Check Point (NASDAQ: CHKP) adds $2B convertibles and settles Israeli tax
Filing Impact
Filing Sentiment
Form Type
20-F
Rhea-AI Filing Summary
Check Point Software Technologies files its annual Form 20-F, outlining key business risks, capital structure and regulatory developments for the year ended December 31, 2025. The company reports 105,596,035 ordinary shares outstanding and cash, cash equivalents and investments totaling $4,342 million.
Risk factors detail intense cybersecurity competition, macroeconomic and geopolitical instability, supply-chain constraints, AI-related challenges, heavy reliance on a few distributors, and expanding global privacy and AI regulation. The filing also highlights a NIS 223.2 million (about $66 million) Israeli tax settlement for 2016–2020 and a $2.0 billion 0.00% Convertible Senior Notes due 2030 issuance, which together reshape its tax profile and leverage while still backed by substantial liquidity.
Positive
- None.
Negative
- None.
Insights
New zero-coupon convertibles and a tax settlement modestly shift Check Point’s risk and capital profile.
Check Point issued $2.0 billion of 0.00% Convertible Senior Notes due 2030, adding leverage but preserving interest expense. The Capped Calls are designed to reduce earnings-per-share dilution within a capped range, while still allowing noteholders to benefit from equity upside on conversion.
The company also closed an Israeli tax settlement of NIS 223.2 million (about $66 million) for 2016–2020. Against $4,342 million in cash, cash equivalents and fixed-income securities as of December 31, 2025, this appears manageable, but it lifts the effective tax burden and shows rising global tax complexity.
Overall risk disclosures emphasize dependence on a concentrated distributor base, growing regulatory and AI-related compliance costs, and potential volatility from foreign exchange and cybersecurity incidents. These factors introduce ongoing earnings variability, though they do not alone indicate acute financial stress in the period covered.
Key Figures
Shares outstanding: 105,596,035 ordinary shares
Cash and investments: $4,342 million
Convertible Senior Notes: $2.0 billion, 0.00% due 2030
+5 more
8 metrics
Shares outstanding
105,596,035 ordinary shares
As of December 31, 2025
Cash and investments
$4,342 million
Cash, cash equivalents, short-term deposits and fixed-income securities at December 31, 2025
Convertible Senior Notes
$2.0 billion, 0.00% due 2030
Issued in December 2025
Israeli tax settlement
NIS 223.2 million (~$66 million)
Additional taxes for 2016–2020 under settlement ratified July 2025
Top 10 distributor sales share
57% of sales
Portion of 2025 sales from ten largest distributors
Top 3 distributor sales share
39% of sales
Portion of 2025 sales from three largest distributors
FX hedging forwards (cash-flow)
$329 million notional
Outstanding as of December 31, 2025 hedging payroll and related expenses
Other FX forwards
$196 million notional
Outstanding as of December 31, 2025 not qualifying for hedge accounting
Key Terms
Convertible Senior Notes, capped call transactions, BEPS’s Pillar Two Rules, General Data Protection Regulation, +2 more
6 terms
Convertible Senior Notes financial
"we issued and sold $2.0 billion aggregate principal amount of 0.00% Convertible Senior Notes due 2030"
Convertible senior notes are a type of loan that a company issues to investors, which can be turned into company shares later on. They are called "senior" because they are paid back before other debts if the company runs into trouble. This allows investors to earn interest like a loan but also have the chance to own part of the company if its value rises.
capped call transactions financial
"we entered into privately-negotiated capped call transactions (“Capped Calls”) with certain financial institutions"
Capped call transactions are agreements where investors buy options that give them the chance to benefit if a stock's price goes up, but with a limit on how much they can gain. This helps protect them from paying too much if the stock's price rises a lot, similar to having a maximum limit on a reward. They matter because they help investors manage risk while still allowing some upside potential.
BEPS’s Pillar Two Rules financial
"The Law introduces a qualified domestic minimum top-up tax, pursuant to which multinational enterprise groups... are subject to a minimum corporate tax rate of 15%"
General Data Protection Regulation regulatory
"For example, the General Data Protection Regulation (“GDPR”) (which is applicable in both the EU and the UK), imposes stringent requirements"
General Data Protection Regulation is a set of legal rules from the European Union that governs how companies collect, store, use and share personal information about people. It matters to investors because compliance affects costs, how a business can operate across borders, and the risk of heavy fines or damage to customer trust—similar to guardrails that shape how safely and freely a company can drive its data-dependent products and services.
Artificial Intelligence Act regulatory
"the EU Artificial Intelligence Act (the “AI Act”), which achieved approval by the European Council"
Qualified domestic minimum top-up tax financial
"The Law introduces a qualified domestic minimum top-up tax, pursuant to which multinational enterprise groups"
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
OR
For
the fiscal year ended December 31 ,
2025
OR
OR
Date
of event requiring this shell company report
For
the transition period from
to
Commission
file number 000-28584
(Exact
name of Registrant as specified in its charter)
N/A
(Translation
of Registrant’s name into English)
(Jurisdiction
of incorporation or organization)
(Address
of principal executive offices)
General
Counsel
Check
Point Software Technologies Ltd.
Tel:
(+972 )
3-753-4555
(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities
registered or to be registered pursuant to Section 12(b) of the Act.
|
Title
of each class |
Trading
Symbol(s) |
Name
of each exchange on which registered |
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Securities
registered or to be registered pursuant to Section 12(g) of the Act. None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of
outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2025. 105,596,035 ordinary
shares, nominal value NIS 0.01 per share.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934:
Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided
pursuant to Section 13(a) of the Exchange Act. ☐
†
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
|
International
Financial Reporting Standards as issued
by the International
Accounting Standards Board ☐ |
Other ☐
|
If
“Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant
has elected to follow.
Item
17 ☐
Item 18 ☐
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes ☐ No ☒
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Auditor
Firm Id:
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Auditor
Name: |
Auditor
Location:
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Currency of Presentation
and Certain Defined Terms
In this Annual Report on Form 20-F, or the Annual Report, references
to “U.S.” or “United States” are to the United States of America, its territories and possessions; and references
to “Israel” are to the State of Israel. References to “$”, “dollar” or “U.S. dollar” are
to the legal currency of the United States of America; references to “NIS” or “Israeli shekel” are to the legal
currency of Israel and references to “Euro” are to the legal currency of the European Union. Our financial statements are
presented in U.S. dollars and are prepared in conformity with accounting principles generally accepted in the United States of America,
or U.S. GAAP.
All references to “we,” “us,” “our”
or “Check Point” shall mean Check Point Software Technologies Ltd., and, unless specifically indicated otherwise or the context
indicates otherwise, our consolidated subsidiaries.
Forward-Looking Statements
In addition to historical fact, this Annual Report contains forward-looking
statements that are subject to risks and uncertainties, and include information about possible or assumed future results of our business,
financial condition, results of operations, liquidity, plans and objectives. In some cases you can identify forward-looking statements
by terminology such as “may,” “will,” “could,” “would,” “should,” “expects,”
“plans,” “anticipates,” “believes,” “intends,” “estimates,” “predicts,”
“potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking
statements include, but are not limited to, statements concerning the following:
| • |
our expectations for our business, trends related to our business and the markets in which we operate and into which we sell products;
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uncertain macro-economic and industry trends (such as inflation and fluctuations in supply chains), which may impact demand and supply
of our products; |
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the effects of increased competition in our market, including from artificial intelligence (AI) solutions; |
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our expectations regarding the transition in our company leadership; |
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our ability to timely and effectively scale and adapt our existing technology and infrastructure to meet current and future market
demands; |
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the effects on our business of global pandemics; |
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our ability to develop or acquire new and more technologically advanced products, and to successfully commercialize these products,
including products incorporating AI; |
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our ability to protect our proprietary technology and intellectual property; |
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our ability to protect our information technology systems, networks and products and services from various security threats;
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our ability to increase adoption of our products and to maintain or increase our market share; |
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our ability to maintain our growth; |
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future amounts and sources of our revenue; |
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our future costs and expenses; |
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the adequacy of our capital resources; |
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our expectations to provide security for all organizations; |
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our expectations with respect to share repurchases by us and dividend payments by us; |
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the effects on our business of evolving laws and regulations, including government export or import controls and U.S. tax regulations;
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the effects of the war between Israel, the U.S. and Iran and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen;
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the impact of the significant military action against Ukraine launched by Russia and any related political or economic responses
and counter-responses or otherwise by various global actors; |
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our ability to repay indebtedness, including repurchasing our outstanding convertible notes when required or paying cash upon the
conversion of our convertible notes, and our expectations regarding the impact of our outstanding convertible notes on our financial results;
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our ongoing relationships with our current and future customers and channel partners, suppliers, contract manufacturers and distributors;
and |
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our other expectations, beliefs, intentions and strategies. |
These statements are subject to known and unknown risks, uncertainties
and other factors, which are difficult to predict and which may cause our actual results to differ materially and adversely from those
implied by the forward-looking statements. Many of these risks, uncertainties and assumptions are described in the risk factors set forth
in “Item 3 – Key Information – Risk Factors” and elsewhere in this Annual Report. All forward-looking statements
included in this Annual Report are based on information available to us on the date of the filing. While we may elect to update forward-looking
statements in the future, we specifically disclaim any obligation to update or revise any of the forward-looking statements after the
date of the filing, except as required by applicable law.
1
TABLE OF CONTENTS
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PART I | ||
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Item 1. |
Identity of Directors, Senior
Management and Advisers |
3 |
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Item 2. |
Offer Statistics and Expected Timetable
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3 |
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Item 3. |
Key Information |
3 |
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Item 4. |
Information on Check Point |
26 |
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Item 4A. |
Unresolved Staff Comments
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36 |
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Item 5. |
Operating and Financial Review and Prospects
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36 |
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Item 6. |
Directors, Senior Management and Employees
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43 |
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Item 7. |
Major Shareholders and Related Party Transactions
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53 |
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Item 8. |
Financial Information |
55 |
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Item 9. |
The Offer and Listing
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56 |
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Item 10. |
Additional Information
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56 |
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Item 11. |
Quantitative and Qualitative Disclosures about
Market Risk |
66 |
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Item 12. |
Description of Securities Other than Equity
Securities |
67 |
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PART II | ||
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Item 13. |
Defaults, Dividend Arrearages and Delinquencies
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67 |
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Item 14. |
Material Modifications to the Rights of Security
Holders and Use of Proceeds |
67 |
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Item 15. |
Controls and Procedures |
67 |
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Item 16A. |
Audit Committee Financial Expert
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68 |
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Item 16B. |
Code of Ethics |
68 |
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Item 16C. |
Principal Accountant Fees and Services
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69 |
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Item 16D. |
Exemptions from the Listing Standards for Audit
Committees |
69 |
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Item 16E. |
Purchases of Equity Securities by the Issuer
and Affiliated Purchasers |
69 |
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Item 16F. |
Change in Registrant’s Certifying Accountant
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70 |
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Item 16G. |
Corporate Governance |
70 |
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Item 16H. |
Mine Safety Disclosure |
70 |
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Item 16I. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection |
70 |
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Item 16J. |
Insider Trading Policies |
71 |
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Item 16K. |
Cybersecurity |
71 |
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PART III | ||
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Item 17. |
Financial Statements |
72 |
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Item 18. |
Financial Statements |
73 |
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Item 19. |
Exhibits |
73 |
2
PART
I
ITEM 1. IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS
AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Risk Factors
An investment in our ordinary shares involves a high degree of
risk. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware
of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize,
our business, financial condition, results of operations and prospects could be materially harmed. In that event, the market price of
our ordinary shares could decline and you could lose part or all of your investment.
Risk Factors Summary
The following is a summary of the principal risks that could
materially and adversely affect our business, financial condition, operating results and growth prospects.
Risks Related to Our Business and Our Market
| • |
If the market for information and network security solutions does not continue to grow, our business will be adversely affected.
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We may not be able to successfully compete, which could adversely affect our business and results of operations. |
| • |
If we fail to enhance our existing products, develop or acquire new and more technologically advanced products, or fail to successfully
commercialize these products, our business and results of operations will suffer. |
| • |
We may need to change our pricing models to compete successfully. |
| • |
Our business, results of operations and financial condition are subject to, have been and may continue to be adversely affected by
the risks of earthquakes, fire, floods, pandemics and other natural events, as well as manmade problems such as power disruptions or terrorism
or war, such as the war between Israel, the U.S. and Iran and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen.
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| • |
Prolonged economic uncertainties or downturns, globally or in certain regions or industries, could materially adversely affect our
business. |
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If our products fail to protect against attacks and our customers experience security breaches, our reputation and business could
be harmed. |
| • |
Product defects may increase our costs and impair the market acceptance of our products and technology. |
| • |
We are subject to risks relating to acquisitions. |
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We are dependent on a limited number of product families. |
| • |
Competition for highly skilled personnel is intense. |
| • |
Issues in the development and deployment of AI may results in reputational harm and legal liability and could adversely affect our
results of operations. |
3
Risks Related to Our Dependence on Third-Parties
| • |
We are dependent on a small number of distributors. |
| • |
We purchase several key components and finished products from limited sources, and we are increasingly dependent on contract manufacturers
for our hardware products. |
| • |
We incorporate third-party technology in our products, which may make us dependent on the providers of these technologies and expose
us to potential intellectual property claims. |
| • |
Failures of the third party technology, third-party servers, cloud service providers, such as Amazon Web Services (“AWS”),
and other third-party hardware, software and infrastructure on which we rely could adversely affect our business. |
Risks Related to Tax, Legal and Regulatory Matters
| • |
We are the defendants in various lawsuits and have been subject to tax disputes and governmental proceedings, which could adversely
affect our business, results of operations and financial condition. |
| • |
Uncertainties in the interpretation and application of worldwide tax reforms, complex tax laws and regulations could materially affect
our tax obligations and effective tax rate. |
| • |
Class action litigation due to stock price volatility or other factors could cause us to incur substantial costs and divert
our management’s attention and resources. |
| • |
We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in
international markets. |
| • |
Changes in government trade policies and international trade disputes that result in tariffs and other protectionist measures could
adversely affect our business in the future. |
Risks Related to Our Intellectual Property
| • |
We may not be able to successfully protect our intellectual property rights, which could cause substantial harm to our business.
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We incorporate open source technology in our products which may expose us to liability and have a material impact on our product
development and sales. |
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If a third-party asserts that we are infringing its intellectual property, whether successful or not, it could subject us to costly
and time-consuming litigation or expensive licenses, which could harm our business. |
| • |
Due to the global nature of our business, we must comply with various anti-bribery regimes and any failure to do so could adversely
affect our business. |
Other General Risks and Risks Related to Capitalization and
Ownership of Our Ordinary Shares
| • |
We are exposed to various legal, business, political, economic, health-related and other risks associated with our international
operations; these risks could increase our costs, reduce future growth opportunities and affect our results of operations. |
| • |
Our actual or perceived failure to adequately protect personal data or customer data, or otherwise comply with data privacy and protection
laws and regulations or other technology related regulations, could subject us to sanctions and damages and could harm our reputation
and business. |
| • |
Issues relating to our use of artificial intelligence and machine learning technologies, combined with an uncertain legal and regulatory
environment, could materially and adversely affect our business, financial condition and results of operations. |
| • |
Repaying and servicing our existing and future debt, including our outstanding convertible notes may require a significant amount
of cash, and we may not have sufficient cash flow from our business to pay our indebtedness. |
| • |
Our Convertible Notes may impact our financial results, result in the dilution of existing shareholders and create downward pressure
on the price of our ordinary shares. |
| • |
Our ability to pay cash upon conversion or repurchase of our outstanding Convertible Notes may be limited. |
| • |
Our capped call transactions may affect the value of our ordinary shares. |
| • |
We are subject to counterparty risk with respect to the capped call transactions. |
| • |
Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies
and increases our costs of compliance. |
4
| • |
A small number of shareholders own a substantial portion of our ordinary shares, and they may make decisions with which you or others
may disagree. |
| • |
Our cash balances and investment portfolio have been, and may continue to be, adversely affected by market conditions and interest
rates. |
| • |
Currency fluctuations may affect the results of our operations or financial condition. |
| • |
Our information technology systems, networks and products and services have been, and may continue to be, subject to various security
threats and cyber security incidents. |
| • |
We depend on our executive officers and other key employees, and the loss of one or more of these employees or an inability to attract
and retain other highly skilled employees could adversely affect our business, and we may not be able to successfully navigate the recent
leadership changes while maintaining key aspects of our culture, which could have a significant negative effect on our existing business
and our ability to pursue future plans. |
Risks Related to Our Operations in Israel
| • |
The ongoing war and hostilities and other potential political, economic and military instability in Israel, where our principal executive
offices and our principal research and development facilities are located, may adversely affect our results of operations. |
| • |
Our operations may be disrupted by the obligations of our personnel to perform military service. |
| • |
We are subject to risks in connection with the development of our new campus in Tel Aviv, Israel |
| • |
The tax benefits available to us require us to meet several conditions, and may be terminated or reduced in the future, which would
increase our taxes. |
| • |
Shareholder rights and responsibilities are, and will continue to be, governed by Israeli law which differs in some material respects
from the rights and responsibilities of shareholders of U.S. companies. |
| • |
Provisions of Israeli law and our articles of association may delay, prevent or make difficult an acquisition of us, prevent a change
of control, and negatively impact our share price. |
| • |
As a foreign private issuer we are not subject to the provisions of Regulation FD or U.S. proxy rules and are exempt from filing
certain Exchange Act reports. |
| • |
As a foreign private issuer whose shares are listed on the Nasdaq Global Select Market (“Nasdaq”), we may follow certain
home country corporate governance practices instead of certain Nasdaq requirements. |
Risks Related to Our Business and Our Market
If the market for information and network security solutions does
not continue to grow, our business will be adversely affected
The market for information and network security solutions may
not continue to grow. Continued growth of this market will depend, in large part, upon:
| • |
the continued expansion of internet usage and the number of organizations adopting or expanding intranets; |
| • |
the continued adoption of “cloud” infrastructure by organizations; |
| • |
the ability of the infrastructures implemented by organizations to support an increasing number of users and services; |
| • |
the continued development of new and improved services for implementation across the internet and between the internet and intranets;
|
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the adoption of data security measures as it pertains to data encryption and data loss prevention technologies; |
| • |
continued access to mobile APIs, APPs and application stores with Apple, Google and Microsoft; |
| • |
government regulation of the internet and governmental and non-governmental requirements and standards with respect to data security
privacy and data protection; and |
| • |
economic, social, or political conditions, including conditions resulting from a decline in the macroeconomic environment, rising
interest rates, exchange rate fluctuations, inflation, global pandemics , global supply chain disruptions and conditions resulting from
geopolitical uncertainty and instability or war, including the war between Israel, the U.S. and Iran and its effects on the delivery of
goods through the Strait of Hormuz, and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen, and the Russia-Ukraine
armed conflict and the tension between China and Taiwan. |
5
In the last few years, global and regional economies around the
world and financial markets have remained volatile largely as a result of economic and political uncertainty, the war and hostilities
between Israel, the U.S. and Iran, and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen, rising interest rates, inflation,
terrorist groups in Yemen, which limited the movement of marine shipments to Israel through the Red Sea, the war in Ukraine, terrorism,
governmental instability and other factors. During this period, many organizations have limited their expenditures and a significant portion
of such organizations have remained reluctant to increase their expenditures. If these challenging macroeconomic conditions continue or
worsen, our customers may reduce or postpone their technology spending, which could result in significant reductions in sales of our products,
longer sales cycles, slower adoption of new technologies or increased price competition.
Further, if the necessary infrastructure required to operate
our industry or complementary products and services are not developed in a timely manner and, consequently, the enterprise security, data
security, internet or intranet markets fail to grow or grow more slowly than we currently anticipate, our business, results of operations
and financial condition may be materially adversely affected. Additional details are provided in “Item 4 – Information on
Check Point”.
We may not be able to successfully compete, which could adversely
affect our business and results of operations
The market for information and network security solutions is
intensely competitive and we expect that competition will continue to increase in the future. Our competitors include Cisco Systems, Inc.,
Fortinet Inc., Palo Alto Networks, Inc. and SonicWall Inc. and other companies in the network security space. We also compete with several
other companies, including Zscaler, Inc., Trellix, Trend Micro Inc., NortonLifeLock Inc., Lookout, Inc., Zimperium, Inc, CrowdStrike Holdings,
Inc., SentinelOne, Inc., Sophos Group plc, Proofpoint, Inc., Broadcom, Inc., Mimecast Limited, Microsoft Corp., Netskope, Inc. and Abnormal
Security Corp., with respect to specific products that we offer.
In addition, there are hundreds of small and large companies
that offer security products and services that we may compete with from time to time.
Some of our current and potential competitors have various
advantages over us, including longer operating histories; access to larger customer bases; significantly greater financial, technical
and marketing resources; a broader portfolio of products, applications and services including AI and machine learning; and larger patent
and intellectual property portfolios. As a result, they may be able to adapt better than we can to new or emerging technologies and changes
in customer requirements, or to devote greater resources to the promotion and sale of their products. Furthermore, some of our competitors
with more diversified product portfolios and larger customer bases may be better able to withstand a reduction in spending on information
and network security solutions, as well as a general slowdown or recession in economic conditions in the markets in which they operate.
In addition, some of our competitors have greater financial resources than we do, and they have offered, and in the future may offer,
their products at lower prices than we do, or may bundle security products with their other offerings, which may cause us to lose sales
or to reduce our prices in response to competition. With the introduction of new products and services and new market entrants, we expect
competition to intensify in the future. Industry developments and evolving technology, such as AI, may also impact our competitive landscape
and the factors required to compete effectively in current or prospective markets. For example, companies offering generative AI services
with cybersecurity capabilities, including large language models represent an additional source of competition because they may currently
or in the future serve as alternative cybersecurity systems. If we are not able to continue to compete with companies offering AI systems
with cybersecurity features our business, results of operations and financial condition could be adversely affected.
In addition, consolidation in the markets in which we compete
may affect our competitive position. This is particularly true in circumstances where customers are seeking to obtain a broader set of
products and services than we are able to provide.
The markets in which we compete also include many niche competitors,
generally smaller companies at a relatively early stage of operations, which are focused on specific internet and data security needs.
These companies’ specialized focus may enable them to adapt better than we can to new or emerging technologies and changes in customer
requirements in their specific areas of focus. In addition, some of these companies can invest relatively large resources on very specific
technologies or customer segments. The effect of these companies’ activities in the market may result in price reductions, reduced
gross margins and loss of market share, any of which will materially adversely affect our business, results of operations and financial
condition.
Further, vendors of operating system software, networking hardware
or central processing units (“CPUs”), may enhance their products to include functionality that is currently provided
by our products. The widespread inclusion of similar functionality to that which is offered by our solutions, as standard features of
operating system software and networking hardware could significantly reduce the demand for our products, particularly if the quality
of such functionality were comparable to that of our products. Furthermore, even if the network or application security functionality
provided as standard features by operating systems software and networking hardware is more limited than that of our solutions, a significant
number of customers may elect to accept more limited functionality in lieu of purchasing additional products.
6
We may not be able to continue competing successfully against
our current and future competitors, and increased competition within the market may result in price reductions, reduced gross margins
and operating margins, reduced net income, and loss of market share, any or all of which may materially adversely affect our business,
results of operations and financial condition. For additional information, see “Item 4 – Information on Check Point”.
If we fail to enhance our existing products, develop or acquire
new and more technologically advanced products, or fail to successfully commercialize these products, our business and results of operations
will suffer
The information and network security industry is characterized
by rapid technological advances, changes in customer requirements, frequent new product introductions and enhancements, and evolving industry
standards in computer hardware and software technology. In particular, the markets for data security, internet and intranet applications
are rapidly evolving. As a result, we must continually change and improve our products in response to changes in operating systems, application
software, computer and communications hardware, networking software, programming tools, and computer language technology. We must also
continually change our products in response to changes in network infrastructure requirements, including the expanding use of cloud computing.
Further, we must continuously improve our products to protect our customers’ data and networks from evolving security threats.
Our future results of operations will depend upon our ability
to enhance our current products and to develop and introduce new products on a timely basis; to address the increasingly sophisticated
needs of our customers; and to keep pace with technological developments, new competitive product offerings, and emerging industry standards.
Our competitors’ introduction of products embodying new technologies and the emergence of new industry standards may render our
existing products obsolete or unmarketable. While we have historically been successful in developing, acquiring, and marketing new products
and product enhancements that respond to technological change and evolving industry standards, we may not be able to continue to do so.
In addition, we may experience difficulties that could delay or prevent the successful development, introduction, and marketing of these
products, as well as the integration of acquired products. Furthermore, our new products or product enhancements may not adequately meet
the requirements of the marketplace or achieve market acceptance. In some cases, a new product or product enhancements may negatively
affect sales of our existing products. If we do not respond adequately to the need to develop and introduce new products or enhancements
of existing products in a timely manner in response to changing market conditions or customer requirements, our business, results of operations
and financial condition may be materially adversely affected.
For additional information, see “Item 4 – Information
on Check Point” and under the caption “We may not be able to successfully compete, which could adversely affect our business
and results of operations” in this “Item 3 – Key Information – Risk Factors”.
We may need to change our pricing models to compete successfully
The intense competition we face in the sales of our products and
services and general economic and business conditions can put pressure on us to change our prices. If our competitors offer deep discounts
on certain products or services or develop products that the marketplace considers more valuable, we may need to lower prices or offer
other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect results of operations.
Additionally, the increasing prevalence of cloud and SaaS delivery models offered by us and our competitors may unfavorably impact pricing
in both our on-premises enterprise software business and our cloud business, as well as overall demand for our on-premises software product
and service offerings, which could reduce our revenues and profitability. Our competitors may offer lower pricing on their support offerings,
which could put pressure on us to further discount our product or support pricing.
Our business, results of operations and financial condition are
subject to, have been and may continue to be adversely affected by the risks of earthquakes, fire, floods, pandemics and other natural
events, as well as manmade problems such as power disruptions or terrorism or war, such as the war between Israel, the U.S. and Iran,
and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen
We operate our business primarily from Israel, and operate and
sell our products worldwide. Our headquarters in the United States, as well as certain of our research and development operations, are
located in the Silicon Valley area of Northern California, a region known for seismic activity. We also have significant operations in
other regions that have experienced natural disasters. A significant natural disaster occurring at our facilities in Israel, in the United
States or elsewhere, or where our channel partners are located, could have a material adverse impact on our business, results of operations
and financial condition. In addition, acts of terrorism or war (including the war between Israel, the U.S. and Iran, and the ongoing hostilities
between Israel and Hezbollah, Hamas and Yemen, and the significant military action against Ukraine launched by Russia and any related
political or economic responses and counter-responses or otherwise by various global actors or general effect on the global economy) have
caused disruptions and could in the future cause disruptions to our or our customers’ businesses or the economy as a whole.
Further, we rely on information technology systems to communicate among our workforce located worldwide. Any disruption to our internal
communications, whether caused by a natural disaster, pandemics or by manmade problems, such as power disruptions or terrorism or war,
could delay our research and development efforts. To the extent any of the foregoing causes disruptions or result in delays or cancellations
of customer orders, our research and development efforts or the deployment of our products, our business and results of operations would
be materially and adversely affected.
7
In addition, following the Russia-Ukraine armed conflict, the
United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus, and the
United States and other countries could impose wider sanctions and export restrictions and take other actions should the conflict further
escalate, which affect our exports or sales into Russia and Belarus and create difficulties in business planning and forecasting due to
the uncertainty of the impact of the war on aspects of our business, such as on our distributors, resellers and end-customers. As
discussed elsewhere in these risk factors, additional worldwide trade protectionism may increase as a result of the trade policies of
the U.S. administration and/or as a result of the global response to such policies. Our efforts to comply with any such measures may be
costly and time consuming. We take precautions to ensure that we and our partners comply with all relevant sanctions-related regulations,
any alleged or actual failure by us or our partners to comply with such laws and regulations could have negative consequences for us,
including reputational harm, government investigations and penalties. The sanctions and other macroeconomic effects of the war or global
trade protectionism may also result in the devaluation of the local currency and other inflationary effects.
Prolonged economic uncertainties or downturns, globally or in
certain regions or industries, could materially adversely affect our business
Our business depends on our current and prospective customers’
ability and willingness to invest money in our products and security, which in turn is dependent upon their overall economic health and
the strength of the broader macroeconomic environment. The negative economic conditions in the global economy or certain regions, including
conditions resulting from financial and credit market fluctuations (including rising interest rates), exchange rate fluctuations, or inflation,
and the potential for regional or global recessions could cause a decrease in corporate spending on cyber security software. Other matters
that influence customer confidence and spending, such as, political unrest, public health crises, terrorist attacks, armed conflicts (such
as the war between Israel, the U.S. and Iran, and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen, and the ongoing
conflict between Russia and Ukraine), rising energy costs, and natural disasters, could also negatively affect our customers’ spending
on our products and services. The activities of certain terrorist groups in Yemen, have previously limited the movement of marine
shipments to Israel through the Red Sea, and the armed conflict involving Russia and Ukraine has resulted in sanctions which restrict
the selling of goods, services, or technology in affected regions. The instability in these regions could further exacerbate the macroeconomic
impacts on a global scale.
Negative economic conditions may cause existing and prospective
customers to reduce their spending. Customers may delay or cancel cyber security projects or seek to lower their costs by renegotiating
renewals or maintenance and support agreements. Further, customers or channel partners may be more likely to refrain from making payments
and/or make late payments in worsening economic conditions. If the economic conditions of the general economy or industries in which we
operate continue to worsen from present levels, our business, results of operation and financial condition could be adversely affected.
If our products fail to protect against attacks and our customers
experience security breaches, our reputation and business could be harmed
Hackers and other malevolent actors are increasingly sophisticated,
often affiliated with organized crime and operate large scale and complex attacks. In addition, their techniques change frequently and
generally are not recognized until launched against a target. If we fail to identify and respond to new and increasingly complex methods
of attack and to update our products to detect or prevent such threats in time to protect our customers’ high-value business data,
our business and reputation will suffer.
In addition, an actual or perceived security breach or theft
of the confidential data of one of our customers, regardless of whether the breach is attributable to the failure of our products, could
adversely affect the market’s perception of our security products. Despite our best efforts, there is no guarantee that our products
will be free of flaws or vulnerabilities, and even if we discover these weaknesses, we may not be able to correct them promptly, if at
all. Our customers may also misuse our products, or may not properly configure or securely deploy our products, which could result in
a breach or theft of business data.
Product defects may increase our costs and impair the market acceptance
of our products and technology
Our products are complex and must meet stringent quality requirements.
They may contain undetected hardware or software errors or defects, especially when new or acquired products are introduced or when new
versions are released. In particular, the personal computer hardware environment is characterized by a wide variety of non-standard configurations
that make pre-release testing for programming or compatibility errors very difficult and time-consuming. We may need to divert the attention
of our engineering personnel from our research and development efforts to address instances of errors or defects.
8
Our products are used to deploy and manage internet security
and protect information, which may be critical to organizations. As a result, the sale and support of our products entails the risk of
product liability and related claims. We do not know whether, in the future, we will be subject to liability claims or litigation for
damages related to product errors, or will experience delays as a result of these errors. Our sales agreements and product licenses typically
contain provisions designed to limit our exposure to potential product liability or related claims. In selling our products, we rely primarily
on “shrink wrap” licenses that are not signed by the end user, and for this and other reasons, these licenses may be unenforceable
under the laws of some jurisdictions. As a result, the limitation of liability provisions contained in these licenses may not be effective.
Although we maintain product liability insurance for most of our products, the coverage limits of these policies may not provide sufficient
protection against an asserted claim. If litigation were to arise, it could, regardless of its outcome, result in substantial expense
to us, significantly divert the efforts of our technical and management personnel, and disrupt or otherwise severely impact our relationships
with current and potential customers. In addition, if any of our products fail to meet specifications or have reliability, quality or
compatibility problems, our reputation could be damaged significantly and customers might be reluctant to buy our products, which could
result in a decline in revenues, a loss of existing customers, and difficulty attracting new customers.
We are subject to risks relating to acquisitions
We have made acquisitions in the past, including the acquisitions
of Cyclops Security Ltd. and Cyata Security Ltd. in February of 2026, the talent of Rotate Ltd. in February of 2026, Lakera AI AG
and Veriti Security Ltd. in October and June of 2025, respectively. Cyberint Technologies Ltd. in 2024, Perimeter 81 Ltd., Atmosec Ltd.
and rmsource, Inc. in 2023, Spectral Cyber Technologies Ltd in 2022 and Avanan, Inc. in 2021, and we may make additional acquisitions
in the future. The pursuit of acquisitions may divert the attention of management and cause us to incur various expenses in identifying,
investigating, and pursuing suitable acquisitions, whether or not they are consummated.
Competition within our industry for acquisitions of businesses,
technologies, assets and product lines has been, and may in the future continue to be, intense. As such, even if we are able to identify
an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or because
the target is acquired by another company. Furthermore, in the event that we are able to identify and consummate any future acquisitions,
we could:
| • |
issue equity securities which would dilute the current shareholders’ percentage of ownership; |
| • |
incur substantial debt; |
| • |
assume contingent liabilities; or |
| • |
expend significant cash. |
These financing activities or expenditures could harm our business,
results of operations and financial condition or the price of our ordinary shares. Alternatively, due to difficulties in the capital and
credit markets, we may be unable to secure capital on acceptable terms, or at all, to complete acquisitions. In addition, we may not be
able to integrate acquired personnel, operations, and technologies successfully or effectively manage the combined business following
the completion of any future acquisition. Additionally, such integration may impact our revenue and operating results. We may also not
achieve the anticipated benefits from the acquired businesses due to a number of factors, including:
| • |
unanticipated costs, liabilities or compliance issues associated with the acquisition; |
| • |
incurrence of acquisition-related costs; |
| • |
diversion of management’s attention from other business concerns; |
| • |
harm to our existing business relationships with manufacturers, distributors and customers as a result of the acquisition;
|
| • |
the potential loss of key employees; |
| • |
use of resources that are needed in other parts of our business; |
| • |
use of substantial portions of our available cash to consummate the acquisition; or |
| • |
unrealistic goals or projections for the acquisition. |
Moreover, even if we do obtain benefits from acquisitions in
the form of increased sales and earnings, there may be a delay between the time when the expenses associated with an acquisition are incurred
and the time when we recognize such benefits.
9
We are dependent on a limited number of product families
Currently, we derive the majority of our revenues from sales
of integrated appliances and internet security products, as well as related revenues from security subscriptions and from software updates
and maintenance. We expect that this concentration of revenues from a small number of product families will continue for the foreseeable
future. Endpoint security products and associated software updates, maintenance, and security subscriptions represent an additional revenue
source as well as our cloud initiatives. Our future growth depends heavily on our ability to effectively develop and sell new and acquired
products as well as add new features to existing products. For more details, see “Item 4 – Information on Check Point”
and “Item 5 – Operating and Financial Review and Prospects”.
Competition for highly skilled personnel is intense
We compete in a market marked by rapidly changing technologies
and an evolving competitive landscape. In order for us to successfully compete and grow, we must attract, recruit, retain and develop
personnel, at an appropriate cost, with requisite qualifications to provide expertise across the entire spectrum of our intellectual capital
and business needs. In recent years, the industry has experienced record growth and activity and as a result, the high-tech industry in
Israel has experienced significant levels of employee attrition and is currently facing a shortage of skilled human capital including
in the areas of AI and machine learning. Similar competition for highly skilled personnel exists in the U.S. and in other markets in which
we operate. Failure to retain or attract qualified personnel, at an appropriate cost, could have a material adverse effect on our business,
financial condition and results of operations.
Issues in the development and deployment of AI may result in reputational
harm and legal liability and could adversely affect our results of operations
We have incorporated, and are continuing to develop and deploy,
AI into many of our products and solutions, including services that support our products and solutions. We are also incorporating AI into
the operations of our business. AI presents challenges and risks that could affect our products and solutions, and the operations of our
business. For example, AI algorithms may have flaws, and datasets used to train models may be insufficient or contain biased information.
The AI that is being incorporated into our products, solutions, and business operation tools may not be successful or beneficial, and
instead may cause technical, legal or ethical problems or result in increased costs. The investments that we are making across our business
in AI reflect our ongoing efforts to innovate and provide products and services that are useful to our customers, as well as provide efficiencies
in our business. Such investments ultimately may not be commercially viable or may not result in an adequate return of capital and we
may incur unanticipated liabilities. These efforts could subject us to regulatory risk, legal liability, including under legislation regulating
AI in jurisdictions such as the E.U. and laws and regulations being considered in other jurisdictions, or brand or reputational harm.
The rapid evolution of AI, including potential government regulation
of AI, requires us to invest significant resources to develop, test, and maintain AI in our products and services in a manner that meets
evolving requirements and expectations. The rules and regulations adopted by policymakers over time may require us to make changes to
our business practices. Developing, testing, and deploying AI systems may also increase the cost profile of our offerings due to the nature
of the computing costs involved in such systems.
The intellectual property ownership and license rights surrounding
AI technologies, as well as data protection laws related to the use and development of AI, are currently not fully addressed by courts
or regulators. The use or adoption of AI technologies in our products may result in exposure to claims by third parties of copyright infringement
or other intellectual property misappropriation, which may require us to pay compensation or license fees to third parties. The evolving
legal, regulatory, and compliance framework for AI technologies may also impact our ability to protect our own data and intellectual property
against infringing use.
Risks Related to Our Dependence on Third-Parties
We are dependent on a small number of distributors
We derive our sales primarily through indirect channels. During
2025, 2024 and 2023, we derived approximately 57%, 56% and 56%, respectively, of our sales from our ten largest distributors. In each
of 2025, 2024 and 2023, our three largest distributors accounted for approximately 39%, 39% and 40%, respectively, of our sales. We expect
that a small number of distributors will continue to generate a significant portion of our sales. Furthermore, there has been an industry
trend toward consolidation among distributors, and we expect this trend to continue in the near future which could further increase our
reliance on a small number of distributors for a significant portion of our sales. If these distributors reduce the amount of their purchases
from us for any reason, including because they choose to focus their efforts on the sales of the products of our competitors, our business,
results of operations and financial condition could be materially adversely affected.
10
Our future success is highly dependent upon our ability to establish
and maintain successful relationships with our distributors. In addition, we rely on these entities to provide many of the training and
support services for our products and equipment. Accordingly, our success depends in large part on the effective performance of these
distributors. Recruiting and retaining qualified distributors and training them in our technology and products requires significant time
and resources. Further, we have no minimum purchase commitments with any of our distributors, and our contracts with these distributors
do not prohibit them from offering products or services that compete with ours. Our competitors may be effective in providing incentives
to existing and potential distributors to favor their products or to prevent or reduce sales of our products. Our distributors may choose
not to offer our products exclusively or at all. Our failure to establish and maintain successful relationships with distributors would
likely materially adversely affect our business, results of operations and financial condition.
We purchase several key components and finished products from
limited sources, and we are increasingly dependent on contract manufacturers for our hardware products
Many components, subassemblies, and modules necessary for the
manufacture or integration of our hardware products are obtained from a limited group of suppliers. The majority of our hardware is manufactured
in Taiwan. Any increase in the tension between China and Taiwan, could adversely affect our manufacturing operations in Taiwan. Although
we do not manufacture in China, some of our component parts are sourced from China. Our reliance on sole or limited suppliers, particularly
foreign suppliers, and our reliance on subcontractors involves several risks, including a potential inability to obtain an adequate supply
of required components, subassemblies, or modules and limited control over pricing, quality, and timely delivery of components, subassemblies
or modules. Such risks could become exacerbated to the extent such suppliers and subcontractors are materially disrupted by quarantines,
factory slowdowns or shutdowns and border closings, as well as travel restrictions. For example, global supply chain disruptions associated
with geopolitical events, such as the war between the U.S., Israel and Iran and its effects on the delivery of goods through the Strait
of Hormuz, and silicon industry impacted the availability of raw products and resulted in prolonged shipping and delivery times. Availability
of specific components continues to impact the global supply chain, mainly impacting lead times. Demand is increasing supply requirements
and the fast growing technology innovation can impact the availability and manufacturers’ capacity. For example, there is currently
a worldwide shortage of semiconductor, memory and other electronic components driven by the proliferation of AI infrastructure and the
high energy demands of such production. Our products are dependent upon some of these components and a continued shortage or increased
prices drive by global semiconductor shortages may negatively impact our business by increasing lead times and prices from our suppliers,
which could adversely affect our results of operations. Any material supply chain disruption could negatively impact our business, financial
condition and results of operations. Although we have been successful in the past, replacing suppliers may be difficult and it is possible
it could result in an inability or delay in producing designated hardware products. Managing our supplier and contractor relationships
is particularly difficult during time periods in which we introduce new products and during time periods in which demand for our products
is increasing, especially if demand increases more quickly than we expect. We also have extended support contracts with these suppliers
and have been dependent on their ability to perform over a period of years.
We incorporate third-party technology in our products, which may
make us dependent on the providers of these technologies and expose us to potential intellectual property claims
Our products contain certain technology that we license from
other companies. Third-party developers or owners of technologies may not be willing to enter into, or renew, license agreements with
us regarding technologies that we may wish to incorporate in our products, either on acceptable terms or at all. If we cannot obtain licenses
to these technologies, we may be at a disadvantage compared with our competitors who are able to license these technologies. In addition,
when we do obtain licenses to third-party technologies that we did not develop, we may have little or no ability to determine in advance
whether the technology infringes the intellectual property rights of others. In the event such third-party developers and owners are otherwise
unable to provide such technology or services to us, our ability to provide our products and services could be disrupted. This includes
mandated government shutdowns. Our suppliers and licensors may not be required or may not be able to indemnify us in the event that a
claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would
be responsible for any further costs or damages. Any failure to obtain licenses to intellectual property or any exposure to liability
as a result of incorporating third-party technology into our products could materially and adversely affect our business, results of operations
and financial condition.
Failures of the third-party technology, third-party servers, cloud
service providers, such as AWS, and other third-party hardware, software and infrastructure on which we rely could adversely affect our
business
We rely on third-party technology, third-party servers, cloud
service providers, such as AWS, and other third-party hardware, software and infrastructure to support our operations. The owners and
operators of the data centers and cloud services with which we are engaged, and the other third parties on which we rely, do not guarantee
uninterrupted or error-free technology, products or services. Problems faced by our third-party providers, including technological or
business-related disruptions, could adversely impact our business and results of operations, including by adversely impacting our products
and services.
Our
servers, data centers and other facilities are also vulnerable to damage or interruption from fires, natural disasters, terrorist attacks,
power loss, telecommunications failures, pandemics or similar catastrophic events. Disruptions to these servers or facilities could interrupt
our ability to provide our products and services and materially adversely affect our business and results of operations.
11
Risks Related to Tax, Legal and Regulatory Matters
We are the defendants in various lawsuits and have been subject
to tax disputes and governmental proceedings, which could adversely affect our business, results of operations and financial condition
As a global company we are subject to taxation in Israel, the
United States and various other countries. We attempt to utilize an efficient operating model and accordingly to pay taxes based on the
laws in the countries in which we operate. Nonetheless, various tax authorities in different parts of the world may disagree with our
operating sale model. This may lead to disputes and to tax assessments, which can have a negative effect on our tax liabilities.
In addition, we are subject to the continuous examination by
tax authorities around the world. It is possible that tax authorities may disagree with certain positions we have taken and any adverse
outcome of such a review, investigation or audit could have a negative effect on our financial position and results of operations. We
regularly assess the likelihood of adverse outcomes resulting from these examinations, and audits to determine the adequacy of our provision
for income and other taxes, but the determination of our worldwide provision for income taxes and other tax liabilities requires significant
judgment by management, and there are transactions where the ultimate tax determination is uncertain. Although we believe that our estimates
are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially
affect our financial results in the period or periods for which such determination is made. There can be no assurance that the outcomes
from continuous examinations will not have an adverse effect on our business, financial condition and results of operations.
In January 2023, the Israeli Tax Authority (the “ITA”)
issued orders for the years 2016 through 2019 challenging our positions on several issues and, demanded the payment of additional
taxes in the aggregate amount of NIS 536 million (approximately $158 million), not including an amount of NIS 476 million (approximately
$140 million) related to expenses that will be deductible in future years, with respect of these four tax years (these amounts include
interest and indexation up to the tax settlement’s payment date, i.e. 31 July 2025). On November 29, 2023, the Company filed an
appeal to the District Court of Tel Aviv against these orders.
In addition, the ITA has issued a tax assessment for the 2020
tax year in which it demanded the payment of additional taxes in the aggregate amount of NIS 94 million (approximately $28 million), not
including an amount of NIS 106 million (approximately $31 million) related to expenses that will be deductible in future years, with respect
to the 2020 tax year (these amounts include interest and indexation up to the tax settlement’s payment date, i.e. 31 July 2025).
