Q2 2026 Check Point Software Technologies Ltd Earnings Call

July 30, 2026

Speaker #3: Today our Chief Executive Officer Nadav Zafrir and our Chief Financial Officer Roei Golan. Before we begin, I'd like to remind everyone that this conference is being recorded and will be available for replay on our website at checkpoint.com.

Kip Meintzer: Today, our Chief Executive Officer, Nadav Zafrir, and our Chief Financial Officer, Roei Golan. Before we begin, I'd like to remind everyone that 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 can 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 statement. Any forward-looking statements made only as of the date hereof. Check Point Software undertakes no obligation to update publicly any forward-looking statements except where required by law.

Speaker #3: During the formal presentation, all participants are in a listen-only mode that will be followed by a Q&A session. During the presentation, checkpoint's representatives may make forward-looking statements; forward-looking statements generally relate to future events or future financial and/or operating performance.

Kip Meintzer: Forward-looking statements can 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 statement. Any forward-looking statements made only as of the date hereof. Check Point Software undertakes no obligation to update publicly any forward-looking statements except where required by law.

Speaker #3: These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statement. Any forward-looking statements made only as of the date hereof, and checkpoint software undertakes no obligation to update publicly any forward-looking statements, except where required by law.

Speaker #3: In our press release, which has been posted on our website, we present gap and non-gap results, along with a reconciliation of such results, as well as reasons for our presentation of non-gap information.

Kip Meintzer: 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 email at kip@checkpoint.com. Now I'd like to turn the call over to Nadav Zafrir.

Speaker #3: If you have any questions after the call, please feel free to contact Investor Relations by email at kip@checkpoint.com. Now I'd like to turn the call over to Nadav Zafrir.

Speaker #4: Okay, and thank you all for joining us today. Our Q2 results were in line with our expectations, and we continue to make tangible progress, strengthening our go-to-market organization.

Nadav Zafrir: Thank you all for joining us today. Our Q2 results were in line with our expectations, and we continued to make tangible progress strengthening our go-to-market organization. We're actually encouraged by improving execution and a growing sales pipeline. We expect Q3 to mark the trough, followed by a stronger Q4 that supports H2 performance. We are maintaining our 2026 guidance. As a next step, we are significantly expanding our sales capacity by hiring hundreds of additional salespeople. We've launched a focused hiring campaign reflecting our confidence in the long-term growth opportunity. Over the past few weeks, I met with more than 1,000 security leaders at Check Point Engage events in Chicago, Paris, and Singapore. Their message is consistent and unmistakable. Our industry is at an inflection point. AI, and particularly the latest frontier model, is driving a collapse in scarcity of adversarial capabilities.

Speaker #4: We're actually encouraged by improving execution and a growing sales pipeline. We expect Q3 to mark the trough, followed by a stronger Q4 that supports second-half performance and we are maintaining our 2026 guidance.

Speaker #4: As a next step, we are significantly expanding our sales capacity by hiring hundreds of additional salespeople. We've launched a focused hiring campaign, reflecting our confidence in the long-term growth opportunity.

Nadav Zafrir: We've launched a focused hiring campaign reflecting our confidence in the long-term growth opportunity. Over the past few weeks, I met with more than 1,000 security leaders at Check Point Engage events in Chicago, Paris, and Singapore. Their message is consistent and unmistakable. Our industry is at an inflection point. AI, and particularly the latest frontier model, is driving a collapse in scarcity of adversarial capabilities.

Speaker #4: Over the past few weeks, I met with more than 1,000 security leaders at Checkpoint Engage events in Chicago, Paris, and Singapore. Their message is consistent and unmistakable: our industry is at an inflection point.

Speaker #4: AI, and particularly the latest frontier model, is driving a collapse in scarcity of adversarial capabilities. This is democratizing and industrializing sophisticated cyber attacks, and challenging many of the assumptions that have guided cybersecurity for decades.

Nadav Zafrir: This is democratizing and industrializing sophisticated cyberattacks and challenging many of the assumptions that have guided cybersecurity for decades. We cannot stop AI adoption, we must prepare to defend against sophisticated attacks at unprecedented scale. This is a time for decisive action. At Check Point, securing our customers' AI transformation means executing the fundamentals better than ever while building the next generation of cybersecurity, and we must do it in parallel. The fundamentals start with prevention, powered by our ThreatCloud AI intelligence, more than 100 AI agents, and telemetry from millions of enforcement points. Prevention-first security is in our DNA. Fundamentals alone are no longer enough. We must build security that operates at machine speed, learns continuously, and evolves as AI evolves. Today, I'm excited to introduce the industry's first AI network firewall.

Speaker #4: We cannot stop AI adoption, and we must prepare to defend against sophisticated attacks at unprecedented scale. This is the time for decisive action. At Checkpoint, securing our customers' AI transformation means executing the fundamentals better than ever.

Speaker #4: While building the next generation of cybersecurity, and we must do it in parallel. The fundamentals start with prevention. Powered by a threat cloud AI intelligence more than 100 AI agents and telemetry from millions of enforcement points, prevention-first security is in our DNA.

Nadav Zafrir: The fundamentals start with prevention, powered by our ThreatCloud AI intelligence, more than 100 AI agents, and telemetry from millions of enforcement points. Prevention-first security is in our DNA. Fundamentals alone are no longer enough. We must build security that operates at machine speed, learns continuously, and evolves as AI evolves. Today, I'm excited to introduce the industry's first AI network firewall.

Speaker #4: But fundamentals alone are no longer enough. We must build security that operates at machine speed, learns continuously, and evolves as AI evolves. And so today, I'm excited to introduce the industry's first AI network firewall.

Speaker #4: We believe AI has created a new class of network traffic and it deserved a new class of firewall. The AI network firewall gives customers visibility, control, and security for prompts, agent actions, and model interactions.

Nadav Zafrir: We believe AI has created a new class of network traffic, and it deserves a new class of firewall. The AI network firewall gives customers visibility, control, and security for prompts, agent actions, and model interactions. The AI network firewall is a part of our AI Defense Plane. It's a full-stack AI security platform, continuously trained on our threat research and intelligence and built to protect applications, users, and agents from AI-based attacks. With the release of the AI network firewall, we're embedding the AI Defense Plane across networks, private and public cloud, and SASE, giving network security teams control they can put in place today. Beyond AI demand across our emerging technologies portfolio remains healthy.

Speaker #4: The AI network firewall is a part of our AI Defense Plane. It's a full-stack AI security platform, continuously trained on our threat research and intelligence, and built to protect applications, users, and agents from AI-based attacks.

Speaker #4: With the release of the AI network firewall, we're embedding the AI defense planes across networks, private and public cloud, and SASE. Giving network security teams control they can put in place today.

Nadav Zafrir: With the release of the AI network firewall, we're embedding the AI Defense Plane across networks, private and public cloud, and SASE, giving network security teams control they can put in place today. Beyond AI demand across our emerging technologies portfolio remains healthy.

Speaker #4: Beyond AI demand across our emerging technologies portfolio remains healthy. Subscription revenue grew 12% year over year in Q2, and we continue to integrate the capabilities from our recent acquisitions across the platform, strengthening our competitive position and expanding the value we deliver to customers.

Nadav Zafrir: Subscription revenue grew 12% year over year in Q2, and we continue to integrate the capabilities from our recent acquisitions across the platform, strengthening our competitive position and expanding the value we deliver to customers. We're building momentum by expanding our go-to-market capacity and strengthening our product portfolio. The launch of our AI network firewall, combined with our AI Defense Plane, reinforced Check Point's mission of securing our customers' AI transformation. We remain focused on disciplined execution, accelerating growth, and delivering long-term value for our customers, our partners, employees, and shareholders. With that, I'll turn over the call to Roei to review the financials.

Speaker #4: We're building momentum by expanding our go-to-market capacity and strengthening our product portfolio. The launch of our AI network firewall, combined with our AI defense play reinforces Checkpoint's mission of securing our customers' AI transformation.

Nadav Zafrir: The launch of our AI network firewall, combined with our AI Defense Plane, reinforced Check Point's mission of securing our customers' AI transformation. We remain focused on disciplined execution, accelerating growth, and delivering long-term value for our customers, our partners, employees, and shareholders. With that, I'll turn over the call to Roei to review the financials.

Speaker #4: We remain focused on disciplined execution, accelerating growth, and delivering long-term value for our customers, our partners, employees, and shareholders and with that, I'll turn over the call to Roei to review the financials.

Speaker #3: Thank you, Nadav. One moment. Great. So thank you, Nadav, and thank you everyone for joining the call. As Nadav mentioned, the second quarter was as planned, with 1% growth in revenues.

Roei Golan: Thank you, Nadav. One moment. Great. Thank you, Nadav, and thank you everyone for joining the call. As Nadav mentioned, Q2 was as planned with 1% growth in revenues, driven by 12% growth in subscription revenues. Our total revenues reached $674 million and were $1 million below the midpoint of our projection as a result of lower product revenues, as the lower demand for firewall appliances. When we're looking on our subscription revenues, it reached $333 million and were at the midpoint of our projections. Our adjusted free cash flow reached $161 million, $1 million above the midpoint of our projection, and represents 24% of our revenues. Our non-GAAP EPS was $2.55 per diluted shares and exceeded our guidance and grew by 8% year over year. As mentioned, we had 1% growth in revenues, while our deferred revenues grew by 7% to $2.025 million.

Speaker #3: Driven by 12% growth in subscription revenues, our total revenues reached $674 million, which is $1 million below the midpoint of our projection. This was a result of lower product revenues, as there was lower demand for firewall appliances.

Speaker #3: When we're looking on our subscription revenues, it reached $333 million, and we're at the midpoint of our projections. Our adjusted free cash flow reached $161 million, $1 million above the midpoint of our projection, and represents 24% of our revenues.

Roei Golan: When we're looking on our subscription revenues, it reached $333 million and were at the midpoint of our projections. Our adjusted free cash flow reached $161 million, $1 million above the midpoint of our projection, and represents 24% of our revenues. Our non-GAAP EPS was $2.55 per diluted shares and exceeded our guidance and grew by 8% year over year. As mentioned, we had 1% growth in revenues, while our deferred revenues grew by 7% to $2.025 million.

Speaker #3: Our non-gap EPS was $2.55 per diluted shares and exceeded our guidance and grew by 8% year over year. As mentioned, we had 1% growth in revenues, while our deferred revenues grew by 7% to $2.25 million.

Speaker #3: Our calculated billing total to $639 million and we're similar to last year, while our current calculated billing grew by 2% to $641 million. Our remaining performance obligation grew by 7% and reached $2.55 billion.

Roei Golan: Our calculated billing total to $639 million and was similar to last year, while our current calculated billing grew by 2% to $641 million. Our remaining performance obligation grew by 7% and reached $2.55 billion. Our current RPO reached $1.6 billion and representing 4% increase compared to last year. As we indicated in the call back in May, we expected lower product revenues, mainly as a result of our disruption affected by the changes were made in the go-to-market organization. Our product revenues declined by 14% in Q2. We are looking on the H2 of the year, we do expect to see similar trends in Q3 with our firewall appliances.

Speaker #3: Our current RPO reached 1.6 billion and representing 4% increase compared to last year. As we indicated in the call back in May, we expected lower product revenues, mainly as a result of our disruption affected by the changes were made in the go-to-market organization.

Roei Golan: As we indicated in the call back in May, we expected lower product revenues, mainly as a result of our disruption affected by the changes were made in the go-to-market organization. Our product revenues declined by 14% in Q2. We are looking on the H2 of the year, we do expect to see similar trends in Q3 with our firewall appliances.

