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Guidewire Software, Inc. (GWRE)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered strong top-line and profitability: revenue $356.6M (+22% YoY) and non-GAAP diluted EPS $0.84, with ARR surpassing $1.0B; execution included 19 cloud deals and a landmark 10-year Tier-1 win (Liberty Mutual) .
  • Results beat Wall Street: revenue beat by ~$18.7M and non-GAAP EPS beat by ~$0.21; the company cited record-low ARR attrition and improving cloud margins as drivers * *.
  • FY2026 guidance introduced with healthy growth and margin progression: Ending ARR $1.210–$1.220B, revenue $1.385–$1.405B, non-GAAP operating income $259–$279M, operating cash flow $350–$370M .
  • Near-term catalysts: strength in Tier-1 demand and pipeline, margin expansion in subscription/support (targeting 71–72% FY2026), and accelerated data/AI product investments (Industry Intelligence, pricing analytics/Quanti) .

What Went Well and What Went Wrong

What Went Well

  • “We…surpass[ed] $1 billion in ARR…Q4 was highlighted by a significant 10-year agreement with a major Tier-1 insurer” (Liberty Mutual cloud migration and PolicyCenter adoption) .
  • Cloud economics improving ahead of schedule: subscription/support gross margin reached 70% in FY2025 (+4ppts YoY) and overall gross margin was 66% (+3ppts), underscoring platform scale .
  • Record sales activity: 19 core cloud deals in Q4; strong Tier-1 presence (nine deals) and broad-based geographic momentum; 16 core deals attached analytics/data offerings .

What Went Wrong

  • License revenue growth trending down longer-term as cloud migrations accelerate; FY2026 outlook assumes license declines >$30M and lower DWP/CPI true-ups in on-prem base .
  • Services gross margins remain structurally lower (FY2026 guide ~13%), limiting consolidated margin leverage relative to subscription/support .
  • Convertible notes dynamics and debt retirement costs impacted GAAP results earlier in the year; company recorded a $53.6M loss on retirement of debt in FY2025 .

Financial Results

Quarterly Trend (actuals)

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$289.5 $293.5 $356.6
Non-GAAP Diluted EPS ($)$0.51 $0.88 $0.84
GAAP Diluted EPS ($)$(0.45) $0.54 $0.60

Q4 YoY Comparison

MetricQ4 2024Q4 2025
Revenue ($USD Millions)$291.5 $356.6
Non-GAAP Diluted EPS ($)$0.62 $0.84
GAAP Diluted EPS ($)$0.20 $0.60

Segment Breakdown (Q4)

Segment Revenue ($USD Millions)Q4 2024Q4 2025
Subscription & Support$151.8 $201.9
License$88.9 $93.6
Services$50.8 $61.0
Total$291.5 $356.6

KPIs and Operating Metrics

KPIQ2 2025Q3 2025Q4 2025
ARR (constant currency, $USD Millions)$918.1 $960.0 $1,032.0
ARR (revalued at year-end FX, $USD Millions)——$1,041.0
Cloud ARR Share of Total (%)——74%
Cloud ARR YoY Growth (%)——36%
Subscription & Support Gross Margin (%) (FY)——70%
Total Gross Margin (%) (FY)——66%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ending ARR ($USD Millions)FY2025$1,000–$1,010M $1,012–$1,022M (raised in Q3) Raised
Total Revenue ($USD Millions)FY2025$1,164–$1,174M $1,178–$1,186M (raised in Q3) Raised
Non-GAAP Operating Income ($USD Millions)FY2025$175–$185M $187–$195M (raised in Q3) Raised
Operating Cash Flow ($USD Millions)FY2025$230–$260M $255–$275M (raised in Q3) Raised
Ending ARR ($USD Millions)Q1 FY2026—$1,048–$1,054M New
Total Revenue ($USD Millions)Q1 FY2026—$315–$321M New
GAAP Operating Income ($USD Millions)Q1 FY2026—$1–$7M New
Non-GAAP Operating Income ($USD Millions)Q1 FY2026—$47–$53M New
Ending ARR ($USD Millions)FY2026—$1,210–$1,220M New
Total Revenue ($USD Millions)FY2026—$1,385–$1,405M New
GAAP Operating Income ($USD Millions)FY2026—$68–$88M New
Non-GAAP Operating Income ($USD Millions)FY2026—$259–$279M New
Operating Cash Flow ($USD Millions)FY2026—$350–$370M New
Subscription & Support Revenue ($USD Millions)Q1 FY2026—≈$218M (management color) New
Services Revenue ($USD Millions)Q1 FY2026—≈$60M (management color) New
Subscription & Support Gross Margin (%)Q1 FY2026—71–72% New
Services Gross Margin (%)Q1 FY2026—~15% New
Total Gross Margin (%)Q1 FY2026—~64% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2)Previous Mentions (Q-1)Current Period (Q4)Trend
AI/data products (Industry Intelligence; pricing/Quanti)— (focus on deal momentum)Record Q3 sales; raised FY targets Expanded vision for data/AI in claims, underwriting, pricing; investing in new apps; Quanti acquisition example Increasing emphasis
Cloud migration & margins12 cloud deals; larger insurers; raised FY outlook 17 cloud deals; raised FY outlook 19 cloud deals; subscription/support GM 70%; aiming 71–72% FY2026 Strengthening
Tier-1 wins/referenceabilityLarger insurer deals Strong engagement; record activity Liberty Mutual 10-year cloud+PolicyCenter; nine Tier-1 deals in Q4 Major validation
Regional momentum—Industry events Paris/Tokyo/Sydney Broad-based strength; EU (11 deals FY), LatAm (3 Q4), APAC/AU/NZ/Japan Broadening
Marketplace/ecosystem——300+ third-party apps; 200+ partners; SI community up 11% to 27,000; cloud-certified +24% Scaling
ARR attrition/renewals——Record-low ARR attrition; enhanced customer success focus; minimal M&A attrition events Improving

