Shares of Varonis Systems (NASDAQ: VRNS) plummeted 37.08% in pre-market trading on Wednesday, following the release of the company's disappointing third-quarter earnings report and significantly reduced full-year guidance. The data security and analytics firm's performance fell short of expectations, raising concerns about its growth trajectory and transition to a SaaS-focused model.
Varonis reported Q3 revenue of $161.577 million, missing the analyst consensus estimate of $166.149 million. Despite a 9.12% increase from the same period last year, the revenue miss alarmed investors. Adding to the worries, Varonis drastically cut its full-year Annual Recurring Revenue (ARR) guidance, now forecasting 2025 full-year ARR between $730 million and $738 million, representing only a 14% to 15% year-over-year growth. This significant adjustment reflects underperformance in the company's on-premises subscription business, particularly in both Federal and non-Federal sectors.
While Varonis highlighted strong demand for its SaaS platform, which now accounts for 76% of total ARR, the transition from term license subscriptions to SaaS appears to be negatively impacting near-term financial results. The company's attempt to boost investor confidence with a new $150 million share repurchase authorization failed to offset concerns about the lowered guidance and revenue miss. As the market reacts to this news, investors will be closely monitoring Varonis's ability to navigate the challenges in its on-premises business and successfully complete its transition to a SaaS-focused model.
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