Check Point Software Aktie

Great. Thank you. Good morning, everyone. My name is Brian Essex. I'm JPMorgan's large-cap mid-cap software analyst. With me today, I'm very excited to have Check Point. To my right, we have Roei Golan, CFO of Check Point. Very excited to have Check Point's new Chief Revenue Officer, Sherif Seddik. And to my left is Kip Meintzer, the Head of IR for Check Point. Before we kick it off, we'll pass it to Kip for a little safe harbor disclosure.

Thank you guys for all joining us this early morning. During the course of this presentation, there may be forward-looking statements as with all forward-looking statements that carry risks and uncertainties that could cause material differences from those that are expected. If you'd like a comprehensive view, but not exhaustive view of all of these risks and uncertainties, you can right before bedtime, take a read of our latest 20-F, and you'll get some good sleep, but you'll have access to the majority of those risks and uncertainties out there. As with all of these types of call-outs, we reserve the right to only update where required by law. With that, I'll throw it back to Mr. Essex, and he can begin.

Right. You didn't even need a cheat sheet for that.

I know. Too long.

So yes, thanks, Kip. Maybe a great place to start, Sherif, if we could start with you. Recently appointed to Chief Revenue Officer. So congratulations on that.

Thank you very much.

I would love to maybe hear a little bit about your background and initial thoughts as you've taken the role and what you think impact that you can have is and might do differently?

Great. So Sherif Seddik, I'm originally from Egypt. I have a degree in communications and electronics engineering. So enough to know about technology that I always say nobody can tell me stories about technology. After graduating, I've been in the IT industry for more than 30 years now with 4 companies. I started in Dubai with NCR at the time. Followed 13 years after that, another 13 years with Microsoft in different roles, then 7 years at Citrix and now 3 years at Check Point. I'd say what's unique about my career is that particularly in the early part of my career, I kept moving between emerging markets and mature markets. So I've lived and worked in 8 countries. And throughout my career, while predominantly in sales and sales leadership, I've deliberately chosen to do other roles along the way.

So I did product management at a certain point of time, I led consulting businesses at a certain point of time. And probably the most common theme in all my roles has been around really driving change. So I've done things like turnarounds, transitioning businesses to subscription and SaaS models. Launching new products and incubation businesses. So that's really the common theme. Probably most interestingly, my last role at Microsoft was running the Enterprise business in Western Europe, which is a $3.5 billion business. At Citrix, I started running the EMEA business for 5 years then the last 2 years, I was running commercial strategy and go-to-market strategy worldwide where I was responsible for go-to-market design, all the strategic partnerships for the company with the hyperscalers and the largest systems integrators, running sales enablement, all of the back-end sales programs, et cetera.

Here at Check Point, I started at EMEA President, after a year got promoted to Head International. And now just 2 weeks ago in this role, and I think what I bring to the role is a mix of really experiences with large and similar-sized companies. So knowing how to build systems and go-to-market models to scale. Also the fact that I've done strategy roles and execution role so I really can straddle both. So when designing new programs, et cetera, I really understand what's the level of detail. And I'm really excited about the opportunity ahead for us. I think with the way the market is going, positions our 4 pillars that we chose to be in, in a unique way that really adapts to the challenges that companies face with AI and the transformation of AI, et cetera. And we have massive opportunities. So very excited about helping the company realize them.

Great. Great. And how should we think about, I guess, the depth of change within the organization. There's a lot of focus, particularly on the earnings call of the changes around the go-to-market motion of the company and how disruptive that was to parts of the business. How deep does that go? And how long do you think that this transition period lasts for the business?

So this process all started in the middle of last year, kind of where our transition and strategy as well around the 4 pillars and the desire to move to multi-pillar selling, et cetera. We did a review of our go-to-market model and said, is that go-to-market model will enable success for us in multiple years. So being successful in all of the different parts of the stack that we want to operate in, focusing on building sustainable double-digit growth. And we realized that our go-to-market hasn't had really a significant change for 4 or 5 years before.

And when we looked at where the market opportunity lies as well we realized, we need to do a significant change if we are to build towards that growth. So there are really 3 objectives of the go-to-market so one was around how do we accelerate growth, how do we put resources behind where we believe the growth is going to come from. And we believe the growth is going to come for us from large enterprise customers from increasing our new logo acquisition.

And obviously, you've all seen in the results our SaaS and subscription businesses have been seeing very healthy growth, and we wanted to fuel and double down on that growth. So we invested in these 3 areas and transition resources through those 3. The second thing was around, as more of our business transitions to subscription and SaaS, thinking of the whole customer journey becomes very, very important. So we also moved resources to our customer success organizations, we wanted, particularly in the territory part of our business to focus sellers on new business. So we increased the staffing of our renewal businesses to look after the renewals exclusively. And the third thing that we've tried to do with it is how do we improve the efficiency and build scalable model.

So we moved resourcing, for example, to marketing funds and partner programs as ways for us to scale the business. We also looked at the efficiency of our sellers across geographies, et cetera. So it was really a whole review and the results were pretty deep. So roughly 1/3 of our people were in a new role. And even many of those that are in existing roles, particularly our account managers and partner managers as we focused on fewer larger customers and fewer larger partners, they had new sets of accounts.

So all of these things resulted in that disruption. However, we are absolutely convinced that it is the right model to take us forward. And we believe now that we've really exited the disruption phase or into execution phase. We're starting to see acceleration in our funnel generation across the different pillars, including firewall so I think we're on a good trajectory to start seeing the benefits of the change.

And how many of those changes were just shuffling seats within the organization versus hiring new talent from outside the organization.

So I'd say about 50-50 roughly. So one of the other things we're doing at the moment, we do have an accelerated hiring path. We still have a number of -- in all of these different roles, customer success, specialist sales and generally sellers, an accelerated path. So it was about 50-50. So we didn't just move seats. We really did a strong evaluation process of the people who are changing are they the right people for those roles.

And how should we think about the disruption in the quarter? I mean it was very heavily weighted towards product, at least in the results. Was it a function of the pipe was disrupted and product just gets converted faster. I mean the product is converted faster so maybe that saw it sooner? Or was there something unique about the dynamics around the Quantum firewall platform that just made it more susceptible to disruption as you made those changes.

I'll start and then I'll let -- I think that the product, which is the firewall appliances, was mainly -- most of the changes that Sherif mentioned was in the generalist team. So I mean, of course, we had many people to the other pillar to the specialists, but most of the changes of the roles that we are talking about, we are talking about account managers, that changed their roles to be, I don't know, or specialist or even territory managers. That was mainly affecting the account managers that are working on firewall business. Renewals, it's less affected because in renewals in the end it's renewal, so you don't need -- I mean, it was less affected. But on new business, when we are looking on new business and the funnel generation that usually the main quarter that was affected is Q2.

You're looking on our guidance for the second quarter because Q1 was slightly less what we expected -- was less than what we expected. But in the end, the main impact is Q2. Why? Because of this disruption and the changes, we did see that the pipeline -- because the execution was -- took more time than what we expected. We see that there were delays with pipeline generation in the beginning of the year. We started to see and this pipeline that's usually affecting Q2 and Q4, it's not affecting Q1, most of the firewall net new business, the sales cycle that is between 5 to 9 months, I would say, sometimes even more than that. So that's mainly affecting the Q2 and Q3.

So that was the effect that because of -- we did see less pipeline that was generated in the first month, I would say, even in the first 2 months of the year that have a direct effect on our Q2 numbers and also some on Q3 numbers. So -- and therefore, I mean that's -- therefore, we provided this updated guidance, and I saw and that's affected mainly the product because it's new business. On the other pillars, we did actually well. Again, also there were changes in the other pillar. I mean, the specialist we did -- we added many people there, but I think that the disruption was less there and mainly on the core business on the generalist.

And when you say new business, it is not necessarily new logos.

It's new logo and net new project, incremental, not just a plan -- yes, not just replacing all the appliances with new.

So does that not include a refresh?

It's both refresh, but it's mainly the effect of the pipeline. It's net new. It means existing customers that's now buying -- doing expansion, data centers, that's the main effect or new logos, but both...

Sherif, maybe touch on the makeup of salespeople, the hunters, the more seasoned people that we're hiring, chasing after new logos and that approach.

Yes, I think -- so historically, we've had our account managers handle both existing customers and prospects. And what we've done in the current model, particularly with the focus on very large enterprises, we said for our strategic segment, the largest customers and the very large prospects, we are now going with a hunter farmer model in that space. And as a result, we are hiring that's -- the hunter profile is a profile that we didn't have, and we're doing a lot of hiring and expansion on that. In the major space, we still have the mix model. So that's another change. The other change that we've done also on the specialist side is wherever we have the scale, we've assigned the specialists to either work on the strategic in nature or the partner-led motion, et cetera.

So that was another mix in terms of historically, our specialist works across all sizes of customers wherever we have the scale now we've separated them. So we're putting a lot of focus, as I said on large enterprise and separating the motion between new customer acquisition and existing customer expansion. I think in terms of where we're seeing the disruption and the changes, et cetera, for particularly on Q1 is when you look at our specialist teams, the impact of the change is increasing the number of resources. So the teams were relatively stable in Q1 so that's why the subscription businesses continue to see growth.

And our subscription businesses generally have a faster sales cycle as well because the firewall projects, data center projects tend to be very complex and so that's why the impact is a little bit less on the subscription businesses for Q1, Q2, while for firewall, we're expecting to start seeing the uptick again from the latter part of Q3 into Q4. And we are putting in place a number of strong initiatives around further accelerating beyond the pipeline increase that we've already seeing. So we are launching a very strong competitive displacement program. We are launching a program on the AI data center. We see that as a huge opportunity for us. We've already had some wins. We're seeing an increased pipeline.

And the third thing is something that we are evolving into more focus on vertical use cases. So we're starting with industry and manufacturing vertical where we have identified 3 use cases that, again, we're building strong pipeline on. So a few things in terms of not just changing the go-to-market structure, but how we go after things.

So maybe if I could peel back a layer on a couple of those comments. So one is how should we think about the timing of the disruption that you saw is that -- if these changes started earlier last year or in the middle of last year, is that when the disruption started or is a disruptive impact more of like 4Q, 1Q and then that kind of hit the like near-term particularly considering like the sales cycles, the duration of the cycles that you see on product side?

Yes. So I'll walk you through the process. So Q3 last year was really all about the analysis phase and the consulting phase around that. So at that stage, it was a relatively small group of people that kind of that were working on that. By the end of Q3, we had the new design in place. And then Q4, we're all working around the change management and so we started to bring field leadership into this in the middle of Q4 of last year, okay? And so you could say, to some degree, there was in the latter part of Q4, not field disruption, but obviously, the management teams were thinking part about executing on Q4, part about preparing for the change.

The change was launched to the field on the 6th of January. So that's why as Roei mentioned, like pipeline generation in January and February were really, really disrupted because of that people were learning with new roles, their new territories, who are their new teammates, what's the new way of working that we're expecting. In February, we started to see an uptick in funnel generation. March was very strong, April even stronger from a year-over-year comparison. So we're starting to see signs of that, okay, now we're starting to get out of the disruption mode and into execution mode. And the pipeline generation increase that we're seeing is across our product portfolio. So it's also showing that we're starting to hit the areas that we want to hit. So for example, pipeline for new logos is growing faster than overall pipeline which was a big focus of us, how do we increase new logo acquisition.

We're starting, as I mentioned, to see a pipeline increase in AI data centers, which is our target motion, our AI security pillar we're starting to see significant changes in that. So what we're seeing is not just pipeline increase, but pipeline increase in the areas that we were strategically designing the change to do. So that's giving us confidence. Again, the changes are starting to land. But as with any change of this magnitude, it will take 2 quarters more to get back to smoothness again. So we're expecting that at the end of Q2.

Okay. That's helpful. And you mentioned competitive displacement program. What are some of the aspects that you're leaning into with that program? Is it more aggressive pricing or sales incentives or better channel compensation? Like how do you think about the major levers in that program?

So there are 3 levers of that program. So one is really focusing on use cases where we believe we have strong differentiation against the competition and giving our sellers and our partners kind of the playbooks saying these are the use cases where we believe we have a high opportunity. Then the second thing that we've done is around the partner incentives. So we put in different levels of partner rebates and partner acceleration on that. But also in terms of like preapproved pricing levels to speed up the process. And the third element is around the customer offer itself. And the customers care about -- what care about the most with a transition like this is how are you going to sort of safe harbor me to the other side. So we've included prepackaged services as part of that to make sure that the customer transition we've created tooling for example, to automate the transition of policies and rules from other vendors' platforms to our platform. So that's another important part of that.

And the third element that we believe this year is also going to be helpful is we've now put in CapEx and OpEx models for the customers. So as you know, different industries are more CapEx. So now we have a compelling offer whether you're CapEx focused or OpEx focused. So we try to cover all of the different elements of -- and what would make a competitive displacement success?

And on the pricing side, is that affected at all about how you go to market and competitively price against your peers?

So we've done a full analysis on kind of pricing and what are the pricing points for these different displacements? And we've already, in a way, preapproved discount levels to get this pricing from day 1 that we believe would get us to that. But we also wanted to make sure that, that aggressive pricing does not seep back to our normal pricing so we have a number of policies around proof of displacement and like that to make sure that we are ring-fencing the pricing around that model.

Got it. Got it. Very helpful. And you mentioned data center business and AI data center is now one of your peers calling out that as an opportunity as well. What -- how large are data centers as a percentage of your total business?

Significant.

Yes. I mean so significant meaning like.

Significant. And I would say -- no, more than 1/3 -- I mean, the total firewall business, not of the total business.

Okay. The total firewall business.

Yes, yes. The majority of our business today is data centers.

Yes. And so how do you -- how should we think about how you're positioned for AI data centers? And do you have a lot of visibility into AI data centers as opposed to data centers that customers may also be running AI inferencing on. How are you seeing that market play out?

So I think. So first of all, we're starting from a position of strength because the data center is the area, and as Roei mentioned where the majority of our business is where you already have a lot of a lot of differentiation. As we evolve to the AI data center models, we think we have even further differentiation, and that comes from a couple of things. So one is, first, our partnership with NVIDIA. And so as you know, kind of AI data centers are running nearly at 100% capacity all the time. Latency is a huge issue kind of for these data centers. They are running multi-tenancy. They are running multi-workloads so the fact that we have our partnership with NVIDIA, where we put our firewall effectively on the DPU addresses many of these issues.

So first of all, it addresses the latency issue because you're on chip. The second thing is also because you are on the DPU, not the GPU so you're leaving the GPU to do its work, you're not affecting the capacity from a GPU perspective. But it's not just that, that's just one factor of it. It's when you combine that with the rest of our product portfolio where the magic happens. So if you look, for example, if you look at the training side, it's only the firewalls on the DPU that work. On the inference side, then you add the AI guardrails through our acquisition of Lakera, and that, again, provides another layer of security. Then on the data center side, with the traffic increase, the fact that we have our Maestro model, which is the best scalability in the industry, again helps us through that. then you come in and you include our WAF solution that addresses security for how do you address the -- access the application, access the application, et cetera.

So you take the different parts of our portfolio, and it's really a compelling complete, differentiated solution. And we've already seen wins in different parts of the work we had wins in Asia. We had wins in the Middle East. We're in discussions with some massive opportunities in the Americas and in Western Europe. So we really see this as an opportunity for us so we now have a standardized architecture against standardized services for delivering it, et cetera.

And how large are these deals relative to the rest of the deals that you see in your pipeline?

So there are -- they're among the larger sizes inside of the deal. But the other thing is some of them as well become opportunity openers for other opportunities so we've won a deal recently in Asia. And these guys are providing services for application and AI application development for companies in that specific country. And what they become now is now they've utilized our services, but they are including them as part of what they sell to their customers in terms of -- and here is the security package to secure the application, the AI applications and the LLMs you're building on our factory. So the deal itself is bigger, but it has a multiplying effect from -- 2 years ago.

And do you have a sense of within the AI data center opportunity, I mean, how far along are we with data center build-outs? Has this been happening for quarters because I think we seen a lot of CapEx spend? Or is -- are we at the point where you've seen some of these data centers get built out. They've kind of figured out what they need. So now is when we're starting to see more demand on the security side to follow that initial spend?

So we think that the investment cycle is only starting. So in the initial phase until now, it's mainly been the hyperscalers and what we're now seeing is large enterprises are getting to the game because of privacy issues or data sovereignty laws that they have to apply to governments are getting into that again for data sovereignty reasons and all that. So you're seeing new types of players that are coming into the AI data center. So we think the cycle is just going to accelerate because of that. And we think frankly, many people still don't know what they need. They know they need something, but they don't know what they need.

And that's why having this standardized architecture that says like the discussions we have with the customers is you're embarking on this journey. These are the things that you need to think about, and this is how our technology. So it's also a very, very consultative sale that we're doing because we're helping customers understand here are all of the things that in the AI world you need to deal with that are different from what you used to deal with before.

Right. And Roei, how does this line up with the Quantum product cycle? I mean, we're pretty well into that now. And that was, I think, one of the issues this quarter, your comps last year were more meaningful. But from a product cycle perspective, is there another cycle in the wings? How do we think about the cyclicality of that firewall business after the most recent quantum...

I know that we'd like to call it a cycle, but I think in the end, of course, we had last year, it was a strong -- we did have a lot of refresh projects. Last year and I think also 2 years ago. But also when I'm looking today on what we have now is just with our installed base, even without accelerate -- I mean, gaining new logos, acquiring new logos, I think that the potential to grow on firewall is there. This is even without AI data centers. We've talked a lot about data centers. I think the -- there is a lot of potential even for our current installed base, they still didn't -- I mean active customers, they still didn't replace their old appliances. They expect to replace it in -- or in this quarter in the remaining of -- or in the second half of the year.

Again, I think the guidance right now takes into account that we're going to see some decline in Q2 and probably also in Q3, but that's mainly because of internal disruption because definitely, we do expect to see back to growth in product from Q4 and afterwards. So -- and again, that's based on our internal metrics, based on what we see. And pipeline -- as Sherif mentioned the pipeline generation we see very strong generation in the last month, in the last few weeks. So we do feel more positive with the firewall back to growth from Q4.

Got it. And I know on the earnings call, I think Nadav was pretty adamant about macro not having an impact this quarter. He's very focused on the disruptive aspects of the quarter. But how is customer spending overall? Are you starting to see access to budgets outside of traditional IT budgets and then maybe part B of the question is, have customer, I guess, spending intentions change since Mythos and GPT 55 emerged and people started freaking out a little bit.

I would say it's a good question. I think that, of course, that there will be more spending on AI, but I don't -- actually -- and again, Sherif can also comment about what he sees, but I don't see the security budget going down. I think that security will continue to go up, of course, in terms of priority. I think that network security is a top priority. I mean, you're going to see more volume of data that's going through the network because of the AI. So I don't see our network security. I think that actually the budget for network security should go up. But again, right now, I think Nadav mentioned, it's not the macro. I mentioned in the beginning of the year when I gave the guidance for the full year in February, I mentioned that there might be some changes in customer behavior because of the rising cost of the memories.

In the end, it's something that we also see today, the memories. It's crazy what's going on there with the -- I mean, the inflation of the pricing. But I have to say that right now I don't see -- I mean, I don't see it across the board customers stretching their assets because of memories because of the memories cost, it might happen. But right now, I think we've been very clear that what happened in Q1 and the reflection the guidance for the -- I mean, the update of the guidance for the full year was not as a result of macro.

I'd say what we're seeing with customers is definitely an increased focus on cyber security on how to reprioritize within the cybersecurity space. So it's definitely becoming more top of mind, Board issue for sure, more than ever before. Have I seen that as a result of that, the purses are open and someone is saying now your cybersecurity budget is 30% more, et cetera. We haven't reached that stage, but there's definitely no sign on the horizon of the budgets being stable or reduced. But what we're seeing is customers really thinking, okay, where do we need to invest based on the changes based on what we're going to see happening like -- that tsunami of vulnerability that's going to happen. How do we react to that in terms of our processes so that we can prioritize how do we change our patching processes, et cetera, in order to speed up.

And we think that, that's bringing, again, for us, benefit. So the whole topic of exposure management is becoming much, much more critical. We are finding ourselves in significantly more discussions around our exposure management portfolio than we have before. And there, we have a unique -- a number of unique assets. One is through the acquisition of Cyberint. We got a lot of external visibility. You combine that with all of the telemetry that we see from our products, and you have an incredible basis of intelligence to start from. Then through the acquisition of Veriti, the fact that we can then go and implement things across multiple vendors and not just our side of things. The fact that we can -- now we are now developing capability to enable us if the customer allow that we, based on certain rules can go on auto patch, not -- again, not just in our technology but others.

And so that's creating a lot of strength in that. Then network security is becoming in fashion again in different things because, again, like topics like segmentation, for example, and microsegmentation become more critical than ever because if you assume someone is going to get there, how do you stop lateral movement. So that's increasing, again, demand for firewall for segmentation purposes, which had slowed down in the last couple of years, AI data center. So we also feel that our choice of pillars to invest in is being vindicated by the changes in AI security, the investments there, top priority, exposure management top priority. People will need to rethink the network security posture where we have our prevention-first ethos and a lot of the things that we had in the past. So we're very positive about where the industry is going and where that allows us to position ourselves.

And how are customers thinking about -- I mean, obviously, one of the themes that we're seeing, particularly over the past couple of months/year-to-date is a collapse of the meantime to exploit, right? So now speed is becoming even more critical, not just in terms of finding the vulnerabilities, but quickly responding to those vulnerabilities or exploitable vulnerabilities. How do you view your platform? Is a tightly integrated platform an advantage in that situation? And maybe if so, how would you describe how that advantage plays out in terms of the ability to react in a faster way to some of those exploitable vulnerabilities.

Yes. I mean, I think the topic of -- we get asked a lot about the topic of our unified platform versus we talk a lot about our open garden and open approach. And I think it's important that we position that in the right way. We are not going away from platform and the benefit of platforms. So for each of our pillars, we're building a platform for that entire pillar. So if you look at the AI defense plane that we've launched around AI security, that's again, a full platform that covers protecting your data center to protecting the use of generative AI to protecting kind of your LLMs and agents and the full stack full platform. If you look at Workspace, again, we have e-mail and collaboration endpoint, mobile, SaaS, SSE kind of part of that. So again, in each of these, we are building a platform.

And what connects underneath is our threat prevention protocols, et cetera. And then we're also building a unified management across all of these. So we're not going away from us building platform. But what we're seeing is we're also realistic enough to understand that customers have installed base, customers have choices and that frankly, if we as a company, we wouldn't bet our cybersecurity on one company because that becomes an exposure in its own right. So what we want is still, if you use another vendor, we still offer you the best protection with that. Example, our workspace management play. You go and it's built and you get the best experience and the best protection if you use everything from our side. However, if you use CrowdStrike for endpoint, you can still go and position and configure and say, "I'm using CrowdStrike." And then we will manage your entire workspace, will it be as good as if the whole thing is from us? Of course, not because we don't control the whole stack, but we will still offer you significant capabilities to still have visibility across your entire workspace.

But where across your platform are customers saying, all right, native integration with this product is the most important. So we're going to be the CrowdStrike and endpoint or we're going to be the Tenable for vulnerability or exposure management like where do you get that leverage from being able to accelerate your time to react?

So we get that leverage from -- so we build obviously, integrations for us, but we are building predefined integrations with other vendors as well. So for example, with Wiz and the partnership we have with on the CNAPP side or with Illumio, on the micro segmentation side. But then we also look at the entire usage of customers and we take what are the most important platform to integrate with endpoint, CrowdStrike and Defender. So that's the majority. So we're going to focus there first. So we have more than -- how many now? I think 80 native integrations with competing products and some others.

