Lawsuit Claims Varonis Systems Hid ARR Risks From Conversion Shortfalls

Lawsuit Alleges Varonis Hid Risks to ARR From Conversion Shortfalls

Varonis Systems is facing a securities class action brought by Kessler Topaz Meltzer & Check LLP that alleges the data-security firm misled investors about its ability to sustain annual recurring revenue (ARR) growth. The complaint, covering purchases from Feb. 4, 2025 through Oct. 28, 2025, contends Varonis overstated its prospects by failing to disclose that it could not maintain ARR momentum without an unusually high rate of quarterly conversions from on‑premises customers to its SaaS offering. Kessler Topaz says defendants’ positive public statements were materially misleading or lacked a reasonable basis and seeks recovery for purported investment losses.

The suit joins a separate shareholder notice from The Gross Law Firm raising similar claims that Varonis concealed material adverse facts about renewal and conversion rates in its on‑premises subscription business. The legal filings cite Varonis’ own third‑quarter fiscal 2025 disclosures, which reveal a substantial miss to ARR and a reduction in full‑year projections, and say the company’s disclosure regime inadequately warned investors about the sustainability of ARR growth given weaker‑than‑expected renewals and conversions. Kessler Topaz’s Feb. 10, 2026 press notice from Radnor, Pennsylvania also points investors to informational videos and procedural guidance about the lawsuit.

Kessler Topaz and The Gross prompt affected shareholders to consider lead plaintiff status or to remain absent class members; the deadline to seek lead plaintiff appointment is March 9, 2026. The lead plaintiff is typically the investor or small group with the largest financial interest who is adequate and typical of the class, the filings note. Potential claimants are advised to assemble transaction records and loss calculations for the class period and to consult counsel about deadlines, rights and possible settlement scenarios; both firms emphasize there is no obligation to retain them and participation options include filing claims, opting out or objecting to proposed resolutions.

Related company actions

In connection with the ARR shortfall, Varonis announces end‑of‑life plans for its self‑hosted solution and a roughly 5% workforce reduction, attributing performance pressures to weaker renewals and conversion metrics in federal and non‑federal on‑premises subscriptions. The company attributes its revised outlook to those operational challenges.

Procedural note for investors

Kessler Topaz provides a website and contact details for prospective lead plaintiffs and says investors who do not seek lead status will remain absent class members eligible for potential recovery pursued on their behalf. The Gross Law Firm offers a similar registration route and stresses it operates on a contingent‑fee basis, with no fee unless recovery is obtained.