We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Guidewire Rises 23% YTD: Where Will the Stock Head From Here?
Read MoreHide Full Article
Key Takeaways
Guidewire gains from strong cloud adoption, margin expansion and healthy cash reserves.
GWRE trades below its 52-week high, indicating potential for moderate gains.
Premium valuation may warrant caution for new investors despite long-term strengths.
Guidewire Software (GWRE - Free Report) stock has appreciated 23.3% year to date
compared with the Zacks Internet Software industry's growth of 23.7%. The broader Computer and Technology sector and the S&P 500 composite have returned 14.6% and 9.5%, respectively, over the same time frame. San Mateo, CA-based Guidewire is a provider of software solutions for property and casualty insurers.
GWRE closed last session at $207.87. The stock is trading 21% down from its 52-week high of $263.20. Does the pullback indicate a buying opportunity?
Price Performance
Image Source: Zacks Investment Research
Let us dive into GWRE’s pros and cons and determine the best course of action for your portfolio.
Factors Driving Growth for GWRE
Guidewire is benefiting from strong momentum in its cloud business, fueled by rising demand from insurers moving away from legacy systems toward cloud-based solutions. The company has strategically expanded its cloud ecosystem, now encompassing 26,000 Guidewire-specialized practitioners across 38 system integrators. Its focus on enhancing the Guidewire Cloud platform with new capabilities, including digital frameworks, automation, tooling and other cloud services, is expected to boost sales of subscription-based solutions in the long haul.
Also, the company announced its first sale of Guidewire Industry Intelligence, a pre-built predictive model embedded into ClaimCenter workflow in the last reported quarter. This solution is trained and validated using anonymized data available on Guidewire’s cloud deployments. This not only represents a new revenue opportunity but is a value addition for insurers looking to make data-driven claims decisions.
In the fiscal third quarter of 2025, Guidewire secured 17 new deals, 14 for various InsuranceSuite Cloud applications and three for InsuranceNow. These included seven core system wins with Tier 1 insurers and three with Tier 2 insurers.
Guidewire Software, Inc. Price, Consensus and EPS Surprise
Management’s efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. Non-GAAP gross margin expanded to 65.5% from 62.6% on a year-over-year basis. The subscription and support segment’s gross margin increased to 70.6% from 65.6% on a year-over-year basis, attributed to higher-than-expected revenues and increases in cloud infrastructure platform efficiency, along with $4 million in credits received from its cloud service provider. Services’ non-GAAP gross margin was 12.9% against negative 10.3% in the year-ago quarter.
For the fiscal fourth quarter, non-GAAP operating income is estimated in the range of $52-$60 million. Non-GAAP operating income for fiscal 2025 is estimated between $187 million and $195 million compared with $175-$185 million expected previously.
Driven by strong collections, Guidewire generated $32.4 million in cash from operations in the quarter under discussion, while free cash flow was nearly $27.8 million. As of April 30, 2025, cash and cash equivalents and short-term investments were $1,243.7 million, with $673.7 million of long-term debt. The company’s ability to generate positive cash flow while continuing to invest in growth initiatives provides a solid foundation for expansion.
Driven by strong revenue performance in the fiscal third quarter, Guidewire expects total revenues for fiscal 2025 to be between $1.178 billion and $1.186 billion compared with earlier guidance of $1.164 billion to $1.174 billion. Subscription revenues are now forecasted to be $660 million, while subscription and support revenues are expected to be $724 million. Services revenues are expected to be approximately $215 million.
Image Source: Zacks Investment Research
In the past 60 days, analysts have marginally revised estimates upwards for the current year.
GWRE Faces Headwinds
Higher costs remain a concern for Guidewire, especially amid prevailing weakness in global macroeconomic conditions. In the fiscal third quarter, total operating expenses increased 12.1% year over year to $178.2 million. Increasing costs can put downward pressure on the company’s profitability, especially if the revenue performance weakens.
Guidewire increasing global footprint, with new customers primarily coming from diverse markets such as Japan, Brazil, Belgium and other international regions, presents foreign exchange as well as integration risks. Strengthening the U.S. dollar could further exacerbate these challenges. Also, these initiatives involve execution risk, especially in regions with different regulatory requirements. If integration delays arise, these could weigh on operating margins or delay expected revenue contributions.
GWRE stock is also not so cheap, as its Value Style Score of F indicates a stretched valuation at this moment. The stock is trading at a premium with a forward 12-month price/sales of 12.95X compared with the industry’s 5.84X.
Retain GWRE Stock
With a Zacks Rank #3 (Hold), GWRE appears to be treading in the middle of the road and new investors could be better off if they trade with caution. The stock is also trading at a premium valuation. New investors could wait for a better entry point to capitalize on its long-term fundamentals, while investors owning the stock can stay put.
The Zacks Consensus Estimate for ANET’s 2025 earnings is pegged at $2.81 per share. ANET’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.8%. Its shares have gained 62.1% in the past year.
The Zacks Consensus Estimate for ALAB’s 2025 EPS is pegged at $1.35, unchanged in the past 60 days. Astera Labs’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 32.2%. Its shares have surged 394.1% in the past year.
The Zacks Consensus Estimate for FFIV’s fiscal 2025 EPS is pegged at $15.26, unchanged in the past seven days. FFIV’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.46%. Its shares have gained 70.6% in the past year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Guidewire Rises 23% YTD: Where Will the Stock Head From Here?
