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Varonis Systems (VRNS)
NASDAQ:VRNS
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Varonis Systems (VRNS) AI Stock Analysis

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VRNS

Varonis Systems

(NASDAQ:VRNS)

Rating:72Outperform
Price Target:
$66.00
▲(19.07% Upside)
Varonis Systems' overall stock score is driven by strong technical indicators and a stable financial performance, despite challenges in profitability and valuation. The company's strategic transition to a SaaS model and recent acquisitions position it well for future growth, although macroeconomic uncertainties and operational losses remain concerns.
Positive Factors
Acquisition
Varonis announced the acquisition of SlashNext, bringing Varonis into the API-based, Email Security market and competing against vendors such as Mimecast and Abnormal AI.
Financial Performance
Varonis is well-positioned to capitalize on the growing adoption of Agentic AI, which should enable revenue growth to significantly accelerate, driving shares higher.
Market Expansion
The acquisition significantly expands Varonis’s total addressable market, as the email security market is projected to grow substantially, driven by the rise of AI-driven phishing and Business Email Compromise attacks.
Negative Factors
Operational Expenses
Management slightly lowered guidance for operating income and EPS due to incremental expenses associated with the SlashNext acquisition.
Profit Margins
New guidance reflects higher expenses from M&A, resulting in a reduced operating margin and adjusted EPS.
Revenue Estimates
The consensus estimate for SaaS revenue is not correctly factoring in the conversion from ARR, underestimating the revenue growth Varonis can deliver.

Varonis Systems (VRNS) vs. SPDR S&P 500 ETF (SPY)

Varonis Systems Business Overview & Revenue Model

Company DescriptionVaronis Systems, Inc. provides software products and services that allow enterprises to manage, analyze, alert, and secure enterprise data in North America, Europe, the Middle East, Africa, and internationally. Its software enables enterprises to protect data stored on premises and in the cloud, including sensitive files and emails; confidential personal data belonging to customers, and patients and employees' data; financial records; strategic and product plans; and other intellectual property. The company offers DatAdvantage that captures, aggregates, normalizes, and analyzes every data access event for users on Windows and UNIX/Linux servers, storage devices, email systems, Intranet servers, cloud applications, and data stores; and DatAlert that profiles users, devices, and their behaviors related to systems and data, detects and alerts on deviations that indicate compromise, and provides a Web-based dashboard and investigative interface. It also provides Data Classification Engine that identifies and tags data based on criteria set in various metadata dimensions, as well as provides business and information technology (IT) personnel with actionable intelligence about data; and DataPrivilege, which offers a self-service Web portal that allows users to request access to data necessary for their business functions, and owners to grant access without IT intervention. In addition, the company provides Data Transport Engine, which provides an execution engine that unifies the manipulation of data and metadata, translating business decisions, and instructions into technical commands, such as data migration or archiving; and DatAnswers that offers search functionality for enterprise data. Varonis Systems, Inc. sells products and services through a network of distributors and resellers. The company serves IT, security, and business personnel. Varonis Systems, Inc. was incorporated in 2004 and is headquartered in New York, New York.
How the Company Makes MoneyVaronis generates revenue primarily through the sale of its software solutions and subscription services. The company's revenue model is largely based on a combination of software licenses, annual maintenance and support services, and subscription fees for its cloud-based offerings. Key revenue streams include the sale of perpetual licenses and subscription-based licenses for their data security products. Additionally, Varonis benefits from its partnerships with various technology firms and resellers, which help expand its market reach and enhance its offerings. The company also invests in ongoing customer support and education services, ensuring customer retention and recurring revenue.

