrealized Gains	2	16
Unrealized Losses	(118)	(79)
Fair Value	53,127	64,541
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less Than 12 Months, Fair Value	43,187	33,430
Less Than 12 Months, Unrealized Losses	(66)	(79)
12 Months or Greater, Fair Value	5,446	0
12 Months or Greater, Unrealized Losses	(52)	0
Total, Fair Value	48,633	33,430
Total, Unrealized Losses	(118)	(79)
Available-for-sale Securities [Abstract]
Fair Value	53,127	64,541
Commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	97,757	95,110
Unrealized Gains	1	23
Unrealized Losses	(23)	(25)
Fair Value	97,735	95,108
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less Than 12 Months, Fair Value	36,844	17,394
Less Than 12 Months, Unrealized Losses	(23)	(25)
12 Months or Greater, Fair Value	0	0
12 Months or Greater, Unrealized Losses	0	0
Total, Fair Value	36,844	17,394
Total, Unrealized Losses	(23)	(25)
Available-for-sale Securities [Abstract]
Fair Value	$ 97,735	$ 95,108

Commitments and Contingencies (Details) - USD ($)	3 Months Ended		9 Months Ended
Commitments and Contingencies (Details) - USD ($)	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Commitment
Rent expense	$ 4,100,000	$ 6,100,000	$ 12,500,000	$ 14,700,000
Inventory purchase commitments	93,664,000		93,664,000
Other contractual commitments and open purchase orders	67,253,000		67,253,000
Indemnification Provisions [Member]
Commitment
Awards under indemnification provisions			0
Commitment to Purchase Certain Real Estate Properties
Commitment
Other contractual commitments and open purchase orders	$ 8,800,000		$ 8,800,000

Inventory (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventory

Inventory consisted of the following (in thousands):



	September 30, 2017		December 31, 2016
Raw materials	$	13,733	$	18,924
Finished goods	59,862		87,963
Inventory	$	73,595	$	106,887

Net Income Per Share , Anti Dilutive Securities (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	2,482	3,598	2,883	5,224
Restricted Stock Units (RSUs) [Member] \| Stock Compensation Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	1,038	2,409	1,567	3,946
Stock Options [Member] \| Stock Compensation Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	1,081	836	1,108	1,067
ESPP [Member] \| Stock Compensation Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	363	353	208	211

Goodwill and Other Intangible Assets - Net (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

Schedule of Finite-Lived and Indefinite-Lived Intangible Assets by Major Class

The following tables present other intangible assets—net as of September 30, 2017 and December 31, 2016 (in thousands, except years):



	September 30, 2017
	Weighted-Average Useful Life (in Years)	Gross		Accumulated Amortization		Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies and other	3.8	$	23,984	$	12,501	$	11,483
Customer relationships	4.7	14,500		9,292		5,208
		38,484		21,793		16,691

Indefinite-lived intangible assets:
In-process research and development		1,600		—		1,600
Total other intangible assets—net		$	40,084	$	21,793	$	18,291



	December 31, 2016
	Weighted-Average Useful Life (in Years)	Gross		Accumulated Amortization		Net
Other intangible assets—net:
Finite-lived intangible assets:
Developed technologies and other	3.8	$	23,984	$	8,750	$	15,234
Customer relationships	4.7	14,500		6,506		7,994
		38,484		15,256		23,228

Indefinite-lived intangible assets:
In-process research and development		1,600		—		1,600
Total other intangible assets—net		$	40,084	$	15,256	$	24,828

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

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



	Amount
Years:
2017 (remainder)	$	2,037
2018	6,885
2019	5,406
2020	2,363
Total	$	16,691

Related Party Transactions (Details) - Law Firm where Board Member's Son is a Partner - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Related-party expenses incurred	$ 0.4	$ 0.1	$ 0.9	$ 0.3
Amounts due and payable to the law firm	$ 0.5		$ 0.5		$ 0.1

Segment Information (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Revenue and Accounts Receivable from external customers by geographic region



	Three Months Ended				Nine Months Ended
Revenue	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Americas:
United States	$	123,646	$	108,142	$	367,124	$	309,041
Latin America (“LATAM”)	24,372		15,614		64,567		46,850
Canada ⁽¹⁾	13,135		10,118		36,539		30,675
Total Americas	161,153		133,874		468,230		386,566
Europe, Middle East and Africa (“EMEA”)	138,335		116,967		394,214		336,911
Asia Pacific (“APAC”)	74,729		65,805		215,818		189,136
Total revenue	$	374,217	$	316,646	$	1,078,262	$	912,613

⁽¹⁾ Certain amounts in the prior periods in Canada were reclassified to the United States to conform with the 2017 presentation as a result of a change in the bill-to address of a customer.

The following customers, each of which is a distributor, accounted for 10% or more of our revenue:



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Exclusive Networks Group ⁽²⁾	29	%	19	%	23	%	19	%
Ingram Micro	11	%	10	%	10	%	*

The following customers, each of which is a distributor, accounted for 10% or more of net accounts receivable:



	September 30, 2017 ⁽²⁾		December 31, 2016
Exclusive Networks Group	31	%	26	%
Fine Tec Computers	*		10	%

* Represents less than 10%

⁽²⁾ Due to the acquisition by Exclusive Networks Group of the U.S. division of Fine Tec Computers (“Fine Tec U.S.”) in July 2017, Fine Tec U.S.’s revenue and accounts receivable have been combined with Exclusive Networks Group’s. As of September 30, 2017, Fine Tec Canada's accounts receivable represent less than 10% of our net accounts receivable.

