Guidewire Software, Inc.
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Item 1.Business
Overview and Purpose
Guidewire is the platform that property and casualty (“P&C”) insurers rely on to engage with customers, innovate, and operate more efficiently. Founded in 2001, we serve insurers of all sizes, ranging from global carriers to regional and local providers, helping them navigate a rapidly changing insurance market.
Our foundational core products, InsuranceSuite and InsuranceNow, are delivered as a cloud-based subscription service leveraging our proprietary cloud platform which we refer to as Guidewire Cloud Platform (“GWCP”). These products serve as transactional systems of record, fully supporting insurance operations, including product definition, pricing and rating, underwriting, policy administration, billing, and claims management.
Our platform combines core systems of record with digital, analytics, and predictive and generative artificial intelligence (“AI”) capabilities. To support our core systems, we provide digital engagement offerings that enable seamless sales and pricing and rating solutions that enable sophisticated pricing models and streamlined rate logic deployment. Our platform provides enhanced claims experiences for policyholders, agents, vendors, and field personnel, and analytics products that allow insurers to manage and use data more effectively, gain business insights, improve operational efficiency, and underwrite emerging risks. To support insurers worldwide, we localize our products to address diverse regulatory, language, and currency requirements. Additionally, we provide Guidewire Marketplace to empower customers pursuing innovation initiatives by offering a vetted collection of insurtech applications that allow them to differentiate their businesses by leveraging capabilities from the Guidewire ecosystem.
We reach customers directly through our global sales team and in partnership with third-party global system integrators (“SIs”). Because our platform is central to insurers’ operations, customer evaluation cycles are often extensive, particularly when multiple products are involved or when insurers are moving to GWCP for the first time. Sales processes typically include detailed due diligence and customer reference checks.
In addition to migration and expansion activity on GWCP, our growth depends on continuously enhancing existing products, introducing new capabilities, ensuring efficient cloud operations, and expanding local or market-specific content. We sell our products through subscription services for our platform and cloud-delivered products. We generally price our subscription services for core products based on the amount of Direct Written Premium (“DWP”) managed on our platform, with certain cloud-delivered products priced based on usage and associated resource consumption. Initial subscription agreements are generally five years in duration, with annual renewals thereafter. In some instances, we have customers that sign contracts with an initial term of seven years or longer. Subscription revenue is recognized ratably over the contract term. We also offer term licenses, primarily for existing on-premise customers, as well as support and professional services. Support is typically priced as a percentage of license fees and recognized ratably. Professional services are generally billed monthly on a time-and-materials basis; however, certain services engagements are based on a fixed fee, and revenue is recognized on a percentage of completion basis.
Industry Background
The P&C insurance industry is large, fragmented, highly regulated, and complex. It is also highly competitive, with insurers competing primarily on product differentiation, coverage and pricing options, customer and claims service, and channel strategies. Often, P&C insurers rely on legacy or immature systems that may impact their ability to respond to business and market requirements.
To better respond to market demands, P&C insurers modernize their transactional core systems to manage key functional areas of P&C insurance, including product definition, pricing and rating, underwriting, policy administration, billing, and claims management. Product definition specifies the insurance coverage, pricing, and financial and legal terms of insurance policies. Pricing and rating consist of developing, testing, and deploying pricing models, rating rules, and rate tables that incorporate internal and external data to estimate risk, set premiums that reflect underwriting strategy and regulatory and market requirements, and apply those premiums consistently for new business and renewals. Underwriting and policy administration includes collecting information from potential policyholders, determining appropriate coverages and terms, pricing policies, issuing policies, and updating and maintaining policies over their lifetimes. Claims management includes loss intake, investigation and evaluation of incidents, settlement negotiation, vendor management, litigation management, and payment processing. Billing includes policyholder invoicing, payment collection, and agent commission calculation. We believe insurers that adopt modern, cloud-based core systems can enhance customer experience, operate more efficiently, and introduce innovative products more rapidly.
