Guidewire's Cash Flow and Buybacks: Can Both Keep Scaling?
Guidewire Software, Inc. GWRE exited fiscal 2026 with stronger cash generation and significant share repurchase activity. Operating cash flow for the year reached $390 million, up 30% year over year. The company ended the fiscal fourth quarter with $1.2 billion in cash, cash equivalents and investments. Management attributed the cash flow performance to execution and operating leverage in the business model.
During fiscal 2026, Guidewire repurchased $606 million worth of shares under its share buyback program. This represented 4.1 million shares bought back at an average price of $148.41 per share. On the lastearnings call management stated that the company had nearly completed its share repurchase program after buying back more than $600 million in shares. Management linked its ability to execute the repurchases to expanding profitability, cash generation and confidence in the long-term durability of the business.
The improvement in cash generation accompanied higher profitability during fiscal 2026. Guidewire reported non-GAAP operating income of $340 million, up 63% year over year. Gross profit increased 25% to $990 million, while overall gross margin was 67%. Subscription and support gross margin improved 4 percentage points to 74.5%. The company highlighted that strong subscription and support gross profit, higher-than-expected license revenues and operating expense discipline drove operating income growth.
For fiscal 2027, Guidewire expects operating cash flow of $445 million to $465 million. The company also projects non-GAAP operating income of $403 million to $423 million and total gross margin of 67% to 68%. Capital expenditures are expected to range from $23 million to $28 million, including approximately $17 million of capitalized software development costs. On the lastearnings call Guidewire stated that the first-quarter fiscal 2027 cash flow will be affected by annual employee bonus payments and commissions related to fourth-quarter sales, similar to the pattern seen in fiscal 2026.
A Look at GWRE’s Competitors’ Cash Flow and Buyback Plans
ServiceNow, Inc. NOW generated $2.26 billion in operating cash flow in the first half of 2026 and continues to target a 35% free cash flow margin for 2026. The company also expects about $500 million in internal AI efficiency savings this year, which should support cash generation while keeping headcount flat despite acquisitions. In the second quarter, free cash flow increased to $634 million from $535 million a year earlier, while the company ended the period with $2.50 billion in cash and cash equivalents. Strong cash generation provides funding capacity for reinvestment, acquisitions and potential capital returns.
Salesforce CRM continues to generate strong cash flow, supporting investments and shareholder returns. In the first half of fiscal 2027, the company generated $7.97 billion in operating cash flow and $7.65 billion in free cash flow. It also returned $364 million through dividends in the second quarter and continued executing its $25 billion accelerated share repurchase program. Through the first half, total capital returns reached $27.9 billion, while the share count declined 15% year over year. Salesforce expects operating and free cash flow to grow 4-5% in fiscal 2027, supporting continued capital returns.
GWRE Price Performance, Valuation and Estimates
Shares of Guidewire have gained 18% over the past three months compared with the Internet Software industry’s growth of 26.2%.
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GWRE’s shares are trading at a forward 12-month price-to-sales multiple of 6.86X, higher than the Internet Software industry’s 4.43X.
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The Zacks Consensus Estimate for GWRE’s earnings for 2026 has been revised upward over the past 60 days.
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GWRE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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