Executive Summary
- Quarter under review: Guidewire Software Inc reported Q2 2025 results with revenue of $289.48 million, up 20.17% year-over-year and 10.11% quarter-over-quarter, signaling ongoing demand for Guidewire’s software and cloud offerings despite the macro and competitive environment. Gross profit rose to $179.15 million, representing a gross margin of 61.9%, aided by favorable mix and pricing discipline.
- Operating momentum improved at the operating income level, posting $11.72 million in operating income and a 4.05% operating margin, marking a meaningful YoY improvement from a prior-year operating loss. This indicates improving operating leverage as the company potentially scales cloud-based and managed services overloads.
- Net income remained negative at -$37.28 million with an EPS of -$0.45, reflecting material non-operating charges (total other income/expenses net recorded at -$54.75 million) and interest/depreciation impacts. The result underscores that profitability remains pressured by non-operating items and financing costs even as core operations show progress. Free cash flow was solid at $85.20 million, and cash at period end stood at $698.68 million, supporting balance sheet resilience. Cash flow from operating activities was $85.99 million, with minimal capital expenditure ($0.79 million), indicating high cash-generation quality from core activities.
- Valuation and risk context: Revenue growth and positive operating income support an optimistic view on the business trajectory, but negative net income and high valuation metrics (P/S ~61.9x, P/CFO ~208x) imply a high bar for sustainable profitability and multiple expansion. The balance sheet remains liquid with low short-term liquidity risks but a meaningful long-term debt load (~$707 million) that investors should monitor as the company continues its cloud-transition investments.
Key Performance Indicators
QoQ: 348.37% | YoY:194.46%
QoQ: -507.89% | YoY:-484.81%
QoQ: -509.09% | YoY:-475.00%
Key Insights
Revenue: $289.48M (+20.17% YoY; +10.11% QoQ)
Gross Profit: $179.15M; Gross Margin: 61.89% (YoY +25.80%; QoQ +13.11%)
Operating Income: $11.72M; Operating Margin: 4.05% (YoY +194.46%; QoQ +348.37%)
Net Income: -$37.28M; Net Margin: -12.88% (YoY -484.81%; QoQ -507.89%)
EPS (Diluted): -$0.45 (YoY -475%; QoQ -509%)
EBITDA: -$28.42M; EBITDA Margin: -9.82%
Cash Flow: Operating Cash Flow $85.99M; Free Cash Flow $85.20M; Capex -$0.79M; Cash at End: $698.68M
Balance Sheet: Total Assets $2.54B; Cash &...
Financial Highlights
Revenue: $289.48M (+20.17% YoY; +10.11% QoQ)
Gross Profit: $179.15M; Gross Margin: 61.89% (YoY +25.80%; QoQ +13.11%)
Operating Income: $11.72M; Operating Margin: 4.05% (YoY +194.46%; QoQ +348.37%)
Net Income: -$37.28M; Net Margin: -12.88% (YoY -484.81%; QoQ -507.89%)
EPS (Diluted): -$0.45 (YoY -475%; QoQ -509%)
EBITDA: -$28.42M; EBITDA Margin: -9.82%
Cash Flow: Operating Cash Flow $85.99M; Free Cash Flow $85.20M; Capex -$0.79M; Cash at End: $698.68M
Balance Sheet: Total Assets $2.54B; Cash & Equivalents $697.49M; Total Debt $885.78M; Net Debt $188.29M; Current Ratio 2.62; Debt/Equity 0.70; Return on Equity (negative); Cash Conversion Cycle ~53.5 days; P/S 61.9x; P/B 14.1x; PCF (Price to CFO) ~208x; CFROI positive in operating activities despite net loss.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
289.48M |
20.17% |
10.11% |
| Gross Profit |
179.15M |
25.80% |
13.11% |
| Operating Income |
11.72M |
194.46% |
348.37% |
| Net Income |
-37.28M |
-484.81% |
-507.89% |
| EPS |
-0.45 |
-475.00% |
-509.09% |
Key Financial Ratios
operatingProfitMargin
4.05%
operatingCashFlowPerShare
$1.03
freeCashFlowPerShare
$0.98
priceEarningsRatio
-120.15
Management Commentary
Note: Earnings transcript data not provided in the input. As a result, transcript highlights could not be extracted. The following synthesis relies on the disclosed financials and typical management themes observed inGuidewire’s segment discussions in prior quarters:
- Strategy and product mix: Management usually emphasizes progress of Guidewire InsuranceNow (cloud), InsuranceSuite, and data/analytics tools as growth engines. Expectation would be around accelerating cloud adoption, customer migrations to cloud-native solutions, and expanding ARR.
- Operational discipline: Commentary often centers on managing R&D and SG&A to balance growth with profitability, including investments in platform capabilities and go-to-market initiatives.
- Market conditions: Insurers’ digital transformation and regulatory changes are typically cited as drivers of demand for Guidewire’s digital engagement and data-management offerings, while competition from peers in insurance software remains a risk.
If/when transcripts are provided, quotes from executives (CEO, CFO, etc.) should be embedded here to illustrate strategic emphasis and execution updates.
Forward Guidance
- No formal quantitative guidance for QQ3/Q3 2025 was present in the provided data. Given the ongoing cloud transition and the elevated level of operating leverage observed in Q2 2025, the trajectory will hinge on sustaining revenue growth while moderating the non-operating drag that contributed to the net loss.
- Near-term outlook considerations: (i) Continuation of mid-to-high single-digit revenue growth with a path to improved operating profitability as scale benefits kick in; (ii) Capital allocation that preserves a strong balance sheet while funding cloud and analytics investments; (iii) Potential uplift from net-new contracts with insurers adopting Guidewire’s cloud-based stack and the potential upsell opportunities with existing customers.
- Key factors investors should monitor: (1) progression of cloud adoption and ARR trajectory; (2) reduction or stabilization of non-operating charges and interest expense; (3) utilization of cash and the evolution of the debt balance; (4) cross-sell/tandem product adoption (InsuranceNow, Rating Management, Reinsurance Management, DataHub, and analytics).