We believe the P&C insurance industry is rapidly evolving in how insurers engage with, sell to, and manage relationships with, consumers and businesses. Today, P&C insurers are striving to respond to significant changes in their competitive marketplace and the characteristics of the risks they underwrite. The most significant changes include:
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•increased need for agility and efficiency from core systems to address rapid changes in the industry;
•an increase in the number of events and insured losses resulting from catastrophes and natural disasters impacting the P&C insurance industry requiring agility and innovation from its core systems;
•a rise in customer expectations for digital, mobile, and omnichannel interaction to augment the traditional agent model;
•a growth in demand for personalized services and products;
•an increase in technology and market-driven changes in vehicular risk, including usage and driving behavior based insurance;
•an increase in consolidation among insurance providers and associated rationalization of product lines and geographic footprints to eliminate overlap and improve combined ratios;
•an increasingly complex distribution ecosystem composed of managing agents, wholesalers, and program administrators who pose both threats and opportunities to insurer growth and profitability;
•demand for coverage of emerging risks such as terrorism, cybersecurity, AI, pandemic, and reputational risk, and the impact of social inflation on increasing liability claims;
•growing data volumes which require modern tools to build analytics and gain actionable insights;
•advances in the use of data and AI-based analytics to better market to and engage with customers, price policies, and manage claims;
•development of opportunities to compete or partner with new or non-traditional players, such as insurtech businesses, that offer disruptive underwriting and distribution models;
•generational turnover in the underwriting and claims workforce, as the baby boomer generation retires and insurers must hire, train, and retain talent at scale; and
•the introduction and leveraging of new technologies, such as generative AI, large language models, autonomous driving, and the internet-of-things.
While each insurer may have different goals and priorities when pursuing new technology investments, in response to these trends, changes, challenges, and opportunities, there are several major themes that we believe guide these investments:
•Innovation. Insurers are under pressure to innovate across their product lifecycle in order to grow their business and improve service quality. Examples of focus areas include creating services and products to target under-insured risks such as cyber, supply chain disruption, and reputational risk and partnering with insurtech providers to streamline operations and improve service to policyholders and agents.
•Agility. Insurers face rising competitive and market pressures that demand faster product definition, risk selection and pricing, and market adjustments. These pressures are rapidly changing and heightened by climate-driven risk events such as wildfires and floods, growing competition from digital-first insurers, social inflation that is contributing to higher claims severity across lines of business, and broader macroeconomic challenges including inflation, supply chain volatility, and changes in trade policies.
•Data Driven Decision-Making. Insurers are increasingly leveraging proprietary and third-party data sources, ranging from the internet-of-things to catastrophe and climate models, in order to inform decisions across underwriting, claims, and pricing. Predictive analytics and AI technologies can help underwriters and claims professionals improve risk selection and loss outcomes, while automation enables straight-through processing where possible. At the same time, insurers must balance these gains with transparency and compliance requirements around the use of analytics and AI technologies. Insurers also face costs from fraud in underwriting and claims and are using analytics and AI technologies to improve detection and reduce related expenses.
•Digital Engagement Models. Policyholders and agents increasingly expect seamless, digital-first experiences. Insurers are investing in modern engagement tools to reduce customer dissatisfaction and improve retention while transitioning from transactional interactions to more advisory and personalized relationships. Examples include embedded insurance offerings, personalized product recommendations, and omnichannel claims service. These investments can drive higher lead conversion and lower churn.
•Cloud-Delivered Solutions. Adoption of cloud platforms is accelerating as insurers recognize the cost efficiencies, scalability, and security benefits of public cloud infrastructure. We believe cloud deployment also enables faster innovation cycles, improved resilience during catastrophe events, and easier compliance with evolving regulatory requirements. By shifting infrastructure management to third parties, insurers can focus more resources on differentiating products and services.
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•Legacy System Modernization. A significant portion of the market continues to rely on legacy systems. We believe modern policy administration, claims management, and billing systems will continue to be adopted as insurers that rely on legacy systems seek to gain operating efficiencies, expand into new markets and lines of business, and introduce new digital and data offerings.
Products
The Guidewire product portfolio is designed so that insurers can increase revenue, reduce operational costs and losses, improve pricing, and engage with a customer base that increasingly demands convenience and automated forms of self-service and communication. We are investing in research and development to accelerate improvements in our platform and suite of products to better serve our customers.
