Guidewire Software (GWRE, Financial) reported impressive Q3 2025 earnings, significantly exceeding EPS and revenue expectations. Revenue growth accelerated to 22% year-over-year from 20% in Q2, and annual recurring revenue (ARR) reached $960 million, surpassing the guidance range of $942-$947 million, highlighting strong demand for its cloud-based solutions.
Looking forward, GWRE provided optimistic Q4 guidance, forecasting revenue between $332-$340 million, surpassing the midpoint of consensus estimates. The company also slightly increased its full-year ARR outlook to $1.012-$1.022 billion, reflecting 17-18% year-over-year growth. This positive outlook is supported by record sales activity, including 17 cloud deals, and a strong pipeline indicating ongoing demand for its cloud platform.
- GWRE's transition from on-premise to cloud-based software has been key to its success, aligning with the property and casualty (P&C) insurance industry's move towards modern systems. The P&C sector, often using outdated back-office systems, represents a $20 billion opportunity for cloud solutions. GWRE's leadership is evident with 17 cloud deals in Q3, up from 12 in Q2, including agreements with Tier 1 and Tier 2 insurers.
- This transition has enabled GWRE to meet industry demands for scalable, flexible platforms like InsuranceSuite and InsuranceNow, increasing recurring revenue to 62% of total revenue, up from 55% a year ago, enhancing its competitive advantage.
- ARR, a crucial metric for GWRE, reached $960 million in Q3, an 11% increase from $864 million a year earlier, fueled by strong cloud adoption and low ARR attrition rates. The company's success in securing 14 InsuranceSuite and three InsuranceNow cloud deals showcases its penetration into high-end markets, especially among complex global insurers.
- Subscription and support revenue rose 32% year-over-year to $181.8 million, driven by strong cloud platform adoption and a $4 million credit from a cloud service provider that boosted margins. High sales momentum, low churn, and structured ARR ramps from previous deals provide visibility into GWRE's path to surpass $1 billion in ARR in Q4.
- GWRE's profitability improved, with Q3 non-GAAP operating income increasing to $46.1 million from $20.8 million a year earlier, reflecting operational discipline and cloud-driven margin expansion. Key factors include the shift to a subscription-based model, improving subscription and support gross margins to 71% from 66% a year ago, supported by economies of scale and the cloud provider credit.
GWRE's Q3 earnings highlighted outstanding financial performance, with significant EPS and revenue beats driven by strong cloud adoption and a record 17 cloud deals. The company's successful shift to a subscription-based model and strong demand from the P&C insurance industry's modernization efforts support its raised full-year guidance and position it for continued growth as it nears the $1 billion ARR milestone.