On December 31, 2023 we submitted a tax appeal against the 2020 tax assessment to the ITA.
On July 15, 2025, the Company and the ITA entered into a settlement
agreement under which the Company agreed to pay total additional taxes of NIS 223.2 million (approximately $66 million) in respect of
the 2016–2020 tax years, which was ratified by the District Court of Tel Aviv on July 16, 2025. The Company settled the tax
demand payment to the ITA on July 31, 2025. The settlement fully and finally resolves all tax matters between the Company and the ITA
relating to the 2016-2020 tax years.
We are the defendant in various other lawsuits, including employment-related
litigation claims, construction claims and other legal proceedings in the normal course of our business. Litigation and governmental proceedings
can be expensive, lengthy and disruptive to normal business operations, and can require extensive management attention and resources,
regardless of their merit. While we currently intend to defend the aforementioned matters vigorously, we cannot predict the results of
complex legal proceedings, and an unfavorable resolution of a lawsuit or proceeding could materially adversely affect our business, results
of operations and financial condition. See also “Item 8 – Financial Information” under the caption “Legal Proceedings”.
Uncertainties in the interpretation and application of worldwide
tax reforms, complex tax laws and regulations could materially affect our tax obligations and effective tax rate
On July 4, 2025, the One, Big, Beautiful Bill Act was enacted,
which, among other changes to U.S. federal income tax law, permanently suspends the requirement to capitalize and amortize domestic research
and development expenditures and permits such deductions on a current basis, and reinstates 100% bonus depreciation for certain qualified
property. The Bill also allows to some extent an accelerated amortization of domestic research and development expenditures that had previously
been amortized during the years 2022-2024.
In addition, California recently enacted a temporary suspension
on the use of California net operating loss carryforwards under certain conditions in the taxable years beginning in 2024, 2025 and 2026,
and other state tax limitations may apply.
The base erosion and profit shifting (“BEPS”) project
undertaken by the Organisation for Economic Co-operation and Development (“OECD”) may have adverse consequences to our tax
liabilities. The first pillar of BEPS’s project is focused on the allocation of taxing rights between countries for in-scope large
multinational enterprises that sell goods and services into countries with minor or no local physical presence. We do not expect to be
within the scope of Pillar One.
12
In December 2022, the Council of the European Union (“EU”)
unanimously adopted the Directive on BEPS’s Pillar Two ensuring a global minimum tax rate of 15% for certain
companies with an annual global turnover of at least €750 million, in the Union (the Directive). The OECD has also
issued the Safe Harbours and Penalty Relief : Global Ani-Base Erosion Rules (“Pillar Two Rules”) and related
guidance. EU Member States and other non-EU countries enacted legislation to integrate the provisions of the
Directive and Pillar Two rules into their national laws by December 31, 2023 and the majority of those countries generally
apply these provisions for fiscal years starting on or after December 31, 2023.
On December 2025, the Israeli Knesset approved the Minimum Corporate
Tax Law (Multinational Group), 2025 (the “Law”) which adopts BEPS’s Pillar Two Rules. The Law introduces
a qualified domestic minimum top-up tax, pursuant to which multinational enterprise groups with annual global turnover of
at least €750 million are subject to a minimum corporate tax rate of 15% on the Israeli Constituent Entity
as defined under the OECD’s Pillar Two Rules. The Law enters into force with effective date of January 1, 2026.
In parallel, as part of the Israeli Economic Program Law for
the 2026 budget year, legislation to incentivize research and development activities (the “R&D Incentive Legislation”)
was enacted on March 30, 2026 and entered into force as of January 1, 2026.
The R&D Incentive Legislation introduces a tax credit, at
varying rates based on specified thresholds, for qualifying research and development expenditures incurred in Israel by eligible Israeli
companies that are part of multinational enterprise groups, subject to meeting defined eligibility criteria. The tax credit may be utilized
to offset Israeli corporate income tax or the Israeli domestic minimum top-up tax.
In addition, the R&D Incentive Legislation, subject to conditions
as prescribed therein, provides that all or a portion of the unutilized R&D tax credit will be provided to eligible companies
in the form of a cash grant upon the lapse of a period stipulated by the R&D Incentive Legislation, rather than being utilized solely
as a tax credit. This mechanism is intended, among other things, to support the qualification of the incentive under the OECD Pillar Two
framework.
The implementation of the Israeli Pillar Two Law is expected
to increase our reported tax expenses beginning in 2026. Based on the current Proposed R&D Incentive Legislation and its associated
tax credit, and assuming enactment effective January 1, 2026, income tax expense is expected to increase, while the net cash impact is
not expected to be material. However, the ultimate impact will depend on the final form of the proposed R&D Incentive Legislation,
if and when enacted and the amount of tax credits approved thereunder.
We are currently monitoring the local minimum corporate tax legislations
in the relevant jurisdictions and awaiting further guidance on the Israeli Proposed R&D Incentive Legislation and its effective
date.
Indirect taxes, including digital service tax (“DST”)
measures as unilaterally adopted by certain jurisdiction, could also adversely affect our tax obligations. These measures generally aim
at securing taxation rights of the jurisdiction for the revenues/profits generated by the transnational e-commerce activities with customers
who are resident in this specific jurisdiction. Current or future attempts to impose sales, income, or other taxes on e-commerce would
likely increase the cost of doing business online and decrease the attractiveness of advertising and selling products over the internet
and could lead to significant increases in internal costs necessary to capture data and collect and remit taxes.
Finally, we are subject to audit by taxing authorities in several
jurisdictions, and tax laws may be interpreted differently by the competent tax authorities and courts, which could lead to an increase
of our tax burden and increased costs to us to comply with new laws and interpretations thereof and tax auditors. New taxes or reporting
obligations could also result in additional costs necessary to collect the data required to assess these taxes and to remit them to the
relevant tax authorities or to comply with these reporting obligations.
Class action litigation due to stock price volatility or
other factors could cause us to incur substantial costs and divert our management’s attention and resources
In the past, following periods of volatility in the market price
of a public company’s securities, securities class action litigation has often been instituted against that company. Companies such
as ours in the technology industry are particularly vulnerable to this kind of litigation as a result of the volatility of their stock
prices. We have been named as a defendant in this type of litigation in the past. Any litigation of this sort in the future could result
in substantial costs and a diversion of management’s attention and resources.
13
We are subject to governmental export and import controls that
could subject us to liability or impair our ability to compete in international markets
Because we incorporate encryption technology into our products,
certain of our products are subject to U.S. export controls and may be exported outside the U.S. only with the required export license
or through an export license exception. If we were to fail to comply with U.S. export licensing requirements, U.S. customs regulations,
U.S. economic sanctions, or other laws, we could be subject to substantial civil and criminal penalties, including fines, incarceration
for responsible employees and managers, and the possible loss of export or import privileges. Obtaining the necessary export license for
a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws
and economic sanctions prohibit the shipment of certain products to U.S. embargoed or sanctioned countries, governments, and persons.
Even though we take precautions to ensure that we comply with all relevant regulations, any failure by us or any partners to comply with
such regulations could have negative consequences for us, including reputational harm, government investigations, and penalties.
In addition, various countries regulate the import of certain
encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to
distribute our products or could limit our end-customers’ ability to implement our products in those countries. Changes in our products
or changes in export and import regulations for whatever reason may create delays in the introduction of our products into international
markets, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay
the export or import of our products to certain countries, governments, or persons altogether. Any change in export or import regulations,
economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments,
persons, or technologies targeted by such regulations or protectionist measures, could result in decreased use of our products by, or
in our decreased ability to export or sell our products to, existing or potential end-customers with international operations. Any decreased
use of our products or limitation on our ability to export to or sell our products in international markets would likely adversely affect
our business, financial condition, and results of operations.
Changes in government trade policies and international trade disputes
that result in tariffs and other protectionist measures could adversely affect our business in the future
The U.S. government and the current administration have made
public statements and taken certain actions indicating significant changes in U.S. trade policy, including imposing new or increased tariffs
on certain goods imported into the United States from Canada, Mexico and China. In response, a number of other countries have announced
an intention to impose additional duties on imports from the United States. To date, our business has not been affected by such actions.
However, changes in government trade policies and international trade disputes that result in tariffs and other protectionist measures
could adversely affect our business in the future.
Risks Related to Our Intellectual Property
We may not be able to successfully protect our intellectual property
rights, which could cause substantial harm to our business
We seek to protect our proprietary technology by relying on a
combination of statutory as well as common law copyright and trademark laws, trade secrets, confidentiality procedures and contractual
provisions as indicated below in the section entitled “Proprietary Rights” in “Item 4 – Information on Check Point”.
We have certain patents in the United States and in several other countries, as well as pending patent applications. We cannot assure
you that pending patent applications will be issued, either at all or within the scope of the patent claims that we have submitted. In
addition, someone else may challenge our patents and these patents may be found invalid. Furthermore, others may develop technologies
that are similar to or better than ours, or may work around any patents issued to us. Despite our efforts to protect our proprietary rights,
others may copy aspects of our products or obtain and use information that we consider proprietary. In addition, the laws of some foreign
countries do not protect our proprietary rights to the same extent as the laws of the United States and Israel. Our efforts to protect
our proprietary rights may not be adequate and our competitors may independently develop technology that is similar to our technology.
In addition to patents, we rely on trade secret and other rights
to protect our unpatented proprietary intellectual property and technology. Despite our efforts to protect our proprietary technologies
and our intellectual property rights, unauthorized parties, including our employees, consultants, service providers or customers, may
attempt to copy aspects of our products or obtain and use our trade secrets or other confidential information. We generally enter into
confidentiality agreements with our employees, consultants, and other service providers, and generally limit access to and distribution
of our proprietary information and proprietary technology through certain procedural safeguards. These agreements and arrangements may
not effectively prevent unauthorized use or disclosure of our intellectual property or technology and may not provide an adequate remedy
in the event of unauthorized use or disclosure of our intellectual property or technology. We cannot be certain that the steps taken by
us will prevent misappropriation of our intellectual property or technology or infringement of our intellectual property rights.
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If we are unable to secure, protect and enforce our intellectual
property rights, such failure could harm our brand and adversely impact our business, financial condition and results of operations.
We incorporate open source technology in our products which may
expose us to liability and have a material impact on our product development and sales
Some of our products utilize open source technologies. These
technologies are licensed to us under varying license structures, including the General Public License. If we have improperly used, or
in the future improperly use, software that is subject to such licenses with our products in such a way that our software becomes subject
to the General Public License, we may be required to disclose our own source code to the public. This could enable our competitors to
eliminate any technological advantage that our products may have over theirs. Any such requirement to disclose our source code or other
confidential information related to our products could materially and adversely affect our competitive position and impact our business,
results of operations and financial condition.
If a third-party asserts that we are infringing its intellectual
property, whether successful or not, it could subject us to costly and time-consuming litigation or expensive licenses, which could harm
our business
There is considerable patent and other intellectual property
development activity in our industry. Our success depends, in part, upon our ability not to infringe upon the intellectual property rights
of others. Our competitors, as well as a number of other entities and individuals, own or claim to own intellectual property relating
to our industry. From time to time, third parties have brought, and continue to bring, claims that we are infringing upon their intellectual
property rights, and we may be found to be infringing upon such rights. In addition, third-parties have in the past sent us correspondence
claiming that we infringe upon their intellectual property, and in the future we may receive claims that our products infringe or violate
their intellectual property rights. Furthermore, we may be unaware of the intellectual property rights of others that may cover some or
all of our technology or products. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted
against us, could require that we pay substantial damages or royalty payments, prevent us from selling our products, or require that we
comply with other unfavorable terms. In addition, we may decide to pay substantial settlement costs and/or licensing fees in connection
with any claim or litigation, whether or not successfully asserted against us. Even if we were to prevail, any disputes or litigation
regarding intellectual property matters could be costly and time-consuming and divert the attention of our management and key personnel
from our business operations. As such, third-party claims with respect to intellectual property may increase our cost of goods sold and
operating expenses, reduce the sales of our products, and may have a material and adverse effect on our business.
Due to the global nature of our business, we must comply with
various anti-bribery regimes and any failure to do so could adversely affect our business
The global nature of our business creates various domestic and
local regulatory challenges. The U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act
2010 (the “U.K. Bribery Act”), Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition on Money
Laundering Law – 2000 (the “Israeli Anti-Bribery Laws”) and similar anti-bribery laws in other jurisdictions generally
prohibit companies and their intermediaries from making improper payments to foreign government officials and other persons for the purpose
of obtaining or retaining business. In addition, companies are required to maintain records that accurately and fairly represent their
transactions and have an adequate system of internal accounting controls. Further, changes in laws could result in increased regulatory
requirements and compliance costs which could adversely affect our business, financial condition and results of operations.
As a result, we are exposed to a risk of violating anti-bribery
laws in the countries where we operate. Although we have internal policies and procedures, including a code of ethics and proper business
conduct, reasonably designed to promote compliance with anti-bribery laws, we cannot assure that our employees or other agents will not
engage in prohibited conduct and render us responsible under the FCPA, the U.K. Bribery Act, the Israeli Anti-Bribery Laws or any similar
anti-bribery laws in other jurisdictions. If we are found to be in violation of the FCPA, the U.K. Bribery Act, the Israeli Anti-Bribery
Laws or other anti-bribery laws (either due to acts or inadvertence of our employees, or due to the acts or inadvertence of others), we
could suffer criminal or civil penalties or other sanctions, which could have a material adverse effect on our business, results of operations,
cash flows, financial condition, reputation and ability to win future business or maintain existing contracts.
Other General Risks and Risks Related to the Ownership of Our Ordinary
Shares
We are exposed to various legal, business, political, economic,
health-related and other risks associated with our international operations; these risks could increase our costs, reduce future growth
opportunities and affect our results of operations
We operate our business primarily from Israel, we sell our products
worldwide, and we generate a significant portion of our revenue outside the United States. We intend to continue to expand our international
operations, which will require significant management attention and financial resources. In order to continue to expand worldwide, we
will need to establish additional operations, hire additional personnel and recruit additional channel partners internationally. To the
extent that we are unable to do so effectively, our growth is likely to be limited and our business, results of operations and financial
condition may be materially adversely affected.
15
Our international sales and operations subject us to many potential
risks inherent in international business activities, including, but not limited to:
| • |
technology import and export license requirements; |
| • |
costs of localizing our products for foreign countries, and the lack of acceptance of localized products in foreign countries;
|
| • |
varying economic and political instability or war, including the war between Israel, the U.S. and Iran and the ongoing hostilities
between Israel and Hezbollah, Hamas and Yemen and the significant military action against Ukraine launched by Russia; |
| • |
potential tariffs, sanctions, fines or other trade restrictions, including any political or economic responses and counter-responses
or otherwise by various global actors to the significant military action against Ukraine launched by Russia, as well as the possibility
of further international trade disputes that result in tariffs and other protectionist measures; |
| • |
imposition of or increases in tariffs or other payments on our revenues in these markets; |
| • |
greater difficulty in protecting intellectual property; |
| • |
difficulties in managing our overseas subsidiaries and our international operations; |
| • |
economic, social, or political conditions, including conditions resulting from a decline in the macroeconomic environment, rising
interest rates, exchange rate fluctuations and inflation; |
| • |
political instability and civil unrest which could discourage investment and complicate our dealings with governments; |
| • |
widespread health emergencies or pandemic; |
| • |
difficulties in complying with a variety of foreign laws and legal standards and changes in regulatory requirements; |
| • |
expropriation and confiscation of assets and facilities; |
| • |
difficulties in collecting receivables from foreign entities or delayed revenue recognition; |
| • |
recruiting and retaining talented and capable employees; |
| • |
differing labor standards; |
| • |
increased tax rates; |
| • |
potentially adverse tax consequences, including taxation of a portion of our revenues at higher rates than the tax rate that applies
to us in Israel; |
| • |
fluctuations in currency exchange rates and the impact of such fluctuations on our results of operations and financial position;
and |
| • |
the introduction of exchange controls and other restrictions by foreign governments. |
These difficulties could cause our revenues to decline, increase
our costs or both. This is also specifically tied to currency exchange rates which have an impact on our financial statements based on
currency rate fluctuations.
Our actual or perceived failure to adequately protect personal data or customer data,
or to otherwise comply with data privacy and protection laws and regulations or other technology related regulations, could subject us
to sanctions and damages and could harm our reputation and business
A variety of state, national, foreign, and international laws
and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data and customer
data, and other areas in new and evolving technologies. These laws and regulations, as demonstrated by the examples below, continue to
evolve. New or modified laws and regulations relating to these matters are proposed and implemented frequently and existing laws and regulations
subject to new or different interpretations. Compliance with these laws and regulations can be costly and can delay or impede the development
and offering of new products and services.
16
For example, the General Data Protection Regulation (“GDPR”)
(which is applicable in both the EU and the UK), imposes stringent requirements for data processors and controllers. Such requirements
include amongst other things, obligations to: i) provide data subjects with fulsome disclosures about the processing of personal information;
ii) adhere to reasonable data retention limits; iii) comply with individual requests in relation to their personal data, including access
and deletion requests; iv) ensure suitable security / protection of personal data and comply with mandatory notification requirements
in the case of a data breach; v) adhere to elevated standards regarding valid consent in some specific cases of data processing; and vi)
comply with stringent data transfer obligations, including in relation to international transfers of personal data. The GDPR also includes
potentially severe penalties for failure to comply, inter alia, a fine up to 20 million EUR / 17.5 million GBP (as applicable) or up to
4% of the annual worldwide turnover, whichever is greater, which can be imposed. Compliance with these stringent requirements on privacy
user notifications and data handling (both as they apply to us but also our customers) could increase our financial risk exposure, require
us to adapt our business in order to comply with the GDPR requirements and incur additional costs.
Additionally, the United States has various privacy laws with
privacy laws now having been implemented in 19 US states. In some respects the laws across US states are harmonised but there remain points
of difference and fragmented regulations increase the burden of compliance. In California, the California Consumer Privacy Act (“CCPA”)
and California Privacy Rights Act (“CPRA”) provide data privacy rights for consumers and privacy-related operational requirements
for companies. The CCPA and CPRA, and other US state laws are making it easier for certain individuals to opt-out of having their
personal data processed and disclosed to third parties through various opt-out mechanisms, which could result in an increase to our operational
costs to ensure compliance with such legal and regulatory requirements.
Other jurisdictions have also enacted and strengthened data protection
laws, which have increased the cost of complying with them for businesses. For example, Israel has enacted laws and regulations relating
to privacy, data protection, and security, including Israeli Privacy Protection Law 5741-1981 and its associated regulations that have
brought the Israeli regime closer to the GDPR, in particular with regard to enforcement with the law providing for administrative fines
of up to 5% of global turnover. In Latin America, Brazil’s Lei Geral de Proteção de Dados (LGPD), one of the most impactful
data protection laws in Latin America, is largely aligned to the GDPR. In China, Personal Information Protection Law of the People’s
Republic of China (“PIPL”) applies and has parallels with the GDPR given that is has extra-territorial effect, applying to
data processing activities in China and outside of China in certain circumstances. In Australia, the Privacy and Other Legislation Amendment
Act 2024 (POLA) modernised Australia’s data privacy legislation and introducing GDPR‑style features, new enforcement powers,
and expanded individual rights.
In addition, the increasing use of artificial intelligence and
AI-enabled tools in business operations, including by third-party service providers, may increase the risk that personal data is processed,
disclosed or retained in ways that are inconsistent with applicable data protection laws or contractual obligations. Regulatory frameworks
governing the use of AI and automated data processing are also evolving in multiple jurisdictions (for example in the EU through the EU
AI Act), which may further increase our compliance costs and exposure to regulatory scrutiny, penalties and other liabilities, all of
which could have a material adverse effect on our business and results of operations.
Stringent privacy, data protection and security requirements
in the GDPR, CCPA, and other laws and regulations (e.g., in those regulating AI) could decrease demand for our products and services,
increase our costs, and impair our ability to maintain and grow our customer base and increase our revenue, We may face challenges in
addressing these requirements and making necessary changes to our policies and practices, and may incur significant costs and expenses
in an effort to do so. Moreover, because the interpretation and application of many laws, regulations, industry standards, contractual
obligations and other actual and asserted obligations to which we are or may become subject relating to privacy, data protection,
security, AI, and other new and evolving areas are uncertain, it is possible that these laws, regulations, industry standards, contractual
obligations or other actual or asserted obligations to which we are or may become subject may be interpreted and applied in a manner that
is inconsistent with our existing or future data processing practices or features of our products and services. Our actual or alleged
failure to comply with applicable laws and regulations, or any other actual or asserted obligations relating to the collection, use, retention,
protection, disclosure, transfer, and other processing of personal data and customer data, could result in investigations, enforcement
actions and other proceedings, significant penalties imposed or sought by a regulator or data subject, claims, demands, and litigation
or other legal action or proceedings against us or our customers or suppliers, which could result in negative publicity, increased operating
costs, restrictions upon our practices and damages, financial penalties and other liabilities, all of which could have a material adverse
effect on our business and results of operations.
Issues relating to our use of artificial intelligence and machine
learning technologies, combined with an uncertain legal and regulatory environment, could materially and adversely affect our business,
financial condition and results of operations.
We have incorporated and may continue to incorporate artificial
intelligence and machine learning solutions and features into our products or services, and
otherwise within our business, and these solutions and features may become more important to our operations, including our product development,
product demand, customer support and internal processes, or to our future growth over time. There can be no assurance that we will realize
the desired or anticipated benefits from artificial intelligence and machine learning technologies, or at all, and we may fail to properly
implement or market our artificial intelligence and machine learning solutions and features. Additionally, our artificial intelligence
and machine learning solutions and features may expose us to additional claims, demands, and proceedings by private parties and regulatory
authorities and subject us to legal liability as well as brand and reputational harm. For example, if artificial intelligence models used
in our products or services are incorrectly designed, the data used to train them is incomplete or inadequate, or we do not have sufficient
rights to use data on which such models rely, the performance of our artificial intelligence and machine learning solutions and features,
as well as our reputation, could suffer or we could incur liability through the violation of contractual or regulatory obligations. The
legal, regulatory, and policy environments around artificial intelligence and machine learning are evolving rapidly. For example, the
EU Artificial Intelligence Act (the “AI Act”), which achieved approval by the European Council on February 2, 2024, and the
European Parliament on March 13, 2024, imposes obligations on providers and users of artificial intelligence technologies. The AI Act
may impact the development and adoption of our artificial intelligence and machine learning solutions in Europe. Additionally, several
U.S. states have proposed, and in certain cases have enacted, legislation imposing obligations in connection with the development or use
of, or otherwise regulating, artificial intelligence and machine learning technologies. Other countries also are contemplating laws regulating
artificial intelligence and machine learning technologies. We may become subject to new legal and other obligations in connection with
our use of artificial intelligence and machine learning, which could require us to make significant changes to our policies and practices,
necessitating expenditure of significant time, expense, and other resources.
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Repaying and servicing our existing and future debt, including our outstanding Convertible
Notes may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
Our ability to make scheduled payments of the principal of the
Convertible Notes depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our
control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital
expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets,
restructuring debt, or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability
to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to
engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
In addition, our indebtedness, combined with our other financial obligations and contractual commitments,
could have other important consequences. For example, it could:
| • |
make us more vulnerable to adverse changes in general economic, industry, and competitive conditions and adverse changes in government
regulation; |
| • |
limit our flexibility in planning for, or reacting to, changes in our business and our industry; |
| • |
place us at a disadvantage compared to our competitors who have less debt; |
| • |
limit our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes;
and |
| • |
make an acquisition of our company less attractive or more difficult. |
Any of these factors could harm our business, results of operations,
and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service
or repay our indebtedness would increase.
Our Convertible Notes may impact our financial results, result in the dilution of existing
shareholders and create downward pressure on the price of our ordinary shares.
In December 2025, we issued and sold $2.0 billion aggregate principal
amount of 0.00% Convertible Senior Notes due 2030 (the “Convertible Notes”), in a private offering to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, all of which were outstanding as of December 31, 2025.
Our Convertible Notes may affect our earnings per share figures,
as accounting procedures may require that we include in our calculation of earnings per share the number of ordinary shares into which
the Convertible Notes are convertible. The Convertible Notes may be converted under the conditions specified in the indenture governing
the Convertible Notes (the “Indenture”). Upon conversion, we will satisfy our conversion obligation by paying cash up to the
aggregate principal amount of the Convertible Notes being converted and by paying and/or delivering, as the case may be, ordinary shares
or cash or a combination of cash and ordinary shares, at our election, in respect of the remainder, if any, of our conversion obligation
in excess thereof. If our ordinary shares are issued to holders of the Convertible Notes upon conversion, it will cause dilution to our
shareholders’ equity, and the market price of our ordinary shares may decrease due to the additional selling pressure in the market.
We may determine in the future to repurchase all or portions
of the outstanding Convertible Notes from time to time in accordance with applicable Securities and Exchange Commission (“SEC”)
and other legal requirements and in consideration of market and other conditions. Any repurchases or exchanges of our outstanding Convertible
Notes are likely to affect the market price of our ordinary shares. We expect that holders of any Convertible Notes that are repurchased
or exchanged may enter into or unwind various derivatives with respect to our ordinary shares and/or purchase or sell our ordinary shares
in the market to hedge their exposure in connection with these transactions. In addition, in connection with any repurchases of the Convertible
Notes, the counterparties to the Capped Call (as defined below) or their respective affiliates may modify their hedge positions with respect
to the Capped Call by entering into or unwinding various derivatives with respect to our ordinary shares and/or purchasing or selling
our ordinary shares or other securities of ours in secondary market transactions. This activity could impact the market price of our ordinary
shares at that time.
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Our ability to pay cash upon conversion or repurchase of the Convertible Notes may
be limited.
If the last reported sale price of our ordinary shares on the
trading day immediately preceding the business day immediately preceding December 15, 2028 is less than 110% of the conversion price,
holders of the Convertible Notes have the right to require us to repurchase for cash all or any portion of their Convertible Notes on
December 15, 2028 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued
and unpaid “special interest” (as defined in the Indenture) to, but excluding, the repurchase date. Additionally, holders
of the Convertible Notes have the right, subject to and under the terms of the Indenture to require us to repurchase all or a portion
of their Convertible Notes upon the occurrence of a “fundamental change” before the maturity date, at a repurchase price equal
to 100% of the principal amount of such Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any.
Our ability to repurchase the Convertible Notes upon any required
repurchase event or to pay cash upon maturity or conversion of Convertible Notes may be limited by law, regulatory authority, or agreements
governing our future indebtedness or cash liquidity constraints. In addition, we may not have enough available cash or be able to obtain
financing at the time we are required to make repurchases of the Convertible Notes surrendered or Convertible Notes being converted. Our
failure to repurchase the Convertible Notes at a time when the repurchase is required by the Indenture or to pay cash upon maturity or
conversion of such Convertible Notes as required by the Indenture would constitute a default under the Indenture. A default under the
Indenture or the fundamental change itself within the meaning of the Indenture could also lead to a default under agreements governing
our future indebtedness. If the payments of the related indebtedness were to be accelerated after any applicable notice or grace periods,
we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or to pay cash upon conversion of the
Convertible Notes.
Our capped call transactions may affect the value of our ordinary shares.
In connection with the pricing of the Convertible Notes, we entered
into privately-negotiated capped call transactions (“Capped Calls”) with certain financial institutions (the “option
counterparties”). The Capped Calls are expected generally to reduce the potential dilution to our ordinary shares upon any conversion
of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible
Notes, as the case may be, with such reduction and/or offset subject to a cap.
The option counterparties and/or their respective affiliates
may modify their hedge positions by entering into or unwinding various derivatives with respect to our ordinary shares and/or purchasing
or selling our ordinary shares or other securities of ours in secondary market transactions prior to the maturity of the Convertible Notes
(and are likely to do so following any conversion of the Convertible Notes, any repurchase of the Convertible Notes by us on any fundamental
change repurchase date, any redemption date or any other date on which the Convertible Notes are retired by us, in each case, if we exercise
the relevant election under the Capped Calls and in connection with any negotiated unwind or modification of the Capped Calls). This activity
could cause or avoid an increase or a decrease in the market price of our ordinary shares.
The potential effect, if any, of these transactions and activities
on the trading price of our ordinary shares will depend in part on market conditions. Any of these activities could adversely affect the
market price of our ordinary shares.
We are subject to counterparty risk with respect to the capped call transactions.
We are subject to the risk that any of the option counterparties
may default under the Capped Calls. Our exposure to the credit risk of the option counterparties under the Capped Calls will not be secured
by any collateral. Past global economic conditions, including recent increases in prevailing interest rates, have resulted in the actual
or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency
proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions
with them. Our exposure will depend on many factors. Generally, the increase in our exposure will be correlated to the increase in the
market price and in the volatility of our ordinary shares. In addition, upon a default by any counterparty to any capped call transactions,
we may suffer more dilution than we currently anticipate with respect to our ordinary shares. We can provide no assurances as to the financial
stability or viability of the option counterparties.
Compliance with new and changing corporate governance and public
disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance
Changing laws, regulations and standards relating to accounting,
corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010 (“Dodd-Frank”), new SEC regulations, amendments to the Israeli Companies Law and Nasdaq rules are creating increased
compliance costs and uncertainty for companies like ours. These new or changed laws, regulations and standards may lack specificity and
are subject to varying interpretations. The implementation of these laws and their application in practice may evolve over time as new
guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and
higher costs of compliance as a result of ongoing revisions to such governance standards.
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In addition, continuing compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting
requires the commitment of significant financial and managerial resources and the report of an independent registered public accounting
firm on the Company’s internal control over financial reporting.
In connection with our Annual Report for fiscal 2025, our management
assessed our internal control over financial reporting, and determined that our internal control over financial reporting was effective
as of December 31, 2025, and our independent auditors have expressed an unqualified opinion over the effectiveness of our internal
control over financial reporting as of December 31, 2025. However, we will undertake management assessments of our internal control
over financial reporting in connection with each annual report, and any deficiencies uncovered by these assessments or any inability of
our auditors to issue an unqualified report could harm our reputation and the price of our ordinary shares.
A small number of shareholders own a substantial portion of our
ordinary shares, and they may make decisions with which you or others may disagree
As of February 28, 2026, our directors and executive officers
owned approximately 23.96% of the voting power of our outstanding ordinary shares, or 25.43% of our outstanding ordinary shares if
the percentage includes options currently exercisable or exercisable within 60 days of February 28, 2026 and RSUs and PSUs vesting within
60 days of February 28, 2026. The interests of these shareholders may differ from your interests and present a conflict. If these shareholders
act together, they could exercise significant influence over our operations and business strategy. For example, although these shareholders
hold considerably less than a majority of our outstanding ordinary shares, they may have sufficient voting power to influence matters
requiring approval by our shareholders, including the election and removal of directors and the approval or rejection of mergers or other
business combination transactions. In addition, this concentration of ownership may delay, prevent or deter a change in control, or deprive
a shareholder of a possible premium for its ordinary shares as part of a sale of our company.
Our cash balances and investment portfolio have been, and may
continue to be, adversely affected by market conditions and interest rates
We maintain substantial balances of cash and liquid investments,
for purposes of general corporate purposes, which may include acquisitions, share repurchases and other purposes. Our cash, cash equivalents,
short-term bank deposits and fixed-income marketable securities valued total of $4,342 million as of December 31, 2025. The performance
of the debt capital markets affects the market values of funds that are held in marketable securities. These assets are subject to price
fluctuations, changes in interest rates and credit spreads, market liquidity and various other factors, including, without limitation,
rating agency upgrades / downgrades that may impair some or all of their value, or unexpected changes in the financial markets’
healthiness worldwide.
We expect that market conditions will continue to fluctuate and
the fair value of our investments may be affected accordingly. Moreover, in case we would like to liquidate some of our investments into
cash – we are dependent on market conditions and liquidity opportunities, which may be impacted by economic, social, or political
conditions, including, without limitation, conditions resulting from a decline in the macroeconomic environment, rising interest rates,
exchange rate fluctuations, inflation, global pandemics, global supply chain disruptions and conditions resulting from geopolitical uncertainty
and instability or wars.
Financial income is an important component of our net income.
The outlook for our financial income is dependent on many factors, some of which are beyond our control, and they include the future direction
of interest rates, foreign exchange rates, amount of any share repurchases, acquisitions that we may execute and the amount of cash flows
from operations that are available for investment. We rely on third-party money managers to manage the majority of our investment portfolio
in a risk-controlled framework and subject to our investment policy. Our investment portfolio is invested primarily in fixed-income securities
and short-term bank deposits, and is affected primarily by changes in interest rates and credit spreads. Interest rates are highly sensitive
to many factors, including governmental monetary policies and domestic and international economic and political conditions, such as the
wars and significant military actions around the globe and any related political or economic responses and counter-responses or otherwise
by various global actors or general effect on the global economy. Any significant decline in our financial income or the value of our
investments due to changes in interest rates, interest rate expectations, credit spreads, deterioration in the credit rating of the securities
in which we have invested, or general market conditions, could have an adverse effect on our results of operations and financial condition.
We generally buy and hold our fixed income securities, while
limiting credit risk by setting a maximum concentration limit per issuer as well as setting minimum credit rating requirement. Our fixed
income investment portfolio consists primarily of government bonds, securities issued by government agencies and corporate debentures.
Although we believe that we generally adhere to conservative investment guidelines, a turmoil in the financial markets may result in impairments
of the carrying value of our investment assets. We classify our investments in fixed maturity securities as available-for-sale. Changes
in the fair value of investments classified as available-for-sale are not recognized as income during the period, but rather are recognized
as a separate component of equity until realized. Realized losses in our investments portfolio may adversely affect our financial position
and results. Had we reported the cumulative changes in the fair value of our fixed income securities as part of our income, our reported
net income for the year ended December 31, 2025, would have increased by $10 million.
20
Currency fluctuations may affect the results of our operations
or financial condition
Our functional and reporting currency is the U.S. dollar. We
generate a majority of our revenues and expenses in U.S. dollars. In 2025, we incurred approximately 42% of our expenses in foreign currencies,
primarily Israeli Shekels and Euros. As such, changes in exchange rates may have a material adverse effect on our business, results of
operations and financial condition. The exchange rates between the U.S. dollar and certain foreign currencies have fluctuated substantially
in recent years and may continue to fluctuate substantially in the future. We expect that a majority of our revenues will continue to
be generated in U.S. dollars for the foreseeable future and that a significant portion of our expenses, including payroll related costs,
as well as capital and operating expenditures, will continue to be denominated in the currencies referred to above. The results of our
operations may be adversely affected in relation to foreign exchange fluctuations. During 2025, we entered into forward contracts to hedge
against some of the risk of foreign currency exchange rates fluctuations resulting in changes in future cash flow from payments of payroll
and related expenses denominated in Israeli Shekels and Euros. As of December 31, 2025, our total outstanding forward contracts that
hedge against these fluctuations in foreign currency exchange rates was $329 million.
In addition, we entered into forward contracts to hedge the impact
of fluctuations in exchange rates on assets and liabilities denominated in Israeli Shekels and other currencies. As of December 31,
2025, the total amount of outstanding forward contracts that did not qualify for hedge accounting, was $196 million. We may use derivative
financial instruments, such as foreign exchange forward contracts, put and call options, and others, to mitigate the risk of fluctuations
changes in foreign exchange rates on assets, cash flows receivables and payables denominated in certain currencies. We may not be able
to purchase derivative instruments adequate to fully protect us from foreign currency exchange risks.
Additionally, our hedging activities may also generate losses
as a result of volatility in foreign currency markets. If foreign exchange markets continue to be volatile, such fluctuations in foreign
exchange rates could materially and adversely affect our profit margins and results of operations in future periods. Also, the volatility
in the foreign exchange markets may make it difficult to hedge our foreign currency exposures effectively.
The imposition of exchange or price controls or other restrictions
on the conversion of foreign currencies could also have a material adverse effect on our business, results of operations and financial
condition.
Changes in foreign exchange rates around the globe, could have
an adverse impact on our business and results of operations. These changes may have an impact on some of our expenses which are paid in
local currencies (non-US dollar), as well as an impact on our non-US customers which have their financials in non-US dollar currencies.
Our information technology systems, networks and products and
services have been, and may continue to be, subject to various security threats and cyber security incidents
Our information technology systems, networks, products, and services
have in the past and may in the future be subject to various security threats or cyber security incidents, including from computer malware,
malicious code injection, ransomware, viruses, social engineering (including phishing attacks), denial of service or other attacks, human
error, technical errors, employee theft or misuse and general hacking. For example, we regularly face attempts by others to gain unauthorized
access, or to introduce malicious software to our information technology systems, and certain of these attempts have been successful.
Additionally, malicious hackers have attempted and in the future likely will attempt to gain unauthorized access to, or sabotage, take
control of or otherwise corrupt, our information technology systems, networks, processes, products and services. We are also a target
of attempts to gain access to our network or data centers or those of our customers or end users, steal proprietary information related
to our business, products, services, employees, and customers, or interrupt our information technology systems or networks or those of
our customers or others. We may also be subject to increasing risks in connection with geopolitical events and conflicts, such as the
war that began on February 28, 2026 between Israel, the United Stated and Iran resulting in Iran launching thousands of ballistic missiles
and drones against civilian targets in Israel and against U.S. military bases and other civilian targets in several countries in the Persian
Gulf, and Hezbollah, a terrorist organization based in Lebanon, launching hundreds of missiles and drones Israeli military sites and civilian
targets in Northern Israel, the Russia-Ukraine and the war and hostilities between Israel and Hezbollah, Hamas and Yemen, including risks
of a security breach or incident, ransomware, destructive malware, and distributed denial-of-service attacks, as well as fraud, spam and
fake accounts, cyber attacks or other threats or illegal activity. Additionally, with many of our employees continuing to work remotely,
we face an increased risk of attempted security breaches and incidents.
21
We also have incorporated machine learning and other artificial
intelligence technologies into aspects of our products, services, and business, and may continue to incorporate additional artificial
technologies into our products and services and otherwise in our business and operations in the future. The use of artificial intelligence
technologies may create additional cyber security risks or increase cyber security risks and may result in security breaches or other
types of cyber security incidents. Further, artificial intelligence technologies may be used in connection with certain cyber security
attacks, resulting in heightened risks of security breaches and incidents.
There also have been and may continue to be significant supply
chain attacks (such as the attacks resulting from vulnerabilities in SolarWinds Orion and other widely-used software and technology infrastructure)
and we cannot guarantee that our or our third-party providers’ systems have not been breached or compromised or that they do not
contain exploitable defects, vulnerabilities, or bugs that could result in a security breach or incident of or impacting, or other disruption
to, our information technology systems, networks, products or services, or those of third parties that support us and our platform. We
have been impacted by security incidents of widely trusted third-party software and technology infrastructure, such as the SolarWinds
Orion incident in December 2020. We have taken steps to protect our information technology systems, networks and products and services,
but our security measures or those of our customers or third-party service providers could be insufficient and breached or otherwise compromised
or disrupted, including as a result of third-party action, employee, customer or user errors, technological limitations, defects or vulnerabilities,
malfeasance, fraud or malice on the part of employees or third parties, including state-sponsored organizations with significant financial
and technological resources, or from failures in technological resources, failures to comply with policies or otherwise. We have been,
and may in the future be, impacted by these threats and our internal controls and operations regarding security may not be effective in
eliminating the risk of compromise of our information technology systems or networks or our products or services.
While we seek to prevent, detect and investigate unauthorized
attempts, attacks and other threats against our information technology systems, network and products and services, no set of security
safeguards is infallible, and we remain at risk, including to additional known or unknown threats. We have experienced cyber security
incidents of various kinds in the past and we may experience cyber security incidents in the future, and we cannot guarantee that any
such incidents will not have a material adverse impact in the future. Any actual or perceived security breach or incident impacting us,
our third-party service providers, or our customers or users, whether successful or unsuccessful, could result in reputational harm, governmental
inquiries, investigations or other proceedings, penalties and significant costs, including those related to, for example, rebuilding internal
systems, reduced inventory value, providing modifications to our products and services, defending against litigation, responding to regulatory
inquiries or actions, paying damages, or taking other remedial steps, all of which could damage our reputation and reduce demand for our
products and services. Further, we may be required or otherwise find it appropriate to expend significant resources, adapt our business
activities and practices, or modify our operations or information technology in an effort to protect against security incidents and to
mitigate, detect and remediate vulnerabilities, whether in connection with an actual or perceived security breach or incident or otherwise.
We cannot be certain that our insurance coverage will be adequate
for data security liabilities incurred and, that it will cover any indemnification claims against us relating to any incident, that insurance
will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any
future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence
of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements,
could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
We depend on our executive officers and other key employees, and
the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could adversely affect
our business, and we may not be able to successfully navigate the recent leadership changes while maintaining key aspects of our culture,
which could have a significant negative effect on our existing business and our ability to pursue future plans
Our success depends largely upon the continued services of our
executive officers and other key employees. There have been changes in the past, and there may be changes in the future, to our executive
management team resulting from the hiring or departure of executives, which could disrupt our business. In December 2024, Nadav Zafrir
became our new Chief Executive Officer and our founder and former Chief Executive Officer, Gil Shwed, transitioned into the role
of Executive Chairman. In addition, in 2025 we announced the appointments of several senior management members. The loss of one
or more of our executive officers or other key employees could adversely affect our business. Changes in our executive management team
may also cause disruptions in, and adverse impacts to, our business. We also may not be able to successfully navigate the recent
leadership changes while maintaining key aspects of our culture, which could have a significant negative effect on our existing business
and our ability to pursue future plans.
22
Risks Related to Our Operations in Israel
The ongoing war and other potential political, economic and military
instability in Israel, where our principal executive offices and our principal research and development facilities are located, may adversely
affect our results of operations
We are incorporated under the laws of the State of Israel, and
our principal executive offices and principal research and development facilities are located in Israel. Accordingly, political, economic
and military conditions in and surrounding Israel may directly affect our business. Since the State of Israel was established in 1948,
a number of armed conflicts have occurred between Israel and its Arab neighbors. Terrorist attacks and hostilities within Israel; and
the war between Israel, the U.S. and Iran, and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen, have also heightened
these risks.
In October 2023, Hamas terrorists infiltrated Israel’s
southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched
extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip
and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers.
Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations
commenced in parallel to their continued rocket and terror attacks. Following the attack by Hamas on Israel’s southern border, Hezbollah
in Lebanon has also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns in northern
Israel. In response to these attacks, Israel’s security cabinet declared war against the Hezbollah in southern Lebanon. The Houthi
movement, which controls parts of Yemen, launched missile, rocket, and shooting attacks against Israel and attacks on marine vessels traversing
the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned by Israeli businessmen.
It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile
countries will join the hostilities.
On February 28, 2026, Israel and the United States launched a
joint attack against Iran, targeting key officials and military commanders. Iran launched thousands of ballistic missiles and drones against
civilian targets in Israel and against U.S. military bases and other civilian targets in several countries in the Persian Gulf , and Hezbollah
launched hundreds of missiles and drones from Lebanon against Israeli military sites and civilian targets in Northern Israel.
The intensity and duration of the current war between Israel,
the U.S. and Iran, and the ongoing hostilities between Israel and Hezbollah, Hamas and Yemen are difficult to predict, as are such hostilities’
economic implications on our business and operations and on Israel's economy in general. Our principal place of business is located in
Tel Aviv, Israel, and there can be no assurance that attacks launched will not reach our facilities, which could result in a significant
disruption of our business. Further, these events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s
economic standing, that may involve an additional downgrade in Israel's credit rating by rating agencies, which may have an adverse effect
on the Company and our ability to effectively conduct our operations.
Any war or hostilities involving Israel, a significant increase
in terrorism or the interruption or curtailment of trade between Israel and its present trading partners, a potential boycott of any Israeli
products, or a significant downturn in the economic or financial condition of Israel, could materially adversely affect our operations.
Ongoing and revived hostilities or other Israeli political or economic factors could materially adversely affect our business, results
of operations and financial condition. In addition, there have been increased efforts by activists to cause companies and consumers to
boycott Israeli goods based on Israeli government policies. Such actions, particularly if they become more widespread, may adversely impact
our ability to sell our products.
Our commercial insurance does not cover losses that may occur
as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct
damages that are caused by terrorist attacks or acts of war, we cannot be certain that such government coverage will be maintained or
that it will sufficiently cover our potential damages.
Uprisings and armed conflicts in various countries in the Middle
East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of the political
and trade relationships that exist between Israel and these countries. In addition, this instability may affect the global economy and
marketplace, including as a result of changes in oil and gas prices.
Beginning in 2023, governmental attempts to pursue a reform in
Israel’s judicial system have prompted significant political tension in Israel. This controversy has prompted protests in Israel
and triggered a considerable political debate. The proposed legislation has not become effective and its scope has not been fully determined.
