Guidewire Software (NYSE:GWRE) executives highlighted accelerating demand for cloud-based core systems modernization in the property and casualty (P&C) insurance market during the company’s fiscal second-quarter 2026 earnings call, pointing to strong ARR growth, increased customer contract duration, and expanding adoption of newer products tied to data, analytics, and AI.
Quarterly performance and raised full-year targets
CEO Mike Rosenbaum said fiscal Q2 was “another strong quarter,” with annual recurring revenue (ARR) growing 22%. CFO Jeff Cooper added that the company “surpassed the high end of all of our financial outlook targets,” prompting management to raise its full-year targets “across the board.”
Revenue for the quarter totaled $359 million, up 24% year-over-year and above the high end of the company’s outlook. Subscription and support revenue was $237 million, up 33%, which Cooper attributed to continued InsuranceSuite cloud momentum. Services revenue was $62 million, up 30% and ahead of expectations, driven by strong demand for Guidewire-led services programs, including increased field engineering activity delivered via the professional services organization.
On a non-GAAP basis, Cooper said gross profit was $243 million, up 28%, with an overall gross margin of 68%. Subscription and support gross margin was 75%, up from 69% a year earlier, while services gross margin improved to 9% from 6%. Non-GAAP operating profit was $87 million, helped by higher-than-expected gross profit and lower-than-expected operating expenses.
Guidewire ended the quarter with over $1.35 billion in cash, cash equivalents, and investments. Operating cash flow was $112 million. The company repurchased $148 million of shares and announced it has a new $500 million share repurchase authorization, with $490 million remaining and an expectation to complete the program before the end of the fiscal year.
For fiscal 2026, Guidewire raised its ARR outlook to $1.229 billion to $1.237 billion, implying 18% to 19% year-over-year growth. It increased its total revenue outlook to $1.438 billion to $1.448 billion, with the midpoint implying 20% growth, up from 17% in the prior outlook. The company now expects $962 million to $966 million in subscription and support revenue and approximately $255 million in services revenue.
On profitability, management raised subscription and support gross margin expectations to approximately 74% for the year and services gross margin expectations to approximately 13%, with overall gross margin projected at 67%. Guidewire expects GAAP operating income of $100 million to $110 million and non-GAAP operating income of $293 million to $303 million. Cooper said the higher profitability outlook reflects increased revenue expectations and is partially offset by higher expenses due to increased annual bonus accrual tied to expected outperformance on key metrics. The company expects stock-based compensation of approximately $185 million and operating cash flow of $360 million to $375 million. CapEx is expected to be $30 million to $35 million, including about $18 million in capitalized software development costs.
Deal activity, customer wins, and longer commitments
Rosenbaum said Guidewire closed 15 InsuranceSuite cloud deals and two InsuranceNow deals in Q2, with activity spanning three new customer wins as well as migrations and expansions. He emphasized that the company is seeing “larger, fully ramped ARR outcomes and longer-durated contracts.”
Among new customer wins, Rosenbaum cited a deal with “one of Canada’s largest private insurers” to modernize legacy claims administration by adopting ClaimCenter, noting the relationship dated back to 2008 and that the deal reflected “a little over $8 billion in direct written premium.” He also said Guidewire had wins at customers reflecting more than $15 billion in direct written premium and under $50 million in direct written premium, underscoring the range of insurer sizes engaged in the quarter.
Rosenbaum and Cooper both emphasized longer contract duration trends. Cooper said that, over the last 12 months, the weighted average contract term (weighted by fully ramped ARR) for new InsuranceSuite deals was “over 6 years,” compared with Guidewire’s standard five-year contract for new cloud arrangements. Cooper linked the shift to increasing maturity of the cloud platform and larger customers making bigger bets on Guidewire.
Cooper also pointed to remaining performance obligations (RPO) as another indicator of durability, disclosing RPO of $3.5 billion, up 63% year-over-year. In addition, he said customers with more than $5 million in fully ramped ARR increased from 35 in 2021 to 96 at the end of Q2.
