Varonis Systems, Inc.

What they do

Varonis sells software that finds, classifies and governs sensitive enterprise data stored in files, emails, databases, cloud infrastructure, identity repositories and SaaS/AI applications. Its platform is delivered primarily as a SaaS offering introduced in 2022, and it also sells MDDR, a 24x7 managed detection and response service. Sales are channel-led through distributors and resellers, targeting larger enterprises across industries; it has announced end-of-life for its self-hosted business effective December 31, 2026.

Revenue drivers

• SaaS revenues — Primary growth engine and the majority of the business: $171.7 million in Q2 2026 versus $105.9 million in Q2 2025, out of $180.0 million total quarterly revenues.
• Term license subscriptions — $4.2 million in Q2 2026, down from $32.4 million a year earlier, with the decline largely attributed to customers converting to SaaS.
• Maintenance and services — $4.1 million in Q2 2026 versus $13.9 million in Q2 2025, also declining mostly due to SaaS conversions.
• Newer products: Atlas, Interceptor, Database Activity Monitoring — Sourced from acquisitions Cyral (DAM), SlashNext (email/collaboration security) and AllTrue.ai (AI system security); cited by the CEO as showing increasing momentum, though no separate revenue figures were disclosed.

Recent performance

Q2 2026 total revenues were $180.0 million versus $152.2 million in Q2 2025, driven by SaaS revenues of $171.7 million replacing term license and maintenance revenue as customers convert. Total SaaS ARR was $726.0 million, up 52% year-over-year, or up 25% excluding conversions. GAAP operating loss was ($40.6) million versus ($36.6) million a year earlier, while non-GAAP operating income was $3.7 million versus a ($1.9) million loss. First-half 2026 operating cash flow was $80.1 million versus $89.3 million in the prior-year period; the company reported $911.5 million in cash, equivalents, deposits and marketable securities at June 30, 2026.

Strategy

Management is completing a deliberate transition to a SaaS delivery model, enabling continuous classification, real-time risk reduction and automated threat detection. It has announced end-of-life for the self-hosted business effective December 31, 2026 and expects increased variability from remaining self-hosted customers as it converts them. Growth is being supplemented by acquisitions that extend the platform: Cyral for database activity monitoring, SlashNext for email and collaboration security, and AllTrue.ai for AI system security. The company is promoting MDDR, an agentic-AI, 24x7x365 monitoring service with a guaranteed response SLA, and deepening integrations with AI platforms such as Anthropic's Claude Enterprise and the coding tool Cursor.

Risks

• Dependence on continued data security market growth — The 10-K states future success depends on continued growth of the market for software that analyzes, secures, governs, manages and migrates enterprise data, and that failure of the market to develop would materially hurt results.
• Continued GAAP losses — GAAP operating loss was ($40.6) million in Q2 2026 and net losses were reported in each year from 2021 through 2025, including ($129.3) million in 2025.
• Self-hosted end-of-life execution risk — The company expects increased variability with remaining self-hosted customers through the December 31, 2026 end-of-life period as it seeks to convert them to SaaS.
• Macroeconomic and IT budget sensitivity — The 10-K notes the business depends on customers' willingness to invest in IT and cybersecurity projects, which is sensitive to economic conditions, inflationary pressure, currency fluctuations and higher interest rates.

Outlook

For Q3 2026, management guided to revenues of $185.0 million to $188.0 million (14% to 16% year-over-year growth), non-GAAP operating income of $2.5 million to $3.5 million, and non-GAAP net income per diluted share of $0.02 to $0.03 on 131.1 million diluted shares. For the full year 2026, the company raised its outlook for SaaS ARR growth excluding conversions to 21% at the midpoint, a range of $769 million to $775 million, a $5 million raise over the prior quarter. Management cited underlying demand drivers, new logo momentum tied to AI security, and a strong start to July.