Data security company Varonis Systems (NASDAQ: VRNS) reported Q3 2026 results exceeding the market’s revenue expectations, with revenue up 17.3% year on year to $189.5 million. Its non-GAAP profit of $0.09 per share was significantly above analysts’ consensus estimates.
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Varonis Systems (VRNS) Q3 2026 highlights:
- Revenue $189.5 million vs S&P analysts’ consensus estimates of $186.7 million (17.3% year-on-year growth, 1.5% beat)
- Adjusted EPS $0.09 vs S&P analysts’ consensus estimates of $0.03 (significant beat)
- Adjusted operating income $7.59 million vs analysts’ consensus estimates of $3.05 million (4% margin, significant beat)
- Operating margin -25.2%, down from -22.2% in the same quarter last year
- Free cash flow margin 13.6%, up from 11.1% in the previous quarter
- Billings $192.9 million at quarter end, up 7.1% year on year
- Market capitalization $5.6 billion
Revenue growth
Reviewing a company’s long-term revenue performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones sustain growth for years. Over the last five years, Varonis Systems grew its revenue at a 14.8% compounded annual growth rate. Though this growth is acceptable on an absolute basis, assessing software companies requires more than just revenue growth, as the sector can display significant earnings volatility. The bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, the five-year period starts around Covid, when revenue was depressed and 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 annualized revenue growth of 14.5% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.
This quarter, Varonis Systems reported year-on-year revenue growth of 17.3%, and its $189.5 million of revenue exceeded Wall Street’s consensus estimates by 1.5%.
Looking ahead, sell-side analysts expect revenue to grow 17.7% over the next 12 months, according to S&P, an improvement versus the last two years. The projected growth is strong and suggests its newer products and services will spur better revenue performance.
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 came in at $192.9 million in Q3, and over the last four quarters, its growth was underwhelming as it averaged 11.3% year-on-year increases. This alternative top-line metric grew more slowly than total revenue, meaning the company recognizes revenue faster than it collects cash, a headwind for its liquidity that could also signal a slowdown in future revenue growth.
Key takeaways from Varonis Systems’s Q3 results
Varonis Systems delivered mixed Q3 results: adjusted operating income came in well above analysts’ consensus estimates and revenue narrowly beat Wall Street’s consensus, but billings fell short. Shares remained flat at $48.66 immediately after the release.
Should you invest in Varonis Systems? If you’re making that decision, consider the bigger picture of valuation and business quality, as well as the latest earnings. Read our full research report here (it’s free).
