Check Point Software Technologies Ltd Q1 FY2026 Earnings Call

Greetings, and welcome to Check Point Software's 2026 First Quarter Financial Results Video Conference. I'm Kip Meintzer, Global Head of Investor Relations. And joining me today are Chief Executive Officer, Nadav Zafrir; and our Chief Financial Officer, Roei Golan. Before we begin, I'd like to remind everyone 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 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 made speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. 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. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at kip@checkpoint.com. Now I'd like to turn the call over to Nadav.

Thank you, Kip. And thank you all for joining us. So I'm going to begin with the key operating dynamics of the quarter and obviously talk a little bit about how we're advancing our strategy to drive sustainable long-term growth. So to begin, in our first quarter, we delivered double-digit growth in non-GAAP earnings per share and adjusted free cash flow with revenue growth at 5%. Subscription revenue remained a key strength, driven by strong demand across our emerging technologies, which generated 45% growth in calculated billings led by e-mail security, CTEM and SASE. At the same time, we did see a decrease in some research projects that resulted in lower-than-expected product revenues. As we discussed in our last earnings call, during the second half of 2025, we conducted a comprehensive go-to-market assessment with the objective of accelerating both new logo acquisition and increasing wallet share in large enterprise accounts in order to enable the successful execution of a multi-pillar platform strategy. So based on this, we implemented changes to our go-to-market model to align with these goals. And the transition to the new model did create short-term disruption to the rhythm of our sales execution and primarily affects our appliances business. Now while we're confident that the changes made are setting us up for success in the mid and long term, we do see a short-term impact on our business that will negatively affect our 2026 revenue projections. We believe these headwinds are transitory and they reflect a deliberate reset to position our business for improved execution and scalability. We're already seeing that the current pipeline trends and ongoing customer engagements and our plans to further invest in our firewall business make us optimistic about the future growth trajectory. Beyond that, our strategy continues to be anchored around our four-pillar approach, which we believe is well aligned with the evolving security requirements of the enterprise, particularly as AI adoption expands the threat landscape. And in support of our go-to-market execution, we're strengthening our leadership team with four key appointments. So first, Sherif Seddik has been named Chief Revenue Officer and will lead our go-to-market organization. Sherif has successfully led our international sales business over the past few years. He brings more than three decades of global sales leadership experience, and he'll be replacing Itai Greenberg. I want to take this opportunity to thank Itai for his continued support during my first year and for his leadership in the go-to-market changes. Beyond that, a leader from Cyberint, who has led our CTEM offering since the acquisition of Cyberint and has driven 96% year-over-year ARR growth, will join the leadership team. As organizations operate in this increasingly complex environment, exposure management is becoming mission-critical because it enables security teams to rapidly identify emerging threats and materially accelerate their remediation. I think we have an advantage here, and I'm happy to welcome this leader to the team. Alongside that, to lead our AI pillar, I'm happy to say that Adam Elin has joined as General Manager of AI security, and he'll also join the leadership team. Adam brings deep experience at the intersection of cybersecurity and large-scale enterprise security operations because in his previous roles he was a CISO at Fidelity and is also a founder of Blue Box Security. I think Adam adds a proven operator perspective, which is essential at this time, and we will focus on building our AI security platform to scale with speed, rigor and a strong commercial pipeline. And then lastly, Rafi Kretchmer is appointed VP of Global Marketing. He replaced Brett Theiss, and we wish Brett well in his future endeavors. Beyond that, AI is a watershed moment for the security industry. When you look at the emergence of these frontier AI models, including models in the GPT class, they're driving two structural shifts in cybersecurity. The first is that the barrier to sophisticated cyber attacks is literally collapsing because AI is democratizing capabilities that were once exclusive to nation-states and a very small set of elite criminal organizations, and this is exposing a far broader set of enterprises to material risk. Second, cyber attacks are undergoing structural industrialization. Agentic AI enables attackers to continuously scan global infrastructure, and they're generating a continuous flow of novel attack techniques. Manual operations are giving way to automated attack pipelines. This is what we call the Check Point AI attack factories. When you look at the convergence of these two forces, it creates a different threat environment: a larger attack population executing more sophisticated campaigns with greater speed and volume, and the time to exploit is shrinking dramatically. I believe this directly validates our ethos of prevention-first, in which we are second to none in the industry. At Check Point, we're not waiting for this threat environment to materialize. Our response is ready and active, structured across our four-pillar framework: security for the network through our hybrid mesh, CTEM and workspace security. During this quarter, we introduced solutions to secure enterprise AI transformation. For example, we launched the AI Defense Plan which is designed to secure enterprises across employee AI usage, applications and agents that both people and applications use. We also introduced the AI Factory Security Blueprint. It's integrated with NVIDIA GPU service pinning on the server itself and provides end-to-end protection for AI infrastructure, and we are very bullish about this. Most recently, we also announced our partnership with Google Cloud. We're integrating the AI Defense Plan with Google Cloud's enterprise agent platform and this can deliver real-time runtime protection at scale. We also delivered AI-driven exposure management, enabling customers to close the remediation gap through improved intelligence, better risk prioritization and safe remediation, which is critical to reduce time to remediate in organizations today. Finally, we launched a Secure AI Advisory Service to help enterprises and government deploy and ultimately scale AI with security and responsibility. To close my opening remarks, while we're experiencing near-term headwinds in our appliances business and adjusting our annual revenue guidance, we remain confident in our ability to gain market share in this expanding security market. The emerging technologies continue to perform strongly and position Check Point well to secure the rapidly growing enterprise attack surface driven by AI adoption. Our differentiated strategy, our core capabilities, our strong financial profile with industry-leading profitability, and disciplined execution over time position us to benefit from accelerating demand for secure enterprise AI, which is transforming organizations at scale. So before I take the question, I'll turn to Roei to give you some of the financials.