Varonis Systems Key Performance Indicators (KPIs)

Any
Any
Annual Recurring Revenue
Annual Recurring Revenue
Highlights the steady income from subscription-based services, indicating the company's ability to retain customers and generate predictable cash flow.
Chart InsightsVaronis Systems' Annual Recurring Revenue has shown consistent growth, driven by strong demand for its SaaS platform and AI-driven data security solutions. The latest earnings call highlights a 19% year-over-year ARR increase, with SaaS now comprising 69% of the total. The company achieved FedRAMP Authorization, opening federal sector opportunities, and announced a strategic partnership with Microsoft. Despite these positives, challenges like operating losses and macroeconomic headwinds persist. Varonis raised its full-year ARR guidance, emphasizing a strategic focus on achieving over 20% ARR growth post-transition.
Data provided by:Main Street Data

Varonis Systems Earnings Call Summary

Earnings Call Date:Jul 29, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Nov 03, 2025
Earnings Call Sentiment Neutral
Varonis Systems' earnings call reflects a positive momentum in ARR growth, free cash flow, and strategic advancements like FedRAMP Authorization and a stronger partnership with Microsoft. However, there are challenges, including an operating loss, decreased gross margin, and ongoing macroeconomic uncertainties. The transition to SaaS is showing strong demand but has led to revenue recognition headwinds.
Q2-2025 Updates
Positive Updates
Strong ARR Growth
ARR grew by 19% year-over-year to $693.2 million, with SaaS ARR representing 69% of total ARR.
Free Cash Flow Increase
Year-to-date free cash flow increased to $82.7 million from $67.3 million in the same period last year.
FedRAMP Authorization
Achieved FedRAMP Authorization, enabling Varonis to offer its SaaS platform to the federal sector.
New Customer Wins
Secured new contracts with large organizations, including a health care organization with over 20,000 employees and a defense contractor with over 25,000 employees.
Expansion in Cloud Security
Strong demand for SaaS platform from new and existing customers, particularly in cloud environments such as AWS and Azure.
Microsoft Partnership
Expanded partnership with Microsoft to improve AI security, including integration with Microsoft Copilot.
Negative Updates
Operating Loss
Reported an operating loss of $1.9 million for the second quarter, compared to an operating income of $2.1 million in the same period last year.
Gross Margin Decline
Gross margin decreased to 80.6% from 84.1% in the second quarter of 2024.
Revenue Headwinds Due to SaaS Transition
Recognized a 7% headwind in year-over-year revenue growth due to increased SaaS sales, which are recognized ratably.
Uncertain Macro Environment
Continued macroeconomic uncertainty with increased deal scrutiny, similar to previous quarter.
Company Guidance
During Varonis Systems' second quarter 2025 earnings call, the company reported a 19% year-over-year growth in Annual Recurring Revenue (ARR), reaching $693.2 million, with SaaS ARR constituting about 69% of the total. This reflects the company's significant progress in transitioning to a SaaS model. Year-to-date, Varonis generated $82.7 million in free cash flow, an increase from $67.3 million in the previous year. The call highlighted the strong demand for Varonis' SaaS platform, driven by its automated data security capabilities. The company raised its full-year ARR guidance to $748-$754 million and projected total revenues between $616-$628 million for 2025. Additionally, the company achieved FedRAMP Authorization, expanding its reach into the federal sector.