Core Operational Products
We offer the following suite of products: Guidewire InsuranceSuite and Guidewire InsuranceNow.
Guidewire InsuranceSuite
Guidewire InsuranceSuite is a highly configurable and scalable product, delivered as a service, and primarily comprised of five core applications (PolicyCenter, ClaimCenter, BillingCenter, PricingCenter and UnderwritingCenter) that can be subscribed to separately or together. These applications are built on and optimized for our GWCP architecture and leverage our in-house cloud operations team. GWCP is a Guidewire-developed infrastructure layer enabled by and hosted on Amazon Web Services (“AWS”). GWCP’s architecture consists of three primary layers. The specialized cloud infrastructure service and tool layer centered around optimizing service and resource availability, performance, scalability, and cost efficiency, maintaining data security, privacy and regulatory compliance, and offering a high degree of service observability to provide customers with better insight and control consistent with their operational needs. The data platform layer providing access to core and predictive analytics data to allow creation of curated datasets that can be used to drive delivery of actionable insights across the insurance lifecycle. The app platform layer containing modular, cloud-native services decoupled from the InsuranceSuite core that can be used individually or interconnected to enhance existing applications and empower creation of new business applications. GWCP was developed to meet the specialized needs of the P&C insurance industry, providing a scalable cloud architecture that combines multi-tenant cloud services and tools with the ability to isolate each customer’s system of record and database instances. This architectural approach provides our customers with the benefits of cloud-native infrastructure and services and the flexibility to provide differentiated services to their customers.
InsuranceSuite is designed to support multiple releases each year to accelerate delivery of new capabilities and ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts. Additionally, InsuranceSuite embeds digital, analytics, and generative AI capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite.
Guidewire PolicyCenter is our flexible underwriting and policy administration application that serves as a comprehensive system-of-record supporting the entire policy lifecycle, including product definition, underwriting, quoting, binding, issuance, endorsements, audits, cancellations, and renewals. Guidewire PricingCenter is our integrated pricing and rating engine that centralizes pricing strategy, operationalizes advanced analytics, and enables rapid test-and-learn rate changes across products, channels, and regions. Guidewire UnderwritingCenter is an agentic, AI-powered underwriting application that turns submissions into better, faster decisions from intake through risk selection and bind, unifying data, workflows, and insights so underwriters can focus on high-value, preferred opportunities. Guidewire ClaimCenter is a complete end-to-end claims management solution that offers core claims management and servicing functionality. Guidewire BillingCenter automates the billing lifecycle, enables the design of a wide variety of billing and payment plans, manages agent commissions, and integrates with external payment systems. These primary applications also include predictive analytics that drive smart decisions, digital engagement, and an ecosystem of partners and insurtechs.
Guidewire InsuranceNow
Guidewire InsuranceNow is a cloud-based application that offers policy administration, claims management, and billing functionality, plus pre-integrated document production, analytics, and other capabilities, that increases agility without adding complexity in a single bundled software service. Like InsuranceSuite, InsuranceNow is hosted on GWCP and managed by our internal cloud operations team. InsuranceNow is currently only available in the United States (“U.S.”) and Canada, and is generally suited to mid-market carriers and managing general agents, who are highly cost sensitive and whose needs are often not as complex as a typical InsuranceSuite customer.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included in Item 8 and the Risk Factors included in Item 1A of Part I of this Annual Report on Form 10-K. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references in this Annual Report on Form 10-K to particular years or quarters refer to our fiscal years ended in July and the associated quarters of those fiscal years. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations located in our Form 10-K for the fiscal year ended July 31, 2025, filed on September 11, 2025, for reference to discussion of the fiscal year ended July 31, 2024, the earliest of the three fiscal years presented.
Overview
Guidewire is the platform that property and casualty (“P&C”) insurers rely on to engage with customers, innovate, and operate more efficiently. Our platform combines core systems of record with digital, analytics, and predictive and generative AI capabilities. We serve insurers of all sizes, ranging from global carriers to regional and local providers, helping them navigate a rapidly changing insurance market.
