Guidewire Software, Inc. — Call Transcript 2026

Greetings, welcome to the Guidewire third quarter of fiscal 2026 financial results conference call. As a reminder, this call is being recorded and will be posted on our investor relations page later today. I would now like to turn the call over to Alex Hughes, Vice President of Investor Relations. Thank you, Alex. You may begin. Thank you, Grace. Hello, everyone. With me today is Mike Rosenbaum, Chief Executive Officer, Jeff Cooper, Chief Financial Officer, as well as John Mullen, President, who will be available for the Q&A portion of today's call. Complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website. We have also posted this quarter's earnings deck on the IR section of the site. Today's call is being recorded, and a replay will be available following its conclusion. Statements today include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national, and geopolitical events on our business, and other matters. These statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. Please refer to the press release and the risk factors and documents we file with the SEC, including our most recent annual report on Form 10-K and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. We also will refer to certain non-GAAP financial measures to provide additional information to investors. All commentary on margins, profitability, and expenses are on a non-GAAP basis unless stated otherwise. Please note that starting this quarter, we have updated our non-GAAP methodology to exclude the impact of unrealized foreign currency exchange rate gains and losses. To ensure an accurate comparison, we have recast all our non-GAAP schedules back to the first quarter of fiscal 2025. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted at the end of our quarterly earnings deck on our IR website. With that, I'll now turn the call over to Mike. Good afternoon, and thank you for joining us today. We delivered another great quarter in Q3 and continue to build momentum across the business. The quarter was highlighted by 11 cloud wins, strong progression in key pipeline deals, and growing customer interest in PricingCenter and our AI platform tooling and ProNavigator offerings. Together, these dynamics continue to strengthen our position as we head into our fourth quarter and provide a solid foundation for the remainder of this fiscal year and next. From a financial perspective, revenue, profitability, and cash flow all finished ahead of expectations, continuing to demonstrate the strength and durability of our model. ARR in Q3 came in within our guidance range, growing 19% year-over-year, and fully ramped ARR continues to grow faster than ARR. The bookings results in the quarter were solid, 19% ARR growth is a great achievement. We anticipated a couple more deals to close in the quarter, but one of the things about Guidewire is that there are a relatively small number of discrete deals each quarter, and sometimes timing doesn't align perfectly with quarterly boundaries. That said, the progress we made in Q3 with respect to pipeline momentum gives me a lot of confidence as we head into Q4, which is one of our largest and most important quarter of the year. As I think about the quarter and the progress we have made so far in our fiscal year, I'm very happy with the momentum and trust we have built in the industry. What stands out is the degree to which insurers are aligning around Guidewire as their long-term core platform partner. Customers increasingly want a complete platform they can trust, something that combines IT agility, an open approach to integration, and amplifies their ability to innovate rapidly. This position has become even more valuable as insurers modernize core systems and look to operationalize the latent benefits AI creates for the insurance industry. During the quarter, we closed 11 cloud deals, including two net new core system wins and five ProNavigator deals. One notable transaction was a seven-year extension and DWP expansion with Auto Club of Southern California for InsuranceSuite on Guidewire Cloud Platform, alongside a significant new sale of ProNavigator. This carrier is investing in Guidewire to support long-term growth while incorporating greater AI-driven capabilities into its operations. We also saw continued momentum from insurers modernizing legacy core systems globally. In Europe, a U.K. insurer, part of a global insurance group, selected ClaimCenter on Guidewire Cloud Platform as part of a broader modernization initiative designed to simplify and accelerate its technology roadmap. In Brazil, we closed a large strategic net new win with Bradesco Seguros, which selected Guidewire Cloud Platform as part of an effort to consolidate and modernize a significant legacy footprint. This insurer is focused on improving product velocity and accelerating speed to market. In North America, a large U.S. insurer selected PolicyCenter on Guidewire Cloud Platform within a commercial insurance entity. We continue to believe these types of transformational core system modernizations represent a durable long-term opportunity for Guidewire, and we were encouraged by the progress we made during the quarter. Beyond core system modernization, we are also seeing increasing traction across newer offerings on the platform. We had three great PricingCenter wins in the quarter, including one with a Swedish insurer, an insurer in Poland, as well as our first U.S. win for PricingCenter at Oklahoma Farm Bureau, which selected the platform to become more nimble in pricing and rating, reduce IT and operational friction costs, and accelerate speed to market. As I previously stated, we also saw continued and building momentum for ProNavigator, which was adopted in the quarter by five insurers spanning multiple sizes and lines of business, as each increasingly looks to embed AI-driven knowledge and workflow automation directly into core insurance operations. In addition to Automobile Club of Southern California, ProNavigator was chosen by two regional mutual insurers, as well as a farm and ranch-focused P&C carrier and a workers' compensation insurer. Additionally, our data and analytics offerings continue to gain traction as customers seek to embed more real-time insight throughout the insurance lifecycle. Overall, we're seeing increasing platform gravity around Guidewire, and that's translating into healthy adoption of new offerings across our portfolio. These trends and the broader momentum in the business were reinforced at recent insurance forums we hosted in Europe, Australia, Japan, and Canada. In each of these events, insurers consistently emphasized the same priorities: modernizing core systems, increasing operational agility, and positioning themselves to take advantage of AI in practical and scalable ways. As we've said before, Guidewire sits at the center of the insurance enterprise. Our platform manages the core systems of record for policy, billing, and claims, and we continue to expand that foundation into critical business functions like pricing and underwriting through a continuously improving cloud platform. Our platform provides the context insurance companies need to apply AI to real workflows. AI in insurance or any other regulated industry use case depends on trusted data, well-defined workflows, and systems capable of executing decisions reliably at scale, which is exactly what Guidewire provides. With ProNavigator, we have embedded AI decision support directly into the applications and workflows insurers use every day. We help underwriters, claims adjusters, and customer service teams make better decisions through contextual insights, recommendations, and increasingly agentic capabilities integrated into the flow of work. Underpinning all of this is our cloud platform and developer ecosystem, which was the focus of our recent developer summit in Bangalore, India. This event was a real highlight for me for two reasons. First, because of its scale. We had 3,000 people attend, which was double our prior year, and we had people come to Bangalore from all over the world. When we began this event, we just had no idea it would be so popular, and I never imagined that we would have customer development teams from the United States traveling halfway around the world to engage with us in this way. Second was the breadth of AI capabilities we are unlocking on the platform. Connecting these frontier models and tools like Claude Code to our platform and our MCP servers is unlocking a staggering amount of productivity in our ecosystem. Walking around the event and speaking to the real on-the-ground engineers who are every day translating the requirements of the industry to real solutions was just motivating for me. We are unleashing a productivity tsunami, and the same excitement that people are experiencing with Claude Code-driven software development is now very real on the Guidewire platform, making it possible to build workflows faster, integrations faster, new insurance products faster, new digital experiences faster, and it was just incredible, and everyone in our ecosystem is excited about it. We're also seeing significant and measurable productivity gains internally and across our partner ecosystem through the use of these agentic development tools, which is helping accelerate delivery and implementation timelines. This improvement will accelerate migration and modernization efforts across the industry. We are almost a decade into our efforts to bring the industry a modern cloud platform, and still, much of the insurance industry still operates on legacy technology. The insurance companies not operating on modernized core systems will struggle to take full advantage of AI to support the agility and intelligence insurers increasingly require to remain competitive. This reality creates a growing opportunity for Guidewire. By reducing the time, cost, and complexity associated with this modernization, adding AI capabilities, agents, and automation into an open platform, we believe we will expand our addressable market and continue to accelerate our business. Finally, before I turn the call over to Jeff, I wanted to quickly mention an important leadership transition in our sales org. After an incredible career as an enterprise sales leader in the software industry, David Laker has decided to step away from his role as Chief Commercial Officer and transition into a new position focused on strategic partners and initiatives. David will continue his current role through the end of the fiscal year. To ensure a smooth transition, I'm excited to announce that Shane Cassidy is joining Guidewire starting today and will formally assume Chief Commercial Officer responsibilities after the end of our fourth quarter. Shane is a proven insurance industry leader and has been instrumental in partnering with Guidewire and helping grow our business over his 20-year career at Capgemini, where most recently, he was the Executive Vice President of the Global Insurance Practice. The Chief Commercial Officer role will continue to report to John Mullen, and we anticipate that Shane will build on the strong sales discipline and execution that David's established. We're pleased to have Shane on board, and I'm excited to work with David in his new capacity next year. With that, I'll turn it over to Jeff. Thanks, Mike. We are pleased about the progress we made in Q3 as we shift our focus to our important fourth quarter. In Q3, we executed on healthy cloud demand, we made exciting progress moving key deals through our sales pipeline, we saw strong services demand and execution, we really demonstrated the power of our financial model, with revenue growing 27%, combined with strong margin and cash flow dynamics. I was pleased with the progress we delivered in Q3 to set ourselves up to achieve a fantastic fiscal 2026. ARR finished Q3 within the range at $1.147 billion, up over 19% year-over-year. Fully ramped ARR growth rates continue to outpace ARR growth, which is a strong indication into the growth environment we are experiencing. Total revenue was $373 million, up 27% year-over-year, above the high end of our outlook. Subscription and support revenue finished Q3 at $245 million, reflecting 35% year-over-year growth. Services revenue finished at $72 million, up 32% year-over-year, well ahead of our expectations on continued strong demand for Guidewire-led services programs and field engineering activities. Now let me turn to profitability for the third quarter, which we will discuss on a non-GAAP basis. Gross profit was $247 million, representing 29% year-over-year growth. Overall gross margin was 66%. Subscription and support gross margin was 74%, compared to 71% a year ago. The scalability of the cloud platform continues to deliver strong margins. Services gross margin was 14%, compared to 13% a year ago. This margin benefited from strong utilization rates, which was partially offset by higher subcontractor expenses to ensure we had sufficient capacity for the demand we are experiencing. We finished Q3 with operating profit of $78 million. This finished ahead of our outlook due to higher than expected revenue and gross profit and lower than expected operating expenses. In general, operating expenses have benefited from some slow hiring and some expense timing. We ended the quarter with $1.15 billion in cash equivalents, and investments. Operating cash flow ended the quarter at $61 million. We repurchased 1.7 million shares at an average price of $147.07 per share. We have $241 million remaining on our share repurchase authorization that we put in place towards the end of Q2. Now let me go through our updated outlook for fiscal year 2026. Starting with the top line, we are maintaining our ARR outlook of $1.229 billion-$1.237 billion, which reflects growth of 18%-19% year-over-year. As we mentioned last quarter, we continue to see fully ramped ARR growth rates above ARR growth rates, and we expect that trend to continue for the full year fiscal 2026. This is important because it sets a solid foundation for durable growth as we look ahead to FY '27 and beyond. For total revenue, we now expect between $1.46 billion and $1.47 billion. The midpoint of our revenue growth outlook is 22%, up from 16% growth assumed at the beginning of the year, and 20% growth as of the end of last quarter. We expect between $963 million and $969 million in subscription and support revenue. This is a modest increase but reflects a $20 million increase in our guide over the first three quarters of the year. This outlook takes into account the continued healthy DWP true-up activity, strong attach of new products, and a robust pipeline in Q4. Additionally, we were thrilled with the progress of ProNavigator and PricingCenter in the quarter. These new product areas have already surpassed my expectations for the year. We now expect services revenue to be approximately $270 million, given strong cloud demand, and in particular, demand for Guidewire services expertise. Additionally, as we noted last quarter, we are leaning into some field engineering programs where our services personnel are helping customers utilize Guidewire Cloud Platform and leverage newer agentic capabilities to solve business problems. Turning to margins, we still expect our subscription and support gross margins to be approximately 74% for the year. We expect services gross margins to be approximately 14%. Overall gross margins are still expected to be 67% for the full year. We are also lifting our outlook for operating income. We expect GAAP operating income of between $124 and $134 million, and non-GAAP operating income of between $314 and $324 million for the fiscal year. This updated outlook reflects higher revenue and gross profit expectations and lower operating expenses than originally anticipated. This is partially offset by a larger services revenue mix and an upward adjustment to our company bonus accrual, given strong growth and profitability expectations. We expect stock-based compensation to be approximately $182 million, representing 13% year-over-year growth. We are raising our expectations for cash flow from operations for the year to be between $365 and $380 million. Our CapEx expectations for the year are between $30 and $35 million, including approximately $18 million in capitalized software development costs. Alex, you can now open the call for questions. Great. Thanks, Jeff. Our first question comes from Adam Hotchkiss at Goldman Sachs. Okay, great. Thanks for taking the questions. I just wanted to start on ARR for the quarter. Mike, I know you called out deal timing, but it would be great if you could share any additional details on what drove that and how broad it was. It felt like historically you've had a pretty good handle on the quarterly cadence of backlog and deal velocity. I'd just be curious what was different this time around and how we should think about whether you expect this same dynamic to impact Q4. Thanks very much for the question. I'll answer the last part of the question first. We have a tremendous amount of pipeline and we have to execute, but we expect a very strong Q4. The situation in Q3 with respect to deal timing honestly isn't that unusual. It's just there's a discrete number of deals that we have to close every quarter, and sometimes things are in our control and sometimes they're not. I actually think 19% ARR growth was a very solid quarter. I think when you zoom out and look at the long history of the company, I think you have to say, "Well, everything is fine here, and there's really nothing to read into this other than a company like us that does big, large, discrete deals is going to occasionally have a situation in which some things fall on the wrong side of that line." When I think about what's going on, we see pipeline building and we see demand building, and we see a tremendous amount of confidence in the sales organization, and then really also the customer base, and then the demand for not just core modernizations, but these new products. Jeff mentioned this, we're creating alternative ways to get to the number and alternative products to sell in PricingCenter and ProNavigator and our analytics product offerings that are really increasing our confidence looking into Q4 and next fiscal year. Hopefully that gives you just a little bit of color about how confident I am in the company right now and how pipeline is shaping up into Q4. The only thing that I would add is we've been talking for some period of time around what the impact of ARR backlog is into the net new ARR numbers, and we've known as we entered into this year that Q3 faced a pretty meaningful headwind with respect to that particular metric. As we look at Q4, given the pipeline that we have, which is incredibly strong, in addition to the visibility that we have into the backlog that will flow out of backlog and into the ARR number in Q4, it gives us a lot more visibility into that number and informs our confidence into how we think about the guide. Great. That's really helpful. Then, Mike, just to follow up on something you said on ProNav and PricingCenter, it feels like you're getting some really good early traction there. Maybe for you or Jeff, how should we start to think about when these products and UnderwritingCenter as well, I know that's moving along into next year, will start to materially benefit ARR growth? Thanks so much. Well, those products are building in terms of the overall portfolio at the company. They also strengthen the overall message and the value we can create for our customer by making sure we deliver a completely integrated suite across the full insurance lifecycle. Obviously as those product lines grow faster than the overall collection of product lines, they'll become a more and more meaningful part of the overall bookings number. We called it out just because it was an objective this year to get those product lines established. As Jeff said, we're very pleased with the momentum. It'll definitely happen that they'll grow as a percentage of the overall book, and we're very pleased with how much momentum we've been able to create in a short amount of time. Great. Thanks, Adam. Our next question comes from Alexei Gogolev of JPMorgan. Hello, everyone. Can you hear me? Yes. Perfect. Hi, Mike. Hi. As a insurance partner with major LLM vendors, what's the practical integration posture with Guidewire in terms of enablement points or governance or security, and where do you expect Guidewire to build versus partner? Great question. It's a super complicated, multifaceted answer, so forgive me, I'll do my best in I don't know how long I allocate to answers of questions on earnings calls, but let's say three minutes. Most important thing for us right now is the work that we've done on what people are calling a development harness to make sure that these LLM agentic development tools work effectively with the Guidewire stack. This is actually real software engineering that has to be put in. When you point these tools at a platform and a code base like Guidewire, you don't necessarily get good results. After doing the work to make sure that the system knows how to interact with Guidewire, we've been extraordinarily pleased with the results. This is what I was referring to at our Dev Summit in Bangalore, showing people how to get this thing deployed, how to get Claude Code running on top of Guidewire, how to create the code, the integrations, the digital experiences, all of that stuff through prompt engineering. It really is phenomenal. I would describe that as a partnership, right? We don't necessarily need an official PR from these companies. They've done an incredibly good job publishing their APIs and how to build these things to work together. We've done a great job working with their technical teams to make sure that these things deploy well, and the results have been phenomenal. Obviously, we also have LLMs that are sitting inside of products like ProNavigator and the agents that we build to run on our agentic layer inside of our platform. There's this good-symbiosis, if that's a word, in how these things are working together and being practically deployed right now that I am very excited about. I think if you say, "What's the world going to look like in five years, and how much of the solution is going to be delivered by Guidewire, and how much of the solution is going to be delivered by a large language model and the various layers of the prompts?" Who knows? I tell you one thing for apps that I am absolutely sure of, though, is the industry is going to run on a modern relational database like Guidewire. Claims, policy, billing, product modeling, these things are going to run on a modern cloud infrastructure that we provide, and we will remain open to working with these large language models and honestly, also other application providers that have incorporated these capabilities. This is what our customers want, and that's what's working right now. That's the message, and that's the architecture, and that's the reality that's working really well for us right now. Hopefully that gives you a sense of where things are and where I think they'll go. I would say generally, couldn't be more pleased with how this is evolving in the ecosystem. Thank you, Mike. One follow-up in terms of monetization. How are you thinking about it for embedded gen AI features over time, and what guardrails are you likely to implement to protect unit economics? Generally speaking, I would like to build product that aligns to insurance value, and we tend to almost universally sell our products based on direct written premium, based on a % of the direct written premium that runs on the service. That enables us to describe the value we create in relationship to the size of the insurance company, and therefore the size of the value that we're creating for that insurance company. If there's an LLM that's incorporated into that story in the way that it is very directly with ProNavigator, we want to have a basis points-based pricing structure that will include whatever amount of, let's say, tokens that are necessary to deliver the value that we've been able to describe in selling that product. Obviously, there are guardrails that we will build, technical and contractual, that will protect us from a use case that goes beyond what we expect. Nothing that we've seen causes me to worry that that's going to become something that slows us down. We think we're going to be able to create DWP-based pricing structures for the products that align to the insurance workflow, and that's going incredibly well for us right now. Hopefully, that makes sense. Slightly a technical question, but that's the philosophy around pricing and guardrails right now at Guidewire. Thanks, Alexei. Next question is from Parker Lane at Stifel. Hey, guys. Thanks for taking the question. Mike, really nice to see the ProNavigator momentum here that you called out in the quarter. I think you acquired that back in October. Maybe formally announced a release in April. Can you just give us a sense of how long those deals were in the pipeline? Generally speaking, when you look out to 4Q and the coming fiscal year, how you're feeling about the pipeline