Guidewire (GWRE) Q4 2025: Cloud ARR Jumps 36% as Tier 1 Wins Accelerate Platform Expansion
Guidewire’s record-setting Q4 capped a year of accelerating cloud adoption, highlighted by a landmark 10-year Liberty Mutual deal and broad-based growth across geographies and product lines. Cloud ARR now comprises nearly three-fourths of the business, with platform maturity and referenceability driving larger, longer-term commitments from top-tier insurers. Management’s focus shifts to “Act 3”—data, analytics, and generative AI—leveraging its cloud position for the next phase of industry modernization and value creation.
Summary
- Cloud Penetration Surges: Cloud ARR now 74% of total, fueled by large-scale migrations and Tier 1 insurer wins.
- Margin Structure Strengthens: Subscription and support gross margins improved ahead of schedule, supporting long-term profitability targets.
- Strategic Shift to AI: Platform maturity enables investment in data, analytics, and generative AI as the next growth frontier.
Performance Analysis
Guidewire delivered a record Q4, with annual recurring revenue (ARR) reaching $1.32 billion, up 19% year-over-year (YoY) on a constant currency basis, and fully ramped ARR growing 22% YoY. Cloud ARR, which includes all cloud product subscriptions and customers contracted to migrate, surged 36% YoY and now represents 74% of total ARR. This marks a significant inflection in the company’s core business model, as cloud adoption becomes the dominant revenue engine.
Revenue composition reflects the ongoing migration shift: Subscription revenue climbed 40% YoY to $667 million, while legacy license revenue was flat, with management signaling further decline as migrations accelerate. Services revenue grew 21% YoY, supported by balanced utilization and expanded partnerships with system integrators (SI). Gross margin improvements were broad-based: Subscription and support gross margin hit 70% (up four points YoY), and services gross margin almost doubled to 13%, both reflecting scale and operational efficiency gains. Operating income more than doubled, and operating cash flow reached $301 million, underscoring the financial leverage from cloud scaling and disciplined cost management.
- Cloud Adoption Drives Mix Shift: 74% of ARR now cloud-based, up from prior years, reshaping revenue quality and predictability.
- Margin Expansion Outpaces Plan: Subscription and services gross margins both improved, reflecting maturity and operational discipline.
- Balanced Growth Across Segments: New customer wins, migrations, and expansions contributed to robust ARR and revenue growth.
The company’s ability to deliver record-low ARR attrition and higher deal sizes, especially with Tier 1 insurers, signals increasing customer confidence and platform stickiness.
Executive Commentary
"Q4 was a record quarter, driven by deal volume, deal size, and a milestone win for our company. Liberty Mutual, a major tier one insurer, chose to migrate their on-premise claim center instance to the cloud and also made a 10-year commitment to Guidewire to adopt Policy Center on our Guidewire Cloud Platform. This is one of the most strategic partnerships in our history."
Mike Rosenbaum, Chief Executive Officer
"Total cloud ARR, which includes ARR for all of our cloud products and for customers that have contracted to move to the cloud, grew 36% year-over-year and comprised 74% of total ARR. Global revenue for the year was $1.2 billion, ahead of our expectations due to strong performance across all components of revenue."
Jeff Cooper, Chief Financial Officer
Strategic Positioning
1. Cloud Platform Maturity and Referenceability
Guidewire Cloud Platform, the company’s SaaS core system for property and casualty (P&C) insurers, has reached a level of maturity where reference customers and successful large-scale migrations are driving both larger deal sizes and longer-term commitments. The Liberty Mutual 10-year deal is emblematic, but management emphasized that similar conversations are progressing with other Tier 1 insurers, with flexibility in contract structure to match customer rollout plans and value realization.
2. Ecosystem and SI Community Expansion
The SI community, Guidewire’s network of certified implementation partners, expanded 11% to over 27,000 professionals, with a 24% increase in cloud-certified consultants. This ecosystem is critical for scaling cloud migrations, accelerating implementation, and supporting new AI-driven solutions. The technology partner ecosystem now includes 300+ third-party apps and 200+ partners, enabling a broader set of customer use cases and reinforcing platform stickiness.
3. Data, Analytics, and Generative AI “Act 3”
Management is pivoting toward “Act 3”—leveraging its cloud install base and deep industry context to build new data, analytics, and AI applications. The Quanty acquisition, industry intelligence predictive models, and intelligent document ingestion for underwriting are early examples. Guidewire’s platform position gives it privileged access to mission-critical data and workflows, which is essential for delivering differentiated AI-powered solutions in claims, pricing, and underwriting—areas that drive insurers’ core economics.