Thank you, Nadav. And thank you, everyone, for joining the call. As Nadav mentioned, the first quarter was a solid quarter with 5% growth in revenues, driven by 11% growth in our subscription revenues. Our total revenues reached $668 million and were $2 million below the midpoint of our projection as a result of lower revenues from firewall appliances that impacted our product revenues. Subscription revenues grew by 11% to $323 million and were at the midpoint of our projections. Our adjusted free cash flow was very strong and reached $457 million, $70 million above the midpoint of our projection and grew by 11%. Our non-GAAP EPS was $2.50 and exceeded our guidance with 13% growth year-over-year. As mentioned, we had 5% growth in revenues, while our deferred revenues grew by 8% to $2.06 billion. Our calculated billings totaled $548 million reflecting a 1% decline year-over-year, while our current calculated billings grew by 2%. Our remaining performance obligations grew by 7% and reached $2.592 billion. As Nadav indicated earlier in the call, we had lower-than-expected product revenues, mainly as a result of the disruption affected by the changes we made in the go-to-market organization. Looking into the second quarter, we do expect this disruption to impact product revenue. But based on the finance metrics that we see, we expect to see an improvement in the second half of the year. It is important to note that our new business continues to be stable, and our firewall subscription ARR continues to grow year-over-year. Regarding subscription revenue, we do see a trajectory for reacceleration, and we expect to see acceleration in our subscription revenues in the second quarter and for the full year driven by strong demand for emerging pillars, mainly CTEM, e-mail security and SASE. As indicated, our total subscription business continues to be strong. We continue to experience strong demand for our emerging products, which remains the primary driver of our revenue growth. In Q1, our e-mail security, SASE and CTEM in total exceeded 45% growth in calculated billings year-over-year. It is important to note that although these revenues are still not a large portion of the total business, we see significant growing momentum for our AI security offering and that, together with CTEM, we expect to drive subscription revenue growth in the next few quarters. When we look at revenues by geography, 46% of our revenues came from EMEA, which had 6% growth year-over-year, 42% of the revenues came from the Americas and saw 4% growth year-over-year, and the remaining 12% came from Asia Pacific and had 2% growth. Looking at the P&L for this quarter, gross profit increased from $564 million to $586 million, representing a gross margin of 88%. Our operating expenses, excluding R&D grants, increased by 14%, while on a constant currency basis, our OpEx increased by 12%. Q1 results include approximately $27 million of benefit from R&D grants to be received under the new Israeli incentive program law, which was ratified during the period, and that's reflecting the positive impact in our financial results. Our operating expenses, net of R&D grants, were $321 million and increased by 5% year-over-year. We expect to have an approximately $100 million benefit for the full year on our operating income, reflecting the new law that was just approved. The increase in our OpEx is primarily the result of our increase in workforce as a result of investments in our AI security efforts and investments in sales and marketing programs. Looking at our non-GAAP operating income, it continues to be strong at $265 million or a 40% operating margin. Our non-GAAP net income increased by 8% and reached $265 million, while our GAAP net income reached $192 million, similar to last year. Our non-GAAP EPS grew by 13% and reached $2.50 while our GAAP EPS was $1.81, representing a 5% increase. Moving into our cash flow and cash position, our cash balances as of the end of the quarter, together with marketable short-term deposits, reached $4.4 billion. During February, we completed the acquisition of a small company for approximately $92 million of net cash consideration. Our adjusted free cash flow increased by 11% and reached $457 million. In addition, we continued our buyback program and purchased 1.9 million shares for a total of $325 million at an average price of $170 per share. To summarize: strong double-digit growth in non-GAAP EPS and adjusted free cash flow; we see continuous strong demand for our emerging technologies CTEM, SASE and e-mail security. On the other hand, we did see in the near term lower new business for firewall appliances that affected our product revenues. Now I'll go into guidance for the second quarter and for the full year. For the second quarter, our total revenues are expected to be between $660 million to $690 million. Our subscription revenues are expected to be between $328 million to $338 million and non-GAAP EPS is between $2.40 to $2.50 while our GAAP EPS is expected to be around $0.70 less. Our adjusted free cash flow is expected to be between $145 million to $175 million. Regarding cash flow, there are some significant payments that moved from Q3 to Q2, but again, that's mostly a timing shift between quarters. For the full year guidance, as indicated, we are adjusting the revenue guidance and cost of revenues guidance for the full year. The new revenue guidance is between $2.770 billion to $2.850 billion. That's a reflection of expected lower revenues on firewall appliances mainly in the second quarter. Our subscription guidance is not changing; we see strong demand for emerging products and expect to finish in the upper end of the range. We are keeping the same range for non-GAAP EPS, which remains between $10.05 to $10.85. GAAP EPS will be slightly higher mainly because of lower share count and slightly higher acquisition-related costs. Our adjusted free cash flow guidance is not being updated and remains as previously communicated. I'll stop sharing now.

