Fortinet’s (ticker: FTNT) flagship product is the FortiGate firewall, which combines various security and networking features for both enterprise and government customers. The company layers a “security fabric” on top of the hardware that includes “zero trust” network access controls, endpoint protection, and other features.
Growth has been impressive: Third-quarter revenue was up 33%, with product revenue up 52% and billings up 42%. RBC analyst Dan Bergstrom wrote in a research note last month following the earnings report that the company is seeing broad-based strength, “driven by the convergence of security and networking, consolidation and increased awareness around the threat landscape.”
In a research note last week previewing the outlook for the software sector for 2022, Mizuho analyst Gregg Moskowitz noted that over the past few years, the company has “strengthened its competitive positioning and taken share in the network security market.” But he thinks it has “more work to do in the cloud,” and notes that its earnings comparisons get tougher in 2022.
The chip maker Nvidia (NVDA) was the No. 2 tech stock in the S&P 500 in 2021, up 137% year to date, boosting its valuation to $750 billion, which makes it the world’s most highly valued semiconductor company—nearly twice the combined valuation of Intel (INTC) and Advanced Micro Devices (AMD). Originally focused on producing graphics cards used in PCs and game consoles, the company has evolved into a key component provider to cloud computing companies—and a play on almost every key trend in the semiconductor world, including cryptocurrency mining, artificial intelligence, electric and autonomous vehicles, and even the metaverse. Revenue in the latest quarter surged 50%.
The IT consulting and events company Gartner (IT) has rallied 109% this year, as its IT research and consulting arms returned to prepandemic levels, though its events business has continued to lag. Gartner’s surge reflects widespread anticipation of a continued acceleration in enterprise technology spending as the world emerges from the pandemic. Another strong stock on a related theme was EPAM Systems (EPAM), an IT consulting firm that has rallied 95% over the past year.
Arista Networks shares (ANET) have doubled this year on strong demand for its networking wares, in particular from cloud players. The company is seeing accelerating earnings growth, and last month announced both a 4-for-1 stock split and a $1 billion stock-repurchase plan. Another stock that benefited from strong demand from cloud players is disk-drive maker Seagate Technology (STX), which rallied 83%. While the company was once largely tied to the PC market, it now primarily sells drives for enterprise applications.
Semiconductor equipment stocks have been strong performers in 2021, no surprise given the continuing chip shortage and new commitments to expand capacity from Intel (INTC), Taiwan Semiconductor (TSM), GlobalFoundries (GF), and other chip manufacturers. Among the best performers in the S&P 500 were Applied Materials (AMAT), up 89%, and KLA (KLAC), up 70%.
Intuit (INTU) shares have rallied 70%, driven by better-than-expected revenue growth, thanks in part to the company’s successful acquisition of Credit Karma. October-quarter revenues were up 52%, 15 percentage points ahead of the company’s original guidance. In an interview with Barron’s in November, Intuit CEO Sasan Goodarzi said the better-than-expected growth reflects the success of the company’s strategy over the past few years to expand its services for both consumers and small businesses beyond accounting and tax software.
Rounding out the top 10, with a gain of 69%, is Google parent Alphabet (GOOGL), pushing its valuation to nearly $2 trillion. The company continues to see strong growth in demand for online advertising. Google has largely avoided the pain inflicted on some ad-supported businesses by Apple ‘s (AAPL) shift to new rules that make it harder to follow customer behavior on iPhones. Search activity isn’t as dependent as display ads for determining consumer intent—and it seems likely that some ad spend is shifting from social media to search-based advertising. Growth is robust, too, in the company’s YouTube business.
Write to Eric J. Savitz at email@example.com