Guidewire Software drops 13% as full-year ARR guidance trails estimates

Guidewire Software reported Q3 adjusted EPS of $0.82 on revenue of $372.5M, beating estimates on both counts.

"It's clear that our strategy and market position are resonating with insurers as they focus on modernizing core systems," Chief Executive Officer Mike Rosenbaum said.

Revenue rose 27% from a year earlier, topping the $355.9M consensus. Adjusted earnings compared with $0.55 a share in the same period last year. Annual recurring revenue, a key metric for software companies, increased 19% to $1.147B, narrowly missing the $1.148B analyst target.

Metric	Actual	Consensus	Beat/Miss
Revenue	$372.5M	$355.9M	+4.7%
EPS	$0.82	$0.74	+$0.08
ARR	$1.147B	$1.148B	-$0.001B

The stock fell 13% in premarket trading as the full-year ARR guidance midpoint of $1.233B came in just below the $1.235B Wall Street expected. The company raised its full-year revenue outlook to as much as $1.47B, up from a prior $1.448B and above the $1.44B consensus.

For the fiscal fourth quarter, Guidewire forecast ARR of $1.229B to $1.237B, above the $1.22B analyst estimate. Revenue is expected between $396M and $406M, compared with the $394.1M consensus.

The San Mateo, California-based company provides cloud software to property and casualty insurers, competing with firms such as Duck Creek Technologies and Sapiens International in the core systems modernization market.

The marginal ARR miss overshadowed a clean beat on both profit and revenue, showing how closely Wall Street scrutinizes recurring revenue metrics for software valuations. Investors will watch the Q4 report for signs of whether the company can accelerate subscription growth to close the gap with consensus expectations.

This article is for informational purposes only and does not constitute investment advice.