Check Point Software Technologies(NASDAQ: CHKP) may not be a household name in the cybersecurity industry, but the company has registered impressive gains of 15% already in 2025, and the good part is that it seems to be in a solid position to sustain its impressive momentum in the future as well.
That's because Check Point is witnessing an improvement in its revenue pipeline on account of the fast-growing adoption of artificial intelligence (AI) tools in the cybersecurity industry. Let's take a closer look at Check Point's recent results to find out why this cybersecurity stock is capable of delivering more upside.
Check Point Software's growth rate is likely to improve
Check Point ended 2024 with total revenue of $2.66 billion, a 6% increase from the same period last year. Its non-GAAP (adjusted) earnings increased at a slightly faster pace of 9% in 2024 to $9.16 per share. Investors may not find this pace of growth appealing, but they should note that Check Point's improving revenue pipeline could help it step on the gas and grow at a faster pace in the future.
This is evident from the 12% year-over-year increase in its remaining performance obligations (RPO) in Q4 2024, which was double the pace of its revenue growth during the quarter. The faster growth in RPO is good news for Check Point investors as this metric "represents the total value of non-cancellable contracted products and/or services that are yet to be recognized as revenue."
So, Check Point is bringing in more business than it is fulfilling right now. As it starts fulfilling more of its contracts, its growth rate should ideally improve. A key reason why the company is signing more contracts now is because of its focus on bringing AI tools to customers. Check Point has unveiled a range of AI cybersecurity tools in recent times, including the Infinity AI Copilot, which is a generative AI-powered security assistant meant to help organizations improve the efficiency of their security analysts.
Given that the adoption of generative AI within the cybersecurity space is expected to grow at an annual rate of 24% through the end of the decade, Check Point is doing the right thing by launching AI-focused tools. The good part is that these product development moves seem to be paying off for the company as its Infinity Platform witnessed double-digit growth in the fourth quarter of 2024.
On the other hand, the demand for the company's AI-powered firewall product, Quantum Force, is also picking up. Sales of Check Point's products and licenses increased by 8% year over year in the previous quarter on the back of rising Quantum Force demand. While that may not seem like much, it is worth noting that its product and licenses business grew at a much slower pace in the first three quarters of the year.
All this indicates that Check Point's pace of growth could pick up in the future and it may even be able to outpace its own expectations. Throw in the company's attractive valuation, and buying Check Point right now seems like a smart move.
An attractive valuation and a potential improvement in growth
Check Point is expecting its fiscal 2025 revenue to increase in the range of 4% to 8%. Meanwhile, the company has guided for slightly stronger bottom-line growth to a range of 5% to 11%. At the midpoint, Check Point's full-year earnings could land at $9.90 per share.
Again, Check Point's guidance isn't earth-shattering, but the possibility of the company clocking faster growth than what it has called for cannot be ruled out. That's because new contracts are flowing in at a faster pace than sales. And if Check Point can indeed deliver better-than-expected results, the market could reward it with more upside.
Moreover, Check Point is trading at just 22 times forward earnings, lower than the Nasdaq-100 index's forward earnings multiple of 28 (using the index as a proxy for tech stocks). Analysts are expecting an uptick in Check Point's earnings growth over the next couple of years, which seems achievable considering the points discussed in the previous section.
Assuming Check Point indeed delivers $12 per share in earnings in 2027 and trades in line with the Nasdaq-100 index's forward earnings multiple of 28, its stock price could hit $342. That would be a 59% jump from current levels. So, investors looking to buy a cybersecurity stock that's trading at attractive levels and has the ability to step on the gas should take a closer look at Check Point Software as it can sustain its bull run in the future.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Check Point Software Technologies. The Motley Fool has a disclosure policy.