Varonis Systems Financial Statement Overview

Summary
Varonis Systems shows consistent revenue growth and improved cash flow management, despite ongoing net losses. The balance sheet is stable with strong liquidity, but the decline in equity requires attention.
Income Statement
65
Positive
Varonis Systems has shown a consistent revenue growth, with a TTM revenue of $595.2M, up from $550.9M in the previous year. However, the company is still operating at a net loss, though the net loss has decreased from $95.8M to $14.4M. Gross profit margins are strong at 81.5% for TTM, but EBIT and EBITDA margins remain negative, indicating ongoing operational challenges.
Balance Sheet
72
Positive
The company's balance sheet reveals a reasonable debt-to-equity ratio of 2.17 in TTM, suggesting moderate leverage. Stockholders' equity has decreased, but cash reserves are strong at $770.9M. The equity ratio is 21.1%, indicating a balanced capital structure. While the financial stability is decent, the decline in equity requires attention.
Cash Flow
78
Positive
Varonis has improved its free cash flow from $108.5M to $124.8M in TTM, indicating positive cash flow growth. The operating cash flow to net income ratio is 9.45, revealing strong cash generation relative to net income. The company has demonstrated effective cash management, though capital expenditures are increasing.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue595.17M550.95M499.16M473.63M390.13M292.69M
Gross Profit484.84M457.10M427.41M403.80M330.74M248.43M
EBITDA-71.97M-67.31M-70.55M-82.04M-98.69M-68.51M
Net Income-14.41M-95.77M-100.92M-124.52M-116.86M-94.01M
Balance Sheet
Total Assets1.62B1.66B1.10B1.04B1.11B555.48M
Cash, Cash Equivalents and Short-Term Investments770.86M568.42M533.72M732.49M807.61M298.26M
Total Debt742.26M754.41M311.84M316.46M294.02M273.00M
Total Liabilities502.12M1.21B614.26M541.61M511.94M461.41M
Stockholders Equity341.50M455.66M489.65M502.13M596.59M94.07M
Cash Flow
Free Cash Flow124.81M108.51M54.32M475.00K-3.31M-15.96M
Operating Cash Flow136.10M115.20M59.42M11.87M7.18M-5.84M
Investing Cash Flow-370.35M-532.25M-143.08M-374.25M54.38M-54.75M
Financing Cash Flow278.08M371.90M-53.40M-75.58M510.11M225.75M

Varonis Systems Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price55.43
Price Trends
50DMA
54.19
Positive
100DMA
49.98
Positive
200DMA
47.27
Positive
Market Momentum
MACD
0.96
Positive
RSI
45.95
Neutral
STOCH
38.18
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VRNS, the sentiment is Neutral. The current price of 55.43 is below the 20-day moving average (MA) of 57.22, above the 50-day MA of 54.19, and above the 200-day MA of 47.27, indicating a neutral trend. The MACD of 0.96 indicates Positive momentum. The RSI at 45.95 is Neutral, neither overbought nor oversold. The STOCH value of 38.18 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for VRNS.

Varonis Systems Risk Analysis

Varonis Systems disclosed 55 risk factors in its most recent earnings report. Varonis Systems reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Varonis Systems Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
74
Outperform
$4.90B26.6539.53%9.69%9.50%
72
Outperform
$6.61B-25.73%14.29%-14.42%
71
Outperform
$4.73B25.86163.44%6.29%62.03%
65
Neutral
$6.29B-27.34%25.39%-42.90%
63
Neutral
$3.74B-12.60%11.41%33.76%
61
Neutral
$35.09B8.26-10.59%1.90%8.56%-9.51%
52
Neutral
$1.34B48.29155.46%4.67%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
VRNS
Varonis Systems
55.43
0.38
0.69%
QLYS
Qualys
135.88
12.02
9.70%
BOX
Box
32.36
-0.51
-1.55%
RPD
Rapid7
20.42
-16.29
-44.37%
TENB
Tenable Holdings
30.75
-9.14
-22.91%
S
SentinelOne
18.02
-5.09
-22.03%

Varonis Systems Corporate Events

M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Varonis Systems Acquires SlashNext to Boost Security
Positive
Sep 2, 2025

On September 2, 2025, Varonis Systems announced the acquisition of SlashNext, an AI-native email security provider, to enhance its data breach prevention capabilities. This acquisition is expected to expand Varonis’ total addressable market and improve its threat detection and response offerings, particularly in combating AI-driven phishing attacks. The financial outlook for Varonis includes updated guidance reflecting the acquisition’s expenses, with anticipated revenue growth and free cash flow for 2025.

Shareholder MeetingsBusiness Operations and Strategy
Varonis Systems Approves Key Proposals at Annual Meeting
Positive
Jun 6, 2025

On June 5, 2025, Varonis Systems, Inc. held its 2025 Annual Meeting of Stockholders, where several key proposals were approved. The stockholders approved the 2025 Employee Stock Purchase Plan and an increase in the number of shares available under the 2023 Omnibus Equity Incentive Plan, reflecting strategic moves to enhance employee engagement and shareholder value. Additionally, the election of directors, executive compensation, and the appointment of an independent accounting firm were ratified, indicating strong shareholder support for the company’s governance and financial oversight.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 02, 2025