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Check Point Software reported third-quarter revenue of $670 million on Monday, down 1% from a year earlier, as subscription growth was offset by weakness elsewhere and Chief Executive Nadav Zafrir said the company’s recovery was taking longer than anticipated.
The headline earnings declines require an important qualification: the year-earlier quarter included a large one-time tax benefit. Although reported GAAP earnings per share fell 45% and non-GAAP earnings per share declined 37%, Check Point said both measures increased 1% when that prior-year benefit was excluded.
The Tel Aviv-based cybersecurity company released its results for the quarter ended September 30 in an official announcement Monday morning.
Subscriptions grow despite lower total revenue
Security-subscription revenue increased 11% to $339 million. Zafrir attributed the growth to demand for email security, continuous threat exposure management and AI security.
The financial statements put total revenue at $669.8 million, compared with $677.5 million a year earlier. Products and licenses revenue fell to $105.5 million from $130.4 million, while software updates, maintenance and services declined to $225.7 million from $241.7 million.
Remaining performance obligations reached $2.5 billion, up 5%. That measure represents non-cancellable contracted products and services that have not yet been recognized as revenue. It is not additional revenue already earned in the quarter.
The tax benefit changes the earnings comparison
GAAP diluted earnings were $1.82 per share, compared with $3.28 in the third quarter of 2025. Non-GAAP diluted earnings were $2.49, compared with $3.94.
Check Point said a tax settlement in the third quarter of 2025 led it to update tax provisions and recognize a benefit of approximately $1.47 per share in both GAAP and non-GAAP results. Without that one-time year-earlier benefit, the company said each earnings-per-share measure rose 1%.
The reported declines are real comparisons to the published 2025 figures, but they do not by themselves show a comparable collapse in ongoing earnings. The unusual tax benefit raised the year-earlier base.
GAAP operating income was $177 million, or 26% of revenue. Non-GAAP operating income was $251 million, or 37% of revenue. The adjusted measures exclude specified expenses and are supplemental to, rather than replacements for, GAAP results.
Cash flow and repurchases
Operating cash flow increased to $264 million from $241 million. This year’s figure included $10 million in expense related to currency-hedging transactions, whereas the year-earlier quarter included a $3 million hedging benefit.
Adjusted free cash flow was $258 million. Check Point repurchased approximately 2.5 million shares during the quarter for about $325 million and said it bought back roughly 9 million shares over the preceding twelve months.
Cash, marketable securities and short-term deposits totaled $4.123 billion at September 30, compared with $2.817 billion a year earlier. The company said the increase primarily reflected $1.8 billion in net proceeds from its $2 billion convertible senior-notes offering after issuance costs and purchased capped calls. The higher cash balance therefore should not be described solely as cash generated by operations.
Israel research-and-development program affects expenses
Check Point recognized a $25 million reduction in research and development expenses under Israel’s research-and-development tax incentive program.
The company linked that benefit to legislation enacted March 30 as part of Israel’s 2026 budget, not a new law announced with these earnings. It said eligible Israeli companies within multinational groups can receive credits for qualifying domestic research and development expenses, with unused credits potentially convertible to cash grants after a defined period.
Management expects gradual improvement
Zafrir said the quarter was in line with expectations and that management believed revenue had reached a trough. He said the company expected gradual improvement beginning in the fourth quarter, while acknowledging that recovery was taking longer than anticipated.
Those remarks are management’s outlook, not evidence that a fourth-quarter recovery has already occurred. The quarter’s results show growing subscriptions and contracted obligations alongside a slight decline in total revenue, with the earnings comparison heavily affected by the prior-year tax settlement.
Stock reaction
Check Point shares closed Monday’s regular session at $141.50 at 4 p.m. Eastern, down $10.61, or 6.98%, following its morning earnings release, according to market quote data. The latest quoted after-hours price was also $141.50 at 4:33 p.m. Eastern, unchanged from that close. The regular-session decline is distinct from the extended-session move.
JBizNews Desk | Tel Aviv
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