Varonis Systems Shares Plunge 43% After Q3 Miss, SaaS Shift Struggles

Varonis Systems recently reported third-quarter results that fell short of revenue and earnings expectations, prompting a steep 43% drop in its share price and a cautious outlook for the fourth quarter and full year. Despite this, the company has made significant progress in transitioning to a SaaS business model, with 76% of its Annual Recurring Revenue now SaaS-based, reflecting strong growth in cloud-based cybersecurity solutions. Analysts have responded positively to Varonis’s SaaS transformation and new product initiatives, resulting in raised price targets, with some forecasts reaching as high as $80 per share. However, operational challenges persist, including unexpected declines in renewal rates for the legacy on-premises subscription segment and ongoing operating losses, which have led to workforce reductions and cost controls. Varonis is aiming to complete its SaaS transition by the end of 2026 while launching innovative security products and conducting a $150 million share buyback to support shareholder value. Overall, the company faces a critical period of balancing its strategic SaaS pivot against near-term financial pressures and market skepticism.