Our foundational core products, InsuranceSuite and InsuranceNow, are delivered as a cloud-based subscription service leveraging our proprietary cloud platform which we refer to as Guidewire Cloud Platform (“GWCP”). These products serve as transactional systems of record, fully supporting insurance operations, including product definition, pricing and rating, underwriting, policy administration, billing, and claims management.
In addition, we provide digital engagement offerings that enable seamless sales, pricing and rating solutions, and enhanced claims experiences for policyholders, agents, vendors, and field personnel. Our analytics products allow insurers to manage and use data more effectively, gain business insights, improve operational efficiency, and underwrite emerging risks. To support insurers worldwide, we localize our products to address diverse regulatory, language, and currency requirements. Additionally, we provide Guidewire Marketplace which offers a vetted collection of insurtech applications.
InsuranceSuite is a highly configurable and scalable product, delivered as a service, and primarily comprised of five core applications (PolicyCenter, ClaimCenter, BillingCenter, PricingCenter, and UnderwritingCenter) that can be subscribed to separately or together. These applications are built on and optimized for our GWCP architecture and leverage our in-house cloud operations team. InsuranceSuite is designed to support multiple releases each year to accelerate delivery of new capabilities and ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts. Additionally, InsuranceSuite embeds digital, analytics, and generative AI capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite.
InsuranceNow is a complete, cloud-based application that offers policy administration, claims management, and billing functionality, plus pre-integrated document production, analytics, and other capabilities, that increases agility without adding complexity. Like InsuranceSuite, InsuranceNow is hosted on GWCP and managed by our internal cloud operations team. InsuranceNow is currently only available in the U.S. and Canada, and is generally suited to mid-market carriers and managing general agents, who are highly cost sensitive and whose needs are often not as complex as a typical InsuranceSuite customer.
We reach customers directly through our global sales team and in partnership with third-party global system integrators (“SIs”). Because our platform is central to insurers’ operations, customer evaluation cycles are often extensive, particularly when multiple products are involved or when insurers are moving to GWCP for the first time. Sales processes typically include detailed due diligence and customer reference checks. Our growth depends on continuously enhancing existing products, introducing new capabilities, ensuring efficient cloud operations, and expanding local or market-specific content.
We sell our products primarily through subscription services for our platform and cloud-delivered products. We generally price our subscription services for core products based on the amount of Direct Written Premium (“DWP”) managed on our platform, with certain cloud-delivered products priced based on usage and associated resource consumption. Initial subscription agreements are generally five years in duration, with annual renewals thereafter. In some instances, we have customers that sign contracts with an initial term of seven years or longer. Subscription revenue is recognized ratably over the contract term. We also offer term licenses, primarily for existing on-premise customers, as well as support and professional services. Support is typically priced as a percentage of license fees and recognized ratably. Professional services are generally billed monthly on a time-and-materials basis; however, certain services engagements are based on a fixed fee, and revenue is recognized on a percentage of completion basis.
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Over the past few years, we have primarily been entering into cloud-based subscription arrangements with our new and existing customers, and we anticipate that subscription arrangements will continue to be a significant majority of annual new sales going forward. We may decide to change certain contract terms in new arrangements to remain competitive or otherwise meet market demands which may impact the way we recognize revenue and/or ARR.
To extend our technology leadership in the global market and to drive operating efficiency, we continue to invest in product development and cloud operations to enhance and improve our current products, introduce new products, and advance our ability to securely and cost-effectively deliver our services in the cloud. Continued investment is critical as we seek to assist our customers in achieving their technology goals, maintain our competitive advantage, grow our revenue, expand internationally, and meet evolving customer demands. In certain cases, we may also acquire skills and technologies to manage our cloud infrastructure and accelerate our time to market for new products, solutions, and upgrades.
