Check Point (CHKP) Q1 FY26 earnings call: guidance and Q&A

Was the lower product revenue due to macro factors or go-to-market changes? Can you elaborate on the depth of the changes, where friction occurred, and your confidence that this is a short-term issue?

Management stated that macro factors were not the issue. The significant go-to-market changes, including account optimization, increased marketing, channel focus, and leadership changes, caused short-term execution headwinds as personnel shifted roles. This disruption primarily affected the firewall business but is expected to be transitory, with pipeline and customer engagement already showing signs of normalization. The company is optimistic about future growth, particularly in new AI data centers.

“I don't think the macro is the issue here. When you look at our -- the changes that we've made to our go-to-market, they are significant. So it's optimizing 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 or the main headwind that we're seeing in terms of the firewall business.”

asked by Brian Essex · answered by Unknown Executive

Given the rapid changes in the cyber world, how do you perceive Check Point's momentum, and how do you ensure that current disruptions don't lead to longer-term share losses, especially with new threats emerging?

Management believes the company is gaining, not losing, momentum. The evolving AI threat landscape validates their prevention-first ethos, where they excel. Strong growth in emerging pillars like CTEM (96% ARR growth) and Email Security (over 40% calculated billings growth) positions them well. They emphasize their ability to block attacks quickly and remediate rapidly as a key advantage in the current environment.

“Well, honestly, I actually think that we're gaining, not losing when you look at the big picture... I actually believe that we're really well positioned to answer that. At the same time, when you look at the relevant pillar, [indiscernible] has grown 96%, e-mail, which we are one of the best-in-class in the industry and ready for this AI revolution is growing over 40%, et cetera.”

asked by Robbie Owens · answered by Unknown Executive

Despite strong subscription growth, current billings excluding products only grew 3% in Q1. What gives you confidence in the guided 12% subscription growth and acceleration in the back half, and what's the outlook for billings?

Management clarified that current billings excluding products includes maintenance and software updates, which are currently flat. The underlying subscription billings growth is much higher. They see strong demand and a significant funnel for subscription packages, including Email, CTEM, SASE, and AI security, which is expected to drive acceleration in subscription revenues over the next few quarters.

“So you're right in terms of current billings, excluding products, but that takes into account also maintenance and software and maintenance updates. And actually, pretty flattish right now. So if you're excluding that, so actually the growth of subscription is much higher subscription billings.”

asked by Joseph Gallo · answered by Unknown Executive

What are the mechanical reasons for the product revenue revision (e.g., distributor terms, supply)? How do the current go-to-market changes compare to past efforts, and what has been learned?

The product revenue impact stems from the go-to-market changes, specifically the reassignment of account managers for large enterprises, which caused more disruption than expected in new firewall business funnel creation in Q1 and Q2. Improvement is now being seen. Management emphasized bringing seasoned leaders from the security industry, investing more in marketing and channels, and adopting a multi-pillar approach as differentiators from past changes. They are bullish on the long-term success despite short-term disruption.

“So on the -- in terms of the product side, same affected the product. So we did the changes in the go-to-market organization. part of these changes were a lot of changes for assignments for eco managers that will work from large enterprise and enterprises that moves from accounts to other accounts. This has some kind of -- again, something that was expected, but that had more disruption than we expected on the business, mainly on the new business.”

asked by Adam Tindle · answered by Roei Golan

Can you clarify expectations for appliance revenue in the second half – stabilization or recovery? What drives your confidence in this outlook?

Management expects improvement in appliance revenues in the second half of the year, following a sharper decline in Q2. This improvement means better performance compared to Q1 and Q2, though not necessarily growth. Confidence is driven by visible progress in the funnel, including large deals, and recent wins against competitors. They monitor these metrics weekly and feel more confident about the second half.

“So for the second half of the year, you do expect to see improvement. Right now for the second quarter, we do expect to see a decline sharper decline in the product revenues. But for the third quarter and the fourth quarter, it's going to be gradually. We receive a much better funnel also for the appliances. And we do expect to see improvement there.”

asked by Joshua Tilton · answered by Unknown Executive

Given the strong pipeline for AI security, when do you expect it to become a material contributor? Will it be primarily stand-alone products or cross-sell opportunities?

Management stated that AI security is in its early innings. As a stand-alone business, it is expected to become a substantial part of Check Point's revenue by 2027. However, it also contributes significantly to other pillars, such as workspace security (employee AI usage), infrastructure (embedding AI in NVIDIA GPUs), and services (AI red teaming). It's viewed as both a stand-alone offering and a contributor to existing product lines.

“Yes. Thanks for the question. Look, early innings, right? And I think to become a substantial part of our revenue, that will only happen in -- as a stand-alone that will only happen and it's a big investment... to be a real impact on our revenue and become a significant part of 2027.”

asked by Jonathan Ho · answered by Unknown Executive