The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this annual report. This discussion contains certain forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those set forth under Item 3, “Key Information - Risk Factors” and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements. For more information about forward-looking statements, see the “Preliminary Note” that immediately follows the Table of Contents of this annual report. Overview NiCE is a global enterprise software leader, delivering mission-critical AI-powered cloud platforms that serve two main markets: Customer Engagement and Financial Crime and Compliance. Our platforms are designed to automate complex, high-volume, and highly regulated workflows where reliability, security, and measurable outcomes are essential. In Customer Engagement, our CXone platform enables enterprises to automate customer service by orchestrating workflows, AI and human agents, and enterprise knowledge within a single, unified AI platform. In Financial Crime and Compliance, we provide embedded AI solutions that help financial institutions prevent money laundering and fraud, and ensure real-time regulatory compliance across financial markets. Our strategy is based on serving specialized and rapidly expanding markets that demand feature-rich solutions, delivered through secure, enterprise-grade cloud platforms. AI is foundational to this strategy, driving differentiation, accelerating cloud adoption, and enabling customers to automate increasingly complex workflows at scale. We leverage our proprietary AI models and unique customer engagement data to increase competitive win rates in cloud migrations, expand adoption across digital and automated channels, and introduce new domain-specific use cases that deepen customer relationships and increase long-term platform value. In the Customer Engagement market, our CXone AI platform enables organizations to automate service at scale, augment their workforce with AI-powered solutions, and unify enterprise knowledge, data and AI models to drive faster resolutions and superior customer experiences. Purpose-built AI ensures every interaction and workflow is intelligently orchestrated across all customer touchpoints, seamlessly blending autonomous Agentic AI and human assisted interactions to deliver best-in-class service that is proactive, knowledge-based, resolution-oriented and efficient. Our Public Safety and Justice business is included in our Customer Engagement segment. In this business, we are transforming the criminal justice system by using AI to uncover the truth in digital evidence, facilitating swift justice. Our AI-powered workflows help relieve police, prosecutors, public defenders, courts and correctional institutions from the tedious task of managing digital evidence. In the Financial Crime and Compliance market, we protect financial services organizations, with embedded-AI solutions that identify risks to help prevent money laundering and fraud in real-time, as well as help ensure financial markets compliance. With our holistic, data and entity-centric approach, we leverage machine learning, predictive analytics, behavioral analytics, network analytics, NLP (natural language processing), generative AI and Agentic AI to detect suspicious activity and automate routine tasks, collaborate with analysts and adapt in real time to proactively keep ahead of emerging threats. NiCE is at the forefront of several industry technological disruptions that have greatly accelerated in the last several years: AI-driven automation and Agentic AI solutions are transforming customer service, as organizations seek to optimize both efficiency and customer experience; domain-specific AI is enhancing decision-making and workforce performance; and cloud scalability is enabling enterprises to modernize operations at an unprecedented pace. NiCE’s AI-powered platforms unify data, workflows, AI agents and automation to drive enterprise-wide transformation. Built on deep domain expertise, our solutions empower customer service, financial crime prevention, and criminal justice organizations to lead with intelligence, efficiency, and confidence. We rely on multiple key assets and core strengths to drive our growth: •Our AI leadership with purpose-built AI models that power automation, optimization, and user experience transformation. 