Security Software: Preview: AI-Driven Threat Urgency Providing Meaningful Tailwinds for FROG, TENB, VRNS, QLYS; Stepping to the Sidelines on CHKP

Research evidence excerpt

Security Software: Preview: AI-Driven Threat Urgency Providing Meaningful Tailwinds for FROG, TENB, VRNS, QLYS; Stepping to the Sidelines on CHKP

which pointed to a sharper decline before a gradual

improvement in 2H. Guidance last Q implied full-year product revenue decline of

roughly 10% y/y at the midpoint. Consensus estimates reflecting a 2Q product revenue

decline of approximately -18% y/y could prove conservative, as it implies the steepest

2Q decline in recent years. We expect FY margin guidance to remain strong, as the

current FY26 operating margin guidance of 39-40% absorbs gross margin pressure from

memory costs weighted to 2H. We remain cautious on renewal strength, as partner

conversations have indicated share loss to peers from more favorable discounting and

stronger platform positioning, even in a healthy firewall market. CHKP continues to

screen below peers for SASE, with partners citing gaps in technology, integration, and

platform breadth relative to larger vendors.

Upside risk remains, but as the stock has appreciated recently, we view risk/reward

as less favorable at current levels. We acknowledge several factors that could support

better performance. 1) Better than expected traction in emerging products across email,

SASE, and CTEM, meaningfully contributing to subscription re-acceleration. 2) Faster

than expected contribution from CHKP's AI Security stack. 3) A firewall recovery in 2H

as the GTM changes settle, supported by improving pipeline trends and early large-

enterprise win-backs cited by management. Despite these factors, we view tougher

competition from larger platform vendors and ongoing self-inflicted GTM disruption as

outweighing the positives near-term.

2Q26 Metrics We’re Watching:

• Revenue consensus of $675mm