Full Transcript: Check Point Software Q2 2026 Earnings Call

On Thursday, Check Point Software (NASDAQ: CHKP ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

The full earnings call is available at Summary Check Point Software reported Q2 revenues of $674 million, with a 1% growth driven by a 12% increase in subscription revenues, though product revenues declined by 14%. The company is expanding its sales capacity by hiring hundreds of additional salespeople, reflecting confidence in long-term growth opportunities. Check Point introduced the AI Network Firewall as part of its AI Defense Plane, targeting AI-based attacks and aligning with the company's strategy to secure AI transformations. Q3 is expected to be the trough, with a stronger Q4 anticipated, supported by a growing sales pipeline and deferred deals from Q3.

Despite current challenges, the company maintains its 2026 guidance and sees significant improvement in the sales pipeline for Q4. 55 per diluted share, an 8% year-over-year increase. The company announced a $2 billion expansion of its share repurchase program. Management emphasized the importance of AI security, discussing the democratization of sophisticated cyberattacks and the need for proactive, prevention-first strategies.

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 Software'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 are made only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements except where required by law. 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. com.

Now I'd like to turn the call over to Nadav Zafrir. Nadav Zafrir, Chief Executive Officer Thank you all for joining us today. Our Q2 results were in line with our expectations, and we continue to make tangible progress strengthening our go-to-market organization. We're encouraged by improving execution and a growing sales pipeline.

We expect Q3 to mark the trough, followed by a stronger Q4 that supports second-half performance, and we are maintaining our 2026 guidance. As a next step, we are significantly expanding our sales capacity by hiring hundreds of additional salespeople. We've launched a focused hiring campaign, reflecting our confidence in the long-term growth opportunity. Over the past few weeks I met with more than 1,000 security leaders at Check Point Engage events in Chicago, Paris, and Singapore.

Their message is consistent and unmistakable: our industry is at an inflection point. AI, and particularly the latest frontier models, is driving a collapse in scarcity of adversarial capabilities. This is democratizing and industrializing sophisticated cyberattacks and challenging many of the assumptions that have guided cybersecurity for decades. We cannot stop AI adoption, and we must prepare to defend against sophisticated attacks at unprecedented scale.

This is the time for decisive action at Check Point. Securing our customers' AI transformation means executing the fundamentals better than ever while building the next generation of cybersecurity—and we must do it in parallel. The fundamentals start with prevention powered by our ThreatCloud AI intelligence, more than 100 AI agents, and telemetry from millions of enforcement points. Prevention-first security is in our DNA.

But fundamentals alone are no longer enough. We must build security that operates at machine speed, learns continuously, and evolves as AI evolves. Today I'm excited to introduce the industry's first AI Network Firewall. We believe AI has created a new class of network traffic, and it deserves a new class of firewall.

The AI Network Firewall gives customers visibility, control, and security for prompts, agent actions, and model interactions. The AI Network Firewall is a part of our AI Defense Plane. It's a full-stack AI security platform, continuously trained on our threat research and intelligence, and built to protect applications, users, and agents from AI-based attacks. With the release of the AI Network Firewall, we're embedding the AI Defense Plane across networks—private and public cloud—and SASE, giving network security teams control they can put in place today.

Beyond AI, demand across our Emerging Technologies portfolio remains healthy. Subscription revenue grew 12% year over year in Q2, and we continue to integrate the capabilities from our recent acquisitions across the platform, strengthening our competitive position and expanding the value we deliver to customers. We're building momentum by expanding our go-to-market capacity and strengthening our product portfolio. The launch of our AI Network Firewall, combined with our AI Defense Plane, reinforces Check Point Software's mission of securing our customers' AI transformation.

We remain focused on disciplined execution, accelerating growth, and delivering long-term value for our customers, our partners, employees, and shareholders. With that, I'll turn the call over to Roei to review the financials. Roei Golan, Chief Financial Officer Thank you, Nadav. One moment.

Great. So thank you, Nadav, and thank you everyone for joining the call. As Nadav mentioned, the second quarter was as planned, with 1% growth in revenues, driven by 12% growth in subscription revenues. Our total revenues reached $674 million and were $1 million below the midpoint of our projection as a result of lower product revenues and lower demand for firewall appliances.