4. Global Diversification and Market Penetration
Geographic momentum was broad-based: North America led, but EMEA, Latin America, and Asia Pacific all saw meaningful deal wins and pipeline growth. Guidewire’s investments in international go-to-market and local regulatory adaptation are yielding results, positioning the company for continued global expansion.
5. Full Suite and Cross-Sell Momentum
Full insurance suite deals are rising, with more customers considering multi-product commitments at the outset. Attach rates for analytics and data products are growing faster than the core business, indicating successful cross-sell and a maturing platform sales motion.
Key Considerations
This quarter marks a strategic inflection for Guidewire as cloud becomes the dominant revenue engine and platform maturity unlocks new product and market opportunities. Investors should weigh the following:
- Cloud Mix and Revenue Quality: The rapid shift to cloud ARR improves revenue predictability, but also accelerates the decline of legacy license revenue.
- Margin Sustainability: Subscription and support margins are ahead of plan, but scaling AI and analytics investments will test cost discipline as new products ramp.
- Platform Expansion Risks: Success in “Act 3” will depend on Guidewire’s ability to deliver differentiated AI-driven solutions and maintain ecosystem engagement.
- Tier 1 Referenceability: The Liberty Mutual deal, if successful, could catalyze further Tier 1 wins, but execution risk remains high for such complex migrations.
- Global Execution: International growth is accelerating, but requires continued adaptation to local market needs and regulatory requirements.
Risks
Execution risk on large, multi-year Tier 1 migrations is significant, as any failure could impact referenceability and future deal flow. Competition remains, particularly as legacy vendors pivot to cloud and new insurtech entrants target adjacent opportunities. Macro-driven slowdowns in insurance premium growth could modestly impact license revenue, though cloud migration and modernization demand remain more resilient. AI investments carry both cost and adoption risk, as practical deployment in insurance workflows is still nascent.
Forward Outlook
For Q1 2026, Guidewire guided to:
- ARR between $1.048 and $1.054 billion
- Subscription and support revenue of approximately $218 million
- Services revenue of approximately $60 million
For full-year 2026, management guided to:
- ARR of $1.21 to $1.22 billion (17% constant currency growth at midpoint)
- Total revenue of $1.385 to $1.405 billion
- Subscription revenue of $888 million (34% growth)
- Subscription and support gross margin of 71-72%
- Operating income (non-GAAP) of $259 to $279 million
- Cash flow from operations of $350 to $370 million
Management cited a “very healthy” pipeline entering Q1, with robust demand, strong backlog contribution, and continued acceleration in cloud migrations and platform expansion.
- Cloud migration pace to drive subscription growth and license revenue decline
- Ongoing investment in data, analytics, and AI to support long-term differentiation
Takeaways
Guidewire’s Q4 and FY25 results confirm its transition to a cloud-native, platform-centric business model, with cloud ARR and margin expansion outpacing expectations and Tier 1 reference wins expanding the addressable market.
- Cloud Leadership Entrenched: The 36% cloud ARR growth and 74% mix position Guidewire as the default modernization partner for P&C insurers, especially as legacy systems sunset.
- Margin and Cash Flow Leverage: Operating leverage from cloud scaling is now evident, giving Guidewire room to invest in “Act 3” product innovation.
- AI and Analytics as Next Growth Engine: The company’s unique access to insurance data and workflows provides a defensible edge in building industry-specific AI solutions, but execution in this “Act 3” will be closely watched.
Conclusion
Guidewire’s cloud transformation is now self-sustaining, with platform maturity, referenceability, and ecosystem scale driving durable growth and profitability. The next phase will depend on successful execution in analytics and AI, as well as continued Tier 1 customer success to reinforce its market leadership.
Industry Read-Through
Guidewire’s results reinforce that the P&C insurance sector is entering a decisive phase of core system modernization, with cloud adoption, data-driven analytics, and AI-powered workflows now table stakes for insurers seeking agility and efficiency. Vendors with deep domain expertise, robust partner ecosystems, and proven migration success are best positioned to win, while legacy on-premise models face accelerating obsolescence. The industry’s appetite for full-suite, multi-year cloud deals and openness to third-party innovation through marketplaces is rising, raising the bar for both incumbents and new entrants in insurtech and vertical SaaS.