Great. With that, I think we're out of time. So Sherif, Roei, Kip. Thank you so much, everyone. I appreciate it. It's great to see you.

Great. Thank you, everyone.

Greetings, and welcome to Check Point Software's 2026 First Quarter Financial Results Video Conference. I'm Kip Meintzer, Global Head of Investor Relations. And joining me today are Chief Executive Officer, Nadav Zafrir; and our Chief Financial Officer, Roei Golan.

Before we begin, I'd like to remind everyone this conference is being recorded and will be available for replay on our website at checkpoint.com. During the formal presentation, all participants are in a listen-only mode that will be followed by a Q&A session. During the presentation, Check Point's representatives may make forward-looking statements. Forward-looking statements generally relate to future events or future financial and/or operating performance. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Any forward-looking statements made speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements.

In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results as well as the reasons for our presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at [email protected].

Now I'd like to turn the call over to Nadav.

Thank you, Kip. And thank you all for joining us. So I'm going to begin with the key operating dynamics of the quarter and obviously talk a little bit about how we're advancing our strategy to drive sustainable long-term growth. So to begin, in our first quarter, we delivered double-digit growth in non-GAAP earnings per share and adjusted free cash flow with revenue growth at 5%. Subscription revenue remained a key strength, driven by strong demand across our emerging technologies, which actually generated 45% growth in calculated billings led by e-mail security CAM and SASE.

At the same time, we do see a decrease in times research projects that resulted in lower-than-expected product revenues. As we discussed in our last earnings call, during the second half of 2025, we conducted a comprehensive go-to-market assessment with the objective of accelerating both new logo acquisition and increasing wallet share in large enterprise accounts in order to enable the successful execution of a multi-pillar platform strategy. So based on this, we implemented changes to our go-to-market model to align with these goals. And the transition to the new model did create short-term disruption to the rhythm of our sales execution and primarily affects our appliances business. Now while we're confident that the changes made are spending the sub for success in the mid and long term, we do see a short-term impact on our business that will negatively affect our 2026 revenue projections.

We believe these headwinds are transitory and they reflect a deliberate reset to position our business for improved execution and scalability. We're already seeing that the current pipeline trends and ongoing customer engagements and our plans to further invest in our firewall business make us optimistic about the future growth trajectory. Beyond that, our strategy continues to be anchored around our 4-pillar approach, which we believe is well aligned with the evolving security requirements of enterprise, particularly as AI adoption expands the threat landscape. And in support of our go-to-market execution, we're strengthening our leadership team with 4 key appointments.

So first, Sherif Seddik has been named Chief Revenue Officer and will lead our go-to-market organization. Sherif has successfully led our international sales business over the past few years. He brings more than 3 decades of global sales leadership experience, and he'll be replacing Itai Greenberg. I want to take this opportunity to thank Itai for his continued support during my first year and for his leadership in the go-to-market changes. Beyond that, [indiscernible], who has led our CTEM offering since the acquisition of Cyberint and has driven 96% year-over-year ARR growth will join the leadership team. You know that as organizations operate in this increasingly [indiscernible] exposure management is becoming mission-critical because it enables security teams to rapidly identify emerging threats. And the most important part is materially accelerate their mediation. And I think we have an advantage here, and I'm happy to welcome [indiscernible].

Alongside that, to lead our AI pillar, I'm happy to say that [ Adam Elin ] has joined as General Manager of AI security, and we'll also join the leadership team. Adam brings deep experience at the intersection of cybersecurity and large-scale enterprise security operations because in his previous roles, he was a CISO fidelity, [indiscernible], but he's also a founder of Blue Box security. I think Adam adds really a proven operator perspective, which is so essential in this time and we will focus on building the platform, our AI security platform to scale with the speed, the rigor and a strong commercial pipeline. And then lastly, Rafi Kretchmer is appointed a VP of Global Marketing. He replaced Brett Theiss, so we wish well on his future endeavors.

Beyond that, look, you're all aware, AI is a watershed moment for the security industry. When you look at the emergence of these frontier AI models, including metals and GPT class, they're driving 2 structural shifts in cybersecurity. First one is that the barrier to sophisticated cyber attacks is literally collapsing because AI is democratizing capabilities that were once a exclusive to nation state and some very large elite "criminal organizations" and this is exposing a far broader set of enterprises to material risk. So that's number one. Number two, cyber attacks are undergoing structural industrialization. The Agentic AI enables [indiscernible] to continue scan global infrastructure, and they're generating a continuous flow of novel attack techniques.

And so manual operations are giving way to automated attack pipelines. And this is what we call a checkpoint, the AI attack factories. Now when you look at the convergence of these 2 forces, it really creates a different threat environment, larger attack population that is executing more sophisticated campaigns with greater speed and volume and the time to exploit is shrinking dramatically. And we believe -- I believe that this is directly validating our ethos of prevention first, which we're second to none in the industry, in my opinion. Beyond that, a checkpoint, we're not waiting for this threat environment to materialize. Our response is ready and active. It's structured, of course, across our 4-pillar framework. The security for the network through our hybrid mesh, CCAM and workspace security.

Now during this quarter, we introduced solutions to secure enterprise AI transformation. As an example, we launched the AI defense plan which is designed to secure the genetic enterprises across employee AI usage, the applications and the agents that both of these use the people and the applications. Beyond that, we introduced the AI factory security blueprint. It's integrated with the NVIDIA GPU service pinning on the server itself. And this provides end-to-end protection for AI infrastructure and we are very bullish about this. Most recently, we also announced our partnership with Google Cloud. We're integrating this AI Defense place with Germany enterprise agent platform. And this can deliver real-time runtime protection at scale.

We also delivered AI-driven exposure management, enabling customers to close the remediation gap through: one, improved intelligence, than the risk prioritization and finally safe remediation, which is critical, the time to remediate in organizations today. And then finally, we launched a secure AI advisory service to help enterprise government deploy and ultimately scale AI with security and doing so responsibly. And so to close my opening remarks, our experiencing near-term headwinds in our clients business and adjusting our annual revenue guidance, we remain confident in our ability to gain market share in this expanding security market -- the emerging technologies continue to perform strongly and position Checkpoint in a really good place to secure this rapidly growing enterprise attack surface driven by our adoption and we believe that our differentiated strategy, our core capabilities, our strong financial profile with its industry-leading profitability.

And at the end of the day, a disciplined execution over time position us to really benefit from the accelerating demand for secure enterprise and create AI, which is transforming the organizations at scale.

So before I take the question, with that, I'll turn to Roei to give you some of the financials.

Thank you, Nadav. So thank you, Nadav, and thank you, everyone, for joining the call. So as Nadav mentioned, the third quarter was a solid quarter with 5% growth in revenues, driven by 11% growth in our subscription revenues. Our total revenues reached $668 million and were $2 million below the midpoint of our projection as a result of lower revenues from firewall appliances that impacted our product revenues. When we are looking around subscription revenues, they grew by 11% to $323 million and were at the midpoint of our projections.

Our adjusted free cash flow was very strong and reached $457 million, $70 million above the midpoint of our production and grew by 11%. Our non-GAAP EPS was $2.50 and was exceeded our guidance with 13% growth year-over-year. So as mentioned, we had 5% growth in revenues, while our deferred revenues grew by 8% to $2.06 billion. Our calculated billings totaled to $548 million reflecting a 1% decline year-over-year, while our current calculated billings grew by 2%. Our [indiscernible] performance obligation grew by 7% and reached $2.592 billion. So as we -- as Nadav indicated earlier in the call, we had lower-than-expected product revenues, mainly as a result of the disruption affected by the changes we made in the go-to-market organization.

As we are looking in the second quarter -- into the second quarter, we do see this disruption [indiscernible] plants revenue. But based on the finance that we see, we expect to see an improvement in the second half of the year. It is important to note that our new business continues to be stable, and our fire subscription ARI continue to grow year-over. When we are looking on our subscription revenue, we do see projectory for reacceleration, and we do expect to see acceleration in our subscription revenues in the second quarter and for the full year driven by strong demand by emerging pillars, mainly by [indiscernible], system and SASE.

So as indicated, our total subscription business continues to be strong. We continue to experience strong demand for our emerging products, which remains the primary driver of our revenue growth. In Q1, our Email Security SASE in ERM in total exceeded growth in ARR and over 45% in calculated billings year-over-year. It is important to note that although the revenues are still not significant for the total business, we see a significant growing finance for our AI security offering and that's together with the [indiscernible] expect to drive the subscription revenue growth in the next few quarters. When we are looking at the revenues by geography, so 46% of our revenues came coming from EMEA, which had 6% growth [indiscernible], 42% of the revenues came from America and believe a 4% growth year-over-year, and the remaining 12% came from Asia Pacific and this had 2% growth.

When we are looking on the P&L for this quarter, so gross profit increased from $564 million to $586 million, representing a gross margin of 88%. Our operating expenses, excluding R&D grants, increased by 14%, while on a constant currency basis, our OpEx increased by 12%. Q1 results include approximately $27 million of benefit from R&D grants to be received at the new Israeli incentive program law, which was ratified during the period, and that's reflecting the surge impact in our financial results. Our operating expenses, net of R&D grants were $321 million and increased by 5% year-over-year. When we're looking on these grants, we do expect to have an approximately benefit for the total year of $100 million on our operating income, reflecting the new law that was just approved.

So just finalize. The increase in our OpEx is primarily as a result of our increase in our workforce as a result of the investment in our AI security and investments in sales and marketing program. Looking on our non-GAAP operating income, it continues to be strong at $265 million or 40% operating margin. Our non-GAAP net income increased by 8% and reached $265 million, while our GAAP net income reached $192 million similar to last year. Our non-GAAP EPS grew by 13% and reached $2.50 while our GAAP EPS was $1.81, represent 5% increase.

Moving into our cash flow and cash position. So our cash balances as of the end of the quarter, together with master [indiscernible] short-term deposits reached $4.4 billion. During February, we completed the acquisition of [indiscernible] for approximately $92 million of net cash consideration. Our adjusted free cash flow increased by 11% and reached $457 million. In addition, we continued our buyback program and purchased 1.9 million shares for a total of $325 million at an average price of $170 per share. To summarize. So strong double-digit growth, non-GAAP EPS and adjusted free cash flow, we do see continuous strong demand for our emerging technologies SASE, e-mail security system. And from the other hand, we did see -- we do see in the near term lower new business from firewall that affected our revenues.

When I want to go into the guidance for the second quarter and for the full year. So for the second quarter, our total revenues are expected to be between $660 million to $690 million. Our subscription revenues expected to be between $328 million to $338 million and non-GAAP EPS is between $2.40 to $2.50 while our GAAP EPS expected to be around $0.70 less. While our adjusted free cash flow is expected to be between $145 million to $175 million, regarding the cash flow, the free cash flow, important to say that there is some -- there are some payments, significant payments that moved from Q3 to Q2. But again, that's mostly shifting from Q2 to Q3. When we are looking on the full year guidance, so as a as indicated, we are adjusting the revenue guidance, our cost of revenues guidance for the full year.

The new -- the [indiscernible] is between $2.770 billion to $2.850 billion. That's a reflection of expected lower revenues on firewall appliances mainly in the second quarter. Our subscription revenues were not changing. We do see strong demand for emerging products, and we opt to finish in the upper end of the range, but we are keeping the same range for the full year. Same thing for non-GAAP EPS, we are not changing our non-GAAP EPS expected to be between $10.05 to $10.85. GAAP EPS is going to be slightly higher, again, mainly because of lower share count and slightly higher acquisition-related costs. And our adjusted free cash flow, we are not updating the guidance, same as we gave between [indiscernible] I'll stop sharing. [indiscernible]

Sorry about that guys, having a little bit of technical difficulty. Starting off today's Q&A is going to be Brian Essex from JPMorgan, followed by Rob in the Piper Sandler.

I wanted to dig into product revenue performance. We'll take the easy question. was macro or customer decisions to sweat assets not a factor at all? And if not, can offer a little more color around the depth of the go-to-market changes. Where was the friction in the process most apparent? Where did the system break down? And what gives you confidence that this is just a near-term issue?

Thanks. So look, I don't think the macro is the issue here. When you look at our -- the changes that we've made to our go-to-market, they are significant. So it's optimizing accounts to account managers. It's doubling down on our marketing, doubling down on our channels. But it did create a short-term headwind in terms of execution as many of our people changed their role or changed accounts, and I see this as the main driver or the main headwind that we're seeing in terms of the firewall business. So I don't think this is -- we don't see a macro problem. We're actually already seeing that the engagement with our customers and the funnel going back to normal.

So we're optimistic that this is sort of a blip but it does take a little time to sort of get the motion back and everybody in their seats, et cetera. But for the long run, we believe this is the right thing to do, and we're going to continue to invest. Now this is just on the workforce, but also leadership changes in America leadership changes in other areas. So there's a process here that we're going through. I think we're at the tail end of the disruption and very optimistic about the future. And at the same time, when I actually look at the demand side, we're seeing different areas of growing. So as an example, we're very bullish on new AI data centers where I think we have a very unique capability for the longer term, that's how we see the market, and we're optimistic.

Next up is Rob Owens from Piper Sandler, followed by Joseph Gallo from Jefferies.

Obviously, the world has been changing quickly over the last 6 weeks. I'd love to understand your perception relative to what's happening and how that's influencing Checkpoint's business. But in line with that, it seems like you're losing momentum at a critical time for cyber here. So how do you ensure that this doesn't lead to longer-term share losses as customers are having to make decisions in the near term to protect against these next-generation threats?

Well, honestly, I actually think that we're gaining, not losing when you look at the big picture, right, take [indiscernible], an example, right? We think that, as I said, this is going to create a demarketization industrialization and change the nature of the business. And I actually believe that we're really well positioned to answer that. At the same time, when you look at the relevant pillar, [indiscernible] has grown 96%, e-mail, which we are one of the best-in-class in the industry and ready for this AI revolution is growing over 40%, et cetera. So that's one thing.

The other thing is when you look at the fundamentals of the change in cybersecurity, I actually think that our ethos of prevention first as an example, if you look at the latest reports by NSS and [indiscernible]. Again, once again, we're at 99.9% ability to stop a tax of known CBEs. This was always important. I think now it's becoming really critical because that's exactly the change that's happening. You're going to have to be able to block as fast as possible or everything that is possible and then you're going to have to remediate extremely fast. I think from both sides of the equation, we actually have an advantage here.

Next up is Joseph Gallo from Jefferies, followed by Adam Tindle of Raymond James.

I know you talked about the impact to appliance execution, but I think the most exciting part of the story is the subscription growth and the potential for acceleration there. But if you look at current billings, and you take out products, that only grew 3% year-over-year in 1Q. So just you're guiding to 12% subscription growth and acceleration in the back half. Maybe just walk us through a little bit more about the confidence in that? And then just any broader commentary on how we should think about billings going forward.

So I'll take it. So you're right in terms of current billings, excluding products, but that takes into account also maintenance and software and maintenance updates. And actually, pretty flattish right now. So if you're excluding that, so actually the growth of subscription is much higher subscription billings. And we do see, by the -- we see the final even for the second quarter and also -- and mainly for the second half of the year. We see very strong demand for our subscription packages, our subscription offering, if it's email, [indiscernible] we discussed. And also AI security. Also the numbers are still not significant in terms of bookings for AI security, but we see very significant funnel that was created just in the last few weeks. We see the enthusiasm about it. We have a new leader there. And now that's managing this business. So definitely, we feel positive about the subscription also for the next few quarters to be accelerated.

Next up is Adam Tindle from Raymond James, followed by Shaul Eyal of TD Cowen.

I just wanted to just take a step back to kind of 2 major things that we're having to digest here on this call. The first one, I want to understand what exactly is happening to product revenue that is causing this revision? Is there changes to terms of distributors? Is there issues of supplies and shipping? What exactly is changing and happening that's causing this mechanically? And the second thing that we're digesting here is the go-to-market changes that you're implementing I wonder, we've gone through this before with checkpoint in the past, a number of changes to go-to-market leadership. When you look at these, if you could maybe compare and contrast some of the things that have been done in the past to this time, what you've learned and what might be different with these go-to-market changes?

I can start on the third one, and Nadav will take the second. Yes. So on the -- in terms of the product side, same affected the product. So we did the changes in the go-to-market organization. part of these changes were a lot of changes for assignments for eco managers that will work from large enterprise and enterprises that moves from accounts to other accounts. This has some kind of -- again, something that was expected, but that had more disruption than we expected on the business, mainly on the new business. On the new business on the -- I'll remind you that the funnel for research projects for new business on firewall takes a little bit more time than the sales cycle is longer than a sales cycle for selling send e-mail or other products or this kind of product profile is usually takes longer.

And we see disruption in final creation mainly in Q1, that's affecting mainly some of it in Q1, but mainly in the second quarter. And therefore, we see the finance starting. We see a very nice improvement in the last few weeks after all people are on and the relevant roles and they are starting to open their accounts. And we're starting to see the finance creative in the second half or the second half of the year. But as we mentioned, there is a near-term headwind, specifically for the second quarter. Nadav, do you want to take the second one?

Sure. Adam, thanks for the question. Look, we I would say a couple of things. Number one, it's my job to continue and optimize and see that I have, that we have the right leaders in the right place I think that one change that we're doing, which is, I think, a differentiation is beyond just the structural changes that Roei spoke about. We're also investing more in marketing. We're doubling down on the channels. To your question about the personnel changes that we're conducting, we do want to bring strong leaders that come from the security business with the right experience, right?

So in our last earnings call, we announced Rachel Roberts, who's taking as President of Americas. We -- and she has experienced vast experience in the cybersecurity market. Tom alone joined us and needing the global Adam Eli comes from the industry and is going to be the AI security. So the idea is to bring seasoned leaders that know this business and then put like we go-to-market organization. So these 2 things work together. And the third thing is, which we've been speaking about is the multi-pillar approach that we're coming with. So all in all, I'm very bullish about where that is going to take us. But I do acknowledge that in the first quarter, this has created a disruption, but I think it sets us up for success as we go forward.

And you'll see more people joining us at different levels from different companies as we are just getting the right people, the right data, the right processes to create this sustainable growth. And we have the vision, we have the mission. I really believe that we have a meaningful headwind with the products that we have, and we're bullish about where that's going to take us.

All right. Next up is Shaul Eyal, followed by Shrenik Kothari.

Nadav [indiscernible] are we maybe sticking with the product revenue question as you guys know, checkpoint as well as its competitors. You guys are selling a number of appliance families, low, mid, high tier markets. Is there a specific market here in which you're seeing increased pressure or the current softness is pretty much across all market tiers?

It's across what I would say, mainly around the large. And again, many of the results of the disruption in the go-to-market because there were many changes to assignment of enterprise and large enterprises are many consuming the large boxes. So that's -- I would say that. But again, we see the cost of bottom.

I will say this Shaul that -- I'm trying to put together the trends that are coming. And I know that this is sort of zooming out a little bit, right? But when you think about the priorities of large security organizations in the -- today and in the next couple of years, which I think are going to be chaotic. If you believe that this democratization industrialization of the attackers, and the changes that agentification is doing in everyone's network is real, then I think that our firewalls are actually very well positioned for this future.

It's nothing else because of the ability to prevent every known CVE and deploy it through our IPS in hours, not days or weeks. This is becoming more and more critical. I know that we've been preaching this for a long time, but I think this is now going to become more important. And I think gives us an advantage not with -- only with the customer like growing with the customers that we have, but going after new logos, which is actually a part of the change that we've made in the go-to-market organization. Now as [indiscernible] said, getting new logos in CTEM is much faster than getting new logos and firewall. But I think we have what it takes, and we've done the adjustments we put the right people in the right places. We'll continue to do it. It's never good enough.

But I think it actually gives us a headwind not only in the emerging categories but also in the core in the firewall, which is alive and kicking it, forget checkpoint for a second. I think when you look at where the world is going right now, network security is becoming so much more important. It's one of the only places where you can really prepare an organization for the AI adoption. It doesn't happen overnight, but I truly believe this is a tailwind for Checkpoint.

Next up is Shrenik Kothari followed by Keith Bachman from BMO.

Yes. Just maybe to switch gears from appliances, Nadav, you mentioned about the data [indiscernible] and factory blueprint and between that and the new AI defense plan, the Gemini agent integration, the sector AI, it seems like you are trying to go after multiple layers of the enterprise study strategically very compelling and talk about the opportunity. But just how should we think about monetization of the top from where you see the near-term opportunity this year in the next 12 months?

Yes. So I'll say this, it is a process. We're making very investments, right, in a couple -- I think 6 months ago, we told you about the acquisition of [ Lakera ] as an example. This is where we're building a truly foundational model. We believe that if you look at the security for AI, you won't be able to use existing large language models that can do everything known to humanity right phones and protect. But rather, if you want the latency, the accuracy in the cost, we are going to have to train our own model. So that's a huge investment. We're investing in the researchers, we're investing in the GPUs. We're investing even thinking out of the box, we created a game called Gandalf where we have over 1 million worldwide users that thousands of them attack us every day so that we can put that into the -- to our small language model to continuously breed it so it can get better and better. That's a big investment.

Now on top of that, we're building security for AI as a platform, so for users, for employees, for applications, whether they're looking inside or to customers. And both of these, both people and applications using agents. And we're doing the security to the people. We're securing run time. We're doing it, as I said, with Gemini. We're also doing it with Copilot for Microsoft. Now all this is heavy investment. Now Adam is coming in to lead also the commercial side of this. We're hiring the first salespeople to drive this. And we think that it's going to be still a small part of 2026, but each potential for the future. That's one thing.

Beyond that, it's also going to feed into our other pillars because by having those foundational models, we also have people that are simulating sort of in what we call the future labs, what these attacks of the future are going to look like. So it's not just the AI pillar. It also feeds into our intelligence, it feeds into our e-mail security it feeds into our endpoint security. And I think over time, the value of real security, real proactive security is going to become more and more important. So at the end of the day, it's a big investor but I think it's essential, and I think it positions us well for what's coming.

All right. Next up in place to Keith Bachman is going to be Todd Weller and that will be followed by [indiscernible].

Just a question on memory pricing. What are you seeing in terms of impact? More importantly, how are you thinking about it kind of going forward over the remainder of this year? And then any kind of additional pricing actions being contemplated?

So memory pricing continue to inflect to increase. I mean we see this trend continues. As I mean, as for what we are looking at is when I set our revenue -- our product revenues, I talked about it already when we gave the full year guidance. We took into account some disruption from the memory cost, fundamental cost also on the firewall business. Right now, I think it's tough to say if there is anything related to that. I mean we are looking on the final for the second half of the year, we see good finance for firewall. So I mean, tough to say how it will impact right now. I don't know to tell you it impacted the behavior of our customers in terms of buying firewalls buying the clients. But definitely, I can tell you that the memory costs are continued to surge, and I don't see it stop, I mean, in the near term.

Next is [indiscernible] with BofA.

I keep asking you the same question. I'm going to come back to the same question. You joined the company a few years ago with hope that growth is going to accelerate. You've done many things on sales on products and growth has decelerated instead of accelerating in the sense that we are now at 5% environment. It's just not big enough for such a great space there could not be a better space for you to grow and accelerate revenues -- revenue growth. So the question is, what is not working with the strategy? What is not working? How can you change the growth trajectory to the point that we see double-digit sustainable double-digit growth. And really to synthesize the question, the issue is what is the problem? Meaning, is it about sales execution? Is it about portfolio? Is it about the employee composition and the fact that maybe a culture needs to change. I'm trying to understand -- what do you -- what can you do in order to change the growth trajectory?

