Check Point Software Technologies Ltd. Q3 FY2025 earnings call

• Strong Q3 performance with double-digit growth in calculated billings. • Strategy anchored in 4 principles: securing evolving connectivity fabric, prevention first approach, open platform philosophy, and securing AI. • Acquired Lakera, a Zurich-based AI native security leader, to build a full stack AI-powered security platform. • Achieved Fed rep authorization for the Infinity platform for government. • New go-to-market leadership: Rachel Roberts as President of Americas Sales, Avi Rembaum as President of Technical Sales, Brett Theiss as Chief Marketing Officer. • Revenue grew 7%, non-GAAP EPS reached $3.94 per diluted share, exceeding guidance.

Revenues grew by 7% to $678 million, exceeding the midpoint by $6 million. Deferred revenues grew by 8% to $1.887 billion. Calculated billing totaled $672 million, a robust 20% year-over-year growth, driven by strong demand across all portfolios and geographies. Services calculated billings grew 21% compared to 7% last year. Emerging technologies (ARR from Harmony SASE, Harmony e-mail, etc.) grew organically over 40% year-over-year. Global revenue distribution: Americas 42%, EMEA 45%, APAC 13%.

• Q4 revenue range: $724 million to $764 million, midpoint 6% growth. Non-GAAP EPS range: $2.70 to $2.80. • Annual revenue guidance midpoint revised up by $15 million, range $2.705 to $2.745, midpoint 2.725, 6% growth YOY. Non-GAAP EPS expected 11.22-11.32, GAAP EPS ~2.29. • FX to impact 2026 expenses by $50 million to $60 million. • Lakera acquisition adds ~0.5 point margin headwind in Q4.

• Weak dollar negatively impacts P&L, with ~1 point margin headwind in Q4. • Lakera acquisition adds ~0.04 to 0.05 point margin headwind in Q4. • Uncertainty in budget flush for Q4, which could affect demand.

Q: Reflect on Harmony e-mail competitive dynamics and potential growth in CY '26 vs '25?

A: Nadav Zafrir said no deceleration expected, believing Harmony e-mail has best product in market with AI capability, expecting acceleration. Roei Golan said will talk more about 2026 gross margins in February when announcing Q4 numbers.

Q: On AI security component, how much M&A needed?

A: Nadav Zafrir said some M&A will be inorganic, looking at acquisition targets, with M&A team actively seeking companies, nothing imminent but more to come.

Q: Open platform approach progress?

A: Nadav Zafrir said Veriti integration is example, with over 100 deployments, unified management allows managing other firewalls, seeing early success with open platform.

Q: Spending environment in 3Q vs first half, budget flush expectations?

A: Roei Golan said Q3 was better execution than first half, Q4 has large refresh deals, early to say on budget flush, guidance doesn't assume significant budget flush.

Q: Impact of sales incentives change on billings?

A: Roei Golan said ARR factor in comp plan improved discounts on renewals, saw positive effects, Nadav Zafrir said Q3 performance mostly due to execution, change in comp plan is work in progress.

Q: Federal government shutdown impact and federal investments?

A: Nadav Zafrir said current federal business is small, but will continue investing in federal side as big market with complex environments.

Q: Hardware refresh impact on 2026 cohort?

A: Roei Golan said refresh cycle is big part of business, current opportunities in refresh of existing installed base, see cross-selling of other products, potential for next 12 months.

Q: Product strategy, partnership with Wiz, portfolio rationalization?

A: Nadav Zafrir said partnering with Wiz on CNAPP, partnering on micro segmentation, identity, etc., on full stack AI, GenAI Protect is part of portfolio, growth expected in 2027.

Q: Subscription licensing model evolution towards usage-based?

A: Nadav Zafrir said speaking about usage-based models, especially for SASE, but not yet moved to consumption base, but considering it for areas like war space.