Summary
Guidewire opened fiscal 2026 with broad top-line and margin expansion. Revenue for the first quarter ended October 31, 2025 was $332.6 million, up 26.5% from the prior-year quarter. Gross profit rose 32.3% to $209.5 million. Operating income was $18.5 million, up 491.5% and swung to a profit. Net income was $31.3 million, up 242.6%. Diluted EPS was $0.36, up 227.3%. Gross margin reached 63.0%, up 2.7 percentage points. Operating margin was 5.6%, up 7.4 percentage points. The company also reported ARR of $1,063 million at October 31, 2025, compared with $1,041 million at July 31, 2025, and ARR growth of 22% year-over-year.
Operational momentum centered on the Guidewire Cloud Platform. CEO Mike Rosenbaum said the company continues to see strong momentum for the platform and pointed to the annual Connections customer conference, where Guidewire launched new pricing and underwriting products. Those products, PricingCenter and UnderwritingCenter, deliver intelligence and AI powered automation to P&C insurers. Guidewire serves more than 570 insurers in 43 countries and has supported 1,700+ successful projects. Non-GAAP income from operations was $63.4 million, compared with $34.7 million in the prior-year quarter. Non-GAAP net income was $57.0 million, compared with $36.7 million. Non-GAAP diluted EPS was $0.66, compared with $0.43.
Backlog and recurring revenue metrics showed strong demand. Deferred revenue was $256.0 million, up 12.6% from the prior-year quarter. Remaining performance obligations were $3.20 billion, up 60.0% from the prior-year quarter. Cash flow remained seasonal. Operating cash flow was negative $67.4 million, down 8.2% from the prior-year quarter. Capital expenditures were $4.88 million, up 478.6%. The 10-Q notes that the first fiscal quarter typically uses more cash because Guidewire pays annual employee bonuses and seasonally higher sales commissions from fourth-quarter orders.
Management issued guidance for the second quarter of fiscal 2026 and updated its full-year fiscal 2026 outlook. For the second quarter, ending ARR is expected between $1,107 million and $1,113 million, and non-GAAP operating income is expected between $68 million and $74 million. For the full fiscal year, ending ARR is expected between $1,220 million and $1,230 million, and non-GAAP operating income is expected between $266 million and $282 million. The company raised its full-year outlook ranges. CFO Jeff Cooper said first-quarter results inform confidence to raise the fiscal-year outlook.
Risks remain familiar for a company selling mission-critical software to insurers. The 10-Q cites reliance on sales to and renewals from a relatively small number of large customers and their substantial negotiating leverage. It also flags lengthy and complex sales, product development, and implementation cycles, competition, international expansion, AI and machine learning development and evolving regulation, long-term pricing commitments based on cost estimates, and seasonal variations in results. Global events such as conflicts, inflation, high interest rates, economic volatility, political uncertainties, tariffs, bank failures, and supply chain issues could affect ARR, revenue growth, sales cycles, services margins, operating cash flow, and expenses. Data security breaches, new regulations, and intellectual property claims are additional risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $332.6M | $356.6M | -6.7% | $262.9M | +26.5% |
| Gross profit | $209.5M | $231.8M | -9.6% | $158.4M | +32.3% |
| Gross margin | 63.0% | 65.0% | -2.0 pp | 60.3% | +2.7 pp |
| Research & development | $78.3M | $84.1M | -6.9% | $68.9M | +13.7% |
| Sales & marketing | $64.3M | $65.6M | -2.1% | $51.5M | +24.8% |
| General & administrative | $48.5M | $52.5M | -7.6% | $42.8M | +13.4% |
| Total operating expenses | $191.0M | $202.2M | -5.5% | $163.1M | +17.1% |
| Operating income (loss) | $18.5M | $29.6M | -37.6% | -$4.7M | +491.5% |
| Operating margin | 5.5% | 8.3% | -2.8 pp | -1.8% | +7.3 pp |
| Net income (loss) | $31.3M | $52.0M | -39.7% | $9.1M | +242.6% |
| Net margin | 9.4% | 14.6% | -5.2 pp | 3.5% | +5.9 pp |
| Diluted EPS | $0.36 | $0.60 | -$0.24 | $0.11 | +$0.25 |
Risks
Revenue and ARR depend on a relatively small number of P&C insurance customers. The ten largest customers accounted for 20% and 22% of revenue in fiscal years 2025 and 2024, and 20% of total ARR at July 31, 2025. These customers have substantial negotiating leverage and may seek price reductions or ramped ARR, and P&C insurer consolidation could further concentrate the customer base.
