Check Point Software Technologies Ltd. (CHKP) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial metrics, such as a 41% operating margin and 24% growth in operating cash flow. However, guidance indicates margin headwinds due to acquisitions and FX, and management avoided specifics on acquisition impacts and memory pricing. The raised 2025 revenue guidance is a positive factor, but uncertainties in product revenue and unclear management responses temper enthusiasm. The stock price is likely to remain stable, reflecting a balanced view of positive growth prospects and existing challenges.
Key Financial Performance
Revenue (Q4 2025) $745 million, a 6% year-over-year growth. Driven by 11% growth in subscription revenues. Growth was moderated due to a subscription price increase in July 2025, which shifted bundled hardware deals towards subscription.
Non-GAAP EPS (Q4 2025) $3.40 per diluted share, exceeded guidance. Includes a one-time tax benefit of approximately $0.52 related to a reduction in corporate tax rate in Israel and updates to tax reserves.
Revenue (Full Year 2025) $2.725 billion, a 6% year-over-year growth. Driven by strong demand for emerging product portfolio and subscription revenues.
Non-GAAP EPS (Full Year 2025) $11.89 per diluted share, exceeded guidance. Includes a tax benefit of approximately $1.90 related to a reduction in corporate tax rate and updates to tax reserves.
Deferred Revenue $2.18 billion, a 9% year-over-year growth. Growth driven by subscription price increases and strong demand for subscription services.
Calculated Billings (Q4 2025) $1.039 billion, an 8% year-over-year growth. Current calculated billings grew by 6%.
Remaining Performance Obligation (RPO) $2.7 billion, an 8% year-over-year growth. Reflects strong demand for subscription services.
Gross Profit (Q4 2025) $660 million, an increase from $623 million in Q4 2024. Represents a gross margin of 89%.
Operating Expenses (Q4 2025) $358 million, a 13% year-over-year increase. Primarily due to workforce expansion and investments in sales, marketing, and channel programs.
Non-GAAP Operating Income (Q4 2025) $302 million, representing a 41% operating margin. Reflects strong profitability.
GAAP Net Income (Q4 2025) $305 million, an 18% year-over-year increase. Driven by a one-time tax benefit and strong operational performance.
Operating Cash Flow (Q4 2025) $310 million, a 24% year-over-year growth. Represents 42% of revenues in Q4.
Operating Cash Flow (Full Year 2025) $1.234 billion, a 17% year-over-year growth. Includes a $66 million one-time tax payment related to a tax settlement.
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Operating Highlights
Security for AI and Exposure Management: Expanded platform with two new pillars: Security for AI and Exposure Management. Building both organically and through targeted acquisitions.
AI Security: Securing AI-driven attack surfaces with purpose-built capabilities and leveraging AI to simplify and automate security management.
Hybrid Mesh Network Security: Securing infrastructure across data centers, hybrid cloud, branch, and SASE with AI-powered unified management.
Workspace Security: Integrated platform spanning devices, browser, email, SaaS applications, and remote access.
MSP Market: Acquired Rotate to build momentum in the MSP market, leveraging position as a leading MSP email security provider.
Exposure Management: Established as a new strategic pillar with plans to expand market share in the coming years.
Financial Flexibility: Enhanced with a $2 billion 0 coupon convertible notes offering.
Revenue Growth: Achieved 6% growth in revenues for Q4 2025, driven by 11% growth in subscription revenues.
Regional Revenue Growth: Revenue growth across all regions: EMEA (5%), Americas (6%), and Asia Pacific (9%).
Acquisitions: Acquired Cyclops, Lakera, and Cyata to enhance capabilities in Exposure Management, AI Security, and Workspace.
AI Transformation: Positioning the company to lead the AI era of cybersecurity by securing customers' AI transformation through four strategic solution pillars.
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Risk or Challenges
AI-driven threat landscape: The rapid adoption of AI is fundamentally changing the threat landscape, making decades of corporate infrastructure vulnerable. Organizations must revalidate their security foundations and protect new attack surfaces, which presents a significant challenge.
