Insurance software provider Guidewire Software (NYSE:GWRE) announced better-than-expected revenue in Q3 CY2025, with sales up 26.5% year on year to $332.6 million. Guidance for next quarter’s revenue was better than expected at $342 million at the midpoint, 1.5% above analysts’ estimates. Its non-GAAP profit of $0.66 per share was 7.5% above analysts’ consensus estimates.
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Guidewire Software (GWRE) Q3 CY2025 Highlights:
- Revenue: $332.6 million vs analyst estimates of $318 million (26.5% year-on-year growth, 4.6% beat)
- Adjusted EPS: $0.66 vs analyst estimates of $0.61 (7.5% beat)
- Adjusted Operating Income: $63.43 million vs analyst estimates of $51.06 million (19.1% margin, 24.2% beat)
- The company lifted its revenue guidance for the full year to $1.41 billion at the midpoint from $1.40 billion, a 1.1% increase
- Operating Margin: 5.6%, up from -1.8% in the same quarter last year
- Annual Recurring Revenue: $1.06 billion vs analyst estimates of $1.05 billion (21.6% year-on-year growth, 1.1% beat)
- Billings: $243.9 million at quarter end, up 19.1% year on year
- Market Capitalization: $18.34 billion
StockStory’s Take
Guidewire Software’s third quarter was marked by strong momentum in its core cloud business, with management crediting accelerating adoption from both new and existing property and casualty insurance customers as a key driver. CEO Mike Rosenbaum noted that the company’s cloud platform maturity allowed for broader and deeper customer engagement, particularly as insurers sought greater operational agility. The integration of newly launched applications and the continued buildout of the partner ecosystem were highlighted as helping to meet evolving customer needs. Rosenbaum emphasized, “We continue to see accelerating adoption for Guidewire Cloud Platform and have plenty of runway to continue growing our core business.”
Looking ahead, Guidewire’s raised outlook is underpinned by the expansion of its InsuranceSuite with PricingCenter and UnderwritingCenter, as well as the integration of generative AI capabilities. Management believes these new tools can address industry-wide challenges, including fragmented processes and slow response times, by streamlining workflows and enabling faster product rollouts. CFO Jeff Cooper added that early market feedback on these products has been encouraging, with customer interest supporting confidence in the updated revenue and profit guidance. Rosenbaum stated, “We are extremely excited about the opportunity our platform unlocks for us in new products, innovation, and generative AI.”
Key Insights from Management’s Remarks
Management pointed to several factors behind the quarter’s performance, including strong deal momentum, the evolution of its product suite, and early traction with new AI-powered applications.
- Cloud platform adoption: Guidewire saw continued momentum in cloud migrations and new customer wins, with eight additional cloud deals closed during the quarter, including major insurers in North America, the UK, Japan, and Australia. This was attributed to the maturity of the Guidewire Cloud Platform and a proven track record with large, complex customers.
- New product expansion: The company expanded its InsuranceSuite by launching PricingCenter and UnderwritingCenter, targeting actuarial and underwriting process automation. These applications aim to reduce manual workflows and accelerate pricing and risk selection for insurers, addressing a significant pain point in the industry.
- ProNavigator acquisition: Guidewire acquired ProNavigator, an AI-driven knowledge management platform specifically designed for insurance. Management highlighted that integrating ProNavigator into its suite will deliver instant, context-aware guidance within core applications, accelerating user productivity and supporting AI deployment at scale.
- Generative AI integration: Generative AI features are being built into new and existing Guidewire applications, with the goal of improving operational efficiency and decision-making for insurers. Management described its open platform approach, inviting both internal and partner-developed AI solutions to foster innovation and flexibility for customers.
- Ecosystem and partner strategy: The company underscored the importance of its ecosystem, emphasizing the role of systems integrator partners and the InsurTech Vanguard program in co-developing solutions and supporting customer success across global markets. This collaborative approach has been a differentiator in winning large deals and accelerating adoption.
Drivers of Future Performance
Guidewire’s updated guidance is driven by ongoing cloud migration activity, new product launches, and increased investment in AI-driven features, with management highlighting broad-based demand and pipeline strength.
- Cloud migration momentum: Management expects continued migration of existing customers to the Guidewire Cloud Platform, supported by proven delivery at scale and high customer retention rates. This migration is viewed as a catalyst for recurring revenue growth, particularly as more customers transition multiple core applications simultaneously.
- New product rollouts: The launch and adoption of PricingCenter and UnderwritingCenter are anticipated to create new revenue streams and cross-sell opportunities, as insurers seek to modernize and automate critical pricing and underwriting processes. Early customer feedback has been positive, but management acknowledged that adoption timelines may vary based on customer readiness and integration complexity.
- AI-driven efficiency gains: Guidewire is investing in generative AI across its suite, both through internal development and partner integrations. Management believes these capabilities can lower implementation costs, improve user experience, and expand the platform’s value proposition, though ongoing investment will be required to maintain technology leadership and manage the cost of supporting AI features at scale.
Catalysts in Upcoming Quarters
Going forward, the StockStory team will be closely watching (1) the pace at which existing customers migrate to Guidewire Cloud and expand usage of new modules, (2) adoption rates and customer feedback for PricingCenter and UnderwritingCenter, and (3) the impact of generative AI integration on both operational efficiency and platform differentiation. Additional focus will be on how well the ProNavigator acquisition accelerates AI-driven knowledge management within Guidewire’s ecosystem.
Guidewire Software currently trades at $225.42, up from $217 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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