Sorry about that, guys, having a little bit of technical difficulty. Starting off today's Q&A is going to be Brian Essex from JPMorgan, followed by Rob Owens from Piper Sandler.

I wanted to dig into product revenue performance. We'll take the easy question. Was macro or customer decisions to sweat assets a factor at all? And if not, can you offer a little more color around the depth of the go-to-market changes. Where was the friction in the process most apparent? Where did the system break down? And what gives you confidence that this is just a near-term issue?

Thanks. So look, I don't think the macro is the issue here. When you look at the changes that we've made to our go-to-market, they are significant. So it's reassigning accounts to account managers, it's doubling down on our marketing, doubling down on our channels. But it did create a short-term headwind in terms of execution as many of our people changed their role or changed accounts, and I see this as the main driver of the headwind that we're seeing in the firewall business. We don't see a macro problem. We're already seeing that engagement with our customers and the funnel are returning to normal, so we're optimistic that this is a blip but it does take a little time to get the motion back and everybody in their seats. For the long run, we believe this is the right thing to do and we're going to continue to invest. This is not just workforce changes, but also leadership changes in America and other areas. There's a process here that we're going through. I think we're at the tail end of the disruption and very optimistic about the future. At the same time, when I look at the demand side, we're seeing areas of growth. For example, we're very bullish on new AI data centers where I think we have a unique capability for the longer term. That's how we see the market, and we're optimistic.

