How is the recent 'Ethos' event driving accelerated customer conversations and pipeline for Varonis, particularly in converting that pipeline?

Yaki Faitelson explained that while such events expose vulnerabilities, the primary driver for pipeline is customers' AI adoption maturity. He highlighted that securely connecting AI to data is a bottleneck, and misconfigured AI agents pose significant breach risks. This understanding, coupled with the synergy between Atlas and the data security platform, is generating substantial pipeline as organizations seek foundational security for AI. “AI without data is nothing, and you need to have all the life cycle of AI in order to take it to production in the right way to make sure you're in compliance and then to take care of the pipeline.”

How did you reassure customers about the slipped deals given the news, and what gives you confidence in closing them for the rest of the year?

Yaki Faitelson stated that the timing of the rumors was unfortunate, impacting deals in the last week of the quarter. He noted that Varonis operates as business as usual, committed to customers' success and innovation. Guy Melamed added that the guidance philosophy remains conservative, with the raise only including some of the slipped deals, and a strong start to July with some already closed provides confidence for the remainder of the quarter. “But we're talking to our customers and just explain to them, we are -- we can't comment on any rumors, but we are committed to you, committed to your success, keep innovating and make sure that everything is working.”

Are new products like Atlas, Interceptor, and DAM increasing deal complexity or changing the buyer persona?

Yaki Faitelson clarified that the CISO remains the primary buyer, with Chief AI Officers also involved. He noted that new products are synergetic, with Interceptor complementing MDDR and DAM replacing incumbents. Guy Melamed added that sales cycles have not lengthened, indicating no increased deal complexity despite selling a larger platform. “Mostly the buyer is the CISO. It's also very interesting that the Chief AI Officer, we're also talking to them, but they just -- the CISO is bringing them because what is happening today in organizations, and I said in this adoption curve, that it's very hard for them to safely connect AI to data.”

VRNS

Varonis (VRNS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Jul 28, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
SaaS ARR growth, excluding conversions	20% to 21% high materiality	FY26	High
Total SaaS ARR	$819 million to $850 million high materiality	FY26	High
Free cash flow	$105 million to $110 million high materiality	FY26	High
Total revenues	$735 million to $739 million medium materiality	FY26	High
Non-GAAP operating income	$11 million to $13 million medium materiality	FY26	High
Non-GAAP net income per diluted share	$0.14 to $0.15 medium materiality	FY26	High
SaaS ARR growth, excluding conversions	22% to 23% high materiality	Q3 · FY26	High
Total revenues	$185 million to $188 million medium materiality	Q3 · FY26	High
Non-GAAP operating income	$2.5 million to $3.5 million medium materiality	Q3 · FY26	High
Non-GAAP net income per diluted share	$0.02 to $0.03 medium materiality	Q3 · FY26	High

VRNS operating KPIs by quarter

VRNS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Annual recurring revenue (ARR) SaaS excluding conversions	$522.6M In Q1, SaaS ARR, excluding conversions, increased 29% year-over-year to $522.6 million and total SaaS ARR, including conversions was $683.2 million. Source: earnings call transcript	$598.1M In Q2, SaaS ARR, excluding conversions, increased 25% year-over-year to $598.1 million and total SaaS ARR, including conversion was $726 million. Source: earnings call transcript	+14.4%
Annual recurring revenue (ARR) SaaS	$683.2M In Q1, SaaS ARR, excluding conversions, increased 29% year-over-year to $522.6 million and total SaaS ARR, including conversions was $683.2 million. Source: earnings call transcript	$726M In Q2, SaaS ARR, excluding conversions, increased 25% year-over-year to $598.1 million and total SaaS ARR, including conversion was $726 million. Source: earnings call transcript	+6.3%
Annual recurring revenue (ARR) Non-SaaS	~$83.7M In Q1, we had $11.3 million of conversion ARR, and we finished the quarter with approximately $83.7 million of non-SaaS ARR remaining. Source: earnings call transcript	~$59.3M In Q2, we had $11.4 million of conversion ARR, and we finished the quarter with approximately $59.3 million of non-SaaS ARR remaining. Source: earnings call transcript	—
Renewal rate SaaS	90%+ Our SaaS renewal rate was over 90%. Source: earnings call transcript	90%+ Our SaaS renewal rate was over 90%. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
Atlas Interceptor	update	—
Database Activity Monitoring (DAM)	update	—
Atlas Complete	update	—
Gov Ramp	milestone	a few weeks ago

Deals & partnerships

Healthcare organization New 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 company Expanded 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

Large deals slipped due to market rumors Q2 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-life YTD 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 compression Q2 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

Closing of slipped deals

Q3 FY26

Current Some deals slipped in Q2, some closed in July.

Target Most 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.

Find out whether VRNS delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.