Well, first of all, I totally agree that we couldn't be in a better industry right now. And I think that, like you said, that's why I'm here, and that's what I'm here to do. Look, as we said before, yes, some of it is execution, and that's why we're making these changes that we just spoke about, which are meaningful, hundreds of people, getting new accounts, moving seats, pretty new leaders I think it's essential, giving us a short-term headwind, but I think we'll drive that sustainable growth that you're looking for. At the same time, I do want to say that when you look at the total product portfolio that we have, although it's still not the biggest part of what we do, if you look at the emerging technologies that we have, right, e-mail, CTAM, SASE and hopefully -- and now joining with security for AI, that as [indiscernible], as we spoke about before, is going really, really fast and becoming a bigger piece of what we're doing.

So all in all, I think that the vision and the strategy are there, we're making the changes that we need to do. it does take time. And we need to continue course and have the patience to get there because we need to do it with discipline. And that's what we're doing, and it's going to take time. But believe that we're in the right business with the right products. In every one of the pillars that I spoke about, we're also looking at acquisitions. And I believe that when you bake all that together with the leadership that we're putting in place, we'll be in a good place in the future.

Next is Joshua Tilton from Wolfe followed by Jonathan Ho of William Blair.

I love getting no warning. But with that in mind, I'll take you to one. Maybe one for Roei. Can you just reiterate exactly what you expect in the second half for appliance. I wasn't sure if you said stabilize or recover? And then maybe just talk to kind of the visibility you have or maybe the confidence you have around that view?

So for the second half of the year, you do expect to see improvement. Right now for the second quarter, we do expect to see a decline sharper decline in the product revenues. But for the third quarter and the fourth quarter, it's going to be gradually. We receive a much better funnel also for the appliances. And we do expect to see improvement there. It doesn't mean that we're going to grow in Q3 and Q4 product revenues. But definitely, we're going to show better performance compared to what we have -- what in -- what we had in Q1 and what's expected for the second quarter [indiscernible]

Can you just talk to like what's driving the confidence in that view? Is it just what you see in the funnel? Like any incremental color would be helpful there.

So we see progress in the -- we see improvement in the [indiscernible] we're looking. We are checking all the time, I mean, these metrics on a week year basis. We see improvement in the final for the second half of the year. We see very nice deals, large deals in the funnel that are progressing. And we -- and again, we are doing these checks. We are doing the discussion with the go-to-market leadership of the world we feel more confident about the second half of the year. We do see the already some nice deals have been we already won over competition, or our competitors, win backs or cloud enterprises. Of course, it's not going to be -- we're not going to see revenues in the second half of the year, but we see some -- these kind of deals being closed and will affect our revenues in the second half of the year. But all of that together put us in much better -- I mean much better view for the second half.

Next up is Jonathan Ho, followed by Peter Levine.

You referenced some strong growth in your securities for AI solutions, but they're still relatively small contributors. But with that strong pipeline build, particularly in the last couple of weeks, when do you expect AI security to be more of a material contributor? And will this be more sort of stand-alone products or can there be maybe a stronger given the spear type solution where you can land some new customers? So cross-sell within your base versus [indiscernible]

Yes. Thanks for the question. Look, early innings, right? And I think to become a substantial part of our revenue, that will only happen in -- as a stand-alone that will only happen and it's a big investment. Organizations are going to inevitably even those that are trying to sort of slow down the adoption inevitably need to adopt new AI for their employees, for their applications, et cetera. We're all seeing it in our own personal life. We're seeing it in our businesses, et cetera. but it's a process. And so as a stand-alone business, I think to be substantial to Check Point, 2027. Beyond that, you're right. It's not just the stand-alone.

So for example, it's part of our workspace pillar where workspace employee usage is sold as a bundle through our workspace when you look at the infrastructure level, where we spoke about the firewall business, being able to double down on the infrastructure and embed AI in the NVIDIA GPUs. Again, as Roei said, we're only seeing the first links of these projects happening. But as they happen, I think we are gaining advantages. So to answer your question, I think it's both as a standalone and as a contributor to our other pillars. And even to our -- not just as our product is one of the fastest-growing things in security for AI is the AI red teaming, as an example, which is a part of our services business. So it does have an impact on each one of those and as a stand-alone but to be a real impact on our revenue and become a significant part of 2027.

All right. Thank you, Jonathan. Next up is Peter Levine, followed by Saket Kalia.

Maybe just to double down. So we last reported mid February, just help us what -- like when do you really see the material impact to the go-to-market strategy? And then maybe help us understand the deals that were impacted are these upsells renewals or like net new deals meeting, what's the level of confidence that if it was net new deals since you're still in the pipeline? Obviously, you talked about stabilization in the second half. But just help us understand like the impact on like where [indiscernible] for?

I think when we report it back then in February, we were in the middle of deposit. I mean, we are [indiscernible] we started it some time in January, but in the middle of the process. We did expect some kind of disruption back then. But when we looked and after when I -- when we look -- we are looking at February and March, we did see this disruption in our funnel, affecting the funding creation mainly for the second quarter and some for the third quarter, we did see some delays on finance creation. We see that coming with we do see these delays expecting it. And we've seen in the last few weeks, the impact, you see that in the last few years, we do see a significant change in the finance creation. And these delays mainly impact the second half or the first half of the year.

And again, there are -- of course, there are several deals that have been pushed from one -- from first half to the second half. It's important to say that renewal business looks stable. We don't see any -- many affected new businesses and in firewall and that's the main change. I mean when we put back -- I mean we are being in the middle of the process. And as Nadav said, today, we are -- I think we are in the last inning, we're almost done with these changes, and we are now more confident what we see for the second half of year.

Up next is Saket Kalia, followed by Eric Heath.

Okay. Great. I want to shift gears a little bit and Roei, maybe the question is for you. The growth in emerging ARR and billings was great to see, 40%, 45%, I think those numbers were. Can you just remind us how big those businesses are in aggregate as a percent of subscription revenue. And then I want to connect that back to some of the go-to-market changes. How can some of the go-to-market changes maybe support growth in those emerging products going forward?

So we don't -- we're not disclosing it, but these specific 3 products are slightly below, I would say, slightly below 30% of our ARR for subscription. So think about that area, the specific 3 products. And Nadav, do you want to talk about [indiscernible]

When you look at the go-to-market adjustments that we've made, it does support exactly what you said, right? We're doubling down investment on these pillars but also integrating our work -- our sales sports together with them. That is when we want to become a multi-pillar organization, we want our account managers to be able not just to do firewalls but also the emerging business. So that's part of the change that we're doing. Beyond that, we need to go to our channels and introduce them to these new products, which some of them are novel to them.

So you're right. On the one hand, we need to push these emerging technologies and capabilities faster and we're doing that. But at the same time, we are going to go after new logos, win backs, et cetera, with what I believe is a tailwind of what's happening from the attackers perspective and our capabilities. And at the end of the day, it's obviously the change itself is disruptive. But now I think we're at the tail end of the discussion, as Roei said, we're starting to see the upside but it's never ending. We've got to get the right people. We've got to get the right data. We got to get the right processes. And then again -- but ultimately, it's putting a really big focus on our go-to-market all the way from funnel creation, demand creation, channels, the people, the processes, et cetera. And that's what we're doing. And I think it positions us for the future.

All right. Next up is Eric Heath followed by Roger Boyd.

I wanted to come back, I mean, to your comment about M&A. It's been part of the strategy with tuck-ins and you have the balance sheet strength, which is a strong cooper yourself and relatively muted valuations out there, broadly speaking. So just -- anything you can share about more transformational M&A as part of the strategy going forward?

Yes. Thanks, Eric. So we're looking at this based on our pillar approach, right, which at least in my mind, is very, very clear. What do we want to achieve in the hybrid niche? What do we want to achieve in CTAM, what do we want to achieve in workspace. And in each one of them, our M&A teams are constantly hunting for early-stage start-ups with foundation with technologies that we can take advantage of, but also larger opportunities. And I do think that one, our balance sheet; second, our discipline. And third, the volatility in the market is going to create opportunities for us, and we are going to make those moves when it's strategically within what we want to do in the pillar. We believe that from an execution culture merge -- we have the ability to do it. When all these DUCs are lined up, that's when we're going to make those bigger moves.

Next up is Roger Boyd followed by Matthew Hedberg.

I wanted to come back to emerging products. I think you mentioned 90% growth in CTEM, 40% growth in e-mail. Just any sense on where you are in terms of SASE growth. And to what extent is that business impacted or not impacted by some of the dynamics you're seeing across products and firewall right now?

Yes. Thank you. So look, SASE has become a fundamental part of the hybrid mesh network security, and we're making really big investments there. We have -- our R&D part is rushing to complete our feature list. We're now able to go upstream to the larger enterprises and creating some differentiated unique capabilities. In terms of the impact, no, I don't think it was impacted by the go-to-market change. I think the go-to-market change primarily affected our core firewall with people moving around. In fact, we're doubling down on our SASE sales capabilities. We joined forces with our CGS, our cloud network security sales force with SASE.

So in effect, that we now have a bigger team and more salespeople that can do both. And as this matures, the most important thing for us is to make sure that our general account managers can also be selling SASE and that's sort of the trajectory we're going into. But it is becoming more and more important around our hybrid mesh network security as organizations are moving. And in fact, I think adoption of AI is actually going to make this even more critical.

All right. On our last questioner today is going to be Matthew Hedberg.

With all the advancements from some of the AI models and with [indiscernible], I mean it's got to represent an incredible challenge for not only customers, but even for some of your engineers. Like how -- what is the focus internally with keeping up with this rapid change from these frontier models? And like how do we as a secret community adapt to this?

Yes. Look, I think that's sort of the biggest question that we're all looking at, right? So when you think about it, we're witnessing democratization and industrialization from the attachment side. That's a huge shift. And our networks as they become identified, they really change the nature of the network because if you really want to harness agents, you got to give them the ability to get into different data sets and so that creates different pathways that we haven't seen before. This is not a new shift, but it's accelerating dramatically. And so look, we're preparing for this era for a long time. It's not just about the single model announcement like [indiscernible] and I think we're executing intensively over the past year.

I'll give you one example of what sets us apart we have the depth of the research. We have folks in Tel Aviv in Zurich, in San Francisco that are building this foundational model that we're constantly feeding in order to anticipate that future. And again, like I said before, this allows us not just for the latency and accuracy, but also the cost structure. We started working in different verticals like banking, health, energy, with large design partners so that not only we try to anticipate what the attackers are doing, but they also tell us what they are doing in order to optimize their own organizations, irrelevant, not because of cyber, but because how they want to harness these models. And together, we're trying to understand how to security adopt them.

One of the things that I I'm very glad to see is that someone like Adam Eli is joining us. And then we're seeing like we're securing Microsoft Copilot. We're securing Gemini at Google. And so you're right. This is a fundamental change. I think at the end of the day, on the one hand, we want to move really fast with AI adoption. On the other hand, we need to use our decades of hardening our environment. so that we can get ahead of the curve before exploits go public. In this case, I think that our IPS signature and WAF rules is best in the industry right now. And so I think it positions us well. I think there are going to be many more models. I think a lot of them are going to become publicly available. And so we're really just seeing the beginning of this on 0 days become 1 day. The time to patch is going to need to accelerate dramatically.

This is where we're bringing our CTEM capability. And again, when you put these things together, I really think that we have a proposition to customers that not just going to keep them more safe, but also allow them to do this AI adoption. Having said all that, look, there's a lot of unknown. I want to be very clear about that. Some of the things that we're seeing with these new models is truly a game changer. And so what we're doing in order to try to stay ahead of it is not just to try to see what's happening in the wild, but also to get -- to try to simulate how the attackers are going to take advantage of these tools because the whole attack process, everybody is talking about vulnerabilities, but there are so many other things that we need to be aware of in order to stay ahead of this.

In that sense, these are really accelerating time. I think like we said before, this is a good time to be in this industry from a business perspective, but it's also one of the most important times to be in this industry. so that we can keep this digital world running.

All right, guys, thank you very much for attending. I'm sure we'll see you guys throughout the quarter, and we'll be speaking to quite a few of you over the next few days. Have a great day, and we'll see you guys soon.

Bye-bye now. Thank you.

Greetings, and welcome to Check Point Software's 2025 Fourth Quarter and Full Year Financial Results Video Conference. I'm Kip Meintzer , Global Head of Investor Relations. And joining me today are Chief Executive Officer and Nadav Zafrir; and our Chief Financial Officer, Roei Golan.

Before we begin, I'd like to remind everyone that the conference is being recorded and will be available for replay on our website at checkpoint.com. During this presentation, Check Point's representatives may make forward-looking statements. Forward-looking statements generally relate to future events or our future financial and/or operating performance, including statements related to the anticipated ratification of the Israeli government Research and Development Incentive Program and potential impact of these grants on our financial results. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.

Any forward-looking statements made speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results as well as the reasons for our presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at [email protected]. And now I'd like to turn the call over to Nadav for. Thank you, Kip. It's great to be with everyone here today.

I want to begin with a recap of 2025, followed by our plans for 2026 and beyond. We printed solid 2025 fourth quarter and full year results. During the year, we delivered consistent execution while building a stronger foundation for our long-term sustainable growth. We expanded our platform with 2 new pillars, security for AI and exposure management. We're building both organically and through targeted acquisitions. We also strengthened our go-to-market engine. We expanded and flattened our C-suite structure and aligned it to our operating model. We're laser-focused on strategic customers, new logo acquisition and partner leverage.

And our sales are focused and designed to develop deeper enterprise penetration, a broader portfolio adoption and increased new logo wins. We also enhanced our financial flexibility with a $2 billion 0 coupon convertible notes offering, strengthening our balance sheet and creating the capacity to invest in our highest conviction priorities. Looking ahead to 2026 and beyond, we are positioning the company to lead the AI era of cybersecurity. As you're keenly aware, AI is fundamentally changing the threat landscape, and this requires organizations to revisit their core security assumption and revalidate their security foundations. In fact, decades of corporate infrastructure is now vulnerable because the very nature of attacks is changing. And so security leaders must revalidate their existing security foundations, protect new attack surfaces that are driven by the adoption of new capabilities and tools as well as embrace AI as a force multiplier just to remain competitive.

And our mission at Check Point is very clear. We secure our customers' AI transformation. That means we continuously update our existing security solutions to defend against evolving threats. We're securing the expanding AI-driven attack surface with purpose-built capabilities and leveraging AI to simplify and automate security management and operations. And we do this by applying a proactive prevention-first approach, which leverages our superior capabilities and continuously research, discover and build solutions to anticipate the evolving threats. We secure our customers' AI transformation through 4 strategic solution pillars, each one of them a platform of its own. hybrid mesh network security, securing the infrastructure, workspace security, securing the employees, exposure management that provides situational awareness and then finally, AI security across all of these pillars. We secure the hybrid mesh infrastructure across data centers, hybrid cloud, branch and SASE.

And we have a very clear market differentiation for hybrid mesh. And our advantages are we have the superior proactive prevention, second to none, a hybrid architecture that optimizes user experience at the edge, an unparalleled ability to scale and then finally, an AI-powered unified management. As you know, AI is embedded everywhere. And so that the attacks can originate from everywhere, from anywhere. And so we're building an integrated and unified workspace platform that's spanning across devices, browser, e-mail SaaS applications and remote access. We believe that our recognized leadership position in e-mail security and superior phishing prevention capability is a springboard to lead the way in exposure management. Managed service providers, or MSPs also represent an important opportunity in the Workspace security pillar. We identified Rotate as a provider of a comprehensive platform purpose-built for MSPs. We acquired the team of Rotate to build momentum in the MSP market, leverage our position as a leading MSP e-mail security provider.

Next, we established exposure management as a new strategic pillar, and we believe we're uniquely positioned to expand our market share in the coming few years. Security teams are challenged by the overwhelming volumes of vulnerability, disconnected intelligence, shrinking remediation windows. And in an AI-driven threat landscape, weeks-long resolution cycle for critical vulnerabilities are no longer viable. At Check Point, we deliver real-time situational awareness unified across threat intelligence, attack surface visibility, providing context and automated remediation. Today, I'm also excited to announce the acquisition of SyCOps, a cyber asset attack surface management company that brings AI-driven asset discovery to enable accurate vulnerability context and risk prioritization. Cyclops strengthens our exposure management platform and delivers robust CTAM offering that includes threat intelligence, vulnerability scanning and prioritization and at the end of the day, also actionable and safe remediation.

And finally, as organizations rush to adopt AI, just to remain relevant, this breakneck pace of AI adoption prevents many new risks to organization. We get data leakage via prompts, the uploading of sensitive data, AI threats like jailbreaking or model inversion. And lastly, agents with uncontrolled autonomy, sometimes acting beyond their scope. AI security is a foundational pillar of our strategy. Our comprehensive AI security stack protects employee usage, enterprise application, agents and models. Late last year, we made the acquisition of Lakira to deliver runtime protection across AI applications and agents based on an industry-leading foundational model. You know that this is evolving faster than anything we've ever seen and requires design partnerships and open Gardner and the ability to track and acquire the innovators.

And so today, I'm happy to announce the acquisition of Siyata, specializing in discovering and understanding and ultimately governing autonomous AI agents. Siyata extends our platform by protecting the emerging AI workforce, enabling organizations to safely accelerate their AI transformation. In summary, 2025, as you know, my first year as CEO of Check Point. During the year, we strengthened our leadership team. We improved our go-to-market execution and enhanced our financial flexibility, all while delivering solid results. I believe during my first year, we built a foundation that positions us to accelerate our growth over the next few years.

And looking ahead, our strategy is focused and aligned. Organizations around the world are accelerating adoption, and our mission is to secure their AI transformation. Through our 4 strategic pillars, we are addressing the expanding AI-driven attack surface and bringing critical innovation to customers. The recent acquisition of Sightclub, Siyata and Browthase Talent further enhance our capabilities in exposure management, AI security and workspace. And these acquisitions strengthen our competitive position and ultimately support our long-term growth ambitions. We're executing with discipline, investing behind our highest conviction opportunities and driving greater value for customers, partners and shareholders in 2026 and beyond. And with that, I'll turn to Roei Golan on to address our financials.

Thank you, Nadav. One moment. Can you see my slides?

Yes.

Okay. So thank you, Nadav, and thank you, everyone, for joining the call. As Nadav said, we had a solid -- fourth quarter was a solid quarter with 6% growth in revenues, driven by 11% growth in our subscription revenues. Our revenues reached $745 million and were $1 million above the midpoint of our projections. Our non-GAAP EPS was $3.40 per diluted share and exceeded our guidance. The figure includes a onetime tax benefit of approximately $0.52 related to a reduction in our corporate tax rate in Israel that impacted prior periods income taxes and also updates into our tax reserves. Excluding the onetime benefit, EPS exceeded the top end of our projection by approximately $0.08.

As for the full year, our revenues reached $2.725 billion and were $5 million above the midpoint of our original projections. Our non-GAAP EPS was $11.89 per diluted share and exceeded our guidance. This figure includes a tax benefit of approximately $1.90 related to a reduction in our corporate tax rate that impacted prior year income taxes and uplift in our tax results also due to the tax settlement that we announced last quarter. Excluding onetime benefit, EPS exceeded the midpoint of our projection by approximately $0.09. As mentioned, our revenues grew by 6% year-over-year, while deferred revenues grew by 9% to $2.18 billion. It is important to note that our product revenues growth was moderated in the quarter, mainly as a result of our subscription price increase that we announced in July 2025, which shifted a larger portion of bundled hardware deals towards subscription.

This resulted in a headwind of $6 million to our product revenues in this quarter as we allocated relatively smaller product component without changing overall deal value. We do expect to see this impact also in Q1 of approximately $4 million to $5 million on our product revenues. We expect the benefits of this strategy to increasingly materialize in subscription revenue during Q1 and throughout 2026, while also the product price increase that we have effectively from 1/1/2026 of 5%, expect to support our product growth primarily from the second quarter of 2026. When we are looking on our calculated billings, they totaled to $1.039 billion, reflecting an 8% year-over-year growth, while our current calculated billing grew by 6%.

Our remaining performance obligation, RPO grew by 8% to $2.7 billion. On an annual perspective, our revenue grew by 6% year-over-year, while our calculated billing grew by 9% to $2.9 billion. Our current calculated billing totaled to $2.784 billion, reflecting a 6% growth year-over-year. When we are looking on our recurring calculated billing, which represents the calculated billing from subscription and maintenance and update, this grew by 10% year-over-year. As we mentioned, our growth this quarter was driven by our subscription revenues. We continue to experience strong demand for our emerging product portfolio, which remains the primary driver for our revenues. In this quarter, in Q4, we had a growth across all our pillars, CEM, Workspace and hybrid mesh, while our emerging products, e-mail security, SASE and ERM exceeded 40% -- more than 40% growth in ARR.

When now looking on the global revenue distribution, so we did see growth in all regions. 48% of our revenues came from EMEA, and that grew by 5% year-over-year. 40% of the revenues came from America, which had 6% growth year-over-year, while the remaining 12% came from Asia Pacific that grew 9% year-over-year. When I'm looking at the full year 2025, so actually saw 46% of our revenue came from EMEA, grew by 5%. 42% of the revenues came from America, and that grew 7%, while the remaining 12% came from Asia Pacific and that grew double digit, 11% year-year -- looking into our P&L in this quarter.

So our gross profit increased from $623 million to $660 million, representing a gross margin of 89%. Our operating expenses increased by 13% to $358 million. On a constant currency basis, our OpEx increased by 11%. The increase is primarily as a result of increase in our workforce and investment in sales and marketing and channel programs. Our non-GAAP operating income continues to be strong at $302 million or 41% operating margin. Our non-GAAP net income increased by 21%, mainly as a result of a onetime tax benefit that I mentioned in the beginning of this deck in connection with reduction in tax rate and updated tax reserves.

The non-GAAP EPS grew by 26%, while the onetime benefit contributed approximately $0.52. Our GAAP net income reached $305 million, an increase of 18% year-over-year, while our GAAP EPS was $2.81 and grew by 22% year-over-year. When I'm looking on the full year, so our gross profit increased to $2.4 billion, and that represents a gross margin of 88%. When I'm looking ahead into 2026, we all know the memory price increase, the recent memory price increase that we have in the market over the past few months. And it is expected to have an impact also on our gross margin in 2026. We estimate this impact to be approximately 1 point for the full year, 1 point on our gross margin for the full year, with most of the impact expected in the second half of 2026 as we have enough inventory -- sufficient inventory to support the needs for the first half of 2026.

We will continue to closely monitor supply and pricing dynamics into the second half of the year and adjust our procurement strategy as needed, including potential product price increase. Our operating expenses increased by 10%, mainly as a result of our continued investment in our workforce organically and also the impact related to Cyber acquisition that we closed back in September 2024 and the acquisition that we've done during 2025 of Verity and Laqera. Our non-GAAP operating income was $1.140 billion or 41% operating margin. Looking ahead to 2026, we continue to actively hedge our foreign exchange exposure. However, not all currency are fully covered.

As we disclosed in the previous earnings calls, if current exchange levels persist, we anticipate an additional headwind of approximately 1 to 1.5 points on our operating margin for next year. Our financial income increased to $114 million in 2025 as we kept reinvested our cash in higher rates compared to 2024. In December 2025, as Nadav mentioned, we completed a $2 billion convertible notes offering. As a result, we expect higher financial income in 2026 that's estimated to be between $40 million to -- the financial income in 2026 is expected to be $40 million to $40 million per quarter. In 2025, we had income tax benefit of $79 million, which included the benefit of approximately $209 million or $1.90 non-GAAP EPS in connection with updating our tax reserve due to the tax settlement and also the reduction of the tax rate for prior years.