Speaker #3: Our product revenues declined by 14% in the second quarter. As we are looking on the second half of the year, we do expect to see similar trend in the third quarter with our firewall appliances, while we do see significant improvement in our pipeline and our opportunities in the qualified opportunities in Q4 as and we do expect to see a back to growth in product revenues in the fourth quarter.

Roei Golan: We do see significant improvement in our pipeline, in the opportunities, in the qualified opportunities in Q4, and we do expect to see a back to growth in product revenues in Q4. We are looking on the subscription revenues, it continued to accelerate to 12% growth this quarter, driven by the strong demand for our emerging technologies, as email security and CTEM continue to have strong demand. We are looking on Q3, we do expect slight deacceleration in our subscription revenue as a result of large appliances deals that were pushed from Q3 to Q4 and have also an impact on our subscription line item. Indicated, our total subscription business continued to be strong as we continue to experience strong demand for our emerging product portfolio, which remains the primary driver for our revenues growth.

Speaker #3: When we are looking on the subscription revenues, in continue to accelerate to 12% growth this quarter, driven by the strong demand for emerging technologies, as email security and system are continue to have strong demand.

Speaker #3: When I'm looking on when we are looking on the third quarter, we do expect slightly acceleration in our subscription revenues as a result of as a result of large appliances deals that were that were that were pushed from Q3 to Q4 and have also an impact on our subscription line item.

Roei Golan: We are looking on Q3, we do expect slight deacceleration in our subscription revenue as a result of large appliances deals that were pushed from Q3 to Q4 and have also an impact on our subscription line item. Indicated, our total subscription business continued to be strong as we continue to experience strong demand for our emerging product portfolio, which remains the primary driver for our revenues growth.

Speaker #3: As indicated, our total subscription business continue to be strong as we continue to experience strong demand for emerging product portfolio, which remains the primary driver for our revenues growth.

Speaker #3: In the second quarter, if we are looking on the email security, system and AI security, accumulated they exceeded 40% growth in ARR year over year, while the current calculated billing from these products grew by 35% year over year.

Roei Golan: In Q2, if we're looking on the email security, CTEM, and AI security, accumulated, they exceeded 40% growth in ARR year over year, while the calculated billing from these products grew by 35% year over year. Looking on our revenues by geographies, Our revenues from EMEA and Americas were 44% each for Q2, while the remaining 12% came from Asia Pacific, similar to what we had last year. We are reviewing, we are looking on our P&L for this quarter. Our gross profit increased from $585 million to $588 million, representing a gross margin of 87%. The slight decrease in the gross margin was explained due to higher memory costs. Our operating expenses, excluding R&D grants, increased by 13%, while on constant currency basis, our operating expenses increased by 11%.

Speaker #3: Looking on our revenues by geographies, so our revenues from EMEA and America were 44% each for the second quarter, while the remaining 12% came from Asia Pacific, similar to what we had last year.

Speaker #3: When we are reviewing, we are looking on our P&L for this quarter. So our gross profit increased from $585 million to $588 million, representing a gross margin of 87%.

Roei Golan: We are reviewing, we are looking on our P&L for this quarter. Our gross profit increased from $585 million to $588 million, representing a gross margin of 87%. The slight decrease in the gross margin was explained due to higher memory costs. Our operating expenses, excluding R&D grants, increased by 13%, while on constant currency basis, our operating expenses increased by 11%.

Speaker #3: The slight decrease in the gross margin was explained by higher memory costs. Our operating R&D grants increased by 13%, while, on a constant currency basis, our operating expenses increased by 11%.

Speaker #3: Our Q2 results include approximately $28 million of benefit from R&D grants to be received from the Israeli government. When we are looking on our operating expenses, net of R&D grants, we there were the expenses were $328 million, an increase by 5% year over year.

Roei Golan: Our Q2 results include approximately $28 million of benefits from R&D grants to be received from the Israeli government. We are looking on our operating expenses, net of R&D grants, the expenses were $328 million, an increase by 5% year over year. The net increase is primarily the result of increase in our workforce and as a result in continuing investment in AI security and investment in our sales and marketing programs. Looking on the operating income, it continues to be strong at $260 million or 39% operating margin. Our non-GAAP net income increased by 1% and reached $264 million, while our GAAP net income reached $194 million and decreased by 4% year over year. Our non-GAAP EPS grew by 8% and reached $2.55. 8%, as I said, growth year over year, while our GAAP EPS was $1.87, a 2% increase year over year.

Speaker #3: The increase, the net increase is primarily the result of increases in our workforce and as a result in continuing investment in AI security and investment in our sales and marketing programs.

Speaker #3: When we look at operating income, it continues to be strong at $260 million, or a 39% operating margin. Our non-GAAP net income increased by 1% and reached $264 million.

Roei Golan: Looking on the operating income, it continues to be strong at $260 million or 39% operating margin. Our non-GAAP net income increased by 1% and reached $264 million, while our GAAP net income reached $194 million and decreased by 4% year over year. Our non-GAAP EPS grew by 8% and reached $2.55. 8%, as I said, growth year over year, while our GAAP EPS was $1.87, a 2% increase year over year.

Speaker #3: While our GAAP net income reached $194 million and decreased by 4% year over year, our non-GAAP EPS grew by 8% and reached $2.55—an 8% increase year over year, as I said. Meanwhile, our GAAP EPS was $1.87, a 2% increase year over year.

Speaker #3: Our number of fully diluted outstanding shares for the for for Q2 was 103.5 million shares, and while we continue to do our buyback, we expect the number of shares for the next quarter to decrease by approximately 1.5 million shares.

Roei Golan: Our number of fully diluted outstanding shares for Q2 was 103.5 million shares. While we continue to do our buyback, we expect the number of shares for the next quarter to decrease by approximately 1.5 million shares. Moving into our cash flow and cash position. Our cash balances as of the end of the quarter was $4.2 billion of cash and marketable securities and deposits. Our adjusted free cash flow reached $161 million, as planned, in line with our projections. We also continue to do our buyback program and purchased approximately 2.5 million shares for $325 million this quarter at an average price of $131 per share. During the quarter, the company announced also a $2 billion expansion of the company share repurchase program. We're going to continue to do this buyback. Next.

Speaker #3: Moving into our cash flow and cash positions. So our cash balances as of the end of the quarter was $4.2 billion, cash and marketable securities and deposit.

Speaker #3: Our adjusted free cash flow reached $161 million, as planned, in line with our projections. We also continue to do our buyback program and purchased approximately $2.5 million shares for $325 million this quarter at an average price of $131 per share.

Roei Golan: Our adjusted free cash flow reached $161 million, as planned, in line with our projections. We also continue to do our buyback program and purchased approximately 2.5 million shares for $325 million this quarter at an average price of $131 per share. During the quarter, the company announced also a $2 billion expansion of the company share repurchase program. We're going to continue to do this buyback. Next.

Speaker #3: During the quarter, the company announced also a $2 billion expansion of the company share repurchase program. So we we're going to continue to do this buyback.

Speaker #3: Next to summarize, so from one end, definitely strong demand continue strong demand for emerging technology led by email security and system that's becoming more and more significant to our total business.

Roei Golan: To summarize, from one end, definitely strong demand, continued strong demand for emerging technology led by email security and CTEM, as that's becoming more and more significant to our total business. On the other end, we did see, as expected, lower demand for firewall appliances this quarter. As I mentioned, we do expect similar trend to continue also in Q3, but definitely, we do see significant improvement on the appliances business in Q4, and we do expect to be back to growth in Q4 in the product revenues. We're going to move to the guidance, to the business outlook. First, regarding the full year, we're not touching the full year guidance. We're maintaining the same guidance as we gave you back in May, in the last call. Looking on the Q3 outlook, the total revenue range is between $655 to 685 million, subscription revenue between $332 to 343 million.

Speaker #3: On the other end, we did see as expected, lower demand for firewall appliances this quarter, as I mentioned, we do expect similar trend to continue also in Q3, but definitely we we do see significant improvement on the appliances business in Q4, and we do expect to be back to growth in Q4 in the product revenues.

Roei Golan: As I mentioned, we do expect similar trend to continue also in Q3, but definitely, we do see significant improvement on the appliances business in Q4, and we do expect to be back to growth in Q4 in the product revenues. We're going to move to the guidance, to the business outlook. First, regarding the full year, we're not touching the full year guidance. We're maintaining the same guidance as we gave you back in May, in the last call. Looking on the Q3 outlook, the total revenue range is between $655 to 685 million, subscription revenue between $332 to 343 million.

Speaker #3: We're going to move to the guidance, to the business outlook. So first, regarding the full year, we are not touching the full year guidance.

Speaker #3: We are maintaining the same guidance as we gave you back in May in the last call. Looking on the Q3 outlook, so the total revenue range is between $655 to $685, subscription revenue between $332 to $343, non-gap EPS between $2.43 to $2.53, while our adjusted and the gap EPS is 70 cents less.

Roei Golan: Non-GAAP EPS between $2.43 to $2.53, while our adjusted-- and the GAAP EPS is $0.70 less. Our adjusted free cash flow expected to be between $235 to $265 million. It is important to note, as I mentioned earlier, that we do see significant opportunities and deals that are expected to be pushed from Q3 to Q4, therefore, that have an effect, a negative impact mainly on our appliances revenues. As I said, if I'm comparing to what we've seen in the pipeline for Q4 in May and now, definitely we do see even stronger pipeline for Q4. Definitely, the more back and loaded deals also is a reflection of the go-to market discussion that we've done.

Speaker #3: And our adjusted free cash flow expected to be between $235 to $265 million. It is important to note, as I mentioned, in in in the earlier that we do see significant opportunities and deals that being pushed from Q3 to Q that are expected to be pushed from Q3 to Q4, and therefore that have an effect, a negative impact mainly on our appliances appliances revenues.

Speaker #3: And as I said, we if I'm comparing to what we've seen in the pipeline for Q4 in May and now, definitely we do see even stronger pipeline for Q4.

Roei Golan: As I said, if I'm comparing to what we've seen in the pipeline for Q4 in May and now, definitely we do see even stronger pipeline for Q4. Definitely, the more back and loaded deals also is a reflection of the go-to market discussion that we've done.

Speaker #3: Definitely it's a more back and loaded year. It's also as a reflection of what of the go-to-market disruption that we've done, but definitely we do see a positive sign.

Roei Golan: Definitely we do see a positive sign, first of course, with the emerging product that continue to have a strong demand, also with the appliances and the firewall, we see positive signs that we are seeing the end in Q3 in terms of the decline, and going back to growth in Q4. Thank you. We are moving to Q&A. Kip, floor is yours. We can't hear you, Kip.

Speaker #3: First, of course, with the emerging product that continue to have a strong demand and also with the appliances and the firewall, we we we see positive signs that we are seeing the end in in Q3 in terms of the decline and going back back to growth in Q4.

Speaker #3: Thank you. And we are moving to Q&A. The floor is yours. We can't hear you. Please go ahead.

Speaker #2: Might be good. Probably most people appreciate that. As with always, please keep your question to one question for each time around. Today, to begin, we're going to have Joseph Gallo from Jefferies.

Kip Meintzer: Might be good. Probably most people appreciate that. As with always, please keep your question to one question for each time around. Today, to begin, we're going to have Joseph Gallo from Jefferies, followed by Patrick Colville from Scotiabank.

Speaker #2: Followed by Patrick Colville from Scotiabank.

Speaker #1: Hey guys, thanks for the question. It was great to hear about the investment and sales capacity. Can you just remind us what the normal cadence of sales ramp to productivity is?

Joseph Gallo: Hey, guys. Thanks for the question. It was great to hear about the investment in sales capacity. Can you just remind us what the normal cadence of sales ramp to productivity is? I'm just trying to understand better.

Speaker #1: I'm just trying to understand better the confidence and afford to your rebound when hiring today would be more indicative of 2027's benefit.

