Guidewire Q4 Earnings Coming Up: Here's What Investors Should Know

Guidewire Software, Inc. GWRE is slated to report fourth-quarter fiscal 2025 results on Sept. 4. 

Management expects revenues to be between $332 million and $340 million. The Zacks Consensus Estimate is pegged at $337.2 million, indicating a 15.7% rise from the same quarter last year. The consensus estimate for the bottom line is pinned at 62 cents, which has remained unchanged in the past 60 days. 

For the fiscal year, total revenues are expected to be between $1.178 billion and $1.186 billion, with the consensus estimate pinned at $1.18 billion. 

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in the remaining one, with an average surprise of 38%. 

Shares of GWRE have gained 48.5% in the past year compared with the Internet-Software industry’s growth of 42.9%.

Factors at Play for GWRE’s Q4

Accelerating momentum in its cloud business as insurers transition from legacy systems bodes well for GWRE. 

It is witnessing solid deal volume across all tiers (especially Tier 1 insurers) and increasing international momentum, especially in APAC and Europe. In the last reported quarter, Guidewire Cloud reported 17 deal wins. Of these, 14 were for various InsuranceSuite Cloud applications and three were InsuranceNow deals. It closed seven core system deals with Tier 1 insurers and three with Tier 2 insurers. 

Early traction from the Guidewire Industry Intelligence solution is likely to have acted as a growth driver. In the fiscal third quarter, Guidewire announced its first sale of the Industry Intelligence, a pre-built predictive model embedded into ClaimCenter workflow. This solution is trained and validated using anonymized data available on Guidewire’s cloud deployments. This is a value addition for insurers looking to make data-driven claims decisions.

The company’s focus on enhancing the Guidewire Cloud platform with new capabilities is expected to have boosted sales of subscription-based solutions. For fiscal 2025, management expects Subscription revenues to be $660 million, while subscription and support revenues are expected to be $724 million. Services revenues are expected to be approximately $215 million. 

Guidewire Software, Inc. Price and EPS Surprise

Guidewire Software, Inc. price-eps-surprise | Guidewire Software, Inc. Quote

For the fiscal year, ARR is anticipated to be between $1.012 billion and $1.022 billion. We expect ARR to be $1,019.2 million. 

GWRE’s efforts to drive cloud operations efficiency to boost cloud margins remain an additional tailwind. The company’s expectation for non-GAAP operating income for the fiscal year is pinned in the range of $187-$195 million. Subscription and support non-GAAP gross margin is expected to remain strong at 69-70%. 

We expect non-GAAP gross margin Subscription and support to be 69.5% while our estimate for non-GAAP operating income is pegged at $187.5 million, up 88.4% year over year.  

Increasing investments in product enhancements, along with weakness in global macroeconomic conditions and inflation, remain concerning. License revenues are likely to have been affected owing to the migration of on-premise customers to the cloud.

What Our Model Says About GWRE Stock

Our proven model does not predict an earnings beat for GWRE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

GWRE has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Broadcom Inc. AVGO is set to release quarterly numbers on Sept. 4. It currently has an Earnings ESP of +1.16% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AVGO’s to-be-reported quarter’s earnings and revenues is pegged at $1.66 per share and $15.83 billion, respectively. Shares of AVGO have gained 94.5% in the past year.

Torrid Holdings Inc. CURV presently has an Earnings ESP of +71.43% and a Zacks Rank #2. CURV is scheduled to report quarterly numbers on Sept. 4. The Zacks Consensus Estimate for CURV’s to-be-reported quarter’s earnings and revenues is pegged at 4 cents per share and $259.6 million, respectively. Shares of CURV have lost 64.5% in the past year.

High Tide Inc. HITI has an Earnings ESP of +400% and a Zacks Rank #3 at present. HITI is scheduled to report quarterly figures on Sept. 15. The Zacks Consensus Estimate for HITI’s to-be-reported quarter’s earnings and revenues is pegged at breakeven and $107.3 million, respectively. Shares of HITI have plunged 82.5% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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