Property and equipment by geographic region



Property and Equipment—net	September 30, 2017		December 31, 2016
Americas:
U.S.	$	112,210	$	96,414
Canada	101,103		12,881
LATAM	360		607
Total Americas	213,673		109,902
EMEA:
France	12,185		13,241
Other EMEA	5,903		6,391
Total EMEA	18,088		19,632
APAC	8,130		7,715
Total property and equipment—net	$	239,891	$	137,249

Property and Equipment—Net (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment - Net

Property and equipment—net consisted of the following (in thousands):



	September 30, 2017			December 31, 2016
Building and building improvements	$	131,054		$	49,783
Computer equipment and software	76,872			65,323
Land	62,226			35,079
Leasehold improvements	20,690			18,699
Evaluation units	20,169			20,173
Furniture and fixtures	13,892			13,995
Construction-in-progress	2,971			4,669
Total property and equipment	327,874			207,721
Less: accumulated depreciation	(87,983		)	(70,472		)
Property and equipment—net	$	239,891		$	137,249

Related Party Transactions	9 Months Ended
Related Party Transactions	Sep. 30, 2017
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	RELATED PARTY TRANSACTIONS The son of one member of our board of directors is a partner of an outside law firm that we utilize for certain complex litigation matters. Expenses for legal services provided by the law firm were $0.4 million and $0.1 million during the three months ended September 30, 2017 and September 30, 2016, respectively. Expenses for legal services provided by the law firm were $0.9 million and $0.3 million during the nine months ended September 30, 2017 and September 30, 2016, respectively. Amounts due and payable to the law firm were $0.5 million and $0.1 million as of September 30, 2017 and December 31, 2016, respectively.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2017
Accounting Policies [Abstract]
Basis of Presentation and Preparation	Basis of Presentation and Preparation—The unaudited condensed consolidated financial statements of Fortinet, Inc. and its wholly owned subsidiaries (collectively, “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2016, contained in our Annual Report on Form 10-K filed with the SEC on March 1, 2017. In the opinion of management, all adjustments, which includes normal recurring adjustments, considered necessary for a fair presentation have been included. All intercompany balances, transactions and cash flows have been eliminated. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results for the full year or for any future periods. The condensed consolidated balance sheet as of December 31, 2016 is derived from the audited consolidated financial statements for the year ended December 31, 2016. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Certain amounts in prior periods have been reclassified to conform with current period presentation. There have been no material changes to our significant accounting policies as of and for the three and nine months ended September 30, 2017, except for changes to our policies related to business combinations. For more information, refer to the “Recently Adopted Accounting Standards.”
Recently Adopted Accounting Standards and Recent Accounting Standards Not Yet Effective	Recently Adopted Accounting Standards Business Combinations – Definition of a Business In January 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-01—Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business to assist organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. We elected to early adopt ASU 2017-01 on a prospective basis beginning on January 1, 2017. The adoption of ASU 2017-01 did not have a material impact on our consolidated financial statements. Recent Accounting Standards Not Yet Effective Share-Based Payment Accounting In May 2017, the FASB issued ASU 2017-09—Compensation—Stock Compensation to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective prospectively for us beginning on January 1, 2018. We do not believe ASU 2017-09 will have a material impact on our consolidated financial statements. Goodwill Impairment In January 2017, the FASB issued ASU 2017-04—Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 from the goodwill impairment test which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and should recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for us beginning on January 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. At adoption, this update will require a prospective approach. We early adopted ASU 2017-04 on October 1, 2017. The adoption did not have a material impact on our consolidated financial statements. Income Taxes – Intra-Entity Asset Transfers In October 2016, the FASB issued ASU 2016-16—Income Taxes: Intra-Entity Transfer of Assets Other Than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 will be effective for us beginning on January 1, 2018. We are currently evaluating the impact of ASU 2016-16 on our consolidated financial statements. Financial Instruments – Credit Losses In June 2016, the FASB issued ASU 2016-13—Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for us beginning on January 1, 2020, with the option to adopt early on January 1, 2019. Based on our current accounts receivable portfolio, we do not believe ASU 2016-13 will have a material impact on our consolidated financial statements. Leases In February 2016, the FASB issued ASU 2016-02—Leases, which requires the recognition of right-of-use assets and lease liabilities on the consolidated balance sheet for substantially all leases. The new guidance includes a number of optional practical expedients that entities may elect to apply. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. This new guidance will be effective for us beginning on January 1, 2019, using a modified retrospective approach. Based on our current lease portfolio, we currently estimate that the value of leased assets and liabilities that may be recognized to be at least $40.0 million. We are continuing to evaluate the impact of ASU 2016-02 and our estimate is subject to change. We do not believe that ASU 2016-02 will have a material impact on our consolidated statements of operations. We expect to expand our disclosures in the notes to consolidated financial statements include more details on our leases, significant judgments and lease-related amounts recognized in the consolidated financial statements. Financial Instruments – Recognition and Measurement In January 2016, the FASB issued ASU 2016-01—Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which requires most equity investments to be measured at fair value, with subsequent changes in fair value recognized in net income. A practicality exception will apply to those equity investments that do not have a readily determinable fair value. These investments may be measured at cost, adjusted for changes in observable prices minus impairment. ASU 2016-01 is effective for our cost-method investments beginning on January 1, 2018 on a prospective basis. The adoption of ASU 2016-01 will result in the adjustment to the carrying amount when the cost-method investees complete a financing round subsequent to adoption date. Revenue Recognition In May 2014, the FASB issued ASU 2014-09—Revenue from Contracts with Customers, which outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, accordingly, we expect more judgment and estimates may be required within the revenue recognition process than is required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 will be effective for us beginning January 1, 2018. ASU 2014-09 permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We will adopt the standard using the modified retrospective method and apply the standard to contracts that are not completed as of January 1, 2018, and recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. We have substantially completed our analysis of historical contracts and believe that the quantitative impact on revenue in our consolidated financial statements is not material. We expect the pattern of revenue recognition from the sales of our FortiGate and other appliances and FortiGuard and FortiCare subscription services to be substantially unchanged on an ongoing basis. We believe that the acceleration of revenue and associated cost of sales to certain channel partners which are currently accounted for only once the product is sold through to the end-customer, and the allocation of revenue related to software due to the removal of the residual method will not have a significant impact on our financial statements. Under ASU 2014-09, we will be required to capitalize and amortize incremental costs related to obtaining customer contracts, such as sales commission costs related to service contracts. Under current U.S. GAAP, we expense all sales commissions when incurred. Our quantitative analysis of the impact of the change in accounting for sales commissions, including the various components of our current and future compensation plans and the key assumptions associated with the amortization term, is in progress. We believe that the amortization of incremental commission costs of obtaining customer contracts is likely to have a material impact on our financial statements. We expect to expand our financial statement disclosures, which may include more details on our disaggregation of revenue, performance obligations, contract balances and costs to obtain a contract, as well as any significant judgments. We are in the process of documenting process changes, implementing required changes in our systems and developing new controls to support recognition and disclosure under ASU 2014-09. Reviews are ongoing, which may alter our conclusions and the anticipated financial impact. We will continue to assess the impact of ASU 2014-09, along with industry trends until the adoption date.

