Varonis (VRNS) Down 0.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Varonis Systems (VRNS). Shares have lost about 0.8% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Varonis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.

Varonis Q4 Earnings Surpass Estimates, Revenues Increase Y/Y

Varonis came out with fourth-quarter 2025 earnings of 8 cents per share, beating the Zacks Consensus Estimate by 166.7%. This compares with earnings of 18 cents per share a year ago.

VRNS posted revenues of $173.37 million for the quarter ended December 2025, beating the Zacks Consensus Estimate by 2.87%. This compares with year-ago revenues of $158.5 million.

Varonis’ strong performance in the fourth quarter of 2025 was attributed to SaaS momentum, rising demand for automated data security, expanding AI adoption, higher SaaS retention, and accelerating cloud workloads.

Varonis Systems’ Q4 2025 Details

Coming to Varonis’ business segments, revenues from SaaS (82.1% of total revenues) increased 97.1% year over year to $142.3 million. Term license subscriptions (12.1% of total revenues) decreased 68.6% year over year to $21.0 million. Maintenance and services (5.8% of total revenues) decreased 48.3% year over year to $10.1 million due to customers converting to the SaaS platform.

Varonis’ total annual recurring revenues (ARR) came in at $745.4 million, indicating a year-over-year rise of 16.1% in the fourth quarter of 2025. SaaS ARR of $638.5 million accounted for 86% of total ARR, rising 32% year over year, excluding conversions.

Varonis’ gross margin declined 470 basis points to 78.9% in the fourth quarter of 2025, reflecting the ongoing transition toward a SaaS-centric revenue model. The company reported a non-GAAP operating income of $4.6 million compared with $15.3 million in the year-ago quarter. The non-GAAP operating margin for the quarter was 2.7%, down from 9.7% in the prior-year period.

VRNS’ Balance Sheet & Cash Flow

As of Dec. 31, 2025, Varonis had $1.11 million in cash, cash equivalents, marketable securities and short-term deposits, compared with $1.1 billion as of Sept. 30, 2025.

The company generated $147.4 million in operating cash flow and reported free cash flow of $131.9 million in 2025.

Varonis Initiates Q1 and 2026 Guidance

For the first quarter of 2026, revenues are expected to be in the range of $164 million to $166 million, suggesting year-over-year growth of 20-22%. Varonis expects SaaS annual recurring revenue (ARR) to grow 27-28% year over year, excluding conversions. Varonis expects a non-GAAP operating loss between $10 million and $11 million. The company projects a non-GAAP net loss per basic and diluted share in the range of 5 cents to 6 cents, based on 118.0 million basic and diluted shares outstanding.

For full-year 2026, total revenues are expected to be between $722 million and $730 million, suggesting year-over-year growth of 16-17%. Varonis expects SaaS ARR to be between $805 million and $840 million, implying year-over-year growth of 26-32%. SaaS ARR growth is projected to be 18-20% year over year, excluding conversions.

Varonis expects non-GAAP operating income to be in the range of breakeven to $4 million. The company anticipates free cash flow in the range of $100 million to $105 million. The company projects non-GAAP net income per diluted share in the range of 6 cents to 10 cents, based on 134.2 million diluted shares outstanding.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -45.46% due to these changes.

VGM Scores

Currently, Varonis has a average Growth Score of C, 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 value investors.

Overall, the stock has an aggregate VGM Score of F. 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.