48 •Our domain-specific Agentic AI that is designed to manage complex tasks, makes decisions and take action, with and without human intervention. •Our comprehensive cloud platforms that are scalable, secure, and built for enterprise-wide adoption. •Our AI-powered copiloting employee augmentation capabilities, built for specific roles and around domain-specific functionality to increase efficiencies, maintain compliance and improve resolution. •AI-powered orchestration tools that are designed to allow organizations to design, build and operate end-to-end workflows. •Our extensive self-service automation solutions that are built to use the power of AI to deliver human-like interactions at scale. •Our extensive portfolio of applications addresses organizational needs across all our areas of domain expertise. •Our broad array of proprietary technologies and algorithms in the domains of generative AI, Large Language Models (LLMs), automation, analytics, machine learning, speech-to-text, natural language processing, personality-based routing and others. •Our native AI models which are based on years of industry-specific data and domain expertise, consistently using machine learning for generating actionable insights. •Our access to vast amounts of CX data, derived from billions of domain-specific interactions of all types, enriching our applications and enabling us to build hundreds of CX purpose-built AI models. •Our advanced data security and compliance capabilities that deliver trusted enterprise software across all our markets, including FedRAMP authorization to the relevant business lines, with more than 30 authorized applications, native PCI, supported by one of the most advanced SOCs in the industry •Our flexible delivery model that allows our customers to benefit from a wide range of both cloud and on-premises solutions. •Our solutions' market coverage of all segments, from small and mid-sized businesses to large scale Fortune 100 enterprises. •The mission critical nature of our solutions to the operations of our customers and our cloud platforms that are essential for enabling a scalable and sustainable work-from-anywhere environment. •Our market leadership, which makes us a well-recognized brand and creates top-of-mind awareness for our solutions in our areas of operation. •Our large and broad partner ecosystem with strategic alliances and integrations that extend market reach and solution capabilities. •Our loyal customer base of more than 25,000 organizations in over 150 countries, across many industries, including 85 of the Fortune 100 companies. •Our strong cash position that allows us to invest in innovative solutions and product development and fuels strategic acquisitions. •Our ability to quickly drive mainstream adoption for innovative solutions and new technologies and trends, which we introduce to the market through our direct sales force and distribution network. 49 •Our skilled employees and domain expertise in our core markets allow us to bring our customers the right solutions to address key business challenges and build strong customer partnerships. •Our customer support and operations, which enable our customers to quickly enjoy the benefits of our solutions, with multiple deployment models in the cloud or on-premises throughout the world and support for full value realization and customer success. •Our outcome-oriented white-glove services that enable our customers to achieve greater efficiency, higher revenue, and lower operating costs with our solutions. Recent Acquisitions From time to time we make acquisitions and investments. Some of them are not considered material to our business and operations. During 2025, we completed the acquisition of Cognigy, a global market leader in conversational and agentic AI, for total final consideration of $887.3 million, as well as an additional acquisition for total consideration of $36.5 million. During 2024, we completed two acquisitions for a total consideration of approximately $68.9 million. For additional information see Note 1b to our Consolidated Financial Statements included elsewhere in this annual report. The Cognigy acquisition was accounted for by the acquisition method of accounting, and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. The results of operations related to each acquisition are included in our consolidated statements of income from the date of acquisition. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. Certain accounting policies require that we apply significant judgment in determining the appropriate assumptions for calculating financial estimates. By their nature, these judgments will be subject to an inherent degree of uncertainty. Our judgments are based upon our management’s historical experience, terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. We believe that the accounting policies and estimates discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate and (2) changes in the estimate could have a material impact on our financial condition or results of operations. Revenue Recognition. We generate revenues from sales of cloud, service and software products, which include software license, SaaS, network connectivity, hosting, support and maintenance, implementation, configuration, project management, consulting and training, most of which are considered a separate performance obligation. We sell our cloud, software products and services directly through our sales-force and indirectly through a global network of distributors, system integrators and strategic partners. We recognize revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers” (“ASC 606”). Under this standard, we recognize revenues when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Trade Receivables are recorded when the right to consideration becomes unconditional. Trade receivables are recorded net of credit losses allowance for any potential uncollectible amounts. We make 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. We write 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. 