At this stage we cannot assess the potential business impact of these developments and their likely effect on our business, results of
operation, and financial condition , but we continue to monitor the evolving government tensions.
23
Our operations may be disrupted by the obligations of our personnel
to perform military service
Many of our employees in Israel are obligated to perform annual
military reserve duty in the Israel Defense Forces, in the event of a military conflict, could be called to active duty. Our operations
could be disrupted by the absence of a significant number of our employees related to military service or the absence for extended periods
of military service of one or more of our key employees. Military service requirements for our employees could materially adversely affect
our business, results of operations and financial condition.
We are subject to risks in connection with the development of
our new campus in Tel Aviv, Israel
In June 2025, our joint bid with Israel Canada (T.R.) Ltd. for
the long-term prepaid lease of a land lot in Tel Aviv, Israel was approved as the winning bid. Our portion of the aggregate purchase price
payable pursuant to the joint bid was NIS 500 million plus Israeli VAT (total net payment including unrecoverable taxes of approximately
$160 million).
We intend to develop the commercial portion of the land lot,
a piece of land within walking distance from the Company’s current headquarters in Tel Aviv and connected by a park, to address
our expansion plans for the coming years. We expect the construction of the new campus to be completed by 2032.
The successful and timely completion of the new campus project
is subject to numerous risks, many of which are beyond our control. These risks include construction delays, cost overruns and permitting
and regulatory challenges. Any of these factors could increase the total cost of the project above our current expectations and delay
the timing of its completion.
In addition, the design and construction of a large-scale campus
is inherently complex and may require us to make assumptions regarding future workforce size, space utilization, hybrid work environment,
and operational needs. If these assumptions prove to be inaccurate, we may incur inefficiencies in the use of the campus, including underutilized
or excess space. For example, changes in our business, including shifts toward remote or hybrid work arrangements, workforce reductions,
or slower-than-expected growth, could result in a significant portion of the campus being unused or not fully utilized upon completion.
The location of our new campus in Tel Aviv, Israel, is also subject
to risks associated with the ongoing hostilities in the Middle East, and there can be no assurance that attacks launched will not reach
our new campus or delay the construction and buildout of our campus.
The tax benefits available to us require us to meet several
conditions, and may be terminated or reduced in the future, which would increase our taxes
For the year ended December 31, 2025, our effective tax
rate was (12%). Our income tax benefit was primarily related to the settlement with the ITA and the adjustment of Israeli tax expenses
due to the application of the lower statutory tax rate. We have benefited or currently benefit from a variety of government programs and
tax benefits that generally carry conditions that we must meet in order to be eligible to obtain any benefit.
Our income tax and the effective
tax rate reflected in our financial statements increased beginning 2026 as a result of the recently enacted new corporate
minimum tax law of 15% in Israel and other changes in the tax laws of the countries in which we operate or changes in the mix of countries
where we generate profit.
If we fail to meet the conditions upon which certain favorable
tax treatment is based, we would not be able to claim future tax benefits and could be required to refund tax benefits already received.
Any of the following could have a material effect on our overall
effective tax rate:
| • |
Some programs may be discontinued, |
| • |
We may be unable to meet the requirements for continuing to qualify for some programs, |
| • |
These programs and tax benefits may be unavailable at their current levels, or |
| • |
We may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.
|
Additional details are provided in “Item 5 – Operating
and Financial Review and Prospects” under the caption “Taxes on income”, in “Item 10 – Additional Information”
under the caption “Israeli taxation, foreign exchange regulation and investment programs” and in Note 12 to our Consolidated
Financial Statements.
24
Shareholder rights and responsibilities are, and will continue
to be, governed by Israeli law which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies
The rights and responsibilities of the holders of our ordinary
shares are governed by our articles of association and by Israeli law. These rights and responsibilities differ in some material respects
from the rights and responsibilities of shareholders in U.S.- based corporations. In particular, a shareholder of an Israeli company has
a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and
other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting
of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized
share capital, mergers and acquisitions and related party transactions requiring shareholder approval. In addition, a shareholder who
is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director
or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist in understanding
the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations
and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.
Provisions of Israeli law and our articles of association may
delay, prevent or make difficult an acquisition of us, prevent a change of control, and negatively impact our share price
Israeli corporate law regulates acquisitions of shares through
tender offers and mergers, requires special approvals for transactions involving directors, officers or significant shareholders, and
regulates other matters that may be relevant to these types of transactions. Furthermore, Israeli tax considerations may make potential
acquisition transactions unappealing to us or to some of our shareholders. For example, Israeli tax law may subject a shareholder who
exchanges his or her ordinary shares for shares in a foreign corporation, to taxation before disposition of the investment in the foreign
corporation. These provisions of Israeli law may delay, prevent or make difficult an acquisition of our company, which could prevent a
change of control and, therefore, depress the price of our shares.
In addition, our articles of association contain certain provisions
that may make it more difficult to acquire us, such as the provision which provides that our board of directors may issue preferred shares.
These provisions may have the effect of delaying or deterring a change in control of us, thereby limiting the opportunity for shareholders
to receive a premium for their shares and possibly affecting the price that some investors are willing to pay for our securities.
As a foreign private issuer we are not subject to the provisions
of Regulation FD or U.S. proxy rules and are exempt from filing certain Exchange Act reports
As a foreign private issuer, we are exempt from a number of requirements
under U.S. securities laws that apply to public companies that are not foreign private issuers. In particular, we are exempt from the
rules and regulations under the Exchange Act related to the furnishing and content of proxy statements. In addition, we are not required
under the Exchange Act to file annual and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic
companies whose securities are registered under the Exchange Act and we are generally exempt from filing quarterly reports with the SEC
under the Exchange Act. We are also exempt from the provisions of Regulation FD, which prohibits issuers from making selective disclosure
of material nonpublic information to, among others, broker-dealers and holders of a company’s securities when it is reasonably foreseeable
that the holder will trade in the company’s securities on the basis of the information. For so long as we qualify as a foreign private
issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, although pursuant to the Companies Law,
we disclose the annual compensation of our five most highly compensated office holders (as defined under the Israeli Companies Law) on
an individual basis, including in this Annual Report.
As a foreign private issuer whose shares are listed on the Nasdaq
Global Select Market, we may follow certain home country corporate governance practices instead of certain Nasdaq requirements
As a foreign private issuer whose shares are listed on Nasdaq,
we are permitted to follow certain home country corporate governance practices instead of certain requirements of the Nasdaq Stock Market
Rules. For example, we follow our home country law, instead of the Nasdaq Stock Market Rules, which require that we obtain shareholder
approval for the establishment or amendment of certain equity-based compensation plans and arrangements. Under Israeli law and practice,
in general, the approval of the board of directors is required for the establishment or amendment of equity-based compensation plans and
arrangements, unless the arrangement is for the benefit of a director or a controlling shareholder, in which case compensation committee
or audit committee and shareholder approval are also required. A foreign private issuer that elects to follow a home country practice
instead of Nasdaq requirements must submit to Nasdaq in advance a written statement from an independent counsel in such issuer’s
home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign
private issuer must disclose in its annual reports filed with the SEC each such requirement that it does not follow and describe the home
country practice followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection
as provided under Nasdaq’s corporate governance rules.
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| ITEM 4. |
INFORMATION ON CHECK POINT |
Check Point History and Development
Founded over 30 years ago by Gil Shwed, Check Point has continued
its mission to secure the digital world for everyone, everywhere. From Firewall-1, the first stateful firewall to dynamic security innovations
and to the emergence of the Check Point Platform powered by Artificial Intelligence (“AI”), Check Point has demonstrated its
ability to defend against and prevent what is coming. Check Point secures organization’s AI transformation with unified security
architecture of the Hybrid Mesh Networks, Workspace, Exposure Management and AI Security Platform. Through its Check Point Services product,
Check Point provides comprehensive technical services to fulfill the cyber security needs of its global customers.
Business Overview
The Check Point Mission – Securing Our
Customers’ AI Transformation
We are constantly doing the hard work of getting our solutions ready to enable a secure AI transformation.
Our solutions deliver leading protection across infrastructure, to make sure organizations are protected from AI-driven attacks.
We continually modify and improve our security platform services by:
| • |
Regularly updating our security solutions to defend against the full spectrum of evolving threats. |
| • |
Securing the entirely new AI-driven attack surfaces. Requiring purpose-built security capabilities. |
| • |
Deeply integrating AI into our solutions to enable AI-first security teams. |
| • |
Applying a comprehensive prevention-first approach to protect against the most sophisticated attacks. |
| • |
Exploring and implementing novel AI security through ecosystem collaboration, and design partnership |
Check Point assists organizations in defending against AI-driven attacks, securing the new AI attack surfaces
they are creating, and using AI to make security operations faster and simpler. To secure this transformation, organizations need a simpler
and more unified approach to cybersecurity - one that protects networks, users, exposures, and AI systems as part of a single security
strategy.
This is the approach Check Point has established through the following four security pillars:
1. Hybrid Mesh Network Security
Check Point provides a unified security and connectivity foundation across all environments - data
centers, hybrid cloud, internet and perimeter gateways, and branch locations.
2. Workspace Security
Check Point protects the workspace with unified, multi-layer security across devices, browsers, email,
SaaS apps, and remote access, all managed from a single console.
This enables seamless productivity with uncompromising protection - users stay safe, data stays secure,
and business moves faster.
3. Exposure Management
Check Point Exposure Management combines three core elements:
First, threat intelligence powered by Check Point’s unique global telemetry.
Second, smart vulnerability prioritization based on comprehensive internal and external asset discovery,
with continuous detection of vulnerabilities and misconfigurations.
Third, safe and actionable remediation, applying changes intelligently across existing security controls
and reducing operational burden on security teams.
4. AI Security
Our AI Security pillar combined with our prevention-first approach protects the full AI stack - from employee
AI usage, to enterprise applications and agents, and the models, data, and infrastructure behind them.
Together, these pillars provide a unified platform to secure our customers’ entire AI journey.
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Our Strategy: A Platform Built on Four Pillars
1. Hybrid Mesh Network Security
In the AI era, network security challenges are intensifying. Customer networks and applications are borderless
and everywhere, expanding the attack surface, increasing the blast radius, and exposing gaps across fragmented security controls.
We secure hybrid mesh environments through a unified, prevention-first foundation that spans data centers, hybrid cloud, branch, and Secure Access Service
Edge (“SASE”), delivering leading security effectiveness as validated by NSS Labs.
We provide consistent enforcement through a single AI-powered management and security control plane that delivers superior proactive prevention, hyperscale-grade security with an optimized user experience. Our security platform services include:
We secure hybrid mesh environments through a unified, prevention-first foundation that spans data centers, hybrid cloud, branch, and Secure Access Service
Edge (“SASE”), delivering leading security effectiveness as validated by NSS Labs.
We provide consistent enforcement through a single AI-powered management and security control plane that delivers superior proactive prevention, hyperscale-grade security with an optimized user experience. Our security platform services include:
| • |
Check Point Firewall (Data Center, Perimeter, Branch): Our Gateways and firewalls provide
comprehensive security beyond any Next Generation Firewall (“NGFW”) and are designed to manage the most complex security policy
requirements and prevent the most sophisticated cyber-attacks. Our security gateways are powered by over 60 security services, including
the industry’s complete range of security capabilities including firewalling, intrusion prevention, application control, anti-malware,
anti-phishing, DNS security, as well as sandboxing and file sanitization of email and web documents. All of our security gateways receive
immediate threat data from our ThreatCloud AI global threat intelligence system, which leads to increased catch-rate of the most sophisticated
threats. |
| • |
Check Point Maestro Hyperscale Firewall: This
security platform delivers on-demand scalability for requirements that range from 30 Gbps to over 1 Terabits-per-second of threat prevention.
Organizations of any size can benefit from Maestro’s intelligent load balancing firewall cluster design. |
| • |
Firewall Software R82.10 (security operating system &
software): All of our security gateways and firewalls share the same underlying security operating system. Our latest threat
prevention and security management release, launched in December 2025 delivers top-rated threat prevention, cloud services, and performance
acceleration for Check Point firewalls. This operating system provides security controls and management that are a foundational
and integral part of today’s security infrastructure. R82.10 delivers over 20 new capabilities for enterprise customers including:
|
| - |
Supporting Safe AI Adoption: R82.10 strengthens oversight of AI-driven activity by detecting
unauthorized Generative AI (“GenAI”) tools, expanding visibility into AI applications such as ChatGPT, Claude, Gemini, among
others, and monitoring model context protocol (“MCP) usage to protect AI-powered workflows. |
| - |
Strengthening Hybrid Mesh Network Security: Organizations gain more consistent protection
across distributed environments with centralized internet access management for SASE and firewalls, simplified gateway-to-SASE connectivity,
and improved identity and device posture validation to support “Zero Trust” framework at scale. |
| - |
Taking a Prevention-First Approach to Modern Threats: R82.10, introduces phishing protection
that works without HTTPS inspection, adaptive IPS to reduce alert fatigue, and new Threat Prevention Insights to highlight misconfigurations
and posture gaps before attackers can exploit them. |
| - |
Eliminating Silos with a Unified Security Platform: R82.10 expands our open-garden architecture
with more than 250 integrations. These integrations allow organizations to apply endpoint posture signals from their existing providers
directly within Check Point policies, improving identity-based controls and Zero Trust enforcement. |
| • |
Check Point Spark Firewall: This family of security gateways and firewalls designed for small
and medium businesses (“SMBs”) feature advanced threat prevention performance up to 5 Gbps threat prevention. These firewalls
are easy to deploy and manage, and they integrate communication and security into an “all in one” solution. Spark security
gateways provide protection focused on SMBs as well as Enterprises branch offices. |
| • |
AI Powered Security Management: Our AI-powered unified security management control plane –
improves security and optimizes operations through an agentic and autonomous platform, and AI-powered Policy management. |
27
2. Workspace Security – Where Humans Meet AI
Workspace Security Challenges
AI is now embedded across the entire modern workspace: spanning browsers, SaaS applications, email, collaboration
tools, and endpoints. While this proliferation is driving productivity, it is also enabling faster, highly personalized attacks powered
by AI.
At the same time, organizations are relying on disjointed security tools that lack integrated protection
across the user environment. Without dedicated workspace security, AI itself becomes the largest insider risk, amplifying the potential
for data leakage, misuse, and social engineering.
Modern workspace security must evolve to meet these threats. It needs to protect users as they interact
with AI‑driven tools and applications, prevent sensitive data exposure, and block highly targeted, AI‑generated phishing attacks,
particularly through email, before they can cause harm.
The Check Point offering – Workspace Security
We offer services to protect the workspace through the deployment of remote-access enabled, unified, multi-layer
security across devices, browsers, email, SaaS apps. With a single console to manage all features and built-in 360° threat prevention,
organizations can achieve seamless productivity with uncompromised protection. Through the deployment of our security platform with workspace-optimized
features such as browsers security, endpoint security, email security, and SaaS security, users and employees stay safe, data stays secure,
and business moves faster.
Our Workspace Security platform includes features such as:
| • |
Check Point Email Security: secures users’ email clients and gives protection for third-party
providers such as Microsoft Office 365, Exchange, Google G, among others. |
| • |
Check Point Endpoint Security: protects users’ PCs from ransomware, phishing, and malware,
and minimizes breach impact with autonomous detection and response capability. |
| • |
Check Point Mobile Security: protects employees’ mobile devices against malicious apps
and network or operating systems attacks. |
| • |
Check Point Browser Security: provides secure, fast, and private web browsing by inspecting
all Secure Sockets Layer traffic directly on the endpoint. |
| • |
Check Point XDR: provides extended detection,
prevention, and response capabilities. |
Our strength and leadership in email security sets us apart. We are a recognized leader in the 2025 Gartner®
Magic Quadrant™ for Email Security Platforms, reflecting both the maturity of our technology and the trust placed in us by the market.
In 2025 alone, we added 20,000 new customers, underscoring our continued growth and relevance.
We significantly elevate user protection through advanced AI capabilities, including GenAI‑driven
security awareness training with personalized phishing simulations, as well as AI‑powered mailbox observations that proactively
protect against malicious emails while reducing administrative overhead.
In addition, we deliver a truly unified user experience, combined with a defense‑in‑depth approach
to phishing, ensuring comprehensive protection across multiple layers rather than reliance on a single control.
28
3. AI Security- Securing the AI full stack
AI is reshaping the cyber security threat landscape by introducing new risks as organizations rapidly implement
AI applications, agents, and adopt the use of GenAI models. These risks include data leakage through the accidental inclusion of sensitive
information in AI prompts or the uploading of sensitive data to GenAI or other tools, as well as AI threats such as jail breaking or
model inversion and uncontrolled autonomy from agents acting beyond their scope.
We established AI Security as a foundational pillar of our strategy in order to address these emerging and evolving threats. Our end-to-end AI security stack protects employee usage, enterprise applications and agents, and the models, data, and infrastructure that power them.
We established AI Security as a foundational pillar of our strategy in order to address these emerging and evolving threats. Our end-to-end AI security stack protects employee usage, enterprise applications and agents, and the models, data, and infrastructure that power them.
| • |
Check Point AI Workforce Security – delivers instant visibility into all sanctioned
and shadow AI usage, preventing sensitive data exposure, and enabling safe productivity. |
| • |
Check Point AI Agent Security – protects enterprise copilots, chatbots, and agentic
systems from prompt injections, jailbreaks, and malicious output while applying real-time guardrails across AI interactions. |
| • |
Check Point AI Red Teaming – provides continuous red-teaming, model robustness testing,
and compliance readiness for the AI systems that increasingly drive business operations. |
Our platform is built from the ground up on security‑native AI models and prevention‑first
intelligence, rather than retrofitted analytics. This foundation enables us to stop threats before they materialize, rather than reacting
after the fact.
4. Threat Exposure Management – Stopping AI-Era Attacks
Powered by the combined strengths of the recently acquired companies Cyberint Technologies Ltd. and Veriti
Security Ltd., coupled with Check Point’s strong visibility, our Threat Exposure Management platform delivers real time situational
awareness by unifying threat intelligence, dark web insights, attack surface visibility, exploitability context, and automated remediation.
Using Gartner’s Continuous Threat Exposure Management (“CTEM”) framework, we correlate
real‑world attacker behavior with enterprise assets to identify, prioritize, and remediate the exposures that matter most –
before attackers can exploit them.
Our security platforms are designed around three core elements:
| • |
Check Point Threat Intelligence - Leveraging Check Point’s extensive global visibility
and decades of expertise, we map the attacker ecosystem – tracking active campaigns, exploited CVEs, and high‑risk IOCs, while
learning from real‑world attacks. |
| • |
Check Point Vulnerability Detection & Prioritization- Automatically discovering your attack
surface, misconfigurations, and CVEs – across Check Point scanners and existing tools – we deliver a single, prioritized list
of true risks enriched with intelligence and protection context. |
| • |
Check Point Safe Remediation - Going beyond prioritization, we safely reconfigure existing
security controls to close exposures and block threats with minimal operational friction. |
What Sets Us Apart
| • |
Strong intelligence depth, powered by Check Point’s leading visibility and advanced processing, delivering insights that matter.
|
| • |
End-to-end actionability, combining smart prioritization with automated, safe remediation – reducing mean time to remediate
from days to hours and preparing organizations for an era of AI driven attacks. |
Overview of Check Point Services:
Check Point offers its customers with end-to-end customized solutions to fortify defenses,
optimize threat response, maximize their investment on products with advisory and professional services offering to elevate their cyber
posture.
29
| • |
Managed Services: Comprehensive support for Check Point and third-party systems, delivered
with predefined Service Level Agreements (“SLAs”) for a fixed monthly fee. |
| • |
Managed Detection and Response (“MDR/MPR”): A fully managed SecOps platform providing
access to Check Point analysts, researchers, and incident response resources. |
| • |
Incident Response Services: Structured services to address and mitigate security incidents
efficiently. |
| • |
Security Consulting Services Managed Services: Comprehensive support for Check Point and third-party
systems, delivered with predefined Service Level Agreements (“SLAs”) for a fixed monthly fee. |
| • |
Security Consulting Services: Expertise in threat exposure management, threat intelligence,
and risk assessment. |
| • |
Professional Services: End-to-end design, deployment, optimization, and operational support
for Check Point solutions. |
| • |
Training Services: Programs focused on security awareness and executive training to enhance
organizational security maturity. |
| • |
Flex Credits: Prepaid service credits offering one year of flexible access to a range of cyber
security services. |
Check Point Technology Leadership in 2025
During 2025 we were endorsed by market analysts for our leadership position in 28
reports. Below are some of the highlight reviews:
Gartner
| o |
Gartner® Magic Quadrant™ Leader for Hybrid Mesh Firewalls becoming the only vendor to be listed as a Leader for the 24th
time, 2025 |
| o |
Gartner® Magic Quadrant™ Challenger for Endpoint Protection Platforms, 2025 |
| o |
Gartner® Magic Quadrant™ Leader for Email Security Platforms, 2025 |
Forrester
| o |
The Forrester Wave™: Enterprise Email Security, 2025 |
| o |
The Forrester Wave™: Zero Trust Platform Providers, 2025 |
Frost & Sullivan
| o |
Frost & Sullivan® Radar Leader for Endpoint Security, 2025 |
| o |
Frost & Sullivan® Radar Leader for Secure Access Service Edge, 2025 |
| o |
Frost & Sullivan® Radar Leader for Managed Detection and Response (MDR), 2025 |
GigaOm
| o |
GigaOm® Radar Leader for CIEM Solutions V2.0 2025 |
| o |
GigaOm® Radar Leader for Cloud Workload Security, 2025 |
| o |
GigaOm® Radar Leader for Enterprise Firewall 2025 |
| o |
GigaOm® Radar Leader for Extended Detection & Response (EDR) 2025 |
| o |
GigaOm® Radar Leader for Zero Trust Network Access (ZTNA), 2025 |
| o |
GigaOm® Radar Leader for Anti-Phishing, 2025 |
Miercom
| o |
For the fourth consecutive year, Check Point attained Secure Certification in Miercom Enterprise & Hybrid Mesh Firewall Benchmark
Report 2025. Miercom lab tests showed 99.9% malware block rate against Zero+1 Day attacks, 99.7% of phishing attacks, and 98% intrusion
prevention for high & critical threats. |
30
Acquisition and other Corporate Information
In February 2026, we acquired 100% of the share capital of Cyclops
Security Ltd. a privately held Israeli company and a leader in Cyber Asset Attack Surface Management (“CAASM”).
In February 2026, we acquired 100% of the share capital of Cyata
Security Ltd. a privately held Israeli company specializing in discovering, understanding, and governing autonomous AI agents.
In February 2026, we acquired the talent of Rotate Ltd., a privately
held Israeli company to drive continued growth and momentum for Workspace solutions within the managed service providers (MSP) sector.
In October 2025, we acquired 100% of the share capital of Lakera
AI AG, a privately held Swiss company, a leading AI-native security platforms for Agentic AI applications.
In June 2025, we acquired 100% of the share capital of Veriti
Security Ltd., a privately held Israeli company and a provider of a fully automated, multi-vendor pre-emptive threat exposure and mitigation
platform.
In February 2025, we entered into a strategic partnership with
Wiz Ltd. to address the growing challenges enterprises face securing hybrid cloud environments. This collaboration is intended to bridge
the longstanding gap between cloud network security and Cloud Native Application Protection (“CNAPP”) through a deep technological
integration and strategic business alliance, delivering an industry-leading unified, holistic security solution.
In September 2024, we acquired 100% of the share capital of Cyberint
Technologies Ltd., a privately held Israeli company that specializes in comprehensive external risk management solutions, including the
detection and takedown of impersonating website, phishing and social media accounts, as well as stolen credentials and leaked data associated
with organizations.
In October 2023, we acquired 100% of the share capital of rmsource
Inc., a privately held US-based company and a provider of managed security, cloud and IT services, to expand Infinity Global Services
with new managed security services across networks, cloud and security operations.
In September 2023, we acquired 100% of the share capital of Perimeter
81 Ltd., a privately held Israeli company and a leading provider of Zero Trust Network Access (ZTNA) and Secure Service Edge (SSE) software.
In September 2023, we acquired 100% of the share capital of Atmosec
Ltd., a privately held Israeli company that specializes in the rapid discovery and disconnection of malicious SaaS applications, preventing
risky third-party SaaS communications, and rectifying SaaS misconfigurations.
In February 2022, we acquired 100% of the share capital of Spectral
Cyber Technologies Ltd., a privately held Israeli company and key innovator in developer-first security tools designed by developers for
developers, to extend our cloud solution.
In September 2021, we acquired 100% of the share capital of Avanan,
Inc., a privately-held US-based company providing cloud email security, and the developer of a patented application-programming interface
(API) solution to stop email threats before arriving to the inbox (inline), for both internal and external emails using AI based engines.
Further details regarding the material events in the development
of our business since the beginning of 2023 are provided in “Item 5 – Operating and Financial Review and Prospects”
under the caption “Overview”.
We incorporated as a company under the laws of the State of Israel
in 1993 under the name of “Check Point Software Technologies Ltd.” Our registered office and principal place of business is
located at 5 Shlomo Kaplan Street Tel Aviv 6789159, Israel. The telephone number of our registered office is 972-3-753-4555. Our company’s
website is www.checkpoint.com. The contents of our website are not incorporated by reference into this Annual Report.
This Annual Report is available on our website at www.checkpoint.com.
If you would like to receive a printed copy via mail, please contact our Investor Relations department at ir@us.checkpoint.com. The SEC
also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC. The address of that website is www.sec.gov.
Our agent for service of process in the United States is CT Corporation
System, 818 West Seventh Street, Los Angeles, CA 90017 U.S.A.; Tel: 213-627-8252.
31
Revenues by Category of Activity
The following table presents our revenues for the last three
fiscal years by category of activity:
|
|
Year Ended December 31,
|
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
(in millions) |
||||||||||||
|
Category of Activity: |
||||||||||||
|
Products and licenses |
$ |
548.2 |
$ |
507.9 |
$ |
497.4 |
||||||
|
Security subscriptions |
$ |
1,219.0 |
$ |
1,104.2 |
$ |
981.2 |
||||||
|
Software updates and maintenance |
$ |
958.2 |
$ |
952.9 |
$ |
936.1 |
||||||
|
|
||||||||||||
|
Total revenues |
$ |
2,725.4 |
$ |
2,565.0 |
$ |
2,414.7 |
||||||
For information regarding our revenue by geographic market, please
refer to “Item 5 – Operating and Financial Review and Prospects” under the caption “Overview”.
Sales and Marketing
We primarily sell our products and services through a two-tier
distribution model; distributors that sell to resellers and to service providers and Managed Security Service Providers (“MSSPs”),
who sell to end-customers. We support our channel partners with a dedicated team of experienced sales professionals including account
managers, channel managers and sales engineers.
In 2024, we created a demand generation marketing organization
focused on the development and conversion of prospect and customer marketing leads to high quality sales leads. In addition to corporate
and demand generation marketing, Check Point marketing also includes marketing for products, partners, field promotions, digital promotions,
and solutions-oriented thought leadership. In 2025, we continued to invest in sales and marketing resources.
As of December 31, 2025, we had 3,066 employees and subcontractors
in our sales and marketing organization, with a majority of them dedicated to presales and marketing support located in various jurisdictions.
Support and Services
We operate a worldwide technical services organization which
provides a wide range of services including: (i) technical customer support programs and plans; (ii) professional services in
implementing, upgrading and optimizing Check Point products, such as design planning and security implementation; and (iii) certification
and educational training on Check Point products.
Our technical assistance centers in the United States, Israel,
Canada, Japan, India, China, and Australia offer support worldwide, 24-hour service, seven days per week.
As of December 31, 2025, we had 1,168 employees and subcontractors
in our technical services organization.
Research and Product Development
We believe that our future success will depend upon our ability
to enhance our existing products, and to develop, acquire and introduce new products to address the increasingly sophisticated needs of
our customers.
As of December 31, 2025, we had 2,154 employees and subcontractors
dedicated to research and development activities and quality assurance.
Competition
Information concerning competition is provided in “Item
3 – Key Information” under the caption “Risk Factors – Risks Related to Our Business and Our Market – We
may not be able to successfully compete, which could adversely affect our business and results of operations”.
Environmental, Social and Governance (“ESG”)
Since our inception, Check Point’s mission has been to make
the world a safer place. As a global cyber security provider, the Company views our long-term success as inherently linked to the
success of our key stakeholders, and as such, ESG considerations are integrated into our business strategy and operations.
32
Social Standards:
| • |
Community – Check Point supports charitable giving and employee volunteering programs
across the regions in which we operate. Our community engagement and giving policies are governed by the Corporate Responsibility
Policy and the Social Investment and Volunteering Statement. |
| • |
Human Resources – Human capital is a core asset of our Company. We are committed to
promoting an engaging, supportive, and inclusive work environment, free from discrimination and harassment, where our employees can grow
and learn together. Our human resources commitments, programs, and policies are governed and implemented through our Social Engagement
Policy, Human Rights and Labor Policy, Training and Employee Development Policy, and Modern Slavery and Forced Labor Statement. In 2025,
we continued to invest in the personal and professional development of our workforce, while ensuring that all voices, opinions, and outlooks
are heard and fairly addressed. |
| • |
Supply Chain – We uphold high social and human rights standards across our supply chain,
with the goal of ensuring that the working conditions are safe and that all business operations are conducted ethically. Key suppliers
and business partners are asked to comply with the standards of business, labor, environmental, and ethical conduct set out in our Supply
Chain and Business Partner Code of Conduct, which is aligned with the Responsible Business Alliance (“RBA”) Code of Conduct
guidelines. These standards are further supported by our Supply Chain s Policy. |
Environmental
Standards:
As a global company, we seek to promote a responsible relationship
with the environment. It is our belief that our impact on the environment is predominately related to our products, services, and operations.
Our Environmental Policy establishes the framework for compliance with environmental laws and regulations, as well as for identifying,
assessing, and managing relevant climate change-related risks and opportunities to our business.
Governance
Standards:
| II. |
Corporate Governance – Relevant ESG governance considerations are integrated into our
wider corporate governance structure, alongside our commitment to operating according to standards of responsible business conduct, ethical
principles, and a strong corporate governance structure, ensuring that we maintain full accountability, integrity, and transparency in
our business practices. Our corporate governance framework is upheld by our Corporate Governance Guidelines, which assist the director
and committee members in fulfilling their oversight responsibilities. |
| III. |
ESG Governance – The Nominating, Sustainability, and Corporate Governance Committee
of the board is responsible for overseeing our ESG program, including oversight of relevant risks, policies, and programs, conducts ongoing
management of ESG matters. |
| IV. |
Ethics – Check Point maintains a comprehensive ethical compliance framework that is
applicable to directors, officers, employees, and relevant third parties. Relevant policies and guidelines that guide our company’s
ethics include: the Code of Ethics and Business Conduct, which establishes clear standards of behavior and conduct; Anti-Corruption, Bribery,
and Money Laundering Policy; Insider Trading Policy; Privacy Policy; Responsible AI Policy; and Whistleblower Procedure. As a global cyber
security company, information security and data protection are critical to our operations, supported by a global security framework aligned
with recognized industry standards and best practices, including for governance of responsible artificial intelligence principles.
|
Our annual ESG Report, which provides additional information on our ESG strategy,
initiatives, and metrics, is available on our website at https://www.checkpoint.com/about-us/esg/.
The ESG Report and the contents of the Company’s website are not incorporated by reference into this Annual Report.
Proprietary Rights
Check Point relies on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. Check Point relies on trade
secrets and copyright laws to protect its software, documentation, and other written materials. Further, Check Point generally enters
into confidentiality agreements with employees, consultants, customers and potential customers, and limits access and distribution of
materials and information that the company considers proprietary.
Check Point and its subsidiaries have 158 issued patents in the
U.S. and in other regions and 16 pending patent applications worldwide. Our efforts to protect our patent rights and other proprietary
rights may not be adequate and our competitors may independently develop technology that is similar. Additional details are provided in
“Item 3 – Key Information” under the caption “Risk Factors – Risks Related to Our Business and Our Market
– We may not be able to successfully protect our intellectual property rights”.
33
Effect of Government Regulation on our Business
Information concerning regulation is provided in “Item
5 – Operating and Financial Review and Prospects” under the caption “Taxes on income” and in “Item 10 –
Additional Information” under the caption “Israeli taxation, foreign exchange regulation and investment programs”.
Organizational
Structure
We are organized under the laws of the State of Israel. We wholly
own the subsidiaries listed below, directly or through other subsidiaries, unless otherwise specified in the footnotes below:
|
NAME OF SUBSIDIARY |
COUNTRY OF INCORPORATION | |
|
Check Point Software Technologies, Inc. |
United States of America (Delaware) | |
|
Check Point Software (Canada) Technologies Inc. |
Canada | |
|
Check Point Software Technologies (Japan) Ltd. |
Japan | |
|
Check Point Software Technologies (Netherlands) B.V. |
Netherlands | |
|
Check Point Holding (Singapore) PTE Ltd. |
Singapore | |
|
Check Point Holding (Singapore) PTE Ltd. – Rep office Indonesia
(1) |
Singapore | |
|
Check Point Holding (Singapore) PTE Ltd. –US, NY Branch (2)
|
Singapore | |
|
Israel Check Point Software Technologies Ltd. China (3) |
China | |
|
Check Point Holding AB (4) |
Sweden | |
|
Check Point Software Technologies South Africa PTY. Ltd |
South Africa | |
|
Check Point Software (Kenya) Limited |
Kenya | |
|
Check Point Software Technologies B.V Nigeria Ltd. (5) |
Nigeria | |
|
Check Point Serverless Security Ltd. (6) |
Israel | |
|
Check Point Email Security Ltd. (7) |
Israel | |
|
Avanan, Inc. |
United States of America (Delaware) | |
|
Zone Labs, L.L.C. (8) |
United States of America (California) | |
|
Check Point Software Technologies (Sweden) AB. (9) |
Sweden | |
|
Check Point Software Technologies (Sweden) AB. – Dubai Branch
(10) |
Sweden | |
|
Lakera AI AG |
Switzerland | |
|
Lakera Inc. (11) |
United States of America (Delaware) | |
|
Veriti Security Ltd. (6) |
Israel | |
|
Veriti Security Inc. (12) |
United States of America (Delaware) | |
|
Cyata Security Ltd. |
Israel | |
|
Cyata Security, Inc. (13) |
United States of America (Delaware) | |
|
Cyclops Security Ltd. |
Israel | |
|
Cyclops Security Inc. (14) |
United States of America (Delaware) | |
|
Cyberint Singapore Pte Ltd. (15) |
Singapore | |
|
Cyberint Inc. (15) |
United States (Delaware) |
|
(1) |
Representative office of Check Point Holding (Singapore) PTE Ltd. |
|
(2) |
Branch of Check Point Holding (Singapore) PTE Ltd. |
|
(3) |
Representative office of Check Point Software Technologies Ltd. |
|
(4) |
Subsidiary of Check Point Holding (Singapore) PTE Ltd. (former name: Protect Data
AB) |
|
(5) |
Subsidiary of Check Point Holding (Singapore) PTE Ltd. and Check Point Yazilim Teknolojileri
Pazarlama A.S. |
|
(6) |
Under intercompany merger process into Check Point Software Technologies Ltd.
|
|
(7) |
Subsidiary of Avanan, Inc. |
|
(8) |
Subsidiary of Check Point Software Technologies Inc. |
|
(9) |
Subsidiary of Check Point Holding AB |
|
(10) |
Branch of Check Point Software Technologies (Sweden) AB. |
|
(11) |
Subsidiary of Lakera AI AG |
|
(12) |
Subsidiary of Veriti Security Ltd. |
|
(13) |
Subsidiary of Cyata Security Ltd. |
|
(14) |
Subsidiary of Cyclops Security Ltd. |
|
(15) |
Under intercompany merger or dissolution process. |
34
Check Point Software Technologies (Netherlands) B.V. acts as a holding company. It
wholly owns all or substantially all of the share capital of the principal operating subsidiaries listed below, unless otherwise indicated
in the footnotes below:
|
NAME OF SUBSIDIARY |
COUNTRY OF INCORPORATION | |
|
Check Point Software Technologies S.A. |
Argentina | |
|
Check Point Software Technologies (Australia) PTY Limited
|
Australia | |
|
Check Point Software Technologies (Austria) GmbH |
Austria | |
|
Check Point Software Technologies Belarus LLC (1) |
Belarus | |
|
Check Point Software Technologies (Belgium) |
Belgium | |
|
Check Point Software Technologies (Brazil) LTDA |
Brazil | |
|
Check Point Software Technologies (Hong Kong) Ltd. (Guangzhou office)
(2) |
China | |
|
Hong Kong SAR Check Point Software Technologies (Hong Kong) Ltd.
(Shanghai office) (2) |
China | |
|
Check Point Software Technologies (Czech Republic) s.r.o.
|
Czech Republic | |
|
Check Point Software Technologies (Denmark) ApS |
Denmark | |
|
Check Point Software Technologies (Finland) Oy |
Finland | |
|
Check Point Software Technologies Eurl |
France | |
|
Check Point Software Technologies GmbH |
Germany | |
|
Check Point Software Technologies (Greece) SA |
Greece | |
|
Check Point Software Technologies (Hungary) Ltd. |
Hungary | |
|
Check Point Software Technologies (Hong Kong) Limited |
Hong Kong | |
|
Check Point Software Technologies India Private Limited |
India | |
|
Check Point Software Technologies (Italia) S.r.l |
Italy | |
|
Check Point Software Technologies Mexico S.A. de C.V. |
Mexico | |
|
Check Point Software Technologies (Beijing) Co., Ltd. |
China | |
|
Check Point Software Technologies (New Zealand) Limited |
New Zealand | |
|
Check Point Software Technologies Norway A.S. |
Norway | |
|
Check Point Software Technologies (Philippines) Inc. |
Philippines | |
|
Check Point Software Technologies (Poland) Sp.z.o.o. |
Poland | |
|
CPST (Portugal), Sociedade Unipessoal Lda. |
Portugal | |
|
Check Point Software Technologies (RMN) SRL |
Romania | |
|
Check Point Software Technologies (Russia) OOO |
Russia | |
|
Check Point Software Technologies (Korea) Ltd. |
South Korea | |
|
Check Point Software Technologies (Spain), S.A. |
Spain | |
|
Check Point Software Technologies (Switzerland) AG |
Switzerland | |
|
Check Point Software Technologies (Taiwan) Ltd. |
Taiwan | |
|
Check Point Yazilim Teknolojileri Pazarlama A.S. |
Turkey | |
|
Check Point Software Technologies (UK) Ltd. |
United Kingdom |
|
(1) |
Under dissolution process |
|
(2) |
Representative office of Check Point Software Technologies (Hong Kong) Ltd. |
35
Property, Plants and Equipment
As of December 31, 2025, we own our headquarters located in Tel
Aviv, Israel and we lease offices in various locations throughout the world. The breakdown in the various geographies (excluding external
data centers) is as follows:
|
Location
|
Space (square feet) |
|||
|
Israel |
380,784 |
*) | ||
|
Americas |
110,427 |
|||
|
Europe, Middle East and Africa |
70,643 |
|||
|
Asia Pacific |
81,359 |
|||
*) We acquired ownership of our international
headquarters located in Tel Aviv, Israel pursuant to a pre-paid 49 year long-term lease on the land with the City of Tel Aviv –
Jaffa. No additional payments are due under such long-term lease. Our international headquarters building contains approximately 332,000
square feet of office space. In addition, we lease approximately 48,000 square feet of additional space substantially all in Tel Aviv,
Israel and around.
In March 2025, we submitted a tender bid, together with Israel Canada (T.R.) Ltd.,
an Israeli company publicly traded on the Tel Aviv Stock Exchange (“Israel Canada”), for the long-term prepaid lease of a
land lot in Tel Aviv, Israel, which is adjacent to our headquarters in Tel Aviv.
The tender was conducted by the Tel Aviv-Jaffa Municipality and the Israel Electric
Company Ltd., and in June 2025 our joint bid with Israel Canada for NIS 818 million (approximately $241 million) plus Israeli VAT, was
approved as the winning bid. Our portion of the aggregate purchase price payable pursuant to the bid was NIS 500 million, plus Israeli
VAT (total net payment including unrecoverable taxes was approximately $160 million).
We intend to develop the commercial portion of the land lot, a piece of land within
walking distance from the Company’s current headquarters in Tel Aviv and connected by a park, to address our expansion plans for
the coming years. We expect significant investment to be associated with developing and building the commercial portion of the land. We
currently expect the construction of the campus to be completed in 2032.
Principal Capital Expenditures and Divestitures
For more information regarding our principal capital expenditures
currently in progress, see “Item 5 – Operating and Financial Review and Prospects” under the caption “Liquidity
and Capital Resources”.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND
FINANCIAL REVIEW AND PROSPECTS
For discussion related to our financial condition, changes in
financial condition, and the results of operations for 2024 compared to 2023, refer to Part I, Item 5. Operating and Financial Review
and Prospects, in our Annual Report on Form 20-F for the fiscal year ended December 31, 2024, which was filed with the U.S. Securities
and Exchange Commission on March 17, 2025 and which is hereby incorporated by reference.
The following discussion and analysis is based on our consolidated
financial statements including the related notes, and should be read in conjunction with them. Our consolidated financial statements are
provided in “Item 18 – Financial Statements”.
Overview
We develop, market and support a wide range of products and services
for IT security by offering a multilevel security architecture that defends enterprises’ cloud, network, mobile devices, Endpoints
information and IOT solutions. Our solutions operate under a unified security architecture, Infinity, that enables end-to-end security
with a single line of unified security gateways and allow a single agent for all endpoint security that can be managed from a single unified
management console. This unified management allows for ease of deployment and centralized control and is supported by, and reinforced
with, real-time threat intelligence and autonomous security updates. Our products and services are sold to enterprises, service providers,
small and medium sized businesses and consumers. Our open platform framework allows customers to extend the capabilities of our products
and services with third-party hardware and security software applications. Our products are sold, integrated and serviced by a network
of channel partners worldwide.
Our business is subject to the effects of general global economic
conditions and, in particular, market conditions in the IT, internet security and data security industries. If general economic and industry
conditions deteriorate, demand for our products could be adversely affected.
Information concerning the effect of governmental regulation
on our business is provided in “Item 5 – Operating and Financial Review and Prospects” under the caption “Taxes
on income” and in “Item 10 – Additional Information” under the caption “Israeli taxation, foreign exchange
regulation and investment programs”.
36
We derive our sales primarily through indirect channels. During
each of 2025, 2024 and 2023, we derived approximately 57%, 56%, and 56%, respectively, of our sales from our ten largest channel partners.
In 2025, 2024 and 2023, our three largest distributors accounted for approximately 39%, 39% and 40% respectively, of our sales. The following
table presents the percentage of total consolidated revenues that we derive from sales in each of the regions shown:
|
|
Year Ended December 31,
|
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
Region: |
||||||||||||
|
Americas, principally U.S. |
42 |
% |
42 |
% |
43 |
% | ||||||
|
Europe, Middle East and Africa |
46 |
% |
47 |
% |
46 |
% | ||||||
|
Asia-Pacific |
12 |
% |
11 |
% |
11 |
% | ||||||
For information on the impact of foreign currency fluctuations,
please refer to “Item 11 – Quantitative and Qualitative Disclosures about Market Risk – Foreign Currency Risk”.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance
with U.S. GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates,
judgments and assumptions that we make are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions were made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of
the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent
there are material differences between these estimates, judgments or assumptions and actual results, our consolidated financial statements
will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe
are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:
| • |
Revenue recognition; |
| • |
Accounting for income taxes; and |
| • |
Business combination. |
In many cases, the accounting treatment of a particular transaction
is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which
management’s judgment in selecting among available alternatives would not produce a materially different result. Our senior management
has reviewed these critical accounting policies and related disclosures with the audit committee of our board of directors. You can see
a summary of our significant accounting policies in Note 2 to our consolidated financial statements, as set forth in Item 18.
Revenue recognition
We derive our revenues mainly from sales of products and licenses,
security subscriptions and software updates and maintenance. Our products are generally integrated with software that is essential to
the functionality of the product. We sell our products primarily through channel partners including distributors, resellers, Original
Equipment Manufacturers (“OEMs”), system integrators and Managed Security Service Providers (“MSSPs”), all of
whom are considered end users.
Security subscriptions provide customers with access to its
suite of security solutions and is sold as a service.
Software updates and maintenance provide customers with rights
to unspecified software product upgrades released during the term of the agreement and include maintenance services to end-user customers,
through primarily telephone access to technical support personnel as well as hardware support services.
We recognize revenues under the core principle that transfer
of control to our customers should be depicted in an amount reflecting the consideration we expect to receive in revenue. Therefore, we
identify a contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the
transaction price to each performance obligation in the contract and recognize revenues when (or as) we satisfy a performance obligation.
