Ken Xie

Ken Xie argues network security is the critical foundation of AI security, with firewalls acting as the centralized inline enforcement point.

We believe that network security is the most critical foundation of AI security with the firewall serving as a centralized point of in-line enforcement across enterprise, operation technology and hybrid cloud environment.

Xie claims Fortinet's unified FortiOS architecture is a unique competitive advantage, making it the fastest-growing SASE firewall vendor.

we are the only vendor in the industry to build all the key SASE Firewall and AI Security components into a single and unified operation system, FortiOS.

Xie says on-premise sovereign SASE gives Fortinet an addressable market 2-3x larger than cloud-only rivals.

We are also the only vendor offering an easily deployable on-premise sovereign SASE solution alongside cloud SASE, which we believe give us an addressable market 2 to 3x larger than the cloud-only competitors.

Xie believes the current AI-driven security spending cycle is bigger than the post-COVID cycle, with no demand slowdown seen.

I do feel these times are bigger than like 5, 6 years ago. And also now times more kind of work from -- remotely from home drive to some kind of supply chain, but now it's kind of AI built a lot of infrastructure kind of things there. But it's -- on the other side, AI also drive up the demand because now most recently, the AI security become a bigger concern

Xie says component-driven price increases have stabilized but remain hard to forecast, with longer lead times.

I'd say the price probably stabilized, but not improved yet. I think the price increase kind of slowed down compared to the first -- Q1, Q2, Q3 kind of stabilized, but kind of not improving yet, still kind of slowly increase, but it's difficult to forecast going forward.

Xie commits to maintaining constant product gross margin by passing cost changes through to prices.

Our policy -- our strategy always we want to keep in the same gross margin. And if our costs go higher, will increase accordingly. If our costs get lower, we also will decrease accordingly.

Xie says AI is discovering more vulnerabilities and Fortinet firewalls are best positioned to block resulting intrusions.

there's definitely AI discovering more vulnerability, like all the PHP, some other, and we do believe our firewall in the best position to stop some of these attack intrusion, and we do have the signatures that can block some of these vulnerability

Xie expects hybrid sovereign-plus-cloud AI to be the best long-term customer solution, favoring Fortinet.

we do believe long term, the hybrid AI, both sovereign and also cloud combination will be the best solution for customers, which we feel we have a huge advantage.

Xie says enterprises running open-weight models internally boosts demand for network security and monitoring.

we do see more enterprise running whether it's an open-source, open-weight model internally. And that also drive some additional demand for how to monitor and manage all this kind of AI model within the enterprise. So that's where there's more demand for enterprise network security.

Xie doesn't expect customers to stretch hardware lifecycles, as new AI threats drive upgrades.

we don't feel this stretching will be a trend going forward and because it's a new threat and the new demand for this function what will drive the additional growth.

Xie says the SASE firewall market grows about 16% and Fortinet is growing nearly twice as fast.

we believe the total addressable market will grow about 16% in the current market growth rate. and we continue to grow faster. And last quarter, actually, we doubled -- almost doubled the market growth rate.