Check Point (CHKP) Q3 2026 Earnings Call Transcript

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DATE

Mon, Nov. 2, 2026

CALL PARTICIPANTS

• Investor Relations – Kip Meintzer
• Chief Executive Officer – Nadav Zafrir
• Chief Financial Officer – Roei Golan

TAKEAWAYS

• Total Revenue — $670 million, representing a 1% decrease year over year driven by lower firewall appliance refresh activity.
• Subscription Revenue — $339 million, growing 11% year over year due to demand for email security, AI, and exposure management solutions.
• Non-GAAP EPS — $2.49 per diluted share, which was $0.01 above the midpoint of company projections.
• Adjusted Free Cash Flow — $258 million, exceeding the midpoint of management projections by $8 million.
• Calculated Billings — $636 million, a 5% decrease compared to last year due to a difficult year-over-year comparison involving deal slippages in the prior-year period.
• Remaining Performance Obligation — $2.513 billion, reflecting 5% growth year over year.
• Deferred Revenues — $1.992 billion, representing 6% growth year over year.
• Growth Technology ARR — Growing over 38% year over year for email security, AI security, and Continuous Threat Exposure Management combined.
• Growth Technology Calculated Billings — Increased over 47% during the third quarter.
• Email Security ARR — Exceeded $200 million during the quarter, with management citing significant remaining market potential.
• Regional Revenue Mix — 46% from EMEA, 41% from the Americas, and 13% from Asia Pacific.
• Non-GAAP Operating Income — $251 million, resulting in an operating margin of 37.4%.
• Gross Margin — 87%, which management stated was impacted by higher memory costs during the period.
• Currency Headwinds — $30 million year to date, primarily reflecting the weakening of the U.S. dollar against the Israeli shekel.
• Share Repurchases — 2.5 million shares purchased for $325 million, at an average price of $132 per share.
• Israeli R&D Grants — $25 million in benefits received under the Israeli Incentive Program Law.
• Product Pricing Adjustments — 12% to 20% increases on firewall products effective Oct. 4, 2026.
• Diluted Shares Outstanding — 101.9 million shares, which management expects to decrease by 2 million shares next quarter through ongoing buybacks.
• Q4 Revenue Guidance — $720 million to $770 million, representing flat growth year over year at the midpoint.
• Q4 Non-GAAP EPS Guidance — $2.71 to $2.83 per share.
• FY 2026 Revenue Guidance — $2.732 billion to $2.782 billion.
• FY 2026 Non-GAAP EPS Guidance — $10.25 to $10.37 per share.
• 2027 Subscription Revenue Target — Over $1.5 billion, supported by price increases and demand for new growth technologies.
• Incremental 2027 FX Headwind — Estimated up to $50 million based on current exchange rates and less favorable hedging positions.
• Q4 Subscription Revenue Guidance — $351 million to $362 million, reflecting a slight de-acceleration from lower attached firewall subscriptions.

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RISKS

• Zafrir stated, “I want to be clear that the pace of recovery is more gradual than we previously anticipated,” regarding the timeline for product revenue stabilization.
• Golan noted that the company expects a “greater impact in the fourth quarter” from currency exchange rates compared to the third quarter.
• Golan stated, “The decrease in gross margin was explained due to higher memory costs,” which the company expects to continue as a headwind.

SUMMARY

Check Point Software Technologies Ltd. (CHKP -6.54%) reported third-quarter revenue of $670 million, identifying the period as the expected trough for product revenue performance. Management attributed the 1% year-over-year revenue decrease to lower firewall appliance refresh activity, which also negatively impacted maintenance and professional services revenues. Despite these headwinds, subscription revenue grew 11% to $339 million, now accounting for 51% of total revenue. The company is implementing go-to-market changes and expanding its sales capacity to address a recovery that management indicated is progressing more gradually than initially forecast.

• Zafrir indicated that the company is expanding its focus beyond traditional network security to emphasize proactive threat prevention through agentic exposure validation.
• Zafrir noted that the company secured a significant eight-figure deal with a Fortune 200 energy company for network modernization and exposure management.
• Check Point is investing in “security for AI,” including a new AI Network Firewall designed to provide visibility and control over AI-specific traffic.
• The company expanded its sales force by dozens of new sellers in the last three months and plans further hiring through the first quarter of 2027.
• The company launched a new marketing campaign, “It’s Time AI Had a Checkpoint,” targeting enterprise decision-makers as AI adoption increases.
• Zafrir stated the company is training its own small language foundational model based on the acquisition of Lakera to enhance its AI security capabilities.
• Management indicated that data sovereignty and the need for sovereign architectures are driving demand for private cloud and on-premise security deployments.

INDUSTRY GLOSSARY

• Agentic Security: Solutions that utilize autonomous agents to simulate real-world attacker behaviors to validate security postures and automate responses.
• ARR: Annual Recurring Revenue, a metric used to measure the value of subscription-based contracts on an annual basis.
• CTEM: Continuous Threat Exposure Management, a cybersecurity framework that focuses on the ongoing identification and mitigation of vulnerabilities.
• Neocloud: Specialized cloud providers focused on specific workloads, such as AI training or high-performance computing, distinct from traditional hyperscalers.
• PHP2Shell: A specific software vulnerability that allows attackers to execute commands on a server.
• RPO: Remaining Performance Obligation, representing the total future revenue under contract that has not yet been recognized.
• SASE: Secure Access Service Edge, a framework combining network security functions with wide-area networking capabilities.

Full Conference Call Transcript

Kip Meintzer: 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 the 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 mate

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.