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Guidewire's Cash Flow and Buybacks: Can Both Keep Scaling?
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Key Takeaways
Guidewire's fiscal 2026 operating cash flow rose 30% to $390 million as profitability strengthened.
Guidewire repurchased $606 million of shares, buying 4.1 million shares at an average price of $148.41.
Guidewire expects fiscal 2027 operating cash flow of $445 million-$465 million as margins improve.
Guidewire Software, Inc. (GWRE - Free Report) exited fiscal 2026 with stronger cash generation and significant share repurchase activity. Operating cash flow for the year reached $390 million, up 30% year over year. The company ended the fiscal fourth quarter with $1.2 billion in cash, cash equivalents and investments. Management attributed the cash flow performance to execution and operating leverage in the business model.
During fiscal 2026, Guidewire repurchased $606 million worth of shares under its share buyback program. This represented 4.1 million shares bought back at an average price of $148.41 per share. On the last earnings call, management stated that the company had nearly completed its share repurchase program after buying back more than $600 million in shares. Management linked its ability to execute the repurchases to expanding profitability, cash generation and confidence in the long-term durability of the business.
The improvement in cash generation accompanied higher profitability during fiscal 2026. Guidewire reported non-GAAP operating income of $340 million, up 63% year over year. Gross profit increased 25% to $990 million, while overall gross margin was 67%. Subscription and support gross margin improved 4 percentage points to 74.5%. The company highlighted that strong subscription and support gross profit, higher-than-expected license revenues and operating expense discipline drove operating income growth.
For fiscal 2027, Guidewire expects operating cash flow of $445 million to $465 million. The company also projects non-GAAP operating income of $403 million to $423 million and total gross margin of 67% to 68%. Capital expenditures are expected to range from $23 million to $28 million, including approximately $17 million of capitalized software development costs. On the last earnings call, Guidewire stated that the first-quarter fiscal 2027 cash flow will be affected by annual employee bonus payments and commissions related to fourth-quarter sales, similar to the pattern seen in fiscal 2026.
A Look at GWRE’s Competitors’ Cash Flow and Buyback Plans
ServiceNow, Inc. (NOW - Free Report) generated $2.26 billion in operating cash flow in the first half of 2026 and continues to target a 35% free cash flow margin for 2026. The company also expects about $500 million in internal AI efficiency savings this year, which should support cash generation while keeping headcount flat despite acquisitions. In the second quarter, free cash flow increased to $634 million from $535 million a year earlier, while the company ended the period with $2.50 billion in cash and cash equivalents. Strong cash generation provides funding capacity for reinvestment, acquisitions and potential capital returns.
Salesforce (CRM - Free Report) continues to generate strong cash flow, supporting investments and shareholder returns. In the first half of fiscal 2027, the company generated $7.97 billion in operating cash flow and $7.65 billion in free cash flow. It also returned $364 million through dividends in the second quarter and continued executing its $25 billion accelerated share repurchase program. Through the first half, total capital returns reached $27.9 billion, while the share count declined 15% year over year. Salesforce expects operating and free cash flow to grow 4-5% in fiscal 2027, supporting continued capital returns.
GWRE Price Performance, Valuation and Estimates
Shares of Guidewire have gained 18% over the past three months compared with the Internet Software industry’s growth of 26.2%.
Image Source: Zacks Investment Research
GWRE’s shares are trading at a forward 12-month price-to-sales multiple of 6.86X, higher than the Internet Software industry’s 4.43X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GWRE’s earnings for 2026 has been revised upward over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Guidewire's Cash Flow and Buybacks: Can Both Keep Scaling?
Key Takeaways
Guidewire Software, Inc. (GWRE - Free Report) exited fiscal 2026 with stronger cash generation and significant share repurchase activity. Operating cash flow for the year reached $390 million, up 30% year over year. The company ended the fiscal fourth quarter with $1.2 billion in cash, cash equivalents and investments. Management attributed the cash flow performance to execution and operating leverage in the business model.
During fiscal 2026, Guidewire repurchased $606 million worth of shares under its share buyback program. This represented 4.1 million shares bought back at an average price of $148.41 per share. On the last earnings call, management stated that the company had nearly completed its share repurchase program after buying back more than $600 million in shares. Management linked its ability to execute the repurchases to expanding profitability, cash generation and confidence in the long-term durability of the business.
The improvement in cash generation accompanied higher profitability during fiscal 2026. Guidewire reported non-GAAP operating income of $340 million, up 63% year over year. Gross profit increased 25% to $990 million, while overall gross margin was 67%. Subscription and support gross margin improved 4 percentage points to 74.5%. The company highlighted that strong subscription and support gross profit, higher-than-expected license revenues and operating expense discipline drove operating income growth.
For fiscal 2027, Guidewire expects operating cash flow of $445 million to $465 million. The company also projects non-GAAP operating income of $403 million to $423 million and total gross margin of 67% to 68%. Capital expenditures are expected to range from $23 million to $28 million, including approximately $17 million of capitalized software development costs. On the last earnings call, Guidewire stated that the first-quarter fiscal 2027 cash flow will be affected by annual employee bonus payments and commissions related to fourth-quarter sales, similar to the pattern seen in fiscal 2026.
A Look at GWRE’s Competitors’ Cash Flow and Buyback Plans
ServiceNow, Inc. (NOW - Free Report) generated $2.26 billion in operating cash flow in the first half of 2026 and continues to target a 35% free cash flow margin for 2026. The company also expects about $500 million in internal AI efficiency savings this year, which should support cash generation while keeping headcount flat despite acquisitions. In the second quarter, free cash flow increased to $634 million from $535 million a year earlier, while the company ended the period with $2.50 billion in cash and cash equivalents. Strong cash generation provides funding capacity for reinvestment, acquisitions and potential capital returns.
Salesforce (CRM - Free Report) continues to generate strong cash flow, supporting investments and shareholder returns. In the first half of fiscal 2027, the company generated $7.97 billion in operating cash flow and $7.65 billion in free cash flow. It also returned $364 million through dividends in the second quarter and continued executing its $25 billion accelerated share repurchase program. Through the first half, total capital returns reached $27.9 billion, while the share count declined 15% year over year. Salesforce expects operating and free cash flow to grow 4-5% in fiscal 2027, supporting continued capital returns.
GWRE Price Performance, Valuation and Estimates
Shares of Guidewire have gained 18% over the past three months compared with the Internet Software industry’s growth of 26.2%.
Image Source: Zacks Investment Research
GWRE’s shares are trading at a forward 12-month price-to-sales multiple of 6.86X, higher than the Internet Software industry’s 4.43X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GWRE’s earnings for 2026 has been revised upward over the past 60 days.
Image Source: Zacks Investment Research
GWRE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.