EPS of $0.11 increased by 133.3% from previous year
Gross margin of 60.2%
Net income of 9.14M
"I do genuinely believe that we are going to get 100% of our customer base to our cloud and that's a pretty amazing thing to say when you think about the scope of what Guidewire has achieved over its 20-year history." - Mike Rosenbaum
Guidewire delivered a strong start to fiscal 2025, underscored by robust cloud adoption and expanding enterprise deals. Total revenue reached $263 million in Q1 2025, up 27% year over year, with subscription and support revenue of $170 million (+33% YoY). ARR ended at $874 million, at the high end of guidance, signaling durable growth from Guidewire Cloud Platform and InsuranceSuite deployments. The company demonstrated improving profitability on a non-GAAP basis, with subscription and support gross margin of 70% and overall gross margin of 63%, contributing to an operating profit of $34.7 million versus an expected midpoint of $21 million. Management highlighted accelerating cloud momentum, a growing ecosystem of partners, and a clear AI roadmap as core drivers for future growth. Importantly, Guidewire maintained its FY2025 targets, raising the relevance of its cloud migration strategy and international expansion while signaling ongoing investments in AI-enabled capabilities. However, near-term cash flow remained negative on a reported basis due to working capital dynamics around client bonuses and revenue mix, a factor commonly observed in Q1 across software peers. The guidance reflects continued cloud-led expansion, with FY2025 ARR guided to $995–$1,005 million, total revenue of $1.155–$1.167 billion, and non-GAAP operating income in the range of $164–$176 million.
Key Performance Indicators
Revenue
262.90M
QoQ: -9.82% | YoY:26.76%
Gross Profit
158.39M
60.25% margin
QoQ: -15.04% | YoY:41.05%
Operating Income
-4.72M
QoQ: -145.76% | YoY:86.03%
Net Income
9.14M
QoQ: -45.47% | YoY:133.76%
EPS
0.11
QoQ: -45.00% | YoY:133.33%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $262.9 million in Q1 2025, up 27% YoY; QoQ data not provided in the release.
Subscription and support revenue: $170.0 million, +33% YoY, reflecting the strongest growth rate in 2 years and ongoing InsuranceSuite cloud momentum.
Services revenue: $56.0 million; higher utilization and healthy bookings supported the top-line mix.
Gross profit: $158.4 million; gross margin 60.2% (versus 58% prior year and 42% in 2023 Q1).
Subscription and support gross margin: 70%; Services gross margin: 20%.
Financial Highlights
Highlights and metrics (USD, YoY and QoQ context where available):
- Revenue: $262.9 million in Q1 2025, up 27% YoY; QoQ data not provided in the release.
- Subscription and support revenue: $170.0 million, +33% YoY, reflecting the strongest growth rate in 2 years and ongoing InsuranceSuite cloud momentum.
- Services revenue: $56.0 million; higher utilization and healthy bookings supported the top-line mix.
- Gross profit: $158.4 million; gross margin 60.2% (versus 58% prior year and 42% in 2023 Q1).
- Subscription and support gross margin: 70%; Services gross margin: 20%.
- Operating income: $(4.72) million (GAAP); adjusted/Non-GAAP operating income: not separately stated here, but implied through gross profit and OpEx discipline; a $12 million beat to the gross profit line contributed to a stronger quarter than the midpoint of a $21 million GAAP operating income outlook.
- Net income: $9.14 million; net income margin 3.48%; EPS $0.11 (diluted).
- Cash & liquidity: over $1.5 billion in cash, cash equivalents and investments; completed a $690 million convertible debt offering; retired ~30% of existing convertibles maturing in 2025; established a $300 million revolving credit facility.
- Cash flow: Operating cash flow negative by $62 million, reflecting Q1 timing of annual bonuses/commissions; free cash flow negative by $67.4 million.
- ARR guidance (FY25): $995–$1,005 million.
- Total FY25 revenue guidance: $1.155–$1.167 billion; Subscription revenue: ~$648 million; Subscription and support revenue: ~$713 million; Services revenue: ~$205 million.
