Varonis Systems (VRNS) Q2 2026 earnings summary

Executive summary

• SaaS ARR reached $726.0 million in Q2 2026, up 52% year-over-year, with ARR excluding conversions at $598.1 million, up 25% year-over-year.

• SaaS revenues increased 71% year-over-year, now representing 94% of total revenues, driven by strong new logo growth and product adoption, especially for Atlas, Interceptor, and Database Activity Monitoring.

• Non-GAAP operating income was $3.7 million, reversing a prior year loss, while GAAP net loss widened due to increased R&D, sales, and acquisition costs.

• Completed the acquisition of AllTrue.ai, enhancing AI security capabilities and integrating AI-driven offerings.

• Announced end-of-life for self-hosted business by December 31, 2026, focusing on recurring SaaS revenue and automation.

Financial highlights

• Q2 2026 total revenues were $180.0 million, up 18% year-over-year; SaaS revenues were $171.7 million, up from $105.9 million.

• Gross profit was $139.9 million with a gross margin of 77.7%, down from 80.6% last year.

• Non-GAAP net income was $5.3 million ($0.04 per diluted share), up from $3.8 million ($0.03 per share) last year; GAAP net loss was $46.8 million.

• Free cash flow for the first half of 2026 was $69.1 million, down from $82.7 million, impacted by acquisition-related costs.

• Cash and equivalents totaled $911.5 million as of June 30, 2026.

Outlook and guidance

• FY 2026 SaaS ARR guidance: $819–$850 million (28–33% growth); ARR excluding conversions: $769–$775 million (20–21% growth).

• FY 2026 revenue guidance: $735–$739 million (18–19% growth); free cash flow guidance: $105–$110 million.

• Q3 2026 guidance: SaaS ARR growth of 22–23% (excluding conversions), revenue of $185–$188 million, non-GAAP net income per share of $0.02–$0.03.

• Remaining performance obligations (RPO) were $1,084.5 million, with 57% expected to be recognized as revenue over the next 12 months.

• Management anticipates continued SaaS revenue growth, with term license and maintenance revenues expected to decline.