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 60,360	$ 7,021
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,208	34,896
Amortization of investment premiums	2,125	3,828
Stock-based compensation	102,729	90,342
Other non-cash items—net	3,179	4,846
Changes in operating assets and liabilities:
Accounts receivable—net	51,447	12,788
Inventory	17,687	(24,555)
Deferred tax assets	(22,133)	(35,005)
Prepaid expenses and other current assets	(9,599)	4,301
Other assets	(360)	(2,595)
Accounts payable	(16,537)	(1,584)
Accrued liabilities	8,052	598
Accrued payroll and compensation	(3,531)	3,253
Other liabilities	(3,830)	(3,119)
Deferred revenue	184,350	142,867
Income taxes payable	21,716	6,789
Net cash provided by operating activities	436,863	244,671
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	(359,569)	(370,573)
Sales of investments	9,995	21,805
Maturities of investments	329,132	344,959
Purchases of property and equipment	(121,641)	(50,319)
Payments made in connection with business acquisition, net of cash acquired	0	(22,087)
Net cash used in investing activities	(142,083)	(76,215)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	61,836	42,292
Taxes paid related to net share settlement of equity awards	(35,869)	(29,886)
Repurchase of common stock	(123,956)	(75,000)
Payments of debt assumed in connection with business acquisition	0	(1,626)
Net cash used in financing activities	(97,989)	(64,220)
NET INCREASE IN CASH AND CASH EQUIVALENTS	196,791	104,236
CASH AND CASH EQUIVALENTS—Beginning of period	709,003	543,277
CASH AND CASH EQUIVALENTS—End of period	905,794	647,513
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Liability for purchase of property and equipment	8,598	8,325
Transfers of evaluation units from inventory to property and equipment	$ 16,255	$ 15,627

Condensed Consolidated Balance Sheets Parenthetical - USD ($) shares in Thousands, $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Reserves for sales returns and doubtful accounts	$ 14,787	$ 11,235
Common Stock, par value (dollars per share)	$ 0.001	$ 0.001
Common Stock, shares authorized	300,000	300,000
Common Stock, shares issued	174,625	173,078
Common Stock, shares outstanding	174,625	173,078

Segment Information

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION

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

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



	Three Months Ended				Nine Months Ended
Revenue	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Americas:
United States	$	123,646	$	108,142	$	367,124	$	309,041
Latin America (“LATAM”)	24,372		15,614		64,567		46,850
Canada ⁽¹⁾	13,135		10,118		36,539		30,675
Total Americas	161,153		133,874		468,230		386,566
Europe, Middle East and Africa (“EMEA”)	138,335		116,967		394,214		336,911
Asia Pacific (“APAC”)	74,729		65,805		215,818		189,136
Total revenue	$	374,217	$	316,646	$	1,078,262	$	912,613

⁽¹⁾ Certain amounts in the prior periods in Canada were reclassified to the United States to conform with the 2017 presentation as a result of a change in the bill-to address of a customer.