Roei Golan: Yeah

Joseph Gallo: The confidence in a 4-tier rebound when hiring today would be more indicative of 2027's benefit.

Speaker #3: Yeah. Thanks, Joe. The latter. Right. So the impact to sales is expected in Q1 and Q2 of 2027. So the the guidance and what we're expecting for Q3 and Q4 does not take into consideration the ramp-up.

Roei Golan: Yeah. Thanks, Joe. The latter. The impact to sales is expected in Q1 and Q2 of 2027. The guidance and what we're expecting for Q3 and Q4 does not take into consideration the ramp-up. The ramp-up obviously has its momentum, but it's going to take some time. However, it is very significant. For us, hiring hundreds of new frontline sellers is a major move. I don't know if you've seen it. I hope you have. We've started an aggressive campaign, it's not just the number, it's also the people that we're hiring, and the invigorating of our sales force across the globe. It's really meaningful and it's a company-wide effort. The guidance that we gave today does not take that into consideration. That is sort of preparing for a stronger 2027.

Speaker #3: The ramp-up, you know, obviously has its has its momentum, but it's going to take some time. However, it is very significant, you know, for us hiring hundreds of new frontline sellers is a major move.

Speaker #3: I don't know if you've you've seen it. I hope you have. We we've started an aggressive campaign. So it's it's not just the number.

Roei Golan: I don't know if you've seen it. I hope you have. We've started an aggressive campaign, it's not just the number, it's also the people that we're hiring, and the invigorating of our sales force across the globe. It's really meaningful and it's a company-wide effort. The guidance that we gave today does not take that into consideration. That is sort of preparing for a stronger 2027.

Speaker #3: It's also the people that we're hiring and the invigorating of our sales force across the globe. It's it's really meaningful and it's a company-wide effort.

Speaker #3: So what the guidance that we gave today does not take that into consideration. That is sort of preparing for a stronger 2027.

Speaker #1: Thank you.

Joseph Gallo: Thank you.

Speaker #2: All right. Next up's Patrick Colville, followed by John Dufucci.

Kip Meintzer: All right. Next up's Patrick Colville, followed by John DiFucci.

Speaker #4: Thank you, Kip. I guess I wanted to ask about kind of mythos preparedness and advanced AI preparedness. You know, there's a lot of excitement in the market around what advanced AI means for cybersecurity.

Patrick Colville: Thank you, Kip. I guess I wanted to ask about kind of Mythos preparedness and advanced AI preparedness. There's a lot of excitement in the market around what advanced AI means for cybersecurity. You kind of touched on this in your prepared remarks a little bit, but just vis-a-vis Check Point specifically, are you seeing changes in buying patterns as a result of enterprises kind of concerned about the risks brought on by advanced AI models? Then, I guess, specifically, where is that hitting the financial model? Is it at the firewall layer for Check Point? Is it at the SecureKnowledge subs? Any changes to sales cycles?

Speaker #4: You know, you kind of touched on this in your prepared remarks a little bit, but, you know, just just vis-a-vis Check Point specifically, you know, are you seeing changes in buying patterns as a result of enterprises kind by advanced AI models?

Speaker #4: And then I guess specifically, like like where is that hitting the financial model? Is it is it at the firewall layer for Check Point?

Patrick Colville: Then, I guess, specifically, where is that hitting the financial model? Is it at the firewall layer for Check Point? Is it at the SecureKnowledge subs? Any changes to sales cycles?

Speaker #4: Is it at the non-chat subs? And any changes to sales cycles?

Speaker #3: Yeah, great question. So if you zoom out, really the phenomena that we're seeing is very interesting. It's when you think about it from the attacker's perspective, you want to think about it from an ROI perspective.

Roei Golan: Yeah. Great question. If you zoom out, really, the phenomena that we're seeing is very interesting. When you think about it from the attacker's perspective, you want to think about it from an ROI perspective. The way we see it is the attackers now have access to resources that they didn't have before. That's what we call the collapse of scarcity. They literally have access to what used to be very scarce resources. That's sort of what leads into the democratization and industrialization. We're going to see more sophisticated attacks at a much higher cadence. That is happening already. We think it's going to accelerate within the next couple of years.

Speaker #3: So the way we see it is from the the attackers now have access to resources that they didn't have before. That's what we call the collapse of scarcity.

Speaker #3: They literally have access to what used to be very scarce resources, and that's sort of what leads into the democratization and industrialization. So we're going to see more sophisticated attacks at a much higher cadence.

Roei Golan: They literally have access to what used to be very scarce resources. That's sort of what leads into the democratization and industrialization. We're going to see more sophisticated attacks at a much higher cadence. That is happening already. We think it's going to accelerate within the next couple of years.

Speaker #3: That is happening already, but we think it's going to accelerate within the next couple of years. So when you think about the security paradigm, or the assumptions that we have around security, we're seeing signs that some of these assumptions and the current paradigm do not necessarily withstand the change that's coming from the attackers.

Nadav Zafrir: When you think about the security paradigm that or the assumptions that we have around security, we're seeing signs that some of these assumptions and the current paradigm does not necessarily withstand the change that's coming from the attackers. That leads us to, like a Kuhnian way, to really a world between two paradigms. That's what I mean when I say, number 1, going back to fundamentals. This is the proactive prevention first. That's our DNA. That's where we shine. That's what our customers expect from us. We have to do everything that we have learned, just much better, much faster, much more diligently. At the same time, in parallel, we have to look into the future. We have to imagine different possible futures, give them different probabilities, and start simulating how the attackers are going to change.

Speaker #3: And that leads us to like an Acunian way to really a world between two paradigms. And so that's what I what I mean when I say number one, going back to fundamentals.

Nadav Zafrir: That's what I mean when I say, number 1, going back to fundamentals. This is the proactive prevention first. That's our DNA. That's where we shine. That's what our customers expect from us. We have to do everything that we have learned, just much better, much faster, much more diligently. At the same time, in parallel, we have to look into the future. We have to imagine different possible futures, give them different probabilities, and start simulating how the attackers are going to change.

Speaker #3: This is the proactive prevention first. That's our DNA. That's where we shine. That's what our customers expect from us. And we have to do everything that we have learned just much better, much faster, much more diligently.

Speaker #3: At the same time, in parallel, we have to look into the future. We have to imagine different possible futures give them different probabilities and start simulating how the attackers are going to change.

Speaker #3: So for example, I believe we believe that detection and response are going to be much less relevant because we're going to have to go to automatic remediation at machine speed.

Nadav Zafrir: For example, I believe, we believe that detection and response are going to be much less relevant because we're going to have to go to automatic remediation at machine speed. We're making massive investments. Last year, we spoke about hiring hundreds of new individuals to build the next generation. Today, we announced the launch of the first AI Network Firewall integrated into our AI Defense Plane. There's a whole strategy around that. Now, to your question about the buyer's perspective, I think that they realize that on the one hand, back to basics, and at the same time, they're looking to what's next. I'll give you a couple of examples. I think the Continuous Threat Exposure Management, based on three acquisitions that we made, that is growing. Last quarter, we spoke about that growing at almost 100%, is a part of that. Why?

Speaker #3: And so we're making massive investments last year we we we we spoke about hiring hundreds of new individuals to build the next generation. Today we we announced the launch of the first AI network firewall integrated into our AI defense plane.

Speaker #3: And there's a whole strategy around that. Now, to your question about the buyer's perspective, I think that they realize that on the one hand, back to basics, and at the same time, they're looking to what's next.

Nadav Zafrir: There's a whole strategy around that. Now, to your question about the buyer's perspective, I think that they realize that on the one hand, back to basics, and at the same time, they're looking to what's next. I'll give you a couple of examples. I think the Continuous Threat Exposure Management, based on three acquisitions that we made, that is growing. Last quarter, we spoke about that growing at almost 100%, is a part of that. Why?

Speaker #3: So I'll give you a couple of examples. I think the continuous threat exposure management based on three acquisitions that we made, that is growing last quarter we spoke about that growing at almost 100% is a part of that.

Speaker #3: Why? Because it gives you the ability to understand what's coming at you, but also to create a real pathway to understand what the real threats mean and automatically remediate that in an open platform approach.

Nadav Zafrir: Because it gives you the ability to understand what's coming at you, but also creating a real pathway to understand what the real threats mean and automatically remediating that in an open platform approach. That's why CTEM, for example, is having such success. At the same time, the reason I'm so excited about the AI Network Firewall is that it's also happening at the network level. Customers that already have our firewall can now also take advantage of the network to understand what their employees are doing, what agents are running, and control that. I really think to summarize, it's sort of a tale of two cities. On the one hand, everything that we've learned, we must do better than we've ever done before. At the same time, we're creating the new technology, the new products.

Speaker #3: And that's why CTAM, for example, is having such success. At the same time, the reason I'm so excited about the AI network firewall is that it's also happening at the network level.

Speaker #3: And so customers that already have our our firewall can now also take advantage of the network to to understand what their employees are doing, what agents are running, and control that.

Nadav Zafrir: Customers that already have our firewall can now also take advantage of the network to understand what their employees are doing, what agents are running, and control that. I really think to summarize, it's sort of a tale of two cities. On the one hand, everything that we've learned, we must do better than we've ever done before. At the same time, we're creating the new technology, the new products.

Speaker #3: So I I really think to summarize, it's a it's sort of a tale of two of two cities. On the one hand, everything that we've learned, we must do better than we've ever done before.

Speaker #3: At the same time, we're creating the new technology, the new products, the new and and I think within the next couple of years, you'll see a new paradigm emerging.

Nadav Zafrir: I think within the next couple of years, you'll see a new paradigm emerging. That's sort of the story of where we are right now. I think that in some way, some of the frontier models may be hyped, but the phenomena as a phenomena cannot be overhyped. We're seeing it in a very tactical level in the amount of vulnerabilities that are out there, and how fast we need to patch them. That's what we're doing today. As we move forward, we need to change that paradigm, and we're working on this in different buckets. The last one is actually running these models on our own software, to make sure that we can simulate, imagine, and get ahead of the curve before attackers do it.

Speaker #3: So that's sort of the story of where we are right now. I think that in some way, some of the frontier models may be hyped, but the phenomena is a phenomena cannot be overhyped.

Speaker #3: So we're seeing it in a very tactical level in the amount of vulnerabilities that are out there. And how fast we need to patch them.

Speaker #3: And so that's what we're doing today. But as we move forward, we need to change that paradigm and we're working on this in different in different buckets.

Nadav Zafrir: That's what we're doing today. As we move forward, we need to change that paradigm, and we're working on this in different buckets. The last one is actually running these models on our own software, to make sure that we can simulate, imagine, and get ahead of the curve before attackers do it.

Speaker #3: The last one is actually running these models on our own software to make sure that we can simulate imagine and get ahead of the curve before attackers do it.

Speaker #1: All right. Next up is John DeFucci, followed by Brian Essex.

Kip Meintzer: All right. Next up is John DiFucci, followed by Brian Essex.

Speaker #2: Thanks, Gabe. Nadav, I sort of have a high-level question, I think. I mean, Check Point's always been a respected technology company and a thought leader in its field.

John DiFucci: Thanks, Gabe. Nadav, I sort of have a high-level question, I think. Check Point's always been a respected technology company and a thought leader in its field. Long before the term platformization came out, I remember your predecessor talking about the Infinity Platform, and I know it became products too, but it was-

Speaker #2: Long before the term platformization came out, I I remember your predecessor talking about the infinity platform. And I know it became products too, but it was a platform.

John DiFucci: a platform. It was the first time we had heard about one company working to secure an enterprise from top to bottom. Even today, partners in the field acknowledge the strength of the technology at Check Point, but there seems to be a customer perception of the sort of dreaded word, legacy, even though your install base is really loyal and pretty much Check Point diehards. I guess, what is it, other than hiring a lot of new go-to-market people, that you think has to be done to change that perception? Because that's really important. That's hard. Is the issue really just not enough feet on the street?

