Guidewire Software Q3 Earnings Call Highlights

Guidewire Software (NYSE:GWRE) reported stronger-than-expected fiscal third-quarter revenue, profitability and cash flow, while management said demand for cloud migrations, pricing tools and AI-related products continued to build heading into the company’s seasonally important fourth quarter.

Chief Executive Officer Mike Rosenbaum said the quarter included 11 cloud wins, including two net-new core system wins, as well as five ProNavigator deals and three PricingCenter wins. He said annual recurring revenue, or ARR, grew 19% year over year and finished within the company’s guidance range, despite several expected deals slipping beyond the quarter.

“The bookings results in the quarter were solid, 19% ARR growth is a great achievement,” Rosenbaum said. He added that Guidewire works with a “relatively small number of discrete deals each quarter,” which can make quarterly timing uneven.

Chief Financial Officer Jeff Cooper said third-quarter ARR was $1.147 billion, up more than 19% from a year earlier. Total revenue rose 27% year over year to $373 million, above the high end of the company’s outlook. Subscription and support revenue increased 35% to $245 million, while services revenue rose 32% to $72 million.

Cloud demand and new products drive activity

Rosenbaum said insurers are increasingly aligning around Guidewire as a long-term core platform partner as they modernize policy, billing and claims systems and prepare to use artificial intelligence in operational workflows.

Among the quarter’s notable transactions, Rosenbaum highlighted a seven-year extension and direct written premium expansion with Auto Club of Southern California for InsuranceSuite on Guidewire Cloud Platform, along with a significant new ProNavigator sale. He also cited a U.K. insurer that selected ClaimCenter on Guidewire Cloud Platform, Bradesco Seguros in Brazil as a “large strategic net new win,” and a large U.S. insurer that selected PolicyCenter on Guidewire Cloud Platform for a commercial insurance entity.

Guidewire also reported traction for newer offerings. PricingCenter wins included insurers in Sweden and Poland, as well as Oklahoma Farm Bureau, which Rosenbaum said selected the platform to become more agile in pricing and rating, reduce operational friction and accelerate speed to market. ProNavigator, which supports AI-driven knowledge and workflow automation, was adopted by five insurers during the quarter.

Rosenbaum said Guidewire is seeing “increasing platform gravity” as customers adopt offerings across its portfolio, including data and analytics products. He said recent insurance forums in Europe, Australia, Japan and Canada reinforced insurer priorities around core modernization, operational agility and practical use of AI.

Financial model shows margin and cash flow strength

Cooper said Guidewire’s third-quarter non-GAAP gross profit was $247 million, up 29% year over year, with an overall gross margin of 66%. Subscription and support gross margin was 74%, compared with 71% a year earlier, which Cooper attributed to scalability in the company’s cloud platform.

Services gross margin was 14%, compared with 13% a year earlier. Cooper said the margin benefited from strong utilization, partly offset by higher subcontractor expenses needed to support demand.

Guidewire reported non-GAAP operating profit of $78 million, ahead of its outlook due to higher-than-expected revenue and gross profit, as well as lower-than-expected operating expenses. Cooper said operating expenses benefited from slower hiring and some expense timing.

The company ended the quarter with $1.15 billion in cash equivalents and investments. Operating cash flow was $61 million. Cooper said Guidewire repurchased 1.7 million shares at an average price of $147.07 per share and had $241 million remaining under its share repurchase authorization.

Guidewire raises revenue and cash flow outlook

Guidewire maintained its fiscal 2026 ARR outlook of $1.229 billion to $1.237 billion, representing year-over-year growth of 18% to 19%. Cooper said fully ramped ARR growth continues to outpace reported ARR growth, which management views as an indicator of durable growth heading into fiscal 2027 and beyond.

The company raised its total revenue outlook to a range of $1.46 billion to $1.47 billion. Cooper said the midpoint implies 22% growth, up from 16% growth assumed at the start of the year and 20% as of the prior quarter.

Guidewire now expects subscription and support revenue of $963 million to $969 million and services revenue of approximately $270 million. Cooper said the subscription outlook reflects healthy direct written premium true-up activity, strong attachment of new products and a robust fourth-quarter pipeline. He said ProNavigator and PricingCenter had already exceeded his expectations for the year.

The company also lifted its operating income outlook. Guidewire now expects GAAP operating income of $124 million to $134 million and non-GAAP operating income of $314 million to $324 million for fiscal 2026. Cash flow from operations is now expected to be $365 million to $380 million.

Management addresses deal timing and AI questions

During the question-and-answer portion of the call, analysts pressed management on the deals that did not close during the quarter. Rosenbaum said the issue was not related to macroeconomic conditions, geopolitical uncertainty or customers delaying decisions because of AI. He said pipeline and demand are building and that the company expects a strong fourth quarter.

“It could be a record Q4,” Rosenbaum said, while emphasizing that the company still needs to execute.

Cooper said Guidewire has visibility into backlog that is expected to flow into ARR in the fourth quarter, as well as a strong deal pipeline. He said the company continues to focus on annual performance because a small number of large deals can materially affect quarterly results.

AI was a major theme of the call. Rosenbaum said Guidewire’s platform provides the data, workflows and execution systems needed for insurers to apply AI in regulated environments. He said ProNavigator embeds AI decision support into workflows for underwriters, claims adjusters and customer service teams.

Rosenbaum also described productivity improvements from agentic development tools used with Guidewire’s platform. President John Mullen said investment in these tools has unlocked about a 35% improvement in on-premise-to-cloud migrations, and he said the company sees a path toward further improvement, potentially reaching 55%, though duration savings may eventually level off due to change management requirements.

Sales leadership transition announced

Rosenbaum also announced a leadership change in Guidewire’s sales organization. David Laker will step away from his role as chief commercial officer and move into a new position focused on strategic partners and initiatives. Laker will remain in his current role through the end of the fiscal year.

Shane Cassidy joined Guidewire and will formally assume chief commercial officer responsibilities after the fiscal fourth quarter. Rosenbaum said Cassidy spent 20 years at Capgemini, most recently as executive vice president of the global insurance practice, and has experience partnering with Guidewire.

Rosenbaum said Guidewire enters the fourth quarter with momentum across cloud modernization, newer product adoption and AI-enabled development, while Cooper said the company’s financial results demonstrated the strength of its model amid continued demand for cloud and services programs.

About Guidewire Software (NYSE:GWRE)

Guidewire Software, Inc develops software products and cloud services for property and casualty (P&C) insurance carriers. Headquartered in San Mateo, California, the company’s offerings are designed to help insurers manage the core functions of their business—policy administration, billing and claims—while supporting digital engagement, analytics and operational modernization.

Guidewire’s core product portfolio is commonly known as the InsuranceSuite, which includes PolicyCenter for policy administration, BillingCenter for billing and receivables, and ClaimCenter for claims management.