- Margin guidance: FY25 subscription and support gross margin ~69%; services gross margin ~12%; overall gross margin ~65%; Non-GAAP operating income $164–$176 million.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
262.90M
26.76%
-9.82%
Gross Profit
158.39M
41.05%
-15.04%
Operating Income
-4.72M
86.03%
-145.76%
Net Income
9.14M
133.76%
-45.47%
EPS
0.11
133.33%
-45.00%
Key Financial Ratios
currentRatio
2.66
grossProfitMargin
60.2%
operatingProfitMargin
-1.8%
netProfitMargin
3.48%
returnOnAssets
0.35%
returnOnEquity
0.72%
debtEquityRatio
0.78
operatingCashFlowPerShare
$-0.75
freeCashFlowPerShare
$-0.76
priceToBookRatio
12.23
priceEarningsRatio
424.31
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the earnings call, grouped by themes:
- Strategy and cloud migration
- Mike Rosenbaum: Cloud demand remained strong with 9 deals in Q1, including 7 InsuranceSuite Cloud deals and 5 with Tier 1 insurers; Zurich global framework will streamline multi-country cloud adoption, accelerating large-scale modernization.
- Mike Rosenbaum: The move to Guidewire Cloud is enabling faster releases and more frequent updates, improving referenceability and reducing perceived risk for on-prem customers considering cloud migrations.
- Mike Rosenbaum: The global Zurich framework is designed to grease cross-border deployments and speed up contracting, signaling a scalable, worldwide go-to-market framework.
- AI and platform maturity
- Mike Rosenbaum: Generative AI capabilities will be infused into the platform to improve developer productivity and accelerate underwriting and claims processes; customer feedback is highly positive and supports a modern, API-first core platform.
- John Mullen: 100% GenAI conversations across customer dialogs are becoming common, with business cases focusing on decision-making and modernization of core processing.
- Operations and ecosystem
- Jeff Cooper: Subscription and support gross margin of 70% reflects platform efficiency and favorable mix; ongoing migration tooling and DevOps resource shifts will modestly temper this margin in the near term but are expected to be accretive over the full year.
- Mike Rosenbaum: Partner and marketplace momentum is strong, with 33 SI partners and integrations like Box and Hi Marley illustrating the expanding insurance lifecycle coverage and value creation for customers.
- Market and international growth
- The company highlighted growth in Europe and Asia Pacific, including Tier 1 wins in Australia and New Zealand and a strategy session for Japan; Zurich expansion is a key catalyst for cross-border expansion.
- Financial performance and outlook
- Jeff Cooper: FY25 ARR outlook at $995–$1,005 million; total revenue guidance of $1.155–$1.167 billion; improving gross margins and profitability metrics support the transition toward a cloud-first, high-cash-flow model over time.
- The call emphasized higher utilization rates and a mix shift toward services delivered by partners, with ongoing optimization of cloud COGS and R&D alignment.
I do genuinely believe that we are going to get 100% of our customer base to our cloud and that's a pretty amazing thing to say when you think about the scope of what Guidewire has achieved over its 20-year history.
— Mike Rosenbaum
ARR ended at the high end of our outlook at $874 million; second, subscription and support revenue growth accelerated to 33% in Q1; third, subscription and support gross margin hit 70% in the quarter; and fourth, total revenue on a trailing 12-month basis surpassed $1 billion.
— Jeff Cooper
Forward Guidance
Assessment of the forward-looking outlook and potential catalysts:
- Base-case view remains constructive: Guidewire maintained a FY25 ARR target of $995–$1,005 million and lifted the total revenue outlook to $1.155–$1.167 billion, reflecting a strong start to the year and continued cloud momentum. The company also raised subscription and support gross margin guidance to 69% for the year and projects total gross margins around 65%, signaling ongoing efficiency gains as cloud adoption deepens.
- Q2 guidance implies continued strength in cloud deployments and utilization: ARR finishing at $909–$914 million; total revenue $282–$288 million; subscription and support revenue ~$175 million; services ~ $48 million; total gross margin ~64% and non-GAAP operating income of $39–$45 million.
- Growth drivers and achievability:
- Cloud migration velocity remains a key lever; management believes it will take time to convert remaining on-prem customers, but the path to 100% cloud migration remains feasible given product maturity, referenceability, and credible case studies from Tier 1 insurers.
- GenAI integration is core to the product roadmap; monetization frameworks for GenAI use cases are still evolving and will be announced as solutions mature.
- International expansion (Europe, APAC, Japan) is a meaningful growth vector supported by multi-country agreements with Zurich and a growing set of cloud customers in these regions.
- Risks to watch include churn and mix effects, longer sales cycles for Tier 1 deals in new regions, currency and macroeconomic pressures, and potential delays in realizing the full uplift from cloud-based efficiencies.