37
We recognize revenues from sales of products and licenses, under
Topic 606, upon shipment when control of the promised goods is transferred to the customer, or upon electronic transfer of the Certificate
Key to the customer.
We recognize revenues from security subscriptions and software
updates and maintenance ratably over the term of the agreement due to the continuous transfer of control to the customer over the period
and upon the transfer of services to the customers.
Our arrangements typically contain multiple deliverables, such
as products and licenses, security subscriptions and software updates and maintenance, which are generally capable of being distinct and
accounted for as separate performance obligations. We evaluated the criteria to be distinct under Topic 606, and concluded that the products
and the licenses were distinct and distinct in the context of the contract from the security subscription and the software updates and
maintenance, as the customer can benefit from the products and licenses without the services and the services are separately identifiable
within the arrangement. We allocate the transaction price to each performance obligation based on relative standalone selling price basis,
by using the prices charged for a performance obligation when sold separately.
Deferred revenues represent mainly the unrecognized revenue billed
for security subscriptions and for software updates and maintenance. Such revenues are recognized ratably over the term of the related
agreement.
We recognize revenues net of estimated amounts that may be refunded
for sales returns, rebates, stock rotations and other rights provided to customers on product and service related sales subject to varying
limitations. We estimate and record these reductions based on our historical sales returns experience, analysis of credit memo data, rebate
plans, stock rotation and other known factors. In each accounting period, we use judgments and estimates to determine potential future
sales credits, returns and stock rotation, related to current period revenue. These estimates affect our “revenue” line item
on our consolidated statements of income and affect our “deferred revenues” and “accrued expenses and other liabilities”
on our consolidated balance sheets.
Accounting for income tax
We are subject to income taxes in Israel, the United States and
numerous foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our taxes.
Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different
from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts
and circumstances, such as the closing of a tax audit or the refinement of an estimate, or upon lapse of statute of limitations. To the
extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision
for income taxes in the period in which such determination is made.
Business combination
We apply the provisions of ASC 805, Business Combinations and
allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed or incurred, and intangible assets
acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable
assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed or incurred,
management makes significant estimates and assumptions, especially with respect to intangible assets.
Significant estimates in valuing certain intangible assets include,
but are not limited to, future expected cash flows from acquired technology, and customer relationships from a market participant perspective,
useful lives and discount rates.
We also apply the provisions of ASU 2021-08, Business Combinations
(Topic 805)(“ASU 2021-08”) which requires that we recognize and measure contract assets and contract liabilities acquired
in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and that
at the acquisition date, we account for related revenue contracts in accordance with ASC 606 as if we had originated the contracts.
Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
38
Results of Operations
The following table presents information concerning our results
of operations in 2025 and 2024:
|
|
Year Ended December 31,
|
|||||||
|
|
2025
|
2024
|
||||||
|
|
(in millions) |
|||||||
|
Revenues: |
||||||||
|
Products and licenses |
$ |
548.2 |
$ |
507.9 |
||||
|
Security subscriptions |
1,219.0 |
1,104.2 |
||||||
|
Software updates and maintenance |
958.2 |
952.9 |
||||||
|
|
||||||||
|
Total revenues |
2,725.4 |
2,565.0 |
||||||
|
|
||||||||
|
Operating expenses (*): |
||||||||
|
Cost of products and licenses |
105.8 |
97.8 |
||||||
|
Cost of security subscriptions |
90.9 |
72.6 |
||||||
|
Cost of software updates and maintenance |
132.6 |
123.9 |
||||||
|
Amortization of technology |
32.5 |
25.0 |
||||||
|
|
||||||||
|
Total cost of revenues |
361.8 |
319.3 |
||||||
|
|
||||||||
|
Research and development |
456.7 |
394.9 |
||||||
|
Selling and marketing |
947.0 |
862.9 |
||||||
|
General and administrative |
128.8 |
111.9 |
||||||
|
|
||||||||
|
Total operating expenses |
1,894.3 |
1,689.0 |
||||||
|
|
||||||||
|
Operating income |
831.1 |
876.0 |
||||||
|
Financial income, net |
114.0 |
96.1 |
||||||
|
|
||||||||
|
Income before taxes on income (tax benefit) |
945.1 |
972.1 |
||||||
|
Taxes on income (tax benefit) |
(111.8 |
) |
126.4 |
|||||
|
|
||||||||
|
Net income |
$ |
1,056.9 |
$ |
845.7 |
||||
39
| (*) |
Including pre-tax charges for stock-based compensation, amortization of intangible assets and acquisition related expenses in the
following items: |
|
|
Year Ended December 31,
|
|||||||
|
|
2025
|
2024
|
||||||
|
|
(in millions) |
|||||||
|
Amortization of intangible assets and acquisition related expenses
|
||||||||
|
Amortization of technology |
$ |
32.5 |
$ |
25.0 |
||||
|
Research and development |
4.6 |
6.5 |
||||||
|
Selling and marketing |
40.1 |
40.3 |
||||||
|
|
||||||||
|
Total amortization of intangible assets and acquisition related
expenses |
$ |
77.2 |
$ |
71.8 |
||||
|
|
||||||||
|
Stock-based compensation |
||||||||
|
Cost of products and licenses |
$ |
0.6 |
$ |
0.4 |
||||
|
Cost of software updates and maintenance |
13.5 |
8.2 |
||||||
|
Research and development |
76.3 |
53.1 |
||||||
|
Selling and marketing |
79.8 |
58.2 |
||||||
|
General and administrative |
35.4 |
29.8 |
||||||
|
|
||||||||
|
Total stock-based compensation |
$ |
205.6 |
$ |
149.7 |
||||
The following table presents information concerning our results of operations as a
percentage of revenues for the periods indicated:
|
|
Year Ended December 31,
|
|||||||
|
|
2025
|
2024
|
||||||
|
Revenues: |
||||||||
|
Products and licenses |
20 |
% |
20 |
% | ||||
|
Security subscriptions |
45 |
43 |
||||||
|
Software updates and maintenance |
35 |
37 |
||||||
|
|
||||||||
|
Total revenues |
100 |
% |
100 |
% | ||||
|
|
||||||||
|
Operating expenses: |
||||||||
|
Cost of products and licenses |
4 |
4 |
||||||
|
Cost of security subscriptions |
3 |
3 |
||||||
|
Cost of software updates and maintenance |
5 |
5 |
||||||
|
Amortization of technology |
1 |
1 |
||||||
|
Total cost of revenues |
13 |
13 |
||||||
|
Research and development |
17 |
15 |
||||||
|
Selling and marketing |
35 |
34 |
||||||
|
General and administrative |
5 |
4 |
||||||
|
|
||||||||
|
Total operating expenses |
70 |
66 |
||||||
|
|
||||||||
|
Operating income |
30 |
34 |
||||||
|
Financial income, net |
5 |
4 |
||||||
|
|
||||||||
|
Income before taxes on income (tax benefit) |
35 |
38 |
||||||
|
Taxes on income (tax benefit) |
(4 |
) |
5 |
|||||
|
|
||||||||
|
Net income |
39 |
% |
33 |
% | ||||
40
Revenues
We derive our revenues mainly from the sale of products and licenses,
security subscriptions and software updates and maintenance. Our revenues were $2,725 million in 2025 and $2,565 million in
2024.
Total revenues in 2025 increased by 6% compared to 2024. Product
and license revenues were $548 million in 2025 and $508 million in 2024. We continued to deliver increasingly more of our latest
security offerings as subscriptions resulting in increased sales of our security subscription packages, including considerable demand
for our emerging products portfolio and across all 3 pillars: Hybrid Mesh, Workspace and CTEM . As a result, security subscription revenues
increased by $115 million, or 10%, from $1,104 million in 2024 to $1,219 million in 2025. Software updates and maintenance
revenues increased by $5 million, or 1%, from $953 million in 2024 to $958 million in 2025, primarily as a result of renewals
of existing and sales of new maintenance contracts and professional services.
Cost of Revenues
Total cost of revenues was $362 million in 2025 and $319 million
in 2024. Cost of revenues includes cost of product and licenses, cost of security subscriptions and cost of software updates and maintenance
and amortization of technology. Our cost of products and licenses includes mainly cost of software and hardware production, packaging
and shipping. Our cost of security subscriptions is comprised of costs paid to third parties, hosting and infrastructure costs and cost
of customer support related to these services. Our cost of software updates and maintenance include mainly the cost of post-sale customer
support.
Cost of products and licenses was $106 million in 2025 and
$98 million in 2024.
Cost of security subscriptions was $91 million in 2025 and
$73 million in 2024.
Cost of software updates and maintenance was $133 million
in 2025 and $124 million in 2024.
In 2025, amortization of technology was $33 million compared
to $25 million in 2024. The increase in 2025 is attributed to the acquisitions made during 2025 and 2024.
Research and Development
Research and development expenses were $457 million in 2025
and $395 million in 2024, and represented 17% of revenues in 2025 and 15% of revenues in 2024. Research and development expenses
consist primarily of salaries and other related expenses for personnel as well as the cost of our cloud infrastructure expenses.
The $62 million increase in 2025 is primarily a result of an
increase in compensation and related expenses for personnel , cloud infrastructure expenses and a $7 million expense related to currency
exchange and hedging.
The majority of our personnel engaged in research and development
are located in Israel, where compensation-related expenses are paid in Israeli Shekels, while our research and development expenses are
reported in U.S. dollars. Therefore, changes to the exchange rate between the Israeli Shekel and the U.S. dollar have affected and may
in the future affect our research and development expenses. We have forward contracts to hedge against a certain portion of the exposure
mentioned above.
Selling and Marketing
Selling and marketing expenses consist primarily of salaries,
commissions, advertising, trade shows, seminars, public relations, co-op activities with partners, travel and other related expenses.
Selling and marketing expenses were $947 million in 2025 and $863 million in 2024, which represented 35% of revenues in 2025
and 34% of revenues in 2024.
The net increase of $84 million in selling and marketing
costs in 2025 primarily stems from significant investments in partners and marketing programs.
Our selling and marketing expenses worldwide are paid in local
currencies and are reported in U.S. dollars. Therefore, changes to the exchange rates between the local currencies and the U.S. dollar
have affected, and may in the future affect, our expense level.
General and Administrative
General and administrative expenses consist primarily of salaries
and other related expenses for personnel, professional fees, insurance costs, legal and other expenses. General and administrative expenses
were $129 million in 2025 and $112 million in 2024 , which represented 5% of revenues in 2025 and 4% of revenues in 2024.
Operating Income Margin
In 2025, our operating margin was 30% compared to 34% in 2024.
The decrease in our operating margin was primarily due to an increase in our workforce related expenses, cloud expenses, stock-based compensation
expenses and amortization of intangibles expenses in related to our acquisitions.
We may experience future fluctuations or declines in operating
margins from historical levels due to several factors, as described above in “Item 3 – Key Information” under the caption
“Risk Factors – Risks Related to Our Business and Our Market”.
Financial Income, Net
Net financial income consists primarily of interest earned on
cash equivalents, short-term deposits and marketable securities. Net financial income was $114 million in 2025 and $96 million
in 2024. As we generally hold debt securities until maturity, our current portfolio’s yield is derived primarily from interest rates
and the yield on securities at time of purchase. Since most of our investments are U.S. dollars denominated securities, our net financial
income is heavily dependent on prevailing U.S. interest rates changes and the market expectations to such changes. The higher financial
income is mainly due to higher reinvestment yield in our investment portfolios in 2025, as well as additional interest income on operational
cash. Additionally, in December, 2025, we completed a $2,000 million Convertible Senior Note issuance, while the net cash received during
the last month of the year contributed additional interest income. For further risk related to our portfolio see also Item 3, “Risk
Factors – Risks Related to Our Business and Our Market – Our cash balances and investment portfolio have been, and may continue
to be, adversely affected by market conditions and interest rates”.
41
Taxes on Income (tax benefit)
Total taxes on income (tax benefit) were $(112) million
in 2025 and $126 million in 2024. Our effective tax rate was (12)% in 2025 and 13% in 2024. See Note 12 to our consolidated financial
statements for further information on our statutory rates.
Additional details are provided in “Item 10 – Additional
Information” under the caption “Israeli taxation, foreign exchange regulation and investment programs” and “Item
3 – Key Information” under the caption “The tax benefits available to us require us to meet several conditions, and
may be terminated or reduced in the future, which would increase our taxes”.
Net Income
Net income increased by $211 million to $1,057 million in 2025
compared to $846 million in 2024.
Liquidity and Capital Resources
During 2025 and 2024, we financed our operations through cash
generated from operations. Our total cash and cash equivalents, short-term investments and long-term interest bearing investments, were
$4,342 million as of December 31, 2025 and $2,784 million as of December 31, 2024. Our cash and cash equivalents and
short-term investments were $3,015 million as of December 31, 2025 and $1,372 million as of December 31, 2024. Our
long-term interest bearing investments were $1,327 million as of December 31, 2025 and $1,412 million as of December 31,2024.
The majority of our financial assets are held and managed through the parent company in Israel and our subsidiaries in Canada and the
U.S.
In December 2025, we issued and sold $2.0 billion aggregate principal
amount of 0.00% Convertible Senior Notes due 2030 in a private offering to qualified institutional buyers pursuant to Rule 144A under
the Securities Act (all of which were outstanding as of December 31, 2025).
We generated net cash from operations of $1,199 million
in 2025 and $1,052 million in 2024. Net cash from operations for 2025 and 2024 consisted primarily of net income adjusted for non-cash
activity. The increase in our cash from operations includes benefit from balance sheet hedging transaction of $51 million, offset by one-time
tax settlement payment of $66 million.
Net cash used in investing activities was $680 million in 2025
compared to $24 million in 2024. In 2025, net cash used in investing activities increased compared to 2024, primarily due to higher
investment in short term deposit and lease prepayment paid during 2025. Our net cash paid for acquisitions amounted to $273 million
in 2025 and $186 million in 2024. Our capital expenditures amounted to $27 million in 2025 and $24 million in 2024, and consisted
primarily of computer equipment, software and leasehold improvements.
Net cash provided by financing activities was $752 million
in 2025 and net cash used in financing activities was $1,060 million in 2024 . In 2025, net cash provided by financing activities
was attributed primarily to the issuance of convertible senior notes in the amount of $1,780 net of issuance costs and net of purchased
capped call. Net cash used in financing activities in 2025 and 2024 was also attributed to the repurchase of ordinary shares. Under the
repurchase programs, we may purchase our ordinary shares from time to time, depending on market conditions, share price, trading volume
and other factors. We repurchased ordinary shares in the amount of $1,400 million in 2025 and $1,300 million in 2024. We re-issued
the repurchased shares to settle exercises of options and restricted share unit awards to our employees and directors. Proceeds from such
activities were $393 million and $259 million in 2025 and 2024, respectively.
Our investments in marketable securities are classified as AFS.
AFS securities are carried at fair value, with the unrealized gains and losses, net of tax, recorded in other comprehensive income (loss).
Amortization of premium, discount and interest is recorded in our consolidated statements of income.
Our liquidity could be negatively affected by a decrease in demand
for our products and services, or increase in employment costs. Also, if the financial system or the credit markets deteriorate or remain
volatile, our investment portfolio may be impacted and the values and liquidity of our investments could be adversely affected.
Our principal sources of liquidity consist of our cash and cash
equivalents, short-term bank deposits and marketable securities (which aggregated $4,342 million as of December 31, 2025) and
our cash flow from operations. We believe that these sources of liquidity will be sufficient to meet our normal operating requirements
during the next 12 months and the foreseeable future and to fund capital expenditures.
42
Research and Development, Patents and Licenses, etc.
Additional details are provided in this Item 5, under the caption
“Results of Operations”.
Trend Information
Additional details are provided in this Item 5, under the caption
“Results of Operations”.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
Our directors and executive officers as of March 15, 2026, were
as follows:
|
Name |
Position |
Independent Director (1) |
Outside
Director (2) |
Member of
Audit Committee |
Member of
Compensation Committee |
Member of
NSCG Committee |
|
Gil Shwed |
Executive Chair of the Board of Directors |
|||||
|
Nadav Zafrir |
Chief Executive Officer and Director |
|||||
|
Nataly Kremer |
Chief Product Officer and Head of Research and Development |
|||||
|
Roei Golan |
Chief Financial Officer |
|||||
|
Itai Greenberg |
Chief Revenue Officer |
|||||
|
Yoav Chelouche (3) |
Lead Independent Director |
X |
X |
X |
X |
|
|
Dafna Gruber |
Director |
X |
X |
X |
X |
|
|
Tzipi Ozer-Armon |
Director |
X |
X |
X |
X | |
|
Ray Rothrock |
Director |
X |
X |
X |
X |
|
|
Tal Shavit Shenhav |
Director |
X |
X | |||
|
Jill Smith |
Director |
X |
X | |||
|
Jerry Ungerman |
Director |
X |
| (1) |
“Independent Director” under the Nasdaq regulations and the Israeli Companies Law (see explanation below). |
| (2) |
“Outside Director” as required by the Israeli Companies Law (see explanation below). |
| (3) |
“Financial expert” as required by the Israeli Companies Law and Nasdaq requirements with respect to membership on the
audit committee (see “Item 16A – Audit Committee Financial Expert”). |
43
Gil Shwed is the founder
of Check Point and Executive Chair of the Board of Directors. Mr. Shwed served as the Chief Executive Officer from Check Point’s
inception through December 2024, and Mr. Shwed previously served as Chairman of our board of directors until September 2015. Mr. Shwed
is considered the inventor of the modern firewall and authored several patents, such as the company’s Stateful Inspection technology.
Mr. Shwed has received numerous accolades for his individual achievements and industry contributions, including an honorary Doctor
of Science from the Technion – Israel Institute of Technology, an honorary Doctor of Science from Tel Aviv University, the World
Economic Forum’s Global Leader for Tomorrow for his commitment to public affairs and leadership in areas beyond immediate professional
interests, and the Academy of Achievement’s Golden Plate Award for his innovative contribution to business and technology. Mr. Shwed
is the Chairman of the Board of Trustees of the Youth University of Tel Aviv University. Mr. Shwed is a Tel Aviv University Governor
and founder of the University’s Check Point Institute for Information Security. He is also Chairman of the Board of Directors of
Yeholot Association Founded by the Rashi Foundation whose charter is, among other things, to reduce the dropout rates in high schools.
In 2018, Gil was awarded the prestigious Israel Prize for his contributions to the Israeli technology industry.
Nadav Zafrir, Chief Executive
Officer of Check Point since December 2024, brings thirty years of experience in management, leadership, and technology innovation, Mr.
Zafrir was previously the co-founder and Managing Partner of Team8 Labs Ltd., a global venture group that builds and backs technology
companies at the intersection of artificial intelligence, cyber security, data, fin-tech, enterprise software, and infrastructure, since
2014. Prior to founding Team8, Nadav spent 20 years in the Israel Defense Forces. He served as Commander of Unit 8200, Israel’s
elite military technology unit, where he established the Israel Defense Forces Cyber Command. Mr. Zafrir was a director of SolarEdge Technologies,
Inc. from 2019 until 2025. He holds an LLB from the Interdisciplinary Center Herzliya (IDC) and an Executive MBA from the Kellogg –
Recanati program of the Kellogg Graduate School of Business at Northwestern University in Chicago and the Recanati School of Business
at Tel Aviv University.
Nataly Kremer, Chief
Product Officer and Head of Research and Development since March 2023, oversees all product and technology units and uses her proficiency
in delivering network, security, and cloud technologies for large enterprises to meet customer needs. Ms. Kremer brings extensive R&D
and leadership experience to Check Point. Ms. Kremer joined the company after 12 years with AT&T Inc. (“AT&T”), where
she led its Software and Delivery organization and AT&T’s center in Israel. She holds an MBA and BSc in Computer Sciences and
Management from Tel Aviv University. Ms. Kremer is a board member of IBI Investment House Ltd. and a board member of Israel Advanced Technology
Industries (“IATI”), where she also holds the role of Head of the ITAI Diversity and Inclusion Group.
Roei Golan, has been
serving as Chief Financial Officer of Check Point since 2023, as Acting Chief Financial Officer from October 2022 until May 2023, and
as VP Finance from 2021 until November 2022. Mr. Golan oversees Check Point's finance operations, including accounting, business analysis,
investor relations, legal, tax and treasury. Mr. Golan has over 15 years of financial experience. Prior to joining Check Point in
2021, Mr. Golan worked at EY for 11 years, where he held the role of Managing Director in the Technology practice. Mr. Golan holds a B.A.
in Economics and Accounting and an M.B.A in Finance Management. Mr. Golan is a certified public accountant.
Itai Greenberg, has been
serving as Chief Revenue Officer of Check Point since January 2025. Prior to transitioning to his current role, Mr. Greenberg held the
roles of Chief Strategy Officer and Head of the Cloud and SASE Businesses, VP Product Management and VP Product Marketing. Mr. Greenberg
joined Check Point in 2010, after serving as VP of Product and R&D at EyeClick Ltd. Previously, he held key leadership roles at Microsoft
in Windows Security and Mobile divisions. Mr. Greenberg holds a B.Sc. in Information Systems from the Ben-Gurion University.
Yoav Z. Chelouche has
served on our board of directors since 2006 and as our Lead Independent Director since December 2024. Mr. Chelouche has also served
as one of our outside directors under the Israeli Companies Law since 2006. Mr. Chelouche has been Managing Partner of Aviv Venture
Capital (“Aviv”) since August 2000. Before joining Aviv, Mr. Chelouche served as a President and Chief Executive Officer
of Scitex Corporation (“Scitex”), a world leader in digital imaging and printing systems, from December 1994 until July 2000.
Prior to that, Mr. Chelouche held various managerial positions with Scitex, including VP Strategy and Business Development, VP Marketing
and VP Finance for Europe. Mr. Chelouche is a member of the board of directors of a number of private companies. He was also a board
member and, until 2015, Co-Chairman of IATI-Israel Advanced Technology Industries, an Israeli nonprofit organization that researches,
develops and advocates policies that promote Israel’s high tech ecosystem through activities in training, tuition, business development,
public relations and public policy advocacy. Mr. Chelouche is a board member of Tower Semiconductor Ltd., Malam Team Ltd., and until
February 2024 served as an external director of the Tel Aviv Stock Exchange (TASE). Mr. Chelouche earned a B.A. in Economics
and Statistics from Tel Aviv University, and an M.B.A. from INSEAD University in Fontainebleau, France.
Dafna Gruber has served
on our board of directors since 2024 and as one of our outside directors under the Israeli Companies Law. From 2007 to 2015, Ms. Gruber
served as Chief Financial Officer of NICE Ltd., a publicly traded company listed on Nasdaq and TASE, where she was responsible, inter
alia, for finance, operations, MIS and IT, legal affairs, and investor relations. From 1996 to 2007, Ms. Gruber held various senior finance
roles at Alvarion Ltd., then a publicly traded company listed on Nasdaq and TASE, primarily serving as Chief Financial Officer. From 2016
to 2024, Ms. Gruber served as Chief Financial Officer of several private companies, including Netafim Ltd., Aqua Security Ltd., and Clal
Industries Ltd. Ms. Gruber currently serves as an Independent or External Director at ICL Group Ltd. and Cellebrite DI Ltd., and previously
served as a board member of several publicly traded technology companies. Ms. Gruber is a Certified Public Accountant (CPA) and holds
a Bachelor’s degree in Accounting and Economics from Tel Aviv University.
44
Tzipi
Ozer-Armon has served on our board of directors since 2023. Ms. Ozer-Armon serves as the Chief Executive Officer of Lumenis
Ltd. since May 2012. Before joining Lumenis, Ms. Ozer-Armon headed the Japanese market activities of Teva Pharmaceutical Industries Ltd.
and served as Senior Vice President of Sales and Marketing at SanDisk Corporation. Previously, Ms. Ozer-Armon also served as VP &
General Manager of MSystems Ltd. Ms. Ozer-Armon is a director of ICL Group Ltd. and was previously a director of Strauss Group Ltd. Ms.
Ozer-Armon holds a B.A. magna cum laude in Economics and an M.B.A. degree majoring in Finance and Marketing from Tel Aviv University and
she is an AMP graduate of the Harvard Business School.
Ray Rothrock has served
on our board of directors since 1995. Mr. Rothrock has also served as one of our outside directors under the Israeli Companies Law
since 2000. Mr. Rothrock is a Partner emeritus at Venrock, a venture capital firm, where he was a member since 1988 and a general
partner since 1995. He retired from Venrock in 2013. Presently, Mr. Rothrock is the Chairman of RedSeal, Inc. (“RedSeal”),
a cybersecurity analytics company. Mr. Rothrock served as the Chief Executive Officer of RedSeal from February 2014 until May 2020.
Mr. Rothrock is a director of Nasdaq-listed Roku, Inc., NYSE-listed Centrus Energy Corp., and a number of private companies. Mr. Rothrock
is a member of the Massachusetts Institute of Technology Corporation, and a Trustee of Aerospace Corporation. Mr. Rothrock received
a B.S. in Engineering from Texas A&M University, an M.S. from the Massachusetts Institute of Technology and an M.B.A. from the Harvard
Business School.
Dr. Tal Shavit Shenhav
has served on our board of directors since 2000. Dr. Shavit Shenhav is an organizational consultant specializing in international
collaboration between Israeli and American companies, consulting in the management of cultural differences in order to forge effective
collaboration. Her work with leading management teams includes the definition of organizational culture as the engine of such company’s
activities. Dr. Shavit Shenhav consults with companies undergoing structural change with emphasis on organizational growth through effective
mergers and acquisitions and a redefining of management roles in order to meet market changes.
Jill D Smith has
served on our board of directors since 2023. Ms. Smith brings more than 25 years of international leadership experience, including 17
years as chief executive officer of private and public companies in the technology and information services markets. Ms. Smith previously
served as the President and Chief Executive Officer of Allied Minds plc, an IP commercialization company, from March 2017 through June
2019, and prior to that she served as Chairman, Chief Executive Officer and President of DigitalGlobe Inc., a global provider of satellite
imagery products and services. Ms. Smith started her career as a consultant at Bain & Company, Inc., where she rose to become a Partner.
She subsequently joined Sara Lee Corporation as Vice President, and went on to serve as President and Chief Executive Officer of eDial,
a VoIP collaboration company, and of SRDS, a business-to-business publishing firm. She also served as Chief Operating Officer of Micron
Electronics, and co-founded Treacy & Company, a consulting and boutique investment business. Ms. Smith currently serves as a director
of MDA Space Ltd., Securitas AB and Evolent Health, Inc. and was previously a director of R1 RCM Inc.
Jerry Ungerman has served
on our board of directors since 2005, and served as the chairman of the board of directors from August 2020 through December 2024, after
serving as Vice Chairman of our board of directors from 2005 until August 2020. From 2001 to 2005, Mr. Ungerman served as our President
and before that, from 1998 until 2000, he served as our Executive Vice President. Prior to joining us, Mr. Ungerman accumulated extensive
experience in high-tech sales, marketing and management experience at Hitachi Data Systems (HDS), a data storage company and a member
of the Hitachi, Ltd. group. He began his career with International Business Machines Corp. (IBM), a global technology products and services
company, after earning a B.A. in Business Administration from the University of Minnesota.
Of the individuals mentioned above, only Gil Shwed owned more
than one percent of our outstanding shares as of December 31, 2025. Additional details are provided in this Item 6, under the caption
“Share ownership” and in “Item 7 – Major Shareholders and Related Party Transactions”.
Some of our directors are board members of multiple companies,
some of which may be technology companies. The board of directors has determined that there are no current conflicts of interest with
respect to any of our directors.
The terms of Gil Shwed, Nadav Zafrir, Tzipi Ozer-Armon, Dr. Tal
Shavit Shenhav, Jill Smith and Jerry Ungerman will expire at our 2026 annual meeting of shareholders. The term of Ray Rothrock will expire
at our 2026 annual meeting of shareholders and the terms of Yoav Chelouche and Dafna Gruber will expire at our 2027 annual meeting of
shareholders.
There are no arrangements or understandings with major shareholders,
customers, suppliers or others, pursuant to which any of our directors or members of senior management are elected or appointed.
45
Compensation of Directors and Officers
The total direct cash compensation that we accrued for our directors
and executive officers as a group, including those who left the company during 2025, was approximately $5.4 million for the year ended
December 31, 2025. These amounts include $0.5 million that were set aside or accrued to provide for severance and retirement insurance
policies in 2025. These amounts do not include amounts accrued for expenses related to business travel, professional and business association
dues and other business expenses reimbursed to officers. We do not have any agreements with our director who is also an officer that provide
for benefits upon termination of employment, except for severance payments mandated by Israeli law for all employees employed in Israel.
Following is a summary of the salary and benefits paid in 2025
(i) to our five most highly compensated executive officers (referred to as the “Covered Executives”) and (ii) to our
non-executive directors.
Cash Compensation
Mr. Nadav Zafrir, Chief Executive
Officer. Compensation expenses recorded in 2025 included $451.7 thousands in salary expenses and $107.8 thousands in benefit costs.
Mr. Itai Greenberg, Chief
Revenue Officer. Compensation expenses recorded in 2025 included $321.1 thousands in salary expenses and $85.7 thousands in
benefit costs.
Mr. Gil Friedrichl, General
Manager, Workspace Security. Compensation expenses recorded in 2025 included $318.7 thousands in salary expenses and $146.2 thousands
in benefit costs.
Ms. Nataly Kremer, Chief Product
Officer. Compensation expenses recorded in 2025 included $339.6 thousands in salary expenses and $86.2 thousands in benefit costs.
Mr. Roi Karo, Chief Strategy
Officer. Compensation expenses recorded in 2025 included $276.0 thousands in salary expenses and $69.5 thousands in benefit costs.
The salary expenses summarized above include the gross salary
paid to the Covered Executives, and the benefit costs include the social benefits paid by us on behalf of the Covered Executives, including
convalescence pay, contributions made by the company to an insurance policy or a pension fund, work disability insurance, severance, educational
fund and payments for social security. We also provide our Covered Executives with director and officer (D&O) indemnification, insurance
and exculpation to the maximum extent permitted by applicable law, telecommunication and electronic devices and communication expenses,
reimbursement of business travel, “runoff” and other insurances, periodic medical examinations, holiday and special occasion
gifts, academic and professional studies, and safety, security and protection measures (including, in certain cases, at household premises).
We do not lease vehicles for our Covered Executives.
In accordance with the company’s executive compensation
policy, we will also pay cash bonuses following compliance with predetermined 2025 performance parameters set by the Compensation Committee
and the Board of Directors. The 2025 cash bonus expenses for Mr. Zafrir, Mr. Greenberg, Ms. Kremer and Mr. Karo were $434.6 thousands,
$224.6 thousands, $289.7 thousands, and $127.5 thousands, respectively. Mr. Friedrich did not receive a cash bonus for 2025. For
the non-U.S. executives, the cash compensation amounts paid were denominated in Israeli Shekels and converted into U.S. Dollars at the
exchange rate as of year-end and will be paid in 2026 with respect to compliance with pre-determined 2025 performance metrics.
We currently pay each of our non-executive directors an annual
cash retainer of $40.0 thousands for the services provided to our board of directors and an annual cash retainer of $7.5 thousands for
each committee membership. In addition, we pay the lead independent director an annual cash retainer of $35.0 thousands, the chair of
our audit committee an annual cash retainer of $7.5 thousands and the chair of each of our nominating, sustainability and corporate governance
committee and compensation committee an annual cash retainer of $2.5 thousands. Only directors who are not officers receive compensation
for serving as directors.
46
Equity-based Compensation
From time to time, we grant options and other awards under our
equity incentive plans (described below) to our executive officers and directors. See Item 10 “Additional Information – Compensation
of Executive Officers and Directors; Executive Compensation Policy” for a detailed description of the approval procedures we follow
in compensating our directors and executive officers.
Our non-employee directors receive an automatic option grant
and are also eligible for discretionary awards under the plans. Each non-employee director who is first elected or appointed to the board
of directors is granted an option to purchase 25,000 ordinary shares and restricted share units (RSUs) with a value of $200.0 thousands
on the date of the initial election or appointment, vesting in equal annual installments over a four-year period. On the date of each
annual general meeting of shareholders, each non-employee director who is to continue to serve as a non-employee director after the annual
meeting is granted an option to purchase an additional 5,000 ordinary shares and RSUs with a value of $150.0 thousands, of which 50% vest
six months after the grant date, 25% vest nine months after the grant date, and another 25% vest a year after the grant date, provided
that the director has served as a non-employee director for at least six months prior to the date of the annual meeting. The directors
in office immediately prior to the date of initial appointment or election, or of the annual meeting, as applicable, may determine to
reduce the initial or annual grant to all non-employee directors or specific non-employee directors.
During 2025, we granted our executive officers and directors
options to purchase an aggregate of approximately 0.38 million shares and approximately 0.35 million RSUs and PSUs under our equity incentive
plans. The exercise price of these options range between $191.47-$223.08, and their expiration dates range between February 2032 and September
2032.
All options granted to directors and executive officers in 2025
were granted with an exercise price equal to 100% of the closing price of the ordinary shares on the Nasdaq on the applicable date of
grant.
We recorded equity-based compensation expenses in our financial
statements for the year ended December 31, 2025, for Mr. Zafrir, Mr. Greenberg, Mr. Friedrich, Ms. Kremer and Mr. Karo of $6.5 million,
$5.7 million, $5.5 million, $1.4 million and $1.6 million, respectively. Assumptions and key variables used in the calculation of such
amounts are described in Note 2y to our audited consolidated financial statements included in Item 18 of this Annual Report. All equity-based
compensation grants to our Covered Executives were made in accordance with the parameters of our company’s executive compensation
policy and were approved by the company’s Compensation Committee and Board of Directors, and, in the case of the equity-based compensation
granted to Mr. Zafrir, also by the company’s shareholders in accordance with the Israeli Companies Law.
As of December 31, 2025, our executive officers and directors
held options to purchase an aggregate of approximately 3.02 million shares and held 0.50 million RSUs and PSUs under our equity incentive
plans. The exercise prices of these options range between $114.23 and $223.08, and their expiration dates range between June 2026 and
September 2032.
Chief Executive Officer Compensation.
Pursuant to the employment agreement of Nadav Zafrir, our Chief Executive Officer, as approved by our Compensation Committee, Board of
Directors and the company’s shareholders, Mr. Zafrir is entitled to the following:
Cash Compensation: An annual base salary of NIS 1.44 million
(~$0.45 million ), and an annual cash target bonus of NIS 1.5 million (~0.47 million ). The annual cash bonus targets are set annually
by the Compensation Committee and the Board in line with Check Point's Executive Compensation Policy and the performance targets specified
in the policy. The maximum bonus can reach up to 200% of the annual base salary.
Upon joining Check Point in December 2024, Mr. Zafrir was granted the following equity
awards: (i) an RSU award of $4.4 million vesting in four annual installments, with $1.4 million of RSUs vesting after the first year and
$1.0 million of RSUs vesting in each of the remaining second, third and fourth years, (ii) a PSU award of $4 million that is subject to
achievement of a bookings growth performance criteria set by the Compensation Committee (over a period of four years), and (iii) a stock
option award to purchase 123,892 ordinary shares at an exercise price equal to 100% of the last reported closing price of the ordinary
shares on the date of grant, vesting gradually over a period of four years (with a Black-Scholes-Merton value of $6 million calculated
on the date of grant).
Equity Compensation:
On September 3, 2025, following the approval of our Compensation
Committee, Board of Directors and the company's shareholders at the 2025 Annual General Meeting, we granted Mr. Zafrir the following equity
awards: (i) an RSU award of $5.0 million vesting in four annual installments, with $2.0 million of RSUs vesting after the first year and
$1.0 million of RSUs vesting in each of the remaining second, third and fourth years, (ii) a PSU award of $4 million that is subject to
achievement of a bookings and ARR growth performance criteria set by the Compensation Committee (over a period of four years), and (iii)
a stock option award to purchase 118,475 ordinary shares at an exercise price equal to 100% of the last reported closing price of the
ordinary shares on the date of grant, vesting gradually over a period of four years (with a Black-Scholes-Merton value of $6 million calculated
on the date of grant).
47
In the event Check Point initiates a termination of Mr. Zafrir's
employment in his first 24 months (other than for cause)(i.e., prior to December 1, 2026), then 50% of his unvested RSUs and stock options
will vest at the end of his employment. In case of death or permanent disability, 100% of Mr. Zafrir's unvested equity awards will vest
immediately with any applicable performance conditions deemed to be achieved at target.
Executive Chair Compensation.
As approved by our Compensation Committee, Board of Directors and the company’s shareholders at the 2025 Annual General Meeting,
Gil Shwed, our founder and Executive Chair of our Board of Directors, was granted options to purchase 170,000 ordinary shares at an exercise
price equal to 100% of the closing price of the ordinary shares on the Nasdaq on the date of the grant, vesting gradually over a period
of four years. We recorded equity-based compensation expenses in our consolidated financial statements for the year ended December 31,
2025, for Mr. Shwed of $10.7 million. Assumptions and key variables used in the calculation of such amounts are described in Note 2y to
our audited consolidated financial statements included in Item 18 of this Annual Report.
In addition, we recorded cash compensation expenses for Mr. Shwed
in 2025 of $24.6 thousands in salary expenses, and $24.0 thousands in benefit costs.
Other than as specified in the share ownership table under the
caption “Share ownership” below, none of our directors and executive officers holds more than 1% of our outstanding shares.
Board Practices
Our board of directors currently consists of eight members, including
three outside directors in accordance with the requirements of the Israeli Companies Law. For more information, see “Outside and
Independent Directors” below. Under our articles of association, the number of directors on our board is to be no less than six
and no more than twelve. Each director (other than an outside director as described below) is elected to serve until the next annual general
meeting of shareholders and until his or her successor has been elected. Each executive officer is elected by the board of directors and
serves at the discretion of the board. All of our executive officers and directors, other than non-employee directors, devote substantially
all of their working time to our business. There are no family relationships among any of our directors, officers or key employees.
As permitted under the Israeli Companies Law, our articles of
association provide that any director may, by written notice to us, appoint another person to serve as an alternate director or may cancel
the appointment of an alternate director. Any person eligible to serve as a director, other than a person who is already a director or
an alternate director, may act as an alternate director. The term of appointment of an alternate director may be for one meeting of the
board, for a specified period of time, a specified meeting or action of the board or until notice is given of the cancellation of the
appointment. No director has appointed, and, to our knowledge, no director currently intends to appoint, any other person as an alternate
director. We do not have any service contracts with our directors providing for benefits upon termination of service.
Outside and Independent Directors
Outside directors. In
accordance with the Israeli Companies Law and the relevant regulations, we must have at least two outside directors who meet the Israeli
statutory requirements of independence. At least one of the outside directors is required to have “financial and accounting expertise”,
and the other outside director or directors are required to have “professional expertise”, all as defined under the Israeli
Companies Law. Our board of directors has determined that each of Yoav Chelouche, Dafna Gruber and Ray Rothrock has “financial and
accounting expertise” and each of Dafna Gruber and Ray Rothrock has “professional expertise”.
An outside director serves for a term of three years, which may
be extended for additional three-year terms. An outside director can be removed from office only under very limited circumstances. All
of the outside directors must serve on the company’s audit committee and compensation committee (including one outside director
serving as the chair of the audit committee and the compensation committee), and at least one outside director must serve on each committee
of the board of directors. As of December 31, 2025, Yoav Chelouche, Dafna Gruber and Ray Rothrock are our outside directors under
the Israeli Companies Law. Yoav Chelouche’s and Dafna Gruber’s term of office will expire in 2027, and Ray Rothrock’s
term of office will expire in 2026.
Pursuant to the Israeli Companies Law Regulations, an Israeli
company traded on Nasdaq that does not have a “controlling shareholder” (as defined in the Israeli Companies Law) may elect
not to appoint Outside Directors to its Board of Directors and not to comply with the Audit Committee and Compensation Committee composition
and chairman requirements of the Israeli Companies Law (as described above); provided, that the
company complies with the applicable Nasdaq independent director requirements and the Nasdaq Audit Committee and Compensation Committee
composition requirements. Accordingly, Check Point is eligible to adopt the relief provided by the amended Israeli regulations. To date,
Check Point has not elected to adopt such relief.
Independent directors.
The Sarbanes-Oxley Act of 2002, as well as related rules subsequently implemented by the Securities and Exchange Commission and the Nasdaq,
requires issuers to comply with various corporate governance practices. Under the rules applicable to us as a foreign private issuer,
we are required to have a majority of independent directors within the meaning of the applicable Nasdaq regulations. Our board of directors
complies with these requirements by including a majority of members who are independent directors within the meaning of the applicable
Nasdaq regulations.
48
Pursuant to the Israeli Companies Law, an Israeli company whose
shares are publicly traded may elect to adopt a provision in its articles of association pursuant to which a majority of its board of
directors (or a third of its board of directors in case the company has a controlling shareholder) will consist of individuals complying
with certain independence criteria prescribed by the Israeli Companies Law, as well as certain other recommended corporate governance
provisions. Although we have not included these provisions in our articles of association because our board of directors already complies
with the independence requirements and the corporate governance rules of the Nasdaq, as described below, a majority of our board of directors
and all the members of our audit committee, compensation committee and nominating, sustainability and corporate governance committee are
directors who comply with the independence criteria prescribed by the Israeli Companies Law.
Our board of directors has determined that each of Yoav Chelouche,
Dafna Gruber, Tzipi Ozer-Armon, Ray Rothrock, Tal Shavit Shenhav, Jill Smith and Jerry Ungerman is an independent director under the applicable
Nasdaq regulations and the Israeli Companies Law. Our independent directors have regularly held meetings at which only independent directors
are present.
Committees of the Board of Directors
Our articles of association provide that the board of directors
may delegate all of its powers to committees of the board as it deems appropriate, subject to the provisions of Israeli law. Our board
of directors has established an audit committee, a compensation committee and a nominating, sustainability and corporate governance committee.
Audit Committee. Under
the Israeli Companies Law, the board of directors of any public company must establish an audit committee. The audit committee must consist
of at least three directors, must include all of the outside directors (including one outside director serving as the chair of the audit
committee), and a majority of the committee members must comply with the director independence requirements prescribed by the Israeli
Companies Law.
The audit committee may not include the chairman of the board,
or any director employed by us, by a controlling shareholder or by any entity controlled by a controlling shareholder, or any director
providing services to us, to a controlling shareholder or to any entity controlled by a controlling shareholder on a regular basis, or
any director whose income is primarily dependent on a controlling shareholder, and may not include a controlling shareholder or any relatives
of a controlling shareholder. Individuals who are not permitted to be audit committee members may not participate in the committee’s
meetings other than to present a particular issue at the request of the chair of the committee. However, an employee who is not a controlling
shareholder or relative may participate in the committee’s discussions but not in any vote, and the company’s legal counsel
and corporate secretary (if they are not a controlling shareholder or relative) may participate in the committee’s discussions and
votes if requested by the committee.
In addition, the Nasdaq regulations also require us to maintain
an audit committee consisting of at least three directors, all of whom must be independent under the Nasdaq regulations applicable to
audit committee members and each of whom is financially literate and one of whom has accounting or related financial management expertise.
Yoav Chelouche is the chairman of the audit committee. Dafna Gruber, Tzipi Ozer-Armon and Ray Rothrock serve as the other members of our
audit committee. Following the filing of this Annual Report, Ms. Gruber will assume the role of Chair of the Audit Committee and replace
Mr. Chelouche. The audit committee has adopted a written audit committee charter as required by the Nasdaq regulations.
The audit committee’s duties include providing assistance
to the board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting,
internal control and legal compliance functions. In this respect the audit committee approves the services performed by our independent
accountants and reviews their reports regarding our accounting practices and systems of internal accounting controls. The audit committee
also oversees the audits conducted by our independent accountants and takes those actions, as it deems necessary, to satisfy itself that
the accountants are independent of management. Under the Israeli Companies Law, the audit committee is also required to monitor whether
there are any deficiencies in the administration of our company, including by consulting with the internal auditor and independent accountant,
to review, classify and approve related party transactions and extraordinary transactions, to review the internal auditor’s audit
plan and to establish and monitor whistleblower procedures.
Under the Israeli Companies Law, a meeting of the audit committee
is properly convened if a majority of the committee members attend the meeting and, in addition, a majority of the attending committee
members are independent directors within the meaning of the Israeli Companies Law, and include at least one outside director.
49
Compensation Committee.
Under the Israeli Companies Law, the board of directors of any public company must establish a compensation committee. The compensation
committee must consist of at least three directors, include all of the outside directors (including one outside director serving as the
chair of the compensation committee), and a majority of the committee members must comply with the director independence requirements
prescribed by the Israeli Companies Law.