Our track record of success with customers and their implementations is central to maintaining our strong competitive position. We rely on our global services team and SI partners to ensure that teams with the right combination of product, business, and language skills are used in the most efficient way to meet our customers’ implementation and migration needs. We have extensive relationships with SI, consulting, technology, and other industry partners. Our network of partners has expanded as interest in and adoption of our platform has grown. Our strong relationships with leading SI partners enhance our direct sales through co-marketing efforts and by providing additional market validation of the distinctiveness and quality of our offerings. We encourage our partners to pursue joint sales initiatives, obtain certifications related to our products, and drive broader adoption of our technology, helping us grow our business more efficiently and enabling us to focus our resources on continued innovation and further enhancement of our solutions.
We work closely with our network of SI partners to facilitate new sales and implementations of our products. Our partnerships with leading SI partners allow us to increase efficiency and scale while reducing customer implementation and migration costs. We continue to invest time and resources to increase the number of qualified consultants employed by our SI partners, develop relationships with new partners in existing and new markets, and ensure that all SI partners are qualified to assist with implementing our products. We believe this model will continue to serve us well, and we intend to continue to expand our network of partners and the number of certified consultants with whom we work so we can leverage our SI partners more effectively, especially for future subscription migrations and implementations.
We face a number of risks in the execution of our strategy, including, but not limited to, risks related to fluctuations in our results due to factors largely outside of our control, reliance on sales to a relatively small number of large customers and the related substantial negotiating leverage of these customers, lengthy and variable sales and implementation cycles, competing effectively in the global market, growing our business and managing our expanding operations, development, adoption, deployment, workforce use and maintenance of AI in an evolving regulatory environment, making long-term pricing commitments based on cost estimates that may change, expanding market adoption of our cloud-based offerings, maintaining customer satisfaction and renewals, cost-effectively and securely managing the infrastructure of our cloud-based customers, and the impact of these and other factors, including the impact of AI on the insurance and software industries, on our stock price and its volatility. In response to these and other risks we might face, we continue to invest in many areas of our business, including product development, cloud operations, cybersecurity, introduction of new products and/or new features, implementation and migration services, and sales and marketing.
Seasonality
We have experienced seasonal variations in our license revenue and, to a lesser extent, in our subscription revenue as a result of increased customer orders in our fourth fiscal quarter, which is the quarter ending July 31. We generally see significantly increased orders in our fourth fiscal quarter due to efforts by our sales team to achieve annual incentives. As a result, a significantly higher percentage of our annual license revenue and cash receipts have historically been recognized in our fourth fiscal quarter. Because we recognize revenue upfront for term licenses compared to over time for subscription services, an increase in term licenses due to renewals or expansion orders, or a decrease from migrations or non-renewals may impact our quarterly results. Additionally, any significant multi-year term license renewal or non-renewal could impact quarterly results and cash flows. Subscription sales now represent the significant majority of total sales and, as a result when compared to term license sales, the revenue we recognize in the initial fiscal year of an order is lower, deferred revenue is higher, and our total reported revenue growth may be adversely affected in the near term due to the ratable nature of these arrangements. Over time, this ratable revenue dynamic has and will dampen the impact of seasonality on our revenue. However, our cash flows remain subject to seasonal variations and will most likely remain concentrated in the fourth fiscal quarter due to the annual billing arrangements of our customer contracts.
Our services revenue is also subject to seasonal fluctuations, though to a lesser degree than our license revenue and subscription revenue. Our services revenue is impacted by the number of billable days in a given fiscal quarter. Our second fiscal quarter, which is the quarter ending January 31, usually has fewer billable days due to the impact of calendar year end holidays. Our fourth fiscal quarter usually has fewer billable days due to the impact of vacations taken by our services professionals. Because we pay our services
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professionals the same amount throughout the year, our gross margins on our services revenue are usually lower in these quarters. This seasonal pattern, however, may be absent in any given year.
Global Events
Global events have adversely affected and may continue to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflationary pressures, and increased market volatility. For instance, the ongoing war between Russia and Ukraine, conflicts in the Middle East, tensions in the South China Sea, currency exchange fluctuations, changes in interest rates, changes in trade policies and practices (including the imposition of tariffs), previous bank failures in the U.S. and Switzerland, and supply chain issues have contributed to global economic and market volatility in recent years. We are unable to accurately predict the full impact that these global events will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties.