in the early stages of having ProNavigator on the platform? Yeah. Thanks a lot, Parker. It's a great question. I appreciate it. We probably should have woven that into our script. It's exciting for us actually, to have a product that we can materialize demand for and close business around in a reasonable amount of time. It's a very different sales motion than we have with core system modernizations that I think you know can sometimes last multiple years. Certainly there was a bit of that pipeline that was already part of the company when we did the acquisition. Since acquisition, and hopefully everybody gets this, is there's this prompt shift in the perspective of the customer base around the trust that they're able to put into a service. It just shifts from a small company to a large company, and a lot of the things that we can do to build trust around the products we sell can be applied to the new products that we add to the mix here at Guidewire, and that's certainly true with ProNavigator. Deal cycles are shorter. The conversations are quicker, and especially relative to a modernization or a cloud upgrade. That's very exciting, and that's one of the things that's driving the excitement in our sales organization, but also our customer base, is there's this real demand to be able to actively operationalize AI in a way that allows a company to get started very quickly, and ProNavigator meets that need. I'll add one quick comment there, Mike. With regard to both ProNavigator and PricingCenter, the pathway to the business strategy conversation and business value outcome conversation as we continue to enrich our conversations with customers has been really powerful. The gestation period of these deals standalone, Mike mentioned a different selling cycle. It is also proving to be a really rich engagement with chief claims officers and heads of underwriting, heads of product and pricing inside of companies to connect the dots between the core modern platform to the business value that can be derived over the top of that. That's not just about cost dislocation and operational savings, but really about growth and indemnity management, and that's becoming a really powerful enrichment of the modernization of core message. Got it. Maybe one quick one for you, Jeff. You talked about slower hiring. You also talked about a surge in services demand. Was the slower hiring across the board, or should I weave that in with the commentary about services demand and what you said about subcontracting and a need to invest more there, and particularly like FTE-type roles? Slower hiring was mostly outside of services, I would say. Services has been hiring to meet the demand threshold. On the slower hiring side, there's a bit of sometimes it just takes a little bit longer to get the heads in the door that we want to get in. There's also a bit of us coming to terms with some of the productivity gains that we're seeing with some of the AI tooling that we're rolling out throughout the company and being a bit more measured about how we think about future headcount growth. Those two things are playing into some of the hiring practices right now. Got it. Appreciate it. Thanks, guys. Great. Next up is Ken Wong at Oppenheimer. Go ahead, Ken. Great. Can you guys hear me? Yeah, we can hear you, Ken. Okay, fantastic. Mike, maybe circling back on the slip deals. I feel like you guys have been executing so well, so anytime there's a little bit of hiccup, I think investors just wonder, potentially, is it maybe macro, given some of the geopolitical stuff that happened in the quarter? Is it maybe AI causing customers to think through their deployment timelines? I guess any reason why it wouldn't be some of those external factors and you guys feel comfortable that it is just some deal timing. Then any update on whether or not those have closed in fiscal Q4? Yeah. It's a good question, and I would say just generally, no. Right. This is just simply a matter of us looking at the end of Q2 and saying, what do we project is going to occur in Q3? You could say, getting it wrong or seeing things move, just things didn't go exactly the way we wanted. That said, I want to reiterate the pipeline is actually building, and the ARR growth rate ended up at 19%, which is pretty phenomenal. I think that more so, I would say, this is a headline associated with us hitting the target that we set in Q2. It is not related to anything macroeconomic or a general condition that we see in the overall demand environment. Like I said, pipeline's building, demand is building. We're looking at potentially, I have to qualify this as we need to execute, and we're going to execute, but it could be a record Q4. The demand that we see, the pipeline that we see, is very, very significant. Yeah, I wouldn't connect the dots to anything related to macro or AI or anything like that. I agree, Ken, there's nothing like that at all. We have a ton of confidence into the market position, the demand environment. As we look at the linearity at the start of Q4, it's off to a good start. Guidewire is a business that has a small number of very large deals that can be quite impactful. This is just a dynamic of our business and part of the reason why we always coach people to focus more on the annual results as the true measure of our success. We feel very confident that anything that we didn't quite get in Q3, we'll manage to get over the finish line in Q4, and the pipeline is really strong. Understood. Thanks for all the color there, Mike and Jeff. Jeff, I appreciate the color on the fully ramp lining up with ARR this quarter and likely similar in Q4. I don't suppose any directional color in terms of whether or not fiscal Q3 was tracking at or above, below. Yeah What Q2 levels were? Yeah. Here's what I can say. Our fully ramp continues to be very, very healthy. I think it's helpful reminder that when we approach a deal negotiation, we really focus on making sure we're being thoughtful around driving customer lifetime value. This means optimizing the ARR dynamics for the out years more so than optimizing them for the year one in quarter ARR that's delivered, and that's a dynamic of our model that we have to manage and measure, but we will always optimize for that customer lifetime value. Last year we saw fully ramped ARR growth at 22%, which was very strong. As we move through this year and as we look ahead to next year, we're confident that we can deliver those levels or potentially higher. That's how we're thinking about where we've been throughout this year and how we're thinking about the remainder of this year. Great. Our next question goes to Allan Verkhovski at BTIG. Awesome. Thanks for taking the question here, guys. Mike, I just want to pull on that earlier thread and the productivity tsunami you mentioned in the prepared remarks. There are a lot of product updates in the Palisades release. I want to just go a bit deeper on the developer assistant that's in early access. Can you unpack the level of demand there is from Tier 1 insurers? What the most in-demand use cases are based on your conversations, and how is this further driving incremental tailwinds and pressure on insurers that haven't moved to the cloud to do so sooner? Yeah, great question. Yeah, it's interesting. You know, there's a variety of things that involve development that relate to either the implementation of Guidewire or the ongoing, let's call it maintenance or evolution, related to IT projects that drive the initiatives at an insurance company. It really is across the board. Probably the most tangible thing you can point to is product creation. We've done a lot of work over the years around what we call Advanced Product Designer and creating a better system for creating new products on the PolicyCenter platform. Using AI to do that is a phenomenal step up in productivity associated with the work to make that happen. Building integrations, again, is a big part of an implementation project, and it's something that just takes up a lot of time, and that can also be accelerated. Oftentimes associated with a new product introduction will be the digital interface, the customer-facing, web-facing screens associated with quoting those products or engaging with agents around those products. That also can be accelerated. There's demand for all of these developer assistants. It's really across the board because what's so amazing about these tools is the intelligence is general, right? We can build the harness, we can apply the harness to our dev platform, and we can tweak this thing and train this thing to work against our specific type of technology platform. Regardless of what the development project is, it's accelerated, and that is awesome. With respect to demand and what tailwinds this creates, you should think about this in two ways. One is there's just a tremendous amount of work involved in migration, right? I've got a legacy mainframe system that needs to be modernized, or I've got a Guidewire Cloud implementation that hasn't been maintained quite as much as we would've liked over the years, and now that needs to be modernized. That needs to be moved into Guidewire Cloud. These tools can also be applied to all that work. We're seeing the estimates and the timelines associated with professional services to do that work come down in very significant ways. That's what creates more demand. People often say, "What's the meter on Guidewire? What can cause Guidewire to grow faster, grow slower?" Of course, you have to pay money for Guidewire licenses. We talked about that in an earlier question. It's much more the implementation project that stretches out over years that really costs a lot of money. If we can make that faster and accelerate that is creating the tailwind and the extra demand for people saying, "Oh, that project that I was putting off, maybe if it's faster, cheaper, maybe this is the time to go tackle that project." That's just as exciting as this sort of ongoing maintenance and the productivity boost in the IT departments post-implementation. That's very, very real, and I think it's absolutely creating a tailwind for the company. Perfect. That's really helpful, Mike. Thank you. Jeff, maybe just a quick follow-up for you. It's impressive the fully ramped ARR growth is still expected to outpace ARR growth next quarter, despite seeing some of the deals push this quarter. Can you just walk through your confidence, your visibility, and assumptions behind that? Thank you, guys. Yeah, we do a very detailed bottoms-up review of our pipeline on the deals that are coming in. We are seeing very healthy demand for larger commits, insurers expanding their work with Guidewire, when they're modernizing one module to the cloud, kind of consuming another module in addition to that activity. All of that kind of flows through the model. We have very good visibility, obviously, into the first three quarters of the year that also inform our guides. A very meaningful amount of that work is already in the rear-view mirror as we look ahead to kind of the end of this fiscal year. All of these themes are really playing into the environment that we're seeing, kind of the larger commitments that insurers are making to the cloud platform that inform that guide. There is certainly work that has to be done and completed in Q4 to realize that, but we have good visibility into the corpus of deals that we expect to see in Q4. Thanks, Allan. Our next question's from Tyler Radke at Citi. Yeah, thank you for taking the question here. Obviously, you hit on the slip deals a bit already, but I guess just bigger picture, one of the dynamics that investors are asking about is just sort of the AI crowding out effect. I'm curious, as you talk to your insurance customers, and they're presumably ramping up coding projects, how much is that budget an issue as it relates to your deals and, as you think about sort of Q4, if you could just sort of provide the underlying assumptions on close rates and whatnot. Have you introduced more conservatism given sort of the timing issues you saw in the quarter? Thank you. No, we're obviously being very careful and going through everything in Q4, let's say with a fine-tooth comb, to ensure that we're confident in reaffirming the guide and the confidence that we have in the execution. That's being done. In terms of AI crowding out, I certainly hear this narrative from people, let's say. I don't hear it from customers. I think the reality is that the insurance industry is recognizing what a profound impact AI can have on, A, development velocity and IT agility, B, underwriting and the efficiency of underwriting departments, and C, claims departments and the efficiency of customer service and claims automation in the industry. The productivity improvements that are potentially possible in insurance, in any insurance company, are so significant relative to what these companies spend on these IT programs, that it doesn't make sense to compare these two things against one another. You look at this and you say, "Well, if this works," which I think more and more people expect that it will, "then in order to remain competitive going forward, you're going to have to have a modern core system that is capable of supporting these sort of agentic capabilities." Otherwise, you're not going to be able to remain competitive. You're going to lose ground. It's like a first-order question to say, "Well, could I code this in a different way?" It's the wrong way to look at it. The customers are seeing, especially the big Tier 1 customers see this, they recognize this, they take a look, and they assess where they are and where they want to be and where they want to be with AI. You come to the conclusion that being on a modernized platform with an open approach to APIs and MCP servers and integration to these agentic tools and large language models, integration to an ecosystem of partners that are building on top of these LLMs and building integrated into Guidewire, this is the logical answer, and that creates the lift that we're talking about. I want to acknowledge that, yes, the narrative that you describe exists, but the counter-narrative, specifically in insurance and the use cases we unlock for IT underwriting and claims so overwhelm this logic that that's what's driving the business positively for us at Guidewire. Great. Thanks. Go ahead, Tyler. Sorry. Yeah. Sorry. Go ahead. Sorry. Mike, I think in the prepared remarks, you talked about how you're seeing measurable and significant productivity, and accelerated migration timelines. I'm just wondering if you could double-click on that. Any metrics you could put around that? Is it happening 30% faster? How should we think about that just in terms of when that starts to show up for you guys in terms of getting that maybe faster ramp from time to booking to active ARR? Yeah. Great question. I appreciate it. I'll give a little bit of a preamble, and then I'll prep John, and I appreciate John already took himself off mute, so he's going to chime in here on this because he owns and is driving this directly. Obviously, we started off a little bit conservatively and said, "Okay, let's get these tools in people's hands. Let's start to assess what we can do. Let's start to apply these tools and these techniques to a couple of programs with a couple of customers. Let's be very careful and open with customers about what we're doing and how we're doing it, and let's see what happens and see if it really produces the acceleration that we think it will." The amazing answer is it is accelerating. We are seeing the results, and we're starting to expand it to more and more projects, and it's just on its way. I don't know, John, if you want to throw out a couple of the numbers that we are talking to customers about. Feel free to chime in. Yeah. The investment pace right now has unlocked about 35% improvement in migration, so on-prem to cloud migration. That's a great use case because there's some control parameters around the database conversion that allow us to move really fast. We're starting now to see, we've redirected some of the investment towards the migration off of either a legacy estate or some other asset towards Guidewire. We're starting to get to that 35% improvement on the, we'll call them net new deals. If I look forward, I'd say we don't start to see a leveling off, the return on investment on that. We see that maintaining the same pace, the same curve, probably until we get to that 55%. We'll start to see continuing cost savings, but probably less so on the duration savings, just because of the gestation period of just the change management principles of doing these programs. We still have a promising pathway ahead of us and some really great success stories behind us that we're really confident in. Great. Thanks, John. Our next question comes from Aaron Kimson of Citizens Bank. Great. Thank you, guys. Mike, do you see any high-level differences in the appetite and relative budgets for adopting AI products amongst P&C insurers geographically in the Americas versus EMEA versus APAC? That's a good question. It's interesting. Yes. Summary is, yes, we do. I don't want to call out any particular countries, but yeah, we do. The other way to think about it is I think everybody wants to use AI for development, no question. You can very clearly see that you can use AI for development. I think there's different perspectives in different countries, but also at different carriers, different customers, about the degree to which you will expose these agents to consumers, or whether or not you will use sort of more human-in-the-loop use cases where you're exposing these tools to employees and using it to boost productivity through employees. The common factor is everybody wants to get on the learning curve. Everybody wants to get it deployed and start to figure out how it makes sense for their business. Certainly you do see differences in country and also in company about how aggressively they want to target the more aggressive efficiency agendas. Got it. Then as a follow-up, Jeff, can you talk about the shape of the ramp of token spend at Guidewire, your level of visibility and how that'll evolve going forward, and if there could be any potential gross margin effects? Yeah. We're pretty early in terms of how we're kind of monitoring and measuring this. Obviously, we're starting to see it pick up on the development side. We're starting to get it into the hands of customers with respect to the agentic framework and how they're adopting AI within the platform. It's pretty early for us right now. We've kind of built the mechanisms to start measuring that. As we engage with customers, I would say right now we're at a place where we're focused on adoption, but kind of adoption with some controls to ensure that we can make sure that there's not any sort of usage that goes out of the scope of what was intended by our contracts. That's where we are. No numbers, no metrics to report at this point in time. That's how we're measuring it today, though. Okay. Thanks, Aaron. Next question is from Jessica Wang at Raymond James. Thanks for sliding me in here. Just to touch on base on UnderwritingCenter, I know it's still early, it's still under developments, but what have you been hearing from customers that are interested in there? Like how should we think about product maturity so far and potential pipeline into next year, just considering the success you've had so far with ProNavigator and PricingCenter already? Yeah, thanks for the question. It's going very well. We have a handful of customers that we're working on this product with, and in plans to get it into their hands in the next couple of weeks/months. There is a tremendous amount of interest, I would say, in commercial lines underwriting around the potential for these LLMs and agents specifically tuned to the underwriting use case to be able to very significantly improve the efficiency of underwriting teams, reduce the time it takes for companies to respond to submissions, and then also do a better job focusing on the risk analysis of the submissions that they choose to quote. The other part of this that's very interesting is we're being able to establish a better connection to the actual policy system and the quoting system and the pricing systems that these companies are using. That's also part of the equation. The use case, there's a tremendous amount of demand for, I would say, universally across the customer base. The project is going according to schedule, and we're excited about the work we're doing with these sort of carefully chosen design partners that we're working with. That's great to hear. Also just touching on PricingCenter again. With the success of the pipeline so far, how should we think about the demand drivers here that came from your existing customers versus completely new logos? How should we think about potential attach rates that are involved between these different cohorts? Yeah. It's a great question. Technically, the PricingCenter to PolicyCenter to product model integration is so much an important part of the value proposition. That honestly drove the thesis behind the acquisition in the first place. What you're seeing in general in the insurance industry is this need to not only launch new products more quickly, but actually adjust pricing and adjust rate routines more fluidly to keep pace with competition and keep their products, A, competitive, but also profitable. The friction associated with doing that relates to how the components of that solution all integrate. Like I said, the thesis behind making PricingCenter part of the suite at Guidewire is that we can do a really good job integrating the product model, integrating into our quoting service, integrating it into PolicyCenter. That connects logically to selling this to existing PolicyCenter customers and selling this alongside new PolicyCenter implementations. That go-to-market dynamic is playing out exactly as we expected it to. That's where we're seeing the demand. You could also say that's where we're focused because our value proposition is strongest there. It's very much working according to plan. Great. Our last question comes from Faith Brunner at William Blair. Hey, just building on those last couple of questions, I wanted to ask about PricingCenter. I guess you saw the one in Sweden, Poland, the first one in the U.S. How is this maybe building on referenceability of these newer products? Maybe as you touched on the different appetite that may vary region to region, how are these kind of serving as proof points and maybe getting people a little bit more comfortable saying, "Hey, we might have to actually get into something we didn't think we'd want to stay competitive"? Yeah. I'll touch on the last thing. I don't know that I've heard so often that people are saying that they're surprised that they need to do this. I think most of the companies that we're working with have recognized that this is on the strategic agenda. That also, this being on the strategic agenda factored into our interest in adding this to the portfolio and building out this well-integrated solution at Guidewire. That was a factor. I think reference ability is very important. I also just think us doing the work to get this into our infrastructure and being able to run it alongside the rest of the InsuranceSuite, application suite, this is really important. It's an incredibly good actuarial engineering team that we acquired. There's some things we need to do to mature it in terms of how it runs and how it's supported and running it at the scale and reliability and the security expectations that Tier 1 insurance companies expect. That's a big part of the work that we've been focused on since the acquisition, and I think that's helping to drive the demand. It's like, "Hey, can you do all of these things you say you can do, and can you do them with the same level of trust and integration expectations that we see from the rest of the product suite at Guidewire?" That kind of checks all these boxes and creates the demand uptick that we're seeing with the product. The teams, both on the PricingCenter team, but also the general infrastructure and platform teams at Guidewire have done a really good job executing on this, and earning the trust of these customers, and that helps build the pipeline that we're executing against and giving us confidence that this is going to continue. I don't know. Hopefully, that helps you. Actually, let me add, the other thing I'd say is we don't tend to oversell much at Guidewire. We try to make sure we have a stellar track record in terms of selling things that we know we can do and executing on those things effectively and making sure that no programs ever fail. I think that philosophy is factoring into the way we're approaching PricingCenter rollout. Anyway, thanks for the question. Yeah. Thanks for the color. Thanks, Faith. That's it. Okay. Well, everybody, thank you very much for participating in the call today. As you've heard, we're incredibly excited about the momentum in the business in Q4, and we look forward to seeing everybody, talking to everybody after we conclude the fourth quarter in our fiscal year. Thanks very much.

