Guidewire Software lifts revenue outlook on subscription strength
The property-casualty insurance software provider raised its full-year revenue guidance to as much as $1.47 billion.
Guidewire Software (GWRE) reported third-quarter results that accelerated its top-line growth and prompted the company to lift its full-year revenue outlook. The property-casualty insurance software provider said total revenue rose 27% year-over-year to $372.5 million.
The quarter marked a continued shift toward recurring revenue, with subscription and support revenue climbing 35% to $244.7 million, outpacing the 24% growth recorded in the prior quarter. License revenue, however, declined 2% to $56.0 million, an improvement from the 7% drop in the second quarter but still below the 5% gain seen in the fourth quarter of fiscal 2025. Services revenue grew 32% to $71.8 million, slightly slower than the 30% growth in the prior quarter.
Annual recurring revenue (ARR) reached $1.147 billion, up 19% from the year-ago period, though growth decelerated from the 22% pace in the second quarter. Non-GAAP operating income fell sequentially to $77.8 million from $87.4 million in the prior quarter, while non-GAAP net income declined to $69.6 million, or $0.82 a share, from $100.7 million, or $1.17 a share, in the second quarter. The company attributed the sequential declines to a $20.1 million foreign currency loss in the quarter, compared with a $34.2 million gain in the year-ago period.
Subscription and support gross margin compressed slightly to 72.3% from 73.0% in the prior quarter, though it remained above the 68.0% recorded in the fourth quarter of fiscal 2025. Services gross margin improved to 5.8% from negative 1.4% in the second quarter, reflecting ongoing margin expansion. Total non-GAAP gross margin was 66.4%, down sequentially from 67.5%.
Guidewire raised its fiscal 2026 revenue guidance to a range of $1.46 billion to $1.47 billion, up from $1.438 billion to $1.448 billion previously. The company reiterated its ARR guidance of $1.229 billion to $1.237 billion and lifted its non-GAAP operating income outlook to $314 million to $324 million from $293 million to $303 million. Operating cash flow guidance was also raised to $365 million to $380 million from $360 million to $375 million.
Free cash flow improved to $53.7 million from negative $77.4 million in the first quarter, driven by stronger operating cash flow. The company repurchased 1.7 million shares at an average price of $147.07 during the quarter, leaving $240.5 million remaining under its $500 million share repurchase program authorized in January.
Guidewire also began excluding unrealized foreign currency exchange rate gains and losses as a non-GAAP adjustment in the quarter, recasting prior periods to reflect the change.
Source: company public filings.