VRNS 2Q Preview: Expecting 2Q Beat w/ Building AI Enthusiasm

研报英文原文证据摘录

VRNS 2Q Preview: Expecting 2Q Beat w/ Building AI Enthusiasm

Varonis Systems, Inc. (VRNS)

Equity Research

July 21, 2026

Valuation. VRNS currently trades at 6.2x CY27E rev on ARR growth estimates of 17% yoy in 2027. We

believe that VRNS could emerge from this transition stronger and capitalize on secular AI tailwinds,

which could potentially prove our estimates conservative. Our $60 PT implies 8x CY27E rev, which we

believe remains reasonable given VRNS' increasing probability of 20%+ ARR growth in CY27.

Channel Checks. We hosted a cyber services practice director (with previous work experience at

VRNS), who sees VRNS as well positioned to capture a larger share of the data governance market,

driven by its transition to SaaS, broader platform capabilities, and improved performance in cloud

environments. He also believes continued investment in the cloud roadmap will further strengthen

VRNS' competitive position. We also hosted a field CISO, who noted seeing some strength and was

positive on the recently introduced Atlas platform.

Monitoring Conversions. VRNS' converted $11.3M of the $23.2M decrease in term & maintenance

ARR to SaaS ARR in 1Q, or 49%. Management retained its endorsement of $50-$75M in conversion ARR

for FY26. In order to meet the midpoint of this guide, VRNS would need to convert 61% of remaining

non-SaaS ARR, which raises some risk (tethers NT FCF). That said, VRNS has noted it has already

engaged with these customers and is confident in the guide.

FCF. VRNS maintained its FY26 FCF margin guide of 14% which would be 7 pts lower than FY25

margins of 21%. We highlight that VRNS has previously beat its 4Q opening FCF guide by $25M+ on avg

the past 3 years. While we wouldn't necessarily expect a beat/raise to this magnitude over the course