Check Point Software Technologies Q1 Earnings Call Highlights

Key Points

• Check Point's subscription revenue remained a key strength, with total revenue of $668 million, subscription up 11% to $323 million, non-GAAP EPS of $2.50 (up 13% YoY) and adjusted free cash flow of $457 million.
• Management said short-term execution disruption from recent go-to-market changes mainly hurt firewall appliance sales, expecting the headwind to continue into Q2 but to improve in the second half as the sales organization stabilizes.
• Emerging products—email security, CTEM and SASE—posted strong momentum (over 40% ARR growth and 45% growth in calculated billings), and the company launched multiple AI security offerings while noting meaningful standalone AI revenue is likely only by 2027.

Check Point Software Technologies NASDAQ: CHKP reported first-quarter results that management characterized as solid overall, highlighted by growth in subscription revenue and profitability, while acknowledging weaker-than-expected firewall appliance product revenue tied to go-to-market execution changes.

Q1 results: subscription strength offsets weaker product revenue

CEO Nadav Zafrir said the company delivered “double-digit growth in non-GAAP earnings per share and adjusted free cash flow, with revenue growth at 5%.” He added that subscription revenue “remained a key strength,” driven by “strong demand across our emerging technologies,” which generated 45% growth in calculated billings led by email security, CTEM, and SASE. However, Zafrir said Check Point saw “a decrease in Appliance refresh projects that resulted in lower than expected product revenues.”

CFO Roei Golan provided additional detail, saying total revenue reached $668 million, “$2 million below the midpoint of our projection as a result of lower revenues from firewall appliances that impacted our product revenues.” Subscription revenue grew 11% year over year to $323 million and came in at the midpoint of guidance, he said.

Golan also reported adjusted free cash flow of $457 million, “$70 million above the midpoint of our projection,” and up 11% year over year. Non-GAAP EPS was $2.50, exceeding guidance and rising 13% year over year. Deferred revenue grew 8% to $2.06 billion, remaining performance obligation increased 7% to $2.592 billion, and calculated billings were $548 million, reflecting a 1% decline year over year, with current calculated billings up 2%.

Go-to-market changes created near-term disruption, mainly in appliances

Management repeatedly attributed the product revenue shortfall to disruption from go-to-market changes rather than broader macroeconomic weakness. In response to a question from J.P. Morgan’s Brian Essex, Zafrir said, “I don't think the macro is the issue here,” adding that changes included “optimizing accounts to account managers,” “doubling down on our marketing,” and “doubling down on our channels.” He said the transition “did create a short-term headwind in terms of execution” as “many of our people changed their role or changed accounts,” and he described the issue as “the main driver” of the firewall business headwind.

Golan added that the disruption was most pronounced in new business, particularly among large enterprise accounts. He said many account managers covering large enterprise were reassigned and that the resulting disruption “had more disruption that we expected on the business, mainly on the new business.” He noted that firewall refresh and new-business sales cycles tend to be longer than those for CTEM and email security, which contributed to the timing impact. When asked by TD Cowen’s Shaul Eyal about whether softness was tied to a particular appliance tier, Golan said it was “across” tiers but “more on the large one,” because large enterprises “are mainly consuming the large boxes.”

Golan said the company expects the disruption to continue affecting appliance revenue into the second quarter, but he pointed to improving funnel trends. “Based on the funnel that we see, we expect to see an improvement in the second half of the year,” he said, adding that renewals remained stable and firewall subscription ARR continued to grow year over year.

Emerging products: email, CTEM, SASE, and early AI security funnel

Both executives emphasized momentum in emerging product areas. Golan said that in Q1, email security, SASE, and ERM together “exceeded 40% growth in ARR and over 45% in calculated billings year-over-year.” While he noted these revenue contributions are “still not significant for the total business,” he said Check Point sees “a significant growing funnel for our AI security offering,” alongside email security, CTEM, and SASE as drivers of subscription revenue growth in the coming quarters.