As for 2026 taxes, it is important to update that in December 2025, Israel enacted the OECD Pillar 2 framework, established a 15% global minimum effective tax rate for large multinational groups effective for taxes beginning in 2026. As a result, we currently estimate that our tax rate for 2026 will be between 16% to 17%. In parallel, a complementary Israeli government R&D incentive program was initially approved in January 2026. The outcome from this program that is expected to be effective from January 2026 can be approximately $50 million benefit into our operating income. This program is expected to be finally approved by the end of Q1 2026. Our outlook reflects this development as part of our forward-looking statements, including the anticipated certification of the R&D incentive program and the potential financial impact of related grants on our future financial results.

One moment -- moving into our cash flow and our cash position. Our cash balances as of the end of the quarter was $4.3 billion. As a reminder, on December 2025, we also announced a $2 billion, and we received $1.8 billion net proceeds net of issuance costs and the purchase of the Capco. Also during October 2025, we acquired Laera for approximately $190 million of net cash consideration. Our operating cash flow was very strong this quarter with $310 million, 24% growth year-over-year and representing 42% of our revenues in Q4. We also continued our buyback program and purchased 2.2 million shares for $425 million at an average price of $193 per share. On an annual perspective, our operating cash flow grew by 17% to $1.234 billion, while important to note that this includes $66 million tax payment, onetime tax payment that related to our tax settlement that we signed in Q3, while our balance sheet hedge transaction resulted from the other end, the benefit of $51 million in 2025.

Also as a reminder, during 2025, we completed the $160 million payment for the land purchase associated with the new Check Point campus that we are building here in Tel Aviv. We do not expect any significant additional payment in connection with this new campus in 2026. So to summarize, our revenues were above the midpoint of our projection and the EPS exceeded our projection. We do see continued strong demand for emerging technologies, it's e-mail, if it's SE, SASE, and we had another quarter and another year of strong operating cash flow and strong profitability. Now moving to the business outlook to our projection for Q1 and for the full year.

So for Q1 and the full year, I'll start with the revenues. So first, our revenues is expected to be between $655 million to $685 million in Q1 2026. I remind you the short-term headwind that we have only specifically in Q1 in terms of product revenues. For the full year, we expect our revenues to be between $2.83 billion to $2.950 billion, between 4% to 8%, while the midpoint is 6%. This time, we're also going to give you the subscription revenue guidance which expected to accelerate to continue to accelerate. As for Q1, we do expect it to be between $318 million to $328 million, while as for the full year, we expect it to be between 10% to 14%, which means that the midpoint expect to be 12% growth.

Our non-GAAP EPS, including -- it takes into effect the expected grants, the R&D incentive program that needs to be completed by the end of Q1. This take into account and the EPS is between $2.35 to $2.45, while the full year EPS, non-GAAP EPS expected to be between $10.05 and $10.85. GAAP EPS for Q1 expected to be $0.64 less, while for the full year is expected to be $2.58 less. Also, we're going to share with you guidance projections, sorry, for adjusted free cash flow for Q1 and for the full year. This is the operating cash flow minus CapEx, minus any acquisition-related costs. And we are -- in Q1, we expect to have a strong adjusted free cash flow between $420 million to $460 million, which represents 66% of our midpoint, the expected revenues in Q1. While for the full year, we expect it to be 42% of the revenues in the midpoint, which is $1.150 billion to $1.250 billion. That's it. And we keep, the floor is yours.

All right. So for Q&A, today, first up, we're going to have Adam Tindle from Raymond James.

All right. Can you hear me?

Yes.

And we'll be followed by Shaul Lal from TD Cowen.

Nadav, I wanted to ask AI security is obviously a clear focus in your script today. And it sounds like you're investing both organically and inorganically with some of the acquisitions here. I wonder, this is sort of a high-level strategic question for you. The heart of it is to kind of compare and contrast your view of AI security versus how cloud security played out. And with the context being that you made the very smart decision in cloud security to choose to partner with Wiz, essentially exiting Check Point's efforts in organically as the ROI wasn't there.

Again, in hindsight, very smart given the cloud security market has been problematic for your competitors, bad pricing, bad profitability there. And I see some similarities in cloud security and AI security. So I guess what's different about AI security that got you more comfortable to invest here versus the decision to invest in cloud? And how big do you think this could be for Check Point over time?

Yes. No, great question. And the sort of the analogy is in place. However, in my opinion, the AI transformation is both more foundational. It's not shift and lift your activities from on-prem to the cloud, but rather it's a real shift in the way you use technology, do business, employ people, et cetera. And the second change, in my humble opinion, is that it's -- we're seeing it already, but I expect this to accelerate. So it's happening much faster.

So in my opinion, you can look at the cloud analogy, but you need to have it as a reference for difference. The second thing I'll say is that -- here are 2 fundamental issues. Number one, attackers are using AI much faster than defenders. This is just the nature of this asymmetry between offense and defense and in this learning competition and how, unfortunately, for several reasons, the attackers can adapt faster. And so what we're seeing is larger scale, more precision and a real change in the nature of attacks, right? And so that's one angle that we need to look at. The other is -- and that's sort of the nature of what we're seeing right now. Every organization on the planet is racing to adopt AI to stay relevant.

And as they're doing that, they're sort of creating a new attack surface. When you look at these 2 things separately, in my humble opinion, this is time to revalidate security altogether. We think we're really well positioned to lead the way to secure our customers' AI transformation based on the 4 pillars that we were talking about, based on the fact that we truly have the best prevention -- proactive prevention security, which has always been important, but it's now becoming critical. And so building we have decade data 100,000 customers, 4 pillars, a vision that I believe is very specific to secure AI transformation. This is a must for us. We're making acquisitions. We're building organically. And we really believe this is our time and our space to challenge the status quo.

Next up is Shaul Lal, followed by Joseph Gallo of Jefferies. Apologies for some background noise.

Question for Roei. How should we be thinking about ASP hikes from a linearity perspective? Are we seeing them coming in the first half of the year? Are we seeing them coming in the second half of the year? Can you just help us out a little bit?

Yes. So we did several price increase. One of them was in July only for the subscription, the firewall subscription. And in January, we've done it for all the firewall, which including client hardware, subscription and support. In general, usually, it takes to see the ASP going up. It takes -- usually it's a quarter. I mean, if I'm looking at about, for example, appliances, we talked about the appliances. So we -- of course, it's effective from January 1.

But from a revenues perspective, that's something that usually we see the main impact coming from the quarter afterwards because certain revenues that are recognizing in Q1 are coming from bookings that came from prior periods. And also, we have -- we are expecting quotes that being delivered to our customers before the effective price increase. So most of the effects usually come in -- we should expect to see from Q2 this year.

All right. Next up is Brian Essex Rob Owens, followed by Brian Essex, pardon me.

Am I in here first, Ki or...

You are in first, Joseph, I'm sorry.

I appreciate that. It was great to see the strength in subscription, but I just wanted to ask on product in 4Q. I know there was some mix shift and reallocation in large deals, but is there anything else we should be aware of? And then I believe your product guide for '26 implies approximately flat. Just any comments on remaining refresh cycle available? Or have you seen customers change their buying behaviors ahead of these incoming price increases?

Yes. So I think Q4, we had a good quarter for product. Again, it was less good than what we've seen in the first 3 quarters, but still, we did see a good quarter for the demand for our product. If I'm looking ahead for 2026, 2026, I think we still have -- we see good funnel for hardware, specifically in the second half of the year. I do have to say that in the -- you are right that when you're talking -- when you're taking into consideration what I gave for subscriptions, so product is around flat to low single digit.

In our guidance, we took more prudent approach, mainly because not we don't see the funnel, mainly because we are taking a more prudent approach of what's going on the macro with the memory shortages that we see everywhere price increase, not specifically only on memories, by the way, on all raw materials, and that might affect some customer behavior that's postponing some CapEx projects. So we took it into account. But definitely, again, we want to be more than that. We want to be higher than that. I think we continue to see refresh. And -- but again, we cannot ignore what's going on in the market with the memory situation.

All right. Next up is Todd Weller -- or Brian Essex, followed by Todd Weller. Sorry about that, Brian.

All right. Joe, I wasn't going to let him pass you by. Really, another question on guidance. Would love to understand maybe the puts and takes embedded in operating margins. What -- if we were to back into operating margins, what are the implicit margins in your guidance? And how do you think about spending? And then maybe one for Nadav, basically back on that, the dynamics around the hardware price increases, are you hearing any shift in spending intentions from your customers anticipating maybe firewall and server prices accelerating on the back of the memory pricing. So one for each of you.

So the margin that we took into account in our guide, it's between 39% to 40%. So that's the operating margin. We're taking into account all the headwinds that we get from the memories from the FX on the other hand, the expected grants from the government. So all of that was taken into account, that puts you in the 39% to 40%. av...

Yes. Look, with regard to the hardware, as Re said, we don't see any change as of now. As Roei said, we do need to be prudent looking into what's happening this year. I actually think for us, this could be a competitive advantage. We have the supply for the first 2 quarters. We're going to figure out how to take advantage of the situation. I don't see this as being a huge headwind, except for what Marie said about the 1 point in the margin that we just spoke about. Obviously, very encouraged by the high growth in the subscription rate that we're seeing and projecting.

And no shift towards SASE or other types of architecture.

Exactly. Exactly. Our SaaS products are becoming a -- our SaaS products and subscription is becoming a much bigger part of our overall cake, and we intend to continue growing that, again, across the different pillars. So in hybrid mesh, SASE, Workspace is completely SASE, so is exposure management. And this year, for the first time, a true North Star around security for AI around the AI security pillar.

All right. Next up is Todd Weller, followed by Jan Siddiqui.

Nadav, you outlined all the changes that were implemented in 2025. What would be the 2 or 3 specific ones you think will most positively impact the growth trajectory in '26? And when do you expect to see those start kind of showing up in the numbers?

Yes. Look, I think that we laid the foundations, right? The most importantly is the C-suite and the new leadership we had and the way we are reorganizing and refocusing our go-to-market. That's number one. And the second thing that I'm very excited about is going to the market with these 4 pillars. Each one of them is a platform in itself. Some of our customers are going to choose to use one pillar as their platform, let's say, for Workspace. Others are still using the hybrid mesh pillar and some are using everything, and it's an open garden so we can play with the others.

So if you ask me, these are the 2 main things. Number one is the 4-pillar approach. Number two is the leadership in the C-suite change and the refocusing of the go-to-market. And above everything else, I am a true believer that we need to revalidate security. Attackers are moving at an extreme speed. I think we have the foundations. But as you can see, we're also making the acquisitions. We have the right design partnerships. We want to do this as an ecosystem play. So the third thing, of course, is security for AI. The race is on, and we're in it.

Thanks, Todd. Next up is Junaid, followed by Keith Bachman from BMO.

Just wanted to talk about the progress on the SASE front. You mentioned ARR grew around 40%. In the past, you've talked about making it much more enterprise-ready, moving to a unified policy. How is that tracking? And is the focus right now mostly on upselling the existing customers?

Yes. So great question. As you can see, the SASE now is a part of our hybrid mesh pillar. We're maturing the product. We made significant investments organically in 2025, and the product is maturing, and we're integrating it as a part of the hybrid mesh pillar and platform like you said, with our unified management. Now in terms of our sales motion, we are integrating the -- what used to be the -- what we used to call a rocket. We're now integrating this into the hybrid mesh pillar.

We're also putting together the sales overlay of our CloudGuard network security with SASE to better integrate that into the overall motion. You're right that I would say that 2/3 is upsell to existing customers, but that's not the only one. We're also seeing new customers that are actually buying our SASE, and we hope to actually move them to our firewall business to create the full capability of a hybrid mesh pillar.

All right. Next up is Keith Bachman, followed by Shrenik Kattharis of Baird.

Nadav, I want to put this to you, and it sort of reflects incoming comments already this morning. investors are looking for an acceleration of growth. You're basically guiding to 6% plus or minus total revenue growth, which is consistent with what's happened in the last 2 years. So while subscription is improving, which is nice -- it's nice to see, total growth isn't improving, right? So how do you sort of respond to -- because you're asking investors to be patient about this notion of acceleration. So how do you respond to that comment? And then consistent with that, Roei, any comments you want us to think about for total billings growth in light of the midpoint of rev growth?

Yes, sure. Thanks. Look, we laid the foundations. Now it's all about execution. I think we have the 4-pillar approach. We have the foundations. We have the right people in place. We have the financial flexibility to make acquisitions. Now it's all about execution. And you're right that it's not an overnight acceleration, but I think we're on the right trajectory. I think also what we have in terms of product solutions around our superior ability to proactively prevent the acquisitions that we're making and the -- what we're building in the AI security is putting us in the right trajectory. And now it's all about execution.

And as for the total billings, similar to the revenues growth around high single digit, 6%, 7%, that's expectation in order to achieve the midpoint.

All right. Next up is...

So, you just mentioned financial flexibility, ended 4Q with $4 billion in cash and you have added $2 billion in convert. Just in terms of so far, you mentioned about favoring smaller AI native integrations and the announcements you made. Just on the large-scale M&A, right, just -- can you just talk to as some of the other peers are kind of going after platform convergence waves, aggressively chasing few things. So what kind of sort of scale IP or adjacency would actually justify more transformative sort of AI-driven bet for you guys, if at all?

Yes. So yes, we have the flexibility and we have the vision. And now in each one of those pillars, we need to be very disciplined and identify the targets. They could be tuck-ins, they could be larger, but the ones that actually take us to be a podium player in each one of those pillars specifically. So the target needs to have the right technology, the right people, the right culture and so that we can see that we can integrate it and move fast to create a real platform.

In my humble opinion, just buying more and more products and putting sort of a supermarket approach is not what our customers are looking for when they look through consolidation. They look for a real integrated for us pillar. And each one of those pillars, we're looking at as its own platform play. So if you take exposure management, we are looking to create the #1 exposure management system. Some of the acquisitions are smaller. We're also looking at larger ones all the time, but we're going to be disciplined about it. And again, through the -- looking at each pillar separately, we're not stopping. We're moving fast.

It looks like you just stopped playing a game when you came on. Good see you. Next up is Joshua Tilton, followed by Roger Boyd from UBS.

Maybe, Roei, for you, any way to think about how much the acquisitions that you announced today are contributing to the guidance that you provided for 2026? And maybe outside of pricing, could you just talk to why or what gives you conviction in the belief that guiding to, I think, what you said flat to low single-digit growth for product is prudent from your perspective?

Okay. So first, in terms of the acquisitions, so of course, it's part of the guidance, and that it should have an effect of approximately 0.5 point in our margin because it's mainly right now in 2026, we expect it to have many costs, many dilution to our margin. That's approximately 0.5 point to the operating margin. As for the pricing and the product, so I think, again, I'm looking -- when we are -- of course, we are working on the guidance and of course, working for our plan on 2026, we're looking on the funnel.

We are looking on the potential. We're looking, of course, on the price increase that we've done in January 1. And I think that, again, we can do -- we should -- I mean, we need to continue the strong demand that we've seen in 2025. We see good final also for hardware mainly in the second half of the year, also in the first half, but mainly in the second half of the year. And I think that definitely also the price increase and the effect that we've seen that the discounts this year were actually even improved compared to last year in 2025 compared to 2024.

So if we manage to continue that and maintain the discounts, we also can benefit from this price increase. I do have to say, it's important to say we didn't take into account in our guidance any additional price increase. Because of the memory shortages, there might, of course, we might consider additional price increase during the year, but that was not a factor in the guidance right now.

And just to be clear, that 0.5 point is in the 39% to 40% margin...

Part of the guidance I provided you.

And any way to think about the top line contribution from the acquisitions?

Minimal.

Minimal to, I would say, a few millions or even a few millions of dollars.

All right. Next up is Roger Boyd from UBS, followed by Peter Levine from Evercore.

Awesome Nadav, I wanted to hit on rotate. They have a lot on their platform. So I guess in addition to the MSP enablement tools that you talked about and some of the exposure management technology, how much interest is there in the rest of their portfolio, which I think includes some native technology for detection across endpoint and some other attack services. And when you think about MSPs in general, can you just talk about the -- what percent of revenue they represent today and how you see that evolving? How important is that in terms of your channel strategy this year?

Yes. Thanks. So today, I think it's -- I don't -- it's still relatively small, but I think it's a high potential growth for us in 2026 and beyond. The MSP, we're going to consolidate everything under Workspace under Gil Friedrich. And the Rotate technology and the folks that are coming with it are going to enable us to actually streamline everything to the MSPs, and that's where the opportunity is. And you're right, it's not -- it's e-mail, it's endpoint, it's browser, it's SASE, all put together for the smaller customers, working with our partners and the MSPs. And so this acquisition is -- will allow us to accelerate to move faster into a consolidated unified ability to work with those MSPs.

All right. Thanks, Roger. Next up is Peter Levine with Evercore, followed by Saket Kalia from Barclays.

What's changed in customer demand that makes kind of exposure management more of a priority today? You touched upon it on the call in your prepared remarks, but are customers explicitly asking for like a united exposure visibility across network, cloud, identity, whatever it is? And then maybe just, Rory, help us understand like how meaningful could this category be over the next, call it, 2 or 3 years in terms of revenue contribution?

Yes. So first, I can't resist to answer Rory's question. It's meaningful. It's not huge right now, but we see great potential in it. When I look at this -- I come from the trenches ultimately. When I look at this as a practitioner, you've got to have this situational awareness. And so yes, we're seeing more and more demand, and we're seeing it going upstream as our capabilities become more and more mature. And what we're building is the full gamut. So on the one hand, based on an acquisition that we made a year before last around Cyberin, we have the intelligence.

Now with Cyclops, we can see the posture and we can prioritize based on what we're seeing CVEs, dark web stuff. We're seeing what's coming. And from the inside, we're seeing what's vulnerable. And with the Verity acquisition, we can actually do the automatic remediation. And so what our customers find us once they deploy that is that a lot of the things that are coming at them are no longer in danger and because we can block it automatically before it even happens. In my opinion, again, looking at this as a practitioner, there's -- one of the shifts is that attackers can actually weaponize vulnerabilities much, much faster. And they can also use autonomous agents that are doing their -- once there is a breach, they operate much, much faster.

And so having that proactive prevention has become more important than ever and building this triage around these 3 components, I think, is unique in the industry, and I think will carry more and more traction. For us at Check Point, it's also important because it allows us to go outside of our installed base right now to new customers and hopefully upsell and cross-sell once we go beyond that. And so yes, we see this as something which is becoming a core pillar and an important part of the 4-pillar strategy that we're going with.

The last thing I'll say about it is that when we do the remediation, the automatic remediation, -- we don't do it just for checkpoint products. And that's the beauty of it. This is where an open platform, open guarding comes in. When we see vulnerability, some of our customers are not using Check Point products to secure their hybrid mesh, but we can go in and fix the other vendors' vulnerabilities when we can -- after we prioritize them. And at the end of the day, I think it gives our customers better security.

Thanks, Peter. Next up is Saket Kalia, followed by Brad Zelnick from Deutsche Bank.

Okay. And by the way, I appreciate the additional detail on guidance. Maybe a question for both Nadav and Roei.

The 4 pillars are really helpful framework for thinking about the business.

Roy, for you, are there any guardrails that you can give us just on the mixes across those 4, high level, of course. And Nadav, what are you changing from either a contracting or sales comp perspective to drive higher growth across those smaller, maybe faster-growing pillars? Does that make sense?

Yes. So I think if you're looking on the 4 pillars, so of course, the most significant one is Diab mesh, which includes also our firewall, which is still a significant part of our business. It's growing, of course, mainly driven by the SASE and our cloud network. That's mainly driving the growth. Both of them SASE and cloud network sitting on the subscription line item. And that's part of the acceleration that we see in the subscription line item. And the others that I think have the highest growth that we see today are Workspace and STEM.

STEM, we talked a lot about it in this call. We do see very strong demand. Of course, still small numbers from total Checkpoint, but very strong demand, which started when we acquired Cyberin, then we added other acquisitions that we've done and included in the offering. And again, when we are looking on the funnel for next year, definitely will be -- it's expected to be even in 2026, a major driver for our subscription line item. And also e-mail e-mails continue to be very strong. We talked about the numbers, I think, talked about the numbers a few quarters for the few quarters.

I mean we already passed the $160 million ARR and continue to grow in very strong double digit. So definitely, we're aiming to pass the $200 million this year. And I think that's the main driver that we -- that's why you see our subscription revenues continue to accelerate, and we expect it to accelerate every quarter. Of course, with the contribution for -- also from firewall, again, contribution that it's a mix of the price increase, but also gaining new logos and expanding our market share in the firewall. So that's in total picture how it translates into our revenues. Nadav, you want to...

Yes. The 4 pillars is strategic, as you said. In the first one, it's the infrastructure and the network. The second one is your employees. The third one is the situational awareness. And then finally, security for AI, which is as a stand-alone, but also embedded in the 3 others, and we have the services that engulf all that. To your question, to grow these pillars faster, we're doing a few things. Number one, in each pillar, we are trying to see what is a differentiated advantage, right?

So like I said, for the hybrid mesh, it's the prevention first, it's the scalability. It's the unified management and it's the hybrid architecture. But there are other things that we want to improve. And so some of them we're doing organically, some we're looking for acquisitions. We're doing the same thing for each one of those pillars. The second thing is from our go-to-market focus, -- we are moving to a multi-pillar, multi-platform company so that our front liner sellers can sell each one of those pillars. And of course, in each one of them, there's also different products, and we're better aligning our account managers with the specialists that can come in and support them. And that's a major change in the way we're going to market as of literally now.

The one thing I want to add is that in each one of those pillars, we're also going to challenge. We're going to challenge some of the existing status quo in the market. So we're going to we're challenging status quo around supermarket approach consolidation through a real platform approach. We're challenging a closed garden to an open garden. We're challenging complexity. So in each one of these, we're not just building our own security platform pillar, but also challenging the existing status quo.

Again, some of it with existing capabilities that I think are critical and becoming more important and in others, by building new stuff and making acquisitions. And at the end of the day, I think we need to realize that especially the world we're going into, every morning, there is a new reality and a new threat. So we need to constantly evolve. We need to constantly see the road map of our customers. We need to constantly look around the corner so we can truly be their companion for a secure AI transformation.

All right. Next up is Brad Zelnick, followed by Shyam Patil from Susquehanna.

Nadav, I've heard you loud and clear, the foundation is in place. It now comes down to execution. And I take that to mean more go-to-market than product because Check Point has always had great product and you're acquiring high-quality tuck-ins that only strengthen your offerings in the position that you're in. But where do we stand from a go-to-market perspective? How much more ramp distribution capacity do you have heading into 2026? And maybe for Rohe to chime in, what needs to happen to exit '26 growing double digit and to get us to double-digit growth for the full year in '27?

Yes. Thank you for that. So you're right that it's about go-to-market execution. It starts with a louder voice around our marketing effort. It's about the focus. And as I described, we're going to be focusing on large enterprise. We're going to be focusing on new logos. We're going to be focusing on a -- on the multi-pillar, multiproduct company approach. We're going to be focusing on hiring the best people in the industry. So it's a plethora of things that we're doing to create a better execution as we go to market.

And lastly, it's also about challenging the status quo. I think this is a time where the nature of security is changing. I think the criticality of the basis of what security means has become more critical than ever. And we're going to take advantage of some of the assets that we already have. We're going to take advantage of where we are situated. We are seeing all the innovators, and we're trying them out as designed -- with our design partners on the customer side. We've got new leaders in marketing. We've got new leaders in sales, and we're going to continue bringing in the best of the best in the industry to join us to do exactly what you said by the end of the year.

