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    VRNS
    Earnings call· Jun 2026(Q2 FY26)

    VARONIS SYSTEMS Q2 FY26 earnings call VRNS

    Jul 28, 2026 Source

    Executive summary

    Varonis Q2 FY26 — Strong SaaS ARR Growth and AI Security Momentum

    Varonis delivered strong Q2 results, driven by robust SaaS ARR growth and significant new logo activity, despite some large deals slipping due to market rumors. The company is capitalizing on the secular tailwind from AI and data security, with new products gaining traction and a healthy pipeline. Management remains confident in its platform's durability and market opportunity, raising full-year guidance for both SaaS ARR and free cash flow.

    Highlights

    5

    • SaaS ARR, excluding conversions, increased 25% year-over-year to $598.1 million.

    • SaaS ARR from new logos grew by more than 20% in the quarter.

    • Growing momentum from newer products including Atlas Interceptor and database activity monitoring.

    • Full year guidance for SaaS ARR (ex-conversions) raised by $5 million to $769 million-$775 million.

    • Full year free cash flow guidance raised by $5 million to $105 million-$110 million.

    Concerns

    3

    • Some large deals slipped at the end of the quarter due to rumors in the news, limiting Q2 upside.

    • Year-to-date free cash flow was $69.1 million, down from $82.7 million in the prior year, impacted by on-prem EOL and $11.9 million in acquisition-related costs.

    • Non-GAAP gross margin decreased to 77.7% from 80.6% in Q2 2025.

    Guidance & targets

    10
    CategoryTargetConfidence
    SaaS ARR growth, excluding conversions
    20% to 21%
    high materiality
    High
    Total SaaS ARR
    $819 million to $850 million
    high materiality
    High
    Free cash flow
    $105 million to $110 million
    high materiality
    High
    Total revenues
    $735 million to $739 million
    medium materiality
    High
    Non-GAAP operating income
    $11 million to $13 million
    medium materiality
    High
    Non-GAAP net income per diluted share
    $0.14 to $0.15
    medium materiality
    High
    SaaS ARR growth, excluding conversions
    22% to 23%
    high materiality
    High
    Total revenues
    $185 million to $188 million
    medium materiality
    High
    Non-GAAP operating income
    $2.5 million to $3.5 million
    medium materiality
    High
    Non-GAAP net income per diluted share
    $0.02 to $0.03
    medium materiality
    High

    Operational metrics

    25
    SaaS ARR, excluding conversions
    $598.1M25% YoY growth
    Q2 FY26
    Total SaaS ARR
    $726M
    Q2 FY26
    Conversion ARR
    $11.4M
    Q2 FY26
    Non-SaaS ARR remaining
    $59.3M
    Q2 FY26
    Acquisition-related costs
    $11.9M
    YTD Q2 FY26

    Related to accounting treatment of acquisitions, impacting free cash flow.

    Total revenues
    $180M18% YoY growth
    Q2 FY26
    SaaS revenues
    $171.7M
    Q2 FY26
    Term license subscription revenues
    $4.2M
    Q2 FY26
    Maintenance and services revenues
    $4.1M
    Q2 FY26
    SaaS renewal rate
    >90%
    Q2 FY26
    Non-GAAP Gross profit
    $139.9M
    Q2 FY26
    Non-GAAP Gross margin
    77.7%compared to 80.6% in Q2 2025
    Q2 FY26

    In line with long-term target set at Investor Day.

    Non-GAAP Operating expenses
    $136.1M
    Q2 FY26
    Non-GAAP Operating income
    $3.7M
    Q2 FY26
    Non-GAAP Operating margin
    2.1%compared to negative 1.2% in Q2 2025
    Q2 FY26
    ARR contribution margin
    13.3%down from 16.5% last year
    Q2 FY26

    Impacted in 2026 due to the end of life for the self-hosted platform.

    Financial income
    $7M
    Q2 FY26

    Driven primarily by interest income on cash, deposits, and marketable securities.

    Non-GAAP Net income
    $5.3Mcompared to $3.8M in Q2 2025
    Q2 FY26
    Non-GAAP Net income per diluted share
    $0.04compared to $0.03 in Q2 2025
    Q2 FY26

    Based on 130.8 million diluted shares outstanding.

    Diluted shares outstanding
    130.8Mcompared to 135.2M in Q2 2025
    Q2 FY26
    Capex
    $9.4Mcompared to $5.7M in same period last year
    YTD Q2 FY26
    New logo ACV growth
    >20%
    Q2 FY26
    SaaS conversions (H1)
    ~50%
    H1 FY26

    Roughly 50% of expected conversions.

    SaaS conversions (H2 target)
    ~2/3
    H2 FY26

    Target for expected renewals and conversions.

    Cash and investments balance
    $911.5M
    Q2 FY26

    As of June 30, 2026, including cash, cash equivalents, short-term deposits and marketable securities.