Next up is Rob Owens from Piper Sandler, followed by Joseph Gallo from Jefferies.

Obviously, the world has been changing quickly over the last six weeks. I'd love to understand your perception relative to what's happening and how that's influencing Check Point's business. But in line with that, it seems like you're losing momentum at a critical time for cyber here. So how do you ensure that this doesn't lead to longer-term share losses as customers are having to make decisions in the near term to protect against these next-generation threats?

Honestly, I actually think that we're gaining, not losing, when you look at the big picture. We think that the democratization and industrialization of attackers will change the nature of the business, and I believe we're well positioned to respond. As I said, CTEM has grown 96%, e-mail security—which we believe is best-in-class—is growing over 40%, and so on. If you look at the fundamentals of cybersecurity change, our prevention-first ethos is very relevant. In independent evaluations, our ability to stop known CVEs is extremely high; this was always important and now it's becoming critical because you have to be able to block as fast as possible and remediate extremely fast. From both sides of the equation, I think we have an advantage here.

Next up is Joseph Gallo from Jefferies, followed by Adam Tindle of Raymond James.

I know you talked about the impact to appliance execution, but I think the most exciting part of the story is the subscription growth and the potential for acceleration there. But if you look at current billings, and you take out products, that only grew 3% year-over-year in 1Q. So you're guiding to 12% subscription growth and acceleration in the back half. Maybe just walk us through a little bit more about the confidence in that? And then any broader commentary on how we should think about billings going forward.

So I'll take it. You're right in terms of current billings excluding products, but that takes into account maintenance and software and maintenance renewals, which are pretty flattish right now. If you exclude that, the growth of subscription billings is much higher. We do see, particularly for the second quarter and mainly for the second half of the year, very strong demand for our subscription packages and offerings—email, CTEM and SASE—as well as AI security. Booking numbers for AI security are still not yet significant, but we see a very significant funnel that was created in recent weeks. We see enthusiasm and we've appointed a new leader to manage that business, and we feel positive about subscription acceleration in the coming quarters.

Next up is Adam Tindle from Raymond James, followed by Shaul Eyal of TD Cowen.

I just wanted to take a step back on two major things we're having to digest here on this call. First, I want to understand what exactly is happening to product revenue that is causing this revision. Are there changes to terms with distributors? Are there supply or shipping issues? What exactly is changing and happening that's causing this mechanically? And second, the go-to-market changes you're implementing—I've seen Check Point go through several changes to go-to-market leadership in the past. If you could compare and contrast what's being done now versus past efforts, what you've learned and what might be different this time?

I can start on the product side, and Nadav will take the go-to-market question. On the product side, the changes in the go-to-market organization included a number of account reassignments where account managers moved from some accounts to others. This caused more disruption than we expected, mainly on new business. The sales cycle for firewall projects is generally longer than for selling e-mail security or other subscription products. We saw disruption in pipeline creation mainly in Q1 that is affecting Q2 as well. That said, we've seen very nice improvement in the last few weeks after people are in their relevant roles and have started reengaging accounts. We're starting to see pipeline creation improving for the second half of the year. There is a near-term headwind, specifically in Q2, but we expect improvement in the second half.

Adam, thank you. A couple of points. It's my job to continue to optimize and ensure we have the right leaders in the right places. One differentiator this time is that beyond structural changes Roei described, we're also investing more in marketing and doubling down on channel partnerships. For personnel changes, we want to bring seasoned leaders from the security industry with the right experience. In our last earnings call, we announced Rachel Roberts as President of Americas; she brings deep cybersecurity experience. We also brought in Tom and now Adam Elin for AI security. The idea is to bring experienced leaders and align them with a transformed go-to-market organization. These elements work together with our multi-pillar approach. I'm very bullish about where this will take us. I acknowledge that the first quarter saw disruption, but I think these changes set us up for success going forward. You'll see more people join us at different levels from other companies as we put in the right people, data and processes to create sustainable growth. We have the vision and mission, and I believe our product set positions us well for the future.