- Key factors investors should monitor: adoption pace of InsuranceNow and other cloud solutions by mid-market customers, progression of Tier 1 deals into scale ARR, utilization trends and partner-led delivery mix, and the monetization/realization of GenAI-enabled capabilities.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
GWRE Focus
60.25%
-1.80%
0.72%
424.31%
DSGX
66.70%
32.10%
2.74%
57.06%
MANH
56.40%
24.00%
21.50%
50.08%
TYL
47.30%
15.80%
2.31%
76.41%
QTWO
53.20%
1.15%
0.87%
257.65%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Guidewire’s QQ1 2025 results demonstrate a clear transition to a cloud-first, higher-margin growth trajectory supported by a broad enterprise pipeline and international expansion. The company’s ARR of $874 million and FY25 guidance imply durable revenue growth anchored by subscription, with a target gross margin of roughly 65% for the year and 69% for subscription and support. The AI roadmap and a strengthened partner ecosystem provide meaningful optionality for expanded TAM and product differentiation in a competitive P&C software market. However, investors should monitor the sustainability of near-term profitability given working-capital-driven OCF headwinds, execution risk around 100% cloud migration, and the potential for churn or deal pace variability in the near term. Valuation remains elevated relative to industry benchmarks, reflecting Guidewire’s premium position in the P&C software space and the potential upside from AI-enabled insurance workflows. If Guidewire can maintain ARR growth, improve utilization, and monetize GenAI effectively, the stock could trade at a premium to peers, driven by long-term durable growth and margin expansion opportunities.
Key Investment Factors
Growth Potential
Strong growth potential from accelerating cloud adoption (ARR $874M in Q1; FY25 ARR target $995–$1,005M) and a broad international expansion plan (Europe, APAC, Japan). The InsuranceSuite Cloud momentum, 9 cloud deals in Q1, and presence of Tier 1 customers (Zurich, etc.) indicate durable revenue expansion. An advancing AI roadmap (GenAI integration) and expanded partner ecosystem (33 SI partners; Box, Hi Marley integrations) create multiple levers for incremental revenue and improved margins over time.
Profitability Risk
Key risks include near-term gross-margin pressure from cloud tooling investments and DevOps reallocation, potential higher churn or slower ramp in certain Tier 1 deals, execution risk in migrating on-prem customers to cloud, macro/FX influences on international growth, and competitive intensity in a fragmented P&C software market. Elevated valuation metrics (P/S ~59x; P/E ~424x in ratios) suggest sensitivity to execution and monetization of AI-enabled offerings.
Financial Position
Strong liquidity with over $1.5B in cash, cash equivalents and investments; $690M convertible debt offering completed, with partial retirement of maturing convertibles (~30%); $300M revolver established for liquidity and growth agility. FY25 guidance assumes continued positive free cash flow generation over time (operating cash flow guidance of $220–$250M for the year), though Q1 reflected working-capital-driven negative OCF. Balance sheet is supportive for inorganic growth and partnerships.
SWOT Analysis
Strengths
Strong cloud momentum with 9 cloud deals in Q1 and 5 Tier 1 InsuranceSuite Cloud deals
Global framework with Zurich enabling multi-country cloud adoption
70% subscription and support gross margin driven by cloud platform efficiency
Blue-chip customer base and high retention dynamics
Growing ecosystem of SI and technology partners (33 SI partners, Box, Hi Marley) supporting end-to-end insurance lifecycle
Gartner MQ leader in NA for InsuranceSuite SaaS P&C core platforms
Weaknesses
Q1 GAAP operating income negative and near-term negative operating cash flow due to working capital timing
Higher stock-based compensation and DevOps reallocation impacting short-term margin dynamics
Backlog is typically slow in Q1 and churn in Q1 modestly higher than expected
Opportunities
Expansion into Europe and APAC markets with increasing Tier 1 activity
InsuranceNow expansion for smaller customers and mid-market segments
Generative AI integration across underwriting, claims, and analytics to unlock new workflows
Cross-sell opportunities across the Guidewire InsuranceSuite and data/analytics offerings
Further monetization through global Zurich-scale deployments
Threats
Competitive intensity from alt-cloud/core platforms and traditional on-prem providers
Execution risk in migrating on-prem customers to cloud within planned timelines
Macro headwinds and FX exposure in international markets
Dependence on large system integrators and third-party partners for program delivery