Property and Equipment—net	September 30, 2017		December 31, 2016
Americas:
U.S.	$	112,210	$	96,414
Canada	101,103		12,881
LATAM	360		607
Total Americas	213,673		109,902
EMEA:
France	12,185		13,241
Other EMEA	5,903		6,391
Total EMEA	18,088		19,632
APAC	8,130		7,715
Total property and equipment—net	$	239,891	$	137,249

The following customers, each of which is a distributor, accounted for 10% or more of our revenue:



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Exclusive Networks Group ⁽²⁾	29	%	19	%	23	%	19	%
Ingram Micro	11	%	10	%	10	%	*

The following customers, each of which is a distributor, accounted for 10% or more of net accounts receivable:



	September 30, 2017 ⁽²⁾		December 31, 2016
Exclusive Networks Group	31	%	26	%
Fine Tec Computers	*		10	%

* Represents less than 10%

Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

The following table summarizes our future principal contractual obligations as of September 30, 2017 (in thousands):



	Total		2017 (remainder)		2018		2019		2020		2021		Thereafter
Operating lease commitments	$	50,510	$	3,953	$	14,022	$	10,732	$	8,535	$	4,557	$	8,711
Inventory purchase commitments	93,664		89,417		4,247		—		—		—		—
Other contractual commitments and open purchase orders	67,253		40,854		19,651		4,311		2,132		302		3
Total	$	211,427	$	134,224	$	37,920	$	15,043	$	10,667	$	4,859	$	8,714

Operating Leases—We lease certain facilities under various non-cancelable operating leases, which expire through 2026. Certain leases require us to pay variable costs such as taxes, maintenance, and insurance. The terms of certain operating leases also provide for renewal options and escalation clauses. Rent expense was $4.1 million and $6.1 million during the three months ended September 30, 2017 and September 30, 2016, respectively. Rent expense was $12.5 million and $14.7 million during the nine months ended September 30, 2017 and September 30, 2016, respectively. Rent expense is recognized using the straight-line method over the term of the lease.

Inventory Purchase Commitments—Our independent contract manufacturers procure components and build our products based on our forecasts. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and an analysis from our sales and marketing organizations, adjusted for overall market conditions. In order to reduce manufacturing lead times and plan for adequate component supply, we may issue purchase orders to some of our independent contract manufacturers which may not be cancelable. As of September 30, 2017, we had $93.7 million of open purchase orders with our independent contract manufacturers that may not be cancelable.

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. As of September 30, 2017, we had $67.3 million in other contractual commitments that may not be cancelable. Included in other contractual commitments is $8.8 million related to the purchase of certain real estate adjacent to our corporate headquarters.

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 these matters is currently not determinable, we currently believe that there are no existing claims or proceedings that 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, including contingent legal fees with related parties, 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. The actual liability in any such matters may be materially different from our estimates, if any, which could result in the need to adjust the liability and record additional expenses. As required under ASC 450, Contingencies, issued by the FASB, we accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss.

In October 2016, we received a letter from the United States Attorney’s Office for the Northern District of California requesting information relating to our compliance with the Trade Agreements Act. This inquiry is ongoing and we are fully cooperating with this inquiry.

Indemnification—Under the indemnification provisions of our standard sales contracts, we agree to defend our customers against third-party claims asserting various allegations such as product defects and infringement of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay judgments entered on such claims. In some contracts, our exposure under these indemnification provisions is limited by the terms of the contracts to certain defined limits, such as the total amount paid by our customer under the agreement. However, certain agreements include covenants, penalties and indemnification provisions, including and beyond indemnification for third-party claims of intellectual property infringement, that could potentially expose us to losses in excess of the amount received under the agreement, and in some instances to potential liability that is not contractually limited. To date, there have been no material awards under such indemnification provisions.

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
CURRENT ASSETS:
Cash and cash equivalents	$ 905,794	$ 709,003
Short-term investments	369,961	376,522
Accounts receivable—Net of reserves for sales returns and doubtful accounts of $14,787 and $11,235 at September 30, 2017 and December 31, 2016, respectively	257,999	312,998
Inventory	73,595	106,887
Prepaid expenses and other current assets	43,302	33,306
Total current assets	1,650,651	1,538,716
LONG-TERM INVESTMENTS	247,875	224,983
DEFERRED TAX ASSETS	204,721	182,745
PROPERTY AND EQUIPMENT—NET	239,891	137,249
OTHER INTANGIBLE ASSETS—NET	18,291	24,828
GOODWILL	14,553	14,553
OTHER ASSETS	19,297	16,867
TOTAL ASSETS	2,395,279	2,139,941
CURRENT LIABILITIES:
Accounts payable	44,543	56,732
Accrued liabilities	40,439	35,640
Accrued payroll and compensation	75,482	78,138
Income taxes payable	15,862	13,588
Deferred revenue	734,313	645,342
Total current liabilities	910,639	829,440
DEFERRED REVENUE	484,644	390,007
INCOME TAX LIABILITIES	87,993	68,551
OTHER LIABILITIES	9,778	14,262
Total liabilities	1,493,054	1,302,260
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value—300,000 shares authorized; 174,625 and 173,078 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	175	173
Additional paid-in capital	912,053	800,653
Accumulated other comprehensive loss	(416)	(765)
Retained earnings (deficit)	(9,587)	37,620
Total stockholders’ equity	902,225	837,681
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 2,395,279	$ 2,139,941