Management Commentary

  • CEO on Q4/ARR milestone: “We…surpass[ed] $1 billion in ARR…Q4 was highlighted by a significant 10-year agreement with a major Tier-1 insurer” .
  • CFO on margin progression: “Subscription and support gross margin was 70%, up 4 percentage points year-over-year…Overall gross margin was 66% compared to 63% a year ago” .
  • CEO on “Act three” strategy: “Act three is all about data and analytics and more innovative application use cases…potential in pricing, underwriting, claims” .
  • President on deal mix/geography: “19 core cloud deals in Q4…nine deals with Tier 1 brands…broad-based strength by geography…EU 11 for the year…LatAm 3 in Q4” .
  • CFO on FY2026 outlook: “ARR…$1.21–$1.22 billion…subscription & support margins between 71% and 72%…operating cash flow $350–$370 million” .

Q&A Highlights

  • Record-low ARR attrition drivers: durability of use case, rigorous customer success and implementation focus; minimal large M&A attrition events in FY2025 .
  • “Act three” product roadmap: deeper data/analytics, agentic AI embedded in claims/policy workflows; emphasis on vertical context, platform-first architecture, and interoperability with partner ecosystem .
  • Premium growth and license dynamics: DWP growth beneficial but complex contract structures moderate immediate impact; gradual license decline as migrations accelerate, relatively small vs subscription drivers .
  • Tier-1 pipeline linearity: decisions tied more to customer budget cycles than GWRE year-end; Liberty Mutual seen as most strategic deal, with expected learnings to inform broader Tier-1 engagements .

Estimates Context

MetricQ4 2025 ActualQ4 2025 ConsensusBeat/Miss
Revenue ($USD)$356,570,000 $337,850,770*Beat
Non-GAAP Diluted EPS ($)$0.84 $0.6301*Beat

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Execution quality and pipeline depth support elevated ARR growth above mid-teens, with FY2026 ARR guide midpoint +17% (constant currency), sustained by ramp cohorts and record-low attrition .
  • Structural mix shift to subscription continues to improve margin profile; FY2026 targets point to 71–72% subscription/support GM and total GM ~66%, enhancing operating leverage .
  • Liberty Mutual’s 10-year partnership is a pivotal Tier-1 validation likely to improve win rates and deal sizes with large insurers; watch for reference momentum and implementation milestones .
  • Data/AI initiatives (Industry Intelligence, pricing analytics/Quanti) are emerging growth vectors with increasing attach rates to core deals; expect expanded productization and SI-enabled deployment pace .
  • License revenue headwinds are an expected byproduct of cloud migration, but are more than offset by subscription growth; model conservatism around DWP/CPI true-ups embedded in FY2026 outlook .
  • Near-term trading: clear beat on both revenue and EPS and robust guide should be supportive; monitor Q1 linearity and ARR contribution from backlog ramps and bonus/commission cash flow seasonality * .
  • Medium-term thesis: durable ARR growth, margin expansion, Tier-1 adoption, and AI-driven product extensions position GWRE for compounding cash flow and strategic relevance in P&C modernization .