Guidewire Software delivered a stronger-than-expected fourth quarter as insurers continued shifting core operations to cloud platforms and adopting artificial intelligence. However, the company’s results were overshadowed by a more cautious near-term outlook, illustrating the increasingly demanding expectations placed on enterprise software companies benefiting from AI and cloud modernization.

Q4 Revenue and Recurring Revenue Beat Expectations

Guidewire reported $411.1 million in fourth-quarter revenue, representing 15% year-over-year growth and exceeding the approximately $402 million analyst estimate. Adjusted earnings per share reached $0.99, compared with $0.81 a year earlier and above the $0.94 consensus estimate.

The composition of revenue was particularly important. Subscription and support revenue increased 32% to $266.7 million, reinforcing the company’s transition toward recurring cloud-based revenue. Services revenue rose 10% to $67.3 million, while license revenue declined 18% to $77.1 million as the business continues its migration away from traditional software licensing.

For the full fiscal year, Guidewire generated $1.48 billion in revenue, up 23%, while subscription and support revenue climbed 33% to $970.9 million. Ending ARR reached $1.242 billion, representing 19% growth on a constant-currency basis.

AI Is Increasingly Embedded in Insurance Modernization

Guidewire’s management continues to identify artificial intelligence as a major catalyst for modernization among property and casualty insurers. The company provides core systems covering policy administration, claims and billing, while its newer AI capabilities are designed to help insurers automate workflows and use institutional data more effectively.

The company said AI is driving momentum as more insurance customers align their AI transformation strategies with Guidewire. In August, Guidewire introduced its Qusar release, designed to help insurers build and control AI agents. The broader strategy is to allow AI systems to operate within insurance workflows while maintaining enterprise-level controls and governance.

Management also highlighted record sales activity and the lowest ARR gross attrition rate since Guidewire began measuring ARR. That retention trend is strategically important because the company’s cloud transition depends not only on winning new insurers but also on expanding recurring revenue within an established customer base.

FY27 Guidance Creates a More Complicated Market Picture

Guidewire expects FY27 ending ARR of $1.45 billion to $1.46 billion and total revenue of $1.707 billion to $1.727 billion. Non-GAAP operating income is projected at $403 million to $423 million, while operating cash flow is expected to reach $445 million to $465 million.

The first-quarter outlook is more conservative. Guidewire forecasts Q1 revenue of $372 million to $378 million, compared with the approximately $387 million expectation shown in the supplied earnings report. Non-GAAP operating income is expected at $64 million to $70 million, while ending ARR is projected at $1.253 billion to $1.259 billion.

This gap helps explain the market’s reaction. Guidewire shares reportedly fell more than 20% in after-hours trading despite the quarterly earnings and revenue beats, as investors focused on the near-term revenue outlook and the deceleration implied by FY27 guidance. The reaction highlights how expectations can become as important as absolute financial performance for high-growth software companies.

Going forward, the central issue for Guidewire will be whether AI adoption and cloud migration can sustain ARR growth while the company continues expanding operating margins and cash generation. Investors will be watching large-deal activity, subscription growth, customer retention, AI-agent adoption and the pace of quarterly revenue growth. Guidewire’s ability to demonstrate that AI is accelerating rather than merely supporting its existing modernization cycle will be particularly important as the company enters fiscal 2027.