All right. Next is Shaul Eyal, followed by Shrenik Kothari.

As you know, Check Point and its competitors sell a number of appliance families across low, mid and high-tier markets. Is there a specific market tier where you're seeing increased pressure, or is the current softness pretty much across all market tiers?

It's mainly around the large enterprise segment. Much of the disruption in our go-to-market involved reassigning enterprise accounts, and large enterprises are the ones that consume the larger appliance models, so they were more affected. That said, when I try to put together emerging trends, I think about the priorities of large security organizations today and in the next couple of years. If you believe that democratization and industrialization of attackers and agentification are real, then our firewalls are very well positioned for this future because of our ability to prevent known CVEs and deploy protections through our IPS in hours, not days or weeks. This capability is becoming increasingly critical. We've been highlighting this for a long time, but it will matter even more going forward. This should provide an advantage not only with our existing customers but also in winning new logos, which is part of the go-to-market change. Getting new logos in CTEM can be much faster than in firewall, but I believe we have what it takes and have made the necessary adjustments. We'll continue to put the right people in place, refine processes, and drive both our emerging categories and our core firewall business. Network security is becoming more important and is one of the only places where you can prepare an organization for AI adoption. This is a multi-year effort, but I see it as a tailwind for Check Point.

Next up is Shrenik Kothari followed by Keith Bachman from BMO.

Maybe shifting gears from appliances—Nadav, you mentioned the data center factory blueprint and the AI Defense Plan, the Gemini agent integration, and securing AI across the enterprise. It seems like you're going after multiple layers of the enterprise AI stack, which is strategically compelling. Can you talk about monetization: how should we think about the near-term opportunity this year and in the next 12 months?

I'll say this: it's a process and we're making very meaningful investments. Six months ago we acquired Lakera to help build a foundational model for security. We believe that if you want the latency, accuracy and cost profile required for enterprise security, we will need to train models tailored for security, which is a significant investment. We're investing in researchers and GPUs, and we've even created a game called Gandalf with over one million worldwide users where thousands attack the environment every day; this feeds our small language model to improve it continuously. That's a big investment. On top of that, we're building security for AI as a platform for users, employees and applications, including agents. We're securing people, runtime, and infrastructure—integrations with Gemini and Microsoft Copilot are examples. This is a heavy investment and we are hiring salespeople to drive commercial adoption. We believe it will be a small part of 2026 but has significant potential for the future. Beyond that, it feeds into our other pillars: foundational models help our threat simulations and red team exercises, which in turn improve our e-mail security, endpoint and CTEM offerings. It's a large investment but essential and positions us well for what's coming.

All right. Next up is Keith Bachman followed by Todd Weller and then the following questioners.

Just a question on memory pricing. What are you seeing in terms of impact? More importantly, how are you thinking about it going forward over the remainder of this year? And then any additional pricing actions being contemplated?

Memory pricing continues to increase; we see the trend continuing. When we set our product revenue guidance for the full year, we took into account some disruption from memory and other component cost changes that also affect the firewall business. Right now, it's tough to say if it's materially changing customer buying behavior. We are monitoring it closely. We factored expected cost impacts into our full-year guidance assumptions. I can't tell you it has shifted buyer behavior in a measurable way yet, but memory costs are continuing to rise and we don't see that stopping in the near term.

Next is the analyst from Bank of America.

I keep asking you the same question. I'm going to come back to the same question. You joined the company a few years ago with the hope that growth would accelerate. You've done many things on sales and on products and growth has decelerated instead of accelerating in the sense that we are now at 5% growth. It's just not big enough for such a great space. There could not be a better space for you to grow and accelerate revenues. So the question is, what is not working with the strategy? What is not working? How can you change the growth trajectory to the point that we see sustainable double-digit growth? To synthesize: what is the problem? Is it sales execution? Portfolio? Employee composition and culture? What can you do to change the growth trajectory?

