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Factors Setting the Tone for Guidewire's (GWRE) Q2 Earnings

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Guidewire Software, Inc. (GWRE - Free Report) is slated to report second-quarter fiscal 2021 results on Mar 4.

For the fiscal second quarter, Guidewire expects revenues of $168-$172 million. The Zacks Consensus Estimate for revenues is pegged at $170.3 million, indicating a decline of 1.8% on a year-over-year basis.

The Zacks Consensus Estimate for the fiscal second-quarter bottom line is pegged at a loss of 1 cent per share, unchanged over the past 30 days. The company had reported earnings of 21 cents per share in the year-ago quarter.

Factors Likely to Have Influenced Q2 Performance

Guidewire's fiscal second-quarter results are likely to reflect the impact of coronavirus-led macroeconomic weakness, which might have affected renewals from small- and medium-sized insurers.

Guidewire Software, Inc. Price and EPS Surprise

Guidewire Software, Inc. Price and EPS Surprise

Guidewire Software, Inc. price-eps-surprise | Guidewire Software, Inc. Quote

Notably, the company anticipates Services revenues to be $42 million, suggesting a decline of 11% on a year-over-year basis.

Nevertheless, gains from solid momentum in the cloud-based InsurancePlatform suite of solutions might have cushioned the top-line performance in the quarter under review.

Solid uptick in subscription-based InsuranceSuite Cloud offerings, in particular, is expected to have contributed to subscription and support revenues in the to-be-reported quarter.

Further, the coronavirus-triggered demand for cloud-based insurance software solutions is likely to get reflected in the to-be-reported quarter’s revenues.

Notably, the company expects Annual Recurring Revenues (or ARR) between $518 million and $521 million for the quarter to be reported. The company had reported ARR of $513 million as of Oct 31, 2020.

Moreover, efforts on enhancing the Guidewire Cloud platform with new capabilities, including digital frameworks, automation, tooling, and other cloud services, are anticipated to have driven adoption of its InsurancePlatform suite of solutions in the fiscal second quarter.

In fact, growing clout of Guidewire’s offerings can be ascertained from the expanding customer base, which includes the likes of Amerisafe (AMSF - Free Report) . During the quarter under review, a notable property and casualty insurance company, Texas Mutual Insurance Company, announced that it will leverage Guidewire Cloud to run its main business operations.

Furthermore, incremental adoption of the latest InsuranceSuite 10 and InsuranceSuite Cloud offerings is expected to have driven the implementation of InsuranceNow. Solid uptick in multiple components of Guidewire’s InsurancePlatform, which included InsuranceSuite, digital, data and analytics, may have acted as a tailwind.

Also, the new deal wins from MAPFRE USA and Wawanesa Mutual Insurance Company during the fiscal second quarter remain noteworthy.

Besides, solid momentum in Cyence for Cyber Risk Management, ClaimCenter and PolicyCenter solutions is expected to have contributed to revenues.

Likewise, the company’s fiscal second-quarter results are expected to reflect gains from an expanding partner base in the PartnerConnect program. Notably, with the PartnerConnect program, insurers can easily access Guidewire’s Marketplace, which helps them introduce innovative solutions and adapt to changing market demands. On Jan 27, Guidewire announced that its PartnerConnect Solution Alliance Program now boasts more than 100 partners.

The company has been increasing investments to enhance insurance software products via collaborations with leading on-demand cloud infrastructure vendors, including Amazon’s (AMZN - Free Report) Amazon Web Services and Microsoft’s (MSFT - Free Report) Azure cloud platform.

Additionally, increasing expenditure to boost the implementation of Aspen, the company’s first cloud-optimized product release for InsuranceSuite, remains noteworthy.

Indeed, Guidewire is upbeat about its Banff service for its cloud platform. Banff adds on to Aspen cloud service (introduced in June 2020) and Guidewire Cloud platform. Aspen and Banff will create a closed-loop analytics platform to assist insurance professionals in decision-making. Banff service includes capabilities like CloudDirect and along with new InsuranceSuite Cloud API and InsuranceNow API.

Although increasing spend on product enhancements and marketing initiatives bodes well over the long haul, it might have weighed on margin expansion in the fiscal second quarter.

Guidewire currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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