Speaker 12: Greetings, welcome to the Guidewire third quarter of fiscal 2026 financial results conference call. As a reminder, this call is being recorded and will be posted on our investor relations page later today. I would now like to turn the call over to Alex Hughes, Vice President of Investor Relations. Thank you, Alex. You may begin. Greetings, welcome to the Guidewire third quarter of fiscal 2026 financial results conference call. greetings welcome to the guidewire third quarter of fiscal 2026 financial results conference call As a reminder, this call is being recorded and will be posted on our investor relations page later today. as a reminder this call is being recorded and will be posted on our investor relations page later today I would now like to turn the call over to Alex Hughes, Vice President of Investor Relations. i would now like to turn the call over to alex hughes vice president of investor relations Thank you, Alex. thank you alex You may begin. you may begin

Speaker 3: Thank you, Grace. Hello, everyone. With me today is Mike Rosenbaum, Chief Executive Officer, Jeff Cooper, Chief Financial Officer, as well as John Mullen, President, who will be available for the Q&A portion of today's call. Complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website. We have also posted this quarter's earnings deck on the IR section of the site. Today's call is being recorded, and a replay will be available following its conclusion. Statements today include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national, and geopolitical events on our business, and other matters. Thank you, Grace. thank you grace Hello, everyone. hello everyone With me today is Mike Rosenbaum, Chief Executive Officer, Jeff Cooper, Chief Financial Officer, as well as John Mullen, President, who will be available for the Q&A portion of today's call. with me today is mike rosenbaum chief executive officer jeff cooper chief financial officer as well as john mullen president who will be available for the q&a portion of today's call Complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website. complete disclosure of our results can be found in our press release issued today as well as in our related form 8-k furnished to the sec both of which are available on the investor relations section of our website We have also posted this quarter's earnings deck on the IR section of the site. we have also posted this quarter's earnings deck on the ir section of the site Today's call is being recorded, and a replay will be available following its conclusion. today's call is being recorded and a replay will be available following its conclusion Statements today include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national, and geopolitical events on our business, and other matters. statements today include forward-looking ones regarding our financial results products customer demand operations the impact of local national and geopolitical events on our business and other matters These statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. Please refer to the press release and the risk factors and documents we file with the SEC, including our most recent annual report on Form 10-K and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. We also will refer to certain non-GAAP financial measures to provide additional information to investors. All commentary on margins, profitability, and expenses are on a non-GAAP basis unless stated otherwise. These statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. these statements are subject to risks uncertainties and assumptions and are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date Please refer to the press release and the risk factors and documents we file with the SEC, including our most recent annual report on Form 10-K and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. please refer to the press release and the risk factors and documents we file with the sec including our most recent annual report on form 10-k and our prior and forthcoming quarterly reports on form 10-q filed and to be filed with the sec for information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements We also will refer to certain non-GAAP financial measures to provide additional information to investors. we also will refer to certain non-gaap financial measures to provide additional information to investors All commentary on margins, profitability, and expenses are on a non-GAAP basis unless stated otherwise. all commentary on margins profitability and expenses are on a non-gaap basis unless stated otherwise Please note that starting this quarter, we have updated our non-GAAP methodology to exclude the impact of unrealized foreign currency exchange rate gains and losses. To ensure an accurate comparison, we have recast all our non-GAAP schedules back to the first quarter of fiscal 2025. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted at the end of our quarterly earnings deck on our IR website. With that, I'll now turn the call over to Mike. Please note that starting this quarter, we have updated our non-GAAP methodology to exclude the impact of unrealized foreign currency exchange rate gains and losses. please note that starting this quarter we have updated our non-gaap methodology to exclude the impact of unrealized foreign currency exchange rate gains and losses To ensure an accurate comparison, we have recast all our non-GAAP schedules back to the first quarter of fiscal 2025. to ensure an accurate comparison we have recast all our non-gaap schedules back to the first quarter of fiscal 2025 A reconciliation of non-GAAP to GAAP measures is provided in our press release. a reconciliation of non-gaap to gaap measures is provided in our press release Reconciliations and additional data are also posted at the end of our quarterly earnings deck on our IR website. reconciliations and additional data are also posted at the end of our quarterly earnings deck on our ir website With that, I'll now turn the call over to Mike. with that i'll now turn the call over to mike

Speaker 11: Good afternoon, and thank you for joining us today. We delivered another great quarter in Q3 and continue to build momentum across the business. The quarter was highlighted by 11 cloud wins, strong progression in key pipeline deals, and growing customer interest in PricingCenter and our AI platform tooling and ProNavigator offerings. Together, these dynamics continue to strengthen our position as we head into our fourth quarter and provide a solid foundation for the remainder of this fiscal year and next. From a financial perspective, revenue, profitability, and cash flow all finished ahead of expectations, continuing to demonstrate the strength and durability of our model. ARR in Q3 came in within our guidance range, growing 19% year-over-year, and fully ramped ARR continues to grow faster than ARR. The bookings results in the quarter were solid, 19% ARR growth is a great achievement. Good afternoon, and thank you for joining us today. good afternoon and thank you for joining us today We delivered another great quarter in Q3 and continue to build momentum across the business. we delivered another great quarter in q3 and continue to build momentum across the business The quarter was highlighted by 11 cloud wins, strong progression in key pipeline deals, and growing customer interest in PricingCenter and our AI platform tooling and ProNavigator offerings. the quarter was highlighted by 11 cloud wins strong progression in key pipeline deals and growing customer interest in pricingcenter and our ai platform tooling and pronavigator offerings Together, these dynamics continue to strengthen our position as we head into our fourth quarter and provide a solid foundation for the remainder of this fiscal year and next. together these dynamics continue to strengthen our position as we head into our fourth quarter and provide a solid foundation for the remainder of this fiscal year and next From a financial perspective, revenue, profitability, and cash flow all finished ahead of expectations, continuing to demonstrate the strength and durability of our model. from a financial perspective revenue profitability and cash flow all finished ahead of expectations continuing to demonstrate the strength and durability of our model ARR in Q3 came in within our guidance range, growing 19% year-over-year, and fully ramped ARR continues to grow faster than ARR. arr in q3 came in within our guidance range growing 19% year-over-year and fully ramped arr continues to grow faster than arr The bookings results in the quarter were solid, 19% ARR growth is a great achievement. the bookings results in the quarter were solid 19% arr growth is a great achievement We anticipated a couple more deals to close in the quarter, but one of the things about Guidewire is that there are a relatively small number of discrete deals each quarter, and sometimes timing doesn't align perfectly with quarterly boundaries. That said, the progress we made in Q3 with respect to pipeline momentum gives me a lot of confidence as we head into Q4, which is one of our largest and most important quarter of the year. As I think about the quarter and the progress we have made so far in our fiscal year, I'm very happy with the momentum and trust we have built in the industry. What stands out is the degree to which insurers are aligning around Guidewire as their long-term core platform partner. We anticipated a couple more deals to close in the quarter, but one of the things about Guidewire is that there are a relatively small number of discrete deals each quarter, and sometimes timing doesn't align perfectly with quarterly boundaries. we anticipated a couple more deals to close in the quarter but one of the things about guidewire is that there are a relatively small number of discrete deals each quarter and sometimes timing doesn't align perfectly with quarterly boundaries That said, the progress we made in Q3 with respect to pipeline momentum gives me a lot of confidence as we head into Q4, which is one of our largest and most important quarter of the year. that said the progress we made in q3 with respect to pipeline momentum gives me a lot of confidence as we head into q4 which is one of our largest and most important quarter of the year As I think about the quarter and the progress we have made so far in our fiscal year, I'm very happy with the momentum and trust we have built in the industry. as i think about the quarter and the progress we have made so far in our fiscal year i'm very happy with the momentum and trust we have built in the industry What stands out is the degree to which insurers are aligning around Guidewire as their long-term core platform partner. what stands out is the degree to which insurers are aligning around guidewire as their long-term core platform partner Customers increasingly want a complete platform they can trust, something that combines IT agility, an open approach to integration, and amplifies their ability to innovate rapidly. This position has become even more valuable as insurers modernize core systems and look to operationalize the latent benefits AI creates for the insurance industry. During the quarter, we closed 11 cloud deals, including two net new core system wins and five ProNavigator deals. One notable transaction was a seven-year extension and DWP expansion with Auto Club of Southern California for InsuranceSuite on Guidewire Cloud Platform, alongside a significant new sale of ProNavigator. This carrier is investing in Guidewire to support long-term growth while incorporating greater AI-driven capabilities into its operations. We also saw continued momentum from insurers modernizing legacy core systems globally. Customers increasingly want a complete platform they can trust, something that combines IT agility, an open approach to integration, and amplifies their ability to innovate rapidly. customers increasingly want a complete platform they can trust something that combines it agility an open approach to integration and amplifies their ability to innovate rapidly This position has become even more valuable as insurers modernize core systems and look to operationalize the latent benefits AI creates for the insurance industry. this position has become even more valuable as insurers modernize core systems and look to operationalize the latent benefits ai creates for the insurance industry During the quarter, we closed 11 cloud deals, including two net new core system wins and five ProNavigator deals. during the quarter we closed 11 cloud deals including two net new core system wins and five pronavigator deals One notable transaction was a seven-year extension and DWP expansion with Auto Club of Southern California for InsuranceSuite on Guidewire Cloud Platform, alongside a significant new sale of ProNavigator. one notable transaction was a seven-year extension and dwp expansion with auto club of southern california for insurancesuite on guidewire cloud platform alongside a significant new sale of pronavigator This carrier is investing in Guidewire to support long-term growth while incorporating greater AI-driven capabilities into its operations. this carrier is investing in guidewire to support long-term growth while incorporating greater ai-driven capabilities into its operations We also saw continued momentum from insurers modernizing legacy core systems globally. we also saw continued momentum from insurers modernizing legacy core systems globally In Europe, a U.K. insurer, part of a global insurance group, selected ClaimCenter on Guidewire Cloud Platform as part of a broader modernization initiative designed to simplify and accelerate its technology roadmap. In Brazil, we closed a large strategic net new win with Bradesco Seguros, which selected Guidewire Cloud Platform as part of an effort to consolidate and modernize a significant legacy footprint. This insurer is focused on improving product velocity and accelerating speed to market. In North America, a large U.S. insurer selected PolicyCenter on Guidewire Cloud Platform within a commercial insurance entity. We continue to believe these types of transformational core system modernizations represent a durable long-term opportunity for Guidewire, and we were encouraged by the progress we made during the quarter. Beyond core system modernization, we are also seeing increasing traction across newer offerings on the platform. In Europe, a U.K. insurer, part of a global insurance group, selected ClaimCenter on Guidewire Cloud Platform as part of a broader modernization initiative designed to simplify and accelerate its technology roadmap. in europe a u.k insurer part of a global insurance group selected claimcenter on guidewire cloud platform as part of a broader modernization initiative designed to simplify and accelerate its technology roadmap In Brazil, we closed a large strategic net new win with Bradesco Seguros, which selected Guidewire Cloud Platform as part of an effort to consolidate and modernize a significant legacy footprint. in brazil we closed a large strategic net new win with bradesco seguros which selected guidewire cloud platform as part of an effort to consolidate and modernize a significant legacy footprint This insurer is focused on improving product velocity and accelerating speed to market. this insurer is focused on improving product velocity and accelerating speed to market In North America, a large U.S. insurer selected PolicyCenter on Guidewire Cloud Platform within a commercial insurance entity. in north america a large u.s insurer selected policycenter on guidewire cloud platform within a commercial insurance entity We continue to believe these types of transformational core system modernizations represent a durable long-term opportunity for Guidewire, and we were encouraged by the progress we made during the quarter. we continue to believe these types of transformational core system modernizations represent a durable long-term opportunity for guidewire and we were encouraged by the progress we made during the quarter Beyond core system modernization, we are also seeing increasing traction across newer offerings on the platform. beyond core system modernization we are also seeing increasing traction across newer offerings on the platform We had three great PricingCenter wins in the quarter, including one with a Swedish insurer, an insurer in Poland, as well as our first U.S. win for PricingCenter at Oklahoma Farm Bureau, which selected the platform to become more nimble in pricing and rating, reduce IT and operational friction costs, and accelerate speed to market. As I previously stated, we also saw continued and building momentum for ProNavigator, which was adopted in the quarter by five insurers spanning multiple sizes and lines of business, as each increasingly looks to embed AI-driven knowledge and workflow automation directly into core insurance operations. In addition to Automobile Club of Southern California, ProNavigator was chosen by two regional mutual insurers, as well as a farm and ranch-focused P&C carrier and a workers' compensation insurer. We had three great PricingCenter wins in the quarter, including one with a Swedish insurer, an insurer in Poland, as well as our first U.S. win for PricingCenter at Oklahoma Farm Bureau, which selected the platform to become more nimble in pricing and rating, reduce IT and operational friction costs, and accelerate speed to market. we had three great pricingcenter wins in the quarter including one with a swedish insurer an insurer in poland as well as our first u.s win for pricingcenter at oklahoma farm bureau which selected the platform to become more nimble in pricing and rating reduce it and operational friction costs and accelerate speed to market As I previously stated, we also saw continued and building momentum for ProNavigator, which was adopted in the quarter by five insurers spanning multiple sizes and lines of business, as each increasingly looks to embed AI-driven knowledge and workflow automation directly into core insurance operations. as i previously stated we also saw continued and building momentum for pronavigator which was adopted in the quarter by five insurers spanning multiple sizes and lines of business as each increasingly looks to embed ai-driven knowledge and workflow automation directly into core insurance operations In addition to Automobile Club of Southern California, ProNavigator was chosen by two regional mutual insurers, as well as a farm and ranch-focused P&C carrier and a workers' compensation insurer. in addition to automobile club of southern california pronavigator was chosen by two regional mutual insurers as well as a farm and ranch-focused p&c carrier and a workers' compensation insurer Additionally, our data and analytics offerings continue to gain traction as customers seek to embed more real-time insight throughout the insurance lifecycle. Overall, we're seeing increasing platform gravity around Guidewire, and that's translating into healthy adoption of new offerings across our portfolio. These trends and the broader momentum in the business were reinforced at recent insurance forums we hosted in Europe, Australia, Japan, and Canada. In each of these events, insurers consistently emphasized the same priorities: modernizing core systems, increasing operational agility, and positioning themselves to take advantage of AI in practical and scalable ways. As we've said before, Guidewire sits at the center of the insurance enterprise. Our platform manages the core systems of record for policy, billing, and claims, and we continue to expand that foundation into critical business functions like pricing and underwriting through a continuously improving cloud platform. Additionally, our data and analytics offerings continue to gain traction as customers seek to embed more real-time insight throughout the insurance lifecycle. additionally our data and analytics offerings continue to gain traction as customers seek to embed more real-time insight throughout the insurance lifecycle Overall, we're seeing increasing platform gravity around Guidewire, and that's translating into healthy adoption of new offerings across our portfolio. overall we're seeing increasing platform gravity around guidewire and that's translating into healthy adoption of new offerings across our portfolio These trends and the broader momentum in the business were reinforced at recent insurance forums we hosted in Europe, Australia, Japan, and Canada. these trends and the broader momentum in the business were reinforced at recent insurance forums we hosted in europe australia japan and canada In each of these events, insurers consistently emphasized the same priorities: modernizing core systems, increasing operational agility, and positioning themselves to take advantage of AI in practical and scalable ways. in each of these events insurers consistently emphasized the same priorities modernizing core systems increasing operational agility and positioning themselves to take advantage of ai in practical and scalable ways As we've said before, Guidewire sits at the center of the insurance enterprise. as we've said before guidewire sits at the center of the insurance enterprise Our platform manages the core systems of record for policy, billing, and claims, and we continue to expand that foundation into critical business functions like pricing and underwriting through a continuously improving cloud platform. our platform manages the core systems of record for policy billing and claims and we continue to expand that foundation into critical business functions like pricing and underwriting through a continuously improving cloud platform Our platform provides the context insurance companies need to apply AI to real workflows. AI in insurance or any other regulated industry use case depends on trusted data, well-defined workflows, and systems capable of executing decisions reliably at scale, which is exactly what Guidewire provides. With ProNavigator, we have embedded AI decision support directly into the applications and workflows insurers use every day. We help underwriters, claims adjusters, and customer service teams make better decisions through contextual insights, recommendations, and increasingly agentic capabilities integrated into the flow of work. Underpinning all of this is our cloud platform and developer ecosystem, which was the focus of our recent developer summit in Bangalore, India. This event was a real highlight for me for two reasons. First, because of its scale. Our platform provides the context insurance companies need to apply AI to real workflows. our platform provides the context insurance companies need to apply ai to real workflows AI in insurance or any other regulated industry use case depends on trusted data, well-defined workflows, and systems capable of executing decisions reliably at scale, which is exactly what Guidewire provides. ai in insurance or any other regulated industry use case depends on trusted data well-defined workflows and systems capable of executing decisions reliably at scale which is exactly what guidewire provides With ProNavigator, we have embedded AI decision support directly into the applications and workflows insurers use every day. with pronavigator we have embedded ai decision support directly into the applications and workflows insurers use every day We help underwriters, claims adjusters, and customer service teams make better decisions through contextual insights, recommendations, and increasingly agentic capabilities integrated into the flow of work. we help underwriters claims adjusters and customer service teams make better decisions through contextual insights recommendations and increasingly agentic capabilities integrated into the flow of work Underpinning all of this is our cloud platform and developer ecosystem, which was the focus of our recent developer summit in Bangalore, India. underpinning all of this is our cloud platform and developer ecosystem which was the focus of our recent developer summit in bangalore india This event was a real highlight for me for two reasons. this event was a real highlight for me for two reasons First, because of its scale. first because of its scale We had 3,000 people attend, which was double our prior year, and we had people come to Bangalore from all over the world. When we began this event, we just had no idea it would be so popular, and I never imagined that we would have customer development teams from the United States traveling halfway around the world to engage with us in this way. Second was the breadth of AI capabilities we are unlocking on the platform. Connecting these frontier models and tools like Claude Code to our platform and our MCP servers is unlocking a staggering amount of productivity in our ecosystem. Walking around the event and speaking to the real on-the-ground engineers who are every day translating the requirements of the industry to real solutions was just motivating for me. We had 3,000 people attend, which was double our prior year, and we had people come to Bangalore from all over the world. we had 3,000 people attend which was double our prior year and we had people come to bangalore from all over the world When we began this event, we just had no idea it would be so popular, and I never imagined that we would have customer development teams from the United States traveling halfway around the world to engage with us in this way. when we began this event we just had no idea it would be so popular and i never imagined that we would have customer development teams from the united states traveling halfway around the world to engage with us in this way Second was the breadth of AI capabilities we are unlocking on the platform. second was the breadth of ai capabilities we are unlocking on the platform Connecting these frontier models and tools like Claude Code to our platform and our MCP servers is unlocking a staggering amount of productivity in our ecosystem. connecting these frontier models and tools like claude code to our platform and our mcp servers is unlocking a staggering amount of productivity in our ecosystem Walking around the event and speaking to the real on-the-ground engineers who are every day translating the requirements of the industry to real solutions was just motivating for me. walking around the event and speaking to the real on-the-ground engineers who are every day translating the requirements of the industry to real solutions was just motivating for me We are unleashing a productivity tsunami, and the same excitement that people are experiencing with Claude Code-driven software development is now very real on the Guidewire platform, making it possible to build workflows faster, integrations faster, new insurance products faster, new digital experiences faster, and it was just incredible, and everyone in our ecosystem is excited about it. We're also seeing significant and measurable productivity gains internally and across our partner ecosystem through the use of these agentic development tools, which is helping accelerate delivery and implementation timelines. This improvement will accelerate migration and modernization efforts across the industry. We are almost a decade into our efforts to bring the industry a modern cloud platform, and still, much of the insurance industry still operates on legacy technology. We are unleashing a productivity tsunami, and the same excitement that people are experiencing with Claude Code-driven software development is now very real on the Guidewire platform, making it possible to build workflows faster, integrations faster, new insurance products faster, new digital experiences faster, and it was just incredible, and everyone in our ecosystem is excited about it. we are unleashing a productivity tsunami and the same excitement that people are experiencing with claude code-driven software development is now very real on the guidewire platform making it possible to build workflows faster integrations faster new insurance products faster new digital experiences faster and it was just incredible and everyone in our ecosystem is excited about it We're also seeing significant and measurable productivity gains internally and across our partner ecosystem through the use of these agentic development tools, which is helping accelerate delivery and implementation timelines. we're also seeing significant and measurable productivity gains internally and across our partner ecosystem through the use of these agentic development tools which is helping accelerate delivery and implementation timelines This improvement will accelerate migration and modernization efforts across the industry. this improvement will accelerate migration and modernization efforts across the industry We are almost a decade into our efforts to bring the industry a modern cloud platform, and still, much of the insurance industry still operates on legacy technology. we are almost a decade into our efforts to bring the industry a modern cloud platform and still much of the insurance industry still operates on legacy technology The insurance companies not operating on modernized core systems will struggle to take full advantage of AI to support the agility and intelligence insurers increasingly require to remain competitive. This reality creates a growing opportunity for Guidewire. By reducing the time, cost, and complexity associated with this modernization, adding AI capabilities, agents, and automation into an open platform, we believe we will expand our addressable market and continue to accelerate our business. Finally, before I turn the call over to Jeff, I wanted to quickly mention an important leadership transition in our sales org. After an incredible career as an enterprise sales leader in the software industry, David Laker has decided to step away from his role as Chief Commercial Officer and transition into a new position focused on strategic partners and initiatives. David will continue his current role through the end of the fiscal year. The insurance companies not operating on modernized core systems will struggle to take full advantage of AI to support the agility and intelligence insurers increasingly require to remain competitive. the insurance companies not operating on modernized core systems will struggle to take full advantage of ai to support the agility and intelligence insurers increasingly require to remain competitive This reality creates a growing opportunity for Guidewire. this reality creates a growing opportunity for guidewire By reducing the time, cost, and complexity associated with this modernization, adding AI capabilities, agents, and automation into an open platform, we believe we will expand our addressable market and continue to accelerate our business. by reducing the time cost and complexity associated with this modernization adding ai capabilities agents and automation into an open platform we believe we will expand our addressable market and continue to accelerate our business Finally, before I turn the call over to Jeff, I wanted to quickly mention an important leadership transition in our sales org. finally before i turn the call over to jeff i wanted to quickly mention an important leadership transition in our sales org After an incredible career as an enterprise sales leader in the software industry, David Laker has decided to step away from his role as Chief Commercial Officer and transition into a new position focused on strategic partners and initiatives. after an incredible career as an enterprise sales leader in the software industry david laker has decided to step away from his role as chief commercial officer and transition into a new position focused on strategic partners and initiatives David will continue his current role through the end of the fiscal year. david will continue his current role through the end of the fiscal year To ensure a smooth transition, I'm excited to announce that Shane Cassidy is joining Guidewire starting today and will formally assume Chief Commercial Officer responsibilities after the end of our fourth quarter. Shane is a proven insurance industry leader and has been instrumental in partnering with Guidewire and helping grow our business over his 20-year career at Capgemini, where most recently, he was the Executive Vice President of the Global Insurance Practice. The Chief Commercial Officer role will continue to report to John Mullen, and we anticipate that Shane will build on the strong sales discipline and execution that David's established. We're pleased to have Shane on board, and I'm excited to work with David in his new capacity next year. With that, I'll turn it over to Jeff. To ensure a smooth transition, I'm excited to announce that Shane Cassidy is joining Guidewire starting today and will formally assume Chief Commercial Officer responsibilities after the end of our fourth quarter. to ensure a smooth transition i'm excited to announce that shane cassidy is joining guidewire starting today and will formally assume chief commercial officer responsibilities after the end of our fourth quarter Shane is a proven insurance industry leader and has been instrumental in partnering with Guidewire and helping grow our business over his 20-year career at Capgemini, where most recently, he was the Executive Vice President of the Global Insurance Practice. shane is a proven insurance industry leader and has been instrumental in partnering with guidewire and helping grow our business over his 20-year career at capgemini where most recently he was the executive vice president of the global insurance practice The Chief Commercial Officer role will continue to report to John Mullen, and we anticipate that Shane will build on the strong sales discipline and execution that David's established. the chief commercial officer role will continue to report to john mullen and we anticipate that shane will build on the strong sales discipline and execution that david's established We're pleased to have Shane on board, and I'm excited to work with David in his new capacity next year. we're pleased to have shane on board and i'm excited to work with david in his new capacity next year With that, I'll turn it over to Jeff. with that i'll turn it over to jeff