First of all, I agree this is a great industry to be in right now. That's why I'm here and that's what I'm focused on. As we said, some of this is execution, and that's why we're making the meaningful changes we discussed—hundreds of people moved, new leaders, account reassignments. Those are expected to give us a short-term headwind but drive sustainable growth. At the same time, our product portfolio is strong. Our emerging technologies—e-mail security, CTEM, SASE and now AI security—are growing quickly. The strategy and vision are in place; we are making the changes to accelerate execution. It takes time. We need discipline and patience while we put the right people, processes and systems in place. We're also looking at acquisitions to accelerate growth in each pillar. When you combine the strategic focus, leadership changes, and disciplined execution, I believe we'll be in a much better position to deliver the growth investors expect.

Next is Joshua Tilton from Wolfe followed by Jonathan Ho of William Blair.

Can you reiterate exactly what you expect in the second half for appliance revenue? I wasn't sure if you said stabilize or recover. And can you talk to the visibility or confidence you have around that view?

For the second half of the year, we expect to see improvement. For the second quarter, we expect a sharper decline in product revenues due to the disruption, but in the third and fourth quarters we expect gradual improvement. We are receiving a much better funnel for appliances and we expect to see better performance compared to Q1 and what's expected for Q2. That doesn't necessarily mean year-over-year product revenue growth in Q3 or Q4, but it does mean improvement quarter-to-quarter versus the first half of the year.

Can you talk about what's driving the confidence in that view? Is it just what you see in the funnel? Any incremental color would be helpful.

We see progress week to week in the funnel metrics. We're checking these metrics on a weekly basis and we see improvement for the second half. We see very large deals in the pipeline that are progressing; some have already been won against competitors as win-backs or cloud enterprise deals. While not all of these will turn into revenue immediately, many are progressing toward closure and that gives us confidence for better performance in the second half.

Next up is Jonathan Ho, followed by Peter Levine.

You referenced strong pipeline build for AI security solutions, but they're still relatively small contributors. With that strong pipeline, when do you expect AI security to be a more material contributor? Will that be more stand-alone product revenue or is it more likely to be bundled and cross-sold into your base?

It's early innings. As a stand-alone business, to be a substantial part of Check Point's revenue it will likely take until 2027. This is a big investment and adoption is a process—organizations will inevitably adopt AI for employees and applications, but it won't happen overnight. AI security will be both a stand-alone business and something that is embedded across our pillars. For example, workspace security will include employee AI usage sold as part of workspace bundles. At the infrastructure level, we can embed AI protections in data center and GPU environments integrated with NVIDIA. We're seeing the first links of these projects now. We also see AI security impacting our services business—AI red teaming is one of the fastest-growing services. So it will be both stand-alone and integrated to drive cross-sell, and we expect to see meaningful contribution in 2027 as adoption and commercialization scale.

Next is Peter Levine, followed by Saket Kalia.

When did you really see the material impact from the go-to-market strategy? And can you help us understand the deals that were impacted—were they upsells, renewals, or net-new deals? What's the level of confidence that if they were net-new deals, since they're still in the pipeline, they'll convert? You talked about stabilization in the second half, but any more color would be helpful.

When we reported in mid-February, we were in the middle of the go-to-market transition which started around January. We expected some disruption then, but when we reviewed February and March data we observed more disruption in our funnel than expected, affecting pipeline creation mainly for Q2 and parts of Q3. We've seen some deals delayed from the first half to the second half. Renewal business looks stable; the primary impact was on new business in firewall. As of now, we believe we are in the last innings of these changes and are more confident about the second half pipeline.

Next is Saket Kalia followed by Eric Heath.

The growth in emerging ARR and billings was great to see—40% to 45% growth. Can you remind us how big those businesses are in aggregate as a percent of subscription revenue? And how can the go-to-market changes support growth in those emerging products going forward?