Commitments and Contingencies Minimum Operating Lease Payments (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Operating Lease Commitments:
Operating lease commitments, 2017 (remainder)	$ 3,953
Operating lease commitments, 2018	14,022
Operating lease commitments, 2019	10,732
Operating lease commitments, 2020	8,535
Operating lease commitments, 2021	4,557
Operating lease commitments, Thereafter	8,711
Operating lease commitments	50,510
Inventory purchase commitments:
Inventory purchase commitments, 2017 (remainder)	89,417
Inventory purchase commitments, 2018	4,247
Inventory purchase commitments, 2019	0
Inventory purchase commitments, 2020	0
Inventory purchase commitments, 2021	0
Inventory purchase commitments, Thereafter	0
Inventory purchase commitments	93,664
Other contractual commitments and open purchase orders:
Other contractual commitments and open purchase orders, 2017 (remainder)	40,854
Other contractual commitments and open purchase orders, 2018	19,651
Other contractual commitments and open purchase orders, 2019	4,311
Other contractual commitments and open purchase orders, 2020	2,132
Other contractual commitments and open purchase orders, 2021	302
Other contractual commitments and open purchase orders, Thereafter	3
Other contractual commitments and open purchase orders	67,253
Contractual Obligation	211,427
Contractual Obligation, 2017 (remainder)	134,224
Contractual Obligation, 2018	37,920
Contractual Obligation, 2019	15,043
Contractual Obligation, 2020	10,667
Contractual Obligation, 2021	4,859
Contractual Obligation, Thereafter	$ 8,714

Stockholders' Equity , Allocation of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 34,307	$ 31,093	$ 102,729	$ 90,342
Income tax benefit from employee stock option plans	6,722	8,223	21,111	22,961
Cost of product revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	314	309	1,039	887
Cost of service revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	2,371	2,238	7,154	6,495
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	7,976	7,648	24,127	22,249
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	19,609	17,378	58,380	50,183
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	4,037	3,520	12,029	10,528
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	29,904	27,342	89,807	79,244
Stock Options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	1,811	1,516	5,581	5,062
ESPP [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 2,592	$ 2,235	$ 7,341	$ 6,036

Goodwill and Other Intangible Assets - Net (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Goodwill impairment	$ 0	$ 0	$ 0	$ 0
Finite-Lived Intangible Assets, Net [Abstract]
Gross	38,484,000		38,484,000		$ 38,484,000
Accumulated Amortization	21,793,000		21,793,000		15,256,000
Total	16,691,000		16,691,000		23,228,000
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross	40,084,000		40,084,000		40,084,000
Net	18,291,000		18,291,000		$ 24,828,000
Amortization expense	2,000,000	$ 2,800,000	$ 6,500,000	$ 6,300,000
Developed Technologies and Other [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life			3 years 9 months 15 days		3 years 9 months 15 days
Finite-Lived Intangible Assets, Net [Abstract]
Gross	23,984,000		$ 23,984,000		$ 23,984,000
Accumulated Amortization	12,501,000		12,501,000		8,750,000
Total	11,483,000		$ 11,483,000		$ 15,234,000
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life			4 years 8 months 5 days		4 years 8 months 5 days
Finite-Lived Intangible Assets, Net [Abstract]
Gross	14,500,000		$ 14,500,000		$ 14,500,000
Accumulated Amortization	9,292,000		9,292,000		6,506,000
Total	5,208,000		5,208,000		7,994,000
In Process Research and Development [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract]
In-process research and development	$ 1,600,000		$ 1,600,000		$ 1,600,000

Business Combination

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Business Combination

BUSINESS COMBINATION

On June 7, 2016, we completed our acquisition of AccelOps, Inc. (“AccelOps”), a provider of network security monitoring and analytics solutions, for total cash consideration of $22.1 million, net of cash received. This acquisition extended the Fortinet Security Fabric.

The acquisition of AccelOps was accounted as a business combination in accordance with ASC Topic 805 “Business Combinations” issued by the FASB, and we used our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The total purchase price was allocated to AccelOps’ identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

Total allocation of the purchase price was (in thousands):



Cash and cash equivalents	$	171
Accounts receivable	1,126
Prepaid expenses and other assets	430
Property and equipment	203
Deferred tax assets	3,435
Finite-lived intangible assets	14,900
Indefinite-lived intangible assets in process research and development	1,600
Goodwill	9,861
Total assets acquired	31,726
Deferred revenue	4,400
Accounts payable and accrued liabilities	3,348
Other liabilities	1,694
Total liabilities assumed	9,442
Total purchase price allocation	$	22,284

Finite-lived intangible assets consist of developed technology, customer relationships and other intangible assets. AccelOps’ technology provides a software solution to manage security, performance and compliance from a single platform. The acquired developed technologies include software patents, know-how, process and designs. The value of customer relationships is attributable to the generation of a consistent income source and the avoidance of costs associated with creating new customer relationships.

The estimated useful life and fair values of the acquired finite-lived intangible assets were as follows (in thousands, except for estimated useful life):



	Estimated Useful Life (in years)	Fair Values
Developed technologies	4	$	12,400
Customer relationships	3	2,300
Other	2	200
Total		$	14,900

The developed technologies and other are amortized on a straight-line basis. The amortization expense of developed technologies and other intangibles are recorded in cost of revenue. The amortization expense of customer relationships is amortized on an accelerated basis and is recorded in sales and marketing expenses.

Indefinite-lived intangible assets consist of in-process research and development, which will begin to be amortized upon completion of development.

