Strong Results and Guidance Revision Boosted Guidewire Software (GWRE) in Q2

Baron Funds, an investment management company, released its “Baron Asset Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. U.S. stocks rose amid volatility caused by tariff policies and Middle East tensions. Early April risk-off sentiment was fueled by Trump’s “Liberation Day" tariffs, seen as more severe than expected. U.S. equities rose after April 8, driven by favorable trade news, strong earnings, dovish Fed signals, and AI momentum, reaching record highs by quarter’s end. During the second quarter, the fund was up 7.85% (Institutional Shares) compared to an 18.20% gain for the Russell Midcap Growth Index. 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 Asset Fund highlighted stocks such as Guidewire Software, Inc. (NYSE:GWRE). Guidewire Software, Inc. (NYSE:GWRE) offers a platform for property and casualty (P&C) insurance companies. The one-month return of Guidewire Software, Inc. (NYSE:GWRE) was -1.81%, and its shares gained 57.20% of their value over the last 52 weeks. On July 31, 2025, Guidewire Software, Inc. (NYSE:GWRE) stock closed at $226.22 per share, with a market capitalization of $19.047 billion.

Baron Asset Fund stated the following regarding Guidewire Software, Inc. (NYSE:GWRE) in its second quarter 2025 investor letter:

"Shares of property and casualty (P&C) insurance software vendor Guidewire Software, Inc. (NYSE:GWRE) gained on strong fiscal Q3 2025 financial results and an upward revision to its full-year earnings guidance. The company’s annual recurring revenue (ARR) continued to benefit from new customer wins and migrations of its existing customer base to InsuranceSuite Cloud. We expect the company to shift R&D resources from infrastructure investment to product development, which should help drive cross-sales into its sticky installed base and potentially accelerate ARR growth over time. We are further encouraged by Guidewire’s subscription-based gross margin expansion, which improved by more than 600 basis points in the most recently reported quarter. We believe Guidewire will be the critical software vendor for the global P&C insurance industry, capturing a large share of a potential $30 billion total addressable market while generating margins above 40%."

Guidewire Software, Inc. (NYSE:GWRE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held Guidewire Software, Inc. (NYSE:GWRE) at the end of the first quarter, which was 60 in the previous quarter. While we acknowledge the potential of Guidewire Software, Inc. (NYSE:GWRE) 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 Guidewire Software, Inc. (NYSE:GWRE) 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.