We don't disclose absolute percentages by product line, but those specific three products—CTEM, e-mail security and SASE—are slightly below 30% of our subscription ARR in aggregate. They are a meaningful and growing component of our subscription business.

When you look at the go-to-market adjustments we've made, they support exactly that. We're increasing investment in these pillars and integrating sales motions so our account managers can sell not just firewalls but also the emerging offerings. That is part of the change we're executing. We also need to arm our channels and partners with these new products—many of these products are novel to some channel partners. We're pushing emerging technologies harder and aligning sales, channels and marketing to scale these businesses. We're at the tail end of the disruption and are starting to see upside. We will continue to focus on funnel creation, demand generation, channel enablement and putting the right people and processes in place to capture growth.

Next is Eric Heath followed by Roger Boyd.

M&A has been part of the strategy with tuck-ins, and you have a strong balance sheet. With valuations muted broadly, can you share whether more transformational M&A is part of the strategy going forward?

We look at M&A through the lens of our pillar approach—what we want to achieve in hybrid mesh, CTEM, workspace and AI security. Our M&A teams are constantly hunting for early-stage startups with foundational technologies we can integrate, and we also consider larger strategic opportunities. Our balance sheet, disciplined approach and market volatility create opportunities, and we will act strategically when an opportunity fits within our pillar strategy. We believe we have the execution capability to integrate acquisitions and will make larger moves when they are aligned with our strategic objectives.

Next up is Roger Boyd followed by Matthew Hedberg, and that'll be our last questioner today.

Can you share any sense of where you are in terms of SASE growth? To what extent is that business impacted by some of the dynamics you're seeing across appliances and firewalls right now?

SASE has become a fundamental part of hybrid mesh network security and we're making significant investments there. Our R&D team is completing the necessary features and we're now able to go upstream into larger enterprises with differentiated capabilities. In terms of impact, SASE was not materially affected by the go-to-market changes in the way appliances were. The changes primarily affected our core firewall accounts where account assignments shifted. In fact, we're doubling down on SASE sales capabilities and have combined cloud and network security sales forces with SASE to create a bigger, more capable team. As this matures, ensuring our general account managers can also sell SASE is a key objective. Adoption of AI will likely make SASE even more critical.

Our last questioner today is Matthew Hedberg.

With all the advancements from frontier AI models, it represents an incredible challenge for customers and for engineers. How are you focusing internally to keep up with this rapid change from these models, and how should the security community adapt?

This is one of the biggest questions we all face. We're seeing democratization and industrialization of attack capabilities—a huge shift. As networks become agent-enabled, they create new pathways and complexities we haven't seen before. We're preparing for this era over time and have been executing intensively over the past year. We have deep research teams in Tel Aviv, Zurich and San Francisco building foundational models that we constantly feed with data to anticipate future attacks. That gives us advantages in latency, accuracy and cost structure. We're also working with design partners across verticals—banking, healthcare, energy—so we can understand how they want to harness models and how to secure those uses. One example of execution is hiring a proven operator like Adam Elin to lead AI security, and doing integrations to secure Microsoft Copilot and Google Gemini. This is a fundamental change: we want to move fast with AI adoption while applying decades of hardening to stay ahead of exploits. IPS signatures and WAF rules need to be faster and more accurate; time to patch and remediation must accelerate dramatically. That's where our CTEM capability comes in. We're also doing red teaming, simulation and adversary emulation to anticipate attacker behavior. There is a lot of unknown and many of these model advancements are game changers, so we simulate attacker use of tools and study the whole attack lifecycle—not just vulnerabilities—to stay ahead. This is a critical period for the industry and for Check Point; we aim to keep the digital world running by helping customers adopt AI securely while staying ahead of threats.

All right, guys, thank you very much for attending. I'm sure we'll see you throughout the quarter, and we'll be speaking to quite a few of you over the next few days. Have a great day, and we'll see you soon.

Bye-bye now. Thank you.