Varonis Systems (VRNS) Stock Forecast & Price Target

Varonis Systems has demonstrated strong financial growth, with its Software-as-a-Service (SaaS) Annual Recurring Revenue (ARR) increasing over 170% year-over-year to $340 million, constituting 53% of total ARR in the fourth quarter. The company is optimistic about reaccelerating top-line growth beyond 20% once it completes its cloud transition, driven by improved sales productivity and increased customer retention metrics. Additionally, gross and net retention rates are expected to improve significantly in calendar year 2026, supported by SaaS cohorts which exhibit higher retention compared to on-premises customers.

Varonis Systems is experiencing a decline in net retention rates, dropping from 107% to approximately 105%, which reflects possible challenges in retaining existing customers during its cloud transition. Operating income has also fallen significantly, recording $15.3 million with a 10% margin, which is notably below the previously guided range of $20-$22 million, primarily due to a headwind from the SaaS bookings mix. Furthermore, despite an effort to enhance its market position through strategic sales and marketing investments, the projected operating income for CY25 is only $5.5 million, substantially underperforming against the $32 million consensus expectation.