Guidewire Software, Inc. Q2 FY2026 earnings call

Mike Rosenbaum noted Q2 was a strong quarter with ARR growth of 22%. Guidewire is the standalone leader in P&C core systems, now a SaaS company. It sits at the center of the insurance industry's operational backbone. Culture of customer success has led to gross ARR retention rates over 99% for InsuranceSuite and InsuranceNow customers. AI is driving increased demand for core system modernization, with Guidewire seeing more deals, larger commitments, and longer-durated contracts. Notable deals include with Aviva UK, Tokyo Marine North America, Donegal Insurance Group, etc. Guidewire has widened core offerings with Pricing Center and seen strong adoption in data and analytics portfolio, including ProNavigator with nine deals in Q2.

ARR grew 22% in Q2. Total revenue was $359 million, up 24% year-over-year. Subscription and support revenue was $237 million, up 33% year-over-year. Services revenue was $62 million, up 30% year-over-year. Growth profit was $243 million, up 28% year-over-year. Overall gross margin was 68%. Subscription and support gross margin was 75%, services gross margin was 9%. Operating profit was $87 million. ARR ended at $1.121 billion, fully ramped ARR ended Q2 at $1.42 billion. RPO finished the quarter at $3.5 billion. Customers with more than $5 million in fully ramped ARR grew from 35 in 2021 to 96 at the end of Q2. Insurance suite ARR retention was over 99% on a trailing 12-month basis.

Raised full-year ARR outlook to $1.229 to $1.237 billion (18%-19% growth YOY). Total revenue outlook between $1.438 and $1.448 billion. Subscription and support revenue outlook $962 - $966 million. Services revenue outlook approximately $255 million. Subscription and support gross margin outlook ~74%, services gross margin ~13%, overall gross margins ~67%. Operating income outlook: gap operating income $100 - $110 million, non-gap operating income $293 - $303 million. Cash flow from operations outlook $360 - $375 million. Capex outlook $30 - $35 million. Q3 ARR outlook $1.144 - $1.150 billion. Total revenue outlook $352 - $358 million. Subscription and support revenue outlook $239 - $243 million, services revenue ~$60 million. Subscription and support margins ~74%, services margins ~12%, total gross margins ~67%. Non-GAAP operating income outlook $59 - $65 million.

Q: Asked about Guidewire's position in the broader AI stack and revenue opportunity.

A: Guidewire is confident in being the most trusted core system, will do more with AI like ProNavigator, be part of enterprise architecture with customer choice.

Q: Pivoted to core and premium moving into cloud.

A: Premium moving into cloud is increasing, driven by AI potential and need for modern core system.

Q: Focused on new products like Pricing Center and underwriting.

A: Pricing Center has good customer feedback, deal cycle long; underwriting has excitement and engagement with development.

Q: On TrueUp activity.

A: Healthy true-up activity in Q2, expected to temper but still present.

Q: On competition from AI and working with LLM vendors.

A: Seen as additive, Guidewire open to partnerships, AI beneficial for Guidewire and customers.

Q: On modernization timelines and AI usage.

A: Working to increase efficiency of migrations, modernization is more than code conversion.

Q: On fully ramped ARR seasonality and churn assumptions.

A: 4Q weighted, churn assumptions based on bottom-up account analysis.

Q: On ProNavigator trending.

A: Trending ahead of expectations.

Q: On contract duration and incremental disclosures.

A: Longer contracts due to platform maturity, incremental disclosures due to software market backdrop.

Q: On adoption curve of Pricing Center, ProNav and ARR uplift.

A: ProNavigator acceleration in claim space, Pricing Center longer sales cycle, ARR uplift with meaningful ASP.

Q: On fully ramped ARR first half and developer talent growth.

A: First half had large deal volume, reevaluating roadmaps for increased throughput.

Q: On Tier 1 customers and industry intel.

A: Tier 2 and 3 can cross $5M FRAR, industry intel progress with R&D.

Q: On pipeline and product mix shift.

A: Outperformance from larger, longer-term core deals, no major product mix shift