When we're looking at our subscription revenues, they reached $333 million and were at the midpoint of our projections. Our adjusted free cash flow reached $161 million, $1 million above the midpoint of our projection, and represented 24% of our revenues. 55 per diluted share, exceeded our guidance, and grew by 8% year over year. As mentioned, we had 1% growth in revenues, while our deferred revenues grew by 7% to $2,025,000,000.

Our calculated billings totaled $639 million and were similar to last year, while our current calculated billings grew by 2% to $641 million. 55 billion. 6 billion, representing a 4% increase compared to last year. As we indicated in the call back in May, we expected lower product revenues, mainly as a result of the disruption affected by the changes we made in the go-to-market organization.

Our product revenues declined by 14% in the second quarter. As we are looking at the second half of the year, we do expect to see a similar trend in the third quarter with our firewall appliances, while we do see significant improvement in our pipeline and the qualified opportunities in Q4, and we do expect to see a return to growth in product revenues in the fourth quarter. When we are looking at the subscription revenues, they continued to accelerate to 12% growth this quarter, driven by the strong demand for Emerging Technologies, as email security and CTEM are continuing to have strong demand.

When we are looking at the third quarter, we do expect slight deceleration in our subscription revenues as a result of large appliance deals that were pushed from Q3 to Q4 and have an impact on our subscription line item. As indicated, our total subscription business continues to be strong as we continue to experience strong demand for our Emerging product portfolio, which remains the primary driver for revenue growth in the second quarter. If we are looking at email security, CTEM, and AI security combined, they exceeded 40% growth in ARR year over year, while the calculated billings from these products grew by 35% year over year.

Looking at our revenues by geographies, our revenues from EMEA and Americas were 44% each for the second quarter, while the remaining 12% came from Asia Pacific—similar to what we had last year. Reviewing our P&L for this quarter: our gross profit increased from $585 million to $588 million, representing a gross margin of 87%. The slight decrease in gross margin was explained due to higher memory costs. Our operating expenses, excluding R&D grants, increased by 13%, while on a constant currency basis our operating expenses increased by 11%.

Our Q2 results include approximately $28 million of benefit from R&D grants to be received from the Israeli government. Looking at our operating expenses net of R&D grants, the expenses were $328 million and increased by 5% year over year. The net increase is primarily the result of increases in our workforce, resulting in continued investment in AI security and in our sales and marketing. Looking at operating income, it continues to be strong at $260 million, or a 39% operating margin.

Our non-GAAP net income increased by 1% and reached $264 million, while our GAAP net income reached $194 million and decreased by 4% year over year. 87, a 2% increase year over year. 5 million shares. 2 billion—cash, marketable securities, and deposits.

Our adjusted free cash flow reached $161 million, as planned and in line with our projections. 5 million shares for $325 million this quarter at an average price of $131 per share. During the quarter, the company also announced a $2 billion expansion of the company's share repurchase program, so we're going to continue to do this buyback. To summarize: on one hand, definitely continued strong demand for Emerging Technology, led by email security and CTEM that's becoming more and more significant to our total business.

On the other hand, we did see, as expected, lower demand for firewall appliances this quarter. As I mentioned, we do expect a similar trend to continue also in Q3, but we see significant improvement in the appliances business in Q4, and we do expect to be back to growth in Q4 in product revenues. We're going to move to the guidance—the Business Outlook. First, regarding the full year, we're not touching the full-year guidance.

We are maintaining the same guidance as we gave you back in May in the last call. 70 less; and our adjusted free cash flow is expected to be between $235 million to $265 million. It is important to note, as I mentioned earlier, that we do see significant deferred opportunities and deals that are expected to be pushed from Q3 to Q4, and therefore they have a negative impact mainly on the appliances revenues. If I'm comparing what we've seen in the pipeline for Q4 in May and now, we see an even stronger pipeline for Q4.

It's definitely a more back-end-loaded deal flow. It's also a reflection of the go-to-market disruption that we've done. But we do see positive signs—first, of course, with the Emerging product that continues to have strong demand, and also with the appliances and the firewall. We see positive signs that we are seeing the end in Q3 in terms of the decline and going back to growth in Q4.