Our business and financial results have been and may in the future be impacted due to these disruptions, which may affect our ARR and revenue growth rates, sales cycles, services revenue and margins, operating cash flow and expenses, employee attrition, hiring and onboarding necessary personnel, allowance for collectibility of accounts receivable and unbilled receivables, and the change in fair value of strategic investments. Additionally, inflation levels and political uncertainty are impacting the global economy and have magnified the impact of these disruptions.
Our customers may be unable to pay or may request amended payment terms for their outstanding invoices due to the economic impacts from these disruptions, and we may need to increase our accounts receivable allowances. A decrease in orders in a given period could negatively affect our revenue and ARR in future periods, particularly if experienced on a sustained basis, because a substantial proportion of our new software subscription services orders is recognized as revenue over time. Also, the global economic impact of these disruptions could affect our customers’ DWP, which could ultimately impact our revenue as we generally price our products based on the amount of DWP that will be managed by our products. As a result of these developments and the related economic impact to our business, we may be required to record impairment related to our operating lease assets, investments, long-lived assets, capitalized software development costs, intangible assets, or goodwill.
We will continue to monitor and evaluate the nature and extent of these global events on our business.
Key Business Metrics
We use certain key metrics and financial measures not prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) to evaluate and manage our business, including ARR and Free Cash Flow. For a further discussion of how we use key metrics and certain non-GAAP financial measures, see “Non-GAAP Financial Measures” in this Annual Report on Form 10-K.
Annual Recurring Revenue (“ARR”)
We use ARR to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, support contracts, and hosting agreements based on customer contractual terms and invoicing activities for the current reporting period, which may not be the same as the timing and amount of revenue recognized. ARR reflects all fee changes due to contract renewals, non-renewals, expansion, cancellations, attrition, or renegotiations at a higher or lower fee arrangement that are effective as of the ARR reporting date. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded from our ARR calculations. In some arrangements with multiple performance obligations, a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes, but does not get allocated for purposes of calculating ARR. This revenue allocation generally only impacts the initial term of the contract. This means that if we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value would be recognized as services revenue, but our reported ARR amount would not be impacted. During the fiscal year ended July 31, 2026, the recurring license and support or subscription contract value recognized as services revenue was $7.2 million.
If a customer contract contains invoicing amounts that increase over the contract term, then ARR reflects the annualized invoicing amount outlined in the contract for the current reporting period. For example, given a contract with annual invoicing of $1.0 million at the beginning of year one, $2.0 million at the beginning of year two, and $3.0 million at the beginning of year three, and the reporting period is subsequent to year two invoicing and prior to year three invoicing, the reported ARR for that contract would be $2.0 million.
As of July 31, 2026, ARR was $1,237 million, or $1,242 million based on currency exchange rates as of July 31, 2025. We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency exchange rates. ARR grew in fiscal year 2026 by 19%, both on a reported and constant currency basis.
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Free Cash Flow
We monitor our free cash flow as a key measure of our overall business performance, which enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, and stock-based compensation expenses. Additionally, free cash flow takes into account the impact of changes in deferred revenue, which reflects the receipt of cash payments for products before they are recognized as revenue, and unbilled accounts receivable, which reflects revenue that has been recognized that has yet to be invoiced to our customers. Our net cash provided by (used in) operating activities is significantly impacted by the timing of invoicing and collections of accounts receivable, the timing and amount of annual bonus payments, as well as payroll, commissions, payroll taxes, and other tax payments. Our capital expenditures consist of purchases of property and equipment, primarily computer hardware, software, and leasehold improvements, and capitalized software development costs. For a further discussion of our operating cash flows, see “Liquidity and Capital Resources – Cash Flows.”
| Fiscal years ended July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by (used in) operating activities | $ | 389,716 | $ | 300,867 | |||||||
| Purchases of property and equipment | (12,056) | (5,741) | |||||||||
| Capitalized software development costs | (19,003) | (14,714) | |||||||||
| Free cash flow | $ | 358,657 | $ | 280,412 | |||||||
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. Accounting policies, methods, and estimates are an integral part of the preparation of our consolidated financial statements in accordance with GAAP and, in part, are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments. While there are a number of significant accounting policies, methods, and estimates affecting our consolidated financial statements, which are described in Note 1 “The Company and Summary of Significant Accounting Policies and Estimates” to our consolidated financial statements included in this Annual Report on Form 10-K, our revenue recognition policies are critical to the periods presented.