Speaker #2: And it was the first time we had heard about one company working to secure an enterprise from top to bottom. Even today, partners in the field acknowledge the strength of the technology at Check Point, but there seems to be a customer perception of the sort of dreaded word legacy even though you're installed a really loyal and pretty much Check Point diehards.

John DiFucci: Even today, partners in the field acknowledge the strength of the technology at Check Point, but there seems to be a customer perception of the sort of dreaded word, legacy, even though your install base is really loyal and pretty much Check Point diehards. I guess, what is it, other than hiring a lot of new go-to-market people, that you think has to be done to change that perception? Because that's really important. That's hard. Is the issue really just not enough feet on the street?

Speaker #2: I guess what is it other than hiring a lot of new go-to-market people that you think has to be done to change that perception?

Speaker #2: Because that's really important. That's hard. And is the issue really just not enough feet on the street?

Speaker #3: No, I think it goes beyond that. Not enough feet on the street is one thing, and that's why we started this campaign. And now, this is a second phase of the go-to-market changes that we announced last time.

Nadav Zafrir: No, I think it goes beyond that. Not enough feet on the street is one thing, and that's why we started this campaign. This is a second phase of the go-to-market changes that we announced last time. Now that we've stabilized, we're ready to add hundreds of new people based on the new model in the organization or the reorg that we announced. I think second, it's marketing, right? We need to be louder. I really believe that when it comes to this world that we're walking into, this world where on the one hand, security, real security, proactive prevention has never been more important. I think that's our DNA, and I think we can provide real security based on the current paradigm.

Speaker #3: So now that we've stabilized, we're ready to add hundreds of new people based on the new model in the in the organization that or the reorg that we announced.

Speaker #3: I think second, it's marketing, right? So we need to be louder I really believe that when it comes to this world that we're walking into, this this world where on the one hand, security real security proactive prevention has never been more important.

Nadav Zafrir: I think second, it's marketing, right? We need to be louder. I really believe that when it comes to this world that we're walking into, this world where on the one hand, security, real security, proactive prevention has never been more important. I think that's our DNA, and I think we can provide real security based on the current paradigm.

Speaker #3: I think that's our DNA. And I think we can provide real security based on the current paradigm. And at the same time, you know, the announcement of the first AI network firewall, it's a big announcement.

Nadav Zafrir: At the same time, the announcement of the first AI Network Firewall, it's a big announcement. It's taking the firewall and preparing it for the AI era. Not as a standalone, to your point, but as a platform play, and this is where integrating the AI Network Firewall into the AI Defense Plane and having the ability to look at different choke points within the network, not just for observability, but also for enforcement, is a huge advancement. We are seeing the demand for our AI capabilities grow very, very fast. In fact, some of the hiring that we're doing across the globe is because we just can't get to enough customers fast enough with the high demand that we have, because this is a specialized field where you need people, the specialists, that can come in and do all the more technical stuff for our customers.

Speaker #3: It's taking the firewall and preparing it for the AI era—not as a standalone, to your point, but as a platform play.

Speaker #3: And this is where integrating the AI network firewall into the AI defense plane and having the ability to look at different choke points within the network, not just for observability, but also for enforcement, is a huge advancement.

Speaker #3: And we're seeing the demand for our AI capabilities grow very, very fast. In fact, some of the hiring that we're doing across the globe is because we just can't get to enough customers fast enough with the high demand that we have because this is a specialized field where you need people on the specialists that can come in and, you know, do all the more technical stuff for our customers.

Nadav Zafrir: We are seeing the demand for our AI capabilities grow very, very fast. In fact, some of the hiring that we're doing across the globe is because we just can't get to enough customers fast enough with the high demand that we have, because this is a specialized field where you need people, the specialists, that can come in and do all the more technical stuff for our customers.

Speaker #3: And when you bring all these things together, it makes us very optimistic about the future. One thing that I'll say about the platform: yes, consolidation is important, but I think it needs to be an open platform.

Nadav Zafrir: When you bring all these things together, it makes us very optimistic about the future. One thing that I'll say about the platform. Yes, consolidation is important, I think it needs to be an open platform, right? An open platform means that we acknowledge the fact that, number one, the approach should not be a monolithic approach, especially at the enterprise level. That's not going to lead to resilience. Number two, whether we like it or not, a lot of our customers are going to be multi-vendor, and we need to appreciate that and have their security front and center in our policy.

Speaker #3: Right? And so and an open platform means that we acknowledge the fact that number one, from a from a the approach should not be a monolithic approach.

Speaker #3: Especially at the enterprise level, that's not going to lead to resilience. Number two, whether we like it or not, a lot of our customers are going to be multi-vendor, and we need to appreciate that and have their security front and center in our policy.

Nadav Zafrir: That's not going to lead to resilience. Number two, whether we like it or not, a lot of our customers are going to be multi-vendor, and we need to appreciate that and have their security front and center in our policy.

Speaker #3: And so with our unified management, which I think is one of the strongest features that Check Point has, within the next few months, we're going to offer our customers the ability to manage different products and different firewalls, even if there are bigger sys competitors, because at the end of the day, especially in the mythos era, we just don't have the time you know, to take care of things one by one with an SLA of of days and weeks.

Nadav Zafrir: With our unified management, which I think is one of the strongest features that Check Point has, within the next few months, we're going to offer our customers the ability to manage different products and different firewalls, even if they're our fiercest competitors. Because at the end of the day, especially in the Mythos era, we just don't have the time to take care of things one by one with an SLA of days and weeks. We need to be able to see what's coming. We need to be able to understand what the real impact may be. We're using AI to do that, to actually simulate the paths to the vulnerabilities that we're seeing.

Nadav Zafrir: Because at the end of the day, especially in the Mythos era, we just don't have the time to take care of things one by one with an SLA of days and weeks. We need to be able to see what's coming. We need to be able to understand what the real impact may be. We're using AI to do that, to actually simulate the paths to the vulnerabilities that we're seeing.

Speaker #3: We need to be able to see what's coming. We need to be able to understand what the real impact may be. We're using AI to do that, to actually simulate the paths to the vulnerabilities that we're seeing.

Speaker #3: And then we're moving into an automatic remediation capability where whether it's patching or virtual patching or segmenting or segregation within the network, so that at the end of the day, we can have this real proactive prevention-first mentality and at the same time, starts with a new paradigm of autonomous remediation.

Nadav Zafrir: Then we're moving into an automatic remediation capability, whether it's patching, or virtual patching, or segmenting, or segregation within the network, so that at the end of the day, we can have this real proactive prevention first mentality, and at the same time, starts with the new paradigm of autonomous remediation.

Speaker #2: By the way, that makes a ton of sense in and it's a truly unique that open platform to work with others. And it's in the customer's best interest.

John DiFucci: By the way, that makes a ton of sense, and it's truly unique, that open platform to work with others, and it's in the customer's best interest. I think you got to have Roy loosen up that marketing budget a little more and go out there really loud. Have Kip run the marketing, because he's pretty loud.

Speaker #2: I think you’ve got to have Roei loosen up that marketing budget a little more and go out there really loud. Had Kip run the marketing because he’s pretty loud.

Speaker #3: Yeah. Yeah. No, I totally agree. I I totally agree. And it's some of it is already happening. Some of it is work in progress.

Nadav Zafrir: Yeah. No, I totally agree. I totally agree, some of it is already happening. Some of it is work in progress. I think we're starting to see the impact. We're starting to see that turn into the funnel. As Roei said, we're already seeing a very strong Q4 ahead of us.

Speaker #3: And I I think we're starting to see the impact. We're starting to see that the turn into the into the funnel. And as Roy said, we're already seeing a a very strong Q4 ahead of us.

Speaker #2: Thank you.

John DiFucci: Thank you.

Speaker #1: All right. Thank you, John. Next up is Brian Essex with JP Morgan.

Kip Meintzer: All right. Thank you, John. Next up is Brian Essex with JPMorgan.

Speaker #4: Great. Thanks, Kip. And thanks for taking the question. Nadav, I wanted to to follow up on some of that commentary, particularly with regard to platform and your AI firewall.

Brian Essex: Great. Thanks, Kip, and thanks for taking the question. Nadav, I wanted to follow up on some of that commentary, particularly with regard to platform and your AI Firewall. I think it's great to see the innovation of the platform. I think that's another thing that we've heard customers are really focused on is the rate of innovation to build that platform. Would love to know, what is your vision in terms of how you see the AI Firewall technology stacking up against what seems to be an emerging AI gateway market?

Speaker #4: And I think it's great to see the innovation of the platform. I think that's another thing that we've heard customers are really focused on is the rate of innovation.

Speaker #4: To kind of build that platform. Would love to know, you know, what is your vision in terms of how you see the AI firewall technology stacking up with against what seems to be an emerging you know, AI gateway market.

Speaker #4: Are you targeting platforms that that span I mean, I guess are you thinking about the expanding the platform to span across broader observability, tracing, performance optimization, cost control features, which is one thing that I think sales are very focused on.

Brian Essex: Are you targeting platforms that span? I guess, are you thinking about expanding the platform to span across broader observability, tracing, performance optimization, cost control features, which is one thing that I think sales are very focused on. Do you intend to stick towards more security and governance? It seems like maybe some of your peers are looking at things more of in a consolidated, broader observability and security platform, would love to know what your focus is going forward.

Speaker #4: Or do you intend to like stick towards more security and governance? It seems like maybe some of your peers are looking at things more of an a consolidated broader observability and security platform, but would love to know what your focus is going forward.

Speaker #3: Yeah. So I I want to start by saying that we need some I would say humility as we try to understand where this is going.

Nadav Zafrir: Yeah. I want to start by saying that we need some, I would say, humility as we try to understand where this is going. There are different possible futures

Nadav Zafrir: Yeah. I want to start by saying that we need some, I would say, humility as we try to understand where this is going.

Speaker #3: There are different possible futures. In in where this is going. And I think we we must look at it from from different perspectives. One perspective, which I spoke about at length, is the the attacker's perspective.

Nadav Zafrir: There are different possible futures in where this is going. I think it must look at it from different perspectives. One perspective, which I spoke about at length, is the attacker's perspective. The second perspective is different industries and how they are adopting AI. Again, a lot of hype, it's a process. There's a lot of trial and error within this process of adoption of AI, whether it's sort of the bread and butter that all of us have already.

Nadav Zafrir: in where this is going. I think it must look at it from different perspectives. One perspective, which I spoke about at length, is the attacker's perspective. The second perspective is different industries and how they are adopting AI. Again, a lot of hype, it's a process. There's a lot of trial and error within this process of adoption of AI, whether it's sort of the bread and butter that all of us have already. It's the Poe usage of AI. Moving into independent agents that in the beginning take over some of the human, more redundant, mundane, day-to-day tasks. Over time, becoming more and more independent and autonomous. That's where the game changes, not only from the attacker's perspective, but also from the attack surface. Having said all that, our mission remains The securing the AI adoption journey.

Speaker #3: The second perspective is different industries and how they are adopting AI. So again, a lot of hype, but it's a process. And there's a lot of trial and error with it within this process of adoption of AI, whether it's sort of the bread and butter that all of us have already.

Speaker #3: It's the employee usage of AI, moving into independent agents that in the beginning take over some of the human more redundant mundane day-to-day tasks.

Nadav Zafrir: It's the Poe usage of AI. Moving into independent agents that in the beginning take over some of the human, more redundant, mundane, day-to-day tasks. Over time, becoming more and more independent and autonomous. That's where the game changes, not only from the attacker's perspective, but also from the attack surface. Having said all that, our mission remains The securing the AI adoption journey.