As for the double-digit question. So I think -- again, I think we need to show -- first, we need to continue the strong momentum, the strong demand that we've seen for the -- we mentioned the CTM. We mentioned the e-mail security, the workspace and SASE. So definitely, we need to see here. We need to see specifically in e-mail and CTEM continued strong demand there. As we see already, we see it in the funnel. We saw it last year. We saw it in the last few years, but e-mail in the last years, but CTM specifically in 2025 and also in the funnel for next year. for 2026. But definitely, in order to be double digits, we need to grow even faster than firewall.

I mean we are positioned much better today on the firewall than what we've been 2 years ago or 3 years ago, I think we did a significant improvement both on the product side, also on the go-to-market and on the go-to-market. I think we brought -- we have great leadership in the go-to-market. And I think we are positioned much better today to accelerate our growth on the firewall. Definitely, mid- to high single digit in the firewall, together with the continued strong momentum that we have in the other pillars that should bring us to double digit.

All right. Next up is Shyam Patil, followed by Ben Bollin of Cleveland Research.

This is Dan on for Shyam. I guess with the price of memory increasing significantly of late, just I know you talked about potentially increasing prices, but what levers do you have to maybe try to get better deals from suppliers? And how are you looking at that as we progress through the year and try to get through sort of the shortages?

So I think we are working 24/7 with suppliers around the world to get better pricing. I think we are doing -- we have a great team that's doing an amazing job in order to get the best pricing, I think. But still, we cannot avoid the situation that there is a price that the price of the memory has increased significantly. So even if we're getting better pricing, it's still significantly higher than what we used to pay a few months ago before this trend starts.

But definitely, we are investing a lot on that on getting the best pricing. And again, we're doing it. We have teams around the world that's exploring opportunities in order to get the best pricing in the market. Of course, we can -- we always want to do even better, but I think definitely, we are doing a great job there.

All right. Our last caller is going to be Patrick Colville. Ben Bolin is not on the call today. Patrick, nice to show up.

I'll make it a good one to close. It's actually a clarification question. Can you just, Roei, please just go over again what drove the product revenue to be a little bit softer than we might have hoped in 4Q? And then can you just also just reclarify why the pricing benefit doesn't really hit in 1Q and then why it builds throughout the year?

So for product, most of our hardware that we are selling today, that is a significant portion of our product revenues is sold as a bundle to bundle together with the software subscriptions actually with subscription. And when we announced the subscription price increase back in July, so we announced only pricing for subscription without increasing the appliances price. From an accounting perspective, that's more accounting, we need to allocate because the stand-alone subscription price was increased without the total price.

So the allocation of the revenues are smaller to the product, to the bare hardware is allocated is smaller, and that impacts mainly Q4 because in Q3, we just announced it. Some of the deals were not recognized as revenues. But in Q4, we already saw that, and that had -- again, it's mainly short-term headwind. It's not going to affect our total revenues. It's more kind of headwind on our short-term product revenues, and we're going to see the benefit from the subscription over time. So again, that's in general. And your question on the price increase, so let's separate between billings and revenues.

Billings, most of it, you're going to see it in the same quarter that we did the price increase. From a revenues perspective, sometimes like in Infinity, in some other ELAs that we have -- we have deals that have been closed before we -- I mean, in prior quarters, and we are recognized -- it's part of our backlog, and we are recognizing the revenues in future periods. So in that factor, you don't see the price increase in the revenues. You're not going to see that. You might see billings for new deals, but you're not going to see the main impact in the same quarter. So as I said, the main impact we start to see from the quarter -- from Q2, which is the quarter after the price increase on the revenues, not on the billings.

All right. Thank you, everybody, for joining us. We appreciate it, and we'll see you throughout the quarter and then obviously, next quarter. Have a great day. Bye-bye.

Bye. Thank you.

Perfect. Welcome, everybody, bright and early here in London on Tuesday. I'm Meta Marshall. I head up cybersecurity research here at Morgan Stanley, filling Hamza's shoes in his departure. We're delighted to have Check Point here today. For any research disclosures, please see morganstanleyresearch.com.

And I'm going to hand it over to Kip to give a little bit of a safe harbor for Check Point before we start.

So good morning, everyone. During the course of the presentation, there may be forward-looking statements made. As with all forward-looking statements, there's risks and uncertainties that could affect the outcome of results. If you'd like a comprehensive but not exhaustive list of those risk factors, maybe read something before you go to sleep, so you do go to sleep quickly. Take a peek at our 20-F filed with the sec.gov. And as with all forward-looking statements, we reserve the right to update as required by law. And back to you, Meta.

All right. So we're delighted to have Roei Golan here, CFO of Check Point here with us today. It's been almost a year since the CEO transition in Check Point's history. From your vantage point as CFO, just what has changed in terms of strategic priorities, decision-making cadence or risk appetite?

So first, great to be here. Thanks for hosting us. So Nadav joined us in December. Actually, I think it's today, he's marking the first year. I think he joined in December 9. So I think since Nadav joined, we felt there are many changes in the company that Nadav brings. Again, I don't think that -- in the end, Check Point is an amazing company before Nadav. It was a great company before then. But definitely, when Nadav joined, he understand that in order to make this company even better, some changes needs to be done and mainly around the go-to-market.

Since he joined, I'll start from individuals, he almost changed all the go-to-market leadership. We have a new CRO. We have a new Global Head of Americas that just joined us a few weeks ago, Rachel. We have a new CMO that came from BeyondTrust that arrived -- that joined us in September. And we have other leaders, second-line managers, leaders that joined. So I think there are a lot of changes in terms of individuals in the go-to-market. So that's one aspect.

The other aspect in terms of the leadership, it was important for Nadav to hear the voice of the customer, not only from one person. Before he joined, we had one or two persons in the leadership forum that represent the voice of the customer. Today, we are -- we have six people. And that's important because when I'm looking on -- when I've been in these leadership meetings before Nadav joined, before these changes and now, the narrative of the discussions are different. It's not that we didn't talk about the go-to-market before. But when you have six people that represent the voice of the customers in these meetings, you definitely feel different narrative, not only one opinion from one person that represent the voice of the customer. And definitely, that's -- this is a significant change. So that's from the individual changes that he's done.

I think the even more important change that he is trying to do is on the culture perspective. I think the importance for him to have first transparency to the employees. I think we are doing today almost every -- not almost every quarter, there is a [ all-in ] for all company when Nadav is sharing his strategic, his views on the company, where the company is heading. And that's something that -- it's new. I mean, it's something that we didn't do in the past.

And second, even more important, the sense of urgency. As I said, it's not that we didn't have sense of urgency before, but I think that the focus today and sense of urgency that things cannot be postponed, and we need to get back to customers or even to our internal customer, which -- employees, as soon as possible and not delaying anything. I think that's something that's been changed. I mean, since he joined, mainly because of his focus on that. So again, a lot of changes.

Last thing that I would like to add, I think also very important, the C-level engagement. When I'm talking about C-level engagement, so we -- Nadav came from a cybersecurity background. Although he was not the CEO of a corporate, he was at Team8, the founder of Team8. He spent there more than 10 years. And during this time, he managed to have a significant group of people that is -- he knows, connections. And definitely, we feel it today. We feel today that his meetings with the C-level, which is start with the CISO of the largest banks in the world or largest companies in the world and then with the CIOs and even with the CEOs, that's something that we have less in the past. And that's definitely -- it's tough to quantify it in numbers, but that's definitely on the long run will help us to accelerate our business just from these engagements.

Okay. So you just listed off a good list of kind of increased engagement with customers, increased engagement and culture, the C-level engagement. How does that translate to the model? You guys have had leading margins, but maybe mid- to high single-digit revenue growth. Just how are you thinking about that balance of kind of this push and urgency sense that you just mentioned versus kind of protecting margins over the next 2 to 3 years?

So I think, as you said, we have, I think, the best margins in the sector. Even today, I know that our margin went down slightly in the last few years, but still we're talking about 41% to 42% margin that we finished this year. And as we mentioned a few times and Nadav mentioned a few times in the earnings calls, we are not afraid of sacrifice slightly the margins. But in the end, we're going to keep investing in growth, but responsibly.

Not like -- you should not expect from us to take down the margin in 1 year in 5 points or even 4 points. I mean that's not -- I don't think that we need it. I think we might go invest in certain areas more in order to accelerate growth, but it's going to be very responsibly, prudently, and that's how we look at it. There's no actually balance. But as I say, I mean, we want to show progress, and we want to accelerate growth every year.

So right now, if you're looking on our midpoint, so it's around the 6% growth, we want to grow faster. It's next year and the year after. Again, I didn't get yet the question on the double digits, sometimes -- usually I'm getting it. But again, it's going to take gradually. I mean, the improvement will take every year. Not -- you should not expect from us in revenues to go from 6% to 10% in 1 year. It's -- again, we're going to do it responsibly, and we want to see improvement every year like we've seen in the last quarter was one of the best quarters that we had. We want to show more of such quarters that we'll see.

So that's how we see it. And again, from a margin perspective, again, we talk about more about 2026 when we're going to announce earnings in February. But definitely, we should not expect a drastic change to our profile.

Got it. I'll let the rest of the day ask you the 10% question. So maybe turning to Infinity. Could you talk about what you're hearing just from the customer side in terms of kind of consolidation of security solutions onto a single platform? And just how does the Infinity consolidated platform address that need amongst your customers, particularly as you guys are kind of engaging with them more?

So I do have to say we have the Infinity agreement, Infinity platform, we launched it sometime, I think, in 2017. But definitely, since 2021, I think beginning of 2022, we started to see a significant acceleration on the adoption of the Infinity from our customers. We see more and more customers that are willing to move to Infinity.

I think it's -- the reason for that are two. First, customer -- we have today, first, much better portfolio than what we have 6, 7 years ago or 5 years ago. We are not selling only firewall. We have great e-mail security product. We have great enterprise risk management product. We have great SASE product. We have multiple products that we can sell today except the firewall. And definitely, the Infinity is a platform and a tool to do that, to do this upsell -- or cross-sell, sorry, and selling this product.

And definitely, we see more and more customers willing to do so because as I see it, first, it's easier for them to manage one vendor instead of now multiple vendors. In certain areas, they can do the same -- they can use the same policy and same management for these products instead of using different policies around the portfolio.

And the last one, saving costs. Usually, when you're bundling our firewall with the e-mail security, with the SASE, with the endpoint, usually, if you're looking on the total, you're going to pay us less than what you would pay for seven different vendors.

Right. Okay. Feedback on the new channel program has been positive as we've been doing our channel checks. Just what are you hearing from partners in terms of competitiveness? And have there been any changes to kind of incentives that we should understand?

I think we do see very positive feedback from the channels in the last 12 months. I would say since Nadav joined -- it started when we launched a new partner program. But definitely, after Nadav joined, we did see more enthusiasm from the partners. I would say that, first, I think we are -- need to be honest, we're putting more dollars there. We understand mainly in the U.S. that we need to improve our channels -- engagement with channels. And that's, of course, it's not -- it usually comes also with more rebates, more speeds that we are giving.

And I think engagement, I see more engagement. I talked about the C-level engagement. Nadav met -- is meeting with our -- with the C-level, with our biggest partners, working with them on strategic plans. And that's something, again, that we didn't have in the past. And he's actually sitting with them. He is now, by the way, in New York and part of his schedule is also meeting partners, our largest partners there. So that's something that's, of course, helping us because this C-level engagement is also something that's important to show the partners that we are willing to go together and invest together and drive the growth.

Okay. Maybe just turning to the budget environment. Cyber remains a key priority on IT budgets, but IT budgets maybe have continued to be under a little bit of pressure. We've seen varying degrees of checks this year in terms of how strong the cyber environment is. Just how would you characterize the demand environment this year versus kind of a year ago? And are you seeing any changes?

So I have to say that we do see stable environment, healthy environment, except there was some kind of uncertainty when we had this, we -- call it, Liberation Day, we had this time frame of some uncertainty on the tariffs. So that affected some -- that extended the sales cycles in this time frame. But again, we're talking about 2 months' time frame. After there was more certainty about the tariffs.

So if I'm looking at what we are seeing today, pretty stable environment. I don't see any significant change in the environment. Of course, that -- anything can change it. And -- but as we're seeing today, it looks pretty stable environment. I know that more budgets are moving to the AI, but that's not on part -- on top of -- I mean, the security budget seems to be pretty stable. It probably helps some other IT budgets, but not security. I think security, everyone understand that mainly with the AI, you need to make sure that you have the best security.

Got it. Okay. I have an M&A question here. You guys also just raised a convert. So maybe just wrapping those two together, just how are you -- what were kind of the thinking behind the convert? And then just what has kind of been the M&A strategy that you guys are thinking of going forward?

So first, in terms of the convert, you're right. We completed the convert last week. It's I think the first issuance that we ever -- that we've done since the IPO in 1996. I think that first, there was an opportunity for us to raise cash in a very low financing cost. We are talking about 0 coupon. So that's definitely something that we have -- there was an opportunity, and we wanted to use this opportunity to do that because we couldn't know, I mean, if it's something that can last a few more months or next year when we -- if we're going to need more cash, if we'll be able to raise it in such low cost. So that was an opportunity, and therefore, we've done it.

In terms of M&A, strategic M&A, so we don't have a concrete or any imminent M&A that we are doing next week or something. That's not why we did the convert today -- last week. But definitely, we are looking all the time on strategic M&A.

If I'm looking -- if we are looking, and that's something that we also -- when we talked last week with the convertible investors about what we're going to do with the money. So Nadav and myself, we talked about our four strategic pillars that we are playing today. First is the hybrid mesh networking, which includes our firewall market -- our firewall business, SASE and the virtual firewall, which is actually the firewall on the cloud. So this is one aspect that we can do some tuck-in M&A and not significant M&A, but some tuck-in M&A, small acquisition that can improve our offering, mainly on the SASE.

The second pillar is the workspace -- strategic pillar as the workspace, which include our e-mail security, our endpoint security, browser security and mobile. So that's now led by -- being led by Gil Friedrich, the founder of Avanan, which was the e-mail security company that we acquired and now he's leading all this pillar. And definitely also there, if we find something interesting that can improve our offering or expand our offering on the user security, so that's something that we can definitely do.

The third pillar is the CTEM, continued threat exposure management, which includes today our ERM product, which is the Cyberint acquisition that we've done a year ago and doing very well since the acquisition in terms of growing the ARR. And the second is another, the Veriti acquisition that we've done in June. So there, both products are part of the CTEM. And then -- and there, definitely, we can do more acquisition if we want to expand our offering. I think we feel that there is a lot of potential in this market. There is no specific leader there. And definitely, we can -- we see the momentum there and the demand for Cyberint's products. So we might do more acquisition on that area.

And the last one is the AI security. This is the last strategic pillar. We've done already one acquisition, Lakera, Swiss-based company, runtime AI, great technology. We looked on dozens of companies on the AI, we thought -- we picked them. We thought it's the most -- they have the best technology. It cost us a lot. It was very expensive. But I think on the AI, you need to pay premium if you want to have the best technology. So Lakera are part of the AI security pillar. So definitely, we are looking to do more on that front on the AI.

If -- we are looking all the time. Right now, nothing specific, but definitely, if you're looking on the M&A, so probably it would be one of these four strategic pillars.

Okay. Maybe turning to that, these emerging solutions or namely Harmony SASE, e-mail security, enterprise risk management, all saw greater than 40% year-on-year growth -- ARR growth in Q3. Maybe starting with SASE, what's kind of driving the outperformance that you're seeing? And any kind of color on attach rate you would kind of attribute for SASE?

On SASE. So SASE, I think we're doing -- we are growing more than -- faster than the market. We are still talking about -- we're still a small player there. I think our potential on the SASE is even much bigger than what we are growing even with -- that we are growing today more than 40%. I think because we are small and we see the potential with our -- even our current installed base, the potential is much bigger. We see the market. The market is huge on the SASE.

And still, if you are looking on our installed base, our firewall installed base, I would say that mainly in Europe, most of the -- our own customers don't have any SASE solution today. So it's not that they have Zscaler or Netskope, they don't have any solution. They are still using their VPN. And that's something definitely that we have a potential to -- as a firewall customer, we have the best potential to penetrate there and sell them SASE. So the potential is huge.

I think that we still need to do some more progress on the product in terms of the one aspect that we still didn't complete and should be completed in the next few months is the unified integration with our firewall to provide unified policy that a CISO will be able to manage the policy of the firewall and SASE in one policy instead of doing it separately, like they are doing today probably with Zscaler, if they have Zscaler and I don't know, Check Point. So I think that's a huge advantage that we have on the other vendors on the SASE. So that's one aspect.

And the second aspect is to improve the scalability -- the scale. Right now, we are mainly selling to up to 20,000 users. And that's something that we are working also to scale it and be able to sell to bigger enterprises. So that's two fronts that we need -- it's more from a product perspective that we need to complete. And definitely, the potential there is much bigger than the 40% that we are growing today.

Got it. E-mail security, you guys also just mentioned well above kind of $100 million in ARR at this point. Just can you talk about how it's competitively positioned versus other players within the market space?

So actually, we just -- we exceeded $150 million ARR. We aim to be -- to exceed $200 million in the first half of 2026. We see very strong demand there for the e-mail. And I think that although the market itself is pretty mature, it's not growing. I think it's growing high single digit or even low teens, but we do see significant demand for our products. We see many replacement of the legacy vendors.

On this market, I think that we have the -- in terms of security, first, we have the best security because it's integrated. The e-mail security is integrated with our ThreatCloud AI engines, and we have the best catch rate in terms of phishing and e-mail. So that's definitely our advantage.

And in terms of competition, I think the -- as I said, we do see a lot of replacement of legacy vendors. There are -- there is a competition, of course, also from Abnormal that I think, again, I think we are -- we have better security there today compared to them. So that's an advantage that we have mainly on the enterprise market. We just named as a leader again, but improvement from last year in Gartner on e-mail security. So definitely -- and we got the FedRAMP certificate just 2 months ago. So that's definitely -- all these things together should help us to push the business even higher than what we -- and to grow even faster, hopefully, than what we grew so far.

Okay. I want to turn to AI for a second. You mentioned it as kind of the fourth pillar. You guys have now embedded some AI capabilities, including Infinity AI Copilot and ThreatCloud AI as well as the recent Lakera acquisition. Just how do you see Check Point competing in security for AI opportunity?

So I think there are two aspects. There are the security for AI that we talked about Lakera, and that's mainly about the runtime AI. And there, we have already today some -- one of the biggest enterprises in the world that are design partner working with us closely and a customer of Lakera, of Check Point already today, a customer of us.

And definitely, we see there a lot of enthusiasm about the Lakera product because I think that today, if you're looking on the AI security -- on the security for AI, it's still a market that's been -- there is no specific leader there, it's mainly start-ups. This is a market that expect to be a huge market in the next few years. And we want to capture the flag. So we want to be a leader there. I think there is a huge opportunity there for us in terms of our positioning today on the security market. And this transformation to AI is definitely an opportunity for us to be a leader on that front.

On the other hand, we have the AI for security. We talked now about the security AI and because you mentioned the Copilot, but then you mentioned the ThreatCloud AI. So ThreatCloud AI, it's not -- it's something that we have for several years. I don't remember when specifically the ThreatCloud AI engines, but definitely for several years. And that's being used, and that's AI engines that we developed in-house and have a catch rate of 99.9% based on the recent reports that were published both by NSS and Miercom. And that's -- and on top of that, we are working -- we have a designated team to even improve our AI for security to have -- to leverage the AI even more today to improve our security.

So that's two aspects, but definitely, there's a lot of potential there. I'm not sure that in the short term, it's something that's going to affect significantly our numbers or our competitors' numbers. But definitely on the long run, that's the biggest potential.

Okay. Got it. You guys mentioned Europe maybe earlier days in kind of the SASE transition. You also kind of mentioned some softness in Europe over the summer. Can you just kind of unpack what you're seeing by region, maybe more specifically in Europe and whether -- just any trends there?

In terms of macro, you mean?

Yes.

Yes. So I think we did mention that there was some softness in Central Europe, mainly in Germany, in the public sector. We're all probably following and saw that there was some kind of political and -- political issues and elections that caused some kind of shutdown of budgets in the public sector. I think that, that's something that we are already -- we do see improvement there. I mean we see that the public sector is back to -- we do see already some very nice orders from the public sector there started in Q3, but continuing into Q4. So I think this issue is behind us.

And the -- in terms of other areas, I think, again, I think I don't see any specific areas that macro related. Definitely, we are doing great in Asia. We have a new leader. She's not new anymore. I would say it's 2 years. She's 2 years with Check Point, a new leader that she is running our APAC business. And since she joined, we see significant improvement there. You don't see it yet maybe in the revenues. But when we are looking on the internal KPIs, so we do see significant improvement in Asia. So that's one area that we are definitely doing well.

And again, now we did the change in the U.S. We have a new Head of Americas, Rachel, that joined us. She was in Palo Alto before and Cisco, a lot of experience on the security market. And she's going to lead the Americas and hopefully, we'll see significant change there in the Americas business.

Got it. It's come up in some of our latest conversations, but have you thought about potentially starting to disclose kind of an ARR and net retention at some point? Or just any other financial metrics you guys would consider disclosing?

We are considering it all the time. I have to say that without naming our competitors, but based on my discussion, a lot of discussions that I'm having with the sell-side analysts and with investors, sometimes no one understands what's included in the ARR of this. And I don't want to be in a position that someone will ask me -- what you -- I mean, we are -- you know Check Point. Check Point, if we are disclosing a number, we are 100% behind that without any manipulation. This is our numbers.

Again, it's not -- I'm not saying that we might not disclose additional figures in the future. We just mentioned now that we are growing more than 40% in the emerging product. But before doing that, we need to be sure that this is the number, although it's -- again, it's a non-GAAP number, this is the number, that we are behind that, and it's not -- there is no -- any manipulation behind this number and all the investors and all the readers can understand what's included there.

Got it. And then just from your conversation with investors, what do you see as kind of the top two or three misunderstandings about Check Point today? And just how do you feel like you can kind of transform that discussion from the seat of the CFO?

You want to start, maybe you want to answer that? He has spent so much time with investors. So...

Repeat it again real quick.

Just what do you feel like are kind of misunderstandings in the conversations you have with investors right now.

I think the biggest one is this -- I like to say this because it's kind of a catchy little term, but this isn't your daddy's Check Point. This is not a Check Point that was even 10 years ago. This is not even 5 years ago. You have many different growth engines. You have a workforce that's empowered. It's now about ask for forgiveness, not for permission. And that creates a sense of urgency, as Roei talked about earlier, that the company really hasn't experienced in a long, long time. And I think all of those things really have changed the whole dynamic of the company while people are still thinking it's still the same way it used to be. And it's clearly not.

Okay. All right. With that, I know we have quick transitions. So Check Point, thank you guys so much for being here today.

Thank you.

Thank you.

Thank you, Kip, and good to see you all. So we delivered a strong third quarter marked by double-digit growth in calculated billings, driven by disciplined execution and the rising demand across all of our portfolio. And nearly a month into Q4, we remain confident in our trajectory, and we're raising our midpoint for 2025 revenue guidance, and Roei will share more on this shortly.

As we discussed during our second quarter earnings call, our strategy continues to be anchored in 4 core principles that we believe define the foundation of a modern cybersecurity stack, shaped predominantly by the accelerating adoption of AI. As we continue to shape the future of cybersecurity, our strategy is guided by these 4 principles. First, securing the connectivity fabric as it evolves from a traditional infrastructure into a genetic autonomous reality. Second, our prevention first approach, which I believe is now more important than ever as attackers leverage sophisticated agentic capabilities, it's literally imperative that we dramatically improve the signal-to-noise ratio and limit our reliance on detection to a minimum.