Retention, churn history, and pricing model
Rosenbaum said gross ARR retention has been over 99% for InsuranceSuite and InsuranceNow customers, attributing the result to a culture focused on customer success in mission-critical deployments. Cooper added that trailing 12-month InsuranceSuite ARR retention, including down-sell activity, was “over 99%.”
Cooper also described a review of churn events over the last five years involving more than $1 million of ARR, saying there were “a very small number” and that the causes fell into three categories:
- Customers experiencing financial distress or exiting the line of business where they used Guidewire
- A single churn instance driven by an acquisition
- A contract termination tied to Guidewire’s decision to exit Russia following the invasion of Ukraine
Cooper said that, over the last five years, Guidewire has not seen a single InsuranceSuite customer with more than $1 million of ARR choose to replace Guidewire with another system, except where the change was effectively mandated by an acquirer.
Rosenbaum also reiterated Guidewire’s pricing approach: the company sells recurring subscriptions to cloud products and prices as a percentage of the direct written premium managed on the platform, rather than using a seat-based model.
AI strategy: “own the core,” enable a broader ecosystem
Management positioned generative AI as a catalyst for core system modernization. Rosenbaum said AI depends on “clean data, trusted transactions, and reliable systems of record,” and that legacy mainframes are not designed for real-time data access, automation, or AI-driven workflows. He argued that AI is increasing urgency for insurers to modernize and, in turn, increasing demand for InsuranceSuite and InsuranceNow.
In response to analyst questions about competition from AI-native disruptors and “forward deployed engineer” models, Rosenbaum said it would be “quite a bold statement” for Guidewire to claim it will own AI in insurance. Instead, he said Guidewire intends to “own” core systems and run an open model where larger insurers use a mix of Guidewire and partners. He said smaller companies and smaller divisions may source more AI capabilities directly from Guidewire, while larger insurers will mix Guidewire solutions with partner technologies.
Rosenbaum said the company is “super excited” about early momentum with ProNavigator, describing it as an embedded AI solution that can deliver “answers, suggestions, and ultimately actions” in the core UI using InsuranceSuite data and standard operating procedures. In Q2, Guidewire closed nine ProNavigator deals. Cooper later said ProNavigator was trending ahead of prior expectations, noting he had not expected nine deals in its first quarter of broader commercial activity.
Management also stressed Guidewire’s openness to working with large LLM vendors. Rosenbaum said the company views efforts by providers such as Anthropic and OpenAI as additive, not competitive, and expects their tools to be most beneficial when connected to structured insurance processes running on modern core systems.
Product portfolio: PricingCenter, analytics, and underwriting initiatives
Rosenbaum said Guidewire closed its first PricingCenter deal in Q2 and cited a win at Zurich Germany tied to the company’s strategic framework agreement with Zurich. He described PricingCenter as addressing customer demand for pricing and rating agility, and said engagement has been high around the integrated offering.
In Q2, Guidewire also closed 25 deals that included one or more data and analytics offerings, which Rosenbaum described as evidence of demand expanding beyond core modernization to the surrounding application portfolio. He and other executives discussed continued progress in “Industry Intel” work, describing it as involving more research-driven development to validate datasets and predictive signal.
On underwriting, Rosenbaum said Guidewire is working with a small subset of interested customers on a fast-evolving approach to “agentic underwriting,” with an expectation to begin getting the solution into production with a couple customers over the next few quarters and iterate from there.
About Guidewire Software (NYSE:GWRE)
Guidewire Software, Inc develops software products and cloud services for property and casualty (P&C) insurance carriers. Headquartered in San Mateo, California, the company’s offerings are designed to help insurers manage the core functions of their business—policy administration, billing and claims—while supporting digital engagement, analytics and operational modernization.
Guidewire’s core product portfolio is commonly known as the InsuranceSuite, which includes PolicyCenter for policy administration, BillingCenter for billing and receivables, and ClaimCenter for claims management.
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