Speaker 7: Thanks, Mike. We are pleased about the progress we made in Q3 as we shift our focus to our important fourth quarter. In Q3, we executed on healthy cloud demand, we made exciting progress moving key deals through our sales pipeline, we saw strong services demand and execution, we really demonstrated the power of our financial model, with revenue growing 27%, combined with strong margin and cash flow dynamics. I was pleased with the progress we delivered in Q3 to set ourselves up to achieve a fantastic fiscal 2026. ARR finished Q3 within the range at $1.147 billion, up over 19% year-over-year. Fully ramped ARR growth rates continue to outpace ARR growth, which is a strong indication into the growth environment we are experiencing. Total revenue was $373 million, up 27% year-over-year, above the high end of our outlook. Thanks, Mike. thanks mike We are pleased about the progress we made in Q3 as we shift our focus to our important fourth quarter. we are pleased about the progress we made in q3 as we shift our focus to our important fourth quarter In Q3, we executed on healthy cloud demand, we made exciting progress moving key deals through our sales pipeline, we saw strong services demand and execution, we really demonstrated the power of our financial model, with revenue growing 27%, combined with strong margin and cash flow dynamics. in q3 we executed on healthy cloud demand we made exciting progress moving key deals through our sales pipeline we saw strong services demand and execution we really demonstrated the power of our financial model with revenue growing 27% combined with strong margin and cash flow dynamics I was pleased with the progress we delivered in Q3 to set ourselves up to achieve a fantastic fiscal 2026. i was pleased with the progress we delivered in q3 to set ourselves up to achieve a fantastic fiscal 2026 ARR finished Q3 within the range at $1.147 billion, up over 19% year-over-year. arr finished q3 within the range at $1.147 billion up over 19% year-over-year Fully ramped ARR growth rates continue to outpace ARR growth, which is a strong indication into the growth environment we are experiencing. fully ramped arr growth rates continue to outpace arr growth which is a strong indication into the growth environment we are experiencing Total revenue was $373 million, up 27% year-over-year, above the high end of our outlook. total revenue was $373 million up 27% year-over-year above the high end of our outlook Subscription and support revenue finished Q3 at $245 million, reflecting 35% year-over-year growth. Services revenue finished at $72 million, up 32% year-over-year, well ahead of our expectations on continued strong demand for Guidewire-led services programs and field engineering activities. Now let me turn to profitability for the third quarter, which we will discuss on a non-GAAP basis. Gross profit was $247 million, representing 29% year-over-year growth. Overall gross margin was 66%. Subscription and support gross margin was 74%, compared to 71% a year ago. The scalability of the cloud platform continues to deliver strong margins. Services gross margin was 14%, compared to 13% a year ago. This margin benefited from strong utilization rates, which was partially offset by higher subcontractor expenses to ensure we had sufficient capacity for the demand we are experiencing. We finished Q3 with operating profit of $78 million. Subscription and support revenue finished Q3 at $245 million, reflecting 35% year-over-year growth. subscription and support revenue finished q3 at $245 million reflecting 35% year-over-year growth Services revenue finished at $72 million, up 32% year-over-year, well ahead of our expectations on continued strong demand for Guidewire-led services programs and field engineering activities. services revenue finished at $72 million up 32% year-over-year well ahead of our expectations on continued strong demand for guidewire-led services programs and field engineering activities Now let me turn to profitability for the third quarter, which we will discuss on a non-GAAP basis. now let me turn to profitability for the third quarter which we will discuss on a non-gaap basis Gross profit was $247 million, representing 29% year-over-year growth. gross profit was $247 million representing 29% year-over-year growth Overall gross margin was 66%. overall gross margin was 66% Subscription and support gross margin was 74%, compared to 71% a year ago. subscription and support gross margin was 74% compared to 71% a year ago The scalability of the cloud platform continues to deliver strong margins. the scalability of the cloud platform continues to deliver strong margins Services gross margin was 14%, compared to 13% a year ago. services gross margin was 14% compared to 13% a year ago This margin benefited from strong utilization rates, which was partially offset by higher subcontractor expenses to ensure we had sufficient capacity for the demand we are experiencing. this margin benefited from strong utilization rates which was partially offset by higher subcontractor expenses to ensure we had sufficient capacity for the demand we are experiencing We finished Q3 with operating profit of $78 million. we finished q3 with operating profit of $78 million This finished ahead of our outlook due to higher than expected revenue and gross profit and lower than expected operating expenses. In general, operating expenses have benefited from some slow hiring and some expense timing. We ended the quarter with $1.15 billion in cash equivalents, and investments. Operating cash flow ended the quarter at $61 million. We repurchased 1.7 million shares at an average price of $147.07 per share. We have $241 million remaining on our share repurchase authorization that we put in place towards the end of Q2. Now let me go through our updated outlook for fiscal year 2026. Starting with the top line, we are maintaining our ARR outlook of $1.229 billion-$1.237 billion, which reflects growth of 18%-19% year-over-year. This finished ahead of our outlook due to higher than expected revenue and gross profit and lower than expected operating expenses. this finished ahead of our outlook due to higher than expected revenue and gross profit and lower than expected operating expenses In general, operating expenses have benefited from some slow hiring and some expense timing. in general operating expenses have benefited from some slow hiring and some expense timing We ended the quarter with $1.15 billion in cash equivalents, and investments. we ended the quarter with $1.15 billion in cash equivalents and investments Operating cash flow ended the quarter at $61 million. operating cash flow ended the quarter at $61 million We repurchased 1.7 million shares at an average price of $147.07 per share. we repurchased 1.7 million shares at an average price of $147.07 per share We have $241 million remaining on our share repurchase authorization that we put in place towards the end of Q2. we have $241 million remaining on our share repurchase authorization that we put in place towards the end of q2 Now let me go through our updated outlook for fiscal year 2026. now let me go through our updated outlook for fiscal year 2026 Starting with the top line, we are maintaining our ARR outlook of $1.229 billion-$1.237 billion, which reflects growth of 18%-19% year-over-year. starting with the top line we are maintaining our arr outlook of $1.229 billion-$1.237 billion which reflects growth of 18%-19% year-over-year As we mentioned last quarter, we continue to see fully ramped ARR growth rates above ARR growth rates, and we expect that trend to continue for the full year fiscal 2026. This is important because it sets a solid foundation for durable growth as we look ahead to FY '27 and beyond. For total revenue, we now expect between $1.46 billion and $1.47 billion. As we mentioned last quarter, we continue to see fully ramped ARR growth rates above ARR growth rates, and we expect that trend to continue for the full year fiscal 2026. as we mentioned last quarter we continue to see fully ramped arr growth rates above arr growth rates and we expect that trend to continue for the full year fiscal 2026 This is important because it sets a solid foundation for durable growth as we look ahead to FY '27 and beyond. this is important because it sets a solid foundation for durable growth as we look ahead to fy '27 and beyond For total revenue, we now expect between $1.46 billion and $1.47 billion. for total revenue we now expect between $1.46 billion and $1.47 billion The midpoint of our revenue growth outlook is 22%, up from 16% growth assumed at the beginning of the year, and 20% growth as of the end of last quarter. We expect between $963 million and $969 million in subscription and support revenue. This is a modest increase but reflects a $20 million increase in our guide over the first three quarters of the year. This outlook takes into account the continued healthy DWP true-up activity, strong attach of new products, and a robust pipeline in Q4. The midpoint of our revenue growth outlook is 22%, up from 16% growth assumed at the beginning of the year, and 20% growth as of the end of last quarter. the midpoint of our revenue growth outlook is 22% up from 16% growth assumed at the beginning of the year and 20% growth as of the end of last quarter We expect between $963 million and $969 million in subscription and support revenue. we expect between $963 million and $969 million in subscription and support revenue This is a modest increase but reflects a $20 million increase in our guide over the first three quarters of the year. this is a modest increase but reflects a $20 million increase in our guide over the first three quarters of the year This outlook takes into account the continued healthy DWP true-up activity, strong attach of new products, and a robust pipeline in Q4. this outlook takes into account the continued healthy dwp true-up activity strong attach of new products and a robust pipeline in q4 Additionally, we were thrilled with the progress of ProNavigator and PricingCenter in the quarter. These new product areas have already surpassed my expectations for the year. We now expect services revenue to be approximately $270 million, given strong cloud demand, and in particular, demand for Guidewire services expertise. Additionally, as we noted last quarter, we are leaning into some field engineering programs where our services personnel are helping customers utilize Guidewire Cloud Platform and leverage newer agentic capabilities to solve business problems. Turning to margins, we still expect our subscription and support gross margins to be approximately 74% for the year. We expect services gross margins to be approximately 14%. Overall gross margins are still expected to be 67% for the full year. We are also lifting our outlook for operating income. Additionally, we were thrilled with the progress of ProNavigator and PricingCenter in the quarter. additionally we were thrilled with the progress of pronavigator and pricingcenter in the quarter These new product areas have already surpassed my expectations for the year. these new product areas have already surpassed my expectations for the year We now expect services revenue to be approximately $270 million, given strong cloud demand, and in particular, demand for Guidewire services expertise. we now expect services revenue to be approximately $270 million given strong cloud demand and in particular demand for guidewire services expertise Additionally, as we noted last quarter, we are leaning into some field engineering programs where our services personnel are helping customers utilize Guidewire Cloud Platform and leverage newer agentic capabilities to solve business problems. additionally as we noted last quarter we are leaning into some field engineering programs where our services personnel are helping customers utilize guidewire cloud platform and leverage newer agentic capabilities to solve business problems Turning to margins, we still expect our subscription and support gross margins to be approximately 74% for the year. turning to margins we still expect our subscription and support gross margins to be approximately 74% for the year We expect services gross margins to be approximately 14%. we expect services gross margins to be approximately 14% Overall gross margins are still expected to be 67% for the full year. overall gross margins are still expected to be 67% for the full year We are also lifting our outlook for operating income. we are also lifting our outlook for operating income We expect GAAP operating income of between $124 and $134 million, and non-GAAP operating income of between $314 and $324 million for the fiscal year. This updated outlook reflects higher revenue and gross profit expectations and lower operating expenses than originally anticipated. This is partially offset by a larger services revenue mix and an upward adjustment to our company bonus accrual, given strong growth and profitability expectations. We expect stock-based compensation to be approximately $182 million, representing 13% year-over-year growth. We are raising our expectations for cash flow from operations for the year to be between $365 and $380 million. Our CapEx expectations for the year are between $30 and $35 million, including approximately $18 million in capitalized software development costs. Alex, you can now open the call for questions. We expect GAAP operating income of between $124 and $134 million, and non-GAAP operating income of between $314 and $324 million for the fiscal year. we expect gaap operating income of between $124 and $134 million and non-gaap operating income of between $314 and $324 million for the fiscal year This updated outlook reflects higher revenue and gross profit expectations and lower operating expenses than originally anticipated. this updated outlook reflects higher revenue and gross profit expectations and lower operating expenses than originally anticipated This is partially offset by a larger services revenue mix and an upward adjustment to our company bonus accrual, given strong growth and profitability expectations. this is partially offset by a larger services revenue mix and an upward adjustment to our company bonus accrual given strong growth and profitability expectations We expect stock-based compensation to be approximately $182 million, representing 13% year-over-year growth. we expect stock-based compensation to be approximately $182 million representing 13% year-over-year growth We are raising our expectations for cash flow from operations for the year to be between $365 and $380 million. we are raising our expectations for cash flow from operations for the year to be between $365 and $380 million Our CapEx expectations for the year are between $30 and $35 million, including approximately $18 million in capitalized software development costs. our capex expectations for the year are between $30 and $35 million including approximately $18 million in capitalized software development costs Alex, you can now open the call for questions. alex you can now open the call for questions