Key Takeaways
Guidewire Software (GWRE - Free Report) stock has appreciated 23.3% year to date
compared with the Zacks Internet Software industry's growth of 23.7%. The broader Computer and Technology sector and the S&P 500 composite have returned 14.6% and 9.5%, respectively, over the same time frame. San Mateo, CA-based Guidewire is a provider of software solutions for property and casualty insurers.
GWRE closed last session at $207.87. The stock is trading 21% down from its 52-week high of $263.20. Does the pullback indicate a buying opportunity?
Price Performance
Image Source: Zacks Investment Research
Let us dive into GWRE’s pros and cons and determine the best course of action for your portfolio.
Factors Driving Growth for GWRE
Guidewire is benefiting from strong momentum in its cloud business, fueled by rising demand from insurers moving away from legacy systems toward cloud-based solutions. The company has strategically expanded its cloud ecosystem, now encompassing 26,000 Guidewire-specialized practitioners across 38 system integrators. Its focus on enhancing the Guidewire Cloud platform with new capabilities, including digital frameworks, automation, tooling and other cloud services, is expected to boost sales of subscription-based solutions in the long haul.
Also, the company announced its first sale of Guidewire Industry Intelligence, a pre-built predictive model embedded into ClaimCenter workflow in the last reported quarter. This solution is trained and validated using anonymized data available on Guidewire’s cloud deployments. This not only represents a new revenue opportunity but is a value addition for insurers looking to make data-driven claims decisions.
In the fiscal third quarter of 2025, Guidewire secured 17 new deals, 14 for various InsuranceSuite Cloud applications and three for InsuranceNow. These included seven core system wins with Tier 1 insurers and three with Tier 2 insurers.
Guidewire Software, Inc. Price, Consensus and EPS Surprise
Guidewire Software, Inc. price-consensus-eps-surprise-chart | Guidewire Software, Inc. Quote
Management’s efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. Non-GAAP gross margin expanded to 65.5% from 62.6% on a year-over-year basis. The subscription and support segment’s gross margin increased to 70.6% from 65.6% on a year-over-year basis, attributed to higher-than-expected revenues and increases in cloud infrastructure platform efficiency, along with $4 million in credits received from its cloud service provider. Services’ non-GAAP gross margin was 12.9% against negative 10.3% in the year-ago quarter.
For the fiscal fourth quarter, non-GAAP operating income is estimated in the range of $52-$60 million. Non-GAAP operating income for fiscal 2025 is estimated between $187 million and $195 million compared with $175-$185 million expected previously.
Driven by strong collections, Guidewire generated $32.4 million in cash from operations in the quarter under discussion, while free cash flow was nearly $27.8 million. As of April 30, 2025, cash and cash equivalents and short-term investments were $1,243.7 million, with $673.7 million of long-term debt. The company’s ability to generate positive cash flow while continuing to invest in growth initiatives provides a solid foundation for expansion.
Driven by strong revenue performance in the fiscal third quarter, Guidewire expects total revenues for fiscal 2025 to be between $1.178 billion and $1.186 billion compared with earlier guidance of $1.164 billion to $1.174 billion. Subscription revenues are now forecasted to be $660 million, while subscription and support revenues are expected to be $724 million. Services revenues are expected to be approximately $215 million.
Image Source: Zacks Investment Research
In the past 60 days, analysts have marginally revised estimates upwards for the current year.
GWRE Faces Headwinds
Higher costs remain a concern for Guidewire, especially amid prevailing weakness in global macroeconomic conditions. In the fiscal third quarter, total operating expenses increased 12.1% year over year to $178.2 million. Increasing costs can put downward pressure on the company’s profitability, especially if the revenue performance weakens.
Guidewire increasing global footprint, with new customers primarily coming from diverse markets such as Japan, Brazil, Belgium and other international regions, presents foreign exchange as well as integration risks. Strengthening the U.S. dollar could further exacerbate these challenges. Also, these initiatives involve execution risk, especially in regions with different regulatory requirements. If integration delays arise, these could weigh on operating margins or delay expected revenue contributions.
GWRE stock is also not so cheap, as its Value Style Score of F indicates a stretched valuation at this moment. The stock is trading at a premium with a forward 12-month price/sales of 12.95X compared with the industry’s 5.84X.
Retain GWRE Stock
With a Zacks Rank #3 (Hold), GWRE appears to be treading in the middle of the road and new investors could be better off if they trade with caution. The stock is also trading at a premium valuation. New investors could wait for a better entry point to capitalize on its long-term fundamentals, while investors owning the stock can stay put.
Stocks to Consider
Some better-ranked stocks worth consideration with the same industry space are Arista Networks (ANET - Free Report) , Astera Labs (ALAB - Free Report) and F5, Inc. (FFIV - Free Report) . All stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANET’s 2025 earnings is pegged at $2.81 per share. ANET’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.8%. Its shares have gained 62.1% in the past year.
The Zacks Consensus Estimate for ALAB’s 2025 EPS is pegged at $1.35, unchanged in the past 60 days. Astera Labs’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 32.2%. Its shares have surged 394.1% in the past year.
The Zacks Consensus Estimate for FFIV’s fiscal 2025 EPS is pegged at $15.26, unchanged in the past seven days. FFIV’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.46%. Its shares have gained 70.6% in the past year.