CHECK POINT SOFTWARE TECHNOLOGIES LTD

Check Point Software Technologies Ltd. (CHKP) operates in the information and network security solutions industry, offering a multi-level security architecture that defends enterprises' cloud, network, mobile devices, endpoints, and IoT solutions ¹. The company's core business model revolves around developing, marketing, and supporting a wide range of IT security products and services, primarily through a two-tier distribution model involving distributors, resellers, OEMs, system integrators, and Managed Security Service Providers (MSSPs) ². Revenue is generated from sales of products and licenses, security subscriptions, and software updates and maintenance ³. A significant portion of the company's sales, approximately 57% ⁴ in 2025, 56% ⁵ in 2024, and 56% ⁶ in 2023, is derived from its ten largest channel partners, with the three largest distributors accounting for approximately 39% ⁷, 39% ⁸, and 40% ⁹ of sales in those respective years.

The company's product and service lines are structured around four security pillars: Hybrid Mesh Network Security, Workspace Security, AI Security, and Threat Exposure Management ¹⁰. Hybrid Mesh Network Security provides a unified security and connectivity foundation across data centers, hybrid cloud, internet and perimeter gateways, and branch locations, featuring products like Check Point Firewall (Data Center, Perimeter, Branch), Check Point Maestro Hyperscale Firewall, Firewall Software R82.10, and Check Point Spark Firewall for SMBs ¹¹. Workspace Security protects devices, browsers, email, SaaS apps, and remote access with offerings such as Check Point Email Security, Check Point Endpoint Security, Check Point Mobile Security, Check Point Browser Security, and Check Point XDR ¹². AI Security focuses on protecting the full AI stack from employee AI usage to enterprise applications and agents, models, data, and infrastructure, with solutions like Check Point AI Workforce Security, Check Point AI Agent Security, and Check Point AI Red Teaming ¹³. Threat Exposure Management, powered by recent acquisitions, delivers real-time situational awareness by unifying threat intelligence, dark web insights, attack surface visibility, exploitability context, and automated remediation through Check Point Threat Intelligence, Check Point Vulnerability Detection & Prioritization, and Check Point Safe Remediation ¹⁴. Check Point also provides comprehensive technical services including Managed Services, Managed Detection and Response (MDR/MPR), Incident Response Services, Security Consulting Services, Professional Services, Training Services, and Flex Credits ¹⁵.

For the fiscal year ended December 31, 2025, Check Point reported total revenues of $2,725.4 million ¹⁶, an increase from $2,565.0 million ¹⁷ in 2024. Gross profit is not explicitly stated, but total cost of revenues was $361.8 million ¹⁸ in 2025, compared to $319.3 million ¹⁹ in 2024. Operating income for 2025 was $831.1 million ²⁰, down from $876.0 million ²¹ in 2024, resulting in an operating margin of 30% ²² in 2025, a decrease from 34% ²³ in 2024. Net income increased to $1,056.9 million ²⁴ in 2025 from $845.7 million ²⁵ in 2024. Basic earnings per ordinary share were $9.85 ²⁶ in 2025, up from $7.65 ²⁷ in 2024, and diluted earnings per ordinary share were $9.62 ²⁸ in 2025, compared to $7.46 ²⁹ in 2024. The company generated net cash from operations of $1,199.4 million ³⁰ in 2025, an increase from $1,052.4 million ³¹ in 2024. As of December 31, 2025, cash and cash equivalents were $1,800.0 million ³², short-term bank deposits were $525.7 million ³³, and marketable securities were $689.2 million ³⁴ (current) and $1,326.8 million ³⁵ (long-term), totaling $4,341.7 million ³⁶ in cash, cash equivalents, short-term bank deposits, and marketable securities. Total liabilities were $4,924.3 million ³⁷, including $1,972.1 million ³⁸ in convertible senior notes, net.

Year-over-year, total revenues increased by 6% ³⁹ in 2025 compared to 2024. Products and licenses revenue grew from $507.9 million ⁴⁰ in 2024 to $548.2 million ⁴¹ in 2025. Security subscriptions revenue saw a significant increase of $115 million ⁴², or 10% ⁴³, rising from $1,104.2 million ⁴⁴ in 2024 to $1,219.0 million ⁴⁵ in 2025. Software updates and maintenance revenues increased by $5 million ⁴⁶, or 1% ⁴⁷, from $952.9 million ⁴⁸ in 2024 to $958.2 million ⁴⁹ in 2025. The operating margin decreased from 34% ⁵⁰ in 2024 to 30% ⁵¹ in 2025, primarily due to increased workforce-related expenses, cloud expenses, stock-based compensation expenses, and amortization of intangibles from acquisitions ⁵². Research and development expenses increased by $62 million ⁵³ in 2025, primarily due to higher compensation and related personnel expenses, cloud infrastructure expenses, and a $7 million ⁵⁴ expense related to currency exchange and hedging. Selling and marketing expenses increased by $84 million ⁵⁵ in 2025, mainly due to significant investments in partners and marketing programs.