Our open platform philosophy. The open platform philosophy is not the easiest path, but it's the only viable one for achieving security resilience. Building an open collaborative ecosystem among vendors, demands communication and cooperation, sometimes even with previous competitors, yet I can tell you from the trenches of cybersecurity, it's clear to us that it's essential. And our recent acquisition of Veriti is a powerful example of how we're advancing this vision by integrating Veriti into our exposure management organizations, we've expanded integrations across endpoint firewall, cloud providers reaching over 100 deployments and delivering automated remediation based on what's the best security possible.

And finally, as I emphasized before, securing AI is top priority. We are in the very first innings of the most impactful technological revolution of our lifetime. Moving from current phase of human enhancement to replacement and delegation to the next phase of crossover, where sophisticated agents are taking over and crossing the crossing lanes, it's both exhilarating, but also extremely challenging. And I think it's a race for relevance for everyone. And we must remember, and we see that at the same time, we're seeing how rapid the attackers are leveraging AI to outpace us as defenders. And this drives our mission to build a full stack AI-powered security platform.

Last week, we closed the acquisition of Lakera, a Zurich-based AI native security leader with deep expertise in protecting large language models and autonomous agents. Lakera enables real-time defense against prompt injections, data leakage and model manipulation. And it gives us a secure -- a unique security-oriented model that ensures evolving defense to stay ahead of emerging AI threats. And I believe that together, we're building a comprehensive AI security platform that will enable our customers, the enterprises that we work with, to scale AI adoption securely and confidently. And what does that mean? It means securing employee usage of AI tools through observability and data loss prevention. It means protecting AI applications and agents with run time defenses. And then finally, strengthening model robustness by our continuous testing and compliance readiness.

You should know that Lakera is already trusted by Fortune 500 enterprises, including some of the biggest banks and largest technology companies worldwide, and we're just getting started. As AI adoption accelerates, it exposes new threats, and we're committed to leading the journey to enable organizations to adopt AI securely. We're investing organically in research and development and we're identifying strategic acquisition opportunities that will reinforce our leadership position.

Beyond that, I want to touch briefly on our latest go-to-market updates. During the quarter, we achieved Fed rep authorization for the Infinity platform for government. This positions us as a trusted partner for the most demanding federal environments. Our go-to-market organization is now fully staffed. [ Rachel Roberts ] joined us as President of Americas Sales. She brings deep enterprise sales expertise from her leadership roles at [ Cisco ] and [ Palo ] to further build and scale our sales organization. Avi Rembaum was appointed President of Technical Sales. Avi's been with us for a long time. And from here on, he will lead the efforts to drive technical excellence and strengthen consumer customer engagement. And finally, Brett Theiss joins us as Chief Marketing Officer to strengthen our brand presence, to fuel demand and position Check Point for its next chapter of market leadership.

To close, before I hand over to Roei, so with over 10 months in my role as CEO at Check Point, I think that our strategic vision is taking shape. And I'm energized by the progress we've made already and where we're going in the future. And with that, I'll turn it over to Roei.

Right. Can you see my screen?

Yes.

Great. So thank you, Nadav, and thank you, everyone, for joining the call. As Nadav mentioned, we had a strong quarter, driven by strong demand across our portfolio.

If we are looking on our revenues, our revenue grew by 7% to $678 million exceeded by $6 million our midpoint. Our non-GAAP EPS reached $3.94 per diluted share and exceeded our guidance. It is important to note that this number includes a onetime tax benefit in connection with tax settlement we signed during the quarter that resulted in an update for our tax provision, and that had a benefit of $1.47, both our GAAP and non-GAAP EPS. Excluding the onetime benefit, our EPS exceeded the midpoint of our projection by approximately $0.02.

Moving to our results. As I indicated, our revenues grew by 7%. Our deferred revenues grew by 8% to $1.887 billion. Our calculated billing totaled $672 million, reflecting a robust 20% growth year-over-year. That was driven by strong demand across our portfolio and across our geographies that all of them grew by double digit. I don't need to -- I do want to remind you that our billing effect also affected by approximately 3 points that -- from these that were slipped from previous quarter. We talked about it in our last earnings call. In addition, we had one large deal -- early renewal of that resulted in a 2% benefit earlier from Q4 that came in, in Q3 and is also the benefit of 2 points to our billings.

If we're looking on our current calculated billings, so that grew by 14% to $642 million. Our remaining performance obligation grew by 9% to $2.4 billion. I'll move forward. As I said that we did see a strong demand across our portfolio. If we're looking on our services calculated billings, service calculated billings actually the calculated billing excluding our product business, and that grew 21% compared to 7% last year. And again, that's not only from certain products, that's across our portfolio, if it's the Quantum firewall, Harmony e-mail, Harmony SASE drove these great results.

If we are looking on our emerging technology, so that's the ARR, we do see that it's the [ 3 ] main products that [ 3 ] companies that we acquired in the last few years, Harmony SASE, Harmony e-mail and collaboration and external risk management. All of these products grew organically 40% -- more than 40% in ARR year-over-year, and we do see them becoming more and more significant to our total business.

Moving back to our global revenue distribution. So we did see double-digit growth in America, a 10% growth. That represents to the 42% of our revenues in Q3. EMEA, which represents 45% of our revenues this quarter, grew by 3%; while APAC, Asia Pacific, grew by 8% and representing today 13% of our total revenues.

Moving into our P&L into operating performance. So our gross profit decreased from $563 million to $602 million, representing a gross margin of 89%, similar to last year. Our operating expenses increased by 11%. The increase was mainly as a result of our continued investment organically and also the impact of Cyberint and Veriti acquisition that were not part of Q3 last year P&L. Our non-GAAP operating income continues to be strong at $282 million, 42% operating margin.

Also something that I discussed also in our last earnings call, and I want to touch base on it again in this call. The U.S. dollar got, in the last few months, I would say, since the beginning of Q3, the U.S. dollar got weakened significantly [ versus ] the Israeli shekels, given the fact that we have significant expenses in shekels that have had -- and although we are hedging a significant part of that expenses, still, we do see a negative effect for this weaker dollar on our P&L. In this quarter alone that affected our P&L by approximately 1 point to our margin, approximately, I would say, $0.06. Looking ahead, if we're already talking about next quarter. So we continue to hedge, of course, our foreign exchange currencies and our foreign currencies. And we do expect to see approximately 1 point headwind to our margin in Q4.

In addition, as Nadav earlier mentioned, we closed last week, the acquisition of Lakera, leading AI native security for platform -- for agent application. This acquisition that was closed last week will result in approximately 0.5 point headwind for margin in Q4. As we look further into 2026 and as I indicated in the previous earnings call, based on the current FX rates, that can have an increase for [ NL ] expenses next in 2026 of approximately $50 million to $60 million. That's something that we discussed last quarter. And again, because the current rates are similar to what we discussed last quarter, I wanted to bring it back again here.

Moving into our cash flow. Our cash flow was very strong. Operating cash flow was very strong with $241 million of operating cash flow. That included a $66 million onetime tax payment in connection with tax settlement signed during the quarter, that also I touched base about it when we talked about the EPS. Excluding this onetime tax payment, our operating cash flow grew by 23%, very strong cash flow. If we're looking on our total cash, our total cash in the end of the quarter is $2.8 billion for cash and marketable securities and deposits.

Another point that we had during the -- another [ 2.3 ] I want to mention here that we had during the quarter, we talked about it also last quarter that we are building a new Check Point campus in Israel in Tel Aviv. And during the quarter, we paid approximately $160 million for the land. And that's -- we're going to see it in the invest -- in the cash flow from investments. I do have to say here that we don't expect any significant additional investments until 2027. In addition, we continue to do our buyback, and we purchased our share. We purchased approximately $325 million of shares at an average price of [ $198 ].

So to summarize, strong quarter, avenues and EPS exceeded our projection, accelerated growth across our portfolio, driven by 20% growth in calculated billings, driven 20% growth in calculated billing and another strong operating cash flow and profitability -- profitable quarter.

Moving to the business outlook for Q4 before we move to the Q&A. So if we're looking on Q4, so we'll start with the Q4 and then touch base on the full year. So Q4, our range is between $724 million to $764 million, which represents 6% in the midpoint. The non-GAAP EPS is between $2.70 to $2.80. GAAP EPS is expected to be $0.60 less.

If we're looking on the annual guidance. So first, I'll remind you that the -- in the middle column, you see the original guidance we provided in the middle of the year. Our midpoint -- or the updated midpoint of the revenue guidance will be $50 million -- is going to be $15 million above the original midpoint. So it's -- the range is between [ 2.705 and 2.745 ]. Midpoint of 2.725, 6% growth year-over-year. Our non-GAAP EPS is expected to be between $11.22 to $11.32, and the GAAP EPS is expected to be approximately $2.29. Again, the EPS also includes the tax benefit that I discussed.

And 2 things -- 2 items that I want to address here about revenues and EPS. Q4 as we -- it's like -- which is more typical for Q4, it's a very heavy back-end loaded quarter that also includes heavy hardware and heavy hardware projects. We see also in our final today, significant refresh project that's supposed to come in, in Q4. And because it's more heavy, so again, there is more -- we are providing the rent. There is the -- the range is mainly for the [indiscernible] portion that again, we do expect to see more refresh projects, but because the hardware is more significant in Q4, that's something that we need to take into account in the guidance.

And it's for the EPS, I mentioned it when I discussed the P&L. The EPS in Q4 will be affected by 2 main items. One is the FX that we have approximately $0.07 to $0.08 effect based on the current rates in Q4, the weaker dollar that will affect our P&L and Lakera that will have approximately between $0.04 to $0.05 effect on Q4 EPS.

That's it, and I'll turn in to Kip to manage the Q&A.

All right. Just give us a brief moment while we get the speaker situated. Our first up is going to be Brian Essex from JPMorgan, followed by [ Amelia Colpa ] from Patrick Colville and position #2.

Maybe I'll start with Roei. On that last point that you just talked about in terms of guidance, noting that Q4 tends to be a heavier hardware quarter. Could you talk about your underlying assumptions for subscription and recurring revenue in your guide and how much visibility you have? Would love to just get the thoughts around the sensitivity versus hardware in Q4.

So we expect to be -- Here, I can give more insight on that. So we are expecting to have, of course, a double-digit growth in subscription with slight improvement into Q3. I remind you that in Q4 -- last Q4, we have already in the comparable Cyberint that the first quarter this year, the Cyberint is included. But still, we do expect to see acceleration of our subscription revenues from what we did have this quarter and support similar rates -- gross rates for what you've seen in the third quarter. As for the appliances, we do expect to see growth year-over-year more around the midpoint and mid-single digit.

All right. Next up is Patrick Colville. Hey, Patrick.

I'll bow down, kiss the ring. King Kip, King Nadav, and King Roei, congratulations. 20% billings growth is -- I've covered Check Point a long time and it's usually impressive. So good to see that. The question we're getting already is what is the sustainability of that growth? I mean, so you talked about there were a few one-offs pushed from 2Q pull for 4Q. But as we think about 2026, is this a new chapter for Check Point and under Nadav's leadership. And are there any puts and takes as we think -- just on models looking out a year out?

Nadav, you start.

Sure, I can start. First of all, thank you, Patrick. It's -- for your kind words. I think it is a new trajectory. Yes, Q3 was a very strong quarter. And I think it -- and some of it, as you said, has some pullovers and pull-ins. But generally speaking, it's a strong quarter. And I believe that when we give our guidance for 2026, you'll see that we believe a trajectory of growth is in the cards for us.

Having said that, you know us already, we're going to do this prudently and we're going to make sure that we make the investments at the right places at the right time. So I think it's a journey. But I do think that we're seeing the beginning of the fruits of this journey.

All right. Next up is Joseph Gallo followed by Tal Liani.

Nice job on the results. On the go-to-market leadership changes announced, is there a change in strategy? And should we factor that into 4Q billings? Maybe just give us some commentary on how we should think about 4Q billings? And then where are you on a quota carrying rep basis? And how should we think about that growth going forward?

Yes. Thank you for that, Joseph. So the strategy is -- the new strategy with the new leadership is actually going to take effect in Q1 of 2026. Q4, Avi Rembaum is still going to lead the Americas, and we're keeping ahead a full steam for all cylinders ahead.

We are going to make changes as we go into 2026. And we'll announce some of them when we meet again and speak about guidance for 2026. I will say that we are going to be ultra focused on making sure that we go back -- not go back, but continue winning, upsell in large enterprise with our current existing customer base, but also with our new products road map, with our new capabilities, go and acquire new enterprise customers across the world with a focus in the Americas.

All right. Next up is Tal Liani followed by Adam Tindle.

How long does it take for billing growth to translate to revenue growth? And then where would it be recorded? Meaning when I look at your revenues, product revenues, subscription and services, it's all very predictable, meaning the only swing factor is maybe products, but very predictable. So as this increase in billings translates into revenue growth, where would you see it?

So -- so I'll touch base on that. I'll take it. The billing, of course, it's allocated between, as you said, services, I would combine support and subscription services and product. I think on the services side, that grew this quarter, the billing grew by 21%. That's going to be -- you're going to see it in the revenues in the next 4 quarters, most of it because most of these billings came in the last month of the quarter. And every quarter, it's back end loaded quarters. So you're going to see the effect in the next 4 quarters.

I do have to say that we want to show sustainable growth of billing -- of services billing that we -- that if we're going to make sustainable billing grow -- I mean, similar growth as we've seen in this quarter. So that in the end, you'll see it pretty -- I mean, you'll see it also in our revenues.

On the product side, if you're -- most of the billing is coming together with the revenues. So -- because it's recognized immediately and we are billing the customer when we are delivering the product. So it's easier. So you see it usually immediately on the services, as I said, it takes more time.

Next up is Adam Tindle, followed by Rob Owens.

All right. Nadav, congrats, obviously, 20% calculated billings growth. I was scrolling through my model. I don't think I've seen a number like that in the past decade, at least. You talked about at the Analyst Day earlier this year, SASE being a very critical growth area for the company. I wonder as you kind of reflect on the growth that you're seeing right now, if you could talk about the contribution from SASE, the upcoming road map that you have for that product area. And on the back of this, do you think we're at a point in time where it makes sense to step on the gas for investment for Check Point from here and maybe any parameters on what that would do to margin, if Roei wants to weigh in.

Yes. Thank you, Adam. So I'll start with SASE. We are seeing a meaningful ARR growth in SASE, as Roei said, over 40% in Q3 of ARR growth. SASE for us is not a stand-alone. It's a part of our the connectivity fabric and hybrid mesh, and that's one of the reasons this is such a critical factor for us. I also think that as our clients, as our customers start adopting AI, our SASE hybrid approach, the fact that we are not only cloud but also on device gives us another parameter or another, I would say, advantage.

I will say that we've made substantial investments, as I've said before, in SASE, in terms of hiring new talent, and we're talking -- this is not in the dozens, this is in the hundreds because this is a must-win product for us. And we are seeing success as we go into 2026. The good news is that we can upscale and go in and start deploying in larger and larger enterprise as we go into 2026. So that's on the SASE side. Optimism, but to be completely transparent, it's never good enough. We need to move faster. We need to add features. We need to grow the larger enterprise. We need to integrate this into a hybrid mesh connectivity fabric and keep on moving. So that's on SASE.

Investment, generally speaking, the answer is yes, but we need to do it prudently. So we're investing in SASE. But we're also investing in our newly formed Workspace. We've had great success with e-mail. Now we're bringing the other products so that we can secure our customers' employee base wherever they are and whatever they are. So that's endpoint mobile browser.

The biggest investment that you are going to see from us is investing in the future, and that's building the full stack AI security platform. Lakera is just one example. But we're literally going after the best talent. We are -- some of these are building products, some of these individuals are just looking to understand what the attackers are going to do as they increase Phase 2, Phase 3 and Phase 4, so that's going to be an investment in our future, and we really need to make investments across the board.

And we've spoken about this, and I'll let Roei chime in as well. We are doing this calculation of profitability versus growth and always looking at the 2 and trying to make the right calls prudently so that we can get to a sustainable growth without sacrificing too much of our margins.

And I think we're going to talk more about it, Adam, about 2026 when we announce Q4 numbers probably around in February, and we can have more color about 2026 gross margins.

All right. Next up is Rob Owens, followed by Keith Bachman.

Always a pleasure to be behind Adam. So Nadav, maybe you could just expand on some of your comments around the AI security component. I realized -- you laid out kind of the 3 different components of where your strategy is, but how much do you need to fill in from an M&A perspective? And I realize that it's changing rapidly. But at this point, where is Check Point just in terms of having the coverage that you want? And how much more M&A do you think will be in the next 12 to 18 months?

Yes. Thanks, Rob. My favorite topic. I look at this from 2 different perspectives that are outside of Check Point and where Check Point's role is. So outside of Check Point, it's the 4 phases of adoption. I still need to sort of -- I still haven't seen a meeting with the C level, whether it's the Board C-suite, CIO, Chief Data Officer, where this is not front and center of their strategy. We're all there. We're there as people. We're there as organizations. We understand that we either start advancing in the journey or we become obsolete. And it's moving from enhancement where -- which is already where we are right now, right? So we're all -- we're better performers because of AI.

Most of the organizations already have replacement. So they already have agents that are replacing humans in different lanes, but they're in their own lanes. And the first organizations, the more sophisticated ones are starting to play around with crossover agents that are now making crossover decisions and getting access to different databases. That opens a whole new plethora of challenges, changing the idea of what it means to protect the network. Not only because there's more to attack, but also because on the other side, we need to understand that attackers are usually one phase ahead. So if we are in the first and second phase, they're already experimenting with the third phase. So that's how we look at the outside world.

And when we look at our customers, we want to be their partner to be able to quickly adopt AI when we are doing the security part for them. So on the level of the users, I believe we already have the best security. On the level of runtime security for the second phase and approaching the third phase, I think that Lakera is unique. And with Lakera, I think we have the full stack of what's needed for today. However, we need to think about Phase 3 and 4, and that's where some of it will be organically. But to your question, Rob, some of it will be inorganically. And so we're looking at acquisition targets as we speak. I literally just had a meeting before this call with our M&A team, they're looking at multiple companies as we speak. Nothing is imminent right now, but there will be more.

All right. Next up is Keith Bachman followed by the purple man, John DiFucci.

I appreciate going before DiFucci. I wanted to, Nadav, for you, is there anything different or changing on Harmony e-mail in terms of the competitive dynamics, specifically? And I just wanted to understand a little bit how that pipe is building. And the spirit of the question is driven by how should we be thinking about Harmony e-mail potential growth in CY '26 versus CY '25? Is there a deceleration, you think, even driven by just the base or scale, if you will.

And then Roei, just if I could sneak one into, you mentioned that FX would be $50 million to $60 million, I think, next year, headwind. Not trying to jump ahead of your guidance, but just what you've done so far in M&A, if you could just give us some context about what that would be to CY '26 margins just the level set for those 2? And I know you've talked about some other investments you might want to do as well. But just wanted to -- on the knowns that you have today between FX and M&A that will impact margins.

So I'll start with e-mail. So no, we don't see a deceleration. In fact, we're hoping for an acceleration, and we'll speak about it in our guidance. And the reason is very simple. I truly believe that we have the best product in the market. And although e-mail has been around as long as the Internet has been around or as long as cyber has been around, because attackers are already at Phase 2, e-mail attacks are becoming much more sophisticated, and we're all seeing that.

I mean we all have this conversation. Did you get my e-mail? No, I didn't get your e-mail. Why didn't you get my e-mail? Well, because somebody block your e-mail. Why did they block your e-mail? Because they are becoming more and more sophisticated. And so what we've built around our e-mail is an AI capability, which I think is superior to what's out there. So this is a replacement business, right? We're going out there and we're replacing incumbents all the time. And I think that in terms of TAM, we're still relatively small, so I don't see a deceleration.

Beyond that, as you know, we've asked Gil Friedrich based on that success to take all the other products that create the suite for employees. So now we're bringing in not just the e-mail, but e-mail, endpoint, browser and mobile. At the end of the day, we want to look at the use case. And the use case here is employees that are working from everywhere and are now being empowered by AI agents. And the fact that we can have an agent sitting at the endpoint, either at the browser level or at the SASE level, means that we can do more on the device itself, which is cheaper, more scalable and brings better security. So I'm really optimistic about bringing all that together into our workspace.

And I'll continue regarding your second question about the FX. So yes, as I said, about $50 million to $60 million.

And about the M&A, I also talked about the effect for Q4, Lakera. So we talked about $0.04 to $0.05 headwind for Q4. We do expect to have more -- from one end, more investment. But from the other end, we also do expect to see more revenues from Lakera. So in the end, it's tough to say right now, again, we are working on the plan for next deal. So it's tough to say it's going to be the impact on our margin next year, the Lakera acquisition. And in general, margin for next year, I think that it's -- we're going to -- we are still planning working on 2026. And as I said, we'll talk more about it in February when we're going to announce Q4 numbers.

All right. Next up is John DiFucci followed by Shrenik Kothari.

My question is sort of a high-level question for Nadav. Nadav, I've known you a long time. And I know that you mean what you say when you talk about an open garden approach, and it makes total sense for the customer. It really does. And I -- but I almost -- and I was looking for the right word to describe it because it almost seems -- and I know this isn't you. It almost seems naive to think you can do it. Because your competitors, I think you said fierce in your prepared remarks, your fierce competitors. And even though it's the right thing for the customer, no one's ever been able to do it. So I guess, can you give us a little bit more, like are there any anecdotes you can share with us? Anything you talked to us about how it's actually going in the right direction. And then finally, just Roei, just a quick follow-up. It's great to have pricing power. But you -- just how should we think of the price increases in subscription lately and how they may be contributing? How should we think about that? It's great to have that, just try to understand it. Sorry.

So thank you, John. I'll be as open platform -- open, sort of open mind. I'll tell you this. First of all, it's a philosophy, I agree with you. And I've been in the trenches for more than 30 years in cybersecurity. I think that where we're going, trying to come to this with a vendor lock, closed garden, a monolithic approach will really not be enough to secure our customers for many reasons.

Now I agree, it's not an easy path, but we're seeing a glimpse of first success. So I brought up Veriti as an example. Veriti already has the ability to integrate with over 70 other vendors. From our CTAM, we see where the danger or the threat is coming from, and we can take these IC and actually fix them not only a Check Point, but even at other vendors. And that's -- and we already have 100 implementations of that within customers, all right? So I'm not saying this is sort of all the story, but it's a glimpse of the story.

Another one is our unified management. Our unified management today, with some of the cloud native firewalls, we can manage -- in our unified management on those other firewalls so that from the customer's perspective, whatever they're using, they can have the access to truly our best-in-class threat cloud AI with over 100 engines that is blocking billions of attacks all the time. So it's forming.

I agree that from a business perspective, some might say, yes, that's naive, it's never going to happen. I think it needs to happen. I think it's -- there isn't another way to resecure our customers. And we are seeing early success with this open platform approach. There's a lot of investment that we need to do in order to put more meat on the bone and create a real alternative to this idea of -- and we see it and we see how it resonates with our customers, right? They want to listen to this. Some of them because it's just the nature of the beast. They have 1 vendor, but then they make an acquisition. Now they have 3. How are they going to consolidate this? And the attackers are going to come through the cracks. So it's a philosophy, but it's also a road map. And some of it is already happening, not only in our labs, but at customer sites. As I said, over 100 deployments of Veriti only and more to come around that.