Similar to the rules that apply to the audit committee, the compensation
committee may not include the chairman of the board, or any director employed by us, by a controlling shareholder or by any entity controlled
by a controlling shareholder, or any director providing services to us, to a controlling shareholder or to any entity controlled by a
controlling shareholder on a regular basis, or any director whose primary income is dependent on a controlling shareholder, and may not
include a controlling shareholder or any of its relatives. Individuals who are not permitted to be compensation committee’s members
may not participate in the committee’s meetings other than to present a particular issue; provided, however, that an employee that
is not a controlling shareholder or its relative may participate in the committee’s discussions but not in any vote. The company’s
legal counsel and corporate secretary may participate in the committee’s discussions and votes if requested by the committee.
In addition, the Nasdaq rules also require us to maintain a compensation
committee consisting of at least two independent directors. Each of the members of the compensation committee is required to be independent
under Nasdaq rules relating to compensation committee members, which are different from the general test for independence of board and
committee members. Each of the members of our compensation committee satisfies those requirements. Yoav Chelouche is the chairman of the
compensation committee. Dafna Gruber, Tzipi Ozer-Armon and Ray Rothrock serve as the other members of our compensation committee. The
compensation committee has adopted a written compensation committee charter.
The compensation committee’s duties include recommending
to the board of directors a compensation policy for executives and monitor its implementation, approve compensation terms of executive
officers, directors and employees affiliated with controlling shareholders, make recommendations to the board of directors regarding the
issuance of equity incentive awards under our equity incentive plans, and exempt certain compensation arrangements from the requirement
to obtain shareholder approval under the Israeli Companies Law.
Nominating, Sustainability and
Corporate Governance Committee. The nominating, sustainability and corporate governance committee identifies prospective board
candidates, recommends nominees for election to our board of directors, develops and recommends board member selection criteria, considers
committee member qualification, supervises the selection and composition of committees of our board of directors, provides oversight in
the evaluation of our board of directors and each committee, oversees our policies, programs and strategies related to environmental,
social and governance (ESG) matters and develops and recommends to the board a set of corporate governance guidelines. Jill Smith is the
chairman of the nominating, sustainability and corporate governance committee. Tzipi Ozer-Armon and Tal Shavit Shenhav serve as the other
members of our nominating, sustainability and corporate governance committee. The nominating, sustainability and corporate governance
committee has adopted a written nominating committee charter.
Employees
As of December 31, 2025, we had 6,825 employees, as
well as 354 subcontractors (336 subcontractors in 2024, 277 subcontractors in 2023). Over the past three years, the number of our employees
by geographic area was as follows:
|
As of December 31, |
||||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
Function: |
||||||||||||
|
Israel |
2,944 |
2,874 |
2,672 |
|||||||||
|
Rest of the World |
3,881 |
3,795 |
3,778 |
|||||||||
|
Total |
6,825 |
6,669 |
6,450 |
|||||||||
We are subject to Israeli labor laws and regulations with respect
to our Israeli employees. The Israeli labor laws differ materially from U.S. labor laws and, in some cases, impose material obligations
on us (such as severance pay and mandatory cost of living increases). We are also subject to the labor laws and regulations of other jurisdictions
in the world where we have employees.
50
Share Ownership
The following table shows information regarding beneficial ownership
by our directors and executive officers as of February 28, 2026. Beneficial ownership is determined in accordance with rules of the Securities
and Exchange Commission.
All information with respect to the beneficial ownership of any
principal shareholder has been furnished by such shareholder and, unless otherwise indicated below, we believe that persons named in the
table have sole voting and sole investment power with respect to all of the shares shown as beneficially owned, subject to community property
laws, where applicable. All shares shown as beneficially owned have identical rights in all respects. The shares beneficially owned by
the directors include the shares owned by their family members to which such directors disclaim beneficial ownership.
The share numbers and percentages listed below are based on shares
outstanding as of February 28, 2026.
|
Name |
Number of
shares beneficially owned (1)(5) |
% of
class of shares (2)
|
Title of securities covered by the options, RSUs and PSUs |
Number of
options, RSUs, and PSUs (3) |
Exercise price of
options |
Date of expiration of options | ||||||||||||
|
Gil Shwed |
26,492,908 |
25.03 |
%(4) |
Ordinary shares |
1,622,500 |
$ |
122.12 - $173.21 |
08/02/2027 – 10/30/2031 | ||||||||||
|
All directors and officers as a group (12 persons including Mr. Shwed)(5)
|
27,030,338 |
25.43 |
% |
Ordinary shares |
2,057,008 |
$ |
114.23-$216.86 |
06/18/2026 – 09/02/2032 | ||||||||||
| (1) |
The number of ordinary shares shown includes shares that each shareholder has the right to acquire pursuant to stock options that
are exercisable and RSUs and PSUs that vest within 60 days after February 28, 2026. |
| (2) |
If a shareholder has the right to acquire shares by exercising stock options or has RSUs and PSUs (as determined in accordance with
footnote (1)), these shares are deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that
is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the percentage
owned by any other shareholder. |
| (3) |
Number of options immediately exercisable or exercisable and RSUs and PSU that vest within 60 days from February 28, 2026.
|
| (4) |
The share amount and holding percentage includes unexercised stock options. Without such unexercised stock options, the 24,870,408
issued ordinary shares held by Gil Shwed represented 23.86% of the outstanding ordinary shares and voting rights as of February
28, 2026. |
| (5) |
For information regarding the share ownership of each of our directors and executive officers, please refer to Item 7.A. “Major
Shareholders and Related Party Transactions—Major Shareholders”. |
Equity Incentive Plans
The following table summarizes our equity incentive plans, which
have outstanding awards as of December 31, 2025:
|
Plan |
Outstanding
options, RSUs & PSUs |
Options
outstanding exercise price |
Date of expiration of options
|
Options
exercisable |
|||||||||
|
2005 United States Equity Incentive Plan |
1,024,515 |
$ |
105.65-$191.47 |
06/18/2026-09/02/2032 |
166,960 |
||||||||
|
2005 Israel Equity Incentive Plan |
5,158,816 |
$ |
114.23-$223.08 |
02/05/2026-09/03/2032 |
1,913,805 |
||||||||
|
Dome9 Equity Incentive Plan |
226 |
$ |
12.99 |
12/21/2027 |
226 |
||||||||
In 2005, we adopted our 2005 United States Equity Incentive Plan
and our 2005 Israel Equity Incentive Plan, which were subsequently amended in January 2014, July 2018, August 2020 and August 2023. We
refer to the plans, as amended, as the U.S. Equity Plan and the Israel Equity Plan, and, together, as the Equity Plans.
Number of Ordinary Shares Reserved for Future Grants under the
Equity Plans
Following the amendments to the Equity Plans in July 2018, commencing
December 31, 2018, on 31, December of each year, the number of Reserved and Authorized Shares (as defined below) under both Equity
Plans together shall be automatically reset on such date to equal 10% of the sum of (i) the number of ordinary shares issued and
outstanding on such date and (ii) the number of ordinary shares reserved and authorized under the Equity Plans for outstanding awards
granted under the Equity Plans as of such date (provided, however, that in no event shall the number of Reserved and Authorized Shares
be less than the number of ordinary shares reserved and authorized under the Equity Incentive Plans for outstanding awards granted under
the Equity Incentive Plans as of such date). The number of “Reserved and Authorized Shares”
under the Equity Plans shall equal the sum of (i) the number of ordinary shares reserved and authorized under the Equity Plans for
outstanding awards granted under the Equity Plans as of such date, and (ii) the number of ordinary shares reserved, authorized and
available for issuance under the Equity Plans on such date.
51
Accordingly, as of December 31, 2025, the number of Reserved
and Authorized Shares under both Equity Plans together was reset to equal 11,178,565.
As of December 31, 2025, options to purchase 3,128,875 ordinary
shares were outstanding under the Equity Plans and the Dome9 Equity Incentive Plan combined. The option exercise prices of the outstanding
options as of December 31, 2025 range between $12.99 and $223.08 per share. As of December 31, 2025, 3,054,682 RSUs and PSUs
were outstanding under the Equity Plans combined.
Administration
Both Equity Plans are administered by our board of directors
or a committee of our board. The compensation committee of our board of directors currently operates as the administrator of the Equity
Plans. The administrator has full power to determine the persons to whom awards shall be granted and the other terms of the awards granted,
including (a) the number of shares subject to each award, (b) the duration of the related award agreement, (c) the time,
manner and form of payment upon the exercise of an award, and (d) other terms and provisions governing the awards. The administrator
also establishes the vesting schedule of awards that are granted.
2005 United States Equity Incentive Plan, as Amended
Awards. The U.S. Equity
Plan provides for the following kinds of awards, which we refer to generically as awards: (i) Incentive Stock Options (ISOs), (ii)
Non-statutory Stock Options (NSOs), (iii) Restricted Stock, (iv) RSUs, (v) Performance Shares, (vi) Performance RSUs (“PSUs”)
and (vii) Deferred Stock Units. All of these awards can vest based on time or performance milestones.
Granting of options, price and
duration. Our U.S. Equity Plan provides that each option will expire on the date stated in the notice of grant, which will not
be more than seven years from its date of grant (or five years, in the case of an ISO granted to a person who on the date of grant owns
10% or more of our voting power). The exercise price of an option cannot be less than 100% of the fair market value per share on the date
of grant (or 110% of the fair market value, in the case of an ISO granted to a person who on the date of grant owns 10% or more of our
voting power). The administrator will fix the period within which the award can be exercised and the exercise price. No option award can
vest until at least six months after the grant date.
Granting of awards, other than
options, and price. The administrator can determine the conditions that must be satisfied, which typically will be based principally
or solely on the recipient’s continuing to provide services to us, but conditions may also include a performance-based component.
We can issue ordinary shares under grants of Restricted Stock, RSUs, Performance Shares and PSUs upon payment of their nominal value.
No such award can vest until at least one year after the grant date. Deferred Stock Units consist of Restricted Stock, RSUs, Performance
Shares, or PSUs that the administrator permits to be paid out in installments or on a deferred basis.
2005 Israel Equity Incentive Plan, as Amended
Awards. The Israel Equity
Plan provides for the following kinds of awards, which we refer to generically as awards: (i) “Approved 102 Options/Shares”,
which are grants to directors, employees and officers that are eligible for favorable tax treatment in Israel and which must be held by
a trustee for a minimum period as prescribed by Israeli law; (ii) “Non-approved 102 Options/Shares”, which are grants of options
or shares that are not eligible for favorable tax treatment in Israel and which may be held directly by the participants; (iii) Restricted
Stock; (iv) RSUs; (v) Performance Shares; (vi) PSUs; and (vii) Deferred Stock Units. All of these awards can vest based
on time or performance milestones.
Trustee. A trustee designated
by our board of directors and approved by the Israel Tax Authority must hold any shares allocated or issued upon exercise of Approved
102 Options or other shares subsequently received following any realization of rights, including bonus shares (stock dividends), for at
least the period of time specified by Section 102 of Israel’s Income Tax Ordinance.
Granting of options, price and
duration. Our Israel Equity Plan provides that each option will expire on the date stated in the option agreement, which will not
be more than seven years from its date of grant. The exercise price of an option cannot be less than 100% of the fair market value per
share on the date of grant. The administrator will fix the period within which the award can be exercised and the exercise price. No option
award can vest until at least six months after the grant date.
52
Granting of awards, other than
options, and price. The administrator can determine the conditions that must be satisfied, which typically will be based principally
or solely on the recipient’s continuing to provide services to us, but conditions may also include a performance-based component.
We can issue ordinary shares under grants of Restricted Stock, RSUs, Performance Shares and PSUs upon payment of their nominal value.
No such award can vest until at least one year after the grant date. Deferred Stock Units consist of Restricted Stock, RSUs, Performance
Shares, or PSUs that the administrator permits to be paid out in installments or on a deferred basis.
Change of control arrangements.
Upon a change of control of us, if the acquirer refuses to assume or provide substitute awards, then the administrator of the equity
plans, which is currently the compensation committee of our board of directors, can either terminate all unvested awards or accelerate
the vesting period of any award under our Equity Plans. The administrator also has the authority to accelerate the vesting of the ordinary
shares subject to outstanding awards held by our directors, officers and employees in connection with the subsequent termination of some
officers’ employment following a change of control event.
Dome9 Security Ltd. 2011 Share Option Plan and the 2016 Equity
Incentive Subplan
In connection with our acquisition of Dome9 Security Ltd. in
October 2018, we assumed certain outstanding Dome9 share options under the Dome9 Security Ltd. 2011 Share Option Plan and the 2016 Equity
Incentive Subplan, or the Dome9 Equity Plan, which were converted into options to purchase 47,816 of our ordinary shares.
As of December 31, 2025, options to purchase 226 ordinary
shares were outstanding under the Dome9 Equity Plan on that date. The single outstanding grant under this plan has a term of ten years,
expiring in December 2027, and an option exercise price of $12.99 per share. No further options can be granted under the Dome9 Equity
Plan.
Employee Stock Purchase Plans
In 1996, we adopted an Employee Stock Purchase Plan, which was
subsequently amended and restated in 2015, and further amended in June 2019, July 2020, January 2024 and September 2025. We refer to the
Employee Stock Purchase Plan, as amended and restated, as the US ESPP, and the Employee Stock Purchase Plan (Non-U.S. Employees), as the
Non-US ESPP, and together with the US ESPP, as the “ESPPs”. The ESPPs permit employees to purchase ordinary shares through
payroll deductions.
As of February 28, 2026, 586,872 ordinary shares were available
under the US ESPP and 1,057,896 ordinary shares were available under the Non-US ESPP.
Each ESPP has six-month offering periods, with purchases occurring
in January and July. Each of the ESPPs will terminate on the earliest of (i) the last business day in January 2036, (ii) when no
more shares are available for issuance under the applicable ESPP, or (iii) when all purchase rights under the applicable ESPP are
granted or exercised in connection with a “Corporate Transaction” as defined in the applicable ESPP.
An eligible employee can purchase ordinary shares at a price
of 85% of the fair market value of the ordinary shares at the beginning of the six-month offering period (or 85% of the fair market value
of the ordinary shares on the semi-annual purchase date, if that is lower). Each eligible employee can elect to purchase ordinary shares
under the ESPP in an amount of up to 15% of the employee’s compensation, but not more than 1,250 shares per participant on any purchase
date. Employees may terminate their participation in the ESPP at any time during the offering period, and participation ends automatically
on termination of employment with us. Each outstanding purchase right will be exercised immediately prior to our merger or consolidation
with another company. Our board of directors may amend or terminate each of the ESPPs immediately after the close of any purchase date.
Disclosure of a Registrant’s Action to Recover Erroneous
Awarded Compensation
None.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The following table sets forth information with respect to the
beneficial ownership of our shares as of February 28, 2026 by:
| • |
each person or entity known by us to own beneficially more than 5% of our outstanding shares; |
| • |
each of our directors and executive officers individually; and |
| • |
all of our executive officers and directors as a group. |
53
The beneficial ownership of ordinary shares is determined in
accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or
investment power, or the right to receive the economic benefit of ownership. The percentage of shares beneficially owned is based on 104,232,799
ordinary shares outstanding as of February 28, 2026. We have deemed our ordinary shares subject to stock options that are currently exercisable
or exercisable within 60 days of February 28, 2026 or issuable pursuant to RSUs and PSUs that are subject to vesting and performance conditions
expected to be satisfied within 60 days of February 28, 2026 to be outstanding and to be beneficially owned by the person holding the
stock option, RSU or PSU for the purpose of computing the percentage ownership of that person. We did not deem these shares outstanding,
however, for the purpose of computing the percentage ownership of any other person.
All of our shareholders, including the shareholders listed below,
have the same voting rights attached to their ordinary shares. See Exhibit 2.1 of the Annual Report. None of our principal shareholders
nor our directors and executive officers have different or special voting rights with respect to their ordinary shares. Unless otherwise
noted below, each shareholder’s address is Check Point Technologies Ltd., 5 Shlomo Kaplan Street, Tel Aviv 6789159, Israel.
|
Name of Beneficial Owner |
Number of Shares Beneficially Held |
Percentage of
Class |
||||||
|
Directors and Executive Officers: |
||||||||
|
Gil Shwed (1) |
26,492,908 |
25.03 |
% | |||||
|
Nadav Zafrir (2) |
44,288 |
* |
||||||
|
Yoav Chelouche (3) |
86,116 |
* |
||||||
|
Dafna Gruber (4) |
9,430 |
* |
||||||
|
Tzipi Ozer- Armon (5) |
34,832 |
* |
||||||
|
Tal Shavit (6) |
86,116 |
* |
||||||
|
Ray A Rothrock (7) |
60,284 |
* |
||||||
|
Jerry Ungerman (8) |
98,666 |
* |
||||||
|
Jill D Smith (9) |
22,382 |
* |
||||||
|
Roei Golan |
5,559 |
* |
||||||
|
Nataly Kremer |
4,552 |
* |
||||||
|
Itai Greenberg (10) |
85,205 |
* |
||||||
|
All executive officers and directors as a group (12 persons) |
27,030,338 |
25.43 |
% | |||||
|
Other 5% Shareholder: |
||||||||
|
Massachusetts Financial Services Company (11) |
7,937,229 |
7.61 |
% | |||||
* Less than 1%.
| (1) |
Shares beneficially owned consist of 24,870,408 shares and outstanding options to purchase 1,622,500 shares that are exercisable
within 60 days of February 28, 2026. Without such unexercised stock options, the 24,870,408 issued ordinary shares held by Mr. Shwed represented
23.86% of the outstanding ordinary shares and voting rights as of February 28, 2026. |
| (2) |
Shares beneficially owned consist of 13,315 shares and 30,973 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (3) |
Shares beneficially owned consist of 3,225 shares and 82,891 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (4) |
Shares beneficially owned consist of 289 shares and 9,141 shares issuable pursuant to outstanding options that are exercisable within
60 days of February 28, 2026. |
| (5) |
Shares beneficially owned consist of 3,191 shares and 31,641 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (6) |
Shares beneficially owned consist of 3,225 shares and 82,891 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (7) |
Shares beneficially owned consist of 2,393 shares and 57,891 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (8) |
Shares beneficially owned consist of 15,775 shares and 82,891 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (9) |
Shares beneficially owned consist of 1,991 shares and 20,391 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (10) |
Shares beneficially owned consist of 49,407 shares and 35,798 shares issuable pursuant to outstanding options that are exercisable
within 60 days of February 28, 2026. |
| (11) |
As of December 31, 2025, based on information contained in a Schedule 13G/A filed by Massachusetts Financial Services Company
with the Securities and Exchange Commission on January 28, 2026. The address for Massachusetts Financial Services Company is 111
Huntington Avenue, Boston, Massachusetts 02199. |
54
According to our transfer agent, as of December 31, 2025, there
were 84 holders of record of our ordinary shares in the United States, representing approximately 79.82% of our outstanding shares. The
number of record holders in the United States is not representative of the number of beneficial holders nor is it representative of where
such beneficial holders are resident since many of these ordinary shares were held by brokers or other nominees.
We are not controlled by another corporation or by any foreign
government, directly or through any other entity. Each of our outstanding ordinary shares has identical rights in all respects.
ITEM 8.
FINANCIAL INFORMATION
Consolidated Financial Statements
You can find our financial statements in “Item 18 –
Financial Statements”.
Dividend policy
We currently do not intend to distribute any amounts as dividend
in the near-term. During 2013, we entered into a settlement agreement with the Israel Tax Authority, resulting in the full release of
the profits we generated under the Israeli Law for the Encouragement of Capital Investments (the “Investment Law”) through
the year ended December 31, 2011 (known in Israel as “trapped profits”), provided that in accordance with the Investment
Law and the regulations thereunder, during the five years commencing 2013, we were obligated to meet certain conditions which included
investment in (i) production assets (as defined therein), (ii) research and development activities in Israel and (iii) employment
payments for certain new employees (other than office holders) added after 2011. We believe we met those conditions. For amounts that
will be distributed as dividends from the non-trapped earnings, we will be exempt from additional taxes.
Legal Proceedings
We operate our business in various countries and accordingly
attempt to utilize an efficient operating model to structure our tax payments based on the laws in the jurisdictions in which we operate.
The breadth of our operations can cause disputes between us and various tax authorities in different parts of the world. In particular,
following audits of the Company’s 2016–2020 corporate tax returns, the Israeli Tax Authority (the “ITA”) issued
orders for the years 2016 through 2019 challenging our positions on several issues and demanded the payment of additional taxes in the
aggregate amount of NIS 536 million (approximately $158 million), not including an amount of NIS 476 million (approximately $140 million)
related to expenses that will be deductible in future years, with respect of these four tax years (these amounts include interest and
indexation up to the tax settlement’s payment date, i.e. 31 July 2025). On November 29, 2023, the Company filed an appeal to the
District Court of Tel Aviv against these orders.
In addition, the ITA issued tax assessment for the 2020 tax year
in which it demanded the payment of additional taxes in the aggregate amount of NIS 94 million (approximately $28 million), not including
an amount of NIS 106 million (approximately $31 million) related to expenses that will be deductible in future years, with respect to
the 2020 tax year (these amounts include interest and indexation up to the tax settlement’s payment date, i.e. 31 July 2025). On
December 31, 2023 we submitted a tax appeal against the 2020 tax assessment to the ITA.
On July 15, 2025, the Company and the ITA entered into a settlement
agreement under which the Company agreed to pay total additional taxes of NIS 223.2 million (approximately $66 million) in respect of
the 2016–2020 tax years, which was ratified by the District Court of Tel Aviv on July 16, 2025. The Company settled the tax
demand payment to the ITA on July 31, 2025. The settlement fully and finally resolves all tax matters between the Company and the ITA
relating to the 2016-2020 tax years.
We are the defendant in various other lawsuits, including employment-related
litigation claims, lease termination claims and other legal proceedings in the normal course of our business. Litigation and governmental
proceedings can be expensive, lengthy and disruptive to normal business operations, and can require extensive management attention and
resources, regardless of their merit. While we currently intend to defend the aforementioned matters vigorously, we cannot predict the
results of complex legal proceedings, and an unfavorable resolution of a lawsuit or proceeding could materially adversely affect our business,
results of operations and financial condition.
55
ITEM 9. THE OFFER
AND LISTING
Our ordinary shares are traded publicly on the Nasdaq under the
symbol “CHKP” and on the Frankfurt Stock Exchange under the symbol “CPW”.
ITEM 10. ADDITIONAL INFORMATION
We were incorporated in Israel in July 1993, and we are registered
with the Israeli Registrar of Companies as public company number 52-004282-1.
The objectives and purposes stated in our memorandum of association
are to engage in any lawful activity. We develop, market and support a wide range of products and services for IT security, and offer
our customers an extensive portfolio of network security, endpoint security, data security and management solutions. A broad range of
our network security solutions operate under a unified security architecture, with central management and enforcement of security policy,
and with centralized real-time security updates. Our products and services are sold to enterprises, service providers, small and medium-sized
businesses and consumers.
Articles of Association and Israeli Companies Law
The following is a summary of the material provisions of our
articles of association and related provisions of the Israeli Companies Law. For the complete text of our articles of association, see
“Item 19 – Exhibits”.
Description of shares
Our authorized share capital consists of the following: (i) 500,000,000
ordinary shares, NIS 0.01 nominal value; (ii) 5,000,000 preferred shares, NIS 0.01 nominal value; and (iii) 10 deferred shares, NIS 1.00
nominal value.
Please refer to Exhibit 2.1 for Items 10.B.3, B.4, B.5, B.6,
B.7, B.8, B.9 and B.10.
Approval of certain transactions; obligations of directors, officers
and shareholders
Officers and directors.
The Israeli Companies Law codifies the fiduciary duties that office holders, which under the law, includes our directors and executive
officers, owe to a company.
Fiduciary duties. An
office holder’s fiduciary duties consist of a duty of loyalty and a duty of care.
The duty of loyalty requires an office holder to act in good
faith and for the benefit of the company, including to avoid any conflict of interest between the office holder’s position in the
company and personal affairs, and proscribes any competition with the company or the exploitation of any business opportunity of the company
in order to receive personal advantage for himself or herself or for others. This duty also requires an office holder to reveal to the
company any information or documents relating to the company’s affairs that the office holder has received due to his or her position
as an office holder. A company may approve any of the acts mentioned above; provided, however, that all the following conditions apply:
the office holder acted in good faith; neither the act nor the approval of the act prejudices the good of the company; and the office
holder disclosed the essence of his or her personal interest in the act, including any substantial fact or document, in a reasonable time
before the date for discussion of the approval. A director is required to exercise independent discretion in fulfilling his or her duties
and may not be party to a voting agreement with respect to his or her vote as a director. A violation of these requirements is deemed
a breach of the director’s duty of loyalty.
The duty of care requires an office holder to act with a level
of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to use
reasonable means to obtain information regarding the advisability of a given action submitted for his or her approval or performed by
virtue of his or her position and all other relevant information material to these actions.
Disclosure of personal interest.
The Israeli Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have
and all related material information or documents known to him or her, in connection with any existing or proposed transaction by the
company. “Personal interest,” as defined by the Israeli Companies Law, includes a personal interest of any person in an act
or transaction of the company, including a personal interest of his relative or of a corporation: (i) in which that person or a relative
of that person holds 5% or more of the shares, a holder of 5% or more of the voting rights, or a director or general manager, or (ii) in
which he or she has the right to appoint at least one director or the general manager, and includes shares for which the person has the
right to vote pursuant to a power-of-attorney. “Personal interest” does not apply to a personal interest stemming merely from
holding shares of the company.
56
The office holder must immediately make the disclosure of his
or her personal interest and no later than the first meeting of the company’s board of directors that discusses the particular transaction.
This duty does not apply to the personal interest of a relative of the office holder in a transaction unless it is an “extraordinary
transaction”. The Israeli Companies Law defines an “extraordinary transaction” as a transaction that is not in the ordinary
course of business of a company, or that is not on market terms, or which is likely to have a material impact on the company’s profitability,
assets or liabilities. The Israeli Companies Law defines a “relative” as a spouse, sibling, parent, grandparent, descendant
and the descendant, sibling or parent of a spouse, as well as the spouse of any of the foregoing.
Approvals. The Israeli
Companies Law provides that a transaction with an office holder or a transaction in which an office holder has a personal interest requires
the board approval, unless the transaction is an extraordinary transaction or the articles of association provide otherwise. The transaction
shall not be approved if it is adverse to the company’s interest. If the transaction is an extraordinary transaction, or if it concerns
exculpation, indemnification, insurance or compensation of an office holder, then the approval of the company’s compensation committee
and the board of directors is required, except if the compensation arrangement is an immaterial amendment to an existing compensation
arrangement of an officer who is not a director (in which case the approval of the compensation committee is sufficient). Exculpation,
indemnification, insurance or compensation of a director or the Chief Executive Officer also requires shareholder approval.
A person who has a personal interest in a matter that is considered
at a meeting of the board of directors or the audit committee generally may not attend that meeting or vote on that matter, unless a majority
of the board of directors or the audit committee also has a personal interest in the matter or if such person is invited by the chairman
of the board of directors or audit committee, as applicable, to present the matter being considered. If a majority of the board of directors
has a personal interest in the transaction, all directors may attend that meeting and vote, and a shareholder approval would be required
as well.
Shareholders. The Israeli
Companies Law imposes the same disclosure requirements described above on a controlling shareholder of a public company that it imposes
on an office holder. For this purpose, a “controlling shareholder” is defined as any shareholder who has the ability to direct
the company’s actions, including any shareholder holding 25% or more of the voting rights, if no other shareholder owns more than
50% of the voting rights in the company. Two or more shareholders with a personal interest in the approval of the same transaction are
deemed to be one shareholder.
Under the Israeli Companies Law, a shareholder has a duty to
act in good faith toward the company and the other shareholders, and to refrain from abusing his or her power in the company, which includes,
among other things, voting in the general meeting of shareholders on the following matters:
| • |
any amendment to the articles of association, |
| • |
an increase of the company’s authorized share capital, |
| • |
a merger, or |
| • |
approval of interested party transactions that require shareholder approval. |
In addition, any controlling shareholder, any shareholder who
can determine the outcome of a shareholder vote, and any shareholder who can appoint or prevent the appointment of an office holder under
the company’s articles of association, is under a duty to act with fairness towards the company. The Israeli Companies Law provides
that a breach of the duty of fairness will be governed by the laws governing breach of contract. The Israeli Companies Law does not describe
the substance of this duty.
Compensation of Executive Officers and Directors;
Executive Compensation Policy
In accordance with the Israeli Companies Law, we have adopted
a compensation policy for our executive officers and directors. The purpose of the policy is to describe our overall compensation strategy
for our executive officers and directors and to provide guidelines for setting their compensation, as prescribed by the Israeli Companies
Law. In addition, according to the Israeli Companies Law, the policy must be reviewed and readopted at least once every three years.
The adoption of the compensation policy requires the approval
of the compensation committee, the board of directors and our shareholders, in that order. The shareholder’s approval must include
the majority of shares voted at the meeting. In addition to the majority vote, the shareholder approval must satisfy either of two additional
tests:
| • |
the majority includes at least a majority of the shares voted by shareholders other than our controlling shareholders or shareholders
who have a personal interest in the adoption of the compensation policies; or |
| • |
the total number of shares held by non-controlling shareholders and disinterested shareholders that voted against the adoption of
the compensation policies, does not exceed 2% of the aggregate voting rights of our company. |
57
In accordance with the Israeli Companies Law, our policy was
last readopted in September 2025 by the compensation committee, the board of directors and our shareholders.
Under the Israeli Companies Law, the compensation arrangements
for officers (other than the Chief Executive Officer) who are not directors require the approval of the compensation committee and the
board of directors; provided, however, that if the compensation arrangement is not in compliance with our executive compensation policy,
the arrangement may only be approved by the compensation committee and the board of directors for special reasons to be noted, and the
compensation arrangement shall also require a special shareholder approval. If the compensation arrangement is an immaterial amendment
to an existing compensation arrangement of an officer who is not a director and is in compliance with our executive compensation policy,
the approval of the compensation committee is sufficient.
Arrangements regarding the compensation of the Chief Executive
Officer and directors require the approval of the compensation committee, the board and the shareholders, in that order. In certain limited
cases, the compensation of a new Chief Executive Officer who is not a director may be approved without approval of the shareholders.
Clawback Policy
In 2023, we adopted a Clawback Policy in compliance with the SEC
rules and Nasdaq listing standards to recover any excess incentive-based compensation from current and former executive officers after
an accounting restatement.
A copy of the Clawback Policy is filed as exhibit 97.1 to this
Annual Report.
Indemnification and insurance of directors and officers; limitations
on liability
Our articles of association allow us to indemnify, exculpate
and insure our office holders to the fullest extent permitted under the Israeli Companies Law.
Under the Israeli Companies Law, we may indemnify an office holder
for any of the following liabilities or expenses that they may incur due to an act performed or failure to act in his or her capacity
as our office holder:
| • |
Monetary liability imposed on the office holder in favor of a third party in a judgment, including a settlement or an arbitral award
confirmed by a court. |
| • |
Reasonable legal costs, including attorneys’ fees, expended by an office holder as a result of an investigation or proceeding
instituted against the office holder by a competent authority, provided that such investigation or proceeding concludes without the filing
of an indictment against the office holder, and either: |
| • |
no financial liability was imposed on the office holder in lieu of criminal proceedings, or |
| • |
financial liability was imposed on the office holder in lieu of criminal proceedings, but the alleged criminal offense does not require
proof of criminal intent. |
| • |
Reasonable legal costs, including attorneys’ fees, expended by the office holder or for which the office holder is charged
by a court: |
| • |
in an action brought against the office holder by us, on our behalf or on behalf of a third party, |
| • |
in a criminal action in which the office holder is found innocent, or |
| • |
in a criminal action in which the office holder is convicted, but in which proof of criminal intent is not required. |
A company may indemnify an office holder in respect of these
liabilities either in advance of an event or following an event. If a company undertakes to indemnify an office holder in advance of an
event, the indemnification, excluding litigation expenses, must be limited to foreseeable events in light of the company’s actual
activities when the company undertook such indemnification, and reasonable amounts or standards, as determined by the board of directors.
A company may obtain insurance for an office holder against liabilities
incurred in his or her capacity as an office holder. These liabilities include: a breach of duty of care to the company or a third party
including a breach arising out of negligence of the office holder; and a breach of duty of loyalty and any monetary liability imposed
on the office holder in favor of a third party. A company may also exculpate an office holder from a breach of duty of care in advance
of that breach. Our articles of association provide that the exculpation can be made, either in advance or retroactively, to the extent
permitted under Israeli law. A company may not exculpate an office holder from a breach of duty of loyalty towards the company or from
a breach of duty of care concerning dividend distribution or a purchase of the company’s shares by the company or other entities
controlled by the company.
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Under the Israeli Companies Law, a company may indemnify or insure
an office holder against a breach of duty of loyalty only to the extent that the office holder acted in good faith and had reasonable
grounds to assume that the action would not prejudice the company. In addition, a company may not indemnify, insure or exculpate an office
holder against a breach of duty of care if the act or omission were committed intentionally or recklessly (excluding mere negligence),
or with the intent to derive an unlawful personal gain, or for a fine or forfeit levied against the office holder in connection with a
criminal offense.
We have resolved to indemnify our directors and officers, to
the extent permitted by law and by our articles of association, for liabilities not covered by insurance, that are of certain enumerated
types of events, and subject to limitations as to amount.
We have also entered into indemnification, insurance and exculpation
agreements with our directors and officers undertaking to indemnify, insure and exculpate them to the full extent permitted by the Israeli
Companies Law.
Charitable
Contributions
Our articles of association authorize the company to contribute
reasonable amounts to worthy causes. In accordance with our charitable contribution policy, we contribute from time to time to various
worthy causes.
During 2025, the list of entities to which we contributed included,
among others, the Tel Aviv University, Yeholot Association and Hostages and Missing Families Forum. Gil Shwed, our founder and Executive
Chair, is a Governor of the Board of Governors of Tel Aviv University, the Chairman of the Board of Trustees of the Youth University of
Tel Aviv University, the founder of Tel-Aviv University’s Check Point Institute for Information Technology and the Chairman of the
Board of Directors of Yeholot Association Founded by the Rashi Foundation whose charter is, among other things, to reduce the dropout
rates in high schools.
Borrowing power
Our articles of association grant broad powers to the board of
directors to have us borrow, repay borrowings, make guarantees and grant security interests in borrowings.
Material Contracts
Summaries of the following material contracts are included in
this annual report in the places indicated below:
| - |
Indenture, dated as of December 8, 2025, by and between the Company and U.S. Bank Trust Company, National Association, as Trustee,
and Form of 0% Convertible Senior Notes due 2030 (See Note
10 to our audited consolidated financial statements included in Item 18 of this Annual Report). |
| - |
Agreement, dated July 2, 2025, between Tel Aviv-Jaffa Municipality, Israel Electric Company Ltd., Check Point Software Technologies
Ltd. and Israel Canada Shelf 3, Limited Partnership and Long-Term Lease Agreement, dated July 2, 2025, between Tel Aviv-Jaffa Municipality,
Check Point Software Technologies Ltd. and Israel Canada Shelf 3, Limited Partnership (See Item 4 “Information
on Check Point – Property, Plants and Equipment). |
Israeli Taxation, Foreign Exchange Regulation and Investment Programs
The following is a summary of the principal Israeli tax laws
applicable to us, the Israeli Government programs from which we benefit, and Israeli foreign exchange regulations. This section also contains
a discussion of material Israeli tax consequences to our shareholders who are not residents or citizens of Israel. This summary does not
discuss all aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances,
or to some types of investors subject to special treatment under Israeli law. Examples of investors subject to special treatment under
Israeli law include residents of Israel, traders in securities, or persons who own, directly or indirectly, 10% or more of our outstanding
voting capital, all of whom are subject to special tax regimes that are not covered in this discussion. Some parts of this discussion
are based on new tax legislation that has not been subject to judicial or administrative interpretation. The discussion should not be
construed as legal or professional tax advice and does not cover all possible tax consequences.
You are urged to consult your own tax advisor
as to the Israeli and other tax consequences of the purchase, ownership and disposition of our shares, including, in particular, the effect
of any non-Israeli, state or local taxes.
59
General corporate tax structure in Israel
Taxable income of Israeli companies is subject to tax at the
rate of 23% since 2018.
However, as discussed below, the rate is effectively reduced
for income derived from our Technological preferred enterprise and from Special Technological Preferred Enterprise beginning 2024 onwards.
Law for the Encouragement of Capital Investments, 1959 (“Investment
Law”)
Among other changes, the new Law includes Amendment 73 to the
Investment Law (“Amendment 73”). Amendment 73 prescribes special tax tracks for technological enterprises. One of the tracks
is for Technological preferred enterprise—an enterprise for which total consolidated revenues of its parent company and all subsidiaries
are less than NIS 10 billion. A technological preferred enterprise, as defined in the Law, which is located in the center of Israel
will be subject to tax at a rate of 12% on profits deriving from intellectual property. “Special Preferred Technological Enterprise”
(with consolidated annual revenue of its group is at least NIS 10 billion), as defined by the Investment Law, is entitled to a reduced
tax rate of 6% on its preferred technological income, regardless of the place the company’s technology preferred enterprise is located.
The special tax tracks under Amendment 73 are subject to rules issued by the Minister of Finance. On May 1, 2017, the Israeli Finance
Minister signed tax regulations implementing the OECD’s “nexus approach,” a base erosion and profit shifting (BEPS)
requirement for intellectual property (IP) preferential tax regimes. The proposed regulations are subject to approval by the Parliament’s
Finance Committee. On May 16, 2017 the Knesset Finance Committee approved the regulations effective as of January 1, 2017.
The benefits available to a Preferred Enterprise are conditioned
upon terms stipulated in the Investment Law and the related regulations. If we do not fulfill these conditions, in whole or in part, the
benefits can be cancelled, and we may be required to refund the benefits in an amount linked to the Israeli consumer price index plus
interest. We believe that our Special Preferred Technological Enterprise program currently operates, in compliance with all applicable
conditions and criteria, but we cannot assure you that it will continue to do so.
We have derived, and expect to continue to derive, a substantial
portion of our operating income from our Special Preferred Technological enterprise. We are, therefore, eligible for reduced tax
rates for an unlimited period.
To prepare our consolidated financial statements, we estimate
our income taxes in each of the jurisdictions in which we operate. This process involves estimating our potential tax exposure together
with assessing temporary differences resulting from the differing treatment of certain items for tax and accounting purposes.
These differences result in deferred tax assets and liabilities,
which are included within our consolidated balance sheet.
Reduced income under the Investment Law including the Preferred
Enterprise/Technological preferred enterprise Regime will be freely distributable as dividends, subject to a 15% or 20% withholding tax
(or at lower rate, under an applicable tax treaty). However, upon the distribution of a dividend from Preferred/ Technological preferred
Income to an Israeli company, no withholding tax will be remitted.
Our tax assessments through the 2020 tax year are considered
final.
See also Item 3 “Key Information – Risk factors”
– Risks Related to Our Business and Our Market – We are the defendants in various lawsuits and have been subject to tax disputes
and governmental proceedings, which could adversely affect our business, results of operations and financial condition”.
Foreign Exchange Regulations
Under the Foreign Exchange Regulations, an Israeli company calculates
its tax liability in U.S. dollars according to certain orders. The tax liability, as calculated in U.S. dollars is translated into NIS
according to the exchange rate as of December 31 of each year.
Dividends, if any, paid to the holders of our shares, and any
amounts payable upon our dissolution, liquidation or winding up, as well as the proceeds of any sale in Israel of our shares to an Israeli
resident, may be paid in non-Israeli currency. If these amounts are paid in Israeli currency, they may be converted into freely repatriable
U.S. dollars at the rate of exchange prevailing at the time of conversion. In addition, the statutory framework for the potential imposition
of exchange controls has not been eliminated, and may be restored at any time by administrative action.
60
Equity Based Compensation
The Israeli tax legislation enables a company to grant options/shares
through one of three tax tracks:
(a) the income tax track through a trustee pursuant to which
the employee pays income tax rate (according to the marginal tax rate of the employee), up to 47% tax in 2023, 2024 and in 2025, plus
payments to the National Insurance Institute and health tax on the profit gained upon the earlier to occur of the transfer of the options/shares
or the underlying shares from the trustee to the employee or the sale of the options/shares or the underlying shares by the trustee, and
the company may deduct expenses pertaining to the options/shares for tax purposes. The shares/options (or upon their exercise, the underlying
shares), must be held by a trustee for a period of 12 months commencing from the date of which the options/shares were issued and deposited
with the trustee.
(b) the capital gains tax track through a trustee pursuant to
which the employee pays capital gains tax at a rate of 25% on the capital profit portion and marginal tax rate (including payments to
the National Insurance Institute and health tax) on the income portion (in general, the income portion is the profit derived from the
difference between the average market value of the share 30 days before the allotment date and the exercise price of the option/share)
upon the earlier to occur of the transfer of the options/shares or the underlying shares from the trustee to the employee or the sale
of the options/shares or the underlying shares by the trustee. (On the capital profit, the employee is not required to make payments to
the National Insurance Institute and health tax). In this track, on the capital profit, we may not deduct expenses pertaining to the options/shares
for tax purposes but may do so on the income portion. The shares/options (or upon their exercise, the underlying shares), must be held
by a trustee for a period of 24 months commencing from the date of which the options/shares were issued and deposited with the trustee
(with respect to options/shares granted before January 1, 2006, a period of 30 months commencing from the date of which the options/shares
were granted or a period of 24 months commencing from the date of which the options/shares were issued and deposited with the trustee,
whichever route is selected).
(c) the income tax track without a trustee pursuant to which
the employee pays income tax rate (according to the marginal tax rate of the employee up to 47% in 2023, 2024 and in 2025, plus payments
to the National Insurance Institute and health tax on the profit at the allotment date, and pays capital gains tax at a rate of 25% or
30% on the capital profit upon the sale of the underlying shares/shares, and we may not deduct expenses pertaining to the capital gain
for tax purposes but may deduct expenses pertaining to the profit at the allotment date.
In addition, subject to the provisions of an applicable tax treaty,
individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject
to an additional tax at a rate of 3% on annual taxable income (including, but not limited to, dividends, interest and capital gain) exceeding
NIS 721,560 for 2024 and for 2025 (the “Additional Tax”) which amount is linked to the annual change in the Israeli consumer
price index. Additionally, effective from January 1, 2025, such individuals will also be subject to an additional surtax of 2% which will
apply exclusively to their annual taxable income derived exclusively from capital sources income (including from dividend distribution)
exceeding NIS 721,560 (the “Surtax”).
In accordance with the provisions of the Israeli Tax Ordinance,
if a company has selected the capital gains track, the company must continue granting options/shares under the selected capital gains
track until the end of the year following the year in which the first grant of options/shares under that trustee track will be made.
We implement the capital gain track on RSUs, PSUs and stock options
granted to our employees and directors and the income tax track without a trustee on our ESPP.
Notwithstanding the above, the company may at any time also grant
options/shares under the provisions of the income tax track without a trustee.
The above rules apply only to employees, including officeholders
but excluding controlling shareholders.
Controlling shareholders will be taxable under section 3(i) to
the tax ordinance, according to which, the individual pays income tax rate (according to the marginal tax rate of the individual, up to
47% plus the Additional Tax if the individual’s annual taxable income exceeded NIS 721,560 in 2024 and in 2025 as well as
Surtax in 2025 as described above on the profit upon the sale of the underlying shares/shares.
Taxation of Non-Israeli Subsidiaries
Non-Israeli subsidiaries are generally taxed based upon tax laws
applicable in their countries of residence. In accordance with the provisions of Israeli-controlled foreign corporation rules, certain
income of a non-Israeli subsidiary, if the subsidiary’s primary source of income is passive income (such as interest, dividends,
royalties, rental income or income from capital gains), which are subject to tax at a rate which does not exceed 15% in the foreign corporation’s
jurisdictions may be deemed distributed as a dividend to the Israeli parent company and consequently is subject to Israeli taxation. This
tax regime will not apply where the subsidiary’s dividend income is derived from taxable profits that were subject to tax exceeding
15%. An Israeli company that is subject to Israeli taxes on such deemed dividend income of its non-Israeli subsidiaries may generally
receive a credit for non-Israeli income taxes paid by the subsidiary in its country of residence.
