“We estimate this impact to be approximately one point for the full year, with most of the impact expected in the second half of 2026, as we have sufficient inventory to support the needs for the first half of 2026.”

In context

“Roei Golan (CFO): Okay. So thank you, Nadav, and thank you, everyone, for joining the call. As Nadav said, the fourth quarter was solid, with 6% growth in revenues, driven by 11% growth in our subscription revenues. Our revenues reached $745 million and were $1 million above the midpoint of our projections. Our non-GAAP EPS was $3.40 per diluted share and exceeded our guidance. This figure includes a one-time tax benefit of approximately $0.52 related to a reduction in our corporate tax rate in Israel that impacted prior periods' income taxes and also updates into our tax reserves. Excluding the one-time benefit, EPS exceeded the top end of our projection by approximately $0.08. As for the full year, our revenues reached $2.725 billion and were $5 million above the midpoint of our original projections. Our non-GAAP EPS was $11.89 per diluted share and exceeded our guidance. This figure includes a tax benefit of approximately $1.90 related to a reduction in our corporate tax rate that impacted prior year income taxes and uplift in our tax results also due to the tax settlement that we announced last quarter. Excluding the one-time benefit, EPS exceeded the midpoint of our projection by approximately $0.09. As mentioned, our revenues grew by 6% year-over-year, while deferred revenues grew by 9% to $2.18 billion. It is important to note that our product revenue growth was moderated in the quarter, mainly as a result of our subscription price increase that we announced in July 2025, which shifted a larger portion of bundled hardware deals towards subscription. This resulted in a headwind of $6 million to our product revenues in this quarter, as we allocated a relatively smaller product component without changing overall deal value. We expect to see this impact also in Q1 of approximately $4 million to $5 million on our product revenues. We expect the benefits of this strategy to increasingly materialize in subscription revenue during Q1 and throughout 2026, while also the product price increase that we have effectively from 1/1/2026 of 5% is expected to support our product growth primarily from the second quarter of 2026. When we are looking at our calculated billings, they totaled $1.039 billion, reflecting an 8% year-over-year growth, while our current calculated billing grew by 6%. Our remaining performance obligation (RPO) grew by 8% to $2.7 billion. On an annual perspective, our revenue grew by 6% year-over-year, while our calculated billing grew by 9% to $2.9 billion. Our current calculated billing totaled $2.784 billion, reflecting a 6% growth year-over-year. When we are looking at our recurring calculated billing, which represents the calculated billing from subscription and maintenance and updates, this grew by 10% year-over-year. As we mentioned, our growth this quarter was driven by our subscription revenues. We continue to experience strong demand for our emerging product portfolio, which remains the primary driver for our revenues. In this quarter, in Q4, we had growth across all our pillars, CEM, Workspace, and hybrid mesh, while our emerging products, email security, SASE, and ERM exceeded 40% more than 40% growth in ARR. When looking at the global revenue distribution, we saw growth in all regions. 48% of our revenues came from EMEA, which grew by 5% year-over-year. 40% of the revenues came from America, which had 6% growth year-over-year, while the remaining 12% came from Asia Pacific, which grew 9% year-over-year. Looking into our P&L in this quarter, our gross profit increased from $623 million to $660 million, representing a gross margin of 89%. Our operating expenses increased by 13% to $358 million. On a constant currency basis, our OpEx increased by 11%. The increase was primarily due to an increase in our workforce and investment in sales and marketing and channel programs. Our non-GAAP operating income continues to be strong at $302 million or 41% operating margin. Our non-GAAP net income increased by 21%, mainly as a result of a one-time tax benefit that I mentioned in the beginning of this deck, in connection with reduction in tax rate and updated tax reserves. The non-GAAP EPS grew by 26%, while the one-time benefit contributed approximately $0.52. Our GAAP net income reached $305 million, an increase of 18% year-over-year, while our GAAP EPS was $2.81 and grew by 22% year-over-year. Looking ahead into 2026, we all know the memory price increase, the recent memory price increase that we have in the market over the past few months, and it is expected to have an impact on our gross margin in 2026. We estimate this impact to be approximately one point for the full year, with most of the impact expected in the second half of 2026, as we have sufficient inventory to support the needs for the first half of 2026. We will continue to closely monitor supply and pricing dynamics into the second half of the year and adjust our procurement strategy as