Speaker #3: But over time, becoming more and more independent and autonomous and that's where the game changes not only from the attacker's perspective, but also from the attack surface.

Speaker #3: Having said all that, our mission remains the secure AI securing the AI adoption journey. And the way we approach this is with our customers.

Nadav Zafrir: The way we approach this is with our customers. We have a design partner program with different industries, with different verticals. Health is different than finance, and finance is different than energy, and energy is different than production and logistics. For each one of them, we have to sit down with our customers, understand where they are going in the next couple of years, simulate what kind of new threats emerge from that, and coming up with the right mechanisms to govern, to control, and to secure these new capabilities, so that on the one hand they can deploy it, but from a different perspective, they can do it with security in mind. Now, being very direct to your question, Brian, we are focusing on the security part. Security is becoming much broader than just observability.

Speaker #3: And so we have a design partner program with different with different industries, with different verticals, because health is different than finance. And finance is different than energy.

Speaker #3: And energy is different than production and logistics. For each one of them, we have to sit down with our customers, understand where they're going in the next couple of years, simulate what kind of new threats emerge from that, and come up with the right mechanisms to govern, to control, and to secure these new capabilities. So that, on the one hand, they can deploy it, but on the other, from a different perspective, they can do it with security in mind.

Nadav Zafrir: For each one of them, we have to sit down with our customers, understand where they are going in the next couple of years, simulate what kind of new threats emerge from that, and coming up with the right mechanisms to govern, to control, and to secure these new capabilities, so that on the one hand they can deploy it, but from a different perspective, they can do it with security in mind. Now, being very direct to your question, Brian, we are focusing on the security part. Security is becoming much broader than just observability.

Speaker #3: Now, they're being very direct to your question, Brian. We are focusing on the security part, but security is is becoming much broader than than just observability, observability in many ways when you think about the next the next paradigm or the emerging paradigm.

Nadav Zafrir: Observability, in many ways, when you think about the next paradigm or the emerging paradigm, doesn't really matter. Going to the SOC or to the CISO or to the VP of engineering and giving them a list of things that may go wrong is not going to help them. We need to be able to autonomously remediate. We are building those capabilities, but at the end of the day, we are not looking to go beyond the security level. We think security is very broad, very deep. We are building very deep capabilities. When you think about controlling this from a cost perspective, that is not necessarily where we are going. Of course, when you have the observability, you can add that to it.

Speaker #3: It doesn't really matter because going to the sock or to the CISO or to the VP of engineering and giving them a list of things that may go wrong is not going to help them.

Speaker #3: We need to be able to autonomously remediate. And so we're building those capabilities, but at the end of the day, we're not looking to go beyond the security level.

Nadav Zafrir: We need to be able to autonomously remediate. We are building those capabilities, but at the end of the day, we are not looking to go beyond the security level. We think security is very broad, very deep. We are building very deep capabilities. When you think about controlling this from a cost perspective, that is not necessarily where we are going. Of course, when you have the observability, you can add that to it.

Speaker #3: We think security is very broad, very deep. We're building very deep capabilities, but when you think about controlling this from a cost perspective, that's not that's not necessarily where we're going.

Speaker #3: Of course, when you have the observability, you can add that to it.

Kip Meintzer: All right.

Speaker #4: Super helpful. Thank you.

Brian Essex: Super helpful. Thank you.

Speaker #1: Thanks, Brian. Next up is Todd Weller followed by Adam Tyndall.

Kip Meintzer: Thanks, Brian. Next up is Todd Weller, followed by Adam Tindall.

Speaker #5: Thanks. Nadav, I'd love to get your perspectives on potential AI tailwinds for the network security business. You know, there are different kinds of angles to this.

Todd Weller: Thanks. Nadav, would love to get your perspectives on potential AI tailwinds for the network security business. There's different kind of angles to this. AI application and infrastructure deployments related to that, AI data centers, and there's an angle around potentially increasing traffic volumes and spectrum requirements. How do you think about framing those dimensions? How do you think about magnitude and timing of those opportunities? Within your core large enterprise base today, are you seeing any of that, and where do you think we are?

Speaker #5: There's, you know, AI application and infrastructure deployments related to that, AI data centers, and then there's an angle around, you know, potentially increasing traffic volumes and inspection requirements.

Speaker #5: So how do you think about framing those dimensions? How do you think about magnitude and timing of those opportunities? And then within your kind of core large enterprise base today, what are you seeing any of that and where where do you think we are?

Speaker #3: Yeah, I think that to your point about the the tailwinds for for for security, I would look at it from I think there are two different aspects that are relevant to look at.

Nadav Zafrir: Yeah, I think that, to your point about the tailwinds for security, I would look at it from, I think there are two different aspects that are relevant to look at. The first one is how the network is a part of the overall AI Defense Plane. The overall AI Defense Plane is on the device, it's in the cloud, it's in workloads, it's in the DevOps. The network is at the heart of that and needs to play within that. That's why the introduction of the AI Network Firewall as a part of the overall AI Defense Plane is so important. I think that's going to have a meaningful tailwind for the industry and for Check Point specifically. With thinking about that, it's not just about securing, it's also about managing.

Speaker #3: The first one is how the network is a part of the overall AI defense plane. And the overall AI defense plane is on the device, it's in the cloud, it's in workloads, it's in the DevOps, and the network is at the heart of that and needs to play within that.

Speaker #3: And that's why the introduction of the AI network firewall as a part of the overall AI defense plane is so important. And I think that's going to have a meaningful, you know, tailwind for the industry and for Check Point specifically.

Nadav Zafrir: That's why the introduction of the AI Network Firewall as a part of the overall AI Defense Plane is so important. I think that's going to have a meaningful tailwind for the industry and for Check Point specifically. With thinking about that, it's not just about securing, it's also about managing.

Speaker #3: With thinking about that, it's not just about managing. So our AI-driven unified management, which is becoming an open platform and allows us to manage different components and different vendors, different firewalls, connected as a platform to the continuous threat exposure management, which gives us the ability to understand the intelligence from the outside in—the attacker's path—and combining that is one aspect.

Nadav Zafrir: Our AI-driven unified management, which is becoming an open platform and allows us to manage different components and different vendors, different firewalls, connected as a platform to the Continuous Threat Exposure Management, which gives us the ability to understand the intelligence from the outside in, the attacker's path, and combining that is one aspect. The second aspect is emerging new capabilities that enterprises are building. For example, some enterprises have already invested and some are thinking about investing in AI factories, right? Localized capabilities, sort of going back on-prem, whether it's because of privacy issues or cost issues. We're also seeing a plethora of rising investments in different parts of the world, regarding data sovereignty, which is another issue. Finally, very specific data centers that are going to be either for inference or for training, which require different capabilities.

Speaker #3: The second aspect is emerging new capabilities that enterprises are building. So for example, some enterprises are have already invested and some are thinking about investing in in in AI factories, right?

Nadav Zafrir: For example, some enterprises have already invested and some are thinking about investing in AI factories, right? Localized capabilities, sort of going back on-prem, whether it's because of privacy issues or cost issues. We're also seeing a plethora of rising investments in different parts of the world, regarding data sovereignty, which is another issue. Finally, very specific data centers that are going to be either for inference or for training, which require different capabilities.

Speaker #3: So localized capabilities—sort of going back on-prem, whether it's because of privacy issues or cost issues—we're also seeing a plethora of rising investments in different parts of the world regarding data sovereignty, which is another issue.

Speaker #3: And finally, very specific data centers that are going to be either for inference or for training which require different capabilities. If you remember a few months ago, we announced the that we're working with NVIDIA to embed our firewall capability within the GPU level because in those data centers, latency is so important and east-west traffic is so much more imminent.

Nadav Zafrir: If you remember, a few months ago, we announced that we're working with NVIDIA to embed our firewall capability within the GPU level, because in those data centers, latency is so important, and east-west traffic is so much more imminent, that we literally need to do it at the hardware level in order to remain very efficient. That's the second tailwind that we're seeing.

Speaker #3: That we literally need to do it at the hardware level. In order to remain very, very efficient. And so that's the second tailwind that we're seeing.

Speaker #3: However, to be transparent about that.

Speaker #1: When you're ready to go, Kathleen.

Kip Meintzer: Are you ready to go, Kathleen?

Speaker #3: That is that is something that we're seeing in in a in a little bit of a further future. So 2027, we need to start doing that.

Nadav Zafrir: That is something that we're seeing in a little bit of a further future. 2027, we need to start seeing that.

Speaker #1: All right. Thanks, Todd. Next up is Adam Tyndall followed by Shauli Al.

Kip Meintzer: All right. Thanks, Todd. Next up is Adam Tindall, followed by Shaul Eyal.

Speaker #4: Okay. Thanks, Kim. Nadav, I wanted to ask on the business outlook you're reiterating the fiscal year guidance this year. And if I backed into the implied Q4, you're going to need to do about an $800 million revenue quarter at the midpoint of guidance.

Adam Tindall: Okay, thanks, Kev. Nadav, I wanted to ask on the business outlook. You're reiterating the fiscal year guidance this year. If I backed into the implied Q4, you're going to need to do about an $800 million revenue quarter at the midpoint of guidance. I was going back through the model. I've never seen that. That would be a record quarter. You also mentioned earlier that guidance doesn't take the ramp into consideration. I know it's more of a Roei question on guidance, but I wanted to hear from you the debate over setting that expectation today and what markers you're looking at for Q4. Roei, any comments that you could give us on billings? I know we kind of lost track. We were thinking 6% to 7% for the year entering the year.

[Analyst]: Okay, thanks, Kev. Nadav, I wanted to ask on the business outlook. You're reiterating the fiscal year guidance this year. If I backed into the implied Q4, you're going to need to do about an $800 million revenue quarter at the midpoint of guidance. I was going back through the model. I've never seen that. That would be a record quarter.

Speaker #4: And I was going back through the model. I've never never seen that. That would be a record quarter. You also mentioned earlier that guidance doesn't take the ramp into consideration.

[Analyst]: You also mentioned earlier that guidance doesn't take the ramp into consideration. I know it's more of a Roei question on guidance, but I wanted to hear from you the debate over setting that expectation today and what markers you're looking at for Q4. Roei, any comments that you could give us on billings? I know we kind of lost track. We were thinking 6% to 7% for the year entering the year.

Speaker #4: So, I know it's more of a ROI question on guidance, but I wanted to hear from you the debate over setting that expectation today and what markers you're looking at for Q4.

Speaker #4: And Roi, any comments that you could give us on billings? I know, you know, we kind of lost track. We were thinking 6 to 7% for the year entering the year.

Speaker #4: We've got this, you know, very difficult comp in Q3 that I think some are struggling to model. So just correct us a little bit on the billings trajectory as well.

Adam Tindall: We've got this very difficult comp in Q3 that I think some are struggling to model. Just correct us a little bit on the billings trajectory as well. Thanks, guys.

[Analyst]: We've got this very difficult comp in Q3 that I think some are struggling to model. Just correct us a little bit on the billings trajectory as well. Thanks, guys.

Speaker #4: Thanks, guys.

Speaker #5: Roi, you want to say you ou want you want to start and then I'll stop.

Nadav Zafrir: Roei, you want to start?

Speaker #4: I'll start. Yeah. So definitely alright in terms of your calculation for Q4, it's around 6 and a half percent growth for Q4 in order to meet the the be in the midpoint.

Roei Golan: Yeah, I'll start. Definitely you are right in terms of your calculation for Q4. It's around 6.5% growth for Q4 in order to be in the midpoint. I mentioned during my script that we do expect to be back to positive growth in product revenues. I remind you, the main headwind that we see today on our revenues, the decline in revenues is coming from the product revenues, which declined this quarter for 14%, expected to be similar levels in Q3. In Q4, we are expecting to be back to green, to be positive in product. That's one aspect. I remind you also that Q4 is a more product-driven quarter. The portion of product out of the total revenues is bigger than any other quarter in the year. That's one aspect.

