Clearwater Analytics Holdings, Inc. Q1 FY2026 earnings

Clearwater Analytics reported first quarter fiscal 2026 revenue of $221.2 million, up 74.4% from $126.9 million in the prior-year quarter. Management attributed the gain to new clients brought onto the core platform, customers gained through the Enfusion, Beacon, and Bistro acquisitions, changes in existing clients' assets, and revenue not tied to platform assets. Average assets billed to clients grew 16% year over year, and the average basis point rate billed rose 0.6%. Annualized recurring revenue reached $872 million as of March 31, 2026, up 77% from $494 million a year earlier. Gross revenue retention was 97%. Net revenue retention was 108%, down from 114%, and 111% excluding the effects of the acquired entities.

Profitability is where the quarter gets messier. Gross profit rose 56.6% to $145.5 million, but GAAP gross margin fell to 65.8% from 73.3%. Amortization of acquired intangibles, payroll tied to the acquisitions, and higher data and technology costs all pushed cost of revenue up. Operating income rose 26.9% to $9.0 million, so operating margin slipped to 4.1% from 5.6%. The company swung to a net loss of $2.8 million for the quarter, after recording a profit a year earlier. Diluted earnings per share were -$0.01, down from $0.03.

Non-GAAP results look far better than the GAAP ones, and the spread is worth watching. Adjusted EBITDA came in at $77.4 million, up 72%, for a 35.0% margin, up from 34.1% in the fourth quarter of 2025. Non-GAAP gross profit rose 73% to $172.7 million on a 78.1% non-GAAP gross margin, which slipped from 78.9%. Non-GAAP net income rose 39.5% to $48.6 million. Equity-based compensation, depreciation and amortization, and transaction costs for the pending merger and closed acquisitions explain most of the difference between the GAAP and non-GAAP bottom lines.

Cash generation slowed. Operating cash flow was $17.7 million, down 27.9% from $24.5 million, held back by the payment of 2025 accrued bonuses and other working capital moves. Capital expenditures rose to $6.4 million from $1.5 million, an increase of 338.7%. Free cash flow, a non-GAAP measure, was $11.2 million. Deferred revenue, current portion only, climbed 209.3% to $28.0 million from $9.1 million, reflecting the larger billing base after the acquisitions.

There is no guidance to weigh. Because of the pending takeover, Clearwater will not host an earnings call or provide forward-looking guidance for the second quarter or the full fiscal year. The investor group led by Permira and Warburg Pincus agreed to buy the company for roughly $8.4 billion, or $24.55 per share in cash, with participation from Temasek and support from Francisco Partners. Shareholders voted to adopt the merger agreement on May 6, 2026. Every required regulatory approval is in hand except clearance from the Australia Foreign Investment Review Board, and an application was submitted in the second quarter of 2026. Closing is expected in the second quarter of 2026.

The transaction brings its own risks. The Australian Treasurer still has to approve the FIRB application, other closing conditions may not be satisfied, shareholder litigation could add cost or delay, and restrictions during the pendency limit what the company can pursue. Operationally, Clearwater still needs to integrate Enfusion, Beacon, and Bistro, retain their clients and employees, and service the debt raised for those deals. The platform supported more than $10 trillion in assets and over 2,500 clients as of December 31, 2025. Many client contracts remain cancellable on 30 days' notice, and about 74% of platform assets were high-grade fixed income and structured products as of December 31, 2025, which limits but does not eliminate exposure to market swings.