Speaker 3: Great. Thanks, Jeff. Our first question comes from Adam Hotchkiss at Goldman Sachs. Great. great Thanks, Jeff. thanks jeff Our first question comes from Adam Hotchkiss at Goldman Sachs. our first question comes from adam hotchkiss at goldman sachs

Speaker 2: Okay, great. Thanks for taking the questions. I just wanted to start on ARR for the quarter. Mike, I know you called out deal timing, but it would be great if you could share any additional details on what drove that and how broad it was. It felt like historically you've had a pretty good handle on the quarterly cadence of backlog and deal velocity. I'd just be curious what was different this time around and how we should think about whether you expect this same dynamic to impact Q4. Okay, great. okay great Thanks for taking the questions. thanks for taking the questions I just wanted to start on ARR for the quarter. i just wanted to start on arr for the quarter Mike, I know you called out deal timing, but it would be great if you could share any additional details on what drove that and how broad it was. mike i know you called out deal timing but it would be great if you could share any additional details on what drove that and how broad it was It felt like historically you've had a pretty good handle on the quarterly cadence of backlog and deal velocity. it felt like historically you've had a pretty good handle on the quarterly cadence of backlog and deal velocity I'd just be curious what was different this time around and how we should think about whether you expect this same dynamic to impact Q4. i'd just be curious what was different this time around and how we should think about whether you expect this same dynamic to impact q4

Speaker 11: Thanks very much for the question. I'll answer the last part of the question first. We have a tremendous amount of pipeline and we have to execute, but we expect a very strong Q4. The situation in Q3 with respect to deal timing honestly isn't that unusual. It's just there's a discrete number of deals that we have to close every quarter, and sometimes things are in our control and sometimes they're not. I actually think 19% ARR growth was a very solid quarter. Thanks very much for the question. thanks very much for the question I'll answer the last part of the question first. i'll answer the last part of the question first We have a tremendous amount of pipeline and we have to execute, but we expect a very strong Q4. we have a tremendous amount of pipeline and we have to execute but we expect a very strong q4 The situation in Q3 with respect to deal timing honestly isn't that unusual. the situation in q3 with respect to deal timing honestly isn't that unusual It's just there's a discrete number of deals that we have to close every quarter, and sometimes things are in our control and sometimes they're not. it's just there's a discrete number of deals that we have to close every quarter and sometimes things are in our control and sometimes they're not I actually think 19% ARR growth was a very solid quarter. i actually think 19% arr growth was a very solid quarter I think when you zoom out and look at the long history of the company, I think you have to say, "Well, everything is fine here, and there's really nothing to read into this other than a company like us that does big, large, discrete deals is going to occasionally have a situation in which some things fall on the wrong side of that line." When I think about what's going on, we see pipeline building and we see demand building, and we see a tremendous amount of confidence in the sales organization, and then really also the customer base, and then the demand for not just core modernizations, but these new products. I think when you zoom out and look at the long history of the company, I think you have to say, "Well, everything is fine here, and there's really nothing to read into this other than a company like us that does big, large, discrete deals is going to occasionally have a situation in which some things fall on the wrong side of that line." When I think about what's going on, we see pipeline building and we see demand building, and we see a tremendous amount of confidence in the sales organization, and then really also the customer base, and then the demand for not just core modernizations, but these new products. i think when you zoom out and look at the long history of the company i think you have to say "well everything is fine here and there's really nothing to read into this other than a company like us that does big large discrete deals is going to occasionally have a situation in which some things fall on the wrong side of that line." when i think about what's going on we see pipeline building and we see demand building and we see a tremendous amount of confidence in the sales organization and then really also the customer base and then the demand for not just core modernizations but these new products Jeff mentioned this, we're creating alternative ways to get to the number and alternative products to sell in PricingCenter and ProNavigator and our analytics product offerings that are really increasing our confidence looking into Q4 and next fiscal year. Hopefully that gives you just a little bit of color about how confident I am in the company right now and how pipeline is shaping up into Q4. Jeff mentioned this, we're creating alternative ways to get to the number and alternative products to sell in PricingCenter and ProNavigator and our analytics product offerings that are really increasing our confidence looking into Q4 and next fiscal year. jeff mentioned this we're creating alternative ways to get to the number and alternative products to sell in pricingcenter and pronavigator and our analytics product offerings that are really increasing our confidence looking into q4 and next fiscal year Hopefully that gives you just a little bit of color about how confident I am in the company right now and how pipeline is shaping up into Q4. hopefully that gives you just a little bit of color about how confident i am in the company right now and how pipeline is shaping up into q4

Speaker 7: The only thing that I would add is we've been talking for some period of time around what the impact of ARR backlog is into the net new ARR numbers, and we've known as we entered into this year that Q3 faced a pretty meaningful headwind with respect to that particular metric. As we look at Q4, given the pipeline that we have, which is incredibly strong, in addition to the visibility that we have into the backlog that will flow out of backlog and into the ARR number in Q4, it gives us a lot more visibility into that number and informs our confidence into how we think about the guide. The only thing that I would add is we've been talking for some period of time around what the impact of ARR backlog is into the net new ARR numbers, and we've known as we entered into this year that Q3 faced a pretty meaningful headwind with respect to that particular metric. the only thing that i would add is we've been talking for some period of time around what the impact of arr backlog is into the net new arr numbers and we've known as we entered into this year that q3 faced a pretty meaningful headwind with respect to that particular metric As we look at Q4, given the pipeline that we have, which is incredibly strong, in addition to the visibility that we have into the backlog that will flow out of backlog and into the ARR number in Q4, it gives us a lot more visibility into that number and informs our confidence into how we think about the guide. as we look at q4 given the pipeline that we have which is incredibly strong in addition to the visibility that we have into the backlog that will flow out of backlog and into the arr number in q4 it gives us a lot more visibility into that number and informs our confidence into how we think about the guide

Speaker 2: Great. That's really helpful. Then, Mike, just to follow up on something you said on ProNav and PricingCenter, it feels like you're getting some really good early traction there. Maybe for you or Jeff, how should we start to think about when these products and UnderwritingCenter as well, I know that's moving along into next year, will start to materially benefit ARR growth? Thanks so much. Great. great That's really helpful. that's really helpful Then, Mike, just to follow up on something you said on ProNav and PricingCenter, it feels like you're getting some really good early traction there. then mike just to follow up on something you said on pronav and pricingcenter it feels like you're getting some really good early traction there Maybe for you or Jeff, how should we start to think about when these products and UnderwritingCenter as well, I know that's moving along into next year, will start to materially benefit ARR growth? maybe for you or jeff how should we start to think about when these products and underwritingcenter as well i know that's moving along into next year will start to materially benefit arr growth Thanks so much. thanks so much

Speaker 11: Well, those products are building in terms of the overall portfolio at the company. They also strengthen the overall message and the value we can create for our customer by making sure we deliver a completely integrated suite across the full insurance lifecycle. Obviously as those product lines grow faster than the overall collection of product lines, they'll become a more and more meaningful part of the overall bookings number. We called it out just because it was an objective this year to get those product lines established. As Jeff said, we're very pleased with the momentum. It'll definitely happen that they'll grow as a percentage of the overall book, and we're very pleased with how much momentum we've been able to create in a short amount of time. Well, those products are building in terms of the overall portfolio at the company. well those products are building in terms of the overall portfolio at the company They also strengthen the overall message and the value we can create for our customer by making sure we deliver a completely integrated suite across the full insurance lifecycle. they also strengthen the overall message and the value we can create for our customer by making sure we deliver a completely integrated suite across the full insurance lifecycle Obviously as those product lines grow faster than the overall collection of product lines, they'll become a more and more meaningful part of the overall bookings number. obviously as those product lines grow faster than the overall collection of product lines they'll become a more and more meaningful part of the overall bookings number We called it out just because it was an objective this year to get those product lines established. we called it out just because it was an objective this year to get those product lines established As Jeff said, we're very pleased with the momentum. as jeff said we're very pleased with the momentum It'll definitely happen that they'll grow as a percentage of the overall book, and we're very pleased with how much momentum we've been able to create in a short amount of time. it'll definitely happen that they'll grow as a percentage of the overall book and we're very pleased with how much momentum we've been able to create in a short amount of time

Speaker 3: Great. Thanks, Adam. Our next question comes from Alexei Gogolev of JPMorgan. Great. great Thanks, Adam. thanks adam Our next question comes from Alexei Gogolev of JP Morgan. our next question comes from alexei gogolev of jp morgan

Speaker 4: Hello, everyone. Can you hear me? Hello, everyone. hello everyone Can you hear me? can you hear me

Speaker 11: Yes. Yes. yes

Speaker 4: Perfect. Hi, Mike. Perfect. perfect Hi, Mike. hi mike

Speaker 11: Hi. Hi. hi

Speaker 4: As a insurance partner with major LLM vendors, what's the practical integration posture with Guidewire in terms of enablement points or governance or security, and where do you expect Guidewire to build versus partner? As a insurance partner with major LLM vendors, what's the practical integration posture with Guidewire in terms of enablement points or governance or security, and where do you expect Guidewire to build versus partner? as a insurance partner with major llm vendors what's the practical integration posture with guidewire in terms of enablement points or governance or security and where do you expect guidewire to build versus partner

Speaker 11: Great question. It's a super complicated, multifaceted answer, so forgive me, I'll do my best in I don't know how long I allocate to answers of questions on earnings calls, but let's say three minutes. Most important thing for us right now is the work that we've done on what people are calling a development harness to make sure that these LLM agentic development tools work effectively with the Guidewire stack. This is actually real software engineering that has to be put in. When you point these tools at a platform and a code base like Guidewire, you don't necessarily get good results. After doing the work to make sure that the system knows how to interact with Guidewire, we've been extraordinarily pleased with the results. Great question. great question It's a super complicated, multifaceted answer, so forgive me, I'll do my best in I don't know how long I allocate to answers of questions on earnings calls, but let's say three minutes. it's a super complicated multifaceted answer so forgive me i'll do my best in i don't know how long i allocate to answers of questions on earnings calls but let's say three minutes Most important thing for us right now is the work that we've done on what people are calling a development harness to make sure that these LLM agentic development tools work effectively with the Guidewire stack. most important thing for us right now is the work that we've done on what people are calling a development harness to make sure that these llm agentic development tools work effectively with the guidewire stack This is actually real software engineering that has to be put in. this is actually real software engineering that has to be put in When you point these tools at a platform and a code base like Guidewire, you don't necessarily get good results. when you point these tools at a platform and a code base like guidewire you don't necessarily get good results After doing the work to make sure that the system knows how to interact with Guidewire, we've been extraordinarily pleased with the results. after doing the work to make sure that the system knows how to interact with guidewire we've been extraordinarily pleased with the results This is what I was referring to at our Dev Summit in Bangalore, showing people how to get this thing deployed, how to get Claude Code running on top of Guidewire, how to create the code, the integrations, the digital experiences, all of that stuff through prompt engineering. It really is phenomenal. I would describe that as a partnership, right? We don't necessarily need an official PR from these companies. They've done an incredibly good job publishing their APIs and how to build these things to work together. We've done a great job working with their technical teams to make sure that these things deploy well, and the results have been phenomenal. Obviously, we also have LLMs that are sitting inside of products like ProNavigator and the agents that we build to run on our agentic layer inside of our platform. This is what I was referring to at our Dev Summit in Bangalore, showing people how to get this thing deployed, how to get Claude Code running on top of Guidewire, how to create the code, the integrations, the digital experiences, all of that stuff through prompt engineering. this is what i was referring to at our dev summit in bangalore showing people how to get this thing deployed how to get claude code running on top of guidewire how to create the code the integrations the digital experiences all of that stuff through prompt engineering It really is phenomenal. it really is phenomenal I would describe that as a partnership, right? i would describe that as a partnership right We don't necessarily need an official PR from these companies. we don't necessarily need an official pr from these companies They've done an incredibly good job publishing their APIs and how to build these things to work together. they've done an incredibly good job publishing their apis and how to build these things to work together We've done a great job working with their technical teams to make sure that these things deploy well, and the results have been phenomenal. we've done a great job working with their technical teams to make sure that these things deploy well and the results have been phenomenal Obviously, we also have LLMs that are sitting inside of products like ProNavigator and the agents that we build to run on our agentic layer inside of our platform. obviously we also have llms that are sitting inside of products like pronavigator and the agents that we build to run on our agentic layer inside of our platform There's this good-symbiosis, if that's a word, in how these things are working together and being practically deployed right now that I am very excited about. I think if you say, "What's the world going to look like in five years, and how much of the solution is going to be delivered by Guidewire, and how much of the solution is going to be delivered by a large language model and the various layers of the prompts?" Who knows? I tell you one thing for apps that I am absolutely sure of, though, is the industry is going to run on a modern relational database like Guidewire. There's this good-symbiosis, if that's a word, in how these things are working together and being practically deployed right now that I am very excited about. there's this good-symbiosis if that's a word in how these things are working together and being practically deployed right now that i am very excited about I think if you say, "What's the world going to look like in five years, and how much of the solution is going to be delivered by Guidewire, and how much of the solution is going to be delivered by a large language model and the various layers of the prompts?" Who knows? i think if you say "what's the world going to look like in five years and how much of the solution is going to be delivered by guidewire and how much of the solution is going to be delivered by a large language model and the various layers of the prompts?" who knows I tell you one thing for apps that I am absolutely sure of, though, is the industry is going to run on a modern relational database like Guidewire. i tell you one thing for apps that i am absolutely sure of though is the industry is going to run on a modern relational database like guidewire Claims, policy, billing, product modeling, these things are going to run on a modern cloud infrastructure that we provide, and we will remain open to working with these large language models and honestly, also other application providers that have incorporated these capabilities. This is what our customers want, and that's what's working right now. That's the message, and that's the architecture, and that's the reality that's working really well for us right now. Hopefully that gives you a sense of where things are and where I think they'll go. I would say generally, couldn't be more pleased with how this is evolving in the ecosystem. Claims, policy, billing, product modeling, these things are going to run on a modern cloud infrastructure that we provide, and we will remain open to working with these large language models and honestly, also other application providers that have incorporated these capabilities. claims policy billing product modeling these things are going to run on a modern cloud infrastructure that we provide and we will remain open to working with these large language models and honestly also other application providers that have incorporated these capabilities This is what our customers want, and that's what's working right now. this is what our customers want and that's what's working right now That's the message, and that's the architecture, and that's the reality that's working really well for us right now. that's the message and that's the architecture and that's the reality that's working really well for us right now Hopefully that gives you a sense of where things are and where I think they'll go. hopefully that gives you a sense of where things are and where i think they'll go I would say generally, couldn't be more pleased with how this is evolving in the ecosystem. i would say generally couldn't be more pleased with how this is evolving in the ecosystem

Speaker 4: Thank you, Mike. One follow-up in terms of monetization. How are you thinking about it for embedded gen AI features over time, and what guardrails are you likely to implement to protect unit economics? Thank you, Mike. thank you mike One follow-up in terms of monetization. one follow-up in terms of monetization How are you thinking about it for embedded gen AI features over time, and what guardrails are you likely to implement to protect unit economics? how are you thinking about it for embedded gen ai features over time and what guardrails are you likely to implement to protect unit economics

Speaker 11: Generally speaking, I would like to build product that aligns to insurance value, and we tend to almost universally sell our products based on direct written premium, based on a % of the direct written premium that runs on the service. That enables us to describe the value we create in relationship to the size of the insurance company, and therefore the size of the value that we're creating for that insurance company. If there's an LLM that's incorporated into that story in the way that it is very directly with ProNavigator, we want to have a basis points-based pricing structure that will include whatever amount of, let's say, tokens that are necessary to deliver the value that we've been able to describe in selling that product. Generally speaking, I would like to build product that aligns to insurance value, and we tend to almost universally sell our products based on direct written premium, based on a % of the direct written premium that runs on the service. generally speaking i would like to build product that aligns to insurance value and we tend to almost universally sell our products based on direct written premium based on a % of the direct written premium that runs on the service That enables us to describe the value we create in relationship to the size of the insurance company, and therefore the size of the value that we're creating for that insurance company. that enables us to describe the value we create in relationship to the size of the insurance company and therefore the size of the value that we're creating for that insurance company If there's an LLM that's incorporated into that story in the way that it is very directly with ProNavigator, we want to have a basis points-based pricing structure that will include whatever amount of, let's say, tokens that are necessary to deliver the value that we've been able to describe in selling that product. if there's an llm that's incorporated into that story in the way that it is very directly with pronavigator we want to have a basis points-based pricing structure that will include whatever amount of let's say tokens that are necessary to deliver the value that we've been able to describe in selling that product Obviously, there are guardrails that we will build, technical and contractual, that will protect us from a use case that goes beyond what we expect. Nothing that we've seen causes me to worry that that's going to become something that slows us down. We think we're going to be able to create DWP-based pricing structures for the products that align to the insurance workflow, and that's going incredibly well for us right now. Hopefully, that makes sense. Slightly a technical question, but that's the philosophy around pricing and guardrails right now at Guidewire. Obviously, there are guardrails that we will build, technical and contractual, that will protect us from a use case that goes beyond what we expect. obviously there are guardrails that we will build technical and contractual that will protect us from a use case that goes beyond what we expect Nothing that we've seen causes me to worry that that's going to become something that slows us down. nothing that we've seen causes me to worry that that's going to become something that slows us down We think we're going to be able to create DWP-based pricing structures for the products that align to the insurance workflow, and that's going incredibly well for us right now. we think we're going to be able to create dwp-based pricing structures for the products that align to the insurance workflow and that's going incredibly well for us right now Hopefully, that makes sense. hopefully that makes sense Slightly a technical question, but that's the philosophy around pricing and guardrails right now at Guidewire. slightly a technical question but that's the philosophy around pricing and guardrails right now at guidewire

Speaker 3: Thanks, Alexei. Next question is from Parker Lane at Stifel. Thanks, Alexei. thanks alexei Next question is from Parker Lane at Stifel. next question is from parker lane at stifel

Speaker 13: Hey, guys. Thanks for taking the question. Mike, really nice to see the ProNavigator momentum here that you called out in the quarter. I think you acquired that back in October. Maybe formally announced a release in April. Can you just give us a sense of how long those deals were in the pipeline? Generally speaking, when you look out to 4Q and the coming fiscal year, how you're feeling about the pipeline in the early stages of having ProNavigator on the platform? Hey, guys. hey guys Thanks for taking the question. thanks for taking the question Mike, really nice to see the ProNavigator momentum here that you called out in the quarter. mike really nice to see the pronavigator momentum here that you called out in the quarter I think you acquired that back in October. i think you acquired that back in october Maybe formally announced a release in April. maybe formally announced a release in april Can you just give us a sense of how long those deals were in the pipeline? can you just give us a sense of how long those deals were in the pipeline Generally speaking, when you look out to 4Q and the coming fiscal year, how you're feeling about the pipeline in the early stages of having ProNavigator on the platform? generally speaking when you look out to 4q and the coming fiscal year how you're feeling about the pipeline in the early stages of having pronavigator on the platform

