Guidewire Posts 23% Revenue Growth and Record Low Churn

Guidewire Software reported fiscal year-end results showing total revenue of $1.475 billion, a 23% increase year over year. The company’s annual recurring revenue reached $1.242 billion, reflecting 19% constant currency growth that exceeded prior internal targets. This performance was driven by a significant shift toward cloud-based solutions, with cloud ARR growing 35% to account for 84% of the total base.

Profitability improved sharply as non-GAAP operating income rose 63% to $340 million. This margin expansion was supported by a 4 percentage point increase in subscription and support gross margins to 74.5%. Operating cash flow also grew 30% to $390 million, indicating stronger cash conversion from the subscription model.

Cloud Adoption Drives Revenue Mix Shift

Subscription revenue climbed 37% to $916 million, outpacing the decline in license revenue, which fell 7% to $235 million. This transition reflects an accelerated migration from term licenses to cloud subscriptions. Services revenue increased 23% to $270 million as the company balanced direct resource utilization with partner alignment.

Customer retention reached historic lows for churn, with annual gross ARR attrition staying under 1.5% and core system attrition below 1%. These figures indicate deepening customer engagement and reduced risk of large-scale contract cancellations. The stable base allows for predictable revenue growth from existing accounts.

New Products Accelerate Sales Velocity

Guidewire reported strong traction for its AI-integrated tools, with ProNavigator securing 28 wins in the fiscal year. Sales velocity for this product significantly exceeded initial management plans. PricingCenter also gained momentum, closing eight deals in the final quarter, including a landmark agreement with Nationwide for personal lines.

The company signed a multiyear agreement with Nationwide to migrate core systems to the cloud while integrating PricingCenter. This deal underscores the scalability of the platform for Tier 1 insurers. Total core cloud deals reached 62 for the year, with 26 closed in the fourth quarter alone.

Fiscal 2027 Outlook Reflects Continued Growth

Management projects fiscal 2027 ARR between $1.45 billion and $1.46 billion, implying 18% constant currency growth at the midpoint. Subscription and support revenue is expected to rise 28% to approximately $1.243 billion. Non-GAAP operating income is guided to increase to a range of $403 million to $423 million.

Operating cash flow is forecast to grow to $445 million to $465 million. CFO Jeff Cooper noted that the outlook assumes normalizing attrition rates relative to the record-low fiscal 2026 levels. Additionally, investments in AI capabilities temporarily reduced services gross margins to 12.5% from 12.9% as the company funds future program delivery.