The goodwill of $9.9 million represents the amount of the purchase price in excess of the fair value of the net tangible liabilities assumed and intangible assets acquired, including AccelOps’ assembled workforce. The goodwill recorded as part of the AccelOps acquisition is not deductible for U.S. federal income tax purposes.

Inventory

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

INVENTORY

Inventory consisted of the following (in thousands):



	September 30, 2017		December 31, 2016
Raw materials	$	13,733	$	18,924
Finished goods	59,862		87,963
Inventory	$	73,595	$	106,887

Inventory includes finished goods held by distributors where revenue is recognized on a sell-through basis of $1.0 million as of September 30, 2017 and December 31, 2016.

Foreign Currency Derivatives

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Derivatives

FOREIGN CURRENCY DERIVATIVES

Our sales contracts are primarily denominated in U.S. dollars and therefore substantially all of our revenue is not subject to foreign currency translation risk. However, a substantial portion of our operating expenses incurred outside the United States are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Canadian dollar (“CAD”), the Euro (“EUR”) and the British pound (“GBP”). To help protect against significant fluctuations in the value and the volatility of future cash flows caused by changes in currency exchange rates, we engage in foreign currency risk management activities to minimize the impact of balance sheet items denominated in CAD. We do not use these contracts for speculative or trading purposes. All of the derivative instruments are with high quality financial institutions and we monitor the creditworthiness of these parties. These contracts typically have a maturity of one month. Changes in the fair value of forward exchange contracts related to balance sheet accounts are insignificant and are included in Other income (expense)—net in the consolidated statements of operations. As of September 30, 2017, the fair value of the forward exchange contracts was not material.

Additionally, independent of our use of foreign currency risk management activities, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of operations. Our hedging activities are intended to reduce, but not eliminate, the impact of currency exchange rate movements. As our hedging activities are relatively short-term in nature and are focused on CAD, long-term material changes in the value of the U.S. dollar against other foreign currencies, such as the EUR and GBP could adversely impact our operating expenses in the future.

There were no outstanding forward exchange contracts as of September 30, 2017. The notional amount of forward exchange contracts to hedge balance sheet accounts December 31, 2016 were (in thousands):



	Buy/Sell	Notional
Balance Sheet Contracts:
Currency—As of December 31, 2016
CAD	Sell	$	2,615

Business Combination - Intangible Assets Acquired (Details) - AccelOps, Inc. [Member] $ in Thousands	Jun. 07, 2016 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Fair Values	$ 14,900
Developed Technologies [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (in years)	4 years
Fair Values	$ 12,400
Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (in years)	3 years
Fair Values	$ 2,300
Other [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (in years)	2 years
Fair Values	$ 200

Goodwill and Other Intangible Assets - Net - Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
2017 (remainder)	$ 2,037
2018	6,885
2019	5,406
2020	2,363
Total	$ 16,691	$ 23,228