Revenue Recognition
Revenue recognition requires judgment and the use of estimates, especially in identifying and evaluating the various non-standard terms and conditions in our contracts with customers as to their effect on reported revenue.
Our revenue is derived from contracts with customers. The majority of our revenue is derived from subscriptions to our cloud services, licensing arrangements for our software, and implementation and other professional services arrangements. We account for revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to recognize revenue upon the transfer of services or products to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products. We apply a five-step framework to recognize revenue as described in our Revenue Recognition policy included in Note 1 of our consolidated financial statements included in this Annual Report on Form 10-K.
Our customers have significant negotiating power during the sales process, which can and does result in terms and conditions that are different from our standard terms and conditions. When terms and conditions of our customer contracts are not standard, certain negotiated terms may require significant judgment in order to determine the appropriate revenue recognition in accordance with ASC 606.
The estimates and assumptions requiring significant judgment under our revenue policy in accordance with ASC 606 are as follows:
Allocation of the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance
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obligation based on its standalone selling price (“SSP”) in relation to the total fair value of all performance obligations in the arrangement. Some of our performance obligations, such as support, implementation services, training services, and certain subscription services have observable inputs that are used to determine the SSP of those distinct performance obligations. Where SSP is not directly observable, we determine the SSP using information that may include market conditions and other observable inputs. In the circumstances when available information to determine SSP is highly variable or uncertain, such as for our term licenses, we will use the residual method.
The majority of our contracts contain multiple performance obligations, such as when licenses are sold with support, implementation services or training services. As customers enter into a subscription agreement to migrate from an existing term license agreement, customers may, for a period of time, be under contract for self-managed licenses and support, in addition to subscription services, which may require an allocation of the transaction price to each performance obligation. New subscription agreements also typically include implementation, configuration, and training services, which may require an allocation of the transaction price to each performance obligation.
Additionally, contract modifications for products that are distinct but are not priced commensurate with their SSP or are not distinct from the existing contract may affect the initial transaction price or the allocation of the transaction price to the performance obligations in the contract. In such cases, revenue recognized may be adjusted.
Recent Accounting Pronouncements
See Note 1 “The Company and Summary of Significant Accounting Policies and Estimates” to our consolidated financial statements included in this Annual Report on Form 10-K for a full description of recent accounting pronouncements adopted, including the dates of adoption, and recent accounting pronouncements not yet adopted.
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Results of Operations
The following table sets forth our results of operations for the years presented. The data has been derived from the consolidated financial statements contained in this Annual Report on Form 10-K. The results of operations for any period should not be considered indicative of results for any future period. Certain figures included in this document have been subjected to rounding adjustments. Accordingly, figures shown in the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
| Fiscal years ended July 31, | |||||||||||||||||||||||||||||||
| 2026 | As a % of total revenue | 2025 | As a % of total revenue | ||||||||||||||||||||||||||||
| (in thousands except percentages) | |||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||
| Subscription and support | $ | 970,885 | 66 | % | $ | 731,296 | 61 | % | |||||||||||||||||||||||
| License | 234,578 | 16 | 251,935 | 21 | |||||||||||||||||||||||||||
| Services | 269,900 | 18 | 219,228 | 18 | |||||||||||||||||||||||||||
| Total revenue | 1,475,363 | 100 | 1,202,459 | 100 | |||||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||||
| Subscription and support | 265,203 | 18 | 235,106 | 20 | |||||||||||||||||||||||||||
| License | 1,982 | — | 3,624 | — | |||||||||||||||||||||||||||
| Services | 260,810 | 18 | 211,676 | 18 | |||||||||||||||||||||||||||
| Total cost of revenue | 527,995 | 36 | 450,406 | 38 | |||||||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||
