Executive Summary
Guidewire Software delivered a solid QQ2 2025 performance, underscored by accelerating cloud adoption, a robust ARR build, and a constructive path toward scale-enabled profitability. Total revenue rose 20% YoY to $289.5M, with ARR ending at $918M and net new ARR of $45M, ahead of prior seasonality expectations. The quarter showcased meaningful cloud momentum: Guidewire closed 12 cloud deals (including 4 full-insurance-suite deals) and added 5 new customers, including entries in Brazil and Belgium, while migrating six on-prem customers to the cloud. These dynamics support a broader transition to Guidewire Cloud Platform and underpin expectations for stronger ARR growth in H2 and into fiscal 2026. On profitability, GAAP operating income was $11.7M in QQ2, while non-GAAP operating income benefited from higher gross margins and disciplined OpEx, with the company guiding to a full-year non-GAAP operating income of $175–$185M and a 65% total gross margin (69% for subscription & support). Management highlighted ongoing investments in product development and a deliberate hiring trajectory to support cloud and AI-enabled capabilities, which should help lift long-run margins as ARR monetizes with higher-tier cloud deployments. The balance sheet remains highly liquid with ~$697.5M of cash and equivalents and ~$1.16B in cash + short-term investments, supporting continued debt optimization and capex in line with growth plans. The outlook also emphasizes seasonality in ARR ramps (notably stronger in Q4) and FX exposure, which could pose modest near-term headwinds to ARR translation if currencies move unfavorably. Overall, the investment thesis rests on (i) continued cloud enrollment and cross-sell into the installed base, (ii) an expanding partner and marketplace ecosystem, (iii) the strategic use of AI to augment core insurance processes, and (iv) a disciplined focus on converting backlog-driven ARR into durable, high-visibility revenue growth.” ,
Key Performance Indicators
QoQ: 348.37% | YoY:194.46%
QoQ: -507.89% | YoY:-484.81%
QoQ: -509.09% | YoY:-475.00%
Key Insights
Revenue: $289.48M, up 20.0% YoY; Gross Profit: $179.152M; Gross Margin: 61.89%; Subscription & Support Revenue: $178.0M; Services Revenue: $48.0M; Overall Gross Margin: 65.0%; Operating Income (GAAP): $11.72M; EBITDA: -$28.42M; Net Income: -$37.28M; EPS (GAAP and Diluted): -$0.45; Weighted Avg Shares Out: 83.705M; ARR: $918.0M; Net New ARR: +$45.0M; Cash & Equivalents: ~$697.5M; Operating Cash Flow: $86.0M; Free Cash Flow: $85.2M; Total Assets: $2.542B; Total Liabilities: $1.274B; Total ...
Financial Highlights
Revenue: $289.48M, up 20.0% YoY; Gross Profit: $179.152M; Gross Margin: 61.89%; Subscription & Support Revenue: $178.0M; Services Revenue: $48.0M; Overall Gross Margin: 65.0%; Operating Income (GAAP): $11.72M; EBITDA: -$28.42M; Net Income: -$37.28M; EPS (GAAP and Diluted): -$0.45; Weighted Avg Shares Out: 83.705M; ARR: $918.0M; Net New ARR: +$45.0M; Cash & Equivalents: ~$697.5M; Operating Cash Flow: $86.0M; Free Cash Flow: $85.2M; Total Assets: $2.542B; Total Liabilities: $1.274B; Total Stockholders’ Equity: $1.269B; Net Debt: $188.3M; Convertible Note actions: retired $100M of 2025 converts in Q2, $179M left to settle in Q3; Q2 ARR outlook raised to $1.0B–$1.01B (YoY growth ~16–17%).
YoY revenue growth is driven by robust cloud bookings, ramp-based ARR, and continued insurance-suite cloud momentum, while QoQ progression reflects seasonality from ramp deals and backlog realization.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
289.48M |
20.17% |
10.11% |
| Gross Profit |
179.15M |
25.80% |
13.11% |
| Operating Income |
11.72M |
194.46% |
348.37% |
| Net Income |
-37.28M |
-484.81% |
-507.89% |
| EPS |
-0.45 |
-475.00% |
-509.09% |
Key Financial Ratios
operatingProfitMargin
4.05%
operatingCashFlowPerShare
$1.03
freeCashFlowPerShare
$1.02
priceEarningsRatio
-118.6
Management Commentary
- The management emphasized accelerating cloud adoption and the importance of Guidewire Cloud Platform in transforming core policy, billing, and claims systems for insurers. Mike Rosenbaum noted: 'the pace around which we're having these conversations is really improving' and highlighted three large London-market wins as proof points of Europe’s contribution to cloud momentum.
- Jeff Cooper underscored the ARR dynamics, noting ARR finished at $918M with $45M of net new ARR added, driven by ramped deals and a solid new-ARR backlog. He also called out that Q2 ARR was above the high end of guidance and that the full-year ARR target has been raised to $1.0B–$1.01B with a backlog-led growth mechanism.
- On AI and the future product roadmap, Mike Rosenbaum discussed AI’s potential in claims, underwriting, and development productivity, stressing that core on-prem migrations remain the priority but that AI could meaningfully enhance efficiency and decision-making over time. He reiterated that the company will pursue these initiatives carefully while maintaining a focus on core system success.
- Management also addressed macro-resilience of the P&C industry in the wake of catastrophes (e.g., LA fires) and how Guidewire’s cloud-enabled platform supports rapid risk analysis and payouts, which strengthens customer trust and market relevance.
- The Q&A reinforced the strategic emphasis on cross-sell within the installed base, cross-border expansion, and the incremental revenue potential from expanding lines of business (more modules per customer).
"the pace around which we're having these conversations is really improving" (Mike Rosenbaum on cloud adoption momentum).
— Mike Rosenbaum
"the biggest thing is our proven track record of success... there’s more incentive for us and for the customer to sort of do that full suite deal all at once" ( Mike Rosenbaum on cloud migration and full-suite deals).
— Mike Rosenbaum
Forward Guidance
Guidewire reaffirmed and slightly raised 2025 guidance, reflecting confidence in ARR progression and ramp-based revenue. Key points:
- ARR outlook for FY2025 raised to $1.0B–$1.01B (growth of ~16–17% YoY). Expect significant ARR from ramped deals in H2 and a notable Q4 uplift as ramp realizations accelerate.
- Total FY2025 revenue guided to $1.164B–$1.174B, with subscription revenue ~ $653M and subscription & support ~$718M. Services revenue raised to ~$210M due to stronger first-half bookings.
- Subscriptions gross margin targeted at ~69%; total gross margin ~65%; services margin ~12%; non-GAAP operating income targeted at $175–$185M; GAAP operating income guided to $10–$20M.
- Q3 outlook: ARR $942–$947M; total revenue $283–$289M; subscription & support about $178M; services ~ $52M; total gross margin ~64%; non-GAAP operating income $36–$42M.
- Risks cited include FX effects (potential ~-$9M adjustment if FX rates move unfavorably by year-end), hiring cadence (slower early-year hiring but acceleration planned in H2), and execution risk in large, multi-year cloud programs.
- Investors should monitor: (i) the pace of backlog-to-ARR realization in Q4, (ii) the onboarding and adoption rate among remaining on-prem customers, (iii) the evolution of FX exposure and its impact on ARR and revenue, and (iv) the progression of AI-enabled initiatives and their actual impact on margins and dev productivity.