Summary of Significant Accounting Policies	9 Months Ended
Summary of Significant Accounting Policies	Sep. 30, 2017
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Preparation—The unaudited condensed consolidated financial statements of Fortinet, Inc. and its wholly owned subsidiaries (collectively, “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2016, contained in our Annual Report on Form 10-K filed with the SEC on March 1, 2017. In the opinion of management, all adjustments, which includes normal recurring adjustments, considered necessary for a fair presentation have been included. All intercompany balances, transactions and cash flows have been eliminated. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results for the full year or for any future periods. The condensed consolidated balance sheet as of December 31, 2016 is derived from the audited consolidated financial statements for the year ended December 31, 2016. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Certain amounts in prior periods have been reclassified to conform with current period presentation. There have been no material changes to our significant accounting policies as of and for the three and nine months ended September 30, 2017, except for changes to our policies related to business combinations. For more information, refer to the “Recently Adopted Accounting Standards.” Recently Adopted Accounting Standards Business Combinations – Definition of a Business In January 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-01—Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business to assist organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. We elected to early adopt ASU 2017-01 on a prospective basis beginning on January 1, 2017. The adoption of ASU 2017-01 did not have a material impact on our consolidated financial statements. Recent Accounting Standards Not Yet Effective Share-Based Payment Accounting In May 2017, the FASB issued ASU 2017-09—Compensation—Stock Compensation to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective prospectively for us beginning on January 1, 2018. We do not believe ASU 2017-09 will have a material impact on our consolidated financial statements. Goodwill Impairment In January 2017, the FASB issued ASU 2017-04—Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 from the goodwill impairment test which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and should recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for us beginning on January 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. At adoption, this update will require a prospective approach. We early adopted ASU 2017-04 on October 1, 2017. The adoption did not have a material impact on our consolidated financial statements. Income Taxes – Intra-Entity Asset Transfers In October 2016, the FASB issued ASU 2016-16—Income Taxes: Intra-Entity Transfer of Assets Other Than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 will be effective for us beginning on January 1, 2018. We are currently evaluating the impact of ASU 2016-16 on our consolidated financial statements. Financial Instruments – Credit Losses In June 2016, the FASB issued ASU 2016-13—Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for us beginning on January 1, 2020, with the option to adopt early on January 1, 2019. Based on our current accounts receivable portfolio, we do not believe ASU 2016-13 will have a material impact on our consolidated financial statements. Leases In February 2016, the FASB issued ASU 2016-02—Leases, which requires the recognition of right-of-use assets and lease liabilities on the consolidated balance sheet for substantially all leases. The new guidance includes a number of optional practical expedients that entities may elect to apply. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. This new guidance will be effective for us beginning on January 1, 2019, using a modified retrospective approach. Based on our current lease portfolio, we currently estimate that the value of leased assets and liabilities that may be recognized to be at least $40.0 million. We are continuing to evaluate the impact of ASU 2016-02 and our estimate is subject to change. We do not believe that ASU 2016-02 will have a material impact on our consolidated statements of operations. We expect to expand our disclosures in the notes to consolidated financial statements include more details on our leases, significant judgments and lease-related amounts recognized in the consolidated financial statements. Financial Instruments – Recognition and Measurement In January 2016, the FASB issued ASU 2016-01—Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which requires most equity investments to be measured at fair value, with subsequent changes in fair value recognized in net income. A practicality exception will apply to those equity investments that do not have a readily determinable fair value. These investments may be measured at cost, adjusted for changes in observable prices minus impairment. ASU 2016-01 is effective for our cost-method investments beginning on January 1, 2018 on a prospective basis. The adoption of ASU 2016-01 will result in the adjustment to the carrying amount when the cost-method investees complete a financing round subsequent to adoption date. Revenue Recognition In May 2014, the FASB issued ASU 2014-09—Revenue from Contracts with Customers, which outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, accordingly, we expect more judgment and estimates may be required within the revenue recognition process than is required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 will be effective for us beginning January 1, 2018. ASU 2014-09 permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We will adopt the standard using the modified retrospective method and apply the standard to contracts that are not completed as of January 1, 2018, and recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. We have substantially completed our analysis of historical contracts and believe that the quantitative impact on revenue in our consolidated financial statements is not material. We expect the pattern of revenue recognition from the sales of our FortiGate and other appliances and FortiGuard and FortiCare subscription services to be substantially unchanged on an ongoing basis. We believe that the acceleration of revenue and associated cost of sales to certain channel partners which are currently accounted for only once the product is sold through to the end-customer, and the allocation of revenue related to software due to the removal of the residual method will not have a significant impact on our financial statements. Under ASU 2014-09, we will be required to capitalize and amortize incremental costs related to obtaining customer contracts, such as sales commission costs related to service contracts. Under current U.S. GAAP, we expense all sales commissions when incurred. Our quantitative analysis of the impact of the change in accounting for sales commissions, including the various components of our current and future compensation plans and the key assumptions associated with the amortization term, is in progress. We believe that the amortization of incremental commission costs of obtaining customer contracts is likely to have a material impact on our financial statements. We expect to expand our financial statement disclosures, which may include more details on our disaggregation of revenue, performance obligations, contract balances and costs to obtain a contract, as well as any significant judgments. We are in the process of documenting process changes, implementing required changes in our systems and developing new controls to support recognition and disclosure under ASU 2014-09. Reviews are ongoing, which may alter our conclusions and the anticipated financial impact. We will continue to assess the impact of ASU 2014-09, along with industry trends until the adoption date.

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

The following table summarizes our future principal contractual obligations as of September 30, 2017 (in thousands):



	Total		2017 (remainder)		2018		2019		2020		2021		Thereafter
Operating lease commitments	$	50,510	$	3,953	$	14,022	$	10,732	$	8,535	$	4,557	$	8,711
Inventory purchase commitments	93,664		89,417		4,247		—		—		—		—
Other contractual commitments and open purchase orders	67,253		40,854		19,651		4,311		2,132		302		3
Total	$	211,427	$	134,224	$	37,920	$	15,043	$	10,667	$	4,859	$	8,714

Accumulated Other Comprehensive Loss (Changes in Accumulated Balances of Other Comprehensive Loss) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Unrealized losses on investments
Beginning balance	$ (765)
Other comprehensive income before reclassifications	348
Amounts reclassified from accumulated other comprehensive loss	1
Net current-period other comprehensive income	349
Ending balance	(416)
Tax provision related to unrealized gains or losses on investments
Beginning balance, tax	414
Other comprehensive income before reclassifications, tax	(156)
Amounts reclassified from accumulated other comprehensive loss, tax	(1)
Net current-period other comprehensive income, tax	(157)
Ending balance, tax	257
Unrealized Gains and Losses on Investments [Member]
Unrealized losses on investments
Beginning balance	(1,179)
Other comprehensive income before reclassifications	504
Amounts reclassified from accumulated other comprehensive loss	2
Net current-period other comprehensive income	506
Ending balance	$ (673)

Income Taxes , Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Income Taxes , Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Income Tax Contingency [Line Items]
Effective tax rate (percent)	30.00%	5.00%	24.00%	2053.00%
Excess tax benefits from stock options	$ 1.8	$ 2.5	$ 11.4	$ 8.7
Unrecognized tax benefits, end of year	82.1		82.1		$ 65.5
Unrecognized tax benefits that would favoraby affect effective tax rate	80.4		80.4
Accrued interest and penalties related to uncertain tax benefits	12.9		12.9		$ 9.5
Unrecognized tax benefits subject to significant change over next 12 months	$ 9.0		$ 9.0

Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2017

Other Comprehensive Income (Loss), Net of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in accumulated balances of other comprehensive loss (in thousands):



	September 30, 2017
	Unrealized losses on investments			Tax provision related to unrealized gains or losses on investments			Total
Beginning balance	$	(1,179	)	$	414		$	(765	)
Other comprehensive income before reclassifications	504			(156		)	348
Amounts reclassified from accumulated other comprehensive loss	2			(1		)	1
Net current-period other comprehensive income	506			(157		)	349
Ending balance	$	(673	)	$	257		$	(416	)

Amounts reclassified from accumulated other comprehensive loss for unrealized losses on investments and tax provision related to unrealized gains or losses on investments are recorded in Other income (expense)—net and in Provision for (benefit from) income taxes, respectively.

