Varonis Systems (VRNS) AI Stock Analysis

• Market Cap: $2.55B
• Dividend Yield: N/A
• Average Volume (3M): 3.97M
• Price to Earnings (P/E): ―
• Beta (1Y): 0.85
• Revenue Growth: 11.37%
• EPS Growth: -34.44%
• Country: US
• Employees: 2,406
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 0.08
• Shares Outstanding: 117,447,720
• 10 Day Avg. Volume: 3,055,649
• 30 Day Avg. Volume: 3,973,357
• PEG Ratio: -1.04
• Price to Book (P/B): 7.08
• Price to Sales (P/S): 6.79
• P/FCF Ratio: 31.43
• Enterprise Value/Market Cap: 1.20
• Enterprise Value/Revenue: 4.89
• Enterprise Value/Gross Profit: 6.20
• Enterprise Value/Ebitda: -29.30
• 1Y Price Target: $36.57
• Price Target Upside: 60.96% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 16
• EPS Forecast (FY): 0.08
• Revenue Forecast (FY): $717.75M

• Rating: 54 Neutral
• Price Target: $26.00 ▲(14.44% Upside)
• Action: Reiterated Date: 02/05/26
• Date: Action: Reiterated 02/05/26

The score is supported primarily by improving financial resilience (strong and improving free cash flow and healthy gross margins) and constructive SaaS-focused guidance/metrics from the earnings call. These positives are tempered by persistent operating losses and a weak technical setup with the stock trading far below key moving averages alongside negative momentum indicators.

Positive Factors

SaaS ARR Scale

Large SaaS ARR and high mix (86% of ARR) indicate a durable recurring revenue base and strong product-market fit. Scale improves revenue predictability, supports higher gross margins, and enables efficient upsell/cross-sell, underpinning long-term margin recovery as self-hosted declines.

Strong Cash Generation

Consistent positive operating and free cash flow despite accounting losses signals robust cash conversion and working-capital discipline. This provides strategic flexibility to fund R&D, integrations, M&A, and buybacks, reducing reliance on external financing during the SaaS transition.

Product Expansion into AI Security

Acquiring AI security capabilities expands the addressable market and aligns the platform with a structural industry trend toward securing AI systems. This deepens competitive differentiation, supports higher-value offerings, and strengthens long-term customer stickiness across cloud and data-security stacks.

Negative Factors

Persistent Operating Losses

Despite top-line growth and strong gross margins, sustained operating losses show limited operating leverage. This prevents returns on equity from turning positive, constrains reinvestment capacity long-term, and means continued reliance on cash reserves or FCF to fund growth until margins normalize.

End-of-Life Headwind

Deliberate sunsetting of self-hosted products creates a near-term structural drag on ARR contribution margins and FCF. The one-time and ongoing revenue displacement risks compress margins and delay operating-income improvement, making the multi-year transition execution-critical for restoring profitability.

Conversion Uncertainty

A wide conversion range and pockets of low-conversion customers (e.g., federal/state) introduce material execution and forecasting risk. If conversions undershoot, SaaS revenue growth and margin improvements could be delayed, increasing variability in multi-year cash flow and ROI from the transition.

Varonis Systems Business Overview & Revenue Model

Company Description

Varonis 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 Money

Varonis generates revenue primarily through the sale of its software licenses and subscription services. The company employs a SaaS (Software as a Service) model, where customers pay for access to its cloud-based solutions, which provides a recurring revenue stream. Additionally, Varonis offers professional services, including implementation, training, and support, which contribute to its earnings. Key revenue streams include annual subscriptions for its data security products, maintenance fees for existing customers, and professional services. Partnerships with cloud service providers and integrations with third-party software also enhance its market presence and drive sales, as organizations increasingly seek comprehensive data security solutions.

Varonis Systems Financial Statement Overview

Summary

Cash flow is a key strength (solidly positive and improving operating cash flow and free cash flow in 2024–2025), and gross margins are consistently strong. However, operating and net losses persist and widened in 2025, limiting overall quality despite improving leverage.

Income Statement

Revenue has grown steadily over the period, with 2025 showing very strong year-over-year growth versus the low-to-mid single-digit growth seen in 2023–2024. Profitability remains the key weakness: gross margins are consistently strong (~79–86%), but operating losses persist and widened in 2025 (operating and net margins remain meaningfully negative). Overall, the model shows solid top-line momentum and pricing/efficiency at the gross level, but still lacks operating leverage.

Balance Sheet

Leverage has improved materially versus earlier periods: debt relative to equity is moderate in 2025 and better than 2024 and 2020, supported by a larger equity base. However, the company is still loss-making, which keeps returns on equity negative and limits balance-sheet strength from an earnings-quality perspective. In short: healthier leverage trend and adequate capitalization, but profitability is not yet supporting the balance sheet.

Cash Flow

Cash generation is a clear strength. Operating cash flow and free cash flow are solidly positive in 2024–2025 and improved significantly versus 2020–2022 when cash flow was weak/negative. Free cash flow growth is also positive in recent years, and cash flow is holding up despite accounting losses, signaling good working-capital discipline and favorable cash conversion. The main caution is that reported earnings remain negative, so sustained cash generation needs to persist to fully de-risk the story.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	623.53M	550.95M	499.16M	473.63M	390.13M
Gross Profit	493.44M	457.10M	427.41M	403.80M	330.74M
EBITDA	-104.01M	-63.58M	-70.55M	-82.04M	-80.15M
Net Income	-129.32M	-95.77M	-100.92M	-124.52M	-116.86M
Balance Sheet
Total Assets	1.79B	1.66B	1.10B	1.04B	1.11B
Cash, Cash Equivalents and Short-Term Investments	920.97M	568.42M	533.72M	732.49M	807.61M
Total Debt	571.76M	754.41M	311.84M	316.46M	302.82M
Total Liabilities	1.19B	1.21B	614.26M	541.61M	511.94M
Stockholders Equity	598.66M	455.66M	489.65M	502.13M	596.59M
Cash Flow
Free Cash Flow	134.80M	108.51M	54.32M	475.00K	-3.31M
Operating Cash Flow	147.43M	115.20M	59.42M	11.87M	7.18M
Investing Cash Flow	-837.00K	-532.25M	-143.08M	-374.25M	54.38M
Financing Cash Flow	-129.70M	371.90M	-53.40M	-75.58M	510.11M

Varonis Systems Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 22.72
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VRNS, the sentiment is Negative. The current price of 22.72 is below the 20-day moving average (MA) of 25.63, below the 50-day MA of 30.56, and below the 200-day MA of 45.14, indicating a bearish trend. The MACD of -2.45 indicates Positive momentum. The RSI at 34.31 is Neutral, neither overbought nor oversold. The STOCH value of 17.22 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VRNS.

Varonis Systems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
QLYS	73 Outperform	$3.10B	16.76	38.20%	―	9.95%	12.72%
ATEN	70 Outperform	$1.36B	33.32	19.01%	1.33%	10.27%	3.52%
AKAM	62 Neutral	$14.51B	32.53	9.17%	―	4.21%	-0.63%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
TENB	60 Neutral	$2.18B	-63.29	-9.95%	―	11.05%	45.23%
S	57 Neutral	$4.34B	-10.30	-25.79%	―	24.09%	-34.25%
VRNS	54 Neutral	$2.55B	―	-24.53%	―	11.37%	-34.44%