I'll give you one more sort of way to try to defend this. When you think about detection, for example, right, we look at the [ Mitre ] attack sort of chain, right, and kill chain. And we say, okay, at every point, we need to have multiple guarding capabilities in order to be successful at blocking attackers. Within that framework, we're saying a lot goes into the detection and response.

I can tell you that I'm constantly trying to imagine what I would do if I were on the bad side guys, and I'd tell you that with agentic AI, a lot of what's happening on-prem for -- that gives us the ability to detect is going to become obsolete. So now if we're in a client or a customer's environment with a competitor and we don't share what we see immediately, it's going to be game over for the customers. So now afterwards in the aftermath, I'm going to say, yes, but it wasn't my firewall, I was their firewall. The customer doesn't care.

And to your question about the price increase. So yes, we did the price increase for the subscription firewall effective July 1. It didn't have any effect on our revenues for Q3 because most of the business is coming in the last months would have a very immaterial effect. I do -- on the billing side, we do see some benefit from that, yet not significant from the price increase. Again, it's when we're managing the same discount, so we can benefit from this price increase. I don't want to have you that we have another price increase of 5% across all our Quantum firewall, which will be effective 1/1/2026.

All right. Next up is Shrenik followed by Joshua Tilton.

Yes, team, echoing my congrats...

Nice of you to join us from Alaska or whatever other place you're from.

A little sensitive. Great, great execution. Just continuing on with the big picture theme [indiscernible]. So Nadav, you have been firming your belief that not everything goes to the cloud and lean hard into the hybrid mesh value proposition, especially as the cloud infra cost rising. We have been hearing that a lot of AI native use cases also staying on-prem. So can you elaborate from your use case perspective, like where are you winning the most in these hybrid conversation, hybrid mesh? And then I had a quick follow-up on the go to market.

I think our advantage is in large-scale complex hybrid environments, where you have on-prem with cloud, multi-cloud, you need to manage all that. And I think that's where our advantage is. Looking into the future, there are use cases that we're seeing with the use of AI, data sovereign issues and governance that are going to take some of the use cases back to either private or quasi-private establishments that are going to offer that.

Again, I think this is an opportunity for us on 2 fronts. First, it's our sweet spot. Second, when you think about data centers that are providing either data center as a service or a private data center for AI usage, this is where performance and speed matters more than anything else. And again, that is our sweet spot. So I'm not saying this is the only use case, but I think it's a growing use case.

Got it. To make some big go-to-market hires and some ongoing transitions, just if you can walk us through how this factors into your operating model, both near term and on fiscal '26, we appreciate that.

Operating model in terms of our investment in marketing?

Yes, investment, just execution, assumptions, yes.

Yes. We are starting to be more aggressive in our marketing dollars across the board, and we'll see an increase in that in 2026, hopefully, to be offset with operational excellence so that we don't hurt our margins, but are more effective in our go-to-market.

All right. Next up is Joshua Tilton followed by Brad Zelnick.

Great, guys. Can you hear me?

Yes.

Awesome. Congrats on a good quarter. Maybe though, just stepping back, just a broader spending question from my end. I think the first half for security was a little challenging. We had Liberation Day. There was a lot of uncertainty. So I'm just trying to understand like how would you characterize the spending environment in 3Q? How does it compare to what you saw in the first half? And maybe help us parse out how much of the success today is just pent-up demand from the first half versus better execution on your end? And just kind of what are you seeing heading into Q4? Will there be a budget flush? What are your expectations? Just level set that for us, if you could, please.

Mr. Golan, do you want to start here?

Yes. So I'll touch -- I'll start, and then you can continue. As I think, again, I think it's -- first half was more challenging, mainly Q2, I think. You mentioned the Liberation Day. So definitely, it was more uncertainty in the market. I do have to say that -- you ask if the -- I mean, besides the 3 points that we mentioned, that the deals that actually will slip from the first half to Q3. So as I look at, and we're analyzing from across, I mean, many metrics, internal metrics, it's definitely much better execution. Q3 was much better execution.

And when we're looking at Q4, so Q4, again, we do see very nice deals in the pipeline. Q4 is like -- almost every quarter, but Q4 is more tricky. It includes a lot of large refresh, large outdoor deals. And again, it also depends on budget flush. You ask about budget flush. For example, last year, we did see, I would say, less than average budget flush. So tough -- it's early to say, I mean, what's going to be this year. Again, when you're talking with the field, with the sales leaders, too early to see -- to understand if we're going to see more budgets like this year. Our guidance, our midpoint of the guidance didn't take into account any significant budget flush. So that's how I see it.

Nadav, I don't know if you want to add something.

No, no, I agree. I think America, I think, is good and steady. We are hoping see an increased demand in Europe going forward. But as Roei said, what we're guiding right now does not take an optimistic view on how demand is going to be growing beyond that.

Next up is Brad Zelnick followed by Jonathan Ho.

Congrats. It's great to see the success in Q3 and -- and I love saying when Patrick Colville can admit he's a real gentleman, that he's able to admit when maybe he's got it wrong, happens to the best of us.

Nadav, I wanted to ask, as you reflect on changes you made to sales incentives this year, specifically paying on ARR growth, how much of an impact might that have had? And how much might that be contributing to the strong billings we're seeing this morning? And along those lines, maybe Roei, can you talk about the trends in ARR growth as we look through all the billings noise because externally, obviously, there's always puts and takes, but ARR is obviously a very pure metric.

Yes. I'll start also -- I want to -- regarding your first question. So I think we -- this year, we paid -- our [ comp plan ] was -- the significant factor there, a significant factor of our comp plan. Definitely, it's something that we did see improvement when we are looking on the discounts. On the discounts that we are giving that again, for renewals, for example, so we did see improvement on that effect after we implemented ARR factor into the comp plan.

So that's something that definitely -- I mean, we see the change. We see the mine and how the salespeople are. When in the past, it was mainly around bookings. And now, they need to think more about booking only but also about ARR. And definitely, we see the positive effects of that mainly around the renewal, the discounts around renewals. So that's one aspect that I want to touch.

The other stuff, anything else trying to -- what was the next one that you had, Brad? Or Nadav, if you want to add on that.

Well, the only thing I would add is that I think we're seeing the beginning. I agree with Roei that I would attribute a better performance in Q3 mostly to execution. I do believe that as we progress the change in how we measure things and our comp plan, et cetera, will take effect, but it's work in progress.

That's helpful. I guess related, is there a future where maybe you would disclose ARR as a key metric for us externally to measure the business?

Might be, might be. We'll see. I mean it's something that we are considering every time, but it might be in the future.

All right. Next up is Jonathan Ho followed by Gabriela Borges.

Congratulations on the strong results. Can you maybe give us a sense of what you're seeing from the impact of the federal government shutdown? And can you talk a little bit about the investments that you've made on the federal side, maybe where those opportunities lie?

Yes. I would say that because our current business is relatively small, we're not seeing a strong impact. Are -- having said that, our investment in Fed ramping our products is something that we're going to continue to do for a couple of reasons. The obvious one is that it's a big market. The second one is that this is what we're passionate about doing, securing the most under threat environment, the most complex environments. And I think we really have an advantage there to really bring better security. So we're going to continue investing in that. And investing in that means in our product, but also Fed ramping and focusing the -- our selling focus on that because I think there's a big potential there.

All right. Next up is Gabriela Borges, followed by Fatima Boolani.

Nadav and Roei, I wanted to follow up on how you think about the impact of hardware refresh on your business? More specifically, I know that 2024 was a big year for Quantum refresh. I know that 2025 was also a good year for Quantum refresh. Obviously, it's not binary, but when you look at 2026 in the cohort that's up for [ UL ] in 2026, is there anything that we should keep in mind on the size or how, being in year 3 of the quantum refresh, impacts that cohort?

So definitely, the [ refresh ] cycle is a big part of our business. But I have to say that, again, when you are looking today on the opportunities, I think we are in the middle of the refresh cycle. And I'm looking on the final for Q4. And I'm looking on the final for 2026, there's a lot of opportunity just for refresh of our existing installed base. And I'm not talking even about the competitive replacement that we see more of them in the last few quarters. So that's definitely -- have a factor on our total business.

And definitely, we see more cross-sell -- cross-selling of our other products in our portfolio. As we said, a lot of the business is coming from ERM, external risk management. Or from SASE, it's coming from actually opportunities that will be part of the refresh that we did for a customer. That's part of the refresh project. We also took -- they also acquired their purchase, sorry, purchase one of -- a few of our products. So that's definitely a big factor. And again, as of today, based on what we see today, the potential is definitely also there for the next 12 months.

All right. Next up is for Fatima Boolani, followed by Peter Levine.

Nadav, I wanted to ask you a question about product strategy. You have absolutely not been shy about thinking about the portfolio in a holistic manner, both from an M&A standpoint, but also from the standpoint of, hey, these products or these capabilities aren't necessarily our forte. We're going to take a partnership route. So I'm referring to your partnership with Wiz on the CNAPP front. So first and foremost, are there opportunities in the current portfolio as it stands, where there is scope for rationalization, where you can take your wins, where we're very strong and maybe exit certain product areas? So that's the first question.

And then the second question is just with respect to Lakera and the vision around building a full stack AI solution kit for your customers. How much of a budgetary attribution and allocation are you actively seeing from CISOs and CIOs who, I can't imagine aren't getting absolutely inundated with the next new mousetrap in technology. So just helping customers be ready to purchase when the technology around AI security is changing probably the most rapidly than we've ever seen in our lifetime. So a very big picture, but I wanted to get your opinion on it.

No. Thank you, Fatima. So on the first one, yes, we do want to focus and become a podium player where we play. So a couple of examples. You brought up the Wiz example, but we also announced that we're going to be partnering with Illumio in micro segmentation because I think that's an important piece of becoming secure in a hybrid mesh environment, especially as the agents are coming our way and starting to cross these lanes. So segmentation becomes very, very important. So we're doing that with them.

We're partnering with others on OT and IoT, and we're partnering on identity. So yes, there's a lot more where that comes from. Some of it is just being able to go through the normal APIs, but just be very mindful about that so that we can actually do it. Some of it is actual integration, and some of it is going to market together, like what we've done with Wiz.

With regards to the full stack, I think this is just really the beginning, right? This is not a huge market yet because, as I said, it's about these phases. And most organizations are in Phase 1. In Phase 1, we have -- our product, for example, we call it GenAI Protect. So GenAI Protect could come in as a stand-alone, but could also be a part of our browser, a part of our SASE solution. And I think you'll see a lot of that.

As we move to Phase 2 and 3, we will need stand-alone products like what we're going to -- what we're bringing with Lakera, which is already deployed in some of the largest organizations of the world. But those are the earlier -- I wouldn't even say the early. These are the innovators that are starting to do this. I think we'll see more and more. I don't think we'll see this blow up in 2026. We'll see substantial growth, and I think we'll see much more in 2027.

All right. Next up is Peter Levine for our last question of the day.

Great. Maybe to piggyback off that last point, Nadav or Roei, you talked about those different levels. And maybe just as a pricing question is, how do you view the current subscription licensing model, right? Is there a room to kind of evolve towards a more usage-based flexible kind of consumption model, right? You've seen many of your peers kind of move towards this usage-based model. As you talk about AI, SASE, cloud security, what are your thoughts here as you think about pricing and to get customers to maybe expand and adopt more of your products over time?

Yes. I think as we -- and Roei, you can chime in as well. I think as you see our portfolio, its breadth is expanding, but also its nature, right? So when you think about SASE models of consumption, I think that is becoming more relevant. The first thing that we must do is not only sell our products, but make sure that our clients and our customers are using it and are satisfied with it. We still haven't moved to a consumption base. But I'll be honest, it is something that we're speaking about in the corridors, specifically, for example, for areas like war space.

All right. That's it for today, folks. Thank you for joining us. And with that, we'll see you next quarter.

Thanks, everyone, for joining.

Bye now.

[Audio Gap]

Our Chief Financial Officer, Roei Golan.

Before we begin, I'd like to remind everyone that this conference is being recorded and will be available for replay on our website at checkpoint.com. During the formal presentation, all participants are in a listen-only mode that will be followed by a Q&A session.

During this presentation, Check Point's representatives may make forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Any forward-looking statements made speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements.

In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with reconciliation of such results. as well as the reasons for our presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at [email protected].

Now I'd like to turn the call over to Nadav.

Hey, everyone. Good morning to you, and thanks for joining us today. As you already know, our industry is undergoing a generational transformation. It's marked by unprecedented change. And I think more importantly, the unprecedented pace of change. We're still in the very early innings of this revolution. And I believe that at Check Point, we're well positioned to lead it. And in today's call, I want to take some time to talk a little bit about our guiding principles and our vision.

Obviously, before elaborating, I'd like to share, we had a solid quarter. both revenue and EPS in line with our outlook. It was relatively back-end loaded and resulted in several slip deals that have already closed in the last few weeks. And the third quarter is shaping up well with a strong indicator so far in July. Beyond that, we see a very healthy pipeline for the remainder of the year. And so we're reiterating our 2025 guidance. And of course, Roei will elaborate about the financials and the outlook shortly. So if you bear with me for a few minutes, I'll try to be very brief.

To lead future, we are focused on 4 guiding principles: number one, securing the connectivity fabric. Number two, a prevention first ethos. Three, an open platform philosophy and finally, an AI first security. The modern connectivity fabric is hyper, it's hyper-connected. And it's not only a critical infrastructure for every digital transaction, but it's also become a potential source of knowledge that can provide the ability to read between the nodes, revealing patterns, anomalies, emerging threats. And that's an opportunity we must embrace. I can tell you that in Q2, our Quantum force AI-powered firewalls posted another robust quarter, growing in 12% year-over-year. It was driven by the refresh momentum and a growing demand altogether for AI-powered inspection.

We will also continue to accelerate our [indiscernible]. We go into a new R&D center in India that's coming up nicely. We've doubled the size of our SASE R&D team. And we're only seeing the momentum that comes with that with sort of a steady growth across all regions. Recently, this progress is also acknowledged with our inclusion the 2025 Gartner Magic Quadrant for SASE. And also the recognition as a leader in the Forrester Wave for Zero Trust Platforms. On the workspace front, as I shared in our previous call, we continue to make progress under Gil Friedrich's leadership. The Workspace platform now brings together endpoint, Email and SaaS security ultimately, helping our customers' operations and improve protections.

And also under Gil, we're also expanding our MSP and pay-as-you-go offerings so that we can support onboarding and more flexible consumption models, and this is contributing to a steady customer growth, tangible [indiscernible] new customers and millions of users are joining annually through this program. And so to summarize, the first principle, our vision is to securely connect and optimize security across devices, networks, users and clouds. And to do that, we need to look at it as a holistic solution that ultimately deliver assistant unifying security across what we call the hybrid -- the modern Hybrid Mesh Network.

The second principle out of 4 is prevention first. It's been foundational for checkpoint forever, that we must strive to stop attacks before they cost damage. Now preventing attacks may not be glamorous, it's difficult to receive sort of acknowledgments for things that did not happen. At the end of the day, it's like a constant behind the scenes effort that requires discipline, smart design and a proactive mindset, and true prevention is about acting in real time. And you need to stop the zero-day fishing side before a user engages so that you can also plot lock for [indiscernible] before it runs. And the secret sauce is to be able to deliver this in real time so that you can get prevention without a negative impact on the user experience, and that's the hard part. And it takes intelligent engines that are working silently across data streams and are now driven by AI that make those split-second decisions without disruption.

It may not be flashing, but it's foundational. And in says, I'm seeing a renaissance of the importance of prevention, especially when you look at the AI-driven threat landscape, it's expanding really, really fast. Just last week, the SharePoint tools zero-day vulnerability was exposed. It's a vulnerability that affects on-premise Microsoft SharePoint service. And at the end, it allows unauthenticated attackers to gain full access. And our customers at Check Point were protected. We also enhanced our prevention stack with the Veriti acquisition, which we announced recently. And this now provides automated threat intelligence and real-time remediation. And I think that this acquisition positions us at the forefront of preemptive prevention and threat exposure management and it strengthens our leadership in proactive cybersecurity.

Moving on to our next principle, it's all about an open platform. There are different ways that we can approach a cybersecurity philosophy. We believe that an open platform is the right approach. And when we speak about a platform, it's the ability to -- for us to create the core networking fabric tooling everything together, but being able to collaborate and to create an extensive, collaborative situation for our platform. Philosophically, I believe that an open platform also makes you more resilient. And I believe that trying to go for an all-in-one catalog option actually makes you more brittle and agile.

And again, the acquisition that we've just made of Veriti gives us another capability to put together 70 other vendors that work together with us, and that's the open platform strategy. And then finally, we are raising AI as a new tool. This means not only that we have cool LMs that organizations are bringing together, but actually, it's a shift in mindset because if there is going to make decisions for us, we're going to have to trust AI to make those decisions, those predictions going forward. And this is a major change in our industry. At Check Point, we're now -- we now have an AI engine that runs to allow our customers to use AI and the person over all the popular AI capabilities that we see.

And we're also seeing it in each one of our products. And this takes us, I think, to the forefront of embedding AI, using AI to simplify and to provide a unified management that is actually making our customers' lives easier. So long story, we've spoken -- I've spoken to you about the 4 principles. They are important for our vision going forward. And I think we're well positioned to lead the future of cybersecurity based on those 4 principles and our vision of the open platform.

And with that, I'll turn it over to Roei.

Thank you, Nadav. Let me just open the presentation. Okay. Okay. One moment, I have some issue here. I will be with you in a moment. Okay. So can you see my screen? Great. Okay, great. Sorry for the delay.

So as Nadav indicated, so we had a great quarter. I think our revenues exceeded our project, at our midpoint of our projection by $3 million and achieved $665 million. And we -- and our non-GAAP EPS was $2.37 in the midpoint of our projection, presenting 9% growth year-over-year. So moving to the results. So as I mentioned, our revenues grew by 6%. That was mainly driven by strong port and other suppOrtoire for product revenues that's driven by strong customer demand for our new appliances and a higher volume of product refreshes. I have to say that this life cycle is continuous investment in our platform and broader adoption of our latest technologies, our Quantum force technology that we released a year ago.

And as a result of these refreshes, a larger portion yields were bundled, including subscription and support and were offered at IRDs level compared to stand-alone renewals. This dynamic has led to slight deacceleration in our subscription revenues and declining our support risk, slight decline in our support revenues for the quarter However, we view this as a positive trend for the long term as this is strengthening the customer relationship, expand our installed base and position us for increased renewal install revenues and upsell opportunities in the future.

As for the billing, so the calculated billing grew by 4% to $642 million this quarter. Our RPO grew by 6% and reached $2.4 billion this quarter. This quarter, as Nadav indicated, was heavily back-end loaded, resulting as several deals that were pushed last few days to the first 2 weeks of July and were already closed. These deals alone, we're talking about few 7-digit deals affect our billing by approximately 3 points. So that will benefit us in the third quarter. As a reminder, in the same quarter last year, we had a 3 multiyear, this totaling $130 million, which also had a significant impact on our RPO last year.

Moving to our revenues by geographies. So we are looking at our American EMEA grew by 5% this quarter, while APAC had a strong quarter with double-digit growth and reached 15% growth year-over-year this quarter. Moving into our P&L. So our gross profit increased by -- from $557 million to $585 million, representing a gross margin of 88%. Our operating expenses increased by 7%. This increase is mainly as a result of our continued investment in our workforce organically and also the impact related to cyber in ability acquisition. I remind you cyber we acquired during Q3 2024, we completed the acquisition during June this quarter.

Our non-GAAP operating income continues to be strong at $271 million or 41% margin. I think it's important to discuss also the FX impact. As we all see the U.S. dollar is weakening. This is most of the currencies and especially against the Israeli shekels. Given that we are approximately 50% of our operating expenses are denominating in non-USD currencies and mainly the shekel and we are not adding 100% of these expenses, this currency movement resulted in an estimated 0.5 point headwind to our margin this quarter.

If I'm looking on the second half of the year, although we have a significant portion of our foreign exchange exposure, we're still going to have an impact because, again, we are not adding 100% of our foreign currency, and we do expect to see a headwind of approximately 0.5 point to 1 point if the U.S. dollar will stay in these levels. So that's important to say. And if we're looking into 2026. So if the FX rates will stay at these levels, so this could increase our operating expenses next year by approximately $50 million to $60 million.

Moving into our cash flow. So we had a strong operating cash flow this quarter, achieved $262 million, a 31% growth year-over-year. I think it's important to mention here that it included a benefit for $50 million from hedging transactions, offset by $6 million related to our Veriti acquisition. Our cash balance was $2.9 billion, and we continue to do our buyback and purchased 1.5 million shares at an average price of [ $200 to $220 ]. Also, we acquired Veriti during the quarter that was a net cash of around $90 million, and that's also part of the cash flow for this quarter.

And 2 notes regarding the next quarter regarding Q3 that we take our cash flow. We have 2 items that first, we announced that we acquired the land for building our new Check Point campus in Tel Aviv in Israel, and we completed this purchase during July and paid a total of $160 million for that plant. We do not expect any significant additional investments in CapEx in connection with this campus until the beginning of 2027. In addition and other items relevant for the third quarter for the cash flow, as part of tax settlement recently signed -- recently last week, actually, for prior years, we're going to pay approximately $66 million during the third quarter to settle this tax dispute for payers.

As we had higher provision in connection with this dispute, this settlement may also have a material positive impact on our third quarter P&L and EPS. We are still -- as this settlement was just signed a few days ago, we are still assessing the effect. And please note that this potential impact is not reflected in the guidance that I'm going to share with you in the next few slides.

To summarize our second quarter revenues and EPS in line with our projection, accelerated Quantum Forrester demand second quarter in a row of double digits. Continued strong demand for [ EMEA ] SASE and ERM. I think very important we do see strong -- continued strong demand and another strong profitability quarter operating margin and strong operating cash flow. Before we move to the Q&A, I'll move to the guidance for the next quarter.

So as Nadav indicated, we started July -- we started this quarter very strong. We see -- we have some indicators, internal indicators and of course, together also with the deals that were pushed from the second quarter, but also with the funnel -- and this closed in July and the funnel that we have for the remaining of the quarter, we feel very positive about the third quarter and the remaining of the year. Our guidance for third quarter is between $657 million to $687 million, midpoint sits at $672 million. Our non-GAAP EPS between $2.40 to $2.50. And while the GAAP EPS is expected to be approximately $0.68 less.

As for the full year, we are not changing the guidance. The guidance stays the same, same range that we gave you in the beginning of the year. We feel positive that we'll be able to finish in the high end of the guidance. But still, the range is the same and same for the EPS and revenues. And the GAAP EPS is expected to be $2.30 less. Thank you. Kip?

All right. Now we'll move to the Q&A. And the first up today will be Adam Tindle followed by Tal Liani, BofA.

I just wanted to maybe start with the elephant in the room here with the announcement that Palo Alto is acquiring CyberArk in the $25 billion deal. And as it relates to your comments specifically to Check Point, you're talking about how an open platform is the right approach. So I'm wondering if you could maybe just expand on that areas where you're thinking it makes more sense to partner versus maybe own or acquire. And certainly, any comments that you can make on the identity space given that large transaction this morning.

Yes. Thanks, Adam. Yes, sure. Very interesting announcement. Impact on us is, I think, minimal as we're not a player in the identity space. And as I said, our vision is to focus on where -- what we think we can do best. In my opinion, it's the breadth of the connectivity fabric. And that has the hybrid miss on one side, workspace on the other side and creating a unified platform for everything connectivity fabric. And on top of that, winning with AI.

