Clearwater Analytics Holdings (CWAN) Fell in Q2 Despite Strong Earnings and Solid Fundamentals

Baron Funds, an investment management company, released its “Baron Discovery Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund was up 14.76% (Institutional Shares), outperforming the 11.97% return for the Russell 2000 Growth Index. The fund was up 7.68% year-to-date, well ahead of the Index’s -0.48% return.  In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Baron Discovery Fund highlighted stocks such as Clearwater Analytics Holdings, Inc. (NYSE:CWAN). Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is a technology company that develops and provides a Software-as-a-Service (SaaS) for investment analytics and reporting solutions. The one-month return of Clearwater Analytics Holdings, Inc. (NYSE:CWAN) was -3.12%, and its shares gained 7.88% of their value over the last 52 weeks. On July 29, 2025, Clearwater Analytics Holdings, Inc. (NYSE:CWAN) stock closed at $21.09 per share, with a market capitalization of $5.977 billion.

Baron Discovery Fund stated the following regarding Clearwater Analytics Holdings, Inc. (NYSE:CWAN) in its second quarter 2025 investor letter:

"Clearwater Analytics Holdings, Inc. (NYSE:CWAN) provides portfolio accounting and reporting software. While the company reported strong quarterly earnings and its business fundamentals remain solid, shares fell as investors sought evidence that management can successfully integrate its three recent acquisitions without disrupting the core business. Insider selling also weighed on sentiment, though that overhang now appears largely resolved. We retain conviction. We believe Clearwater has meaningful competitive advantages and the potential to compound revenue at a high teens to 20% rate for several years. And the company has an efficient business model that should drive 40%-plus adjusted EBITDA margins over time."

Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held Clearwater Analytics Holdings, Inc. (NYSE:CWAN) at the end of the first quarter, which was 48 in the previous quarter. In the first quarter of 2025, Clearwater Analytics Holdings, Inc. (NYSE:CWAN) reported revenue of $126.9 million, representing an increase of 23.5% year-on-year. While we acknowledge the potential of Clearwater Analytics Holdings, Inc. (NYSE:CWAN) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Clearwater Analytics Holdings, Inc. (NYSE:CWAN) and shared Conestoga Capital Advisors' views on the company. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.