50 To determine revenue recognition for contracts that are within the scope of this standard, we perform the following five steps: 1) Identify the contract(s) with a customer A contract with a customer exists when (i) there is an enforceable contract with the customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services; (ii) the contract has commercial substance; and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is likely based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer's historical payment experience. 2) Identify the performance obligations of the contract We enter into contracts that may include multiple performance obligations. We account for individual products and services separately if they are distinct – i.e., if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. 3) Determine the transaction price The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. For certain contracts, the Company's contracts include usage based fees that constitute variable consideration and are included in the transaction price. We receive payments from customers based upon billing cycles and contract terms which may vary by contract type. Invoice payment terms are usually 30 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we generally do not include a significant financing component in our contracts since our sale prices are not subject to billing terms and the purpose of our contracts is not to receive financing from, or provide financing to, customers. In addition, we elect to apply the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Revenue is measured based on the consideration specified in a contract with a customer, excluding taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer. 4) Allocate the transaction price to the performance obligations of the contract We allocate the transaction price to each performance obligation identified based on its relative standalone selling price (“SSP”) out of the total consideration of the contract. We use judgment in determining the SSP. If the SSP is not observable through standalone transactions, we estimate the SSP by taking into account available information such as geographic or regional specific factors, internal costs, profit objectives, and internally approved pricing guidelines related to the performance obligations. We typically establish SSP range for our products and services, which is reassessed on a periodic basis or when facts and circumstances change. SSP for products and services can evolve over time due to changes in our pricing practices that are influenced by intense competition, changes in demand for products and services, and economic factors, among others. For products where the SSP cannot be determined based on observable prices given that the same products are sold for a broad range of amounts (that is, the selling price is highly variable), we apply the residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSPs, with any residual amount of transaction price allocated to these product revenues. Some of the our contracts include variable fees that are based on actual usage. For these contracts the we generally allocates the variable fees using the variable consideration allocation exception. 51 5) Recognize revenue when (or as) the entity satisfies a performance obligation We derive our cloud revenues from subscription services, which are comprised of subscription fees from granting customers access to our cloud platforms, network connectivity and services fees for deployment of certain cloud platforms. Revenue from subscription services is recognized when control is transferred to the customer, occurring either evenly over the contract period as services have a consistent continuous pattern of transfer to the customer, or based on actual usage. Revenue from network connectivity is based on customer call usage and is recognized in the period the call is initiated. Services fees for deployment, which are considered as material rights, are initially deferred and recognized over the average customer life. Revenue from software license, support and maintenance services are recognized at the time the related performance obligation is satisfied by transferring the promised product or service to the customer. Software license revenues are recognized at the point in time when the software license is delivered, and the customer obtains control of the license asset. Support and maintenance service revenues are recognized when control is transferred to the costumer, occurring evenly over the maintenance contract term, as the services