Having said that, our philosophy is to focus on an open platform to focus on an open platform for a couple of reasons. Number one, when I spend my time speaking to dozens of CISOs a month, at least when you go to the enterprise end up, I think that between this idea of best of breed and best of sweet dilemma, An open platform is the right approach. It's unified layer deeply integrated, allowing it to be extensible, collaborative. That's from the CISO perspective. And also they don't want to be in a vendor lock.

I can tell you, as someone that's been in the industry on all of its side for many, many years, I also think an open platform makes more sense from a security perspective, if you think about the attackers, you don't want to have a monolithic approach. You don't want to come from one shop with the same philosophy, same software, same people, same intelligence. You want to have an open approach to it that allows you to have sort of an open garden and approach that allows you to import and to use different platforms working together. And I think that this -- it's not a technical framework, but it's a real differentiator and our vision and approach to the market.

Up next is Tal Liani of BofA, followed by Joseph Gallo from Jefferies.

Question, I look at your growth, 6%, your billing growth, even if I add the delay, the deals that slipped. We're not seeing acceleration. And the question -- I asked you the same question last quarter, I asked -- what I want to focus on is to understand what are the challenges that you see in accelerating growth, meaning I understand what you're doing, but it does take time. It looks like it takes time from the numbers perspective. So what are the challenges? When you talk about operational challenges, culture challenges, product challenges, go-to-market challenges. Can you just discuss what prevents the company today from accelerating growth? And what would take for the growth to accelerate in the future?

Yes. Well, great question, Tal, and you're right. It's not an overnight shift. It's a [ win ] you have the principles, and you have to make the investment. That's number one. Number two, as I said, and this is something that is already coming around. It's building the right go-to-market approach and the sense of urgency culture. And we're doing all of that. But like you said, it's nothing that's going to happen overnight. Having said that, I don't think that there is a specific challenge. I think we have the right products. I think we're in the right market. I think we have the vision. We need to focus on what we do best on executing it and up our game in go-to-market, and that's the plan.

Got it. And would you say that if you have to kind of rank in order the things you're dealing with, would you say that most of the focus is on go-to-market or most of the focus is on improving the portfolio? Where is the focus of the company that would drive growth acceleration?

I think for the short run, definitely go to market, right? For the short run, definitely go to market. Having said that, I do think we are in a pivotal time in the industry. I really believe that AI is going to change the way we live, operate, do digital structure. And so we need to make a hefty investment here and lead the way. So if you ask me, what are the 3 areas. One is go-to-market. We've been speaking about that. It doesn't happen overnight, but we're making the changes. The second is heavily investing in AI. I think we're already leading with embedding AI in our own products. And number three is a culture of execution and sense of urgency. Now it all happens in parallel. Some will have impact in the short term, some will have the impact in the medium term and some in the long term.

All right. Next up is Joseph Gallo, followed by [indiscernible].

I understand the impact of the discounting, but can you just talk through some of the confidence and why that's a positive long term? Is it until the SASE? Or where should we see some of that goodness over time? And then just any quantitative metrics regarding the performance on the new logo side of the business.

Yes. Okay. So I think when I'm looking on -- we have our internal indicators, when we're looking on the customers that are doing refresh, we are seeing it over time, the ARR from this -- I mean, I'm not talking about the appliances. I'm talking only about the ARR associated with these customers is increasing nicely. And we see that on the long term, maybe not on the first quarter and the second quarter, but on the long term, the ARR is increasing. So we have this internal indicators that we feel confident that because we see very strong demand for these appliances from our existing customers, sometimes it's coming also with cross-selling, SASE or Email or ERM. But even without that, we see that even with the firewall, we see that the ARR is increasing over time and they are buying from us the appliances. So therefore, we feel confident it's not only this quarter. We feel it. We see this indicator over deals.

And Nadav, you want to add around -- you want to add something?

Yes. To your question on where we're seeing the growth, I would say, 2 main areas. Number one is the new product lines, right? So if you look at Email, ERM, SASE, those are growing above 40% year-over-year, right? So a very healthy growth. And as I said, we just -- we doubled the size of our SASE team, and we're making a huge effort to grow it as fast as we can.

The other place is the -- what we call the Infinity platform that at the end of the day, I think we have a real differentiation with our road map to create this unified platform that allows you to have all of your connectivity fabric in one. In my opinion, this is not long term, this is midterm with what we're seeing coming from the attacker's perspective, with the becoming AI-ready enterprise, having that holistic view into your network fabric and being able to read between the nodes and go from a static, reactive to predictive, proactive approach, I think that's going to have a huge impact.

And when you couple that with the fact that we are going to be making more investments in our marketing, I think that over time, you will see the impact and the growth, I mean. At the same time, this investment, and we've been talking about this for a long time, we'll also call for probably having to give up a few margins -- a few points on the margin, so we can grow faster.

All right. [indiscernible] followed by Rob Owens.

Great. Nadav, you've talked about SASE being one of the key focus areas for you. Could you just give us an update on the Perimeter 81 acquisition and where you are from a go-to-market and from a technology integration perspective. And overall, what's the vision that you're trying to articulate to customers that's a bit differentiated from the many vendors that are providing SASE solutions to customers?

Yes, thanks. So since the acquisition, first, in terms of numbers, we're seeing a solid 40%-ish growth, so solid. What we're doing is moving it up to the large enterprise level. So we're now at a position where we have full -- fully deployed capabilities in up to [ 10-K]. And the beginning of 2026, we're already going to have the ability to do that beyond that. So that's one of the answer. And as I said, we're -- this is a critical aspect for us, both on the R&D and on the go-to-market.

Talking about go-to-market. The idea is that it's no longer just a small sales force of an overlay, but they are bringing up to speed the mass field capability that we have that comes from more from the gateway side to also be able to go out there and showcase what we have in SASE. To your question on the differentiation, I think the differentiation has 2 parts.

Number one, it's the whole connectivity fabric platform approach. On the one hand, we have the hybrid measurement, which we've been talking about. On the other side, we have the workspace where we're unifying different capabilities so that we can look at personas and not different technologies. SASE is sort of something that is the glue that connects all that. Our architecture is different than others. Most of the architectures out there of some of the [indiscernible], our architectures that are cloud only. The fact that we have the hybrid capability, the fact that we're also on device means that I believe we can do 3 things better, and we're proving it in the market.

Number one is better user experience, sometimes 10x because we're able to -- in every transaction, find the right way we don't have to go to the cloud every time we do it. That leads to a 10x faster capability on the user experience. Number two, it's cloud cost. The fact that we have this hybrid approach allows us to not use the cloud in every transaction that controls cost. And number three, the fact that we have all of the capabilities on the small agent on the device in the AI era means that we can protect you where the threat is coming. And I think that when you put all that together and with what we've seen so far, I'm very optimistic about it.

All right. Next up is Rob Owens, followed by Brian Essex.

Hoping you could drill down a little bit just into the slip deals that you mentioned. I know you quantified them and appreciate that, but one more reason for the slippage geos that they slipped in anything that you're seeing more broadly out there in the environment.

So based on what we've seen, especially this quarter, I think, again, we still -- again, I think it's a combination of macro and execution. But in the end, we did see more deals that were slip than usual. I mean we have every quarter slip deals. We have, to be honest with everyone here. It's not that we don't have -- there is no project you don't have any slip deals. But this quarter, we had more than usual. But I think why we feel confident that the -- most of these large deals, we're talking about 7-digit deals, all of most -- I would say all of them were closed in the 3 weeks of the quarter. So we feel confident that it's just an issue of timing.

Sometimes, we mentioned that we did see much more back-end-loaded quarter than [indiscernible]. I think that was the most back-end loaded quarter that I ever seen since I'm in Check Point. And therefore, there is a list when you have more back end loaded, there is that some of these will be -- more deals will be slipped. But we feel confident because we close them, and we feel more confidence around it.

Yes. Look, to add to that, I think, Rob, each one of them is sort of a snowflake. There's no one thing. Good news is that it's already closed, and we're seeing a great start to Q3, July so far has been great, and we're optimistic about Q3 and the rest of the year.

Were they equally split amongst the geos? Or were they predominantly in [indiscernible]?

Yes. Pretty much, pretty much. There is no common denominator [indiscernible]. I really think it's back-end loaded execution. And again, all of them have been already been closed off. We're confident that it doesn't have a meaningful impact.

All right. Up next is Brian Essex, followed by Shaul Eyal.

I was wondering if we could dig in on Quantum a little. So Nadav, what are you seeing in terms of the Quantum product cycle, refresh cycle, like how far through your installed base is, the penetration there? And what are you seeing architecturally, are your customers kind of taking a step back and reassessing the network architecture and may be throttling spending into other areas of their network security environment?

Yes, thanks. On the refresh cycle, I'll let [indiscernible] also chime in. On the architecture part though, again, this is sort of the principles that we're talking about, the first one is to look at the whole connectivity fabric. A Quantum gateway is one instance. It's a critical instance. We're seeing everything stay hybrid. So the ability to do it on prem is important. But we also have our CloudGuard the ability to do the same thing to the cloud and more importantly, bringing all that together as one connectivity fabric platform. That's where I think we're going.

And so with that, where are we investing? We're investing on creating one unified management that could push all the policies at the same time, whether it's on the cloud, multi-cloud, on-prem branch data center, et cetera. It's connecting that to the SASE. So each one of the nodes in this very complex environment can get the same capabilities that a data center can get. And all of them together are giving you sort of that sense of what a network is really about. And number three, embedding AI in this to simplify and automate. And again, I think we're in the very early innings. It's going to take not just engineering, it's going to take not just bringing AI in but also a change in sentiment because at some point in which we're already seeing, we need to trust that AI to make real decisions in split seconds because the attackers are not going to give us any more time.

So for me, when you think about Quantum, I think about the whole connectivity fabric and that -- what that brings to our customers. And again, I believe that's not the whole cyber estate market, but it's a core, and I believe that it can be the core platform and being an open platform, open up to other best-of-breed platform just like we did with Wiz and we're going to do with others.

Yes. And for the refi cycle, I think we're in the middle of that. I think when I'm looking on the potential for the potential is huge. We are looking on the funnel for this for the second half of the year. And when I'm looking man on the final -- for the final of 2026, the potential is there. I mean, we still have a significant installed base that's up to refresh and the potential is also to have a competitive replacement. And we did see some of them during the first half of the year. We need to have more of them. But definitely, there is a huge potential on that front.

Any sense of the duration in the back half of the year or into next year? Like is it an acceleration that you might expect? Or how big can that be?

Just based on my -- when I'm looking on the final discussion, it should last at least until the first half of 2026. Tough to me to say if it will be , but again, this trend continue to -- I mean, expected to continue in the next 12 months.

Up next, we have Shaul Eyal, followed by Keith Bachman.

On Harmony Email, is it still growing at similar rates like we've seen in prior quarters? And maybe on those slipped deals, are they like geographic based or across the board pretty much?

No. I mean, just to reiterate on the slip deals, it's -- there's no common thread. It's not many, but it's a few big ones, and it's not rapidly based. We have it both in the Americas, EMEA, et cetera. And again, it's deals that have already closed in the last few weeks, getting us a really good head start for the next quarter. On Email, the answer is absolutely yes. It's continuing to grow at a very healthy rate. Not only it's continuing to grow at a very healthy rate, but also around that, around the leadership and the capabilities we're taking together a few different solutions.

So instead of looking at different product or different devices or different locations, we want to look at the modern workforce. This is the new Workspace division under Friedrich, where we're bringing together Email, end point, SaaS security, browser security and putting together a holistic capability. So at the end of the day, we can look at persona as they do their security, their efficiency, their effectiveness of personas that are moving around the world. And hopefully, that can lift the whole Workspace solution, not just Email.

All right. Next up is Keith Bachman, followed by Andrew Nowinski.

I wanted to go back to subscriptions and discounting and a couple of different threads to pull on. I think you said the impact was 50 basis points this quarter on subscription, but I just want to make sure I heard that clearly. And we did hear from the channel that Check Point was more flexible on the pricing this quarter, but my question is that's not a onetime event, right? So we should be assuming that, that discounting impacts, presumably the next 4 quarters growth on that subscription line item, but I just wanted to hear any thoughts you might want to offer on how we should construct our subscription line.

Candidly, the number looks disappointing. And so even if we layer in 50 basis points, what investors want to see is that line not holding steady, but increasing. And there's not a lot of conviction that firewalls over the next 3 years, the product revenue will be a durable source of growth. Is that sort of the line item that investors really view is important. So maybe just help us think about the ongoing headwind associated with the next couple of quarters, if there is this discounting that's going to be involved?

Yes. So first of all, you're right, I mentioned the after point effect, the headwind that we had from higher discounting related to the subscription, which is part of the refresh. The bundle with the refresh. So that's -- you're right around that. I do expect that it's on-- I mean I'm talking about the refresh from existing customers. We do expect to see a refresh. We're going to see this refresh, and we see that in the final the refresh is going to be strong, hopefully in the next 4 quarters at least. So that will have a headwind effect on the subscription.

But on the other hand, we have tailwinds. I mean, we see that the Email is getting bigger and bigger out of the total subscription revenues and that have high portion it should drive, that Email is growing much higher than the 10% subscription. And also SASE and also ERM, all of them are growing further north of 40% year-over-year. So all these items are getting bigger in the substation line items. And of course, we also expect to have more competitive replacement in the quantum on the firewall. So that's -- together that should drive us to drive the accelerated growth on the subscription. And we do expect to see if we see the trend, we do expect to see slight acceleration in the next few quarters, pushed by these specific emerging technologies that I just mentioned.

All right. Next up is Andrew Nowinski followed by Shrenik.

So Nadav, at the Analyst Day, you talked about the need to win the SASE market to drive subscription growth. But it seems like identity is the foundation for that Zero Trust SASE market. I mean you have to verify the user is who they say they are before connecting them to an application. So I'm trying to understand, how critical is identity security to your SASE solution and to the future adoption of SASE as you push more into that large enterprise space?

Look, see management identity are part of the whole estate. Creating Zero Trust with the capabilities that we already have is actually, I believe, very doable. And we are leading it were -- and the customer needs to choose actually what from glider they want to use as an identity broker. Again, that goes back to the open platform approach. So I don't see this as a big impact, and I definitely don't think that this is a big impact on the SASE solution that we have.

All right. Next up is Shrenik followed by Patrick Colville.

Yes. Sorry. Nadav, you have articulated a strong version around AI-powered prevention. Talked about, of course, Quantum Force, of course to an acquired management real-time detection. Just feels like how are you thinking about monetizing these structures also get a little bit into timing, like overall net new SKUs, pricing lift or broader adoption? And just on that note, since you have said in the past of being prudently honest and takes a village and parity being integrated for real-time prevention. Just on M&A front, given your cash position and the cash generation, how are you prioritizing AI-focused M&A and also internal R&D in your just your law philosophy of it?

Yes. So to start with the second question, this is one of the 4 guiding principles in AI-first security. In order to get to AI first security, we're doing mainly 3 things. Number one is hiring the right talent to lead this future. To this end, we announced last quarter that we're going to have -- we're going to be hiring about 500 new individuals that can lead us to that future, both on SASE and AI, we're earning halfway through this program. Number two, as you said, there's always the opportunity to make acquisitions. And so we have a strong position, and we're looking all the time to the right people, the right IP, the right market access. And we're doing this as we speak. And I believe that we will make moves there as well.

And it's the balance between these 2, the acquisitions and the talent that we already have, the talent that we're onboarding together to lead this future. So that's on the investment that we're making, generally speaking. On the monetization front, I think that there are 3 things that you need to look at. Number one is a stand-alone product. We already have that. So in fact, already selling the capability to allow users to have access based on policy and governance so that organizations and enterprises can embrace these technologies safely and not block them. And that's a -- that could be a stand-alone product. We're also looking at this as a new platform because when you think about AI cybersecurity or security for AI, you're looking at observability, you're looking at users capabilities, you're looking at governance, you're looking at run time and you're looking at CICD.

So we're looking at the whole gamut. It's an evolving space, making our first moves. The next, which is more about optimizing and being more competitive with our capabilities that we already have usually mostly on the management side. So we've launched almost 12 months ago Playblocks and AI Ops. And we're seeing that play a major part. So as you can see, it's a very wide range. But absolutely, to your question, there are -- we already have and will have more separate SKUs, if you like, that are actually being sold either as a part of our network fabric and Infinity platform, but also as a stand-alone. And these are going to be a part of our workspace. They're going to be a part of the network fabric and as a stand-alone.

Patrick Colville followed by Jonathan Ho.

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I'm actually going to ask Nadav, this one, please. I mean, you mentioned earlier in the call that you'd be happy to give up a few points of margin to achieve your goals. I guess my question is, should we interpret that as a new information or should we interpret that nugget as consistent with the messaging from last quarter and the Analyst Day? And the reason I ask this is because many had thought this time last year when your appointment was announced that given your background at teammate, there would be an acceleration of tuck-in deals and we haven't seen that. So any color you can provide there on that margin comment or might there be a change in the pace of tuck-in deals?

So there is no new information, Patrick. It's part of our vision. We've spoken about that we are looking to accelerate growth. It's a journey. I think we're already seeing good initial cues that we're going the right way. But in order to go there, you need to galvanize the strategy, and that's what we're doing. You've seen the 4 guiding principles. And yes, you are going to see an acceleration in the way that we either built in-house to be ready for the future that we've been speaking about extensively, but also acquisitions.

2025, we already gave our guidance. We already reiterated it in January of next year. We'll give the guidance for 2026, and as we've spoken about on the Analyst Day and in other calls, we are willing to make the investments for a faster -- more faster but sustainable growth. And so these tuck-ins and these acquisitions are going to be within the strategy that are articulated and within the 4 guidelines. So we're talking about the connectivity fabric and how we lead that. We don't have everything. Some of it, we can build some of it we can acquire. Same thing goes for Workspace and definitely for AI. And we're very active in assessing the possibilities that are out there and we're willing to -- not willing, we are making the strides to make sure that we see the best-in-class in each one of these categories.

Thanks, Patrick, for telling us you're European with your outfit. Next up is Jonathan Ho, followed by Keith Weiss.

With your go-to-market changes, what have been sort of the most relevant changes that you've made? And can you give us a sense of the timing of when you expect these impacts to be more meaningful and maybe where you are seeing those impacts work today?

Yes. Thanks. I think, first and foremost, it's about the leadership, right? So in the C-suite today, we started out -- when I started out, we had 1 leader. Today, we have 6 -- or sorry, we have 2, and now we have 6. So President of Americas, President of International, customer success, CRO are all a part of this. And so that the balance between the product engineering and the rest of the folks and the go-to-market folks is differentiated.

The second is the people that we are looking to attract, right? So we're hiring people that are coming more from a marketing perspective. The second is on a cultural level, being less shy about what we stand for and why we stand for it. And all this is in the process of happening and more news to come shortly.

All right. Next up is Keith Weiss, followed by Saket Kalia.

Maybe a question for Roei. Nadav talked about the necessity for more marketing dollars to get more of the message out, and that makes sense to get to a pace of acceleration. I think one of the things investors broadly have been hoping for or expecting within software companies is the internal use of the generative AI and more AI technologies to be able to drive more efficiencies within the business.

So maybe you could talk about like the potential within checkpoint, are you guys utilizing the technologies yourself, maybe get more productive in development, more productive in go-to-market using generative AI. What ability is there to offset some of that necessity for higher investment so you could sustain the operating margins? And maybe do both, right, get to that level of acceleration just by being more productive and still putting incremental investments where they're needed.

So Keith, that's a great question. I think definitely, that's one of our priorities. When we are looking also, we're talking a lot about AI and security for AI. But definitely, AI opportunity also to be more productive internally and to optimize the operations. And definitely, that's something that we are already working on that today and definitely should help us in the future.

I don't think that in the short term, we'll see it contributed to our operating margin, this optimization, but definitely, we're actually a tax force in the company that with a development team, with the go-to-market team, with my team. And I think is working to see how we can leverage these AI tools today and how we can be more productive and optimize what we are doing. But I have to say, again, to quantify it for now, today, it will be difficult. But definitely, on the long run and the long term, it should benefit us.

So more like a 2026, 2027 benefit?

Hopefully, yes.

To add to that, Keith, because I think that's on everybody's top of mind. Every organization on the planet is dealing with this. We need to lead it but we need to lead it on different fronts. One of the fronts that you said is being an IFRS company. I think we're at the front line, but it's one of those things that how do you know if you're at the bleeding edge of when there is no sort of benchmark. So we're never going to be content enough.

The way I look at it is, yes, to become more efficient, more effective. But rather than try to -- it's the latter -- it's sort of the last piece of what you said. It's not -- since we are investing in our future, I think that will allow us to do more, not with less but with the same, right, and enable us to go for growth.

And then lastly, I'll say, because Roei talked about the task force, Jonathan Zanger, who I told you about last time we spoke, our new CTO, he's obsessed with those 3 things. How do we become an AI-first company. The second part is how do we help, and I think this is one of our #1 tasks in the world today is how do we allow our customers to become an AI-first company without taking huge risks on privacy security, governance, et cetera. And then finally, constantly having an eye open, that's why we put together the research center that's looking to where the puck is going because I think -- look, attackers have less -- they're flexible. They don't have procurement committees, governance, et cetera. They're embracing these technologies extremely fast.

And we at Check Point have to do all 3 of these things in parallel. And I think we're already -- we're off to a really good start, but a lot more to come on that.

Got it. Got it. Maybe one quick follow-up for Nadav. Not to try to put excuses in you guys' mouth. But in Israel, you guys had a 12-day war during the quarter. And I think it could be forgiven if that created some disruption or some distraction for the workforce within a Check Point during the quarter. I mean do you think that had any impact on slipped deals or execution in the quarter? I mean it was a pretty big deal.

Yes. Well, obviously, it was a big deal. We can talk about the implications for the next few hours. Specifically on Check Point, no. We're a global company. We have people around the globe. We didn't see any direct impact. But believe me, we probably have one of the best BCP DRP programs in the world for obvious reasons. And so no, it didn't have an impact.

But if you -- but what it did have is it shows us what kind of a world we're looking at. And obviously, most of the world has been looking at the impact, the direct impact, the kinetic impact. But behind the scenes, there's the cyber war going. And Iran is one of the proponents of that or they have good capabilities. They have a lot of motivation, and we're seeing an increase, I would say, boldness and the aptitude of what the Iraniers are doing with some of their friends around the world.

Our final call -- our final question will come from Saket Kalia from Barclays.

Nadav, maybe we can end with one of the things you said in your prepared comments, which was steady growth in SASE. Clearly, Check Point has a big customer base to cross-sell SASE too. Maybe the question is, what are you seeing in terms of your SASE wins, in terms of why you win. And Roei, maybe the related question is, anything that you can or want to share just on the scale or run rate of this business as we think about the future of Check Point?

Yes. To begin with, we're still a relatively small player in SASE per se, but we are the leading player when it comes to connected fabric platform in the Hybrid Mesh and SASE is embedded in that. And so many of our wins, I would say, most of our wins are customers that are already using our Quantum base and want to have a more holistic connectivity fabric capability. I don't think there's any other company that has sort of the inspection engines, the AI engines, the intelligence that comes from 32 years and dozens of thousands of customers that now once you put the SASE and you immediately get all that benefit and bring it together as a platform.

So you're right. Today, it's mostly the upsell from existing customers. through our new division that also is going to bring up our MSP pay-as-you-go, I think we also have an opportunity in the downstream. And I do see opportunity for SASE to come into customers that don't have Check Point and hopefully then embrace the other Check Point customers. But you're right at the beginning of the journey, is the upsell from existing enterprise customers.

All right. Thank you all for joining us today. We appreciate it, and we look forward to seeing you throughout the quarter and also this time next quarter. Thank you.

Thanks, guys.

Thank you.