Speaker #4: I mentioned during my script that we do expect to be back to positive growth in product revenues. I remind you the main Edwind that we see today on our revenues the decline in revenues is coming from the product revenues which is declined this quarter for 14% expecting to be similar levels in Q3.

Speaker #4: And in Q4, we are expecting to be back to green to be to be to be positive in product. So that's one aspect that definitely is and I remind you also that Q4 is a more product driven quarter.

Roei Golan: In Q4, we are expecting to be back to green, to be positive in product. That's one aspect. I remind you also that Q4 is a more product-driven quarter. The portion of product out of the total revenues is bigger than any other quarter in the year. That's one aspect.

Speaker #4: The portion of product out of the total revenues is bigger than any other quarter in the year. So that's one aspect. And and again, I think that when we are looking on the funnel for Q4, I know that it's a it's a it's much higher than what we what we guided for Q3.

Roei Golan: I think that when we are looking on the funnel for Q4, I know that it's much higher than what we guided for Q3, I mean, this growth, but when we are looking on the funnel, on the qualified deals, I'm talking about qualified deal, I'm not talking about now potential stuff. We do see much better funnel, much better pipeline for Q4. We went through with our sales leader on all the large deals. Some of them are deals that have been pushed from Q3 to Q4. That is expected to be pushed because there might be some that will be placed in Q3, but you know Q3 is more tricky because of the summer, so we took a more conservative view approach that some of this significant deal will be pushed to Q4.

Speaker #4: I mean, this growth, but when we are looking on the on the on the funnel, on the qualified deals, I'm talking about qualified deal.

Speaker #4: I'm not talking about now potential potential stuff. We do see much better funnel, much better pipeline. For Q4, and again, we went through with our sales leader on on all the large deals, everything it's and again, some of them are deals that been pushed from Q3 to Q4 that again is expected to be pushed because there might be some some that will be will be placed in Q3, but you know, Q3 is more tricky because of the summer.

Roei Golan: We went through with our sales leader on all the large deals. Some of them are deals that have been pushed from Q3 to Q4. That is expected to be pushed because there might be some that will be placed in Q3, but you know Q3 is more tricky because of the summer, so we took a more conservative view approach that some of this significant deal will be pushed to Q4.

Speaker #4: So we took a more concert conservative here approach that some of of these significant deal will be pushed to Q4. So definitely it's a high bar in terms of Q4.

Roei Golan: Definitely it's a high bar in terms of Q4, but when I'm looking on the internal metrics, there is the support for that. You ask about the billing. You're right, when we started, I'm not giving any guidance for billing, but when I was asked about billing for the year, when we started the year, it was our midpoint, missing a digit, and we talked about 5%, 6%. When we came back on May, we talked again, because of the higher disruption that we did see, it resulted more back-end loaded deal. We do see it in the numbers for Q2. When I'm looking on H2, I don't want to give any specific guidance, but definitely I do see much better billings in Q4 in terms of growth. Q3, you are right that the comparables are tougher.

Speaker #4: But when I'm looking on the internal metrics, there is the the support for that. And you ask about the billing. So you're right. When we started, I'm not giving any guidance for billing, but I was asked about billing for for the year when we started the year.

Speaker #4: It was our midpoint mid mid single digit. We talked about five, six percent. When we came back on May, we told again, because of of the higher disruption that we we did see, it resulted more back and lower the deal.

Roei Golan: When we came back on May, we talked again, because of the higher disruption that we did see, it resulted more back-end loaded deal. We do see it in the numbers for Q2. When I'm looking on H2, I don't want to give any specific guidance, but definitely I do see much better billings in Q4 in terms of growth. Q3, you are right that the comparables are tougher.

Speaker #4: And we do see it in the numbers for Q2. And when I'm looking on H2, I don't want to give any specific guidance, but definitely I do see much better billings in Q4 in terms of growth.

Speaker #4: Q3, you are right that the comparable are tougher. So there might be so there as we said, Q3 is going to be might be more challenging with billing.

Roei Golan: There might be, so as we said, Q3 is going to be, might be more challenging with billing. Q4, definitely we are expecting, again, if we're looking on the funnel, on large deals, definitely we expect to be a strong billing quarter.

Speaker #4: But Q4 definitely we are expecting again, if we are looking on the funnel on on large deals expect to be a strong billing quarter.

Speaker #3: Yeah. Just to just to add to that, Adam, remember that when we spoke in our last earnings we were very transparent about the reorg that we did in our go-to-market org.

Nadav Zafrir: Yeah, just to add to that, Adam, remember that when we spoke in our last earnings, we were very transparent about the reorg that we did in our go-to-market org. That's going according to plan. That's why we think Q3 is a trough, when we look at what's happening in the future in Q4, like Roei said, we're seeing a much better outcome and that's why we are maintaining the guidance. With regards to the hiring, the reason we're not taking that into consideration is the natural ramp up, right? It's the second phase. In fact, when you think about it now, because this is a company-wide effort and many of our folks beyond selling need to recruit and onboard. Actually, we're not going to see the impact of the hiring in 2026.

Speaker #3: That's going according to plan. And so that's why we think Q3 is the trough and and when we look at what's happening in the future in Q4, we're like Roi said, we're we're seeing a much better outcome.

Speaker #3: And that's why we are maintaining the guidance. With regards to the hiring the reason we're not taking that into consideration is the natural ramp up, right?

Nadav Zafrir: With regards to the hiring, the reason we're not taking that into consideration is the natural ramp up, right? It's the second phase. In fact, when you think about it now, because this is a company-wide effort and many of our folks beyond selling need to recruit and onboard. Actually, we're not going to see the impact of the hiring in 2026.

Speaker #3: So it's the second phase. And in fact, when you think about it, now because this is a a company wide effort and many of our folks beyond selling need to recruit.

Speaker #3: And on board. And so actually we're not going to see the impact of the hiring in 2026. We're only going to see the impact of the hiring in 2027, right?

Nadav Zafrir: We're only going to see the impact of the hiring in 2027, right? Some of it in Q1 and hopefully more of it in Q2, it's the prudent thing to do, and it's a part of the plan and a part of the strategy that we spoke about last time. For us, hiring hundreds of new sellers is obviously a great investment, and we're investing in our future. Last year we spoke about hiring about 500 new R&D folks to start doubling down on the future products for the AI era. Now we feel we're ready with some of the products. We've done the reorg, and we're ready to ramp up. As you said, that's only going to have an impact in 2027.

Speaker #3: So some of it in Q1 and hopefully more of it in Q2. But it's the but it's the prudent thing to do. And it's and it's a part of the plan and a part of the strategy that we spoke about last time.

Speaker #3: So you know, and for us, hiring hundreds of new sellers is obviously a great investment. And we're investing in our future. So you know, last year we spoke about hiring about 500 new R&D folks.

Speaker #3: To start doubling down on the future products for the AI era. Now we feel we're ready with some of the products. We've done the reorg and we're ready to ramp up.

Speaker #3: But as you said, that's only going to have an impact in 2027.

Speaker #4: That's one more comment about billing, Adam. I think it's important to say it here. I understand that you're following billing. It's important for cash flow and stuff, but it's not the only metric that we are care.

Roei Golan: Just one more comment about billing, Adam. I think it's important to say it here. I understand that you're following billing, it is important for cash flow and stuff, it's not the only metric that we are looking on. We are looking on new business. We are looking on RPO, which is, I mentioned it today, with bookings. I can give you an example. This quarter, the billing was affected. I didn't mention this script, because again, I thought that probably I would be asking about it. Again, the billing this quarter affected, for example, from large deal that was renewed. It's not only renewal, it's renewal and new business that last year we billed annually and this year we billed quarterly. This alone have an effect of 2 points on our billing this quarter, just the moving from annually to quarterly.

Speaker #4: We are looking on new business. We are looking on RPO, which is I mentioned it today, rebookings. I can give you an example. This quarter, the billing was affected.

Roei Golan: This quarter, the billing was affected. I didn't mention this script, because again, I thought that probably I would be asking about it. Again, the billing this quarter affected, for example, from large deal that was renewed. It's not only renewal, it's renewal and new business that last year we billed annually and this year we billed quarterly. This alone have an effect of 2 points on our billing this quarter, just the moving from annually to quarterly.

Speaker #4: I didn't mention this script, but because I I again, I I thought that it's not I probably I would I would be asking about it, but again, the billing this quarter affected for example, from large deal large deal that was renewed.

Speaker #4: It's not only renewal, it's renewal and new business that last year we built annually and this year we build quarterly. This alone alone have an effect of two points on our billing this quarter.

Speaker #4: Just the moving from annually to quarterly. And we are flexible with that. I mean, it's a large deal, very large deal with new business.

Roei Golan: We are flexible with that. It's a large deal, very large deal with new business. You don't see it in the billing because we are billing it quarterly. I approved the quarterly billing on that aspect.

Speaker #4: You don't see it in the billing because we are we are billing it quarterly. We approved I approved the quarterly billing on that persp on that aspect.

Speaker #4: But again, if we would build it annually, probably our billing will look much better for this year, but it wouldn't change the fact that our RPO grew by by 7%.

Nadav Zafrir: Again, if we would bill it annually, probably our billing will look much better for this year, it wouldn't change the fact that our RPO grew by 7%. I totally understand the importance of billing, and it gives you some kind of prediction on what's going on in the business. Definitely, it's not the only metric that we are following.

Speaker #4: So I totally understand the importance of billing, and it gives you some kind of prediction of what's going on in the business. But definitely, it's not the only—it's not the only metric that we are following.

Speaker #1: All right, guys. Thank you, Adam. Next up is Shauli Al. And that'll be followed by Shrenik Katharas from Baird.

Kip Meintzer: All right, guys. Thank you, Adam Tindall. Next up is Shaul Eyal, and that'll be followed by Shrenik Kothari from Baird.

Speaker #2: Thank you. Hi, good afternoon, guys. Maybe Roi orn it up still double clicking on this headcount. When we're saying hundreds of of new people, what is it, 200, 300, and and how do you think about it geographically?

Shaul Eyal: Thank you. Hi, good afternoon, guys. Maybe Roei or Nadav still double-clicking on this headcount. When we're saying hundreds of new people, what is it, 200, 300? How do you think about it geographically.

Speaker #2: From that perspective.

Shaul Eyal: From that perspective?

Speaker #3: Yeah. So I I'll start, Roi. You can you can chime in. When we say hundreds, yes, we're talking about you know, by the end of the year, we need to hire approximately for our go-to-market of a headcount of about 300 more individuals.

Nadav Zafrir: Yeah. I'll start, Roei, you can chime in. When we say hundreds, yes, we're talking about by the end of the year, we need to hire approximately for our go-to-market, a headcount of about 300 more individuals. When you look at it from a percentage perspective, it's a meaningful percentage at our size. When you think about it geographically, honestly, it's pretty globally spread. I wouldn't say that it's just one area. America, Western Europe, a little bit more, but it's across the globe, APAC, etc. Some of it is at the frontline sellers, what we call the generalists, but also specialists. For example, we spoke about AI. We're seeing the funnel growing very substantially. In some cases, we just don't have the people out there that can actually go out to customers and do the POCs.

Speaker #3: When you look at it from a percentage perspective, it's it's a meaningful percentage at at our at our size. When you think about it geographically, honestly, it's pretty you know, globally spread.

Speaker #3: So I wouldn't say that it's just one area. You know, the Amer America, Western Europe, a little bit more, but it's but it's across the globe.