AI security risks: The breakneck pace of AI adoption introduces risks such as data leakage, AI threats like jailbreaking or model inversion, and agents with uncontrolled autonomy acting beyond their scope.
Vulnerability management: Security teams face challenges with overwhelming volumes of vulnerabilities, disconnected intelligence, and shrinking remediation windows. Weeks-long resolution cycles for critical vulnerabilities are no longer viable in an AI-driven threat landscape.
Memory price increase: Recent memory price increases are expected to impact gross margins by approximately 1 point for the full year 2026, particularly in the second half of the year.
Foreign exchange exposure: Currency fluctuations are anticipated to create a headwind of approximately 1 to 1.5 points on operating margins in 2026.
Product revenue headwinds: A subscription price increase in July 2025 shifted a larger portion of bundled hardware deals towards subscription, resulting in a $6 million headwind in Q4 2025 product revenues and an expected $4-5 million impact in Q1 2026.
Regulatory changes: The OECD Pillar Two framework, effective in 2026, establishes a 15% global minimum effective tax rate for large multinational groups, increasing the company's tax rate to an estimated 16%-17%.
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Guidance & Outlook
Revenue Projections for Q1 2026: Expected to be between $655 million to $685 million.
Revenue Projections for Full Year 2026: Expected to be between $2.830 billion to $2.950 billion, representing 4% to 8% growth.
Subscription Revenue Growth: Expected to grow between 10% to 14% for the full year 2026.
Non-GAAP EPS for Q1 2026: Expected to be between $2.35 to $2.45.
Non-GAAP EPS for Full Year 2026: Expected to be between $10.05 and $10.85.
GAAP EPS for Full Year 2026: Expected to be $2.58 less than non-GAAP EPS.
Adjusted Free Cash Flow for Q1 2026: Expected to be between $420 million to $460 million, representing 66% of midpoint expected revenues.
Adjusted Free Cash Flow for Full Year 2026: Expected to be between $1.150 billion to $1.250 billion, representing 42% of midpoint expected revenues.
Gross Margin Impact in 2026: Expected to decrease by approximately 1 point due to memory price increases, with most impact in the second half of 2026.
Tax Rate for 2026: Estimated to be between 16% to 17% due to the OECD Pillar Two framework.
R&D Incentive Program Impact: Expected to provide approximately $50 million benefit to operating income, pending final approval by the end of Q1 2026.
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Shareholder Return Plan
Share Buyback Program: We also continued our buyback program and purchased 2.2 million shares for $425 million at an average price of $193 per share.
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Key Q&A
Q:What is the difference between AI security and cloud security, and why is Check Point investing in AI security?
A:Nadav Zafrir explained that AI transformation is more foundational and faster than the shift to cloud security. Attackers are using AI more rapidly than defenders, creating a new attack surface. Check Point believes it is well-positioned to lead in securing AI transformation with its proactive prevention security and four-pillar strategy.
Q:How should we think about ASP hikes from a linearity perspective?
A:Roei Golan stated that price increases were implemented in July for subscriptions and in January for all firewall-related products. The main revenue impact is expected from Q2 due to prior bookings and quotes delivered before the price increase.
Q:What caused the product revenue to be softer in Q4, and why does the pricing benefit build throughout the year?
A:Roei Golan explained that hardware sold as a bundle with subscriptions led to a smaller revenue allocation to hardware due to subscription price increases. The pricing benefit builds throughout the year as prior bookings and backlog are recognized in future periods.
Q:What are the dynamics around hardware price increases and customer spending intentions?
A:Nadav Zafrir mentioned no significant changes in customer spending intentions but noted the potential competitive advantage due to Check Point's supply availability. Roei Golan added that operating margins are expected to be 39%-40%, considering headwinds like memory costs and FX.
Q:What are the key changes implemented in 2025 that will impact growth in 2026?
A:Nadav Zafrir highlighted the new C-suite leadership, reorganization of go-to-market strategies, and the four-pillar approach as key changes. He emphasized the importance of security for AI and the ecosystem play to drive growth.
