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Guidewire Software (GWRE) delivered a strong beat-and-raise 3Q25 earnings report, decisively surpassing EPS and revenue expectations, marking a significant improvement from last quarter when the company fell just short of the EPS consensus estimate. Furthermore, revenue growth re-accelerated to 22% yr/yr in Q3 from 20% in Q2, signaling strengthening momentum, and annual recurring revenue (ARR) reached $960 mln, well above the company’s guidance range of $942-$947 mln, underscoring strong demand for its cloud-based offerings.

Looking ahead, GWRE provided upbeat Q4 guidance, projecting revenue of $332-$340 mln, which is ahead of the consensus estimate at the midpoint of the range, while slightly raising its full-year ARR outlook to $1.012-$1.022 bln, reflecting 17-18% yr/yr growth. This encouraging guidance is underpinned by the company’s exceptional Q3 performance, driven by record sales activity, including 17 cloud deals, and a robust pipeline that signals sustained demand for its cloud platform.

• The beat-and-raise performance was bolstered by GWRE’s successful transition from an on-premise to a cloud-based software provider, capitalizing on the property and casualty (P&C) insurance industry’s ongoing shift toward modernized systems. The P&C sector, often reliant on inefficient and outdated back-office systems, represents a $20 bln opportunity for cloud-based solutions, and GWRE’s leadership in this space is evident through its 17 cloud deals in Q3, up from 12 in Q2, including seven with Tier 1 insurers and three with Tier 2 insurers.
• This transition has enabled GWRE to meet the industry’s demand for scalable, flexible platforms like InsuranceSuite and InsuranceNow, driving recurring revenue (subscription revenue) to 62% of total revenue, up from 55% a year ago, and reinforcing its competitive edge in a market ripe for digital transformation.
• ARR, a critical metric for GWRE, reached $960 mln in Q3, an 11% increase from $864 mln in the year-earlier period, driven by strong cloud adoption and record-low ARR attrition rates. The company’s sales success, particularly in closing 14 InsuranceSuite and three InsuranceNow cloud deals, reflects its ability to penetrate high-end markets, with notable strength among complex global insurers.
• Subscription and support revenue, another key indicator of GWRE’s cloud transition, surged 32% yr/yr to $181.8 mln, fueled by robust adoption of its cloud platform and a $4 mln credit from a cloud service provider that boosted margins. The combination of high sales momentum, low churn, and structured ARR ramps from prior deals provides clear visibility into GWRE’s path to exceed $1 bln in ARR in Q4.
• GWRE’s profitability continues to improve, with Q3 non-GAAP operating income rising to $46.1 mln from $20.8 mln in the year-earlier quarter, a testament to its operational discipline and cloud-driven margin expansion. Key drivers include the transition to a subscription-based model, which has improved subscription and support gross margins to 71% from 66% a year ago, aided by economies of scale and the aforementioned cloud provider credit.

GWRE's Q3 earnings showcased exceptional financial performance, with significant EPS and revenue beats driven by robust cloud adoption and a record 17 cloud deals. The company’s successful pivot to a subscription-based model, coupled with strong demand from the P&C insurance industry’s modernization efforts, underpins its raised full-year guidance and positions it for sustained growth as it approaches its $1 bln ARR milestone.