Data security company Varonis Systems (NASDAQ: VRNS) reported Q1 CY2026 results topping the market’s revenue expectations, with sales up 26.9% year on year to $173.1 million. The company expects next quarter’s revenue to be around $176.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.06 per share was significantly above analysts’ consensus estimates.
Is now the time to buy Varonis Systems? Find out by accessing our full research report, it’s free.
Varonis Systems (VRNS) Q1 CY2026 Highlights:
- Revenue: $173.1 million vs analyst estimates of $165.5 million (26.9% year-on-year growth, 4.6% beat)
- Adjusted EPS: $0.06 vs analyst estimates of -$0.05 (significant beat)
- Adjusted Operating Income: -$1.38 million vs analyst estimates of -$10.49 million (-0.8% margin, 86.9% beat)
- The company lifted its revenue guidance for the full year to $734 million at the midpoint from $726 million, a 1.1% increase
- Management raised its full-year Adjusted EPS guidance to $0.11 at the midpoint, a 43.7% increase
- Operating Margin: -25.7%, up from -32.1% in the same quarter last year
- Free Cash Flow Margin: 28.3%, up from 11.7% in the previous quarter
- Billings: $170.3 million at quarter end, up 21.4% year on year
- Market Capitalization: $2.88 billion
Yaki Faitelson, Varonis CEO, said, “Our Q1 results reflect strong execution across our business, and SaaS ARR, excluding conversions increased 29%. AI is forcing companies to prioritize data and AI security, and Varonis is uniquely positioned to help customers put the right guardrails in place so they can achieve automated outcomes and safely deploy AI with minimal effort. We believe we are well-positioned to capitalize on the favorable tailwinds in our business and this significant AI market opportunity.”
Company Overview
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ: VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Varonis Systems grew its sales at a 16.1% annual rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the software sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Varonis Systems’s recent performance shows its demand has slowed as its annualized revenue growth of 14.2% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Varonis Systems reported robust year-on-year revenue growth of 26.9%, and its $173.1 million of revenue topped Wall Street estimates by 4.6%. Company management is currently guiding for a 16% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 15.2% over the next 12 months, similar to its two-year rate. This projection is above the sector average and implies its newer products and services will help sustain its recent top-line performance.
ONE MORE THING: 3 Hidden Platforms Growing 3X Faster than Amazon, Google, and PayPal. Amazon, Google, and Meta all followed the same playbook: Dominate an ignored market. Build an unbeatable moat. Scale until you’re unstoppable.
These three platforms are running that exact playbook right now. The early investors in Amazon made fortunes. The early investors in these could do the same. Get All 3 Stocks Here for FREE.
Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Varonis Systems’s billings punched in at $170.3 million in Q1, and over the last four quarters, its growth was solid as it averaged 17.4% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Varonis Systems’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.
Key Takeaways from Varonis Systems’s Q1 Results
We were impressed by how significantly Varonis Systems blew past analysts’ billings expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 4.8% to $26.67 immediately following the results.
Varonis Systems had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).