Q:What is the progress on the SASE front, and how is it being integrated?
A:Nadav Zafrir stated that SASE is now part of the Hybrid Mesh pillar, with significant investments made in 2025. The product is maturing, and sales efforts are being integrated with CloudGuard network security. Two-thirds of sales are upselling to existing customers, with new customer acquisitions also contributing.
Q:How does Check Point plan to accelerate growth and respond to investor concerns about revenue growth?
A:Nadav Zafrir emphasized execution, leveraging the four-pillar strategy, financial flexibility for acquisitions, and focusing on large enterprises and new logos. Roei Golan mentioned high single-digit growth expectations for total billings and revenue.
Q:What is Check Point's approach to large-scale M&A and AI-driven bets?
A:Nadav Zafrir stated that Check Point is disciplined in identifying targets that align with its four-pillar strategy. The focus is on creating integrated platforms rather than a supermarket approach, with acquisitions aimed at becoming podium players in each pillar.
Q:What is the potential of exposure management as a revenue contributor?
A:Nadav Zafrir described exposure management as a growing demand area, with capabilities like intelligence, posture assessment, and automatic remediation. It allows Check Point to expand beyond its installed base and address vulnerabilities across different vendors' products.
Q:What changes are being made to drive higher growth across the four pillars?
A:Nadav Zafrir mentioned focusing on differentiated advantages in each pillar, aligning account managers with specialists, and challenging the status quo in the market. Roei Golan highlighted the strong demand for CTEM, e-mail security, and SASE as key growth drivers.
Q:What is Check Point's strategy for addressing memory price increases and shortages?
A:Roei Golan stated that Check Point is working globally to secure better pricing from suppliers but acknowledged the significant increase in memory costs. The company is exploring opportunities to mitigate the impact while maintaining competitive pricing.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the top-line contribution of recent acquisitions, stating it was minimal and limited to a few million dollars. Additionally, they did not clarify the exact measures being taken to address memory price increases beyond general efforts to secure better pricing.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Security
AI adoption
AI attack
AI security
AI threat
AI transformation
Cyata
Exposure
Hybrid Mesh
MSP
MSPs
Rotate
Security pillar
Workspace Security
acquisition Cyclops
application agent
asset
attack surface
awareness
context
conviction
flexibility
intelligence
mail security
mission
organization AI
pillar AI
prioritization
provider
purpose
remediation
result foundation
security foundation
solution threat
statement
threat AI
threat landscape
vulnerability
CHKP Transcript
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The earnings call summary and Q&A indicate strong financial performance with increased EBITDA margins, cash flow, and new signings. The company has raised its revenue guidance and is optimistic about future opportunities, especially in cybersecurity and Canadian military sectors. Despite some margin headwinds, the overall outlook is positive, with strategic growth initiatives and cost optimization efforts contributing to optimism. Analyst sentiment is generally positive, with expectations of continued growth, leading to a positive stock price movement prediction.
Check Point Software Technologies Ltd. (CHKP) Q4 2025 Earnings Call Transcript
Unknown2-12
The earnings call reveals strong financial metrics, such as a 41% operating margin and 24% growth in operating cash flow. However, guidance indicates margin headwinds due to acquisitions and FX, and management avoided specifics on acquisition impacts and memory pricing. The raised 2025 revenue guidance is a positive factor, but uncertainties in product revenue and unclear management responses temper enthusiasm. The stock price is likely to remain stable, reflecting a balanced view of positive growth prospects and existing challenges.
Check Point Software Technologies Ltd. (CHKP) Presents at 53rd Annual Nasdaq Investor Conference Transcript
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Check Point Software Technologies Ltd. (CHKP) Q3 2025 Earnings Call Transcript
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The company maintains strong guidance and confidence in meeting targets, with positive developments in subscription growth and strategic investments. The Q&A reveals management's optimism about future growth, despite some uncertainties like FX impacts. The reiteration of guidance and strategic focus on expanding enterprise customer base, along with no significant negative factors, supports a positive sentiment.
CHKP Report
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