Speaker 11: Yeah. Thanks a lot, Parker. It's a great question. I appreciate it. We probably should have woven that into our script. It's exciting for us actually, to have a product that we can materialize demand for and close business around in a reasonable amount of time. It's a very different sales motion than we have with core system modernizations that I think you know can sometimes last multiple years. Certainly there was a bit of that pipeline that was already part of the company when we did the acquisition. Since acquisition, and hopefully everybody gets this, is there's this prompt shift in the perspective of the customer base around the trust that they're able to put into a service. Yeah. yeah Thanks a lot, Parker. thanks a lot parker It's a great question. it's a great question I appreciate it. i appreciate it We probably should have woven that into our script. we probably should have woven that into our script It's exciting for us actually, to have a product that we can materialize demand for and close business around in a reasonable amount of time. it's exciting for us actually to have a product that we can materialize demand for and close business around in a reasonable amount of time It's a very different sales motion than we have with core system modernizations that I think you know can sometimes last multiple years. it's a very different sales motion than we have with core system modernizations that i think you know can sometimes last multiple years Certainly there was a bit of that pipeline that was already part of the company when we did the acquisition. certainly there was a bit of that pipeline that was already part of the company when we did the acquisition Since acquisition, and hopefully everybody gets this, is there's this prompt shift in the perspective of the customer base around the trust that they're able to put into a service. since acquisition and hopefully everybody gets this is there's this prompt shift in the perspective of the customer base around the trust that they're able to put into a service It just shifts from a small company to a large company, and a lot of the things that we can do to build trust around the products we sell can be applied to the new products that we add to the mix here at Guidewire, and that's certainly true with ProNavigator. Deal cycles are shorter. The conversations are quicker, and especially relative to a modernization or a cloud upgrade. That's very exciting, and that's one of the things that's driving the excitement in our sales organization, but also our customer base, is there's this real demand to be able to actively operationalize AI in a way that allows a company to get started very quickly, and ProNavigator meets that need. It just shifts from a small company to a large company, and a lot of the things that we can do to build trust around the products we sell can be applied to the new products that we add to the mix here at Guidewire, and that's certainly true with ProNavigator. it just shifts from a small company to a large company and a lot of the things that we can do to build trust around the products we sell can be applied to the new products that we add to the mix here at guidewire and that's certainly true with pronavigator Deal cycles are shorter. deal cycles are shorter The conversations are quicker, and especially relative to a modernization or a cloud upgrade. the conversations are quicker and especially relative to a modernization or a cloud upgrade That's very exciting, and that's one of the things that's driving the excitement in our sales organization, but also our customer base, is there's this real demand to be able to actively operationalize AI in a way that allows a company to get started very quickly, and ProNavigator meets that need. that's very exciting and that's one of the things that's driving the excitement in our sales organization but also our customer base is there's this real demand to be able to actively operationalize ai in a way that allows a company to get started very quickly and pronavigator meets that need

Speaker 9: I'll add one quick comment there, Mike. With regard to both ProNavigator and PricingCenter, the pathway to the business strategy conversation and business value outcome conversation as we continue to enrich our conversations with customers has been really powerful. The gestation period of these deals standalone, Mike mentioned a different selling cycle. It is also proving to be a really rich engagement with chief claims officers and heads of underwriting, heads of product and pricing inside of companies to connect the dots between the core modern platform to the business value that can be derived over the top of that. That's not just about cost dislocation and operational savings, but really about growth and indemnity management, and that's becoming a really powerful enrichment of the modernization of core message. I'll add one quick comment there, Mike. i'll add one quick comment there mike With regard to both ProNavigator and PricingCenter, the pathway to the business strategy conversation and business value outcome conversation as we continue to enrich our conversations with customers has been really powerful. with regard to both pronavigator and pricingcenter the pathway to the business strategy conversation and business value outcome conversation as we continue to enrich our conversations with customers has been really powerful The gestation period of these deals standalone, Mike mentioned a different selling cycle. the gestation period of these deals standalone mike mentioned a different selling cycle It is also proving to be a really rich engagement with chief claims officers and heads of underwriting, heads of product and pricing inside of companies to connect the dots between the core modern platform to the business value that can be derived over the top of that. it is also proving to be a really rich engagement with chief claims officers and heads of underwriting heads of product and pricing inside of companies to connect the dots between the core modern platform to the business value that can be derived over the top of that That's not just about cost dislocation and operational savings, but really about growth and indemnity management, and that's becoming a really powerful enrichment of the modernization of core message. that's not just about cost dislocation and operational savings but really about growth and indemnity management and that's becoming a really powerful enrichment of the modernization of core message

Speaker 13: Got it. Maybe one quick one for you, Jeff. You talked about slower hiring. You also talked about a surge in services demand. Was the slower hiring across the board, or should I weave that in with the commentary about services demand and what you said about subcontracting and a need to invest more there, and particularly like FTE-type roles? Got it. got it Maybe one quick one for you, Jeff. maybe one quick one for you jeff You talked about slower hiring. you talked about slower hiring You also talked about a surge in services demand. you also talked about a surge in services demand Was the slower hiring across the board, or should I weave that in with the commentary about services demand and what you said about subcontracting and a need to invest more there, and particularly like FTE-type roles? was the slower hiring across the board or should i weave that in with the commentary about services demand and what you said about subcontracting and a need to invest more there and particularly like fte-type roles

Speaker 7: Slower hiring was mostly outside of services, I would say. Services has been hiring to meet the demand threshold. On the slower hiring side, there's a bit of sometimes it just takes a little bit longer to get the heads in the door that we want to get in. There's also a bit of us coming to terms with some of the productivity gains that we're seeing with some of the AI tooling that we're rolling out throughout the company and being a bit more measured about how we think about future headcount growth. Those two things are playing into some of the hiring practices right now. Slower hiring was mostly outside of services, I would say. slower hiring was mostly outside of services i would say Services has been hiring to meet the demand threshold. services has been hiring to meet the demand threshold On the slower hiring side, there's a bit of sometimes it just takes a little bit longer to get the heads in the door that we want to get in. on the slower hiring side there's a bit of sometimes it just takes a little bit longer to get the heads in the door that we want to get in There's also a bit of us coming to terms with some of the productivity gains that we're seeing with some of the AI tooling that we're rolling out throughout the company and being a bit more measured about how we think about future headcount growth. there's also a bit of us coming to terms with some of the productivity gains that we're seeing with some of the ai tooling that we're rolling out throughout the company and being a bit more measured about how we think about future headcount growth Those two things are playing into some of the hiring practices right now. those two things are playing into some of the hiring practices right now

Speaker 13: Got it. Appreciate it. Thanks, guys. Got it. got it Appreciate it. appreciate it Thanks, guys. thanks guys

Speaker 3: Great. Next up is Ken Wong at Oppenheimer. Go ahead, Ken. Great. great Next up is Ken Wong at Oppenheimer. next up is ken wong at oppenheimer Go ahead, Ken. go ahead ken

Speaker 10: Great. Can you guys hear me? Great. great Can you guys hear me? can you guys hear me

Speaker 11: Yeah, we can hear you, Ken. Yeah, we can hear you, Ken. yeah we can hear you ken

Speaker 10: Okay, fantastic. Mike, maybe circling back on the slip deals. I feel like you guys have been executing so well, so anytime there's a little bit of hiccup, I think investors just wonder, potentially, is it maybe macro, given some of the geopolitical stuff that happened in the quarter? Is it maybe AI causing customers to think through their deployment timelines? I guess any reason why it wouldn't be some of those external factors and you guys feel comfortable that it is just some deal timing. Then any update on whether or not those have closed in fiscal Q4? Okay, fantastic. okay fantastic Mike, maybe circling back on the slip deals. mike maybe circling back on the slip deals I feel like you guys have been executing so well, so anytime there's a little bit of hiccup, I think investors just wonder, potentially, is it maybe macro, given some of the geopolitical stuff that happened in the quarter? i feel like you guys have been executing so well so anytime there's a little bit of hiccup i think investors just wonder potentially is it maybe macro given some of the geopolitical stuff that happened in the quarter Is it maybe AI causing customers to think through their deployment timelines? is it maybe ai causing customers to think through their deployment timelines I guess any reason why it wouldn't be some of those external factors and you guys feel comfortable that it is just some deal timing. i guess any reason why it wouldn't be some of those external factors and you guys feel comfortable that it is just some deal timing Then any update on whether or not those have closed in fiscal Q4? then any update on whether or not those have closed in fiscal q4

Speaker 11: Yeah. It's a good question, and I would say just generally, no. Right. This is just simply a matter of us looking at the end of Q2 and saying, what do we project is going to occur in Q3? You could say, getting it wrong or seeing things move, just things didn't go exactly the way we wanted. That said, I want to reiterate the pipeline is actually building, and the ARR growth rate ended up at 19%, which is pretty phenomenal. I think that more so, I would say, this is a headline associated with us hitting the target that we set in Q2. It is not related to anything macroeconomic or a general condition that we see in the overall demand environment. Like I said, pipeline's building, demand is building. Yeah. yeah It's a good question, and I would say just generally, no. it's a good question and i would say just generally no Right. right This is just simply a matter of us looking at the end of Q2 and saying, what do we project is going to occur in Q3? this is just simply a matter of us looking at the end of q2 and saying what do we project is going to occur in q3 You could say, getting it wrong or seeing things move, just things didn't go exactly the way we wanted. you could say getting it wrong or seeing things move just things didn't go exactly the way we wanted That said, I want to reiterate the pipeline is actually building, and the ARR growth rate ended up at 19%, which is pretty phenomenal. that said i want to reiterate the pipeline is actually building and the arr growth rate ended up at 19% which is pretty phenomenal I think that more so, I would say, this is a headline associated with us hitting the target that we set in Q2. i think that more so i would say this is a headline associated with us hitting the target that we set in q2 It is not related to anything macroeconomic or a general condition that we see in the overall demand environment. it is not related to anything macroeconomic or a general condition that we see in the overall demand environment Like I said, pipeline's building, demand is building. like i said pipeline's building demand is building We're looking at potentially, I have to qualify this as we need to execute, and we're going to execute, but it could be a record Q4. The demand that we see, the pipeline that we see, is very, very significant. Yeah, I wouldn't connect the dots to anything related to macro or AI or anything like that. We're looking at potentially, I have to qualify this as we need to execute, and we're going to execute, but it could be a record Q4. we're looking at potentially i have to qualify this as we need to execute and we're going to execute but it could be a record q4 The demand that we see, the pipeline that we see, is very, very significant. the demand that we see the pipeline that we see is very very significant Yeah, I wouldn't connect the dots to anything related to macro or AI or anything like that. yeah i wouldn't connect the dots to anything related to macro or ai or anything like that

Speaker 7: I agree, Ken, there's nothing like that at all. We have a ton of confidence into the market position, the demand environment. As we look at the linearity at the start of Q4, it's off to a good start. Guidewire is a business that has a small number of very large deals that can be quite impactful. This is just a dynamic of our business and part of the reason why we always coach people to focus more on the annual results as the true measure of our success. We feel very confident that anything that we didn't quite get in Q3, we'll manage to get over the finish line in Q4, and the pipeline is really strong. I agree, Ken, there's nothing like that at all. i agree ken there's nothing like that at all We have a ton of confidence into the market position, the demand environment. we have a ton of confidence into the market position the demand environment As we look at the linearity at the start of Q4, it's off to a good start. as we look at the linearity at the start of q4 it's off to a good start Guidewire is a business that has a small number of very large deals that can be quite impactful. Th is is just a dynamic of our business and part of the reason why we always coach people to focus more on the annual results as the true measure of our success. guidewire is a business that has a small number of very large deals that can be quite impactful. th is is just a dynamic of our business and part of the reason why we always coach people to focus more on the annual results as the true measure of our success We feel very confident that anything that we didn't quite get in Q3, we'll manage to get over the finish line in Q4, and the pipeline is really strong. we feel very confident that anything that we didn't quite get in q3 we'll manage to get over the finish line in q4 and the pipeline is really strong

Speaker 10: Understood. Thanks for all the color there, Mike and Jeff. Jeff, I appreciate the color on the fully ramp lining up with ARR this quarter and likely similar in Q4. I don't suppose any directional color in terms of whether or not fiscal Q3 was tracking at or above, below. Understood. understood Thanks for all the color there, Mike and Jeff. thanks for all the color there mike and jeff Jeff, I appreciate the color on the fully ramp lining up with ARR this quarter and likely similar in Q4. jeff i appreciate the color on the fully ramp lining up with arr this quarter and likely similar in q4 I don't suppose any directional color in terms of whether or not fiscal Q3 was tracking at or above, below. i don't suppose any directional color in terms of whether or not fiscal q3 was tracking at or above below

Speaker 7: Yeah Yeah yeah

Speaker 10: What Q2 levels were? What Q2 levels were? what q2 levels were

Speaker 7: Yeah. Here's what I can say. Our fully ramp continues to be very, very healthy. I think it's helpful reminder that when we approach a deal negotiation, we really focus on making sure we're being thoughtful around driving customer lifetime value. This means optimizing the ARR dynamics for the out years more so than optimizing them for the year one in quarter ARR that's delivered, and that's a dynamic of our model that we have to manage and measure, but we will always optimize for that customer lifetime value. Last year we saw fully ramped ARR growth at 22%, which was very strong. As we move through this year and as we look ahead to next year, we're confident that we can deliver those levels or potentially higher. Yeah. yeah Here's what I can say. here's what i can say Our fully ramp continues to be very, very healthy. our fully ramp continues to be very very healthy I think it's helpful reminder that when we approach a deal negotiation, we really focus on making sure we're being thoughtful around driving customer lifetime value. i think it's helpful reminder that when we approach a deal negotiation we really focus on making sure we're being thoughtful around driving customer lifetime value This means optimizing the ARR dynamics for the out years more so than optimizing them for the year one in quarter ARR that's delivered, and that's a dynamic of our model that we have to manage and measure, but we will always optimize for that customer lifetime value. this means optimizing the arr dynamics for the out years more so than optimizing them for the year one in quarter arr that's delivered and that's a dynamic of our model that we have to manage and measure but we will always optimize for that customer lifetime value Last year we saw fully ramped ARR growth at 22%, which was very strong. last year we saw fully ramped arr growth at 22% which was very strong As we move through this year and as we look ahead to next year, we're confident that we can deliver those levels or potentially higher. as we move through this year and as we look ahead to next year we're confident that we can deliver those levels or potentially higher That's how we're thinking about where we've been throughout this year and how we're thinking about the remainder of this year. That's how we're thinking about where we've been throughout this year and how we're thinking about the remainder of this year. that's how we're thinking about where we've been throughout this year and how we're thinking about the remainder of this year

Speaker 3: Great. Our next question goes to Allan Verkhovski at BTIG. Great. great Our next question goes to Allan Verkhovski at BTIG. our next question goes to allan verkhovski at btig

Speaker 5: Awesome. Thanks for taking the question here, guys. Mike, I just want to pull on that earlier thread and the productivity tsunami you mentioned in the prepared remarks. There are a lot of product updates in the Palisades release. I want to just go a bit deeper on the developer assistant that's in early access. Can you unpack the level of demand there is from Tier 1 insurers? What the most in-demand use cases are based on your conversations, and how is this further driving incremental tailwinds and pressure on insurers that haven't moved to the cloud to do so sooner? Awesome. awesome Thanks for taking the question here, guys. thanks for taking the question here guys Mike, I just want to pull on that earlier thread and the productivity tsunami you mentioned in the prepared remarks. mike i just want to pull on that earlier thread and the productivity tsunami you mentioned in the prepared remarks There are a lot of product updates in the Palisades release. there are a lot of product updates in the palisades release I want to just go a bit deeper on the developer assistant that's in early access. i want to just go a bit deeper on the developer assistant that's in early access Can you unpack the level of demand there is from Tier 1 insurers? can you unpack the level of demand there is from tier 1 insurers What the most in-demand use cases are based on your conversations, and how is this further driving incremental tailwinds and pressure on insurers that haven't moved to the cloud to do so sooner? what the most in-demand use cases are based on your conversations and how is this further driving incremental tailwinds and pressure on insurers that haven't moved to the cloud to do so sooner