have a consistent continuous pattern of transfer to a customer. Professional services revenues, are generally recognized over-time as services are performed using an input method based on labor hours, which the Company believes best depicts the transfer of the services to the customer. Subscription professional services are recognized evenly over the subscription term, as the services have a consistent continuous pattern of transfer to the customer. Deferred revenue, which represent a contract liability, represent unrecognized fees collected mostly for maintenance, cloud and professional services. Deferred revenues are recognized as (or when) we perform under the contract. Impairment of Long-Lived Assets. Our long-lived assets include goodwill, property and equipment and identifiable other intangible assets that are subject to amortization. Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, "Intangible - Goodwill and Other" ("ASC 350"), goodwill is not amortized but rather subject to an annual impairment test, which we perform as at the fourth quarter of each year, or if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we prepare a quantitative analysis to determine whether the carrying value of reporting unit exceeds its estimated fair value. If the carrying value of a reporting unit exceeds its estimated fair value, we recognize an impairment of goodwill for the amount of this excess. During the fourth quarter of each of the fiscal years ended December 31, 2025, 2024 and 2023, we performed a qualitative assessment for our reporting units and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required. Accordingly, no impairment charge was recognized during any of such fiscal years. Income Taxes. To prepare our consolidated financial statements, we estimate our income taxes in each of the jurisdictions in which we operate, and in certain of these jurisdictions, our income taxes are calculated based on our assumptions as to our entitlement to various benefits under the applicable tax laws in the jurisdiction. The entitlement to such benefits depends upon our compliance with the terms and conditions set out in these laws. We account for income taxes in accordance with ASC 740, “Income Taxes.” This topic prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on 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. We provide a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. Deferred tax assets and deferred tax liabilities are presented under long-term assets and long-term liabilities, respectively. 52 We implement a two-step approach to recognize and measure 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. In December 2023, the Financial Accounting Standards Board issued ASU 2023-09- Income Taxes (Topics 740): Improvements to Income Tax Disclosures, which expands the disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. We have adopted ASU 2023-09 for our annual period beginning January 1, 2025 on a retrospective basis, See Note 13 Income taxes for further information. Business Combination. We apply the provisions of ASC 805, “Business Combination,” and we allocate 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 customer relationships, acquired technology and acquired trademarks 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. Contingent consideration incurred in a business combination is included as part of the acquisition price and recorded at fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings under general and administrative expenses. Stock-based Compensation. We granted restricted share units (“RSUs”) and stock options vesting solely upon continued service, as well as performance-based awards, including performance stock units (“PSUs”), with vesting based on achievement of specified performance targets. In addition, we granted share purchase rights under our Employee Stock Purchase Plan (“ESPP”), which is primarily available to active employees. We account for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”), which requires the measurement and recognition of stock base compensation expense based on estimated fair values for all share-based payment awards made to employees and directors. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. We elected to account for forfeitures as they occur. We recognize compensation expenses for the value of our awards, which have graded vesting, based on the accelerated attribution method over the requisite service period of each of the awards. We estimate the fair value of stock options and ESPP granted using the Black-Scholes-Merton option-pricing model, which requires a number of assumptions: the expected volatility is based upon actual historical stock price movements; the expected term of options granted is based upon historical experience and represents the period of time that options granted are expected to be outstanding; the risk-free interest rate is based on the yield from U.S. Federal Reserve zero-coupon bonds with an equivalent