61
Taxation of Non-Israeli Shareholders on Receipt of Dividends
Under Israeli tax law, a distribution of dividends from income
attributable to an Approved Enterprise, Privileged Enterprise, Preferred Enterprise, Technological preferred enterprise or Special
Technological preferred enterprise will be subject to tax in Israel at the rate of 15%/20%, which is withheld and paid by the company
paying the dividend (,(apply on Approved Enterprise or Privileged Enterprise which are not considered Foreign Investors Company only if
the dividend is distributed during the benefits period or within the following 12 years). However, if the dividend is attributable partly
to income derived from an Approved, Privileged or Preferred Enterprise, and partly to other sources of income, the withholding rate
will be a blended rate reflecting the relative portions of the two types of income. Any distribution of dividends from income that is
not attributable to an Approved Enterprise, Privileged Enterprise Preferred Enterprise, Technological preferred enterprise or
Special Technological preferred enterprise will be subject to tax in Israel at the rate of 25% (or to a reduced tax rate if is distributing
to a foreign shareholder based on an applicable tax treaty), except that dividends distributed to an individual who is deemed “a
substantial shareholder” will be subject to tax at the rate of 30% ( or at a lower rate based on an applicable tax treaty).
Under the United States-Israel tax treaty, the maximum tax on
dividends paid to a holder of shares of our capital stock who is a United States resident is 25%.
Dividends received by a United States company that holds at least
10% of our voting rights, will be subject to withholding tax at the rate of 12.5% or 15%, depends on the nature of the taxable income,
provided that certain other conditions in the tax treaty are met. Dividends distributed to other foreign shareholders may be subject to
different withholding tax rates based on the applicable tax treaty.
A non-resident of Israel who has interest or dividend income
derived from or accrued in Israel, from which tax was withheld at the source, is generally exempt from the duty to file tax returns in
Israel in respect of such income, provided such income was not derived from a business conducted in Israel by the taxpayer.
Capital Gains Taxes Applicable to Non-Israeli Shareholders
According to Israeli domestic tax law, capital gains from the
sale of our shares by non-Israeli shareholders (including United States residents) are exempt from Israeli taxation under the Israeli
domestic tax law, provided that the capital gain is not derived from a permanent establishment in Israel.
A non-resident of Israel who has interest or dividend income
derived from or accrued in Israel, from which tax was withheld at the source, is generally exempt from the duty to file tax returns in
Israel in respect of such income, provided such income was not derived from a business conducted in Israel by the taxpayer.
United States Federal Income Tax Considerations
The following discussion describes certain material U.S. federal
income tax considerations relating to the direct or indirect ownership or disposition of our shares by a shareholder who is:
| • |
An individual citizen or resident (as defined for U.S. federal income tax purposes) of the United States; |
| • |
A domestic partnership; |
| • |
A corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any of
its states; |
| • |
An estate, if the estates income is subject to U.S. federal income taxation; or |
| • |
A trust, if a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons (e.g., a U.S.
citizen, resident, or corporation) have the authority to control all of its substantial decisions or the trust has a valid election in
effect under U.S. Treasury Regulations to be treated as a “United States person”. |
We refer to any of the above as a “U.S. Shareholder”.
This discussion is based on the provisions of the U.S. Internal
Revenue Code of 1986, as amended, referred to as the “Code”, U.S. Treasury Regulations promulgated under the Code and administrative
and judicial interpretations of the Code, all as in effect as of the date of this Annual Report. This discussion generally considers only
U.S. Shareholders who will hold our shares as capital assets (within the meaning of Section 1221 of the Code).
This summary discussion does not address tax considerations applicable
to a U.S. Shareholder that may be subject to special tax rules including, without limitation, the following:
| • |
Aspects of U.S. federal income taxation relevant to U.S. Shareholders by reason of their particular circumstances (including potential
application of the alternative minimum tax); |
| • |
U.S. Shareholders subject to special treatment under the U.S. federal income tax laws, such as banks, financial institutions, insurance
companies, broker-dealers or traders in securities; |
| • |
U.S. Shareholders that are tax-exempt organizations and pension funds; |
62
| • |
U.S. Shareholders that are former citizens or long-term residents of the United States; |
| • |
U.S. Shareholders that are partnerships or entities treated as partnerships or other pass-through entities and persons who own our
shares through such entities, and non-U.S. individuals or entities; |
| • |
U.S. Shareholders that are real estate investment trusts or regulated investment companies; |
| • |
U.S. Shareholders who own 10% or more of our outstanding shares (by vote or value), either directly or constructively ; |
| • |
U.S. Shareholders who hold our shares as part of a hedging, straddle, integrated, or conversion transaction; |
| • |
U.S. Shareholders who acquire their shares of our capital stock in a “compensatory transaction”; |
| • |
U.S. Shareholders whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar; and
|
| • |
Any aspect of U.S. estate, gift, state, or local tax law, or any non-U.S. tax law. |
The following summary does not address all
of the tax consequences of owning or disposing of our shares to you based on your individual tax circumstances. Accordingly, you should
consult your own tax advisor as to the particular tax consequences to you of owning or disposing of our shares, including the effects
of applicable state, local, or non-U.S. tax laws and possible changes in the tax laws.
Dividends Paid on the Company’s Shares
Subject to the discussion below under “Passive Foreign
Investment Company Status,” a U.S. Shareholder, as defined above, may be required to include in gross income the amount of any distributions
made with respect of our shares (and any Israeli taxes withheld on such distributions) to the extent that the distributions are paid out
of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. We do not calculate earnings and
profits under United States federal income tax principles.
Certain non-corporate U.S. Shareholders may qualify for preferential
rates of taxation with respect to dividends on our capital stock if the dividends are “qualified dividend income”. Qualified
dividend income generally includes dividends paid by a U.S. corporation or a “qualified foreign corporation”. A non-U.S. corporation,
such as ours, generally will be considered to be a qualified foreign corporation if (i) our shares are readily tradable on an established
securities market in the United States, or (ii) we are eligible for the benefits of a comprehensive U.S. income tax treaty determined
to be satisfactory to the U.S. Department of the Treasury for purposes of this provision and which includes an exchange of information
provision. The U.S. Department of the Treasury and the Internal Revenue Service have determined that the United States-Israel tax treaty
(the “Treaty”) is satisfactory for this purpose. In addition, our shares are listed on the Nasdaq. However, no assurance can
be given that our shares will be considered readily tradable on an established securities market in the future. The reduced rates do not
apply unless certain holding period requirements are satisfied, nor do they apply to dividends received from a passive foreign investment
company (a “PFIC”) (see discussion below). The information returns, reporting the dividends paid to U.S. Shareholders, will
identify the amount of dividends eligible for the reduced rates.
63
U.S. Income Tax Treatment of Dividends
Any distributions in excess of earnings and profits will be treated
first as non-taxable return of capital, reducing a U.S. Shareholder’s tax basis in our shares to the extent of the distributions,
and then as capital gain from a sale or exchange of our shares. Any capital gain so realized will generally be taxable to the U.S. Shareholder
as either long-term or short-term capital gain depending upon whether the U.S. Shareholder has held our shares for more than one year
as of the time such distribution is received. Our dividends will generally not qualify for the dividends received deduction available
to corporations. Any cash distribution paid in Israeli Shekels will equal the U.S. dollar value of the distribution, calculated based
on the spot exchange rate in effect on the date of the distribution, regardless of whether the foreign currency is converted into U.S.
dollars at that time. Any foreign currency gain or loss a U.S. Shareholder realizes on a subsequent conversion of foreign currency into
U.S. dollars will be U.S. source ordinary income or loss.
Credit for Israeli Taxes
Subject to the PFIC rules discussed below and certain conditions
and limitations, a U.S. Shareholder of an Israeli corporation may be eligible for a foreign tax credit to offset a portion of the U.S.
tax liability assessed on Israeli sourced income when repatriated to the United States. The U.S. Internal Revenue Code provides a foreign
tax credit limitation on the amount of foreign tax credits that may be used during each taxable year. This limitation requires detailed
knowledge of the mechanics of the rules prescribed in the Code and the supporting regulations. Under no circumstances, can foreign tax
credits be used to offset a U.S. tax assessment on U.S. source income, and the credit may not exceed the U.S. tax assessment on foreign
income.
Certain U.S. Treasury Regulations that apply to non-U.S. taxes
paid or accrued in taxable years beginning on or after December 28, 2021 restrict the availability of any such foreign tax credit based
on the nature of the tax imposed by the non-U.S. jurisdiction (although Notice 2023-55, as extended and modified by Notice 2023-80, provides
temporary relief from the application of certain aspects of these regulations for taxable years ending before the date that a notice or
other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or guidance)).
A U.S. Shareholder may elect to claim a foreign tax credit on
its U.S. federal income tax return for foreign taxes paid or accrued, alternatively, the U.S. Shareholder may elect to claim a deduction
for Israeli income tax withheld or paid, but only if the shareholder elects to do so for all foreign income taxes of the same year. Special
rules for determining a U.S. Shareholder ’s foreign tax credit limitation apply in the case of qualified dividend income. Rules
similar to those concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential also apply
to any qualified dividend income. The rules relating to foreign tax credits are complex and each U.S. Shareholder should consult his,
her, or its own tax advisor to determine whether and if such U.S. Shareholder would be entitled to this credit.
Sale, Exchange, or Other Disposition of Our Shares
Subject to the PFIC rules discussed below, the sale or exchange
of our shares would generally result in the recognition of capital gain or loss for the U.S. Shareholder. The amount of gain or loss is
the difference between the U.S. dollar value of the amount realized on the sale or exchange and the tax basis in our shares. If a U.S.
Shareholder’s holding period for our shares exceeds one year at the time of the disposition, the amount of the shareholder’s
gain or loss generally will be long-term capital gain or loss. Long-term capital gains of non-corporate U.S. Shareholders realized upon
a sale or exchange of shares generally will be eligible for a preferential rate of taxation. The deductibility of capital losses may be
subject to limitation. Gain or loss recognized by a U.S. Shareholder on a sale or exchange of shares generally will be treated as U.S.
source income or loss for U.S. foreign tax credit purposes. Accordingly, in the event any Israeli tax (including withholding tax) is imposed
upon such sale or other disposition, a U.S. Shareholder may not be able to utilize foreign tax credits unless such U.S. Shareholder has
foreign source income or gain in the same category from other sources. Moreover, there are special rules under the Treaty, which may impact
a U.S. Shareholder’s ability to claim a foreign tax credit. U.S. Shareholders are urged to consult their own tax advisor regarding
the ability to claim a foreign tax credit and the application of the Treaty to such U.S. Shareholder’s particular circumstances.
Additional Tax on Investment Income
U.S. Shareholders that are individuals, estates or trusts and
whose income exceeds certain thresholds may be subject to a 3.8% tax on all or a portion of their “net investment income”,
including, among other things, dividends on and capital gains from the sale or other disposition of our shares, subject to certain limitations
and exceptions.
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Passive Foreign Investment Company Status
Based upon our income, assets and activities, we believe that
we are not currently, and have not been in prior years, a passive foreign investment company for U.S. federal income tax purposes. We
do not currently anticipate that we will be a PFIC for any subsequent year. We would be classified as a PFIC if, for any taxable year,
either:
| • |
75% or more of our gross income in the taxable year is passive income, or |
| • |
50% or more of the average percentage of our assets held during the taxable year produce or are held for the production of passive
income. |
For this purpose, passive income includes, but is not limited
to, dividends, interest, royalties, rents, annuities and the excess of gain over losses from the disposition of assets that produce passive
income.
If we were a PFIC for any taxable year during which you held
shares as a U.S. Shareholder and you did not timely elect to treat us as a “qualified electing fund” under Section 1295
of the Code or elect to mark our shares to market, you would be subject to special tax rules that have a penalizing effect on the receipt
of an “excess distribution” on our shares. Generally, a distribution is considered an excess distribution to the extent it
exceeds 125% of the average annual distributions in the prior three years (or, if shorter, your holding period of our shares before the
taxable year). You would also be subject to special tax rules that have a penalizing effect on the gain from the disposition of our shares,
including the treatment if any such gain as ordinary income, not capital gain.
A U.S. Shareholder may be able to mitigate certain adverse tax
consequences of holding shares in a PFIC by making a “qualified electing fund”, “deemed sale” or “mark-to-market”
election. However, these elections require specific conditions to be met, for example, as a U.S. Shareholder you may make a qualified
electing fund election only if we agree to furnish certain tax information annually. We do not presently prepare or provide this information,
and this information may not be available to you if we are subsequently determined to be a PFIC.
The mark-to-market election is available only for “marketable
stock”. Generally, stock that is regularly traded on a national securities exchange that is registered with the SEC, including the
Nasdaq (on which our shares are listed), or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that
the market price represents a legitimate and sound fair market value. While our shares are currently listed and traded on Nasdaq, no assurance
can be given that our shares will be treated as marketable stock. U.S. Shareholders should consult their tax advisors regarding the availability
and tax consequences of a mark-to-market election with respect to your shares under their particular circumstances.
A number of specific rules and requirements apply to a U.S. Shareholder
under any of the elections available to owners of a PFIC. You are advised to consult your tax advisor concerning these elections.
Information Reporting and Back up Withholding
Dividend payments and proceeds from the sale or disposal of shares
may be subject to information reporting to the Internal Revenue Service and possible U.S. federal withholding tax. However, withholding
taxes may not apply to a holder, in the event they furnish a valid taxpayer identification number or certificate of foreign status and
makes any other required certification, or who is otherwise exempt from withholding (for example, a corporation). Amounts withheld as
withholding taxes may be credited against a U.S. Shareholder’s federal income tax liability.
Other Reporting Requirements
Certain U.S. Shareholders who are individuals are required to
report information relating to an interest in our shares, subject to certain exceptions (including an exception for shares held in accounts
maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal
income tax return. U.S. Shareholders are urged to consult their tax advisors regarding their information reporting obligations, if any,
with respect to their ownership and disposition of our shares.
Documents on Display
This Annual Report and other information filed or to be filed
by us with the Securities and Exchange may be accessed at the Securities and Exchange Commission’s website, www.sec.gov. We intend
to post our Annual Report on our website (www.checkpoint.com) promptly following the filing of our Annual Report with the Securities and
Exchange Commission.
Additionally, documents referred to in this Annual Report may
be inspected at our principal executive offices located at 5 Shlomo Kaplan Street, Tel Aviv 6789159, Israel.
65
Item 10J. Annual
Report to Security Holders
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks that result primarily from weak
economic conditions in the markets in which we sell our products, and from changes in exchange rates or in interest rates.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates
primarily to our investment in fixed maturity marketable securities, and short-term bank deposits. Our marketable securities portfolio
includes mainly government and government agencies debt instruments (U.S., European and other) and corporate debt instruments, which are
exposed to changes in short-term interest rates. By policy, we limit the amount of credit exposure to any single debt issuer.
Investments in both fixed rate and floating rate interest bearing
securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value impacted due to a rise or fall
in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Due in part to these
factors, our income from investments may change in the future in the event that interest rates fluctuate.
The yield on new investments in our investment portfolio and
our interest income was positively impacted by several years of rising interest rates. From the second half of 2024 interest rates started
to fall as the Federal Reserve bank cut the Federal Funds Rate, and so did other central banks, which negatively affected the yield on
new investments in our investment portfolio.
As of December 31, 2025 securities representing 5% of our investments
portfolios are rated as AAA; securities representing 42% of the portfolio are rated between AA- and AA+; securities representing 53% of
the portfolio are rated between A- and A+; securities representing 1% of the portfolio are rated as BBB+ or below.
The table below provides information regarding our investments
in cash, cash equivalents, short-term bank deposits and marketable securities, as of December 31, 2025:
|
|
Maturity
|
Total
Par Value |
Fair
Value at Dec. 31, 2025 |
|||||||||||||||||||||||||
|
|
2026
|
2027
|
2028
|
2029
|
2030
|
|||||||||||||||||||||||
|
|
(in millions)
|
|||||||||||||||||||||||||||
|
Marketable securities: |
||||||||||||||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government
agencies |
$ |
177.6 |
$ |
74.0 |
$ |
98.2 |
$ |
81.1 |
$ |
44.4 |
$ |
475.3 |
$ |
474.3 |
||||||||||||||
|
Debt securities issued by other governments |
9.4 |
11.7 |
10.8 |
7.0 |
- |
38.9 |
39.3 |
|||||||||||||||||||||
|
Corporate debt securities |
504.8 |
394.2 |
265.2 |
211.6 |
130.0 |
1,505.8 |
1,502.4 |
|||||||||||||||||||||
|
Cash |
109.8 |
109.8 |
109.8 |
|||||||||||||||||||||||||
|
Short-term bank deposits |
525.7 |
525.7 |
525.7 |
|||||||||||||||||||||||||
|
Cash equivalents: |
||||||||||||||||||||||||||||
|
Money market funds |
1,464.5 |
- |
- |
- |
- |
1,464.5 |
1,464.5 |
|||||||||||||||||||||
|
Short term deposits |
225.7 |
- |
- |
- |
- |
225.7 |
225.7 |
|||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total |
$ |
3,017.5 |
$ |
479.9 |
$ |
374.2 |
$ |
299.7 |
$ |
174.4 |
$ |
4,345.7 |
$ |
4,341.7 |
||||||||||||||
66
Foreign Currency Risk
Most of our sales are denominated in U.S. dollars, and we incur
majority of our expenses in U.S. dollar, Israeli Shekel and Euro currencies. According to the factors indicated in ASC 830, “Foreign
Currency Matters”, our cash flow, sale price, sales market, expense, financing and inter-company transactions, and arrangement indicators,
are predominantly denominated in U.S. dollars. In addition, the U.S. dollar is the primary currency of the economic environment in which
we operate, and thus, the U.S. dollar is our functional and reporting currency.
On our balance sheet, we convert into U.S. dollars all monetary
accounts (principally liabilities) that are held in other currencies. For this conversion, we use the relevant foreign currency exchange
rate at the balance sheet date. Any gain or loss that results from this conversion is reflected in the statement of income as financial
income or financial expense, as appropriate.
We measure and record non-monetary accounts in our balance sheet
in U.S. dollars. For this measurement, we use the U.S. dollar value in effect at the date that the asset or liability was initially recorded
in our balance sheet (the date of the transaction).
We entered into forward contracts to hedge the foreign currency
exchange impacts on assets and liabilities denominated in various foreign currencies. As of December 31, 2025, the total amount of
outstanding forward contracts that did not qualify for hedge accounting was $196.0 million. These contracts were for a period of
up to twelve months. The net amount of gains and losses recognized in “financial income, net” during 2025 was a gain of $30.3 million.
During 2025, we entered into forward contracts to hedge against
the risk of overall changes in foreign currency exchange rates on future cash flow from payments of payroll and related expenses denominated
in Israeli Shekel and Euro. These contracts qualified for cash flow hedge accounting and as such the net amount of gains and losses of
$29.1 million in gain was recognized when the related expenses were incurred, and classified in operating expenses during 2025. As of
December 31 2025, the notional amount of outstanding forward contracts that qualified for cash flow hedge accounting was $328.8 million
and their fair value gain amount was $29.8 million.
Our operating expenses may be affected by fluctuations in the
value of the U.S dollar as it relates to foreign currencies; with Israeli Shekel and Euro having the greatest potential impact. In managing
our foreign exchange risk, we periodically enter into foreign exchange hedging contracts. Our goal is to mitigate the potential exposure
with these contracts. By way of example, a 10% weakening in the value of the dollar relative to the currencies in which our operating
expenses are denominated in 2025 would result in an increase in operating expenses of $79.5 million for the year ended December 31,
2025. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES
There are no defaults, dividend arrearages, or delinquencies
that are required to be disclosed.
ITEM 14. MATERIAL MODIFICATIONS TO THE
RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There are no material modifications to, or qualifications of,
the rights of security holders that are required to be disclosed.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of December 31, 2025, our management, including our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship
of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures are effective as of December 31, 2025, to provide reasonable assurance that the information
required to be disclosed in filings and submissions under the Exchange Act, is recorded, processed, summarized and reported within the
time periods specified by the SEC’s rules and forms, and that such information related to us and our consolidated subsidiaries is
accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions about required disclosure.
67
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that:
| • |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets, |
| • |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors, and |
| • |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements. |
Our management recognizes that there are inherent limitations
in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and the circumvention
or override of internal control.
Accordingly, even effective internal control over financial reporting
can provide only reasonable assurance with respect to financial statement preparation, and may not prevent or detect all misstatements.
Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
Our management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2025. In conducting its assessment of internal control over financial reporting, management
used the framework and criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) (the 2013 Framework) as of the end of the period covered by this report. Based on that
evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2025.
Our financial statements and internal control over financial
reporting have been audited by Kost, Forer, Gabbay & Kasierer (A Member of EY Global), an independent registered public accounting
firm, which has issued an attestation report on our internal control over financial reporting included elsewhere in this Annual Report.
Changes in Internal Control over Financial Reporting
During the period covered by this Annual Report, no changes in
our internal control over financial reporting have occurred that materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL
EXPERT
Our board of directors has determined that Mr. Yoav Chelouche
is an “audit committee financial expert” and that he is independent under the applicable Securities and Exchange Commission
and Nasdaq rules.
ITEM 16B. CODE OF ETHICS
Our board of directors adopted a Code of Ethics and Business
Conduct (“Code of Ethics”) that applies to all of our employees, directors and officers, including the Chief Executive Officer,
Chief Financial Officer, principal accounting officer or controller and other individuals who perform similar functions as well as to
contractors working on a regular basis with Check Point. The Code of Ethics is updated from time to time and was last updated in 2023.
The Code of Ethics is available on our website at www.checkpoint.com.
68
ITEM 16C. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Fees and Services
The following table sets forth the aggregate fees for the audit
and other services provided by Kost, Forer, Gabbay & Kasierer, a member of EY Global and other members of EY Global during the
years ended December 31, 2025 and 2024:
|
|
Year Ended December 31, 2025
|
Year Ended December 31, 2024
|
||||||||||||||
|
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||||
|
|
(in millions, except percentages) |
|||||||||||||||
|
Audit fees (1) |
$ |
1.1 |
55 |
% |
$ |
0.9 |
69 |
% | ||||||||
|
Audit related fees (2) |
0.5 |
25 |
% |
0.2 |
15 |
% | ||||||||||
|
Tax fees (3) |
0.4 |
20 |
% |
0.2 |
16 |
% | ||||||||||
|
All Other Fees (4) |
- |
- |
- |
- |
||||||||||||
|
|
||||||||||||||||
|
Total |
$ |
2.0 |
100 |
% |
$ |
1.3 |
100 |
% | ||||||||
| (1) |
“Audit fees” are fees for audit services for each of the years shown in this table, including fees associated with the
annual audit (including audit of our internal control over financial reporting) and reviews of our quarterly financial results submitted
on Form 6-K, consultations on various accounting issues and audit services provided in connection with other statutory or regulatory filings.
|
| (2) |
“Audit-related fees” are fees for professional services, mainly related to the Convertible Note offering and due diligence
work. |
| (3) |
“Tax fees” are fees for professional services rendered by our auditors for tax compliance, tax planning and tax advice
on actual or contemplated transactions, tax consulting associated with international transfer prices and employee benefits. |
| (4) |
“All Other Fees” are fees for products and services other than those described above. For each of the fiscal years ended
in December 31, 2025 and 2024, there were no fees for products or services other than those described above. |
Audit committee’s pre-approval policies and procedures
Our audit committee chooses and engages our independent auditors
to audit our financial statements, with the approval of our shareholders as required by Israeli law. Our audit committee adopted a policy
requiring our management to obtain the audit committee’s approval before engaging our independent auditors to provide any audit
or permitted non-audit services to us or our subsidiaries. This policy, which is designed to assure that such engagements do not impair
the independence of our auditors, requires pre-approval from the audit committee on an annual basis for the various audit and non-audit
services that may be performed by our auditors. In addition, the audit committee limited the aggregate amount of fees our auditors may
have received during 2025 and 2024, and will receive during 2026 for non-audit services in certain categories.
Our Chief Financial Officer reviews all management requests to
engage our auditors to provide services and approves a request if the requested services are of those that have received pre-approval
from our audit committee. We inform our audit committee of these approvals at least quarterly and prior to the commencement of the related
services. If the services are not included in those categories that were pre-approved by our audit committee, then specific approval is
needed from our audit committee before these services are commenced. Our audit committee is not permitted to approve the engagement of
our auditors for any services that would be inconsistent with maintaining the auditors’ independence or that are not permitted by
applicable law.
ITEM 16D. EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES
None.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE
ISSUER AND AFFILIATED PURCHASERS
As of December 31, 2025 and since we started repurchase
programs, we repurchased the company’s ordinary shares for an aggregate amount of $17,073 million. On July 11, 2024 the Company
announced the expansion of the Company’s on-going share repurchase program by an additional $2 billion. Under the current plan,
the Board of Directors is authorized to repurchase up to $325 million a quarter of ordinary shares, and in connection with our convertible
notes offering in December 2025, the Board of Directors was authorized to repurchase an additional $100 million of ordinary shares
. Under the repurchase programs, share purchases may be made from time to time depending on market conditions, share price, trading volume
and other factors and will be funded from available working capital.
69
During 2025, we used $1,400 million to repurchase approximately
6.8 million ordinary shares, which were repurchased under our repurchase program. The table below provides detailed information In
million other than the average price per share per ordinary share.
|
Period |
Total Number
of Ordinary Shares Purchased (1) |
Average Price
per Ordinary Share |
Approximate
Dollar Amount Available for Repurchase under the Plans or Programs |
|||||||||
|
January 1 – January 31 |
0.5 |
$ |
190 |
$ |
1,803 |
|||||||
|
February 1 – February 28 |
0.5 |
$ |
217 |
$ |
1,696 |
|||||||
|
March 1 – March 31 |
0.5 |
$ |
225 |
$ |
1,573 |
|||||||
|
April 1 – April 30 |
0.5 |
$ |
216 |
$ |
1,463 |
|||||||
|
May 1 – May 31 |
0.5 |
$ |
221 |
$ |
1,352 |
|||||||
|
June 1 – June 30 |
0.5 |
$ |
225 |
$ |
1,248 |
|||||||
|
July 1 – July 31 |
0.4 |
$ |
221 |
$ |
1,148 |
|||||||
|
August 1 – August 31 |
0.7 |
$ |
187 |
$ |
1,013 |
|||||||
|
September 1 – September 30 |
0.5 |
$ |
194 |
$ |
923 |
|||||||
|
October 1 – October 31 |
0.6 |
$ |
197 |
$ |
813 |
|||||||
|
November 1 – November 30 |
0.5 |
$ |
194 |
$ |
723 |
|||||||
|
December 1 – December 31 |
1.1 |
$ |
191 |
$ |
498 |
|||||||
|
|
||||||||||||
|
Total |
6.8 |
$ |
207 |
|||||||||
| (1) |
All the Ordinary Shares were purchased as part of publicly announced plans or programs. |
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a foreign private issuer whose shares are listed on the Nasdaq,
we are permitted to follow certain home country corporate governance practices instead of certain requirements of the Nasdaq Marketplace
Rules (each a “Nasdaq Rule” and together the “Nasdaq Rules”).
We do not comply with the Nasdaq rule that an issuer listed on
the Nasdaq have a quorum requirement that in no case be less than 33 1/3% of the outstanding shares of the company’s common voting
stock. Our articles of association, consistent with the Israeli Companies Law, provide that the quorum requirements for an adjourned meeting
are the presence of a minimum of two shareholders present in person. As such, our quorum requirements for an adjourned meeting do not
comply with the Nasdaq Rules and instead follow our home country practice.
In addition, we do not follow the Nasdaq Marketplace Rule, requiring
that we obtain shareholder approval for the establishment of amendment to certain equity-based compensation plans and arrangements. Under
Israeli law and practice, the approval of the board of directors is required for the establishment or amendment of compensation plans
and arrangements, unless the arrangement is for the benefit of a director or a controlling shareholder, in which case compensation committee
or audit committee and shareholder approval are also required. We follow our home country law and therefore require board approval only
for establishing or amending equity-based compensation plans and arrangements, unless the arrangement is for the benefit of a director
or a controlling shareholder.
As a foreign private issuer listed on the Nasdaq, we may also
follow home country practice with regard to, among other things, composition of the board of directors, compensation practices and compensation
committee practices, director nomination process and regularly scheduled meetings at which only independent directors are present. In
addition, we may follow our home country practice, instead of the Nasdaq Rules, which require that we obtain shareholder approval for
certain dilutive events, such as for an issuance that will result in a change of control of the company, certain transactions other than
a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another
company. A foreign private issuer that elects to follow a home country practice instead of Nasdaq Rules must submit to Nasdaq in advance
a written statement from independent counsel in such issuer’s home country certifying that the issuer’s practices are not
prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the
SEC or on its website each such requirement that it does not follow and describe the home country practice followed by the issuer instead
of any such requirement. Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate
governance rules.
See Item 3.D. “Key Information – Risk factors –
Risks Related to Our Operations In Israel – As a foreign private issuer whose shares are listed on the Nasdaq Global Select Market,
we may follow certain home country corporate governance practices instead of certain Nasdaq requirements”, Item 6 “Directors,
Senior Management and Employees – Board Practices” and Item 10 “Additional Information – Articles of Association
and Israeli Companies Law” for a detailed description of the significant ways in which the registrant’s corporate governance
practices differ from those followed by U.S. companies under the listing standards of the Nasdaq Global Select Market.
ITEM 16H. MINE
SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable
70
ITEM 16J.
INSIDER TRADING POLICIES
We
have adopted
a written insider trading policy governing the purchase, sale, and other dispositions of our securities by directors,
senior management, and employees that are reasonably designed to promote compliance with applicable insider trading laws, rules and regulations,
and any listing standards applicable to us. Additionally, with respect to our trading in Check Point own securities, it is our policy
to comply with the U.S. federal securities laws and the applicable exchange listing requirements.
A
copy of the Insider Trading Policy, is filed as an exhibit to this Annual Report.
ITEM 16K.
CYBERSECURITY
Cyber
security Risk Management and Strategy
We
conduct periodic risk assessments to identify cyber security threats, as well as additional assessments in the event of a material change
in our business practices that may affect information systems (as defined below) that are vulnerable to such cyber security threats. These
risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that
could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Following
these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any
identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards. We devote significant resources and
designate high-level personnel, including our Chief Security & Trust Officer, our Chief Information Security Officer (“CISO”)
and our Chief Information Officer (“CIO”), to manage the risk assessment and mitigation process.
As
part of our overall risk management process, we monitor and test our safeguards and train our employees on these safeguards, in collaboration
with human resources, IT, and management. Personnel at all levels and departments receive training on our cyber security policies.
We
engage our internal auditors and other third parties in connection with our risk assessment processes. These service providers assist
us to design and implement our cyber security policies and procedures in accordance with common best practices and methodologies, as well
as to monitor and test our security controls.
71
We
regularly experience attempts by third parties to gain unauthorized access to, or to introduce malicious software into, our information
technology systems. While a limited number of these attempts have resulted in minor and isolated incidents, they were promptly identified,
investigated and remediated in real time by our cyber security and information technology teams. Based on our investigations, these incidents
did not affect our customers, did not involve any leakage of customer or company data, and did not result in any material impact on our
operations. For additional information regarding whether any risks from cyber security threats, including as a result of any previous
cyber security incidents, have materially affected or are reasonably likely to materially affect our company, including our business strategy,
results of operations, or financial condition, please refer to Item 3D, “Key Information – Risk Factors”, in this Annual
Report on Form 20-F, including the risk factors entitled “Other General Risks and Risks Related to the Ownership of Our Ordinary
Shares - Our
information technology systems, networks and products and services have been, and may continue to be, subject to various security threats
and cyber security incidents”.
Cyber
Security Governance
Our
Board of Directors considers cyber security risk as part of its risk oversight function and has delegated oversight of cyber security
and other information technology risks to the Audit Committee. As such, the Audit Committee oversees management’s implementation
of our cyber security risk management program.
The
Audit Committee receives quarterly reports from our Chief Information Officer and CISO on cyber security regarding our company’s
cyber security risks and activities, including any recent cyber security incidents and related responses, cyber security systems testing,
activities of third parties, as well as any incidents with lesser impact potential.
Our
CIO supervises efforts to prevent, detect, mitigate, and remediate cyber security risks and incidents through various means, which may
include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private
sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
For
purposes of this Item 16K:
| - |
A “cyber security
incident” means an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through our information
systems that jeopardizes the confidentiality, integrity, or availability of a registrant’s information systems or any information
residing therein. |
| - |
A “cyber security
threat” means any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects
on the confidentiality, integrity, or availability of our information systems or any information residing therein.
|
| - |
“Information
systems” means electronic information resources, owned or used by us, including physical or virtual infrastructure controlled by
such information resources, or components thereof, organized for the collection, processing, maintenance, use, sharing, dissemination,
or disposition of our information to maintain or support our operations. |
PART
III
ITEM 17.
FINANCIAL STATEMENTS
See
beginning on page F-1 below.
72
ITEM 18.
FINANCIAL STATEMENTS
Check
Point has responded to Item 18.
ITEM 19.
EXHIBITS
|
1 |
Articles
of Association of Check Point Software Technologies Ltd. (1) |
|
2.1 |
Description
of the rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934 |
|
4.1 |
Form
of Director Insurance, Indemnification and Exculpation Agreement between Check Point Software Technologies Ltd. and its directors (2) |
|
4.2 |
Check
Point Software Technologies Ltd. 2005 Israel Equity Incentive Plan, as amended (3) |
|
4.3 |
Check
Point Software Technologies Ltd. 2005 United States Equity Incentive Plan, as amended (4) |
|
4.4 |
Check
Point Software Technologies Ltd. Employee Stock Purchase Plan, as Amended and Restated (5) |
|
4.5 |
Check
Point Software Technologies Ltd. Employee Stock Purchase Plan (Non-U.S. Employees) (6) |
|
4.6 |
A
translation of an agreement between Tzlil Ad Ltd. and Check Point Software Technologies Ltd., for the purchase of the leasing rights of
a building in Tel Aviv, Israel, dated as of March 19, 2006 (7) |
|
4.7 |
Dome9
Security Ltd. 2011 Share Option Plan and the 2016 Equity Incentive Subplan (8) |
| 4.8 |
Check
Point Software Technologies Ltd. Executive Compensation Plan (9) |
|
4.9 |
Indenture,
dated as of December 8, 2025, by and between Check Point Software Technologies Ltd. and U.S. Bank Trust Company, National Association,
as Trustee (10) |
|
4.10 |
Form
of 0.00% Convertible Senior Note due 2030 (11) |
| 4.11 |
Agreement,
dated July 2, 2025, between Tel Aviv-Jaffa Municipality, Israel Electric Company Ltd., Check Point Software Technologies Ltd. and Israel
Canada Shelf 3, Limited Partnership and Long-Term Lease Agreement, dated July 2, 2025, between Tel Aviv-Jaffa Municipality, Check Point
Software Technologies Ltd. and Israel Canada Shelf 3, Limited Partnership (12) |
|
8 |
List of subsidiaries (13) |
|
11 |
Check
Point Software Technologies Ltd. Insider Trading Policy (14) |
|
12.1 |
Certification
of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002 |
|
12.2 |
Certification
of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002 |
|
13.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 |
|
13.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 |
|
15 |
Consent
of Kost, Forer, Gabbay & Kasierer, a Member of EY Global |
|
97.1 |
Check
Point Software Technologies Ltd. Clawback Policy (15) |
|
101 |
Inline XBRL
(Extensible Business Reporting Language) The following materials from Check Point Software Technologies Ltd.’s Annual Report on
Form 20-F for the fiscal year-ended December 31, 2020, formatted in Inline XBRL: |
|
(i) |
Consolidated
Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Shareholders’ Equity/(Deficit)
and Comprehensive Income/(Loss) (iv) Consolidated Statements of Cash Flows, (v) Notes to the Consolidated Financial Statements,
(vi) Schedule II — Valuation and Qualifying Accounts and Reserves, and (vii) Cover Page |
|
104 |
Cover Page
Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
| (1) |
Incorporated by reference to Exhibit 1 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2005. |
| (2) |
Incorporated by reference to Exhibit 4.1 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2005. |
| (3) |
Incorporated by reference to Exhibit 4.2 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2023. |
| (4) |
Incorporated by reference to Exhibit 4.3 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2023. |
| (5) |
Incorporated by reference to Exhibit 4.1 of Check
Point’s Registration Statement on Form S-8 (No. 333-207355) filed with the Securities and Exchange Commission on October 8,
2015. |
| (6) |
Incorporated by reference to Exhibit 4.5 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2017. |
| (7) |
Incorporated by reference to Exhibit 4.11 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2006. |
| (8) |
Incorporated by reference to Exhibit 4.2 of Check
Point’s Registration Statement on Form S-8 (No. 333-228075) filed with the Securities and Exchange Commission on October 31,
2018. |
| (9) |
Incorporated by reference to Annex A of Check
Point’s Report on Form 6-K filed with the Securities and Exchange Commission on July 28, 2025. |
| (10) |
Incorporated by reference to Exhibit 4.1 of Check
Point’s Report on Form 6-K filed with the Securities and Exchange Commission on December 8, 2025. |
| (11) |
Incorporated by reference to Exhibit 4.2 of Check
Point’s Report on Form 6-K filed with the Securities and Exchange Commission on December 8, 2025. |
| (12) |
English summary of Hebrew originals |
| (13) |
Incorporated by reference to “Item 4 –
Information on Check Point – Organizational Structure” in this Annual Report on Form 20-F. |
| (14) |
Incorporated by reference to Exhibit 4.9 of Check
Point’s Annual Report on Form 20-F for the year ended December 31, 2023. |
(15) Incorporated
by reference to Exhibit 97.1 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2023.
73
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
|
CHECK
POINT SOFTWARE TECHNOLOGIES LTD. | ||
|
By: |
/s/ Nadav Zafrir | |
|
|
Nadav Zafrir | |
|
|
Chief Executive Officer | |
|
By: |
/s/ Roei Golan | |
|
|
Roei Golan | |
|
|
Chief Financial Officer |
Date: March
31, 2026
74
CHECK
POINT SOFTWARE TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2025
IN
U.S. DOLLARS
INDEX
|
|
Page
|
|
|
|
|
Reports
of Independent Registered Public Accounting Firm (PCAOB ID Number 1281) |
F-2 - F-6
|
|
|
|
|
Consolidated
Balance Sheets |
F-7
- F-8 |
|
|
|
|
Consolidated
Statements of Income |
F-9
|
|
|
|
|
Consolidated
Statements of Comprehensive Income |
F-10
|
|
|
|
|
Statements
of Changes in Shareholders’ Equity |
F-11
|
|
|
|
|
Consolidated
Statements of Cash Flows |
F-12
- F-13 |
|
|
|
|
Notes
to Consolidated Financial Statements |
F-14
- F-57 |
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and the Board of Directors of Check Point Software Technologies Ltd.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Check Point Software Technologies Ltd. and subsidiaries (the “Company”)
as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’
equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 31, 2026,
expressed an unqualified opinion thereon.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
F
- 2
Revenue
from Contracts with Customers—Estimate of Standalone Selling Price
|
Description of the Matter
|
As
described in Note 2 to the consolidated financial statements, the Company primarily derives revenues from sales of products and licenses,
security subscriptions and software updates and maintenance. The Company’s contracts with customers often contain multiple goods
and services which are accounted for as separate performance obligations when they are distinct. The Company allocates the transaction
price to the distinct performance obligations on a relative standalone selling price. |
|
Auditing
the management’s determination of the standalone selling price required challenging and subjective auditor judgment due to the subjective
assumptions used to establish the standalone selling price for each performance obligation. Standalone selling price for goods and services
can evolve over time due to changes in the Company’s pricing practices that may be influenced by competition, changes in demand
for products and services, and economic factors, among others. This in turn led to significant auditor judgment, subjectivity and effort
in performing procedures and evaluating audit evidence related to management’s determination of the standalone selling price.
|
|
How We Addressed the
Matter in Our Audit |
We
obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s revenue
process, including controls over the development of assumptions used to determine the standalone selling prices.
|
|
Our
substantive audit procedures included testing management’s determination of standalone selling prices for each performance obligation,
including assessing the appropriateness of the methodology applied, testing the mathematical accuracy of the underlying data and evaluating
the significant assumptions used by the Company. We also performed sensitivity analyses over key assumptions to assess the impact on revenue
recognition that could result from changes to the Company’s assumptions. |
F
- 3
Uncertain
Tax Positions
|
Description of the Matter
|
As
discussed in Note 12 to the consolidated financial statements, the Company operates its business in various jurisdictions, and accordingly
attempts to utilize an efficient operating model to structure its tax payments based on the laws in each jurisdiction in which the Company
operates. This can cause disputes between the Company and various tax authorities in different parts of the world. The Company uses significant
judgment in (1) determining whether a tax position’s technical merits are more-likely-than-not to be sustained and (2) measuring
the amount of tax benefit that qualifies for recognition. |
|
Auditing
management’s evaluation of whether an uncertain tax position is more-likely-than-not to be sustained and the measurement of the
benefit of various tax positions can be complex and involves significant auditor judgment. Management’s evaluation of tax positions
is based on interpretations of tax laws and legal rulings, and may be impacted by regulatory changes and judicial and examination activity.
|
|
How We Addressed the
Matter in Our Audit |
We
obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over management’s process
to assess the technical merits of the Company’s tax positions and management’s process to measure the benefit of its tax positions
that qualify for recognition. |
|
We
evaluated the Company’s assessment of which tax positions are more likely than not to be sustained and the related measurement of
the amount of tax benefit that qualifies for recognition. Our audit procedures included, evaluating management’s assumptions and
analysis, and, as applicable, the Company’s communications with tax authorities and tax opinions obtained by the Company, that detailed
the basis and technical merits of the uncertain tax positions. We involved our tax professionals in assessing the technical merits of
certain of the Company’s tax positions based on our knowledge of relevant tax laws and experience with related taxing authorities.
|
/s/ Kost Forer Gabbay & Kasierer
A
Member of EY Global
We
have served as the Company’s auditor since 1994.
Tel-Aviv, Israel
March
31, 2026
F
- 4
Report
of Independent Registered Public Accounting Firm
To the
Shareholders and the Board of Directors of Check Point Software Technologies Ltd.
Opinion
on Internal Control Over Financial Reporting
We
have audited Check Point Software Technologies Ltd. and subsidiaries’ internal control over financial reporting as of December 31,
2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Check Point Software Technologies Ltd. and subsidiaries
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based
on the COSO criteria.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes
in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes,
and our report dated March 31, 2026 expressed an unqualified opinion thereon.
Basis
for Opinion
The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
F
- 5
Definition
and Limitations of Internal Control Over Financial Reporting
A
company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
|
/s/ Kost Forer Gabbay
& Kasierer
A Member of EY Global
|
|
Tel-Aviv,
Israel
March 31,
2026 |
F
- 6
CHECK
POINT SOFTWARE TECHNOLOGIES LTD.
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
In
millions
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
ASSETS
|
||||||||
|
|
||||||||
|
CURRENT
ASSETS: |
||||||||
|
Cash
and cash equivalents |
$
|
|
$
|
|
||||
|
Short-term
bank deposits |
|
|
||||||
|
Marketable
securities |
|
|
||||||
|
Trade
receivables, net |
|
|
||||||
|
Prepaid
expenses and other assets |
|
|
||||||
|
|
||||||||
|
Total
current assets |
|
|
||||||
|
|
||||||||
|
LONG-TERM
ASSETS: |
||||||||
|
Marketable
securities |
|
|
||||||
|
Property
and equipment, net |
|
|
||||||
|
Deferred
tax asset, net |
|
|
||||||
|
Intangible
assets, net |
|
|
||||||
|
Goodwill
|
|
|
||||||
|
Lease
prepayment |
|
|
||||||
|
Other
assets |
|
|
||||||
|
|
||||||||
|
Total
long-term assets |
|
|
||||||
|
|
||||||||
|
Total
assets |
$
|
|
$
|
|
||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 7
CHECK
POINT SOFTWARE TECHNOLOGIES LTD.