Speaker 11: Yeah, great question. Yeah, it's interesting. You know, there's a variety of things that involve development that relate to either the implementation of Guidewire or the ongoing, let's call it maintenance or evolution, related to IT projects that drive the initiatives at an insurance company. It really is across the board. Probably the most tangible thing you can point to is product creation. We've done a lot of work over the years around what we call Advanced Product Designer and creating a better system for creating new products on the PolicyCenter platform. Using AI to do that is a phenomenal step up in productivity associated with the work to make that happen. Building integrations, again, is a big part of an implementation project, and it's something that just takes up a lot of time, and that can also be accelerated. Yeah, great question. yeah great question Yeah, it's interesting. yeah it's interesting You know, there's a variety of things that involve development that relate to either the implementation of Guidewire or the ongoing, let's call it maintenance or evolution, related to IT projects that drive the initiatives at an insurance company. you know, there's a variety of things that involve development that relate to either the implementation of guidewire or the ongoing let's call it maintenance or evolution related to it projects that drive the initiatives at an insurance company It really is across the board. it really is across the board Probably the most tangible thing you can point to is product creation. probably the most tangible thing you can point to is product creation We've done a lot of work over the years around what we call Advanced Product Designer and creating a better system for creating new products on the PolicyCenter platform. we've done a lot of work over the years around what we call advanced product designer and creating a better system for creating new products on the policycenter platform Using AI to do that is a phenomenal step up in productivity associated with the work to make that happen. using ai to do that is a phenomenal step up in productivity associated with the work to make that happen Building integrations, again, is a big part of an implementation project, and it's something that just takes up a lot of time, and that can also be accelerated. building integrations again is a big part of an implementation project and it's something that just takes up a lot of time and that can also be accelerated Oftentimes associated with a new product introduction will be the digital interface, the customer-facing, web-facing screens associated with quoting those products or engaging with agents around those products. That also can be accelerated. There's demand for all of these developer assistants. It's really across the board because what's so amazing about these tools is the intelligence is general, right? We can build the harness, we can apply the harness to our dev platform, and we can tweak this thing and train this thing to work against our specific type of technology platform. Regardless of what the development project is, it's accelerated, and that is awesome. With respect to demand and what tailwinds this creates, you should think about this in two ways. One is there's just a tremendous amount of work involved in migration, right? Oftentimes associated with a new product introduction will be the digital interface, the customer-facing, web-facing screens associated with quoting those products or engaging with agents around those products. oftentimes associated with a new product introduction will be the digital interface the customer-facing web-facing screens associated with quoting those products or engaging with agents around those products That also can be accelerated. that also can be accelerated There's demand for all of these developer assistants. there's demand for all of these developer assistants It's really across the board because what's so amazing about these tools is the intelligence is general, right? it's really across the board because what's so amazing about these tools is the intelligence is general right We can build the harness, we can apply the harness to our dev platform, and we can tweak this thing and train this thing to work against our specific type of technology platform. we can build the harness we can apply the harness to our dev platform and we can tweak this thing and train this thing to work against our specific type of technology platform Regardless of what the development project is, it's accelerated, and that is awesome. regardless of what the development project is it's accelerated and that is awesome With respect to demand and what tailwinds this creates, you should think about this in two ways. with respect to demand and what tailwinds this creates you should think about this in two ways One is there's just a tremendous amount of work involved in migration, right? one is there's just a tremendous amount of work involved in migration right I've got a legacy mainframe system that needs to be modernized, or I've got a Guidewire Cloud implementation that hasn't been maintained quite as much as we would've liked over the years, and now that needs to be modernized. That needs to be moved into Guidewire Cloud. These tools can also be applied to all that work. We're seeing the estimates and the timelines associated with professional services to do that work come down in very significant ways. That's what creates more demand. People often say, "What's the meter on Guidewire? What can cause Guidewire to grow faster, grow slower?" Of course, you have to pay money for Guidewire licenses. We talked about that in an earlier question. It's much more the implementation project that stretches out over years that really costs a lot of money. I've got a legacy mainframe system that needs to be modernized, or I've got a Guidewire Cloud implementation that hasn't been maintained quite as much as we would've liked over the years, and now that needs to be modernized. i've got a legacy mainframe system that needs to be modernized or i've got a guidewire cloud implementation that hasn't been maintained quite as much as we would've liked over the years and now that needs to be modernized That needs to be moved into Guidewire Cloud. that needs to be moved into guidewire cloud These tools can also be applied to all that work. these tools can also be applied to all that work We're seeing the estimates and the timelines associated with professional services to do that work come down in very significant ways. we're seeing the estimates and the timelines associated with professional services to do that work come down in very significant ways That's what creates more demand. that's what creates more demand People often say, "What's the meter on Guidewire? people often say "what's the meter on guidewire What can cause Guidewire to grow faster, grow slower?" Of course, you have to pay money for Guidewire licenses. We talked about that in an earlier question. what can cause guidewire to grow faster grow slower?" of course you have to pay money for guidewire licenses. we talked about that in an earlier question It's much more the implementation project that stretches out over years that really costs a lot of money. it's much more the implementation project that stretches out over years that really costs a lot of money If we can make that faster and accelerate that is creating the tailwind and the extra demand for people saying, "Oh, that project that I was putting off, maybe if it's faster, cheaper, maybe this is the time to go tackle that project." That's just as exciting as this sort of ongoing maintenance and the productivity boost in the IT departments post-implementation. That's very, very real, and I think it's absolutely creating a tailwind for the company. If we can make that faster and accelerate that is creating the tailwind and the extra demand for people saying, "Oh, that project that I was putting off, maybe if it's faster, cheaper, maybe this is the time to go tackle that project." That's just as exciting as this sort of ongoing maintenance and the productivity boost in the IT departments post-implementation. if we can make that faster and accelerate that is creating the tailwind and the extra demand for people saying "oh that project that i was putting off maybe if it's faster cheaper maybe this is the time to go tackle that project." that's just as exciting as this sort of ongoing maintenance and the productivity boost in the it departments post-implementation That's very, very real, and I think it's absolutely creating a tailwind for the company. that's very very real and i think it's absolutely creating a tailwind for the company

Speaker 5: Perfect. That's really helpful, Mike. Perfect. perfect That's really helpful, Mike. that's really helpful mike

Speaker 11: Thank you. Thank you. thank you

Speaker 5: Jeff, maybe just a quick follow-up for you. It's impressive the fully ramped ARR growth is still expected to outpace ARR growth next quarter, despite seeing some of the deals push this quarter. Can you just walk through your confidence, your visibility, and assumptions behind that? Thank you, guys. Jeff, maybe just a quick follow-up for you. jeff maybe just a quick follow-up for you It's impressive the fully ramped ARR growth is still expected to outpace ARR growth next quarter, despite seeing some of the deals push this quarter. it's impressive the fully ramped arr growth is still expected to outpace arr growth next quarter despite seeing some of the deals push this quarter Can you just walk through your confidence, your visibility, and assumptions behind that? can you just walk through your confidence your visibility and assumptions behind that Thank you, guys. thank you guys

Speaker 7: Yeah, we do a very detailed bottoms-up review of our pipeline on the deals that are coming in. We are seeing very healthy demand for larger commits, insurers expanding their work with Guidewire, when they're modernizing one module to the cloud, kind of consuming another module in addition to that activity. All of that kind of flows through the model. We have very good visibility, obviously, into the first three quarters of the year that also inform our guides. A very meaningful amount of that work is already in the rear-view mirror as we look ahead to kind of the end of this fiscal year. All of these themes are really playing into the environment that we're seeing, kind of the larger commitments that insurers are making to the cloud platform that inform that guide. Yeah, we do a very detailed bottoms-up review of our pipeline on the deals that are coming in. yeah we do a very detailed bottoms-up review of our pipeline on the deals that are coming in We are seeing very healthy demand for larger commits, insurers expanding their work with Guidewire, when they're modernizing one module to the cloud, kind of consuming another module in addition to that activity. we are seeing very healthy demand for larger commits insurers expanding their work with guidewire when they're modernizing one module to the cloud kind of consuming another module in addition to that activity All of that kind of flows through the model. all of that kind of flows through the model We have very good visibility, obviously, into the first three quarters of the year that also inform our guides. we have very good visibility obviously into the first three quarters of the year that also inform our guides A very meaningful amount of that work is already in the rear-view mirror as we look ahead to kind of the end of this fiscal year. a very meaningful amount of that work is already in the rear-view mirror as we look ahead to kind of the end of this fiscal year All of these themes are really playing into the environment that we're seeing, kind of the larger commitments that insurers are making to the cloud platform that inform that guide. all of these themes are really playing into the environment that we're seeing kind of the larger commitments that insurers are making to the cloud platform that inform that guide There is certainly work that has to be done and completed in Q4 to realize that, but we have good visibility into the corpus of deals that we expect to see in Q4. There is certainly work that has to be done and completed in Q4 to realize that, but we have good visibility into the corpus of deals that we expect to see in Q4. there is certainly work that has to be done and completed in q4 to realize that but we have good visibility into the corpus of deals that we expect to see in q4

Speaker 3: Thanks, Allan. Our next question's from Tyler Radke at Citi. Thanks, Allan. thanks allan Our next question's from Tyler Radke at Citi. our next question's from tyler radke at citi

Speaker 14: Yeah, thank you for taking the question here. Obviously, you hit on the slip deals a bit already, but I guess just bigger picture, one of the dynamics that investors are asking about is just sort of the AI crowding out effect. I'm curious, as you talk to your insurance customers, and they're presumably ramping up coding projects, how much is that budget an issue as it relates to your deals and, as you think about sort of Q4, if you could just sort of provide the underlying assumptions on close rates and whatnot. Have you introduced more conservatism given sort of the timing issues you saw in the quarter? Thank you. Yeah, thank you for taking the question here. yeah thank you for taking the question here Obviously, you hit on the slip deals a bit already, but I guess just bigger picture, one of the dynamics that investors are asking about is just sort of the AI crowding out effect. obviously you hit on the slip deals a bit already but i guess just bigger picture one of the dynamics that investors are asking about is just sort of the ai crowding out effect I'm curious, as you talk to your insurance customers, and they're presumably ramping up coding projects, how much is that budget an issue as it relates to your deals and, as you think about sort of Q4, if you could just sort of provide the underlying assumptions on close rates and whatnot. i'm curious as you talk to your insurance customers and they're presumably ramping up coding projects how much is that budget an issue as it relates to your deals and as you think about sort of q4 if you could just sort of provide the underlying assumptions on close rates and whatnot Have you introduced more conservatism given sort of the timing issues you saw in the quarter? have you introduced more conservatism given sort of the timing issues you saw in the quarter Thank you. thank you

Speaker 11: No, we're obviously being very careful and going through everything in Q4, let's say with a fine-tooth comb, to ensure that we're confident in reaffirming the guide and the confidence that we have in the execution. That's being done. In terms of AI crowding out, I certainly hear this narrative from people, let's say. I don't hear it from customers. I think the reality is that the insurance industry is recognizing what a profound impact AI can have on, A, development velocity and IT agility, B, underwriting and the efficiency of underwriting departments, and C, claims departments and the efficiency of customer service and claims automation in the industry. No, we're obviously being very careful and going through everything in Q4, let's say with a fine-tooth comb, to ensure that we're confident in reaffirming the guide and the confidence that we have in the execution. no we're obviously being very careful and going through everything in q4 let's say with a fine-tooth comb to ensure that we're confident in reaffirming the guide and the confidence that we have in the execution That's being done. that's being done In terms of AI crowding out, I certainly hear this narrative from people, let's say. in terms of ai crowding out i certainly hear this narrative from people let's say I don't hear it from customers. i don't hear it from customers I think the reality is that the insurance industry is recognizing what a profound impact AI can have on, A, development velocity and IT agility, B, underwriting and the efficiency of underwriting departments, and C, claims departments and the efficiency of customer service and claims automation in the industry. i think the reality is that the insurance industry is recognizing what a profound impact ai can have on a development velocity and it agility b underwriting and the efficiency of underwriting departments and c claims departments and the efficiency of customer service and claims automation in the industry The productivity improvements that are potentially possible in insurance, in any insurance company, are so significant relative to what these companies spend on these IT programs, that it doesn't make sense to compare these two things against one another. You look at this and you say, "Well, if this works," which I think more and more people expect that it will, "then in order to remain competitive going forward, you're going to have to have a modern core system that is capable of supporting these sort of agentic capabilities." Otherwise, you're not going to be able to remain competitive. You're going to lose ground. It's like a first-order question to say, "Well, could I code this in a different way?" It's the wrong way to look at it. The productivity improvements that are potentially possible in insurance, in any insurance company, are so significant relative to what these companies spend on these IT programs, that it doesn't make sense to compare these two things against one another. the productivity improvements that are potentially possible in insurance in any insurance company are so significant relative to what these companies spend on these it programs that it doesn't make sense to compare these two things against one another You look at this and you say, "Well, if this works," which I think more and more people expect that it will, "then in order to remain competitive going forward, you're going to have to have a modern core system that is capable of supporting these sort of agentic capabilities." Otherwise, you're not going to be able to remain competitive. you look at this and you say "well if this works," which i think more and more people expect that it will "then in order to remain competitive going forward you're going to have to have a modern core system that is capable of supporting these sort of agentic capabilities." otherwise you're not going to be able to remain competitive You're going to lose ground. you're going to lose ground It's like a first-order question to say, "Well, could I code this in a different way?" It's the wrong way to look at it. it's like a first-order question to say "well could i code this in a different way?" it's the wrong way to look at it The customers are seeing, especially the big Tier 1 customers see this, they recognize this, they take a look, and they assess where they are and where they want to be and where they want to be with AI. You come to the conclusion that being on a modernized platform with an open approach to APIs and MCP servers and integration to these agentic tools and large language models, integration to an ecosystem of partners that are building on top of these LLMs and building integrated into Guidewire, this is the logical answer, and that creates the lift that we're talking about. I want to acknowledge that, yes, the narrative that you describe exists, but the counter-narrative, specifically in insurance and the use cases we unlock for IT underwriting and claims so overwhelm this logic that that's what's driving the business positively for us at Guidewire. The customers are seeing, especially the big Tier 1 customers see this, they recognize this, they take a look, and they assess where they are and where they want to be and where they want to be with AI. the customers are seeing especially the big tier 1 customers see this they recognize this they take a look and they assess where they are and where they want to be and where they want to be with ai You come to the conclusion that being on a modernized platform with an open approach to APIs and MCP servers and integration to these agentic tools and large language models, integration to an ecosystem of partners that are building on top of these LLMs and building integrated into Guidewire, this is the logical answer, and that creates the lift that we're talking about. you come to the conclusion that being on a modernized platform with an open approach to apis and mcp servers and integration to these agentic tools and large language models integration to an ecosystem of partners that are building on top of these llms and building integrated into guidewire this is the logical answer and that creates the lift that we're talking about I want to acknowledge that, yes, the narrative that you describe exists, but the counter-narrative, specifically in insurance and the use cases we unlock for IT underwriting and claims so overwhelm this logic that that's what's driving the business positively for us at Guidewire. i want to acknowledge that yes the narrative that you describe exists but the counter-narrative specifically in insurance and the use cases we unlock for it underwriting and claims so overwhelm this logic that that's what's driving the business positively for us at guidewire

Speaker 3: Great. Great. great

Speaker 14: Thanks. Thanks. thanks

Speaker 3: Go ahead, Tyler. Sorry. Go ahead, Tyler. go ahead tyler Sorry. sorry

Speaker 14: Yeah. Yeah. yeah

Speaker 11: Sorry. Sorry. sorry

Speaker 14: Go ahead. Sorry. Mike, I think in the prepared remarks, you talked about how you're seeing measurable and significant productivity, and accelerated migration timelines. I'm just wondering if you could double-click on that. Any metrics you could put around that? Is it happening 30% faster? How should we think about that just in terms of when that starts to show up for you guys in terms of getting that maybe faster ramp from time to booking to active ARR? Go ahead. go ahead Sorry. sorry Mike, I think in the prepared remarks, you talked about how you're seeing measurable and significant productivity, and accelerated migration timelines. mike i think in the prepared remarks you talked about how you're seeing measurable and significant productivity and accelerated migration timelines I'm just wondering if you could double-click on that. i'm just wondering if you could double-click on that Any metrics you could put around that? any metrics you could put around that Is it happening 30% faster? is it happening 30% faster How should we think about that just in terms of when that starts to show up for you guys in terms of getting that maybe faster ramp from time to booking to active ARR? how should we think about that just in terms of when that starts to show up for you guys in terms of getting that maybe faster ramp from time to booking to active arr

Speaker 11: Yeah. Great question. I appreciate it. I'll give a little bit of a preamble, and then I'll prep John, and I appreciate John already took himself off mute, so he's going to chime in here on this because he owns and is driving this directly. Obviously, we started off a little bit conservatively and said, "Okay, let's get these tools in people's hands. Let's start to assess what we can do. Let's start to apply these tools and these techniques to a couple of programs with a couple of customers. Let's be very careful and open with customers about what we're doing and how we're doing it, and let's see what happens and see if it really produces the acceleration that we think it will." The amazing answer is it is accelerating. Yeah. yeah Great question. great question I appreciate it. i appreciate it I'll give a little bit of a preamble, and then I'll prep John, and I appreciate John already took himself off mute, so he's going to chime in here on this because he owns and is driving this directly. i'll give a little bit of a preamble and then i'll prep john and i appreciate john already took himself off mute so he's going to chime in here on this because he owns and is driving this directly Obviously, we started off a little bit conservatively and said, "Okay, let's get these tools in people's hands. obviously we started off a little bit conservatively and said "okay let's get these tools in people's hands Let's start to assess what we can do. let's start to assess what we can do Let's start to apply these tools and these techniques to a couple of programs with a couple of customers. let's start to apply these tools and these techniques to a couple of programs with a couple of customers Let's be very careful and open with customers about what we're doing and how we're doing it, and let's see what happens and see if it really produces the acceleration that we think it will." The amazing answer is it is accelerating. let's be very careful and open with customers about what we're doing and how we're doing it and let's see what happens and see if it really produces the acceleration that we think it will." the amazing answer is it is accelerating We are seeing the results, and we're starting to expand it to more and more projects, and it's just on its way. I don't know, John, if you want to throw out a couple of the numbers that we are talking to customers about. Feel free to chime in. We are seeing the results, and we're starting to expand it to more and more projects, and it's just on its way. we are seeing the results and we're starting to expand it to more and more projects and it's just on its way I don't know, John, if you want to throw out a couple of the numbers that we are talking to customers about. i don't know john if you want to throw out a couple of the numbers that we are talking to customers about Feel free to chime in. feel free to chime in

Speaker 9: Yeah. The investment pace right now has unlocked about 35% improvement in migration, so on-prem to cloud migration. That's a great use case because there's some control parameters around the database conversion that allow us to move really fast. We're starting now to see, we've redirected some of the investment towards the migration off of either a legacy estate or some other asset towards Guidewire. We're starting to get to that 35% improvement on the, we'll call them net new deals. If I look forward, I'd say we don't start to see a leveling off, the return on investment on that. We see that maintaining the same pace, the same curve, probably until we get to that 55%. Yeah. yeah The investment pace right now has unlocked about 35% improvement in migration, so on-prem to cloud migration. the investment pace right now has unlocked about 35% improvement in migration so on-prem to cloud migration That's a great use case because there's some control parameters around the database conversion that allow us to move really fast. that's a great use case because there's some control parameters around the database conversion that allow us to move really fast We're starting now to see, we've redirected some of the investment towards the migration off of either a legacy estate or some other asset towards Guidewire. we're starting now to see we've redirected some of the investment towards the migration off of either a legacy estate or some other asset towards guidewire We're starting to get to that 35% improvement on the, we'll call them net new deals. we're starting to get to that 35% improvement on the we'll call them net new deals If I look forward, I'd say we don't start to see a leveling off, the return on investment on that. if i look forward i'd say we don't start to see a leveling off the return on investment on that We see that maintaining the same pace, the same curve, probably until we get to that 55%. we see that maintaining the same pace the same curve probably until we get to that 55% We'll start to see continuing cost savings, but probably less so on the duration savings, just because of the gestation period of just the change management principles of doing these programs. We still have a promising pathway ahead of us and some really great success stories behind us that we're really confident in. We'll start to see continuing cost savings, but probably less so on the duration savings, just because of the gestation period of just the change management principles of doing these programs. we'll start to see continuing cost savings but probably less so on the duration savings just because of the gestation period of just the change management principles of doing these programs We still have a promising pathway ahead of us and some really great success stories behind us that we're really confident in. we still have a promising pathway ahead of us and some really great success stories behind us that we're really confident in