During the reported period, Check Point made several significant operational developments and acquisitions. In February 2026, the company acquired Cyclops Security Ltd., a leader in Cyber Asset Attack Surface Management (CAASM), and Cyata Security Ltd., specializing in autonomous AI agents ⁵⁶. Also in February 2026, the talent of Rotate Ltd. was acquired to boost Workspace solutions within the MSP sector ⁵⁷. In October 2025, Lakera AI AG, an AI-native security platform for Agentic AI applications, was acquired for approximately $201.8 million ⁵⁸. In June 2025, Veriti Security Ltd., a provider of a fully automated, multi-vendor preemptive threat exposure and mitigation platform, was acquired for approximately $92.5 million ⁵⁹. A strategic partnership with Wiz Ltd. was formed in February 2025 to address hybrid cloud security challenges ⁶⁰. In September 2024, Cyberint Technologies Ltd., specializing in external risk management solutions, was acquired for approximately $188.6 million ⁶¹. Earlier, in October 2023, rmsource Inc., a managed security, cloud, and IT services provider, was acquired ⁶². In September 2023, Perimeter 81 Ltd., a Zero Trust Network Access (ZTNA) and Secure Service Edge (SSE) software provider, was acquired for approximately $503.1 million ⁶³, and Atmosec Ltd., specializing in malicious SaaS application discovery and disconnection, was also acquired ⁶⁴. The company also issued and sold $2.0 billion ⁶⁵ aggregate principal amount of 0.00% Convertible Senior Notes due 2030 in December 2025 ⁶⁶. Additionally, the Board of Directors authorized an expansion of the share repurchase program by an additional $2 billion ⁶⁷ on July 11, 2024, and an additional $100 million ⁶⁸ in connection with the convertible notes offering in December 2025. The company repurchased ordinary shares totaling $1,400 million ⁶⁹ in 2025 and $1,300 million ⁷⁰ in 2024.

Management explicitly states that the implementation of the Israeli Pillar Two Law is expected to increase reported tax expenses beginning in 2026 ⁷¹. However, based on the current Proposed R&D Incentive Legislation and its associated tax credit, and assuming enactment effective January 1, 2026, the net cash impact is not expected to be material ⁷². The ultimate impact will depend on the final form of the proposed R&D Incentive Legislation, if and when enacted, and the amount of tax credits approved thereunder ⁷³.

The company's future growth is heavily dependent on its ability to effectively develop and sell new and acquired products, as well as add new features to existing products ⁷⁴. The company is constantly working to get its solutions ready to enable a secure AI transformation, delivering protection across infrastructure to guard against AI-driven attacks ⁷⁵. This includes securing new AI-driven attack surfaces, deeply integrating AI into solutions for AI-first security teams, and applying a prevention-first approach ⁷⁶. The AI Security pillar, combined with a prevention-first approach, protects the full AI stack from employee AI usage to enterprise applications and agents, and the models, data, and infrastructure behind them ⁷⁷. Specific growth areas include Check Point AI Workforce Security for instant visibility into sanctioned and shadow AI usage, Check Point AI Agent Security to protect enterprise copilots and chatbots from prompt injections and jailbreaks, and Check Point AI Red Teaming for continuous red-teaming and model robustness testing ⁷⁸.

In terms of operational outlook, the company expects to experience future fluctuations or declines in operating margins from historical levels due to factors such as increased workforce-related expenses, cloud expenses, stock-based compensation expenses, and amortization of intangibles expenses related to acquisitions ⁷⁹. The company is also making significant investments in partners and marketing programs, which contributed to an $84 million ⁸⁰ increase in selling and marketing costs in 2025 ⁸¹. Research and development expenses are also increasing, with a $62 million ⁸² rise in 2025 primarily due to higher compensation and related personnel expenses, cloud infrastructure expenses, and currency exchange and hedging costs ⁸³.

Planned capital allocation includes significant investment associated with developing and building the commercial portion of a newly acquired land lot in Tel Aviv, Israel, with construction expected to be completed in 2032 ⁸⁴. The company also continues its share repurchase program, with the Board of Directors authorized to repurchase up to $325 million ⁸⁵ a quarter of ordinary shares, and an additional $100 million ⁸⁶ authorized in connection with the convertible notes offering in December 2025. The company does not currently intend to distribute any amounts as dividends in the near-term ⁸⁷.

Management explicitly flagged several structural headwinds and execution risks. The market for information and network security solutions may not continue to grow, and prolonged economic uncertainties or downturns, globally or in certain regions or industries, could materially adversely affect the business by causing customers to reduce or postpone technology spending ⁸⁸. Intense competition, including from artificial intelligence (AI) solutions and companies offering generative AI services with cybersecurity capabilities, is expected to increase, potentially leading to price reductions, reduced gross margins, and loss of market share ⁸⁹. The company is dependent on a limited number of product families, and its future growth relies heavily on its ability to develop and sell new and acquired products and add features to existing ones ⁹⁰. Competition for highly skilled personnel is intense, particularly in AI and machine learning, and failure to attract or retain such personnel could adversely affect the business ⁹¹. Issues in the development and deployment of AI, including flaws in algorithms, biased datasets, and an uncertain legal and regulatory environment, may result in reputational harm and legal liability ⁹². The company is also dependent on a small number of distributors, with the ten largest accounting for approximately 57% ⁹³ of sales in 2025, and the three largest for approximately 39% ⁹⁴ of sales in 2025 ⁹⁵. Reliance on limited sources for key components and finished products, especially foreign suppliers, and increasing dependence on contract manufacturers for hardware products, pose supply chain risks ⁹⁶. Failures of third-party technology, servers, and cloud service providers could also adversely affect the business ⁹⁷.