    Industry KPIs

    8
    MetricValueDetails
    Capacity CAPEX$9.4MUSD
    Revenue growth$180MUSD
    Arr net new arr$598.1MUSD
    Bookings billings—
    Customer account count—
    Large deal new logo metrics—
    Gross retention renewal rate>90%%
    Operating FCF margin rule of 402.1%%

    Product announcements

    4
    ProductTypeDetails
    Atlas Interceptorupdate
    Database Activity Monitoring (DAM)update
    Atlas Completeupdate
    Gov Rampmilestone

    Deals & partnerships

    2
    Healthcare organizationNew customer acquisition for AI and data security

    The organization with 40,000+ employees purchased Varonis for Atlas Complete to safely adapt AI tools (Copilot, cloud, LLMs) and Varonis for AWS, Azure, Databricks, Snowflake, Microsoft 365, and NVIDIA. This followed a risk assessment uncovering significant exposure of sensitive data.

    Financial services companyExpanded deployment and vendor consolidation

    The company expanded its Varonis deployment after a vendor consolidation review, replacing multiple point products (PEM, e-mail security) with Varonis. They purchased Atlas Complete, Interceptor DEM, and Varonis for Ia, Salesforce, and Microsoft 365. A significant security incident was automatically detected and prevented during the cloud evaluation.

    Risks & headwinds

    3
    Large deals slipped due to market rumorsQ2 FY26

    Some large deals, including a 7-figure deal, slipped at quarter-end.

    Mitigation: Some slipped deals have already closed in July, and management is in conversation with most others, expecting to close them throughout Q3.

    Headwind from on-prem platform end-of-lifeYTD Q2 FY26

    Year-to-date free cash flow down to $69.1 million from $82.7 million in the same period last year.

    Mitigation: This was previously communicated and is in line with expectations. Management is confident in cash flow generation and raised full-year FCF guidance.

    Gross margin compressionQ2 FY26

    Non-GAAP gross margin was 77.7% in Q2 FY26, down from 80.6% in Q2 FY25.

    Mitigation: Gross margins are tracking according to plan and are better than initially planned when the SaaS offering was introduced. No price pressures or other issues were identified as drivers.

    What to watch in Q3 FY26

    4

    Closing of slipped deals

    Q3 FY26
    CurrentSome deals slipped in Q2, some closed in July.
    TargetMost slipped deals closed in Q3.

    Why it matters

    Successful closure of these deals will validate management's confidence and contribute to achieving full-year guidance.

    As Yaki said, we have since closed some of these deals, including a 7-figure deal, and the third quarter is off to a strong start.

    Q&A highlights

    5

    Can you elaborate on the deals that pushed out at quarter-end and the impact on net new ARR, given the news headlines?

    Management confirmed that some large deals slipped due to rumors but noted that some, including a 7-figure deal, have already closed in July. They expressed confidence in raising full-year guidance due to strong new logo ACV growth (>20%), increasing adoption of new products (Atlas, DAM, Interceptor), and a healthy pipeline driven by AI security needs.

    “We've already closed some of these in July, including a 7-figure deal, and we expect to close more of them during the third quarter.”

    asked by Saket Kalia · answered by Guy Melamed

    2 min read5 chapters

    Detailed Narrative

    01

    AI and Data Security Urgency

    Varonis highlights the increasing urgency for data and AI security as companies adopt AI, which elevates the value and risk associated with their data. The company emphasizes three key areas: understanding and securing the data itself, controlling how AI systems interact with data, and defending against AI-powered attacks. This dynamic creates a strong secular tailwind for Varonis, as customers seek to reduce risk without hindering business speed.

    02

    Varonis's Solution for AI Risk

    Varonis positions its platform as essential for safely adopting AI by securing data from the inside out through automation. The traditional security model is deemed insufficient for AI-driven risks due to exploding data volumes, constantly changing permissions, and machine-speed AI agents. The company argues that AI-driven defense is the only practical way to manage AI-driven risk, integrating data security with AI security for stronger runtime guardrails and more effective detection.

    03

    New Product Momentum and Pipeline

    The company reported growing momentum from its newer products, including Atlas Interceptor and database activity monitoring (DAM). These offerings reinforce the breadth of Varonis's platform and its ability to address expanding use cases. Management noted that Atlas, acquired in Q1, is already showing promising contributions and is frequently discussed with customers, with expectations for more meaningful impact in the second half of the year.

    04

    Slipped Deals and Q3 Start

    Varonis experienced some large deals slipping at the end of Q2 due to market rumors, which limited the quarter's upside. However, several of these deals, including a 7-figure deal, have since closed in July, leading to a strong start for Q3. This, combined with a healthy pipeline driven by AI and data security needs, provided management with the confidence to raise full-year guidance above the Q2 beat.

    05

    Sales Productivity and Go-to-Market

    Sales productivity for mature representatives has increased compared to prior years, attributed to a larger platform to sell and an upmarket focus. The company expects productivity levels to continue rising as new products like Atlas, Interceptor, and DAM gain traction and convert pipeline into ARR. Varonis maintains its go-to-market strategy of educating customers, demonstrating value through POCs, and ensuring customer success, with CISOs and Chief AI Officers as key buyers.

    AI-generated summary of the company’s earnings call. Not investment advice.