term; and the expected dividend rate (an annualized dividend yield) is based on the per share dividend declared by our Board of Directors. We measure the fair value of restricted stock based on the market value of the underlying shares at the date of grant. Marketable Securities. We account for investments in debt securities in accordance with ASC 320, “Investments - Debt Securities” and ASC No. 326, “Financial Instruments - Credit Losses”. Management determines the appropriate classification of our investments in debt securities at the time of purchase and re-evaluates such determinations at each balance sheet date. 53 Marketable securities classified as “available-for-sale” (“AFS”) are carried at fair value. Unrealized gains and losses are reported in a separate component of shareholders’ equity in accumulated other comprehensive income, net of taxes. Gains and losses are recognized when realized, on a specific identification basis, in our consolidated statements of income. For each reporting period, we evaluate whether declines in fair value below the amortized cost are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs, in accordance with ASC 326. Allowance for credit losses on AFS debt securities are recognized as a charge in financial expenses (income) and other, net, on the consolidated statements of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss). As of December 31, 2025, no credit losses have been recorded. We classified all our marketable securities with maturities beyond 12 months as current assets under the caption short term investments on the consolidated balance sheet. These securities are available to support current operations and we may sell these debt securities prior to their stated maturities. Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires disaggregated disclosure in the notes to the financial statements, of prescribed categories of expenses within relevant income statement captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the effect of adopting the ASU on our disclosures. 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 fiscal years beginning January 1, 2026, with early adoption permitted. We are currently evaluating the effect of adopting the ASU on our consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles - 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 fiscal years beginning January 1, 2028, with early adoption permitted. We are currently evaluating the effect of adopting the ASU on our consolidated financial statements. In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The update provides recognition, measurement, presentation, and disclosure requirements for government grants, including guidance for grants related to an asset and grants related to income. The guidance is effective for the fiscal years beginning January 1, 2029, with early adoption permitted. We are currently evaluating the effect of adopting the ASU on our consolidated financial statements. Results of Operations 54 The following table sets forth our selected consolidated statements of income for the years ended December 31, 2025 and 2024, expressed as a percentage of total revenues (totals may not add up due to rounding). 2025 2024 Revenue: Cloud 76.0 % 72.5 % Services 19.0 % 21.8 % Product 5.0 % 5.7 % 100.0 % 100.0 % Cost of revenue: Cloud 26.2 % 25.6 % Services 6.6 % 6.7 % Product 0.8 % 0.9 % 33.6 % 33.2 % Gross profit 66.4 % 66.8 % Operating expenses: Research and development, net 12.2 % 13.2 % Selling and marketing 22.5 % 23.5 % General and administrative 9.8 % 10.1 % Total operating expenses 44.5 % 46.8 % Operating income 21.9 % 20.0 % Financial income and other, net 2.0 % 2.2 % Income before taxes 23.9 % 22.2 % Taxes on income 3.1 % 5.9 % Net income 20.8 % 16.3 % Comparison of Years Ended December 31, 2025 and 2024 For a comparison of our results for the years ended December 31, 2024 and 2023, please refer to Item 5 in our annual report on Form 20-F for the year ended December 31, 2024, filed with the SEC on March 19, 2025. Our revenues increased by approximately Years Ended December 31, Percentage (In millions) Change 2025 2024 2024-2025 Cloud revenue $ 2,238.4 $ 1,984.2 12.8 % Service revenue 560.0 596.0 (6.0) % Product revenue 147.0 155.1 (5.2) % Total revenue $ 2,945.4 $ 2,735.3 7.7 % Our revenues increased by approximately $210.1 million, or 7.7%, from $2,735.3 million in the year ended December 31, 2024 to $2,945.4 million in the year ended December 31, 2025. The increase consisted of 55 a $178.2 million increase in Customer Engagement revenue and a $31.9 million increase in Financial Crime and Compliance revenue. The revenue growth of our Customer Engagement business segment in 2025 is primarily attributed to the continued increase in demand for our cloud platform CXone from new customers and ongoing expansion within our installed customer base, driven by further penetration into the large enterprise market globally. The revenue increase in our Financial Crime and Compliance