Speaker 3: Great. Thanks, John. Our next question comes from Aaron Kimson of Citizens Bank. Great. great Thanks, John. thanks john Our next question comes from Aaron Kimson of Citizens Bank. our next question comes from aaron kimson of citizens bank

Speaker 1: Great. Thank you, guys. Mike, do you see any high-level differences in the appetite and relative budgets for adopting AI products amongst P&C insurers geographically in the Americas versus EMEA versus APAC? Great. great Thank you, guys. thank you guys Mike, do you see any high-level differences in the appetite and relative budgets for adopting AI products amongst P&C insurers geographically in the Americas versus EMEA versus APAC? mike do you see any high-level differences in the appetite and relative budgets for adopting ai products amongst p&c insurers geographically in the americas versus emea versus apac

Speaker 11: That's a good question. It's interesting. Yes. Summary is, yes, we do. I don't want to call out any particular countries, but yeah, we do. The other way to think about it is I think everybody wants to use AI for development, no question. You can very clearly see that you can use AI for development. I think there's different perspectives in different countries, but also at different carriers, different customers, about the degree to which you will expose these agents to consumers, or whether or not you will use sort of more human-in-the-loop use cases where you're exposing these tools to employees and using it to boost productivity through employees. The common factor is everybody wants to get on the learning curve. Everybody wants to get it deployed and start to figure out how it makes sense for their business. That's a good question. that's a good question It's interesting. it's interesting Yes. yes Summary is, yes, we do. summary is yes we do I don't want to call out any particular countries, but yeah, we do. i don't want to call out any particular countries but yeah we do The other way to think about it is I think everybody wants to use AI for development, no question. the other way to think about it is i think everybody wants to use ai for development no question You can very clearly see that you can use AI for development. you can very clearly see that you can use ai for development I think there's different perspectives in different countries, but also at different carriers, different customers, about the degree to which you will expose these agents to consumers, or whether or not you will use sort of more human-in-the-loop use cases where you're exposing these tools to employees and using it to boost productivity through employees. i think there's different perspectives in different countries but also at different carriers different customers about the degree to which you will expose these agents to consumers or whether or not you will use sort of more human-in-the-loop use cases where you're exposing these tools to employees and using it to boost productivity through employees The common factor is everybody wants to get on the learning curve. the common factor is everybody wants to get on the learning curve Everybody wants to get it deployed and start to figure out how it makes sense for their business. everybody wants to get it deployed and start to figure out how it makes sense for their business Certainly you do see differences in country and also in company about how aggressively they want to target the more aggressive efficiency agendas. Certainly you do see differences in country and also in company about how aggressively they want to target the more aggressive efficiency agendas. certainly you do see differences in country and also in company about how aggressively they want to target the more aggressive efficiency agendas

Speaker 1: Got it. Then as a follow-up, Jeff, can you talk about the shape of the ramp of token spend at Guidewire, your level of visibility and how that'll evolve going forward, and if there could be any potential gross margin effects? Got it. got it Then as a follow-up, Jeff, can you talk about the shape of the ramp of token spend at Guidewire, your level of visibility and how that'll evolve going forward, and if there could be any potential gross margin effects? then as a follow-up jeff can you talk about the shape of the ramp of token spend at guidewire your level of visibility and how that'll evolve going forward and if there could be any potential gross margin effects

Speaker 7: Yeah. We're pretty early in terms of how we're kind of monitoring and measuring this. Obviously, we're starting to see it pick up on the development side. We're starting to get it into the hands of customers with respect to the agentic framework and how they're adopting AI within the platform. It's pretty early for us right now. We've kind of built the mechanisms to start measuring that. As we engage with customers, I would say right now we're at a place where we're focused on adoption, but kind of adoption with some controls to ensure that we can make sure that there's not any sort of usage that goes out of the scope of what was intended by our contracts. That's where we are. No numbers, no metrics to report at this point in time. That's how we're measuring it today, though. Yeah. yeah We're pretty early in terms of how we're kind of monitoring and measuring this. we're pretty early in terms of how we're kind of monitoring and measuring this Obviously, we're starting to see it pick up on the development side. obviously we're starting to see it pick up on the development side We're starting to get it into the hands of customers with respect to the agentic framework and how they're adopting AI within the platform. we're starting to get it into the hands of customers with respect to the agentic framework and how they're adopting ai within the platform It's pretty early for us right now. it's pretty early for us right now We've kind of built the mechanisms to start measuring that. we've kind of built the mechanisms to start measuring that As we engage with customers, I would say right now we're at a place where we're focused on adoption, but kind of adoption with some controls to ensure that we can make sure that there's not any sort of usage that goes out of the scope of what was intended by our contracts. as we engage with customers i would say right now we're at a place where we're focused on adoption but kind of adoption with some controls to ensure that we can make sure that there's not any sort of usage that goes out of the scope of what was intended by our contracts That's where we are. that's where we are No numbers, no metrics to report at this point in time. no numbers no metrics to report at this point in time That's how we're measuring it today, though. that's how we're measuring it today though

Speaker 3: Okay. Thanks, Aaron. Next question is from Jessica Wang at Raymond James. Okay. okay Thanks, Aaron. thanks aaron Next question is from Jessica Wang at Raymond James. next question is from jessica wang at raymond james

Speaker 8: Thanks for sliding me in here. Just to touch on base on UnderwritingCenter, I know it's still early, it's still under developments, but what have you been hearing from customers that are interested in there? Like how should we think about product maturity so far and potential pipeline into next year, just considering the success you've had so far with ProNavigator and PricingCenter already? Thanks for sliding me in here. thanks for sliding me in here Just to touch on base on UnderwritingCenter, I know it's still early, it's still under developments, but what have you been hearing from customers that are interested in there? just to touch on base on underwritingcenter i know it's still early it's still under developments but what have you been hearing from customers that are interested in there Like how should we think about product maturity so far and potential pipeline into next year, just considering the success you've had so far with ProNavigator and PricingCenter already? like how should we think about product maturity so far and potential pipeline into next year just considering the success you've had so far with pronavigator and pricingcenter already

Speaker 11: Yeah, thanks for the question. It's going very well. We have a handful of customers that we're working on this product with, and in plans to get it into their hands in the next couple of weeks/months. There is a tremendous amount of interest, I would say, in commercial lines underwriting around the potential for these LLMs and agents specifically tuned to the underwriting use case to be able to very significantly improve the efficiency of underwriting teams, reduce the time it takes for companies to respond to submissions, and then also do a better job focusing on the risk analysis of the submissions that they choose to quote. The other part of this that's very interesting is we're being able to establish a better connection to the actual policy system and the quoting system and the pricing systems that these companies are using. Yeah, thanks for the question. yeah thanks for the question It's going very well. it's going very well We have a handful of customers that we're working on this product with, and in plans to get it into their hands in the next couple of weeks/months. we have a handful of customers that we're working on this product with and in plans to get it into their hands in the next couple of weeks/months There is a tremendous amount of interest, I would say, in commercial lines underwriting around the potential for these LLMs and agents specifically tuned to the underwriting use case to be able to very significantly improve the efficiency of underwriting teams, reduce the time it takes for companies to respond to submissions, and then also do a better job focusing on the risk analysis of the submissions that they choose to quote. there is a tremendous amount of interest i would say in commercial lines underwriting around the potential for these llms and agents specifically tuned to the underwriting use case to be able to very significantly improve the efficiency of underwriting teams reduce the time it takes for companies to respond to submissions and then also do a better job focusing on the risk analysis of the submissions that they choose to quote The other part of this that's very interesting is we're being able to establish a better connection to the actual policy system and the quoting system and the pricing systems that these companies are using. the other part of this that's very interesting is we're being able to establish a better connection to the actual policy system and the quoting system and the pricing systems that these companies are using That's also part of the equation. The use case, there's a tremendous amount of demand for, I would say, universally across the customer base. The project is going according to schedule, and we're excited about the work we're doing with these sort of carefully chosen design partners that we're working with. That's also part of the equation. that's also part of the equation The use case, there's a tremendous amount of demand for, I would say, universally across the customer base. the use case there's a tremendous amount of demand for i would say universally across the customer base The project is going according to schedule, and we're excited about the work we're doing with these sort of carefully chosen design partners that we're working with. the project is going according to schedule and we're excited about the work we're doing with these sort of carefully chosen design partners that we're working with

Speaker 8: That's great to hear. Also just touching on PricingCenter again. With the success of the pipeline so far, how should we think about the demand drivers here that came from your existing customers versus completely new logos? How should we think about potential attach rates that are involved between these different cohorts? That's great to hear. that's great to hear Also just touching on PricingCenter again. also just touching on pricingcenter again With the success of the pipeline so far, how should we think about the demand drivers here that came from your existing customers versus completely new logos? with the success of the pipeline so far how should we think about the demand drivers here that came from your existing customers versus completely new logos How should we think about potential attach rates that are involved between these different cohorts? how should we think about potential attach rates that are involved between these different cohorts

Speaker 11: Yeah. It's a great question. Technically, the PricingCenter to PolicyCenter to product model integration is so much an important part of the value proposition. That honestly drove the thesis behind the acquisition in the first place. What you're seeing in general in the insurance industry is this need to not only launch new products more quickly, but actually adjust pricing and adjust rate routines more fluidly to keep pace with competition and keep their products, A, competitive, but also profitable. The friction associated with doing that relates to how the components of that solution all integrate. Like I said, the thesis behind making PricingCenter part of the suite at Guidewire is that we can do a really good job integrating the product model, integrating into our quoting service, integrating it into PolicyCenter. Yeah. yeah It's a great question. it's a great question Technically, the PricingCenter to PolicyCenter to product model integration is so much an important part of the value proposition. technically the pricingcenter to policycenter to product model integration is so much an important part of the value proposition That honestly drove the thesis behind the acquisition in the first place. that honestly drove the thesis behind the acquisition in the first place What you're seeing in general in the insurance industry is this need to not only launch new products more quickly, but actually adjust pricing and adjust rate routines more fluidly to keep pace with competition and keep their products, A, competitive, but also profitable. what you're seeing in general in the insurance industry is this need to not only launch new products more quickly but actually adjust pricing and adjust rate routines more fluidly to keep pace with competition and keep their products a competitive but also profitable The friction associated with doing that relates to how the components of that solution all integrate. the friction associated with doing that relates to how the components of that solution all integrate Like I said, the thesis behind making PricingCenter part of the suite at Guidewire is that we can do a really good job integrating the product model, integrating into our quoting service, integrating it into PolicyCenter. like i said the thesis behind making pricingcenter part of the suite at guidewire is that we can do a really good job integrating the product model integrating into our quoting service integrating it into policycenter That connects logically to selling this to existing PolicyCenter customers and selling this alongside new PolicyCenter implementations. That go-to-market dynamic is playing out exactly as we expected it to. That's where we're seeing the demand. You could also say that's where we're focused because our value proposition is strongest there. It's very much working according to plan. That connects logically to selling this to existing PolicyCenter customers and selling this alongside new PolicyCenter implementations. that connects logically to selling this to existing policycenter customers and selling this alongside new policycenter implementations That go-to-market dynamic is playing out exactly as we expected it to. that go-to-market dynamic is playing out exactly as we expected it to That's where we're seeing the demand. that's where we're seeing the demand You could also say that's where we're focused because our value proposition is strongest there. you could also say that's where we're focused because our value proposition is strongest there It's very much working according to plan. it's very much working according to plan

Speaker 3: Great. Our last question comes from Faith Brunner at William Blair. Great. great Our last question comes from Faith Brunner at William Blair. our last question comes from faith brunner at william blair

Speaker 6: Hey, just building on those last couple of questions, I wanted to ask about PricingCenter. I guess you saw the one in Sweden, Poland, the first one in the U.S. How is this maybe building on referenceability of these newer products? Maybe as you touched on the different appetite that may vary region to region, how are these kind of serving as proof points and maybe getting people a little bit more comfortable saying, "Hey, we might have to actually get into something we didn't think we'd want to stay competitive"? Hey, just building on those last couple of questions, I wanted to ask about PricingCenter. hey just building on those last couple of questions i wanted to ask about pricingcenter I guess you saw the one in Sweden, Poland, the first one in the U.S. i guess you saw the one in sweden poland the first one in the u.s How is this maybe building on referenceability of these newer products? how is this maybe building on referenceability of these newer products Maybe as you touched on the different appetite that may vary region to region, how are these kind of serving as proof points and maybe getting people a little bit more comfortable saying, "Hey, we might have to actually get into something we didn't think we'd want to stay competitive"? maybe as you touched on the different appetite that may vary region to region how are these kind of serving as proof points and maybe getting people a little bit more comfortable saying "hey we might have to actually get into something we didn't think we'd want to stay competitive"

Speaker 11: Yeah. I'll touch on the last thing. I don't know that I've heard so often that people are saying that they're surprised that they need to do this. I think most of the companies that we're working with have recognized that this is on the strategic agenda. That also, this being on the strategic agenda factored into our interest in adding this to the portfolio and building out this well-integrated solution at Guidewire. That was a factor. I think reference ability is very important. I also just think us doing the work to get this into our infrastructure and being able to run it alongside the rest of the InsuranceSuite, application suite, this is really important. It's an incredibly good actuarial engineering team that we acquired. Yeah. yeah I'll touch on the last thing. i'll touch on the last thing I don't know that I've heard so often that people are saying that they're surprised that they need to do this. i don't know that i've heard so often that people are saying that they're surprised that they need to do this I think most of the companies that we're working with have recognized that this is on the strategic agenda. i think most of the companies that we're working with have recognized that this is on the strategic agenda That also, this being on the strategic agenda factored into our interest in adding this to the portfolio and building out this well-integrated solution at Guidewire. that also this being on the strategic agenda factored into our interest in adding this to the portfolio and building out this well-integrated solution at guidewire That was a factor. that was a factor I think reference ability is very important. i think reference ability is very important I also just think us doing the work to get this into our infrastructure and being able to run it alongside the rest of the InsuranceSuite, application suite, this is really important. i also just think us doing the work to get this into our infrastructure and being able to run it alongside the rest of the insurancesuite application suite this is really important It's an incredibly good actuarial engineering team that we acquired. it's an incredibly good actuarial engineering team that we acquired There's some things we need to do to mature it in terms of how it runs and how it's supported and running it at the scale and reliability and the security expectations that Tier 1 insurance companies expect. That's a big part of the work that we've been focused on since the acquisition, and I think that's helping to drive the demand. It's like, "Hey, can you do all of these things you say you can do, and can you do them with the same level of trust and integration expectations that we see from the rest of the product suite at Guidewire?" That kind of checks all these boxes and creates the demand uptick that we're seeing with the product. There's some things we need to do to mature it in terms of how it runs and how it's supported and running it at the scale and reliability and the security expectations that Tier 1 insurance companies expect. there's some things we need to do to mature it in terms of how it runs and how it's supported and running it at the scale and reliability and the security expectations that tier 1 insurance companies expect That's a big part of the work that we've been focused on since the acquisition, and I think that's helping to drive the demand. that's a big part of the work that we've been focused on since the acquisition and i think that's helping to drive the demand It's like, "Hey, can you do all of these things you say you can do, and can you do them with the same level of trust and integration expectations that we see from the rest of the product suite at Guidewire?" That kind of checks all these boxes and creates the demand uptick that we're seeing with the product. it's like "hey can you do all of these things you say you can do and can you do them with the same level of trust and integration expectations that we see from the rest of the product suite at guidewire?" that kind of checks all these boxes and creates the demand uptick that we're seeing with the product The teams, both on the PricingCenter team, but also the general infrastructure and platform teams at Guidewire have done a really good job executing on this, and earning the trust of these customers, and that helps build the pipeline that we're executing against and giving us confidence that this is going to continue. I don't know. Hopefully, that helps you. Actually, let me add, the other thing I'd say is we don't tend to oversell much at Guidewire. We try to make sure we have a stellar track record in terms of selling things that we know we can do and executing on those things effectively and making sure that no programs ever fail. I think that philosophy is factoring into the way we're approaching PricingCenter rollout. Anyway, thanks for the question. The teams, both on the PricingCenter team, but also the general infrastructure and platform teams at Guidewire have done a really good job executing on this, and earning the trust of these customers, and that helps build the pipeline that we're executing against and giving us confidence that this is going to continue. the teams both on the pricingcenter team but also the general infrastructure and platform teams at guidewire have done a really good job executing on this and earning the trust of these customers and that helps build the pipeline that we're executing against and giving us confidence that this is going to continue I don't know. i don't know Hopefully, that helps you. hopefully that helps you Actually, let me add, the other thing I'd say is we don't tend to oversell much at Guidewire. actually let me add the other thing i'd say is we don't tend to oversell much at guidewire We try to make sure we have a stellar track record in terms of selling things that we know we can do and executing on those things effectively and making sure that no programs ever fail. we try to make sure we have a stellar track record in terms of selling things that we know we can do and executing on those things effectively and making sure that no programs ever fail I think that philosophy is factoring into the way we're approaching PricingCenter rollout. i think that philosophy is factoring into the way we're approaching pricingcenter rollout Anyway, thanks for the question. anyway thanks for the question

Speaker 6: Yeah. Thanks for the color. Yeah. yeah Thanks for the color. thanks for the color

Speaker 3: Thanks, Faith. That's it. Thanks, Faith. thanks faith That's it. that's it

Speaker 11: Okay. Well, everybody, thank you very much for participating in the call today. As you've heard, we're incredibly excited about the momentum in the business in Q4, and we look forward to seeing everybody, talking to everybody after we conclude the fourth quarter in our fiscal year. Thanks very much. Okay. okay Well, everybody, thank you very much for participating in the call today. well everybody thank you very much for participating in the call today As you've heard, we're incredibly excited about the momentum in the business in Q4, and we look forward to seeing everybody, talking to everybody after we conclude the fourth quarter in our fiscal year. as you've heard we're incredibly excited about the momentum in the business in q4 and we look forward to seeing everybody talking to everybody after we conclude the fourth quarter in our fiscal year Thanks very much. thanks very much