Nadav Zafrir: I wouldn't say that it's just one area. America, Western Europe, a little bit more, but it's across the globe, APAC, etc. Some of it is at the frontline sellers, what we call the generalists, but also specialists. For example, we spoke about AI. We're seeing the funnel growing very substantially. In some cases, we just don't have the people out there that can actually go out to customers and do the POCs.

Speaker #3: You know, APAC, etc. Some of it is at the at the frontline sellers that what we call the generalists. And but but also specialists.

Speaker #3: So for example, we spoke about AI. We're seeing the funnel growing very substantially. In some cases, we just don't have the people out there that can actually go out to customers and do the POCs.

Speaker #3: And and and so we have to ramp up that very, very fast. Obviously, getting you know, just getting the heads is not enough. We need to get the right people on board.

Nadav Zafrir: We have to ramp up that very, very fast. Obviously, just getting the heads is not enough. We need to get the right people on board that are also ready for this future generation of buyers, and the new paradigm that's emerging. It's an opportunity, not just to get more headcount, but also to revitalize and get new blood into the system. That's exactly what we're doing. It's a company-wide effort. Again, we launched a campaign, and we hope to be able to get to the right people that want to join us for this ride.

Speaker #3: There are also ready for this future generation of buyers and the new paradigm that that's emerging. And so it's an opportunity. Not just to get more headcount, but also to revitalize and get new blood into the system.

Speaker #3: And that's exactly what we're doing. It's a it's a company wide effort. Again, we are within we we launched the campaign and we hope to be able to be able to get to the right people that want to join us for for this ride.

Speaker #2: Thank you.

Shaul Eyal: Thank you.

Speaker #1: All right. Next up is Shrenik followed by Joshua Tilton.

Kip Meintzer: All right. Next up is Shrenik, followed by Joshua Tilton.

Shrenik Kothari: Great. Thanks for taking my question. Totally understand the internal execution disruption around go-to-market. Just on your specific comments on firewall appliance demand softer than you expected, right? Some of the peers are seeing stronger firewall demand, AI infrastructure-driven product growth. Just, Nadav and Roei, can you help unpack that a bit? What are your customers actually doing? Are they extending the useful life without refreshing right now? Are they shifting focus towards more AI-centric enforcement, which is sort of elongating cycles? Just, are these pushes primarily rep transition-driven, or are customers fundamentally reevaluating the scopes and the architecture in the AI era as well?

Speaker #2: Great, thanks for taking my question. So, I totally understand the internal execution disruption around go-to-market. But just on your specific comments on firewall appliance demand being softer than you expected, right?

Speaker #2: And some of the peers are are seeing stronger firewall demand AI infrastructure driven product growth. So just Nadav and Roi, can you help unpack that a bit?

Speaker #2: Like what are your customers actually doing? Are they extending the the useful life without refreshing right now? Are they shifting focus towards more AI centric enforcements, which is sort of elongating cycles?

Shrenik Kothari: What are your customers actually doing? Are they extending the useful life without refreshing right now? Are they shifting focus towards more AI-centric enforcement, which is sort of elongating cycles? Just, are these pushes primarily rep transition-driven, or are customers fundamentally reevaluating the scopes and the architecture in the AI era as well?

Speaker #2: Just just are these pushes primarily rep transition driven or are customers fundamentally revaluating the the scopes and and the architecture in in the AI era as well?

Nadav Zafrir: Roei, you want to start or you want me to?

Speaker #3: Roi, you want to start or you want me to?

Speaker #4: I I'll start. So I think it's a combination, Shrenik. I think it's a combination of first, I think, internal disruption that affecting our execution that again, we are we are our execution in Q2.

Roei Golan: I'll start. I think it's a combination, Shrenik. I think it's a combination of sales, I think internal disruption that's affecting our execution. Again, our execution in Q2, you've seen the numbers, was not what we wanted when we started the year. I would say it's a combination of internal disruption and definitely also behavior of customers that I think, again, some of them, we are looking on the memory cost, and it's something that I'm spending significant part of my time for, to find a way to make sure that we have the enough inventory to give. By the way, it's not only for appliances, it's also for internal users. Again, probably it's a combination. I don't know. I don't think there is no clear answer for that.

Speaker #4: I mean, we've seen the numbers was was was not the the what we we wanted in the in the when we started the year.

Speaker #4: But I would say it's a combination of internal disruption and definitely also behavior of customers that I think again, some of them you know, we are looking on the memory cost.

Roei Golan: I would say it's a combination of internal disruption and definitely also behavior of customers that I think, again, some of them, we are looking on the memory cost, and it's something that I'm spending significant part of my time for, to find a way to make sure that we have the enough inventory to give. By the way, it's not only for appliances, it's also for internal users. Again, probably it's a combination. I don't know. I don't think there is no clear answer for that.

Speaker #4: I mean, it's something that I'm spending significant part of my time for for you know, to to find a way, you know, to make sure that we have the enough inventory to to give to our to to by the way, it's not only for appliances, it's also for internal uses.

Speaker #4: So again, probably it's a combination. I don't I don't think it's a clear, you know, there is no clear answer for that. But definitely when I'm looking and I think it's mainly when I'm looking on on our business, I think it's mainly internally.

Roei Golan: Definitely when I'm looking, and I think it's mainly when I'm looking on our business, I think it's mainly internally. Mainly internally because I'm looking on the funnel, I'm looking on deals, I'm looking that our go-to-market being stabilized, and I'm looking that we are now, we have very interesting opportunities, qualified opportunities that located in H2, mainly in Q4, that makes us feel more positive that it's more internal and less external.

Speaker #4: Mainly internally because I'm looking on the funnel. I'm looking on deals. I'm looking that our go-to-market being stabilized. And I'm looking that we are now we have very interesting opportunities qualified opportunities that located in second half of the year mainly in Q4 that makes us feel more positive that it's more internal and less and less external.

Speaker #4: Yeah, I I would say that

Nadav Zafrir: Yeah. I would say that the demand is there, right? We're seeing it. You're seeing it with our competition as well. That's why we're so excited about the announcement of the AI Network Firewall today. The unified management that we're coming out with, and hopefully the fruits of a lot of investment that we put into this in the last couple of years will start to show. Then, the optimism comes from what we see already in Q4, and that's why we're doubling down also to get ready for a higher growth in 2027. Having said all that, from the customer's perspective Look, I think that a top of mind for them right now is, like I said, first of all, go back to basics and fundamentals. This era calls for patching at an unprecedented pace. That's just one example.

Speaker #3: I think that the demand is there, right? We're seeing it, and you're seeing it with our competition as well. That's why we're so excited about the announcement of the AI Network Firewall today.

Speaker #3: The unified management that we're coming out with and hopefully the the fruits of a lot of investment that we put into this in the last couple of years.

Speaker #3: We'll start to show. And then the optimism comes from what we see already in Q4. And that's why we're doubling down also to get ready for a higher growth in in 2027.

Nadav Zafrir: Then, the optimism comes from what we see already in Q4, and that's why we're doubling down also to get ready for a higher growth in 2027. Having said all that, from the customer's perspective Look, I think that a top of mind for them right now is, like I said, first of all, go back to basics and fundamentals. This era calls for patching at an unprecedented pace. That's just one example.

Speaker #3: Having said all that, from the customer's perspective, look, I think that top of mind for them right now is, like I said, first of all, go back to basics and fundamentals.

Speaker #3: You know, this this era calls for patching at an unprecedented pace. That's just one example. And so we're we're also building the the capabilities to do that with them and for them, not just for our own products, but again, we have to have the total security in mind.

Nadav Zafrir: We're also building the capabilities to do that with them and for them, not just for our own products, but again, we have to have the total security in mind. They're also getting a lot of pressure from the executives and the board to adopt AI, whether it's to allow employees to use it or new applications and agents that are now running. It is a transition time. What I believe is that it calls for us to continue doing what we've always done, which is prevention first, but at the same time, really changing the industry.

Speaker #3: They're also getting a lot of pressure from the executives and the board to adopt AI, whether it's to allow employees to use it or for new applications and agents that are now running within the—so it is a transition time.

Speaker #3: What I believe is that it calls for us to continue doing what we've always done, which is prevention first, but at the same time, really changing the industry.

Speaker #3: And that's both on the network level with the AI network firewall and the new unified management, but at the same time, combining that with our workspace, our CTAM, our AI defense plane and going forward, probably more capabilities that we will need to add to this in order to build this open platform that our customers can rely on for their secure AI transformation.

Nadav Zafrir: That's both on the network level with AI Network Firewall and the new unified management, but at the same time, combining that with our workspace, our CTEM, our AI Defense Plane, and going forward, probably more capabilities that we will need to add to this in order to build this open platform that our customers can rely on for their secure AI transformation.

Speaker #2: Thanks.

Shrenik Kothari: Thank you. Appreciate it.

Speaker #1: All right. Next up is Joshua Tilton followed by Junaid Siddiqui.

Kip Meintzer: All right. Next up is Joshua Tilton, followed by Junaid Siddiqui.

Speaker #5: Hey guys, can you hear me?

Joshua Tilton: Hey, guys. Can you hear me?

Speaker #2: Yep.

Kip Meintzer: Yep.

Speaker #5: Yes.

Nadav Zafrir: Yes.

Kip Meintzer: I see you got a shirt on.

Speaker #1: You got a shirt on. Appreciate that.

Joshua Tilton: Just for you, Kip.

Kip Meintzer: Appreciate that.

Speaker #5: Maybe a quick clarification and then my actual question. On the clarification side, maybe this is for Roi, but you know, I understand you're reiterating the full year outlook.

Joshua Tilton: Maybe a quick clarification and then my actual question. On the clarification side, maybe this is for Roei, I understand you're reiterating the full year outlook. You guys are confident in what it implies for Q4. I guess what I'm trying to understand is when you think about what is implied on a quarterly basis, is this how you expected it to play out when you first took guidance down 90 days ago? Did something change between now and then that we're pointing to a much stronger Q4? Maybe just a follow-up, and my actual question for Nadav is, what happens when we get past the disruption from this year? You ramp hundreds of salespeople. All these products are on fire. Everybody needs to replace their current firewall with an AI firewall.

Speaker #5: And you guys are confident in what it implies for Q4. But I guess what I'm trying to understand is when you think about what is implied on a quarterly basis, is this how you expected it to play out when you first took guidance down 90 days ago?

Speaker #5: Or did something change between now and then that we're pointing to a much stronger Q4? And then, maybe just a follow-up—and my actual question for Nadav is, you know, what happens when we get past the disruption from this year?

Joshua Tilton: Did something change between now and then that we're pointing to a much stronger Q4? Maybe just a follow-up, and my actual question for Nadav is, what happens when we get past the disruption from this year? You ramp hundreds of salespeople. All these products are on fire. Everybody needs to replace their current firewall with an AI firewall.

Speaker #5: You ramp hundreds of salespeople, all these products are on fire, everybody needs to replace their current firewall with an AI firewall. What is the durable growth profile that we should be expecting when we move past the disruption, sales ramps, and all the excitement around some of these newer products starts to really come through the model?

Joshua Tilton: What is the durable growth profile that we should be expecting when we move past the disruption, sales ramps, and all the sexiness around some of these newer products starts to really come through the model?

Speaker #4: So I'll start and then Nadav, if you think it. So regarding the guidance, so when we give the guidance in May, so actually we did expect slight improvement in in the third quarter in terms of appliances.

Roei Golan: I'll start, then Nadav can take it. Regarding the guidance, when we gave the guidance in May, actually, we did expect slight improvement in Q3 in terms of appliances. I mentioned in my presentation that we do expect more deals that will be pushed from Q3 to Q4, mainly on appliances. That's affecting not just appliances revenues, but also support and subscription revenues, because they have an attached, it's bundling, and they have an attached revenue, so subscription and support to every appliance deal. I would say that the expectation in the beginning, back in May, that Q3 will be slightly better. Slightly better, not significantly better, slightly better in Q4. Because of the deals being that we are expecting now to be pushed from Q3 to Q4, that's how we are projecting now. Nadav?