business segment in 2025 is primarily attributed to an increase in cloud revenue due to increased adoption of our cloud platforms X-Sight and Xceed, as well as an increase in revenues from our premise-based business. Our cloud revenue in 2025 increased by 12.8%, or $254.2 million, to $2,238.4 million compared to $1,984.2 million in 2024, mainly due to an increase in the Customer Engagement segment from growing demand for our CXone cloud platform and our CX AI solutions, including further adoption at the high end of the market and increasing international cloud adoption, resulting from both new customers and expansion from existing customers. In addition, the increase in overall cloud revenue is partially attributed to the growing adoption of our cloud solutions in the Financial Crime and Compliance segment. Revenue derived from our cloud platforms accounted for 76.0% of our total revenue in 2025, as part of our strategy of increasing cloud revenue as a percentage of our total revenue. Our service revenue in 2025 decreased by 6.0%, or $36.0 million, to $560.0 million compared to $596.0 million in 2024, mainly due to a decrease in maintenance revenue, as a growing number of our existing on-premises customers transitioned to our cloud-based solutions. Our product revenue in 2025 decreased by 5.2%, or $8.1 million, to $147.0 million compared to $155.1 million in 2024, as customers are increasingly shifting towards cloud-based solutions. Revenue by Region Years Ended December 31, Percentage (In millions) Change 2025 2024 2024-2025 United States, Canada and Central and South America (“Americas”) $ 2,465.6 $ 2,321.5 6.2 % Europe, the Middle East and Africa (“EMEA”) 325.1 278.1 16.9 % Asia-Pacific (“APAC”) 154.7 135.7 14.0 % Total revenues $ 2,945.4 $ 2,735.3 7.7 % Revenue in Americas increased in 2025 by 6.2%, or $144.1 million, to $2,465.6 million compared to $2,321.5 million in 2024, due to an increase in cloud revenue for our cloud platforms. Revenue in EMEA increased in 2025 by 16.9%, or $47.0 million, to $325.1 million compared to $278.1 million in 2024, primarily attributed to the increase in cloud revenue for our cloud platforms in both of our business segments. Revenue in APAC increased in 2025 by 14.0%, or $19.0 million, to $154.7 million compared to $135.7 million in 2024. The increase in revenue in 2025 is attributed to the increase in cloud revenue in both of our business segments. 56 Cost of Revenue Years Ended December 31, Percentage (In millions) Change 2025 2024 2024-2025 Cost of cloud revenue $ 770.5 $ 699.7 10.1 % Cost of service revenue 193.9 184.4 5.2 % Cost of product revenue 24.8 25.4 (2.2) % Total cost of revenue $ 989.3 $ 909.5 8.8 % Our cost of cloud revenue in 2025 increased by $70.8 million, or 10.1% compared to 2024, and slightly increased as a percentage of cloud revenue. The increase in the cost of cloud revenue is primarily due to an increase in our public cloud costs associated with an increase in our cloud sales as well as additional infrastructure investments to support sovereign cloud deployments for international expansion. Our cost of service revenue in 2025 increased by $9.5 million, or 5.2%, compared to 2024 and increased as a percentage of service revenue compared to 2024. Our cost of product revenue in 2025 decreased by $0.6 million, or 2.2%, compared to 2024 and remained stable as a percentage of product revenue compared to 2024. Gross Profit Years Ended December 31, Percentage (In millions) Change 2025 2024 2024-2025 Gross profit on cloud revenue $ 1,467.9 $ 1,284.4 14.3 % as a percentage of cloud revenue 65.6 % 64.7 % Gross profit on service revenue 366.1 411.6 (11.1) % as a percentage of service revenue 65.4 % 69.1 % Gross profit on product revenue 122.1 129.7 (5.8) % as a percentage of product revenue 83.1 % 83.6 % Total gross profit $ 1,956.1 $ 1,825.7 7.1 % as a percentage of total revenue 66.4 % 66.7 % Our cloud gross profit was $1,467.9 million in 2025 compared to $1,284.4 in 2024, representing an increase of $183.5 million, or 14.3%. Our cloud gross profit as a percentage of cloud revenue increased to 65.6% in 2025 compared to 64.7% in 2024. The increase in cloud gross profit and margin is mainly attributed to an increase in our cloud business. Our services gross profit was $366.1 in 2025 compared to $411.6 in 2024, representing a decrease of $45.5 million, or 11.1%, which is mainly attributed to a decrease in maintenance revenue, as a growing number of our existing on-premises customers migrate to our cloud-based solutions. As a percentage of service revenue, our services gross profit was 65.4% in 2025 compared to 69.1% in 2024. Our product gross profit was $122.1 in 2025 compared to $129.7 in 2024, representing a decrease of $7.6 million, or 5.8%, which is primarily attributable to an ongoing shift in customer demand toward cloud-based solutions, including the continued migration of existing customers from on-premises products to our cloud offering. Our product gross margin decreased to 83.1% in 2025 compared to 83.6% in 2024. 