Sales and implementation cycles are lengthy and variable, with implementations typically lasting 6 to 24 months or longer. Customers have significant negotiating power, and failure to meet implementation or service-level commitments can lead to monetary credits, reduced fees, revenue reversals, or refusal to pay, delaying revenue and increasing costs.
AI technologies are central to product development and workforce use, but they carry regulatory, litigation, IP, confidentiality, and accuracy risks. Competitors and customers may use evolving AI to build their own solutions, reducing demand, and AI-generated code may create IP infringement or open source exposure.
The shift to cloud-based subscription offerings requires significant investment and ratable revenue recognition, which lowers initial-period revenue and can adversely affect near-term reported revenue growth. Subscription contracts include service-level penalty clauses, and migration and implementation costs may differ from estimates.
Customers have no obligation to renew term licenses or subscriptions and may renew on less favorable terms or cancel under certain circumstances. Some customers can exercise a perpetual buyout of term licenses, eliminating future term license revenue, and delayed payments or renegotiations can harm revenue and profitability.
The market is intensely competitive, including from small independent firms, local international vendors, horizontal software providers, consulting firms, and insurtech companies. Legacy systems and AI-driven custom solutions may reduce demand, and larger competitors may devote greater resources, leading to pricing pressure and higher research and development and sales costs.
Revenue mix shifts toward subscription and support and services, which have lower gross margins than license revenue. Subscription and support was 61% and 56% of total revenue in fiscal years 2025 and 2024, with gross margin of 68% and 63%, while license gross margin was 99% and 98%; services was 18% of total revenue in both years and has at times had negative gross margin.
A significantly higher percentage of annual license revenue and cash receipts is recognized in the fourth fiscal quarter ending July 31 due to sales incentives. Subscription ratable recognition may dampen this over time, but near term it can impact quarter-over-quarter and year-over-year comparisons and cash flow expectations.
Global events, inflation, tariffs, high interest rates, geopolitical conflicts, and bank failures have caused and may continue to cause economic volatility. Customers may defer or cancel purchases, request amended payment terms, or face reduced DWP, which can lower demand and increase collectibility risk.
Future success depends on attracting, training, integrating, and retaining highly skilled employees, especially in cloud operations, sales, services, and engineering. Competition is intense, particularly in the San Francisco Bay Area, and hybrid work arrangements may affect recruitment, retention, collaboration, and cybersecurity.
As of October 31, 2025, $690.0 million aggregate principal of 2029 Convertible Senior Notes was outstanding. Conversion or fundamental change repurchase obligations may require cash settlement, and the $300.0 million revolving credit facility contains restrictive covenants and financial ratios; failure to comply could cause default and acceleration.
Pricing and packaging decisions are based on available information and may need to change due to market demands, inflation, tariffs, interest rates, or costs. Multi-year contracts and inability to foresee changing events could impact contract profitability, and competitors' lower prices may hinder customer acquisition and retention.
The November 2025 acquisition of ProNav Technologies Ltd. and past acquisitions carry integration, retention, due diligence, internal control, and dilution risks. Failure to achieve synergies or unexpected costs could harm margins and results.
SaaS KPIs
All quarters →ARR
Free Cash Flow
ARR Growth
Summary, forecast, risks and KPIs are extracted from Guidewire Software, Inc.'s SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.