This article first appeared on GuruFocus .
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Total Revenue:$173.1 million, up 27% year-over-year.
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SaaS ARR (excluding conversions):$522.6 million, increased 29% year-over-year.
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Total SaaS ARR:$683.2 million.
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Free Cash Flow:$49 million, down from $65.3 million in the same period last year; adjusted for acquisition-related costs, approximately $61.6 million.
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Gross Margin:77.9%, compared to 80.2% in the first quarter of 2025.
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Operating Loss:$1.4 million, or an operating margin of negative 0.8%.
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Net Income:$7.5 million, or $0.06 per diluted share.
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Cash and Equivalents:$900 million as of March 31, 2026.
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Q2 2026 Revenue Guidance:$175 million to $178 million, representing growth of 15% to 17%.
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Full Year 2026 Revenue Guidance:$731 million to $737 million, representing growth of 17% to 18%.
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Full Year 2026 SaaS ARR Guidance:$814 million to $845 million, representing growth of 27% to 32%.
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Full Year 2026 Free Cash Flow Guidance:$100 million to $105 million.
Release Date: April 28, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Varonis Systems Inc ( NASDAQ:VRNS ) reported a strong start to 2026 with a 27% year-over-year increase in total revenues, reaching $173.1 million.
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SaaS ARR, excluding conversions, increased by 29% year-over-year to $522.6 million, indicating healthy demand across new and existing customers.
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The company raised its full-year guidance for total SaaS ARR growth to 27% to 32%, reflecting confidence in sustained growth.
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Varonis Systems Inc ( NASDAQ:VRNS ) saw significant acceleration in new customer acquisitions, contributing to its strong performance.
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The company is well-positioned to capitalize on the growing need for AI and data security, with its platform offering automated remediation and AI-driven security solutions.
Negative Points
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Free cash flow decreased to $49 million from $65.3 million in the same period last year, partly due to acquisition-related costs.
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Gross margin declined to 77.9% from 80.2% in the first quarter of 2025, indicating potential pressure on profitability.
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Operating loss for the first quarter was $1.4 million, with an operating margin of negative 0.8%, although improved from the previous year.
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The company faces challenges in converting remaining non-SaaS ARR, with $83.7 million still outstanding.
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Varonis Systems Inc ( NASDAQ:VRNS ) is navigating a complex competitive landscape with various point solutions and startups in the data security market.
Q & A Highlights
Q: How is Varonis' sales team adjusting to the new focus on new business rather than conversions? A: Guy Melamed, CFO and COO : The sales team is now focused on upselling SaaS customers with additional products and selling our SaaS offering to new customers. We saw an acceleration in new customer contributions, which aligns with our strategy and the strength of our platform. Yakov Faitelson, CEO : Organizations need to securely connect their data to AI, and our platform's automated remediation of excessive permissions is crucial. This demand is driving our business.
Q: Can you provide more details on the acceleration of new logos and expansion efforts? A: Yakov Faitelson, CEO : Organizations are rapidly changing their tech stack to accommodate AI, which requires secure data access. This urgency is driving conversions and new customer acquisitions. Guy Melamed, CFO and COO : We saw a significant increase in new customer contributions and are confident in our ability to continue this trend, especially with new products like Atlas.
Q: What is the status of the Microsoft CoPilot partnership, and are there any channels driving new customers? A: Yakov Faitelson, CEO : Microsoft CoPilot is one of many AI tools organizations are adopting. Our acquisition of Atlas provides a comprehensive control plan for agents and pipelines, allowing us to protect all data types. This capability is becoming foundational for organizations adopting AI.
Q: Why hasn't the free cash flow guidance increased despite successful conversions? A: Guy Melamed, CFO and COO : Our free cash flow guidance assumes a base case scenario of $50 million to $75 million in conversions. We are on track with these numbers, and the guidance reflects this range. The reduction in free cash flow guidance was due to expected churn from the end-of-life announcement of our on-prem platform.
Q: How is the demand for AI security impacting Varonis' business? A: Yakov Faitelson, CEO : Organizations are investing in AI tooling and need to securely connect data to these tools. The realization that data security is critical for AI adoption is driving strategic conversations and demand for our platform. Guy Melamed, CFO and COO : We maintain a responsible guidance philosophy and are confident in our pipeline for the rest of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