Speaker #4: I mentioned during my you know, when I when in my presentation that we did see we do expect more deals that will be pushed from Q3 to Q4, mainly on appliances that affecting not just appliances revenues, but also support and subscription revenues because they have an attached it's bundling and they have an attached revenues of subscription and support to every every appliance.

Speaker #4: So I would say that the expectation in the beginning, back in May, was that Q3 would be slightly better—slightly better, not significantly better—slightly better than Q4.

Roei Golan: I would say that the expectation in the beginning, back in May, that Q3 will be slightly better. Slightly better, not significantly better, slightly better in Q4. Because of the deals being that we are expecting now to be pushed from Q3 to Q4, that's how we are projecting now. Nadav?

Speaker #4: So that's but because of the deals being that we are expecting now to be pushed from Q3 to Q4, that's that's how we are we are projecting now.

Speaker #4: Nadav.

Speaker #3: You know, going forward, looking at 2027 and beyond, from a general industry perspective, I think the security demand will continue to grow.

Nadav Zafrir: Going forward, looking at 2027 and beyond, from a general industry perspective, I think the security demand will continue to grow. We're between two paradigms, I think that we will see meaningful changes over the next couple of years, and we need to get ready for that. Our vision of securing the AI transformation through an open platform means that we have a lot of integration to do. For example, between the network and the CTEM. There's a lot of integration that we need to do between workspace and AI. There's a long road map ahead of us, and at the same time, we also have to keep our eyes wide open to what's out there from the emerging startup community that is doing some very exciting things, and we're looking at that.

Speaker #3: Because we're between two paradigms, I think we will see meaningful changes over the next couple of years, and we need to get ready for that.

Speaker #3: Our vision of securing the AI transformation through an open platform means that we have a lot of integration to do. For example, between the network and the continuous threat exposure management.

Nadav Zafrir: For example, between the network and the CTEM. There's a lot of integration that we need to do between workspace and AI. There's a long road map ahead of us, and at the same time, we also have to keep our eyes wide open to what's out there from the emerging startup community that is doing some very exciting things, and we're looking at that.

Speaker #3: There's a lot of integration that we need to do between workspace and AI. So there's a long roadmap ahead of us. And at the same time, we also have to keep our eyes wide open to what's out there from the emerging startup community that is doing some very exciting things.

Speaker #3: And we're looking at that. I I you know, the combination of that vision and strategy that we're starting to see the fruits of with the stabilization of the go-to-market and the hiring of new people, obviously makes us optimistic and, you know, I think that the hit that we took will will position us for a better outlook going forward.

Nadav Zafrir: The combination of that vision and strategy that we're starting to see the fruits of with the stabilization of the go-to-market and the hiring of new people, obviously makes us optimistic. I think that the hit that we took will position us for a better outlook going forward. Obviously, we're not giving guidance now for beyond that. It's not a short journey. This is a company that has been around from the beginning of cybersecurity history. We need to build it for the next decades. It's a process, it's a journey. I think that we're seeing it going according to plan right now. Hopefully, more good things to come.

Speaker #3: Obviously, I don't you know, we're not giving guidance now for beyond that. It's not it's not a it's not a short journey. You know, this is a company that has been around for from the beginning of of cybersecurity history.

Speaker #3: We need to build it for the next decades. It's a process. It's a journey. And I think that we're seeing it going according to plan right now.

Speaker #3: And hopefully, more good things to come.

Speaker #1: All right. Next up is Junaid followed by Sakit Kalia.

Kip Meintzer: All right. Next up is Junaid, followed by Saket Kalia.

Speaker #6: Great. Thanks, Kip. Nadav, you've previously indicated SASE still around 12 to 18 months away from supporting your largest enterprise customers at the scale that you envision.

Junaid Siddiqui: Great. Thanks, Kip. Nadav, you've previously indicated SASE still around 12 to 18 months away from supporting your largest enterprise customers at the scale that you envision. What milestones should we be watching over the next year? How close are you to being able to compete for the same global deployments targeted by the market leaders?

Speaker #6: What milestones should we be watching over the next year and and how close are you to being able to compete for the same global deployments targeted by the market leaders?

Speaker #5: Yeah, thanks for that, Junaid. So yeah, SASE is is the integral part of our hybrid mesh proposition and part of the platform. We are now at a point where in terms of capacity, we're already ready for the enterprise level.

Nadav Zafrir: Yeah, thanks for that, Junaid. SASE is an integral part of our hybrid mesh proposition and part of the platform. We are now at a point where, in terms of capacity, we're already ready for the enterprise level, integrating SASE into our unified management as we speak. I think we already have a proposition that, in some aspects, is best in class. For example, we have the best latency with our hybrid device architecture. It's fast and easy to deploy and manage. I think we're ready to go bigger with our SASE. This is the time to do it. We're focused on it. We have a very strong and capable R&D team.

Speaker #5: And integrating SASE into our unified management as we as we speak. I think we already have a proposition that in some aspects is best in class.

Speaker #5: So for example, we have the base latency with our hybrid device architecture. It's fast and and easy to deploy and manage. And so I think we're ready to go bigger with our with our SASE and this is the time to do it.

Speaker #5: So we're focused on it. We have a very strong our and capable R&D team as a part of the hiring that we're doing is focused specifically on specialists that will go out and do this.

Nadav Zafrir: As a part of the hiring that we're doing is focused specifically on specialists that will go out and do this. More important than anything is to put that as part of the platform. Connected to the firewall through our hybrid mesh management so that our customers can push their policy both to the SASE remote access, internet access within the firewall, integrate that into our AI Defense Plane. There is a lot of work to do there, but we've made a lot of progress, and we're ready to go bigger as I indicated before.

Speaker #5: And more important than anything, than anything, is to to put that as part of the platform. So connected to the firewall through our hybrid mesh management so that our our customers can push their policy both to the SASE remote access internet access within the firewall, integrate that into our AI defense plan.

Speaker #5: There is a lot of work to do there, but we've made a lot of progress and we're ready to go bigger as I indicated before.

Speaker #1: All right. Thanks, Junaid. Next up is Sakit Kalia followed by Eric Keith who will most likely be our last caller today.

Kip Meintzer: All right. Thanks, Junaid. Next up is Saket Kalia, followed by Eric Heath, who will most likely be our last caller today.

Speaker #6: Hey, great. Hey guys, thanks for taking my question here. Roei, maybe for you, I'd love to dig into the sales investment just from a financial perspective.

Saket Kalia: Hey, great. Hey, guys. Thanks for taking my question here. Roei, maybe for you. I'd love to dig into the sales investment just from a financial perspective. Right? I'm sure that we can all take a shot at the financial impact of hiring 300 additional resources. Just to be clear, that sounds like it's the right thing to do to invest for growth. Not necessarily looking here for guide for next year, but I want to make sure it's asked. Is there any way that you want us to think about the margin impact of that investment, understanding that it's short-term pain for long-term gain?

Speaker #6: Right? I'm sure that we can all take a shot at at the financial impact of hiring 300 additional resources. And and just to be clear, that sounds like it's the right thing to do to invest for growth.

Speaker #6: Not necessarily looking here for for for guide for next year, but I want to make sure it's asked, is there any way that you want us to think about the margin impact of that investment, understanding that it's short-term pain for long-term gain?

Speaker #4: I would say that regarding first of all, the hiring impact will be less for this year because it's going to be mainly for for next year, the hiring.

Roei Golan: I would say that regarding first of all, the hiring impact will be less for this year because it's going to be mainly for next year, the hiring. I would say for next year margin, I would wait with that for the next calls because we have actually, next week, we are kick off our planning for next year for 2027, and I don't want now to give you anything because it's still very in early stages. I would say, let's wait with that for the next call regarding margin for next year.

Speaker #4: But I would say for next year margin I would wait with it for for the next calls because we have actually we have the next week we have our we are kick off our planning for next year for for next year for 2027.

Speaker #4: And I don't want to now to give you anything because it's it's still very in early stages. So I would say let's wait with it for the next call regarding margin for next year.

Speaker #6: Totally get it. Thank you.

Saket Kalia: Totally get it. Thank you.

Speaker #1: All right. Next up is Eric Keith.

Kip Meintzer: All right. Next up is Eric Heath.

Speaker #7: Thanks, Kip. Roei, Nadav, maybe just to come back one more time to the the 3Q, 4Q seasonality. So can you just put a finer point of what changed since last quarter in terms of why you're expecting deals to push?

Eric Heath: Thanks, Chip. Roei, Nadav, maybe just to come back one more time to the Q3, Q4 seasonality. Can you just put a finer point of what changed since last quarter in terms of why you're expecting deals to push? Is this internal execution just giving you a little bit more prudence, or is there something changing on the customer behavior side that maybe changed in the last 90 days? Thanks.

Speaker #7: Is this internal execution? Just giving you a little bit more prudence or is there something changing on the customer behavior side that maybe changed in the last 90 days?

Speaker #7: Thanks.

Speaker #4: I think it's less it's less customer behavior. I think it's more it's again, we've done we've done a very thorough analysis or or going through our pipeline for Q3 and Q4.

Roei Golan: I think it's less customer behavior. I think it's more. Again, we've done a very thorough analysis or going through our pipeline for Q3 and Q4. I think we have, I would say a bit more prudent approach about the Q3. We are taking a more prudent approach in terms of deals that are going to be pushed from Q3 to Q4. I'm taking it because Q3 is usually a tricky quarter because of the summer. People are in vacations, holidays, and are back to work on September. We are taking a more prudent approach.

Speaker #4: I say more a bit more product approach about the Q3. We are taking a more product approach in terms of deals that being going to be pushed from Q3 to Q3 is usually a tricky quarter because of the summer, you know, people are in vacations, holidays, and are back to work on in the on September.

Speaker #4: So we are taking more product approach. But definitely I think we we do see improvements and more stabilization in our go-to-market and therefore I think we are going to this hiring campaign that we feel confident with expanding our go-to-market now after it's been stabilized after the disruption that we had in the in the first in the first half of the year.

Roei Golan: Definitely, I think we do see improvement and more stabilization now go-to-market, and therefore, I think we are going to this hiring campaign that we feel confident with expanding our go-to-market now after it being stabilized after the disruption that we had in H1. Nadav, you want to add something around it or?

Speaker #4: Nadav, you want to add something around it or?

Speaker #3: No. Again, H2 backend loaded so a lot writing on Q4. It's it's it's about having a better execution. And making sure that we have the rate headcount and the right people as we go into 2027.

Nadav Zafrir: No. Again, H2, backend loaded, a lot riding on Q4. It's about having a better execution and making sure that we have the right headcount and the right people as we go into 2027. As Roei said, that's what we're starting to plan for now.

Speaker #3: And as Roei said, that's what we're starting to plan for now.

Speaker #1: All right, everybody. That's going to conclude today. We thank you all for showing up and participating. And we'll be seeing you shortly here after in the analyst calls.

Kip Meintzer: All right, everybody. That's going to conclude today. We thank you all for showing up and participating, we'll be seeing you shortly hereafter in the analyst calls. The rest of you that are following us today, we'll see you throughout the quarter. Thank you and have a great day, guys. Bye-bye.

Speaker #1: And the rest of you that are following us today, we'll see you throughout the quarter. Thank you and have a great day, guys. Bye-bye.

Speaker #5: Bye-bye. Thank you.

Roei Golan: Bye-bye. Thank you.

Operator 2: Goodbye.

Operator: Goodbye.

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