needed, including potential product price increases. Our operating expenses increased by 10%, mainly due to our continued investment in our workforce organically, and also the impact related to Cyber acquisition that we closed back in September 2024 and the acquisition that we've done during 2025 of Verity and Lakira. Our non-GAAP operating income was $1.140 billion or 41% operating margin. Looking ahead to 2026, we continue to actively hedge our foreign exchange exposure. However, not all currencies are fully covered. As we disclosed in the previous earnings calls, if current exchange levels persist, we anticipate an additional headwind of approximately 1 to 1.5 points on our operating margin for next year. Our financial income increased to $114 million in 2025 as we kept reinvesting our cash in higher rates compared to 2024. In December 2025, as Nadav mentioned, we completed a $2 billion convertible notes offering. As a result, we expect higher financial income in 2026, estimated to be between $40 million to $45 million per quarter. In 2025, we had an income tax benefit of $79 million, which included the benefit of approximately $209 million or $1.90 non-GAAP EPS in connection with updating our tax reserve due to the tax settlement and also the reduction of the tax rate for prior years. As for 2026 taxes, it is important to update that in December 2025, Israel enacted the OECD Pillar 2 framework, establishing a 15% global minimum effective tax rate for large multinational groups effective for taxes beginning in 2026. As a result, we currently estimate that our tax rate for 2026 will be between 16% to 17%. In parallel, a complementary Israeli government R&D incentive program was initially approved in January 2026. The outcome from this program, which is expected to be effective from January 2026, can be approximately a $50 million benefit to our operating income. This program is expected to be finally approved by the end of Q1 2026. Our outlook reflects this development as part of our forward-looking statements, including the anticipated certification of the R&D incentive program and the potential financial impact of related grants on our future financial results. Moving into our cash flow and cash position, our cash balances as of the end of the quarter were $4.3 billion. As a reminder, in December 2025, we also announced a $2 billion convertible note offering, and we received $1.8 billion in net proceeds, net of issuance costs and the purchase of Capco. Also, during October 2025, we acquired Laera for approximately $190 million of net cash consideration. Our operating cash flow was very strong this quarter at $310 million, representing 24% growth year-over-year and 42% of our revenues in Q4. We also continued our buyback program and purchased 2.2 million shares for $425 million at an average price of $193 per share. On an annual perspective, our operating cash flow grew by 17% to $1.234 billion, while it is important to note that this includes a $66 million one-time tax payment related to our tax settlement that we signed in Q3, while our balance sheet hedge transaction resulted in a benefit of $51 million in 2025. Also, as a reminder, during 2025, we completed a $160 million payment for the land purchase associated with the new Check Point campus that we are building in Tel Aviv. We do not expect any significant additional payment in connection with this new campus in 2026. To summarize, our revenues were above the midpoint of our projection and the EPS exceeded our projection. We see continued strong demand for emerging technologies, whether it's email security or SASE, and we had another quarter and another year of strong operating cash flow and strong profitability. Now moving to the business outlook to our projection for Q1 and for the full year. Our revenues are expected to be between $655 million to $685 million in Q1 2026. I remind you of the short-term headwind that we have specifically in Q1 in terms of product revenues. For the full year, we expect our revenues to be between $2.83 billion to $2.950 billion, which reflects 4% to 8% growth, while the midpoint is 6%. This time, we're also going to give you the subscription revenue guidance, which is expected to accelerate. As for Q1, we expect it to be between $318 million to $328 million, while for the full year, we expect it to be between 10% to 14%, which means that the midpoint is expected to be 12% growth. Our non-GAAP EPS, which takes into account the expected grants and the R&D incentive program that needs to be completed by the end of Q1, is between $2.35 to $2.45, while the full-year EPS, non-GAAP EPS, is expected to be between $10.05 and $10.85. GAAP EPS for Q1 is expected to be $0.64 less, while for the full year, it is expected to be $2.58 less. We're going to share with you guidance projections for adjusted free cash flow for Q1 and for the full year. In Q1, we expect to have a strong adjusted free cash flow between $420 million to $460 million, which represents 66% of our midpoint expected revenues in Q1. For the full year, we expect it to be 42% of the revenues in the midpoint, which is $1.150 billion to $1.250 billion.”