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Guidewire’s stock drop may fade as cloud shift boosts recurring revenue

Guidewire said licensing revenue fell 18% and cloud annual recurring revenue rose 35% to 84% of total ARR, supporting its longer term margin and cash flow outlook.

Reported · Written up by our desk · Previews

Guidewire Software’s post-earnings plunge appears tied to cautious guidance connected to its ongoing shift from legacy licensing to cloud subscription revenue, an approach that can pressure near term topline even as margins improve, according to MarketBeat Ratings.

The outlet points to revenue growth of 15%, driven by a 32% increase in subscriptions and a 10% rise in services. Licensing revenue contracted 18% and is expected to keep declining in upcoming quarters as the company continues migrating to the cloud.

Cloud annual recurring revenue (ARR) grew 35% to 84% of total ARR, which MarketBeat Ratings says can provide more visibility and support faster cloud growth ahead. The firm also highlights profitability improvement, with operating income up 51.4% year over year, and adjusted earnings of 99 cents, up 22% year over year.

MarketBeat Ratings adds that the quarter’s main offset came from higher capital expenditures and investments that weighed on bottom line strength, though it characterizes cash flow as sufficient to sustain the balance sheet and ongoing capital returns. The outlet notes share buybacks reduced the share count by 3% year over year as of fiscal Q4.

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