Stockholders' Equity , Share Repurchase Program (Details) - 2016 Share Repurchase Program [Member] - USD ($) $ / shares in Units, shares in Millions, $ in Millions	1 Months Ended		3 Months Ended	9 Months Ended
	Jul. 31, 2017	Oct. 31, 2016	Sep. 30, 2017	Sep. 30, 2017	Jan. 31, 2016
Share Repurchase Program [Line Items]
Stock Repurchased During Period, Value			$ 90.8	$ 124.0
Stock repurchase program, authorized amount					$ 200.0
Treasury Stock, Shares, Acquired			2.4	3.3
Treasury Stock Acquired, Average Cost Per Share			$ 37.19	$ 37.67
Additional shares authorized	$ 300.0	$ 100.0
Stock repurchase program, unused balance			$ 365.2	$ 365.2

Foreign Currency Derivatives (Details) - Forward Exchange Contracts [Member] - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Derivative [Line Items]
Derivative notional amount	$ 0
Sell [Member]
Derivative [Line Items]
Derivative notional amount		$ 2,615,000

Summary of Significant Accounting Policies , Recent Accounting Pronouncements (Details) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Currently estimate [Member] \| Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncement, Early Adoption [Line Items]
Expected increase to assets and liabilities upon adoption of new accounting pronouncement	$ 40.0

Stockholders' Equity , Restricted Stock Units Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Shares withheld for taxes	995	937
Tax withholding upon vesting of restricted stock awards	$ 35,869	$ 29,886
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Balance, beginning (shares)	9,509
Granted (shares)	3,630
Forfeited (shares)	(928)
Vested (shares)	(3,153)
Balance, ending (shares)	9,058
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Balance, weighted-average grant-date fair value per share (in dollars per share)—beginning	$ 31.01
Granted, weighted-average grant-date fair value per share (in dollars per share)	37.29
Forfeited, weighted-average grant-date fair value per share (in dollars per share)	34.07
Vested, weighted-average grant-date fair value per share (in dollars per share)	29.02
Balance, weighted-average grant-date fair value per share (in dollars per share)—ending	$ 34.01
Compensation cost not yet recognized	$ 266,400
Compensation cost not yet recognized period of recognition	2 years 8 months 1 day

Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2017

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss (in thousands):



	September 30, 2017
	Unrealized losses on investments			Tax provision related to unrealized gains or losses on investments			Total
Beginning balance	$	(1,179	)	$	414		$	(765	)
Other comprehensive income before reclassifications	504			(156		)	348
Amounts reclassified from accumulated other comprehensive loss	2			(1		)	1
Net current-period other comprehensive income	506			(157		)	349
Ending balance	$	(673	)	$	257		$	(416	)

Goodwill and Other Intangible Assets - Net , Changes in Carrying Amount of Goodwill (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 14,553,000		$ 14,553,000		$ 14,553,000
Goodwill impairment	$ 0	$ 0	$ 0	$ 0

Financial Instruments and Fair Value , Fair Value Measurements (Details) - Recurring [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets, Fair Value Disclosure	$ 707,522	$ 705,403
Fair Value [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets, Fair Value Disclosure	67,952	90,731
Fair Value [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets, Fair Value Disclosure	639,570	614,672
Fair Value [Member] \| Corporate debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	427,127	378,612
Fair Value [Member] \| Corporate debt securities [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	0	0
Fair Value [Member] \| Corporate debt securities [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	427,127	378,612
Fair Value [Member] \| Commercial paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	111,726	105,097
Fair Value [Member] \| Commercial paper [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	0	0
Fair Value [Member] \| Commercial paper [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	111,726	105,097
Fair Value [Member] \| U.S. government and agency securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	53,127	64,541
Fair Value [Member] \| U.S. government and agency securities [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	47,681	52,082
Fair Value [Member] \| U.S. government and agency securities [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	5,446	12,459
Fair Value [Member] \| Municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	39,847	59,025
Fair Value [Member] \| Municipal bonds [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	0	0
Fair Value [Member] \| Municipal bonds [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	39,847	59,025
Fair Value [Member] \| Money market funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	20,271	38,649
Fair Value [Member] \| Money market funds [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	20,271	38,649
Fair Value [Member] \| Money market funds [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	0	0
Fair Value [Member] \| Certificates of deposit and term deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	55,424	59,479
Fair Value [Member] \| Certificates of deposit and term deposits [Member] \| Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	0	0
Fair Value [Member] \| Certificates of deposit and term deposits [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	55,424	59,479
Fair Value [Member] \| Certificates of deposit and term deposits [Member] \| Cash and Cash Equivalents [Member] \| Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure		55,300
Reported as [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets, Fair Value Disclosure	707,522	705,403
Reported as [Member] \| Cash equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	89,686	103,898
Reported as [Member] \| Short-term investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	369,961	376,522
Reported as [Member] \| Long-term investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Fair Value Disclosure	$ 247,875	$ 224,983