Check Point’s product sales fell 19%, subscriptions rose 11%: its CEO calls Q3 the trough

01Product revenue fell 19% while subscriptions grew 11%

Total revenue was US$669.8m in the September quarter, against US$677.5m a year earlier. Products and licences, the line that carries firewall appliances, fell to US$105.5m from US$130.4m. Security subscriptions rose to US$338.6m from US$305.4m, and software updates, maintenance and services fell to US$225.7m from US$241.7m.² GAAP earnings per share fell 45% to US$1.82, because the year-earlier quarter carried a one-time tax benefit; excluding it, Check Point says earnings rose 1%.¹⁶

The chief financial officer, Roei Golan, put the fall in total revenue “mainly due to a lower firewall appliances refresh activity as expected in this quarter”: customers replacing old appliances less often, or later. Some large refresh projects with existing customers were moved to next year; one customer “had a very significant refresh project that was supposed to be this year, and was decided to move it to next year.”⁹ In July the company had guided third-quarter revenue of US$665–685m; US$669.8m sits in the lower half of that range, while subscriptions, at US$338.6m, landed near the middle of their US$332–343m range.¹⁰²

02Subscriptions passed half of revenue; maintenance fell with the appliances

The mix moved faster than the total. Security subscriptions were 50.6% of revenue in the September quarter, the first time above half in the seven quarters we charted, up from 45.1% a year earlier. Products and licences fell to 15.8% of revenue from 19.2%.²⁶ Subscription growth has held between 9.6% and 11.7% in every one of those quarters; the product line went from 13.8% growth to a 19.1% fall.⁸³

Subscriptions are where management points for growth. Golan said email security, AI security and exposure management (CTEM) “continue to demonstrate strong momentum”, together almost 30% of subscription recurring revenue; Zafrir said email security alone had crossed US$200m in annual recurring revenue. Golan expects annual subscription revenue “to cross the $1.5 billion” in 2027.⁹ Golan tied the maintenance line to the appliances: he said half of its decline on the quarter came from maintenance, the other half from professional services, and linked it to the lower refresh activity.⁹

03From “a blip” to “longer than anticipated”: what management said each quarter

A year ago the tone was different: in July 2025 Zafrir said the third quarter was “shaping up well with strong July indicators.”⁷ In February Check Point guided 2026 revenue of US$2.83–2.95bn, 4–8% growth, with product revenue “around flat to low single digits”, and Zafrir described a new sales model, sellers covering each of its product pillars, as “a major change in the way we’re going to market, as of literally now.”¹² In April product revenue was “impacted by go-to-market changes implemented at the beginning of the quarter,” the release said; on the call Zafrir called it “a sort of a blip” and the revenue range was cut to US$2.77–2.85bn.⁴¹¹ A new chief revenue officer, Sherif Seddik, replaced Itai Greenberg from 1 May.⁴

In July, with product revenue down 14%, Zafrir said: “We expect Q3 to mark the trough, followed by a stronger Q4,” and Golan said large appliance deals had been pushed from the third quarter to the fourth and that the company expected “to be back to growth in Q4 in the product revenues.” The full-year range was kept.¹⁰ On 2 November the release repeated the trough and added: “The recovery is taking longer than anticipated, but we remain confident in our vision.”¹

On the call Zafrir drew the line himself: “In July, we said we expected the third quarter to mark the trough in product revenue, and we believe it did,” and “I want to be clear that the pace of recovery is more gradual than we previously anticipated.” Golan: “To your question on the recovery, that will take longer than what we anticipated.”⁹ The first explicit “longer than anticipated” is November’s; April had already spoken of “lower than expected product revenues” from fewer appliance refresh projects.¹¹

Still we do see qualified funnel stronger than what we had last year, but the magnitude is slightly lower.

The analysts on the call pressed on the same gap. Wolfe Research’s Joshua Tilton asked what had changed if the quarter was in line with expectations, and Baird’s Shrenik Kothari whether the refresh delays were structural. Zafrir’s answer to the first included: “We actually see demand rising.”⁹ Check Point’s shares closed 7.0% lower on 2 November, at US$141.50; the Nasdaq Composite fell 1.1%.²⁰

04Same cost pressure, opposite product lines: Check Point, Fortinet, Palo Alto

The refresh Check Point says was deferred is visible at two listed rivals. Fortinet’s product revenue grew 36.8% to US$765.0m in the same September quarter, after 18.0% a year earlier, while its service revenue grew 12.7%, the same rate as a year before.¹³¹⁴ Its CFO, Christiane Ohlgart, said product revenue “benefited from customers shifting towards higher performing models, lifting ASPs”. Asked by Citi about “asset sweating”, customers keeping appliances longer, Fortinet’s chief executive, Ken Xie, said the stretching came from “some low-end or certain vertical, like retail” and “we don’t feel this stretching will be a trend going forward.”¹⁵

Palo Alto Networks’ product revenue grew to US$738m in the quarter to 31 July from US$573.9m, and subscription and support to US$2,672m from US$1,962.4m.¹⁶¹⁷ Those figures include CyberArk, bought on 11 February 2026, whose on-premise identity licences now sit in product revenue; the two acquisitions of the year added US$930m of revenue in the fiscal year. Its 10-K puts the year’s product growth down to software licences “including from our CyberArk acquisition” and “increased demand for our new generation of hardware products.”¹⁸ On the call its CFO, Dipak Golechha, said Network & AI Security revenue grew 17% in the fiscal year to US$8.35bn.¹⁹

One thing is common to all three: component costs, memory above all. Check Point said higher memory costs cut its gross margin, by about a point this year; Palo Alto expects “rising commodity costs to persist in our hardware business, particularly as it relates to memory and storage,” and is taking “selective pricing actions” on hardware; at Fortinet, Ohlgart said “the costs are creeping up and then impacting the product gross margin,” and Anthony Luskey, closing the call, said its price increase had added about 10 percentage points to billings growth.⁹¹⁹¹⁵ Why memory costs rose is in our piece on PC shipments and DRAM prices. Check Point is also not alone with the word: Fortinet’s CFO said on 28 October that “the first quarter of 2026 marked a trough for our services revenue growth rate.”¹⁵ Fortinet’s trough is in services, Check Point’s in products.

05What a trough quarter changes at a firewall renewal

A falling product line does not touch the contract you hold. Check Point generated US$258m of adjusted free cash flow in the quarter, bought back about US$325m of shares, and held US$4.12bn of cash and deposits, up mainly because of a US$2bn convertible note; remaining performance obligations, contracted revenue not yet recognised, were US$2.5bn, up 5%.¹ What the quarter does change is the vendor’s position at the table. Golan said the price rise of 12–20% on “all our firewall products, including support, the attached support and subscription” is effective from 4 October, would add up to three points to revenue growth if fully captured, and that “historically, we managed to benefit slightly less than half of it.”⁹ Golan said the company “will be able to start with much higher sales capacity” in 2027 as new sellers join, and he called the fourth quarter “a more back-end loaded quarter.”⁹