Geopolitical and macro factors identified as constraints include the ongoing war and hostilities in Israel, where the principal executive offices and R&D facilities are located, which may adversely affect operations ⁹⁸. The war between Israel, the U.S., and Iran, and the ongoing hostilities between Israel and Hezbollah, Hamas, and Yemen, along with the Russia-Ukraine armed conflict, could cause disruptions to business, delay or cancel customer orders, and impact R&D efforts ⁹⁹. The activities of terrorist groups in Yemen have previously limited marine shipments to Israel through the Red Sea ¹⁰⁰. Changes in government trade policies and international trade disputes, such as tariffs and other protectionist measures, could adversely affect the business ¹⁰¹. Currency fluctuations, particularly between the U.S. dollar, Israeli Shekel, and Euro, may affect results of operations and financial condition ¹⁰². The company is also subject to various lawsuits and tax disputes, including a settlement with the Israeli Tax Authority for NIS 223.2 million (approximately $66 million) ¹⁰³ for the 2016-2020 tax years ¹⁰⁴. New and changing corporate governance and public disclosure requirements, including those related to AI, add compliance costs and uncertainty ¹⁰⁵.

The company faces material risks from geopolitical instability, including the ongoing war between Israel, the U.S., and Iran, and hostilities between Israel and Hezbollah, Hamas, and Yemen, which could disrupt operations, delay customer orders, and impact research and development efforts ¹⁰⁶. Economic uncertainties, such as rising interest rates, inflation, and potential recessions, may lead to reduced customer spending on cybersecurity solutions ¹⁰⁷. Intense competition in the information and network security market, including from AI solutions and new market entrants, could result in price reductions, reduced gross margins, and loss of market share ¹⁰⁸. Operational risks include dependence on a limited number of product families, a small number of distributors (the ten largest accounted for approximately 57% of sales in 2025 ¹⁰⁹), and limited sources for key components and hardware manufacturing ¹¹⁰. Product defects or failures to protect against sophisticated cyberattacks could harm the company's reputation and business ¹¹¹. The development and deployment of AI technologies introduce risks of flaws, biased data, reputational harm, and legal liability under evolving regulatory frameworks like the EU AI Act ¹¹². The company is also exposed to foreign currency fluctuations, with approximately 42% ¹¹³ of expenses incurred in foreign currencies in 2025, primarily Israeli Shekels and Euros ¹¹⁴, and a 10% weakening of the dollar relative to these currencies could increase operating expenses by $79.5 million ¹¹⁵ for the year ended December 31, 2025 ¹¹⁶. Legal and regulatory risks include ongoing tax disputes, such as the settlement with the Israeli Tax Authority for NIS 223.2 million (approximately $66 million) ¹¹⁷ for the 2016-2020 tax years ¹¹⁸, and compliance with evolving data privacy laws like GDPR, CCPA, and PIPL, which could lead to sanctions or damages ¹¹⁹.

Management's message to shareholders emphasizes the company's mission to secure the digital world for everyone, everywhere, with a strong focus on enabling a secure AI transformation. They highlight the continuous effort to update security solutions against evolving threats, secure new AI-driven attack surfaces, and deeply integrate AI into solutions for AI-first security teams, all underpinned by a comprehensive prevention-first approach ¹²⁰. The company's strategy is built on four security pillars: Hybrid Mesh Network Security, Workspace Security, AI Security, and Threat Exposure Management, which together provide a unified platform for customers' AI journeys ¹²¹. Management explicitly stated that the implementation of the Israeli Pillar Two Law is expected to increase reported tax expenses beginning in 2026 ¹²², but the net cash impact is not expected to be material ¹²³ due to the Proposed R&D Incentive Legislation. Key strategic priorities include continued investment in research and development, as evidenced by the $62 million ¹²⁴ increase in R&D expenses in 2025 ¹²⁵, and significant investments in partners and marketing programs, which led to an $84 million ¹²⁶ increase in selling and marketing costs in 2025 ¹²⁷. The company also continues to pursue strategic acquisitions, such as Lakera AI AG for approximately $201.8 million ¹²⁸ and Veriti Security Ltd. for approximately $92.5 million ¹²⁹ in 2025, and Cyclops Security Ltd. and Cyata Security Ltd. in February 2026 ¹³⁰, to expand its product portfolio and capabilities. Furthermore, management is committed to returning capital to shareholders through its share repurchase program, with the Board authorized to repurchase up to $325 million ¹³¹ per quarter and an additional $100 million ¹³² related to the convertible notes offering ¹³³.