57 Operating Expenses Years Ended December 31, Percentage (In millions) Change 2025 2024 2024-2025 Research and development, net $ 360.5 $ 360.6 — % Selling and marketing 661.1 642.3 2.9 % General and administrative 288.8 276.9 4.3 % Total operating expenses $ 1,310.4 $ 1,279.7 2.4 % Research and Development, Net. Net research and development expenses decreased by $0.1 million to $360.5 million in 2025 compared to $360.6 million in 2024, and represented 12.2% and 13.2% of revenues in 2025 and 2024, respectively. Research and development expenses increased on a gross basis while the decrease is attributed primarily to an increase in capitalization of software development costs. Selling and Marketing Expenses. Selling and marketing expenses increased by $18.8 million to $661.1 million in 2025 compared to $642.3 million in 2024, which represented 22.5% and 23.5% of total revenues in 2025 and 2024, respectively. The increase in selling and marketing expenses is attributed primarily to salary expenses due to an increase in headcount and intangible assets amortization. General and Administrative Expenses. General and administrative expenses in 2025 were $288.8 million compared to $276.9 million in 2024, which represented 9.8% of total revenues in 2025, as compared to 10.1% of total revenues in 2024. The increase in general and administrative expenses is attributed primarily to increase in sub-contractors spend. Financial Expenses and Other, net Years Ended December 31, Percentage (In millions) Change 2025 2024 2024-2025 Financial income and other, net 58.3 58.9 (1.0) % Financial Expense income and Other, net. Financial income and other, net, decreased by $0.6 million to income of $58.3 million in 2025 compared to $58.9 million in 2024. The slight decrease in financial income and other, net is attributable primarily to lower average short-term investment balances due to realization of marketable securities utilized to source funding for acquisitions, which reduced interest income, partially offset by a favorable impact from exchange rate movements year over year. Taxes on Income. Total tax expenses were $91.9 million in 2025 and $162.2 million in 2024. Our effective tax rate was 13.1% in 2025 and 26.8% in 2024. The decrease in 2025 of $70.3 million in tax expenses is mainly due to a favorable outcome of a tax audit settlement in 2025. The majority of our income in Israel continues to benefit from reduced tax rates, pursuant to our Special Preferred Technological Enterprise and Preferred Technology Enterprise programs, as discussed in Note 13 of our Consolidated Financial Statements included elsewhere in this annual report under the caption “Taxes on Income”. Net Income. Net income increased by $169.5 million to $612.1 million in 2025 compared to $442.6 million in 2024. The increase in 2025 resulted primarily from an increase in our revenue, partially offset by higher cost of revenue and operating expenses. Liquidity and Capital Resources To date, we have financed our operations, acquisitions and the repurchase of our equity, primarily through cash generated from our operating activities. 58 As of December 31, 2025, we had $417.4 million of cash equivalents and in short-term investments, which included $379.4 million in cash and cash equivalents, and $38.0 million in short-term investments. We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for the next 12 months and beyond. We plan to continue to finance our operations in the future primarily through sales of our solutions, most notably our cloud platforms. Our future capital requirements will depend on many factors, including our growth rate, continuing market acceptance of our solutions, client retention, our ability to gain new clients, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities and personnel, the introduction of new and enhanced offerings, and the impact of changes to the global economy, among other factors. We may also acquire or invest in complementary businesses, technologies and intellectual property rights, which may increase our use of cash and future capital requirements, both to pay acquisition costs and to support our combined operations. We continually evaluate our capital needs and may decide to raise additional capital to fund the growth of our business and future acquisitions and investments, through public or private equity offerings or through debt financing. Access to additional capital may not be available or on favorable terms. Cash Flows Generally, we invest our excess cash in highly liquid investment grade securities. As of December 31, 2025, we had $417.4 million of cash and cash equivalents and short-term investments, as compared to $1,621.7 million at December 31, 2024. Net cash provided by operating activities primarily resulting from our revenue cash collection. Our primary uses of cash from operating activities have been research and development expenses, selling and marketing expenses, personnel and related