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS (CONT’D)
In millions (except share and per share data)
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY |
||||||||
|
CURRENT
LIABILITIES: |
||||||||
|
Trade
payables |
$
|
|
$
|
|
||||
|
Employees
and payroll accruals |
|
|
||||||
|
Deferred
revenues |
|
|
||||||
|
Accrued
expenses and other liabilities |
|
|
||||||
|
Total
current liabilities |
|
|
||||||
|
|
||||||||
|
LONG-TERM
LIABILITIES: |
||||||||
|
Convertible
senior notes, net |
|
|
||||||
|
Deferred
revenues |
|
|
||||||
|
Income
tax accrual |
|
|
||||||
|
Other
liabilities |
|
|
||||||
|
|
||||||||
|
Total
long-term liabilities |
|
|
||||||
|
|
||||||||
|
Total
liabilities |
|
|
||||||
|
|
||||||||
|
SHAREHOLDERS’
EQUITY: |
||||||||
|
Ordinary
shares, NIS
outstanding
at December 31, 2025 and 2024, respectively |
|
|
||||||
|
Additional
paid-in capital |
|
|
||||||
|
Treasury
shares at cost, December 31, 2025 and 2024, respectively |
(
|
)
|
(
|
)
| ||||
|
Accumulated
other comprehensive income (loss) |
|
(
|
)
| |||||
|
Retained
earnings |
|
|
||||||
|
|
||||||||
|
Total
shareholders’ equity |
|
|
||||||
|
|
||||||||
|
Total
liabilities and shareholders’ equity |
$
|
|
$
|
|
||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 8
CHECK POINT SOFTWARE
TECHNOLOGIES LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF INCOME
In millions (except
share and per share data)
|
|
Year
ended December 31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
Revenues: |
||||||||||||
|
Products and licenses
|
$ |
|
$ |
|
$ |
|
||||||
|
Security subscriptions
|
|
|
|
|||||||||
|
Software updates and maintenance
|
|
|
|
|||||||||
|
|
||||||||||||
|
Total
revenues |
|
|
|
|||||||||
|
|
||||||||||||
|
Operating expenses: |
||||||||||||
|
Cost of products and licenses *)
|
|
|
|
|||||||||
|
Cost of security subscriptions *)
|
|
|
|
|||||||||
|
Cost of software updates and maintenance
*) |
|
|
|
|||||||||
|
Amortization of technology
|
|
|
|
|||||||||
|
|
||||||||||||
|
Total
cost of revenues |
|
|
|
|||||||||
|
|
||||||||||||
|
Research and development
|
|
|
|
|||||||||
|
Selling and marketing
|
|
|
|
|||||||||
|
General and administrative
|
|
|
|
|||||||||
|
|
||||||||||||
|
Total
operating expenses |
|
|
|
|||||||||
|
|
||||||||||||
|
Operating income |
|
|
|
|||||||||
|
Financial income, net |
|
|
|
|||||||||
|
|
||||||||||||
|
Income before taxes on income (tax benefit)
|
|
|
|
|||||||||
|
Taxes on income (tax benefit) |
(
|
) |
|
|
||||||||
|
|
||||||||||||
|
Net income |
$ |
|
$ |
|
$ |
|
||||||
|
|
||||||||||||
|
Basic earnings per ordinary share |
$ |
|
$ |
|
$ |
|
||||||
|
Number of shares used in computing basic earnings
per share |
|
|
|
|||||||||
|
|
||||||||||||
|
Diluted earnings per ordinary share |
$ |
|
$ |
|
$ |
|
||||||
|
Number of shares used in computing diluted earnings
per share |
|
|
|
|||||||||
| *) |
Not including amortization of technology shown separately. |
The accompanying notes are an integral
part of the consolidated financial statements.
F
- 9
CHECK
POINT SOFTWARE TECHNOLOGIES LTD.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
In millions (except share and per share data)
|
|
Year
ended December 31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Net
income |
$
|
|
$
|
|
$
|
|
||||||
|
|
||||||||||||
|
Other
comprehensive income |
||||||||||||
|
|
||||||||||||
|
Change
in unrealized gains on marketable securities: |
||||||||||||
|
Unrealized
gains arising during the period, net of tax |
|
|
|
|||||||||
|
Gains
reclassified into earnings, net of tax |
|
)
|
|
)
|
|
|||||||
|
|
||||||||||||
|
|
|
|
|
|||||||||
|
|
||||||||||||
|
Change
in unrealized gains (losses) on cash flow hedges: |
||||||||||||
|
Unrealized
gains (losses) arising during the period, net of tax |
|
(
|
)
|
(
|
)
| |||||||
|
(Gains)
losses reclassified into earnings, net of tax |
(
|
)
|
|
|
||||||||
|
|
||||||||||||
|
|
|
|
|
|||||||||
|
|
||||||||||||
|
Other
comprehensive income, net of tax |
|
|
|
|||||||||
|
|
||||||||||||
|
Comprehensive
income |
$
|
|
$
|
|
$
|
|
||||||
*)
Represents an amount lower than $0.1
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
F
- 10
CHECK
POINT SOFTWARE TECHNOLOGIES LTD.
AND
SUBSIDIARIES
STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY
In millions (except share and per share data)
|
|
Accumulated
|
|||||||||||||||||||||||
|
|
Additional
|
Treasury
|
other
|
Total
|
||||||||||||||||||||
|
|
Ordinary
|
paid-in
|
shares
|
comprehensive
|
Retained
|
shareholders’
|
||||||||||||||||||
|
|
shares
|
capital
|
at
cost |
income
(loss) |
earnings
|
equity
|
||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance as of January
1, 2023 |
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
|
||||||||||||||||||||||||
|
Issuance
of treasury shares under stock purchase plans, upon
exercise of options and vesting of restricted stock
units ( |
-
|
|
|
-
|
-
|
|
||||||||||||||||||
|
Treasury shares
at cost ( |
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
| ||||||||||||||||
|
Stock-based compensation
|
-
|
|
-
|
-
|
-
|
|
||||||||||||||||||
|
Other comprehensive
loss, net of tax |
-
|
-
|
-
|
|
-
|
|
||||||||||||||||||
|
Fair value of awards
attributable to pre-acquisition services |
-
|
|
-
|
-
|
-
|
|
||||||||||||||||||
|
Net income
|
-
|
-
|
-
|
-
|
|
|
||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance as of December 31,
2023 |
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
|
||||||||||||||||||||||||
|
Issuance
of treasury shares under stock purchase plans, upon
exercise of options and vesting of restricted stock
units ( |
-
|
|
|
-
|
-
|
|
||||||||||||||||||
|
Treasury shares
at cost ( |
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
| ||||||||||||||||
|
Stock-based compensation
|
-
|
|
-
|
-
|
-
|
|
||||||||||||||||||
|
Other comprehensive
income, net of tax |
-
|
-
|
-
|
|
-
|
|
||||||||||||||||||
|
Fair value of awards
attributable to pre-acquisition services |
-
|
|
-
|
-
|
-
|
|
||||||||||||||||||
|
Net income
|
-
|
-
|
-
|
-
|
|
|
||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance as of December 31,
2024 |
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
|
||||||||||||||||||||||||
|
Issuance
of treasury shares under stock purchase plans, upon
exercise of options and vesting of restricted stock
units ( |
-
|
|
|
-
|
-
|
|
||||||||||||||||||
|
Treasury shares
at cost ( |
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
| ||||||||||||||||
|
Purchase of capped
calls |
-
|
(
|
)
|
-
|
(
|
)
| ||||||||||||||||||
|
Stock-based compensation
|
-
|
|
-
|
-
|
-
|
|
||||||||||||||||||
|
Other comprehensive
income, net of tax |
-
|
-
|
-
|
|
-
|
|
||||||||||||||||||
|
Fair value of awards
attributable to pre-acquisition services |
-
|
|
-
|
-
|
-
|
|
||||||||||||||||||
|
Net income
|
-
|
-
|
-
|
-
|
|
|
||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance as of December 31,
2025 |
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 11
CHECK
POINT SOFTWARE TECHNOLOGIES LTD.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
In millions
|
|
Year
ended December 31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
Cash
flows from operating activities: |
||||||||||||
|
|
||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
||||||
|
Adjustments
required to reconcile net income to net cash provided by operating activities: |
||||||||||||
|
Depreciation
of property and equipment |
|
|
|
|||||||||
|
Amortization
of premium and accretion of discount on marketable securities, net |
(
|
)
|
(
|
)
|
|
|||||||
|
Realized
loss on sale of marketable securities, net |
|
) |
|
)
|
|
|||||||
|
Amortization
of intangible assets |
|
|
|
|||||||||
|
Stock-based
compensation |
|
|
|
|||||||||
|
Amortization
of debt discount |
|
|
|
|||||||||
|
Net
gain from financing expenses |
(
|
)
|
|
|
||||||||
|
Deferred
taxes |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Increase
in trade receivables, net |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Increase
in prepaid expenses and other assets |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Increase
(decrease) in trade payables |
(
|
)
|
|
|
||||||||
|
Increase
(decrease) in employees and payroll accruals |
(
|
)
|
(
|
)
|
|
|||||||
|
Decrease
in income tax accrual and accrued expenses and other liabilities |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Increase
in deferred revenues |
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
||||||||||||
|
Net cash
provided by operating activities |
|
|
|
|||||||||
|
|
||||||||||||
|
Cash
flows from investing activities: |
||||||||||||
|
|
||||||||||||
|
Proceeds
from short-term bank deposits |
|
|
|
|||||||||
|
Proceeds
from maturity of marketable securities |
|
|
|
|||||||||
|
Proceeds
from sale of marketable securities |
|
|
|
|||||||||
|
Investment
in marketable securities |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Investment
in short-term bank deposits |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Cash paid
in conjunction with acquisitions, net of acquired cash |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Lease prepayment
|
(
|
)
|
|
|
||||||||
|
Purchase
of property and equipment |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
|
||||||||||||
|
Net cash
provided by (used in) investing activities |
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
*)
Represents an amount lower than $0.1
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 12
CHECK
POINT SOFTWARE TECHNOLOGIES LTD.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONT’D)
In millions
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash
flows from financing activities: |
||||||||||||
|
|
||||||||||||
|
Proceeds
from issuance of treasury shares upon exercise of options |
$
|
|
$
|
|
$
|
|
||||||
|
Proceeds
from issuance of convertible senior notes, net |
|
|
|
|||||||||
|
Purchase
of capped calls |
(
|
)
|
|
|
||||||||
|
Purchase
of treasury shares at cost |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Payments
related to shares withheld for taxes |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
|
||||||||||||
|
Net cash
provided by (used in) financing activities |
|
(
|
)
|
(
|
)
| |||||||
|
|
||||||||||||
|
Effect of
exchange rate changes on cash and cash equivalents |
|
|
|
|||||||||
|
Increase
(decrease) in cash and cash equivalents |
|
(
|
)
|
|
||||||||
|
Cash and
cash equivalents at the beginning of the year |
|
|
|
|||||||||
|
|
||||||||||||
|
Cash and
cash equivalents at the end of the year |
$
|
|
$
|
|
$
|
|
||||||
|
|
||||||||||||
|
Supplemental
disclosure of cash flow information: |
||||||||||||
|
|
||||||||||||
|
Cash paid
during the year for taxes on income |
$
|
|
$
|
|
$
|
|
||||||
|
|
||||||||||||
|
Non-cash
investing activity |
||||||||||||
|
|
||||||||||||
|
Fair value
of awards attributable to pre-acquisition services |
|
|
|
|||||||||
|
Operating
lease liabilities arising from obtaining right of use assets |
$
|
|
$
|
|
$
|
|
||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 13
CHECK POINT SOFTWARE
TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 1:-
GENERAL
| a. |
Check Point Software Technologies Ltd., an Israeli
corporation (“Check Point Ltd.”), and subsidiaries (collectively, the “Company” or “Check Point”),
develop, market and support wide range of products and services for IT security, by offering a multilevel security architecture that defends
enterprises’ cloud, network and mobile device held information. |
|
The Company operates in |
| b. |
In each 2025, 2024 and 2023, approximately |
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES
The
consolidated financial statements are prepared in conformity with United States generally accepted accounting principles (“U.S.
GAAP”).
| a. |
Use of estimates:
|
|
The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s
management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they
are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. |
| b. |
Financial statements in United States
dollars: |
|
Most of the Company’s revenues
and costs are denominated in United States dollar (“dollar”). The Company’s management believes that the dollar is the
primary currency of the economic environment in which the Company and each of its subsidiaries operate. Thus, the dollar is the Company’s
functional and reporting currency. |
|
Accordingly, non-dollar denominated
transactions and balances have been re-measured into the functional currency in accordance with Accounting Standard Code (“ASC”)
No. 830, “Foreign Currency Matters”. |
F - 14
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
All transaction gains
and losses from the re-measured monetary balance sheet items are reflected in the consolidated statements of income as financial income
or expenses, as appropriate. |
| c. |
Principles of consolidation:
|
|
The consolidated financial
statements include the accounts of Check Point Ltd. and subsidiaries. Intercompany transactions and balances have been eliminated upon
consolidation. |
| d. |
Cash equivalents:
|
|
Cash equivalents are short-term
unrestricted highly liquid investments that are readily convertible to cash and with original maturities of three months or less as of
the investment date. |
| e. |
Short-term bank deposits:
|
|
Bank deposits with maturities
of more than three months at investment but less than one year are included in short-term bank deposits. Such deposits are stated at cost
which approximates fair values. |
| f. |
Trade Receivables:
|
|
The Company records trade
receivables when it has unconditional right to consideration. Trade receivables are recorded net of credit losses allowance for any potential
uncollectible amounts. |
|
The Company makes estimates
of expected credit and collectability trends for the allowance for credit losses based upon its assessment of various factors, including
historical collectability experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions,
reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
|
|
As of December 31,
2025 and 2024, the allowances for credit losses of trade receivable were insignificant.
|
|
The Company writes off
receivables when they are deemed uncollectible, having exhausted all collection efforts. Actual collection experience may not meet expectations
and may result in increased bad debt expense. Allowances for credit losses and total write offs expenses during 2025, 2024 and 2023 were
insignificant. |
F - 15
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| g. |
Investments in marketable
securities: |
|
The Company accounts for
investments in marketable securities in accordance with ASC No. 320, “Investments - Debt Securities”.
|
|
Management determines
the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.
The Company classifies all of its marketable debt securities as available-for-sale (“AFS”). Available-for-sale debt securities
are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss)
in shareholders’ equity. Realized gains and losses on sale of investments are included in financial income, net and are derived
using the specific identification method for determining the cost of securities sold.
|
|
The amortized cost of
debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest
on securities is included in financial income, net. |
|
At each reporting period,
the Company evaluates whether declines in fair value below amortized cost are due to expected credit losses, as well as the company’s
ability and intent to hold the investment until a forecasted recovery occurs in accordance with ASC 326, Financial Instrument- Credit
losses. Allowance for credit losses on AFS debt securities are recognized in the Company’s consolidated statements of income,
and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders’
equity. |
|
The credit losses recorded
for the years ended December 31, 2025, 2024 and 2023 were insignificant.
The
Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual
maturity date. Marketable debt securities with maturities of 12 months or less are classified as short-term, and marketable debt securities
with maturities greater than 12 months are classified as long-term |
| h. |
Property and
equipment, net: |
|
Property and
equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets at the following annual rates: |
|
|
%
|
|
Computers
and peripheral equipment |
|
|
Office
furniture and equipment |
|
|
Building
|
|
|
Leasehold
improvements |
|
F - 16
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| i. |
Leases:
The company’s
operating leases are comprised of office leases.
The Company
determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves
the use of an identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use
of the asset throughout the lease term, and (3) whether the Company has a right to direct the use of the asset. The Company elected
to not recognize a lease liability or right-of-use (“ROU”) asset for leases with a term of twelve months or less. The Company
also elected the practical expedient to not separate non-lease components for its leases.
ROU assets
represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum lease
payments arising from the lease. ROU assets are initially measured at amounts, which represents the discounted present value of the lease
payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured at lease commencement date
based on the discounted present value of lease payments over the lease term. The implicit rate within the operating leases is generally
not determinable, therefore the Company uses its Incremental Borrowing Rate (“IBR”) based on the information available at
commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest
rate on similar terms and payments and in economic environments where the leased asset is located. Certain leases include options to extend
or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when
it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain
that the Company will not exercise the option. The ROU assets are included in long-term other assets in the consolidated balance sheet,
while the short-term portion of lease liabilities are included in Accrued expenses and other liabilities, and the long-term portion of
lease liabilities are included in long-term other liabilities.
Below is
a summary of the Company's ROU assets and operating lease liabilities: |
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
Operating
lease ROU assets |
$
|
|
$
|
|
||||
|
Operating
lease liabilities, current |
|
|
||||||
|
Operating
lease liabilities, long-term |
|
|
||||||
|
|
||||||||
|
Total operating
lease liabilities |
$
|
|
$
|
|
||||
The
weighted-average remaining lease term and discount rate were as follows:
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
Weighted-average
remaining lease term |
|
|
||||||
|
Weighted-average
discount rate |
|
%
|
|
%
| ||||
F - 17
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Rent
expenses for the years ended December 31, 2025, 2024 and 2023, were $11.7 ,
$9.6
and $7.7
respectively.
The
Company has a lease that has not yet commenced, for its new campus site in Israel. The lease is expected to commence during fiscal 2026
with a lease term of approximately 83 years. As of December 31, 2025 the Company has prepaid lease payments in connection with
the land of Checkpoint Campus in the amount of $159.9 .
| j. |
Business combination:
|
The
Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase consideration to
the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the
fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
When
determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially
with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to future expected
cash flows from acquired technology and acquired trademarks and tradenames from a market participant perspective, useful lives and discount
rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain
and unpredictable and, as a result, actual results may differ from estimates. Acquisition-related expenses are recognized separately from
the business combination and are expensed as incurred (see also Note 3).
During
the measurement period, which may extend for up to one year from the acquisition date, the Company may record adjustments to the provisional
fair values of the assets acquired and liabilities assumed, with a corresponding adjustment to goodwill. Upon the earlier of the end of
the measurement period or the final determination of the fair values of the assets acquired and liabilities assumed, any subsequent adjustments
are recorded in earnings.
| k. |
Goodwill:
|
Goodwill
has been recorded as a result of acquisitions. Goodwill represents the excess of the purchase price in a business combination over the
fair value of identifiable net tangible and intangible assets acquired. Goodwill is not amortized, but rather is subject to an impairment
test.
ASC
No. 350, “Intangibles - Goodwill and other” (“ASC No. 350”) requires goodwill to be tested for impairment
at the reporting unit level at least annually or between annual tests in certain circumstances, and written down when impaired.
F - 18
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ASC
No. 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill
impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment
testing is required. If it does result in a more likely than not indication of impairment, the quantitative goodwill impairment test is
performed. Alternatively, ASC No. 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly
to performing the quantitative goodwill impairment test. If the carrying
value of a reporting unit exceeds its fair value, the Company recognizes an impairment of goodwill for the amount of this excess.
The
Company operates in
one operating segment, and this segment is the only reporting unit. The Company performs the quantitative goodwill impairment
test during the fourth quarter of each fiscal year, or more frequently if impairment indicators are present and compares the fair value
of the reporting unit with its carrying value.
During
the years 2025, 2024 and 2023, no
| l. |
Intangible assets, net:
|
Intangible
assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives, which range from 1
to 20
years. These intangible assets consist of core technology, customer relationship, trademarks and trade names which are amortized over
their estimated useful lives.
| m. |
Impairment of long-lived assets including
intangible assets subject to amortization and ROU assets: |
The
Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment”,
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to
be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets. During the years 2025, 2024 and 2023, no impairment losses
have been identified.
| n. |
Manufacturing partner and supplier
liabilities: |
The
Company purchases manufactured products from its original design manufacture (“ODM”). The Company generally does not
own the manufactured products. ODM’s provide services of design, manufacture, orders fulfillment and support with a full turn-key
solution to meet the Company’s detailed requirements. If the actual demand is significantly lower than forecast, the Company records
a liability for its commitment in excess of the actual demand. As of December 31, 2025 and 2024, the Company has not accrued any
significant liability in respect with this exposure.
F - 19
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| o. |
Research and development costs:
|
Research
and development costs are charged to the consolidated statements of income as incurred. ASC No. 985-20, “Software - Costs of
Software to Be Sold, Leased, or Marketed”, requires capitalization of certain software development costs subsequent to the establishment
of technological feasibility.
Based
on the Company’s product development process, technological feasibility is established upon completion of a working model. Costs
incurred by the Company between completion of the working models and the point at which the products are ready for general release, have
been insignificant. Therefore, research and development costs are expensed as incurred. As of December 31, 2025 the Company has not capitalized
any significant costs.
| p. |
Revenue recognition:
|
The
Company derives its revenues mainly from sales of products and licenses, security subscriptions and software updates and maintenance.
The Company’s products are generally integrated with software that is essential to the functionality of the product. The Company
sells its products primarily through channel partners including distributors, resellers, OEMs (Original Equipment Manufacturers), system
integrators and MSSPs (Managed Security Service Providers), all of whom are generally considered end-users. The Company’s standard
payments terms are net 30 days, however there are cases where the Company extend the payment terms for longer periods. Shipping fees charged
to customers are reported as part of revenues.
The
Company’s security subscriptions provide customers with access to its suite of security solutions and is sold as a service. Security
subscription revenue also includes software licenses that are not distinct from the related software updates. Revenue related to the combined
performance obligation is recognized over the period the updates are delivered as the nature of the performance obligation is to provide
security over the contract term.
The
Company’s software updates and maintenance provide customers with rights to unspecified software product upgrades released during
the term of the agreement and include maintenance services to end-user customers, through primarily telephone access to technical support
personnel as well as hardware support services. The Company may also provide professional services to its customers.
The
Company recognizes revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers”. As such, the Company
identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates
the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance
obligation.
The
Company’s arrangements typically contain various combinations of its products and licenses, security subscriptions, software updates
and maintenance, and professional services, which are distinct and are accounted for as separate performance obligations. The Company
allocates the transaction price to each performance obligation based on its relative standalone selling price. Standalone selling prices
are typically estimated based on observable transaction when the underlying goods or services are sold on a standalone basis.
F - 20
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Revenues
from sales of products and licenses are recognized when control of the promised goods is transferred to the customer, or upon electronic
transfer of the Certificate Key to the Customer. Revenues from security subscriptions and from software updates and maintenance are recognized
ratably over the term of the agreement since these services generally have a consistent continuous pattern of transfer to a customer during
the contract period. Revenues from professional services are recognized over time, based on customer usage, which the Company believes
best depicts the transfer of services to the customers. In instances where performance obligations do not have observable standalone sales,
the Company utilizes available information that may include market conditions, pricing strategies, and other observable inputs.
Deferred
revenues represent mainly the unrecognized revenue billed to customers for security subscriptions and for software updates and maintenance.
Such revenues are recognized ratably over the term of the related agreement. The amount of revenues recognized in the period that was
included in the opening deferred revenues balance was $1,471.3 and
$1,413.8 for
the years ended December 31, 2025 and December 31, 2024, respectively.
Revenues
expected to be recognized from remaining performance obligations were $2,728.3
and $2,516.1
as of December 31, 2025 and December 31, 2024, respectively. Of the balance as of December 31, 2025 the Company expects
to recognize approximately $1,670.1
over the next 12 months and the remainder will be recognized over a period of two to five years thereafter.
The
Company records a provision for estimated sales returns, rebates, stock rotations and other rights provided to customers on product and
services based on historical sales returns, analysis of credit memo data, rebate plans, stock rotation arrangements and other known factors.
This provision is accounted for as variable consideration that is deducted from revenue in the period in which the revenue is recognized.
Such provision amounted to $10.8
and $13.6
as of December 31, 2025 and 2024, respectively, and is included in accrued expenses and other liabilities in the consolidated balance
sheets.
Sales
commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a
customer. These costs are deferred and then amortized over a period of benefit which is typically over the term of the customer contracts
as initial commission rates are commensurate with the renewal commission rates. Amortization expense is included in sales and marketing
expenses in the consolidated statements of income. If the amortization period of those costs is one year or less, the costs are expensed
as incurred. As of December 31, 2025 and 2024, the amount of deferred commission was $28.9
and $41.5 ,
respectively, and is included in other short term and other long term assets on the balance sheets. During the years ended on December 31,
2025, 2024 and 2023 the Company recorded amortization expenses in connection with deferred commissions in the amount of $17.7 ,
$15.3
and $10.6 ,
respectively.
F - 21
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In
instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts generally
do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with
simplified and predictable ways of purchasing its products and services, not to receive financing from its customers or to provide customers
with financing. The Company has elected to apply the practical expedient such that it does not evaluate payment terms of one year or less
for the existence of a significant financing component. Revenue is recognized net of any taxes collected from customers which are subsequently
remitted to governmental entities.
For
information regarding disaggregated revenues, please refer to Note 16 below.
| q. |
Cost of revenues:
|
Cost
of products and licenses is comprised of cost of software and hardware production, manuals, packaging and shipping.
Cost
of security subscriptions is comprised of costs paid to third parties, hosting and infrastructure costs and costs of customer support
related to these services.
Cost
of software updates and maintenance is mainly comprised of cost of post-sale customer support and professional services.
Amortization
of technology is comprised of amortization of core technology assets which are used in the Company’s operations, and is presented
separately as part of cost of revenues.
| r. |
Severance pay:
|
Effective
January 1, 2007, the Company’s agreements with employees in Israel, are under Section 14 of the Severance Pay Law, 1963.
The Company’s contributions for severance pay have extinguished its severance obligation. Upon contribution of the full amount based
on the employee’s monthly salary for each year of service, no additional obligation exists regarding the matter of severance pay
and no additional payments is made by the Company to the employee. Further, the related obligation and amounts deposited on behalf of
the employee for such obligation are not stated on the balance sheets, as the Company is legally released from the obligation to employees
once the required deposit amounts have been paid.
| s. |
Employee benefit plan:
|
The
Company has a 401(K) defined contribution plan covering certain employees in the U.S. The Company matches 50 %
of employee contributions to the plan up to a limit of 6 %
of their eligible compensation. The Company’s matching contribution to the plan were insignificant for the years ended December 31,
2025, 2024 and 2023.
F - 22
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| t. |
Income taxes:
|
The
Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes” (“ASC No. 740”). ASC
No. 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined for temporary
differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce
deferred tax assets to amounts more likely than not to be realized. The Company accrues interest and indexation related to unrecognized
tax benefits on its taxes on income.
ASC
No. 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate
the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is
more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution
of any related appeals or litigation processes.
The
second step is to measure the tax benefit as the largest amount that is more than 50 %
(cumulative basis) likely to be realized upon ultimate settlement. The Company classifies interest related to unrecognized tax benefits
in taxes on income.
| u. |
Advertising costs:
|
Advertising
costs are expensed as incurred. Advertising expenses for the years ended December 31, 2025, 2024 and 2023, were $11.9 ,
$12.5
and $7.6
respectively.
| v. |
Concentrations of credit
risk: |
Financial
instruments that could potentially expose the Company to concentrations of credit risk, consist primarily of cash and cash equivalents,
short-term bank deposits, marketable securities, trade receivables and foreign currency derivative contracts.
The
majority of the Company’s cash and cash equivalents and short-term bank deposits are deposited in major banks in the U.S., Israel
and Europe. Deposits in the U.S. may be in excess of federal insured limits and are not insured in other jurisdictions. Generally, these
investments may be redeemed upon demand or at maturity, and the Company believes that the financial institutions that hold the Company’s
cash deposits are financially sound and, accordingly, bear minimal risk. Marketable securities are held mainly by Check Point Ltd., the
Company’s Canadian subsidiary and the U.S. subsidiary, and are invested in securities denominated mainly in US dollar.
The
Company’s marketable securities consist mainly of investments in government, corporate and government sponsored enterprises debentures.
The Company’s investment policy, approved by the Board of Directors, limits the amount that the Company may invest in any one type
of investment, or issuer, thereby reducing credit risk concentrations.
The
Company’s trade receivables are geographically dispersed and the majority is derived from sales to channel partners mainly in the
United States, Europe and Asia. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit
evaluation and account monitoring procedures.
F - 23
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The
Company’s derivatives expose it to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement.
The Company seeks to mitigate such risk by entering into such derivatives with financial institutions with Investment Grade credit rating.
| w. |
Derivatives and hedging:
|
The
Company accounts for derivatives and hedging based on ASC No. 815, “Derivatives and Hedging” (“ASC No. 815”).
ASC No. 815 requires the Company to recognize all derivatives on the balance sheets at fair value. The accounting for changes in
the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a
hedging relationship, as well as the type of hedging relationship. For those derivative instruments that are designated and qualify as
hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash
flow hedge, or a hedge of a net investment in a foreign operation. If the derivatives meet the definition of a hedge and are designated
as such, depending on the nature of the hedge, changes in the fair value of such derivatives will either be offset against the change
in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in accumulated other comprehensive
income until the hedged item is recognized in earnings.
The
Company entered into forward contracts to hedge the fair value of assets and liabilities denominated in several foreign currencies. As
of December 31, 2025 and 2024, the Company had outstanding forward contracts that did not meet the requirement for hedge accounting,
in the notional amount of $196.0
and $253.6 ,
respectively. The Company measured the fair value of the contracts in accordance with ASC No. 820, “Fair Value Measurement”
(“ASC No. 820”) (classified as level 2 of the fair value hierarchy). The net gain (losses) resulting from these forward
contracts recognized in financial income, net during 2025, 2024 and 2023 were $30.3 ,
$(5.6 )
and $(6.2 ),
respectively. The change in fair value of the Company’s outstanding forward contracts vs. the notional amounts at December 31, 2025
and 2024 was insignificant.
The
Company entered into forward contracts to hedge against the risk of overall changes in future cash flow from payments of payroll and related
expenses denominated in New Israeli Shekel, in Euro, and in British Pound. As of December 31, 2025 and 2024, the Company had outstanding
forward contracts for payroll and related expenses in the notional amount of $328.7
and $359.4 ,
respectively. These contracts were for a period of up to twelve months.
The
Company measured the fair value of the contracts in accordance with ASC No. 820 (classified as level 2 of the fair value hierarchy).
These contracts met the requirement for cash flow hedge accounting and, as such, gains (losses) on the contracts are recognized initially
as component of Accumulated Other Comprehensive Income in the balance sheets and reclassified to the consolidated statements of
income in the period the related hedged items affect earnings.
F - 24
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
During
2025, 2024 and 2023 gains (losses) were reclassified when the related expenses were incurred and recognized in the operating expenses
as follow:
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
| ||||
|
|
|
(
|
)
|
(
|
)
| |||||||
|
|
|
(
|
)
|
(
|
)
| |||||||
|
|
|
(
|
)
|
(
|
)
| |||||||
|
|
||||||||||||
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
| ||||
| x. |
Basic and diluted earnings
per share: |
Basic
earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted earnings
per share are computed based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential ordinary
shares outstanding during the year, in accordance with ASC No. 260, “Earnings Per Share”.
The
total weighted average number of shares related to the outstanding options, RSUs, PSUs and the Note to purchase the Company’s Ordinary
shares, excluded from the calculations of diluted earnings per share, since it would have an anti-dilutive effect, was 1,057,165 ,
90,092
and 1,319,235
for 2025, 2024 and 2023, respectively.
The number above for 2025 represents shares underlying the Convertible Notes that were excluded from the computation of diluted earnings per share, as their effect was anti-dilutive for the period. As the principal amount of the Convertible Notes are required to be cash settled, only the amount by which the conversion value exceeds the aggregate principal amount of the Convertible Notes is considered in the diluted earnings per share computation.
| y. |
Accounting
for stock-based compensation: |
The
Company accounts for stock-based compensation in accordance with ASC No. 718, “Compensation-Stock Compensation” (“ASC
No. 718”). ASC No. 718 requires companies to estimate the fair value of equity-based payment awards on the grant date
using an option-pricing model.
The
Company recognizes compensation expenses for the value of awards granted, based on the straight line method for service based graded vesting
awards and based on the accelerated method for performance-based graded vesting awards. Compensation expense is recognized over the
requisite service period of the awards. The Company recognizes forfeitures of awards as they occur.
The
Company selected the Black-Scholes-Merton option pricing model as the most appropriate model for determining the fair value for its stock
options awards and Employee Stock Purchase Plan, whereas the fair value of restricted stock units is based on the closing market value
of the underlying shares at the date of grant. The option-pricing model requires a number of assumptions, the most significant of which
are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical
stock price movements over the most recent periods ending on the grant date, equal to the expected term of the options.
F - 25
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The
Company determines the grant‑date fair value of its RSUs and PSUs based on the closing market price of its ordinary shares on the
date of grant.
The
expected term of options granted is based upon historical experience and represents the period of time between when the options are granted
and when they are expected to be exercised. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent
term to the expected term of the options. The Company has historically not paid dividends and has no plans to pay dividends in the foreseeable
future.
The
fair value of options granted and Employee Stock Purchase Plan in 2025, 2024 and 2023 is estimated at the date of grant using the following
weighted average assumptions:
|
|
Year
ended December 31, |
|||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Employee
Stock Options |
||||||||||||
|
Expected
volatility |
|
%
|
|
%
|
|
%
| ||||||
|
Risk-free
interest rate |
|
%
|
|
%
|
|
%
| ||||||
|
Dividend
yield |
|
%
|
|
%
|
|
%
| ||||||
|
Expected
term (years) |
|
|
|
|||||||||
|
|
||||||||||||
|
Employee
Stock Purchase Plan |
||||||||||||
|
|
||||||||||||
|
Expected
volatility |
|
%
|
|
%
|
|
%
| ||||||
|
Risk-free
interest rate |
|
%
|
|
%
|
|
%
| ||||||
|
Dividend
yield |
|
%
|
|
%
|
|
%
| ||||||
|
Expected
term (years) |
|
|
|
|||||||||
F - 26
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| z. |
Fair value of financial instruments:
|
The
Company measures its investments in money market funds (classified as cash equivalents), short-term bank deposits, marketable securities
and its foreign currency derivative contracts at fair value. Fair value is an exit price, representing the amount that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy
is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
| Level 1 - |
Valuations based on quoted prices
in active markets for identical assets that the Company has the ability to access. Since valuations are based on quoted prices that are
readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
|
| Level 2 - |
Valuations based on one or more quoted
prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
| Level 3 - |
Valuations based on inputs that are
unobservable and significant to the overall fair value measurement. |
The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.
The
carrying value of trade receivables, prepaid expenses and other assets, trade payables, employees and payroll accruals, and accrued expenses
and other liabilities approximate fair value due to the short-term maturities of these instruments.
| aa. |
Comprehensive income:
|
The
Company accounts for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”. Comprehensive income
generally represents all changes in shareholders’ equity during the period except those resulting from investments by, or distributions
to, shareholders. The Company determined that its items of other comprehensive income relate to gains and losses on hedging derivative
instruments and unrealized gains and losses on available-for-sale debt securities.
| ab. |
Treasury shares:
|
The
Company repurchases its ordinary shares from time to time on the open market and holds such shares as treasury shares. The Company presents
the cost to repurchase treasury stock as a separate component of shareholders’ equity.
The
Company reissues treasury shares under the stock purchase plan, upon exercise of options and upon vesting of restricted stock units. Reissuance
of treasury shares is accounted for in accordance with ASC No. 505-30 whereby gains are credited to additional paid-in capital and
losses are charged to additional paid-in capital to the extent that previous net gains are included therein; otherwise to retained earnings.
F - 27
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| ac. |
Legal contingencies:
|
The
Company is currently involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its
potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably
estimated, the Company accrues a liability for the estimated loss.
| ad. |
Convertible Senior Notes
and Capped Call Transactions: |
The
Convertible Senior Notes (also referred to as “Notes” or “Convertible Notes”) are accounted for in accordance
with ASC Subtopic 470, "Debt" and ASC 815 "Derivatives and Hedging". The Company records the Notes at amortized cost as a single unit
of account on the consolidated balance sheet, since they were not issued at a substantial premium and do not contain bifurcated embedded
derivatives. The carrying value of the liability is represented by the face amount of the Notes, less debt issuance costs, adjusted for
any amortization of issuance costs. Issuance costs are being amortized as interest expense over the term of the Convertible Notes, using
the effective interest rate method.
Capped
call transactions (“Capped Call Transactions” or “Capped Calls”) entered into in connection with the offering
of the Notes are separate transactions and are not part of the terms of the Notes. The Capped Calls are considered indexed to the Company’s
own stock and are equity-classified. Accordingly, they are recorded within equity. The cost incurred in connection with the Capped Calls
was recorded as a reduction to additional paid-in capital.
| ae. |
Recently adopted Accounting
Pronouncements: |
In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public
entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income
taxes paid disaggregated by jurisdiction. The Company adopted ASU 2023-09 for the year ended December 31, 2025, and applied the new disclosure
requirements prospectively to the current annual period. Prior period disclosures have not been adjusted to reflect the new disclosure
requirements. See Note 12 in the accompanying notes to the consolidated financial statements for further detail.
| af. |
Recently Issued
Accounting Pronouncements, not yet adopted: |
In
November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic
220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense
categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning
after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently
evaluating the impact of adopting ASU 2024-03.
F - 28
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In
July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable
and Contract Assets, which provides a practical expedient when estimating expected credit losses for current accounts receivable and current
contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The practical expedient
assumes that current conditions as of the balance sheet date do not change for the remaining life of the assets. The guidance is effective
for the Company for the first quarter beginning January 1, 2026, with early adoption permitted. The Company is currently evaluating the
impact of adopting ASU 2025-05.
In
September 2025, the FASB issued ASU 2025-06, Intangible - Goodwill and Other Internal-Use Software (Subtopic 350-40), Targeted Improvements
to the Accounting for Internal-Use Software, which modernizes the accounting guidance for costs to develop software for internal use.
It removes the previous development stage model and introduces a more judgment-based approach. The guidance is effective for the Company
for the first quarter beginning January 1, 2028, with early adoption permitted. The Company is currently evaluating the impact of adopting
ASU 2025-06.
In
November 2025, the FASB issued ASU 2025-09 to amend the guidance in Derivatives and Hedging (Topic 815). The update provides targeted
improvements intended to enhance the application of hedge accounting, including expanded eligibility of forecasted transactions, additional
flexibility in measuring hedge effectiveness, and clarifications related to hedging non-financial items. The guidance is effective for
fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating
the impact on its financial statement disclosures.
NOTE 3:-
ACQUISITIONS
The
Company accounted for the following transaction as a business combination and allocated the purchase consideration to assets acquired
and liabilities assumed based on their estimated fair values.
In
addition, the transactions included additional consideration related to compensation for post combination services which were recorded
as prepaid expenses and other long term assets and will be recognized over the requisite service period.
| a. |
On |
F - 29
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 3:-
ACQUISITIONS (Cont.)
| b. |
On
|
The
Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the estimates
of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management.
Goodwill
arising from the Perimeter 81 acquisition was primarily assigned to the synergies between Perimeter 81 solution with Check Point Infinity´s
architecture which allows Check Point to deliver a complete Secure Access Service Edge (SASE) offering across internet access, Zero-Trust
private access, SaaS security and SD-WAN. This enables Check Point to enter new fields or markets. Goodwill is not expected to be deductible
for income tax purposes.
|
Weighted
Average Useful Life |
Amount
|
|||||||
|
Goodwill
|
$
|
|
||||||
|
Core technology
|
|
|
||||||
|
Customer relationship
|
|
|
||||||
|
Net assets acquired
|
|
|||||||
|
Total
|
$
|
|
||||||
The
fair value of Core technology was determined using the income approach, specifically the multi-period excess earnings method.
Customer
relationships represent the fair value of existing contractual relationships and customer loyalty determined based on existing relationships
using the income approach, specifically the with and without method.
The
fair value of the identified intangible assets subject to amortization are amortized over the assets’ estimated useful lives based
on the pattern in which the economic benefits are expected to be received to cost of revenues and operating expenses.
In
2023, Perimeter 81 acquisition-related costs were immaterial and recorded on the Company’s consolidated statements of income. Acquisition-related
costs are primarily comprised of direct transaction costs.
Unaudited
Pro forma results of operations related to this acquisition have not been presented because they are not material to the Company’s
consolidated statements of income.
F - 30
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 3:-
ACQUISITIONS (Cont.)
| c. |
On |
| d. |
On
|
The
Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the estimates
of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management.
Goodwill
arising from the Cyberint acquisition is primarily attributed to synergies. Goodwill is not expected to be deductible for income tax purposes.
|
Weighted
Average Useful Life |
Amount
|
|||||||
|
Goodwill
|
$
|
|
||||||
|
Core technology
|
|
|
||||||
|
Customer relationship
|
|
|
||||||
|
Net assumed liabilities
|
(
|
)
| ||||||
|
Total
|
$
|
|
||||||
The
fair value of Core technology was determined using the income approach, specifically the multi-period excess earnings method.
Customer
relationships represent the fair value of existing contractual relationships and customer loyalty determined based on existing relationships
using the income approach, specifically the with and without method.
The
fair value of the identified intangible assets subject to amortization are amortized over the assets’ estimated useful lives based
on the pattern in which the economic benefits are expected to be received to cost of revenues and operating expenses.
In
2024, Cyberint acquisition-related costs were immaterial and recorded on the Company’s consolidated statements of income. Acquisition-related
costs are primarily comprised of direct transaction costs.
Unaudited
Pro forma results of operations related to this acquisition have not been presented because they are not material to the Company’s
consolidated statements of income.
F - 31
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 3:-
ACQUISITIONS (Cont.)
| e. |
On |
The
Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary
estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions
made by management. The fair values are subject to adjustment for up to one year after the close of the transaction as additional information
is obtained. Any adjustments to the preliminary purchase price allocation identified during the measurement period are recognized in the
period in which the adjustments are determined.
Goodwill
arising from the Veriti acquisition is primarily attributed to synergies. Goodwill is not expected to be deductible for income tax purposes.
|
Weighted
Average Useful Life |
Amount
|
|||||||
|
Goodwill
|
$
|
|
||||||
|
Core technology
|
|
|
||||||
|
Customer relationship
|
|
|
||||||
|
Net assumed assets
|
|
|||||||
|
Total
|
$
|
|
||||||
The
fair value of Core technology was determined using the income approach, specifically the multi-period excess earnings method.
Customer
relationships represent the fair value of existing contractual relationships and customer loyalty determined based on existing relationships
using the income approach, specifically the with and without method.
The
fair value of the identified intangible assets subject to amortization are amortized over the assets’ estimated useful lives based
on the pattern in which the economic benefits are expected to be received to cost of revenues and operating expenses.
F - 32
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 3:-
ACQUISITIONS (Cont.)
From
the Veriti Acquisition Date to December 31, 2025, the consolidated statements of income include immaterial revenue and operating results
attributable to Veriti.
In
2025, Veriti acquisition-related costs were immaterial and recorded on the Company’s consolidated statements of income. Acquisition-related
costs are primarily comprised of direct transaction costs.
Unaudited
Pro forma results of operations related to this acquisition have not been presented because they are not material to the Company’s
consolidated statements of income.
| f. |
On
|
The
Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary
estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions
made by management. The fair values are subject to adjustment for up to one year after the close of the transaction as additional information
is obtained. Any adjustments to the preliminary purchase price allocation identified during the measurement period are recognized in the
period in which the adjustments are determined.
Goodwill
arising from the Lakera acquisition is primarily attributed to synergies. Goodwill is not expected to be deductible for income tax purposes.
|
Weighted
Average Useful Life |
Amount
|
|||||||
|
Goodwill
|
$
|
|
||||||
|
Core technology
|
|
|
||||||
|
Customer relationship
|
|
|
||||||
|
Trademark
|
|
|
||||||
|
Net assumed assets
|
|
|||||||
|
Total
|
$
|
|
||||||
F - 33
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 3:-
ACQUISITIONS (Cont.)
The
fair value of Core technology was determined using the income approach, specifically the multi-period excess earnings method.
Customer
relationships represent the fair value of existing contractual relationships and customer loyalty determined based on existing relationships
using the income approach, specifically the with and without method.
Trademarks
represent the fair value of royalties that would have been charged by a market participant to license such trademark using the income
approach, specifically the relief-from-royalty method.
The
fair value of the identified intangible assets subject to amortization are amortized over the assets’ estimated useful lives based
on the pattern in which the economic benefits are expected to be received to cost of revenues and operating expenses.
From
the Lakera Acquisition Date to December 31, 2025, the consolidated statements of income include immaterial revenue and operating results
attributable to Lakera.
In
2025, Lakera acquisition-related costs were immaterial and recorded on the Company’s consolidated statements of income. Acquisition-related
costs are primarily comprised of direct transaction costs.
Unaudited
Pro forma results of operations related to this acquisition have not been presented because they are not material to the Company’s
consolidated statements of income.
NOTE 4:
CASH AND CASH EQUIVALENTS, SHORT-TERM BANK DEPOSITS AND MARKETABLE SECURITIES
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
Cash and cash equivalents:
|
||||||||
|
Cash
|
$
|
|
$
|
|
||||
|
Money
market funds |
|
|
||||||
|
Short
term deposits |
|
|
||||||
|
|
||||||||
|
Total Cash and cash equivalents
|
|
|
||||||
|
|
||||||||
|
Short-term bank deposits:
|
|
|
||||||
|
Marketable securities:
|
||||||||
|
Debt
securities issued by the U.S. Treasury and other U.S. government agencies |
|
|
||||||
|
Debt
securities issued by other governments |
|
|
||||||
|
Corporate
debt securities |
|
|
||||||
|
|
||||||||
|
Total Marketable securities
|
|
|
||||||
|
Total
Cash and cash equivalents, short-term bank deposits and marketable securities |
$
|
|
$
|
|
| |||
F - 34
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 4:
CASH AND CASH EQUIVALENTS, SHORT-TERM BANK DEPOSITS AND MARKETABLE SECURITIES (Cont.)