In response to a Barclays question on scale, Golan said the company is “not disclosing it,” but described email security, CTEM, and SASE collectively as “slightly below 30% of our ARR for subscription.”

Zafrir also said the go-to-market adjustments are intended to support the multi-pillar approach. “We want our account managers to be able not just to do firewall, but also the emerging business,” he said, adding that the company also needs to work through channels to introduce newer products. On SASE, Zafrir told UBS’s Roger Boyd that the business “has become a fundamental part of the hybrid mesh network security,” and he said it was not meaningfully impacted by the go-to-market disruption, which he said “primarily affected our core, our firewall.”

AI security strategy: new launches and partnerships, monetization expected later

Zafrir framed artificial intelligence as a “watershed moment for the security industry,” arguing that AI is lowering the barrier to sophisticated cyberattacks and enabling what he called “AI attack factories.” He said Check Point’s strategy is organized around four pillars: “the security for AI, the network through our hybrid mesh, CTEM, and workspace security.”

During the quarter, Zafrir said the company introduced multiple offerings aimed at enterprise AI security, including:

• AI Defense Plane, designed to secure employee AI usage, applications, and agents
• AI Factory Security Blueprint, integrated with NVIDIA GPU servers to protect AI infrastructure
• Google Cloud partnership integrating AI Defense Plane with the Gemini Enterprise Agent Platform for runtime protection at scale
• AI-driven exposure management focused on intelligence, risk prioritization, and “safe remediation”
• Secure AI advisory service to help enterprises govern and deploy AI responsibly

On monetization timing, Zafrir told William Blair’s Jonathan Ho that AI security is in the “early innings,” and that as a standalone business, becoming “a substantial part of our revenue… will only happen in 2027.” He said the AI effort is also expected to contribute through other pillars, including workspace bundles, infrastructure projects, and services such as AI red teaming.

Guidance: Q2 outlook and full-year revenue lowered; subscription and EPS ranges maintained

For the second quarter, Golan guided to total revenue of $660 million to $690 million, subscription revenue of $328 million to $338 million, and non-GAAP EPS of $2.40 to $2.50, with GAAP EPS expected to be “around $0.70 less.” Adjusted free cash flow is expected to be $145 million to $175 million, with Golan noting some payment timing shifts between quarters.

For the full year, Golan said the company updated total revenue guidance to a range of $2.770 billion to $2.850 billion, reflecting “expected lower revenues from firewall appliances mainly in the second quarter.” He said Check Point did not change its subscription revenue outlook, non-GAAP EPS guidance of $10.05 to $10.85, or adjusted free cash flow guidance of $1.15 billion to $1.25 billion.

On capital allocation and the balance sheet, Golan said cash and marketable securities totaled $4.4 billion at quarter-end. He also said Check Point completed the acquisition of “Cyata and Cyclops” for approximately $92 million of net cash consideration and repurchased 1.9 million shares for $325 million at an average price of $170 per share.

Looking ahead, management maintained that the appliance revenue pressure is tied to execution and is expected to improve as the sales organization settles into the new structure. “We are now more confident with what we see for the second half of the year,” Golan said, pointing to improved funnel creation and large deals progressing, while reiterating that renewals have remained stable.

About Check Point Software Technologies NASDAQ: CHKP

Check Point Software Technologies Ltd. is an Israeli-founded cybersecurity company that develops, markets and supports a broad portfolio of network, cloud and endpoint security products. Founded in 1993, the company was an early pioneer of stateful inspection firewall technology and later developed a modular “software blade” approach that allowed customers to combine protection capabilities. Check Point's product set spans physical and virtual security appliances, software and cloud-native services designed to prevent cyberattacks, protect data and simplify security management for enterprises and service providers.

Key product families include Quantum Security Gateways (on-premises and hybrid appliances), CloudGuard (cloud security posture and workload protection), Harmony (endpoint, remote access and unified endpoint security), and SandBlast (advanced threat prevention and sandboxing).

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