overhead costs and other costs related to the provision of our business. We expect cash inflows from operating activities to be affected by revenue collection and interest rate. We expect cash outflows from operating activities to be affected by increases in research and development, selling and marketing and increases in personnel costs as we grow our business. Net cash provided by operating activities was $716.5 million and $832.6 million in 2025 and 2024, respectively. Net cash provided by operating activities in 2025 consisted primarily of net income of $612.1 million, adjusted for non-cash activities such as depreciation and amortization of $199.0 million, stock-based compensation of $146.0 million, an increase in deferred taxes of $10.5 million as well as working capital changes derived from a decrease in prepaid expenses and other current assets of $40.7 million, partially offset by a decrease in accrued expenses and other liabilities of $175.1 million, an increase in trade receivables of $75.8 million, an increase in deferred revenue of $22.8 and a decrease in operating lease liabilities of $16.3. Net cash from operations in 2024 consisted primarily of net income of $442.6 million, adjusted for non-cash activities such as depreciation and amortization of $205.0 million, stock-based compensation of $182.1 million, an increase in deferred taxes of $40.3 million as well as working capital changes derived from an increase in trade payables of $44.0 million, an increase in accrued expenses and other liabilities of $42.0 million and a decrease in prepaid expenses and other current assets of $25.0 million, partially offset by an increase in trade receivables of $61.0 million. Net cash provided by (used) in investing activities was $160.0 million and $(397.4) million in 2025 and 2024, respectively. In 2025, net cash provided by investing activities consisted primarily of net marketable securities of $908.8 million offset by payment for acquisitions in the aggregate amount of $856.1 million, purchase of property and equipment of $18.9 million and capitalization of internal use software costs of $74.8 million. In 2024, net cash used in investing activities consisted primarily of net investments in marketable securities and short-term bank deposits of $232.8 million, payment for acquisitions in the aggregate amount of $64.8 million, purchase of property and equipment of $35.0 million and capitalization of internal use software costs of $64.8 million. Net cash used in financing activities was $984.3 million and $456.6 million in 2025 and 2024, respectively. In 2025, net cash used in financing activities was attributed primarily to repurchase of our ordinary shares of $488.9 million and repayment of long-term debt in the amount of $460.0 million. In 2024, net cash used in financing 59 activities was attributed primarily to repurchase of our ordinary shares of $369.2 million and repayment of long-term debt in the amount of $192.1 million. Contractual and Other Obligations Set forth below are our material contractual obligations and other commercial commitments as of December 31, 2025 (in thousands). Payments Due by Period Contractual Obligations Total Less than 1 year 1- 3 years 3-5 years More than 5 years Operating Leases $ 105,404 16,329 28,830 26,102 34,143 Unconditional Purchase Obligations $ 342,548 $ 155,629 $ 185,830 $ 1,089 $ — Severance Pay* $ 23,821 Total Contractual Cash Obligations $ 471,773 $ 171,958 $ 214,660 $ 27,191 $ 34,143 Uncertain Income Tax Positions ** $ 70,541 * Severance pay relates to accrued obligations to employees as required under applicable labor laws. These obligations are payable only upon termination, retirement or death of the respective employees. ** Uncertain income tax positions under ASC 740 are due upon settlement and we are unable to reasonably estimate the ultimate amount or timing of settlement. See Note 13(i) of our consolidated financial statements included elsewhere in this annual report for further information regarding our liability under ASC 740. Amount of Commitment Expiration Per Period Other Commercial Commitments Total Amounts Committed Less than 1 year 1- 3 years 3- 5 years More than 5 years Guarantees* $ 2,595 $ 85 $ 2,172 $ 338 * Primarily in connection with office lease agreements. Research and Development and Intellectual Property For information on our research and development policies and intellectual property, please see “Research and Development” and “Intellectual Property” under Item 4, “Information on the Company” in this annual report. Trend Information For additional information on trends in our industry, please see Item 4, “Information on the Company—Business Overview—Industry and Technology Trends” in this annual report. For additional information on trends, uncertainties, demands, commitments or events that may have a material effect on revenue, please see Item 3, “Key Information—Risk Factors” in this annual report. 60 Item 6. Directors, Senior Management and Employees.