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Why Is Varonis (VRNS) Up 10.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Varonis Systems (VRNS - Free Report) . Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Varonis due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Varonis Systems came out with first-quarter 2026 earnings of 6 cents per share, in contrast to the Zacks Consensus Estimate of a loss of 5 cents.
VRNS posted revenues of $173.13 million in the first quarter of 2026, beating the Zacks Consensus Estimate by 4.5%. This compares with year-ago revenues of $136.4 million.
Varonis’ strong performance in the first quarter of 2026 can be attributed to SaaS momentum and rising demand for automated compliance products.
VRNS Revenue Mix Skews Further Toward SaaS
Varonis continued to benefit from its SaaS transition in the first quarter of 2026. SaaS revenues rose to $161.1 million compared with $88.6 million in the year-ago quarter, highlighting the expanding base of cloud-delivered contracts.
Legacy streams continued to contract as customers shifted to the SaaS platform. Term license subscription revenues declined to $6.9 million from $31.5 million a year ago, while maintenance and services revenues fell to $5.2 million from $16.4 million, with management attributing most of the declines to conversions.
Non-GAAP gross profit for the quarter was $134.9 million, translating to a gross margin of 77.9%, down from 80.2% in the prior-year period. The modest compression aligns with the company’s broader SaaS revenue recognition dynamics and ongoing platform evolution.
On the cost side, non-GAAP operating expenses totaled $136.3 million. That produced a non-GAAP operating loss of $1.4 million compared with a $6.5 million loss a year earlier, with operating margin narrowing to negative 0.8% from negative 4.7%.
As of March 31, 2026, Varonis had $899.5 million in cash, cash equivalents, marketable securities and short-term deposits, down from $921 million at the end of the previous quarter.
Varonis generated $49.0 million of free cash flow in the first quarter compared with $65.3 million a year ago. The company noted that results included acquisition-related costs, and adjusted free cash flow was $61.6 million for the period.
The company also returned capital via repurchases, buying back 5,355,445 shares at an average price of $24.67 for a total of $132.1 million.
Varonis Leans Into AI Security and Expanding Use Cases
Total SaaS ARR in the reported quarter was $683.2 million, up 69% year over year, reflecting both organic subscription expansion and the ongoing conversion of customers to the SaaS platform. Management reported $11.3 million of conversion ARR in the quarter and finished with about $83.7 million of non-SaaS ARR remaining.
Operationally, management emphasized accelerating demand tied to securing enterprise data for AI adoption, pointing to customer traction in managed detection and response capabilities and AI-related offerings. The company also highlighted early customer interest in newer products added through acquisitions, including Atlas, positioning it as a control plane for AI models, agents and pipelines that complements Varonis’ data security platform.
VRNS Raises Full-Year View and Guides Q2 for Growth
For the second quarter of 2026, Varonis expects revenues to be in the range of $175-$178 million, implying 15-17% year-over-year growth.
The company projects breakeven to earnings of a penny per diluted share for the second quarter of 2026.
It also expects SaaS ARR growth to be in the range of 24-25% year over year, excluding conversions.
For full-year 2026, management raised its outlook and now expects revenues to be between $731 million and $737 million, implying growth of 17-18% year over year.
The company projects total SaaS ARR between $814 million and $845 million and free cash flow to be in the range of $100-$105 million.
VRNS’ non-GAAP operating income is expected to be in the band of $7-$9 million and non-GAAP earnings between 11 cents and 12 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Varonis has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Varonis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Varonis (VRNS) Up 10.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Varonis Systems (VRNS - Free Report) . Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Varonis due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
VRNS Q1 Earnings Surpass Expectations, Revenues Increase Y/Y
Varonis Systems came out with first-quarter 2026 earnings of 6 cents per share, in contrast to the Zacks Consensus Estimate of a loss of 5 cents.
VRNS posted revenues of $173.13 million in the first quarter of 2026, beating the Zacks Consensus Estimate by 4.5%. This compares with year-ago revenues of $136.4 million.
Varonis’ strong performance in the first quarter of 2026 can be attributed to SaaS momentum and rising demand for automated compliance products.
VRNS Revenue Mix Skews Further Toward SaaS
Varonis continued to benefit from its SaaS transition in the first quarter of 2026. SaaS revenues rose to $161.1 million compared with $88.6 million in the year-ago quarter, highlighting the expanding base of cloud-delivered contracts.
Legacy streams continued to contract as customers shifted to the SaaS platform. Term license subscription revenues declined to $6.9 million from $31.5 million a year ago, while maintenance and services revenues fell to $5.2 million from $16.4 million, with management attributing most of the declines to conversions.
Varonis Tightens Profitability Despite Transition Headwinds
Non-GAAP gross profit for the quarter was $134.9 million, translating to a gross margin of 77.9%, down from 80.2% in the prior-year period. The modest compression aligns with the company’s broader SaaS revenue recognition dynamics and ongoing platform evolution.
On the cost side, non-GAAP operating expenses totaled $136.3 million. That produced a non-GAAP operating loss of $1.4 million compared with a $6.5 million loss a year earlier, with operating margin narrowing to negative 0.8% from negative 4.7%.
VRNS Cash Generation Remains Solid, Buybacks Continue
As of March 31, 2026, Varonis had $899.5 million in cash, cash equivalents, marketable securities and short-term deposits, down from $921 million at the end of the previous quarter.
Varonis generated $49.0 million of free cash flow in the first quarter compared with $65.3 million a year ago. The company noted that results included acquisition-related costs, and adjusted free cash flow was $61.6 million for the period.
The company also returned capital via repurchases, buying back 5,355,445 shares at an average price of $24.67 for a total of $132.1 million.
Varonis Leans Into AI Security and Expanding Use Cases
Total SaaS ARR in the reported quarter was $683.2 million, up 69% year over year, reflecting both organic subscription expansion and the ongoing conversion of customers to the SaaS platform. Management reported $11.3 million of conversion ARR in the quarter and finished with about $83.7 million of non-SaaS ARR remaining.
Operationally, management emphasized accelerating demand tied to securing enterprise data for AI adoption, pointing to customer traction in managed detection and response capabilities and AI-related offerings. The company also highlighted early customer interest in newer products added through acquisitions, including Atlas, positioning it as a control plane for AI models, agents and pipelines that complements Varonis’ data security platform.
VRNS Raises Full-Year View and Guides Q2 for Growth
For the second quarter of 2026, Varonis expects revenues to be in the range of $175-$178 million, implying 15-17% year-over-year growth.
The company projects breakeven to earnings of a penny per diluted share for the second quarter of 2026.
It also expects SaaS ARR growth to be in the range of 24-25% year over year, excluding conversions.
For full-year 2026, management raised its outlook and now expects revenues to be between $731 million and $737 million, implying growth of 17-18% year over year.
The company projects total SaaS ARR between $814 million and $845 million and free cash flow to be in the range of $100-$105 million.
VRNS’ non-GAAP operating income is expected to be in the band of $7-$9 million and non-GAAP earnings between 11 cents and 12 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Varonis has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Varonis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.