Truist Securities has reduced its price target for Varonis Systems (VRNS) to $34.00 from $42.00 but left its Buy recommendation intact. The revision follows Varonis' fourth-quarter 2025 report, which combined an earnings and revenue beat with a forecast that introduced meaningful headwinds to free cash flow and ARR metrics for the coming fiscal year.
Varonis shares were trading at $26.53 as of the latest quote, having dropped 20.59% over the prior week. Despite that decline, consensus analyst sentiment remains tilted positive, with an aggregate score of 1.76 on a scale where 1 represents Strong Buy.
The company posted fourth-quarter results that outperformed consensus forecasts on several fronts. Annual recurring revenue (ARR) grew 16.1% year over year versus the 14.5% the street had expected, a performance Truist and other observers attributed to sustained momentum in Varonis' software-as-a-service (SaaS) business and a record number of conversions from its on-premises, or OPS, customer base. Gross profit margins were reported at 78.83%, underscoring robust pricing in the company's core offerings.
Yet the favorable headline metrics were accompanied by a cautionary outlook. Varonis warned that fiscal 2026 would include a $30-50 million headwind to free cash flow and ARR contribution margin driven by the end-of-life phase for OPS customers. That guidance lowered the company's total ARR outlook and prompted an approximately 15% drop in the share price during after-hours trading following the results.
On the profitability front, Varonis has not been profitable over the last twelve months. Analysts aggregated by InvestingPro expect the company to return to profitability in the current fiscal year, with an EPS forecast of $0.15.
Truist has emphasized that the core SaaS ARR growth metric - excluding ARR tied to conversions - is the principal growth lever for Varonis going forward. The firm highlights management's guidance for SaaS ARR growth in the 18%-20% range as the key indicator of the business' trajectory, and adjusted its estimates and price target to reflect the projected conversion-related headwinds while leaving the Buy rating intact.
Additional detail from the quarter shows an earnings-per-share result of $0.08, well above the $0.03 analysts had expected, representing a 166.67% earnings surprise. Revenue likewise outperformed, coming in at $173.4 million versus the $168.51 million forecast. Despite these beat figures, the market reaction in after-hours trading was negative, driven by concerns about the fiscal 2026 guidance tied to the OPS lifecycle.
Analysts covering the name did not register recent changes in stance, with no upgrades or downgrades reported immediately following the release and commentary. The combination of a solid quarter, a maintained Buy rating from Truist, and a lowered price target reflects the tension between near-term conversion costs and the company's longer-term SaaS revenue growth trajectory.
Contextual takeaway - Varonis' latest quarter shows durable demand in SaaS and pricing strength but also highlights execution and transition risk as legacy OPS customers move through end-of-life. Market pricing has responded to the forward-looking cash-flow impact despite current-period outperformance on revenue and EPS.