Thank you. And we are moving to Q&A. OPERATOR The floor is yours. We can't hear you.

Might be good. Probably most people appreciate that. As always, please keep your question to one question for each time around. Today, to begin we're going to have Joseph Gallo from Jefferies, followed by Patrick Colville from Scotiabank.

Joseph Gallo, Analyst at Jefferies Hey guys, thanks for the question. It was great to hear about the investment in sales capacity. Can you just remind us what the normal cadence of sales ramp to productivity is? I'm just trying to understand better the confidence in a 4Q rebound when hiring today would be more indicative of 2027's benefit.

Nadav Zafrir, Chief Executive Officer Yeah, thanks, Joe. The latter. Roei Golan, Chief Financial Officer So the impact to sales is expected in Q1 and Q2 of 20. So the guidance and what we're expecting for Q3 and Q4 does not take into consideration the ramp-up.

The ramp-up obviously has its momentum, but it's going to take some time. However, it is very significant for us. Hiring hundreds of new frontline sellers is a major move. I don't know if you've seen it.

I hope you have. We've started an aggressive campaign. So it's not just the number, it's also the people that we're hiring and the invigorating of our sales force across the globe. It's really meaningful and it's a company-wide effort.

So the guidance that we gave today does not take that into consideration. That is sort of preparing for a stronger 2027. OPERATOR Thank you. All right, next up, Patrick Colville, followed by John DiFucci.

Patrick Colville, Analyst Thank you, Kip. I guess I wanted to ask about kind of mythos preparedness and advanced AI preparedness. There's a lot of excitement in the market around what advanced AI means for cybersecurity. You kind of touched on this in your prepared remarks a little bit, but just vis-à-vis Check Point Software specifically, are you seeing changes in buying patterns as a result of enterprises kind of concerned about the risks brought on by advanced AI models?

And then I guess specifically, like, where is that hitting the financial model? Is it the firewall layer for Check Point Software? Is it the non-attached subs, and any changes to sales cycles? Nadav Zafrir, Chief Executive Officer Yeah, great question.

So if you zoom out, really the phenomena that we're seeing is very interesting when you think about it from the attacker's perspective. You want to think about it from an ROI perspective. So the way we see it is the attackers now have access to resources that they didn't have before. That's what we call the collapse of scarcity.

They literally have access to what used to be very scarce resources, and that's sort of what leads into the democratization and industrialization. So we're going to see more sophisticated attacks at a much higher cadence. That is happening already, but we think it's going to accelerate within the next couple of years. When you think about the security paradigm or the assumptions that we have around security, we're seeing signs that some of these assumptions and the current paradigm do not necessarily withstand the change that's coming from the attackers.

That leads us, in a Kuhnian way, to really a world between two paradigms. That's what I mean when I say, number one, going back to fundamentals — this is the proactive, prevention-first. That's our DNA, that's where we shine, that's what our customers expect from us. And we have to do everything that we have learned just much better, much faster, much more diligently.

At the same time, in parallel, we have to look into the future. We have to imagine different possible futures, give them different probabilities, and start simulating how the attackers are going to change. For example, I believe — we believe — that detection and response are going to be much less relevant because we're going to have to go to automatic remediation at machine speed. And so we're making massive investments.

Last year we spoke about hiring hundreds of new individuals to build the next generation. Today we announced the launch of the first AI network firewall integrated into our AI defense plane. And there's a whole strategy around that. Now to your question about the buyer's perspective, I think that they realize that, on the one hand, back to basics, and at the same time they're looking to what's next.

So I'll give you a couple of examples. I think the continuous threat exposure management, based on three acquisitions that we made that is growing — last quarter we spoke about that — growing at almost 100%, is a part of that. Why? Because it gives you the ability to understand what's coming at you, but also creating a real pathway to understand what the real threats mean and automatically remediating that in an open-platform approach.

And that's why CTEM, for example, is having such success. At the same time, the reason I'm so excited about the AI network firewall is that it's also happening at the network level. And so customers that already have our firewall can now also take advantage of the network to understand what their employees are doing, what agents are running, and control that. So I really think, to summarize, it's sort of a tale of two cities.

On the one hand, everything that we've learned, we must do better than we've ever done before. At the same time, we're creating the new technology, the new products, the new.