“Our worldview differs from Palo Alto’s and Microsoft’s”: Check Point charts its own path amid industry shake-up

Check Point was preparing for a fairly routine day of publishing its second-quarter financial results, but the press conference held to mark the event focused less on Check Point and more on its rival, Palo Alto Networks. The previous night, reports surfaced that Palo Alto, the world’s largest cybersecurity company founded by Nir Zuk, one of Check Point’s first employees, was conducting advanced negotiations to acquire the Israeli firm CyberArk. At the time of the press conference, only preliminary contacts were known, but shortly afterward, the $25 billion deal was announced.

Among other consequences, Check Point’s stock fell sharply by 15% during trading, and it lost the title of the largest Israeli tech company to CyberArk. Nadav Zafrir, former commander of Unit 8200 and founder of the Team8 investment group, took over the helm of Check Point at the end of 2024. Although the company’s stock has been hitting all-time highs since then, the challenges he now faces are greater than ever.

Check Point is currently valued at around $20 billion, with expected revenue of $2.7 billion this year. In comparison, Palo Alto is valued at $130 billion and is expected to generate about $10 billion in revenue. Zafrir was compelled to address what could become a wave of major mergers in the cybersecurity market, potentially making the big players even bigger and possibly putting Check Point itself on the acquisition block.

In response to these events, Zafrir unveiled a new strategy for Check Point, fundamentally opposing Palo Alto’s approach, which aims to be a one-stop shop for all cybersecurity solutions. While Zafrir agrees that security managers cannot handle 100 different cyber products, he believes organizations should rely on an open platform that integrates best-in-class products from different vendors.

“The cybersecurity market is undergoing dramatic change,” Zafrir said. “But contrary to Palo Alto’s vision, we believe customers should be able to select and combine many solutions, each the best in its category. It is unhealthy to have all your solutions from a single supplier. Having worked extensively in security, I don’t believe all the wisdom lies in one development approach or intelligence source, doing so increases vulnerability.”

“This race is still open. Our worldview differs from Palo Alto’s and Microsoft’s, but it remains highly relevant and competitive.”

Still, Zafrir reiterated that Check Point will position itself as an acquirer and pursue bigger, bolder deals than those made under Gil Shwed’s leadership. Shwed, who founded the company, favored relatively small technology acquisitions. “We are fully on the side of the acquirer,” Zafrir said. “When we identify a technology that could be a game changer for Check Point, we will aggressively pursue it. We’re not yet big enough to buy Palo Alto or Microsoft, but we’re just getting started.”

“There is no correlation between how much you pay and the quality of the product you receive,” Zafrir added, referring to his predecessor’s approach. “I look at acquisitions differently, we have a clear strategy with guiding principles. I evaluate individual people and companies, what they can bring to us. Even if it’s a team of five who can outperform a company that’s been around for ten years, we’ll be competitive in acquisition offers. Success is not just about the price paid but how well we optimize after the deal. For example, our cloud acquisition was less successful, but Avanan, acquired in 2021 for $280 million, was very successful, and Gil Friedrich, one of Avanan’s founders, is now a key figure at Check Point.”

Historically, the two companies have pursued different acquisition strategies: Palo Alto has made relatively expensive purchases of mature technologies ready for integration into its marketing engine, while Check Point has preferred smaller acquisitions of developing technologies.

Meanwhile, Zafrir faces a profitable Check Point with an operating profit margin of about 30%, but limited growth. Palo Alto’s growth has slowed recently as well, but it still maintains double-digit growth and generates in one quarter what Check Point makes in an entire year, despite being founded ten years after Check Point.

Zafrir’s strategy rests on four principles:

1. Focus on the core of today’s cyberspace — the connectivity fabric within organizations, specifically secure connections for employees and customers. Some solutions come from Check Point itself, and others through a cooperation agreement with Wiz, regarded as the leading cloud security product. One of Zafrir’s early decisions was to discontinue some internal Check Point products in favor of integrating Assaf Rappaport’s team and their offerings into the Check Point platform.
2. Strengthen the “prevention first” approach — the ethos of Check Point. Though not the flashiest segment today, it is experiencing a renaissance due to rapidly evolving AI-driven threats. Zafrir emphasized preventing breaches at all costs rather than managing cyber crises after the fact.
3. Embrace an open platform philosophy — unlike Palo Alto’s “walled garden,” Check Point’s platform will host products from multiple companies, not just its own.
4. Invest heavily in AI — the bulk of Check Point’s future acquisitions are expected to be AI-focused. “Everyone is racing to make AI work for us, and everyone is investing heavily in it,” Zafrir observed.

Check Point has maintained its annual revenue forecast of $2.66 to $2.76 billion for 2025, reflecting 4-8% growth compared to 2024, with earnings expected between $9.6 and $10.2 per share. For the second quarter, it expects minor revenue growth of 6% to between $657 million and $687 million, following $665 million reported in Q2 last year.

The company still holds cash reserves of $3 billion, which provides capacity for significant acquisitions but also makes Check Point an attractive acquisition target, especially given its relatively low valuation multiples compared to competitors.