The
following table classifies the Company’s marketable securities by contractual maturities:
|
|
December
31, 2025 |
|||||||||||||||
|
Amortized
Cost |
Gross
unrealized
gain
|
Gross
unrealized loss |
Fair
Value |
|||||||||||||
|
Contractual maturity
year: |
||||||||||||||||
|
Within one year
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
After one year through
five years |
|
|
(
|
)
|
|
|||||||||||
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
From
the total of $2.1
and $20.3
unrealized losses as of December 31, 2025 and 2024, $1.1
and $9.7
were in continuous unrealized loss for more than 12 months, respectively. The unrealized loss balance declined as the short term
yield curve shifted lower in 2025, which positively impacted the fair value of securities in the Company’s portfolio.
As
of December 31, 2025 and 2024, interest receivable amounted to $19.6
and $17.7 ,
respectively, and is included within prepaid expenses and other assets in the balance sheets.
|
|
December
31, 2024 |
|||||||||||||||
|
Amortized
Cost |
Gross
unrealized
gain
|
Gross
unrealized loss |
Fair
Value |
|||||||||||||
|
Contractual maturity
year: |
||||||||||||||||
|
Within one year
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
After one year through
five years |
|
|
(
|
)
|
|
|||||||||||
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
F - 35
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 5:-
FAIR VALUE MEASUREMENTS
In
accordance with ASC No. 820, the Company measures its money market funds, short-term bank deposits, marketable securities and foreign
currency derivative contracts at fair value. Money market funds and short term bank deposits are classified within Level 1. Marketable
securities are classified within Level 2 or Level 3. This is because these assets are mostly valued using quoted market prices or
alternative pricing sources and models utilizing market observable inputs, or based on unobservable inputs. Foreign currency derivative
contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar
instruments.
The
Level 3 Corporate debt security was structured and issued by a global financial institution and valued based on issuer risk, sovereign
credit risk and interest rates. The Financial income related to the instrument during 2025 and 2024 was insignificant.
The
Company’s financial assets measured at fair value on a recurring basis, excluding accrued interest components, consisted of the
following types of instruments as of the following dates:
|
December 31, | ||||||||||||||||||||||||||||||||
|
|
2025
|
2024
|
||||||||||||||||||||||||||||||
|
|
Fair
value measurements using input type |
Fair
value measurements using input type |
||||||||||||||||||||||||||||||
|
|
Level
1 |
Level
2 |
Level
3 |
Total
|
Level
1 |
Level
2 |
Level
3 |
Total
|
||||||||||||||||||||||||
|
Cash
|
$
|
|
$
|
-
|
$
|
-
|
$
|
|
$
|
|
$
|
- |
$
|
- |
$
|
|
||||||||||||||||
|
Cash
equivalents |
||||||||||||||||||||||||||||||||
|
Money
market funds |
|
-
|
-
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Short
term deposits |
|
-
|
-
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Short-term
bank deposits |
|
-
|
-
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Marketable
securities: |
||||||||||||||||||||||||||||||||
|
Debt
securities issued by the U.S. Treasury and other U.S. government agencies |
-
|
|
-
|
|
- |
|
- |
|
||||||||||||||||||||||||
|
Debt
securities issued by other governments |
-
|
|
-
|
|
- |
|
- |
|
||||||||||||||||||||||||
|
Corporate
debt securities |
-
|
|
|
|
- |
|
|
|
||||||||||||||||||||||||
|
Foreign
currency derivative
contracts
|
-
|
|
-
|
|
- |
|
- |
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total financial assets
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
F - 36
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 5:-
FAIR VALUE MEASUREMENTS (Cont.)
As
of December 31, 2025, the estimated fair value of the Convertible Notes was $2,007.4 .
The fair value of the Convertible Notes is considered to be Level 2 within the fair value hierarchy and was determined based on quoted
prices of the Convertible Notes in an over-the-counter market.
NOTE 6:-
PROPERTY AND EQUIPMENT, NET
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
Cost:
|
||||||||
|
Computers and peripheral
equipment |
$
|
|
$
|
|
||||
|
Office furniture and
equipment |
|
|
||||||
|
Building
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
|
||||||||
|
|
|
|
||||||
|
Accumulated depreciation
|
|
|
||||||
|
|
||||||||
|
Property and equipment,
net |
$
|
|
$
|
|
||||
| NOTE 7:- |
GOODWILL AND INTANGIBLE
ASSETS, NET |
| a. |
Goodwill: |
|
|
2025
|
2024
|
||||||
|
Balance as of January 1
|
$
|
|
$
|
|
||||
|
Acquisitions
|
|
|
||||||
|
|
||||||||
|
Balance as of December 31
|
$
|
|
$
|
|
||||
F - 37
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 7:- |
GOODWILL AND INTANGIBLE
ASSETS, NET (Cont.) |
| b. |
Intangible assets, net: |
|
|
Useful
|
December
31, |
||||||||||
|
|
Life
|
2025
|
2024
|
|||||||||
|
Original amount:
|
||||||||||||
|
Core
technology |
|
$
|
|
$
|
|
|||||||
|
Trademarks
and trade names |
|
|
|
|||||||||
|
Customer
relationship |
|
|
|
|||||||||
|
|
||||||||||||
|
|
|
|
||||||||||
|
|
||||||||||||
|
Accumulated amortization:
|
||||||||||||
|
Core
technology |
|
|
||||||||||
|
Trademarks
and trade names |
|
|
||||||||||
|
Customer
relationship |
|
|
||||||||||
|
|
||||||||||||
|
|
|
|
||||||||||
|
|
||||||||||||
|
Intangible assets, net:
|
||||||||||||
|
Core
technology |
|
|
||||||||||
|
Trademarks
and trade names |
|
|
||||||||||
|
Customer
relationship |
|
|
||||||||||
|
|
||||||||||||
|
|
$
|
|
$
|
|
||||||||
Intangible
assets which were fully amortized as of the prior year, are disposed from the original amount and the accumulated amortization balances.
The
estimated future amortization expense of Intangible assets as of December 31, 2025 is as follows:
|
2026
|
$
|
|
||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
2030
|
|
|||
|
Thereafter
|
|
|||
|
|
||||
|
|
$
|
|
F - 38
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 8:- |
DEFERRED REVENUES
|
Deferred
revenues consisted of the following:
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
Security subscriptions
|
$
|
|
$
|
|
||||
|
Software updates and
maintenance |
|
|
||||||
|
Other
|
|
|
||||||
|
|
||||||||
|
|
$
|
|
$
|
|
||||
The
majority of the deferred revenues are recognized within one year or less and presented as current deferred revenues in the balance sheets.
All of the remaining deferred revenues are presented as long term deferred revenues and are recognized for a period greater than one year
and up to five years.
| NOTE 9:- |
ACCRUED EXPENSES AND
OTHER LIABILITIES |
The
components of accrued expenses and other liabilities are as follows:
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
Accrued products and
licenses costs |
$
|
|
$
|
|
||||
|
Marketing expenses payable
|
|
|
||||||
|
Income tax payable
|
|
|
||||||
|
Legal accrual
|
|
|
||||||
|
Other accrued expenses
|
|
|
||||||
|
|
||||||||
|
|
$
|
|
$
|
|
||||
F - 39
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 10:- |
CONVERTIBLE SENIOR NOTES,
NET |
Convertible
note
In
December 2025, the Company issued $2,000
aggregate principal amount, 0 %
coupon rate, of Convertible Senior
Notes due 2030 (the “Convertible Notes”). The Convertible Notes mature on December
15, 2030 unless earlier repurchased, redeemed or converted. Upon conversion, the Company will settle the principal amount
of converted notes using cash and the conversion premium will be settled using cash, ordinary shares or a combination of each, at the
Company's election.
If
the last reported sale price of our ordinary shares on the trading day immediately preceding the business day immediately preceding December
15, 2028 is less than 110 %
of the conversion price, holders of the notes have the right to require us to repurchase for cash all or any portion of their notes on
December 15, 2028 at a repurchase price equal to 100 %
of the principal amount of the notes to be repurchased, plus accrued and unpaid special interest to, but excluding, the repurchase date.
In addition, if we undergo a fundamental change, holders may require us to repurchase for cash all or any portion of their notes at a
fundamental change repurchase price equal to 100 %
of the principal amount of the notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental
change repurchase date.
Conversion
terms:
Prior
to the close of business on the business day immediately preceding September 16, 2030, a holder may convert its Convertible Notes only
under the following circumstances:
a.
During any calendar quarter commencing after the calendar quarter ending on March 31, 2026 (and only during such calendar quarter), if
the last reported sale price of the Company’s ordinary shares for at least 20 trading days (whether or not consecutive) during a
period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is
greater than or equal to 130 %
of the conversion price on each applicable trading day.
b.
During the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading
price per $1,000
principal amount of Convertible Notes for each trading day of the measurement period was less than 98 %
of the product of the last reported sale price of the ordinary shares and the conversion rate on each such trading day.
F - 40
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 10:- |
CONVERTIBLE
SENIOR NOTES, NET (Cont.) |
c.
If the Company calls the Convertible Notes for redemption in certain circumstances, at any time prior to the close of business on the
second scheduled trading day immediately preceding the redemption date; or
d.
Upon the occurrence of specified corporate events.
On
or after September 16, 2030, until the close of business on the second scheduled trading day immediately preceding the maturity date,
a holder may convert its Convertible Notes at any time, regardless of the foregoing circumstances. During the year ended December 31,
2025, the conditions allowing holders of the Convertible Notes to convert were not met. The Convertible Notes were included within
long-term liabilities in the consolidated balance sheet as of December 31, 2025.
The
Company may redeem for cash (1) all of the Convertible Notes at any time on or prior to the 30th scheduled trading day immediately preceding
the maturity date if certain tax-related events occur and (2) all or any portion (subject to certain limitations) of the Convertible Notes,
at any time, and from time to time, on or after December 20, 2028, and on or before the 30th scheduled trading day immediately before
the maturity date, at its option at any time and from time to time, if the last reported sale price per share of Check Point’s ordinary
shares has been at least 130 %
of the conversion price for a specified period of time and certain other conditions are satisfied. The redemption price will be equal
to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding,
the redemption date. Upon the occurrence of a fundamental change (as defined in the Indenture), holders may require the Company to repurchase
for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 %
of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding,
the fundamental change repurchase date.
The
carrying amount of the liability is represented by the face amount of the notes, less total issuance costs, plus any amortization of issuance
costs. The total issuance costs upon issuance of the notes were $28.25
and are amortized to interest expense using the effective interest rate method over the contractual term of the notes. Interest expense
is recognized at an annual effective interest rate of 0.28 %
over the contractual term of the notes.
The
net carrying amount of the Convertible Notes were as follows:
|
|
2025
|
|||
|
Principal original amount
|
$
|
|
||
|
Unamortized debt issuance
costs |
(
|
)
| ||
|
|
||||
|
Net carrying amount
|
$
|
|
||
The
Company recognized interest expense on the Convertible Notes as follows:
|
|
2025
|
|||
|
|
||||
|
Amortization of debt
issuance costs |
$
|
|
||
F - 41
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 10:- |
CONVERTIBLE
SENIOR NOTES, NET (Cont.) |
Capped
Call Transactions
In
connection with the pricing of the Convertible Notes, the Company entered into capped call transactions (“Capped Call Transactions”)
with certain of the purchasers of the Convertible Notes. The Capped Call Transactions are purchased call options that give the Company
the option to purchase the Company's ordinary shares, subject to anti-dilution adjustments substantially identical to those in the
Convertible Notes. The Capped Call Transactions will expire in 2030, if not exercised earlier. The Capped Call Transactions are intended
to offset potential dilution to the Company’s ordinary shares and/or offset the potential cash payments that the Company could be
required to make in excess of the principal amount upon any conversion of the Convertible Notes under certain circumstances described
in the Capped Call Transactions. The Capped Call Transactions are separate transactions and are not part of the terms of the Convertible
Notes. As the Capped Call Transactions are considered indexed to the Company's shares and are considered equity classified, they are recorded
in shareholders’ equity on the consolidated balance sheets. The Capped Call Transactions each have an initial strike price of $243.65
and an initial cap price of approximately $334.43
per share, which represents a premium of 75 %
over the last reported sale price of the Company’s ordinary shares of $191.10
per share on December 3, 2025, and is subject to certain adjustments under the terms of the Capped Call Transactions. The Company paid
an aggregate amount of $192
for Capped Call Transactions. The amount paid for the Capped Call Transactions was recorded as a reduction to additional paid-in capital
in the consolidated balance sheets.
| NOTE 11:- |
COMMITMENTS AND CONTINGENT
LIABILITIES |
Litigations:
| a. |
The Company is the defendant in various lawsuits,
including employment-related litigation claims, construction claims and other legal proceedings in the normal course of its business.
Litigation and governmental proceedings can be expensive, lengthy and disruptive to normal business operations, and can require extensive
management attention and resources, regardless of their merit. While the Company intends to defend the aforementioned matters vigorously,
it believes that a loss in excess of its accrued liability with respect to these claims is not probable. |
| b. |
On July 15, 2025, the Company and the Israeli
Tax Authorities entered into a settlement agreement under which the Company agreed to pay total additional taxes of NIS |
F - 42
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES ON INCOME
| a. |
Israeli taxation: |
1.
Corporate tax:
Pursuant
to Amendment 73 to the Investment Law adopted in 2017, a Company located in the Center of Israel that meets the conditions for “Preferred
Technological Enterprises”, is subject to tax rate of 12 %.
The Company believes it meets those conditions.
“Special
Preferred Technological Enterprise” (with consolidated annual revenue of its group is at least NIS 10
billion), as defined by the Investment Law, is entitled to a reduced tax rate of 6 %
on its preferred technological income, regardless of the place the company’s technology preferred enterprise is located.
Income
not eligible for Preferred Enterprise benefits is taxed at a regular rate of 23 %.
Reduced
income under the Investment Law including the Preferred Enterprise Regime, Preferred Technological Enterprise Regime and Special Preferred
Technological Enterprise will be freely distributable as dividends, subject to a 15 %
or 20 %
withholding tax (or lower rate for non-Israeli resident shareholder, under an applicable tax treaty). However, upon the distribution of
a dividend from Preferred Income, Technological Preferred Enterprise and Special Preferred Technological Enterprise to an Israeli company,
no withholding tax will be remitted.
The
Company may also receive benefits pursuant to the Law for the Encouragement of Knowledge Intensive Industry (Temporary Provision), 2023
(the “Law”), which was enacted on July 31, 2023. The Law provides certain benefits to entities that qualify as Preferred Technological
Enterprise, special deductions in connection with acquisitions where certain criteria are met.
Pursuant
to a temporary tax relief initiated by the Israeli government, a company that elected by November 11, 2013, to pay a reduced corporate
tax rate as set forth in the temporary tax relief with respect to undistributed exempt income generated under the Investment Law accumulated
by the Company until December 31, 2011 (“Trapped Earnings”) is entitled to distribute a dividend from such income without
being required to pay additional corporate tax with respect to such dividend. A company that has so elected must make certain qualified
investments in Israel over five-year period. A company that has elected to apply the temporary tax relief cannot withdraw from its election.
The Company has elected to apply the temporary tax relief by the respective date and believes it meets those conditions.
In
December 2022, the Council of the European Union (“EU”) unanimously adopted the Directive on BEPS’s Pillar Two ensuring
a global minimum tax rate of 15 %
for certain companies with an annual global turnover of at least €750
million, in the Union (the Directive). The OECD has also issued the Safe Harbours and Penalty Relief : Global Ani-Base
Erosion Rules (“Pillar Two Rules”) and related guidance. EU Member States and other non-EU countries
enacted legislation to integrate the provisions of the Directive and Pillar Two rules into their national
laws by December 31, 2023 and the majority of those countries generally apply these provisions for fiscal years starting
on or after December 31, 2023.
On
December 2025, the Israeli Knesset approved the Minimum Corporate Tax Law (Multinational Group), 2025 (the “Law”) which adopts
BEPS’s Pillar Two Rules. The Law introduces a qualified domestic minimum top-up tax, pursuant to which multinational
enterprise groups with annual global turnover of at least €750
million are subject to a minimum corporate tax rate of 15 %
on the Israeli Constituent Entity as defined under the OECD’s Pillar Two Rules. The Law enters into force as
of January into its national law with effective date of January 1, 2026.
F - 43
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES ON INCOME (Cont.)
In
parallel, as part of the Israeli Economic Program Law for the 2026 budget year, legislation to incentivize research and development activities
(the “R&D Incentive Legislation”) was enacted on March 30, 2026 and entered into force as of January 1, 2026.
The
R&D Incentive Legislation introduces a tax credit, at varying rates based on specified thresholds, for qualifying research and development
expenditures incurred in Israel by eligible Israeli companies that are part of multinational enterprise groups, subject to meeting defined
eligibility criteria. The tax credit may be utilized to offset Israeli corporate income tax or the Israeli domestic minimum top-up tax.
In
addition, the R&D Incentive Legislation, subject to conditions as prescribed therein, provides that all or a portion of
the unutilized R&D tax credit will be provided to eligible companies in the form of a cash grant upon the lapse of a period stipulated
by the R&D Incentive Legislation, rather than being utilized solely as a tax credit. This mechanism is intended, among other things,
to support the qualification of the incentive under the OECD Pillar Two framework.
The
implementation of the Israeli Pillar Two Law is expected to increase the Company’s reported tax expenses beginning in 2026. Based
on the current Proposed R&D Incentive Legislation and its associated tax credit, and assuming enactment effective January 1, 2026,
income tax expense is expected to increase, while the net cash impact is not expected to be material. However, the ultimate impact will
depend on the final form of the proposed R&D Incentive Legislation, if and when enacted and the amount of tax credits approved thereunder.
On
July 4, 2025, the One, Big, Beautiful Bill Act was enacted, which, among other changes to U.S. federal income tax law, permanently suspends
the requirement to capitalize and amortize domestic research and development expenditures and permits such deductions on a current basis,
and reinstates 100% bonus depreciation for certain qualified property. The Bill also allows to some extent an accelerated amortization
of domestic research and development expenditures that had previously been amortized during the years 2022-2024.
In
January 2023, the Israeli Tax Authority (the “ITA”) issued orders for the years 2016 through 2019 challenging our positions
on several issues and demanded the payment of additional taxes in the aggregate amount of NIS 536
million (approximately $158
million), not including an amount of NIS 476
million (approximately $140
million) related to expenses that will be deductible in future years, with respect of these four tax years (these amounts include interest
and indexation up to the tax settlement’s payment date, i.e. 31 July 2025). On November 29, 2023, the Company filed an appeal to
the District Court of Tel Aviv against these orders.
In
addition, the ITA has issued tax assessment for the 2020 tax year in which it demanded the payment of additional taxes in the aggregate
amount of NIS 94
million (approximately $28
million), not including an amount of NIS 106
million (approximately $31
million) related to expenses that will be deductible in future years, with respect to the 2020 tax year (these amounts include interest
and indexation up to the tax settlement’s payment date, i.e. 31 July 2025). On December 31, 2023 we submitted a
tax appeal against the 2020 tax assessment to the ITA.
F - 44
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES
ON INCOME (Cont.)
On
July 15, 2025, the Company and the Israeli Tax Authorities entered into a settlement agreement under which the Company agreed to pay total additional taxes
of NIS 223.2
million (approximately $66
million) in respect of the 2016–2020 tax years, which was ratified by the District Court on July 16, 2025. The Company
settled the tax demand payment to the ITA on July 31, 2025. The settlement fully and finally resolves all tax matters between the Company
and the ITA relating to the 2016-2020 tax years.
Our
tax assessments through the 2020 tax year are considered final.
| 2. |
Foreign Exchange Regulations:
Under the Foreign Exchange
Regulations, Check Point Ltd. and its Israeli subsidiaries calculate their tax liability in dollar according to certain orders. The tax liability, as calculated in dollar is translated into New Israeli Shekels according to the exchange rate as of December 31, of each year. |
| b. |
Income taxes of non-Israeli subsidiaries:
|
Non-Israeli
subsidiaries are taxed according to the tax laws in their respective countries of residence.
The
Company does not provide deferred tax liabilities when it intends to reinvest earnings of foreign subsidiaries indefinitely or if distributed,
no tax liability will be imposed. Undistributed earnings of foreign subsidiaries that are not distributed amounted to $639.5
and unrecognized deferred tax liability related to such earning amounted to $102.0
as of December 31, 2025.
F - 45
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES
ON INCOME (Cont.)
| c. |
Deferred tax assets and liabilities:
|
Deferred
taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of December 31, 2025 and 2024, the Company’s deferred taxes were
in respect of the following:
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
Carry forward tax losses
|
$
|
|
$
|
|
||||
|
Employee stock based
compensation |
|
|
||||||
|
Deferred revenues
|
|
|
||||||
|
Tax credits
|
|
|
||||||
|
Unrealized loss on marketable
securities |
|
|
||||||
|
Accrued employee costs
|
|
|
||||||
|
Other
|
|
|
||||||
|
|
||||||||
|
Deferred tax assets before
valuation allowance |
|
|
||||||
|
Valuation allowance –
mainly in respect to carryforward losses |
(
|
)
|
(
|
)
| ||||
|
|
||||||||
|
Deferred tax asset
|
|
|
||||||
|
|
||||||||
|
Intangible assets
|
(
|
)
|
(
|
)
| ||||
|
Deferred commission
|
(
|
)
|
(
|
)
| ||||
|
Unrealized gain on marketable
securities |
(
|
)
|
|
|||||
|
Other
|
(
|
)
|
(
|
)
| ||||
|
|
||||||||
|
Deferred tax liability
|
(
|
)
|
(
|
)
| ||||
|
|
||||||||
|
Deferred tax asset, net
*) |
$
|
|
$
|
|
||||
*)
As of December 31, 2025 and 2024 unrecognized tax benefit in the amounts of $20.2
and $18.3
was presented net from deferred tax asset.
Through
December 31, 2025, the U.S. subsidiaries had a U.S. federal loss carry-forward of approximately $18.3
that can be carried forward and offset against taxable income and subject to limitation on their utilization. Through December 31, 2025,
the U.S. subsidiaries had a U.S. state net loss carry forward of approximately $27.7 ,
expiring gradually beginning 2035
and subject to limitation on their utilization.
Through
December 31, 2025, the U.S. subsidiaries had federal and states research and development tax credits of approximately $30.3 ,
which expire between fiscal years 2025
and fiscal 2042
and are subject to limitations on their utilization.
F - 46
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES ON INCOME (Cont.)
| d. |
Income before taxes on income (tax benefit) is
comprised as follows: |
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
|
Foreign
|
|
|
|
|||||||||
|
|
||||||||||||
|
|
$
|
|
$
|
|
$
|
|
||||||
| e. |
Taxes on income (tax benefit) are comprised of
the following: |
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Domestic taxes:
|
||||||||||||
|
Current
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Deferred
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
|
||||||||||||
|
|
(
|
)
|
|
|
||||||||
|
|
||||||||||||
|
Foreign taxes:
|
||||||||||||
|
Current
|
|
|
|
|||||||||
|
Deferred
|
(
|
)
|
(
|
)
|
|
|||||||
|
|
||||||||||||
|
|
|
|
|
|||||||||
|
|
||||||||||||
|
Taxes on income (tax
benefit) |
$
|
(
|
) |
$
|
|
$
|
|
|||||
| f. |
The Company operates its business in various countries
and accordingly attempts to utilize an efficient operating model to structure its tax payments based on the laws in the countries in which
the Company operates. This can cause disputes between the Company and various tax authorities in different parts of the world.
|
F - 47
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES
ON INCOME (Cont.)
A
reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows:
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
Beginning balance
|
$
|
|
$
|
|
||||
|
Settlement and decrease
related to tax positions taken during prior years |
(
|
)
|
(
|
)
| ||||
|
Increase related to tax
positions taken during prior years |
|
|
||||||
|
Increase related to tax
positions taken during the current year |
|
|
||||||
|
|
||||||||
|
Ending balance
|
$
|
*)
|
|
$
|
*)
|
| ||
*)
As of December 31, 2025 and 2024 unrecognized tax benefit in the amounts of $20.2
and $18.3
was presented net from deferred tax asset.
Substantially
all the balance of unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate.
The
Company adjusts the unrecognized tax benefit liability and income tax expense in the period in which the uncertain tax position is effectively
settled, the statute of limitations expires or when new information is available. There is a reasonable possibility that $50.9
out of the unrecognized tax benefit liability will be adjusted within 12 months due to statute of limitations.
During
the years ended December 31, 2025, 2024 and 2023, the Company recorded $(41.3 ),
$2.4
and $12.6 ,
respectively for interest expense (income) related to uncertain tax positions. As of December 31, 2025 and 2024, the Company had
accrued interest liability related to uncertain tax positions in the amounts of $33.7
and $75.0 ,
respectively, which is included within income tax accrual on the balance sheets. The Company did not accrue penalties during the years
ended December 31, 2025, 2024 and 2023.
The
Company files federal and state income tax returns in the U.S. All of the U.S subsidiaries’ tax years are subject to examination
by the U.S. federal and most U.S. state tax authorities due to their carry-forward tax losses and overall credit carry-forward position,
except for Check Point Software Technologies Inc. that the assessment statue period for tax years throughout 2017 have expired.
The
Company believes that it has adequately provided for any reasonably foreseeable outcomes related to tax audits and settlement. The final
tax outcome of its tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals.
Such differences could have a material effect on the Company’s income tax provision and net income in the period in which such determination
is made. The Company believes it had adequately provided for all of its uncertain tax positions, including those items currently under
dispute.
F - 48
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES
ON INCOME (Cont.)
| g. |
Reconciliation of the theoretical tax expenses: |
The
following table presents the reconciliation between the Company’s theoretical income tax and effective income tax for the year ended
December 31, 2025 after the adoption of ASU 2023-09:
|
|
Year
ended December 31, |
|||||||
|
|
2025
|
|||||||
|
Israeli
Statutory Corporate Tax Rate |
$
|
|
|
%
| ||||
|
Foreign
tax effects |
||||||||
|
Other
jurisdictions |
|
|
%
| |||||
|
Foreign
tax credits |
(
|
)
|
(
|
)%
| ||||
|
Nontaxable
or nondeductible items |
|
|
%
| |||||
|
Special
Preferred Technological Enterprise |
(
|
)
|
(
|
)%
| ||||
|
Change
in unrecognized tax benefits |
(
|
)
|
(
|
)%
| ||||
|
Special
deduction |
(
|
)
|
(
|
)%
| ||||
|
Other
adjustments |
|
|
%
| |||||
|
|
||||||||
|
Total
Effective Tax Rate |
$
|
(
|
)
|
(
|
)%
| |||
The
following table presents the reconciliation between the Company’s theoretical income taxes and effective income taxes for the years
ended December 31, 2024 and 2023 prior the adoption of ASU 2023-09:
|
|
Year
ended December 31, |
|||||||
|
|
2024
|
2023
|
||||||
|
|
||||||||
|
Income before
taxes as reported in the consolidated statements of income |
$
|
|
$
|
|
||||
|
|
||||||||
|
Statutory
tax rate in Israel |
|
%
|
|
%
| ||||
|
|
||||||||
|
Decrease
in taxes resulting from: |
||||||||
|
Effect of
“Technological preferred or Preferred Enterprise” status *) |
(
|
)%
|
(
|
)%
| ||||
|
Others, net
|
|
%
|
(
|
)%
| ||||
|
|
||||||||
|
Effective
tax rate |
|
%
|
|
%
| ||||
|
|
||||||||
|
*)
Basic earnings
per share amounts of the benefit resulting from the “Technological preferred or Preferred Enterprise” status
|
$
|
|
$
|
|
||||
|
|
||||||||
|
*)
Diluted earnings per share amounts of the benefit resulting from the “Technological preferred or Preferred
Enterprise” status |
$
|
|
$
|
|
||||
F - 49
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 12:-
TAXES
ON INCOME (Cont.)
| h. |
Income taxes paid: |
The
following table presents cash paid for income taxes, net of refunds received, for the year ended December 31, 2025, pursuant to the
disclosure requirements of ASU 2023-09:
|
|
Year
ended
December 31,
|
|||
|
|
2025
|
|||
|
|
||||
|
Israel
|
$
|
|
||
|
Other jurisdictions
|
|
|||
|
|
||||
|
|
$
|
|
||
NOTE 13:-
SHAREHOLDERS’ EQUITY
| a. |
General: |
Ordinary
shares confer upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right
to receive dividends if declared.
| b. |
Share repurchase: |
On
July 11, 2024 the Company announced the expansion of the Company’s on-going share repurchase program by an additional $2,000 .
Under the share repurchase program, as extended, the Company is authorized to continue to repurchase up to $325
each quarter. In connection with our convertible notes offering in December 2025, the Board of Directors authorized to repurchase an additional
$100 million
in December 2025. Under the repurchase programs, share purchases may be made from time to time depending on market conditions, share price,
trading volume and other factors and will be funded from available working capital.
As
of December 31, 2025, the Company repurchased ordinary shares for an aggregate amount of $17,072.6 .
During 2025, 2024 and 2023 the Company repurchased 6,848,579 ,
7,661,359 ,
and 9,857,092
shares for an aggregate amount of $1,400.0 ,
$1,299.9
and $1,287.6 ,
respectively.
| c. |
Stock Options, RSUs and PSUs:
|
In
2005, the Company adopted two new equity incentive plans, which were subsequently amended in January 2014 and in July 2018: the 2005 United
States Equity Incentive Plan and the 2005 Israel Equity Incentive Plan together are referred to as the Equity Incentive Plans.
F - 50
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 13:-
SHAREHOLDERS’ EQUITY (Cont.)
Under
the Equity Incentive Plans, the Company may grant options to employees, officers and directors at an exercise price equal to at least
the fair market value of the ordinary shares at the date of grant and are granted for periods not to exceed seven years. The Company grants
under the Equity Incentive Plans options, Restricted Stock Units (“RSUs”) and Performance stock units (“PSUs”)
and can also grant a variety of other equity incentives. Options granted under the Equity Incentive Plans generally vest over a period
of four
years of employment. Options, RSUs and PSUs that are cancelled or forfeited before expiration become available for future
grants. RSUs generally vest over a four years period of employment from the grant date while PSUs generally vest over a two to four years
period of employment from the grant date. PSUs are subject to certain performance criteria; accordingly, compensation expense is recognized
for such awards when it becomes probable that the related performance condition will be satisfied.
Under
the Equity Incentive Plans, the Company’s non-employee directors receive on an annual basis options and RSUs grant. Following the
amendments to the Equity Incentive Plans in July 2018, commencing December 31, 2018, on December 31 of each year, the number of Reserved
and Authorized Shares (as defined below) under both Equity Incentive Plans together shall be annually reset on such date to equal 10 %
of the sum of (i) the number of ordinary shares issued and outstanding on such date and (ii) the number of ordinary shares reserved
and authorized under the Equity Incentive Plans for outstanding awards granted under the Equity Incentive Plans as of such date (provided,
however, that in no event shall the number of Reserved and Authorized Shares be less than the number of ordinary shares reserved and authorized
under the Equity Incentive Plans for outstanding awards granted under the Equity Incentive Plans as of such date).
The
number of “Reserved and Authorized Shares” under the Equity Plans shall equal the sum of (i) the number of ordinary shares
reserved and authorized under the Equity Incentive Plans for outstanding options, RSUs, PSUs and other awards granted under the Equity
Incentive Plans as of such date, and (ii) the number of ordinary shares reserved, authorized and available for issuance under the
Equity Incentive Plans on such date.
As
of December 31, 2025, the number of Reserved and Authorized Shares under the Equity Incentive Plans is as detailed below:
|
Stock Options outstanding
|
|
|||
|
RSU outstanding
|
|
|||
|
PSU outstanding
|
|
|||
|
Ordinary shares available
for issuance under the Equity Incentive Plans |
|
|||
|
|
||||
|
Total Reserved and Authorized
Shares as of December 31, 2025 |
|
As
of December 31, 2025 the aggregate number of shares, stock options, RSU and PSU outstanding is 111,785,649 .
F - 51
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 13:-
SHAREHOLDERS’ EQUITY (Cont.)
A
summary of the Company’s stock option activity and related information is as follows:
|
|
Number
of options |
Weighted
average
exercise
price
|
Aggregate
intrinsic
value
|
Weighted
Average Remaining Contractual Life (Years) |
||||||||||||
|
|
2025
|
|||||||||||||||
|
|
||||||||||||||||
|
Outstanding at beginning
of year |
|
$
|
|
$
|
|
|
||||||||||
|
Granted
|
|
$
|
|
|||||||||||||
|
Exercised
|
(
|
)
|
$
|
|
||||||||||||
|
Forfeited
|
(
|
)
|
$
|
|
||||||||||||
|
|
||||||||||||||||
|
Outstanding at December 31,
2025 |
|
$
|
|
$
|
|
|
||||||||||
|
|
||||||||||||||||
|
Exercisable at December 31,
2025 |
|
$
|
|
$
|
|
|
||||||||||
The
weighted average fair values at grant date of options granted for the years ended December 31, 2025, 2024 and 2023 with an exercise
price equal to the market value at the date of grant were $54.1 ,
$51.7
and $43.0
per share, respectively.
The
total intrinsic value of options exercised during the years 2025, 2024 and 2023 was $284.2 ,
$81.0
and $20.0 ,
respectively.
The
aggregate grant-date fair value of stock options that vested during 2025 2024 and 2023 was $16.5 ,
$18.1
and $31.0 ,
respectively.
The
aggregate intrinsic value of the outstanding stock options as of December 31, 2025, 2024 and 2023, represents the intrinsic value of 2,710,629
,5,712,254
and 7,233,044
outstanding options that are in-the-money as of such dates. The remaining 418,246
outstanding options are out-of-the-money as of December 31, 2025.
A
summary of the Company’s RSUs and PSUs activity is as follows:
|
Year
ended
December
31, 2025 |
Weighted-Average
Grant
Date
Fair Value Per Share |
|||||||||||||||||||
|
|
RSUs
|
PSUs
|
Total
|
RSUs
|
PSUs
|
|||||||||||||||
|
|
||||||||||||||||||||
|
Unvested at beginning
of year |
|
|
|
$
|
|
$
|
|
|||||||||||||
|
Granted
|
|
|
|
$
|
|
$
|
|
|||||||||||||
|
Vested
|
(
|
)
|
(
|
)
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
Forfeited
|
(
|
)
|
(
|
)
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
|
||||||||||||||||||||
|
|
|
|
|
$
|
|
$
|
|
|||||||||||||
F - 52
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 13:-
SHAREHOLDERS’ EQUITY (Cont.)
The
weighted average fair values at grant date of RSUs and PSUs granted for the years ended December 31, 2025, 2024 and 2023 were $207.8 ,
$161.0
and $125.6
per share, respectively.
The
total fair value of shares vested during the years 2025, 2024 and 2023 was $185.3 ,
$158.4
and $96.1 ,
respectively.
As
of December 31, 2025, the Company had approximately $446.35
of unrecognized compensation expense related to non-vested stock options and non-vested RSU’s and PSU’s, expected to be recognized
over a weighted average period of 1.88
years.
| d. |
Employee Stock Purchase Plan (“ESPP”):
|
In
1996, the Company adopted an ESPP, which was subsequently amended in 2015. Following these amendments, starting with the purchase period
on February 1, 2017, a total of 568,478
ordinary shares were designated for issuance under the US ESPP. On June 19, 2019, the allocation for the US ESPP was increased to 750,000
shares. As well, following amendments of 2015 year, for employees outside the United States, 1,096,795
ordinary shares were authorized for issuance under the Non-US ESPP. On January 16, 2024, the Non-US ESPP was increased by 700,000
ordinary shares, bringing the total allocation for the Non-US ESPP to 1,796,795
ordinary shares. On September 3, 2025, the Non-US ESPP was increased by 1,000,000
ordinary shares, bringing the total allocation for the Non-US ESPP to 2,796,795
ordinary shares and the US ESPP was increased by 500,000
ordinary shares, bringing the total allocation for the US ESPP to 1,250,000
ordinary shares.
As
of December 31, 2025, 3,400,717
ordinary shares had been issued under the amended ESPP plan.
Eligible
employees may use up to 15 %
of their salaries to purchase ordinary shares but no more than 1,250
single shares per participant on any purchase date. The ESPP is implemented through an offering every six months. The price of an ordinary
share purchased under the ESPP is equal to 85 %
of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.
During
2025, 2024 and 2023, employees purchased 362,533 ,
381,859
and 405,458
ordinary shares at average prices of $156.5 ,
$124.8
and $105.8
per share, respectively.
In
accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation cost. For the years ended
December 31, 2025, 2024 and 2023, the Company recognized $19.6 ,
$13.7
and $11.4 ,
respectively, of compensation expense in connection with the ESPP.
F - 53
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
NOTE 13:-
SHAREHOLDERS’ EQUITY (Cont.)
| e. |
Stock-Based Compensation:
|
Stock-based
compensation expense related to stock options, RSUs, PSUs and ESPP is included in the consolidated statements of income as follows:
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Cost of revenues
|
$
|
|
$
|
|
$
|
|
||||||
|
Research and development
|
|
|
|
|||||||||
|
Selling and marketing
|
|
|
|
|||||||||
|
General and administrative
|
|
|
|
|||||||||
|
|
||||||||||||
|
|
$
|
|
$
|
|
$
|
|
||||||
| NOTE 14:- |
EARNINGS
PER SHARE |
The
following table sets forth the computation of basic and diluted earnings per share:
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
||||||
|
|
||||||||||||
|
Weighted
average ordinary shares outstanding |
|
|
|
|||||||||
|
|
||||||||||||
|
Dilutive
effect: |
||||||||||||
|
Employee
stock options, RSUs and PSUs |
|
|
|
|||||||||
|
|
||||||||||||
|
Diluted weighted
average ordinary shares outstanding |
|
|
|
|||||||||
|
|
||||||||||||
|
Basic earnings
per ordinary share |
$
|
|
$
|
|
$
|
|
||||||
|
|
||||||||||||
|
Diluted earnings
per ordinary share |
$
|
|
$
|
|
$
|
|
||||||
F - 54
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 15:- |
ACCUMULATED
OTHER COMPREHENSIVE INCOME |
|
|
Unrealized
Gains
(losses) on marketable securities |
Unrealized
Gains
(losses) on cash flow hedges |
Total
|
|||||||||
|
|
||||||||||||
|
Beginning
balance |
$
|
(
|
)
|
$
|
|
$
|
(
|
)
| ||||
|
Other comprehensive
income before reclassifications |
|
|
|
|||||||||
|
Amounts reclassified
from accumulated other comprehensive income |
|
(
|
)
|
(
|
)
| |||||||
|
Net current
period other comprehensive income |
|
|
|
|||||||||
|
Ending balance
|
$
|
|
$
|
|
$
|
|
||||||
| NOTE 16:- |
GEOGRAPHIC
INFORMATION AND SELECTED STATEMENTS OF INCOME DATA |
| a. |
Summary information about geographical
areas: |
The
Company operates in one
reportable segment (see Note 1 for a brief description of the Company’s business). The total revenues are attributed to geographic
areas based on the location of the Company’s channel partners which are considered as end customers, as well as direct customers
of the Company.
The
following tables presents total revenues and property and equipment, net, by geographic area:
1.
Revenues based on the channel partners’ location:
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Americas,
principally the U.S. |
$
|
|
$
|
|
$
|
|
||||||
|
EMEA *)
|
|
|
|
|||||||||
|
Israel
|
|
|
|
|||||||||
|
Asia Pacific
|
|
|
|
|||||||||
|
|
||||||||||||
|
|
$
|
|
$
|
|
$
|
|
||||||
*)
Includes Europe, the Middle East (excluding Israel) and Africa.
Includes
United Kingdom with 14 %,15 %
and 16 %
from the total revenues in 2025, 2024 and 2023 respectively.
F - 55
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 16:- |
GEOGRAPHIC
INFORMATION AND SELECTED STATEMENTS OF INCOME DATA (Cont.) |
2.
Property and equipment, net and ROU assets:
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
|
||||||||
|
Israel
|
$
|
|
$
|
|
||||
|
U.S.
|
|
|
||||||
|
Rest of the
world |
|
|
||||||
|
|
||||||||
|
|
$
|
|
$
|
|
||||
| b. |
Summary information about product
lines: |
The
Company’s products can be classified by three
main product lines. The following table presents total revenues for the years ended December 31, 2025, 2024 and 2023 by product lines:
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Product and
licenses: |
||||||||||||
|
Network security
Gateways |
$
|
|
$
|
|
$
|
|
||||||
|
Other *)
|
|
|
|
|||||||||
|
|
||||||||||||
|
|
|
|
|
|||||||||
|
Security
subscriptions |
|
|
|
|||||||||
|
Software
updates and maintenance |
|
|
|
|||||||||
|
|
||||||||||||
|
Total revenues
|
$
|
|
$
|
|
$
|
|
||||||
| *) |
Comprised of Endpoint security, Mobile
security and Security management products, each comprising of less than |
F - 56
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except share and per share data)
| NOTE 16:- |
GEOGRAPHIC
INFORMATION AND SELECTED STATEMENTS OF INCOME DATA (Cont.) |
| c. |
Financial income, net:
|
|
|
Year
ended
December
31, |
|||||||||||
|
|
2025
|
2024
|
2023
|
|||||||||
|
|
||||||||||||
|
Financial
income: |
||||||||||||
|
Interest
income |
$
|
|
$
|
|
$
|
|
||||||
|
Amortization
of marketable securities premium and accretion of discount, net |
|
|
|
|||||||||
|
|
||||||||||||
|
|
|
|
||||||||||
|
Financial
expense: |
||||||||||||
|
Amortization
of marketable securities premium and accretion of discount, net |
|
|
|
|||||||||
|
Realized
loss on sale of marketable securities, net |
|
|
|
|||||||||
|
Foreign currency
re-measurement loss |
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
|
||||||||||||
|
|
|
|
|
|||||||||
|
|
||||||||||||
|
|
$
|
|
$
|
|
$
|
|
||||||
NOTE
17:- SEGEMENT
The
Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business
activities as a single operating and reportable segment at the consolidated level. Accordingly, the CODM uses consolidated net income
and operating income as shown in the consolidated financial statements to allocate resources and to assess the performance of the segment.
There is no expense or asset information, that are supplemental to those disclosed in these consolidated financial statements, that are
regularly provided to the CODM. Since the Company operates as one operating segment, financial segment information, including profit or
loss and asset information, can be found in the consolidated financial statements.
NOTE
18:- SUBSEQUENT EVENTS
In
February 2026, the Company acquired:
| 1. |
|
| 2. |
|
| 3. |
The Company
acquired the talent of Rotate Ltd., a privately held Israeli company, in order to drive continued growth and momentum for Workspace solutions
within the managed service providers (MSP) sector. |
F - 57
FAQ
What is the size and key term of Check Point’s new convertible notes?
Check Point issued $2.0 billion aggregate principal amount of 0.00% Convertible Senior Notes due 2030. The notes bear no cash interest, are convertible under specified conditions, and may be settled in cash, ordinary shares, or a combination, potentially diluting shareholders when conversions occur.
What Israeli tax settlement did Check Point disclose in its 2025 Form 20-F?
Check Point agreed to pay NIS 223.2 million, approximately $66 million, in additional taxes covering the 2016–2020 years. The settlement, ratified by the Tel Aviv District Court, fully and finally resolves those years’ disputes with the Israeli Tax Authority, removing related uncertainty but increasing historical tax expense.
How concentrated are Check Point’s distributor relationships according to the filing?
In 2025, about 57% of Check Point’s sales came from its ten largest distributors, with roughly 39% from its three largest. Similar concentrations existed in 2024 and 2023, meaning losing or weakening ties with a few key distributors could materially affect sales and channel reach.
What liquidity position does Check Point report at year-end 2025?
As of December 31, 2025, Check Point held $4,342 million in cash, cash equivalents, short‑term bank deposits and fixed‑income marketable securities. This sizeable liquidity base supports operations, potential acquisitions, share repurchases, debt obligations, and cushions against macroeconomic, tax, or regulatory shocks described in the risk factors.
How is Check Point exposed to foreign currency risk, and how does it hedge it?
Check Point incurs around 42% of expenses in non‑U.S. currencies, mainly Israeli shekels and euros, creating foreign exchange risk. As of December 31, 2025, it used $329 million in forward contracts qualifying as cash‑flow hedges and $196 million in additional forwards to mitigate currency impacts on expenses and balance‑sheet items.
Check Point Software Tech Ltd
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[Form 3] CHECK POINT SOFTWARE TECHNOLOGIES LTD Initial Statement of Beneficial Ownership
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[Form 3] CHECK POINT SOFTWARE TECHNOLOGIES LTD Initial Statement of Beneficial Ownership