| Subscription and support | 705,682 | 48 | 496,190 | 41 | |||||||||||||||||||||||||||
| License | 232,596 | 16 | 248,311 | 21 | |||||||||||||||||||||||||||
| Services | 9,090 | 1 | 7,552 | — | |||||||||||||||||||||||||||
| Total gross profit | 947,368 | 64 | 752,053 | 62 | |||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||
| Research and development | 340,097 | 23 | 296,160 | 24 | |||||||||||||||||||||||||||
| Sales and marketing | 258,937 | 18 | 230,346 | 19 | |||||||||||||||||||||||||||
| General and administrative | 198,460 | 13 | 184,479 | 15 | |||||||||||||||||||||||||||
| Total operating expenses | 797,494 | 54 | 710,985 | 58 | |||||||||||||||||||||||||||
| Income (loss) from operations | 149,874 | 10 | 41,068 | 4 | |||||||||||||||||||||||||||
| Interest income | 48,564 | 3 | 56,625 | 4 | |||||||||||||||||||||||||||
| Interest expense | (13,324) | (1) | (13,211) | (1) | |||||||||||||||||||||||||||
| Other income (expense), net | (20,997) | (1) | (35,087) | (3) | |||||||||||||||||||||||||||
| Income (loss) before provision for (benefit from) income taxes | 164,117 | 11 | 49,395 | 4 | |||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | 24,834 | 2 | (20,409) | (2) | |||||||||||||||||||||||||||
| Net income (loss) | $ | 139,283 | 9 | % | $ | 69,804 | 6 | % | |||||||||||||||||||||||
Comparison of the Fiscal Years Ended July 31, 2026 and 2025
Revenue
We derive our revenue primarily from delivering cloud-based services, licensing our software applications, providing support, and delivering professional services.
Subscription and Support
The majority of our revenue consists of fees for our subscription services, which are generally priced based on the amount of DWP that is managed by our subscription services. Subscription revenue is recognized ratably over the term of the arrangement, beginning at the point in time our provisioning process has been completed and access has been made available to the customer. The initial term of such arrangements is generally five years, though in some instances customers have entered into contracts with an initial
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term of seven years or longer. Subscription agreements contain optional annual renewals commencing upon the expiration of the initial contract term. A majority of our subscription customers are billed annually in advance. In some arrangements with multiple performance obligations, a portion of recurring subscription contract value may be allocated to license revenue or services revenue for revenue recognition purposes. For example, in arrangements with multiple performance obligations that include services at discounted rates, a portion of the total contract value related to subscription services will be allocated and recognized as services revenue. Additionally, agreements to migrate an existing term license customer to subscription services contain multiple performance obligations, including a provision to continue using the term license during the subscription service implementation period. Under these migration agreements, a portion of the total contract value related to subscription services could be allocated and recognized as term license and support revenue in the period renewed or delivered.
Our support revenue is generally recognized ratably over the committed support term of the licensed software. Our support fees are typically priced as a fixed percentage of the associated term license fees. We generally invoice support annually in advance. Support related to subscription arrangements is included in subscription revenue, as support is not quoted or priced separately from the subscription services.
License
The majority of our license revenue consists of term license fees. Our term license revenue is primarily generated through license fees that are billed annually in advance during the term of the contract, including any renewals. Our term license fees are generally priced based on the amount of DWP that will be managed by our licensed software. Our term licenses are generally sold under an initial term of two years with optional annual renewals after the initial term. Term license revenue for the committed term of the customer agreement is generally fully recognized upon delivery of the software or at the beginning of the renewal term. We do enter into license arrangements that have an initial term of two or more years and renewal terms of more than one year which results in significantly higher revenue in the initial year of the committed term than arrangements for our subscription services.
Services
Our services revenue is primarily derived from implementation and migration services performed for our customers, reimbursable travel expenses, and training fees. A majority of our services engagements are billed and revenue is recognized on a time and materials basis upon providing our services, while certain services engagements are based on a fixed fee, and revenue is recognized on a percentage of completion basis.
| Fiscal years ended July 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
As a % of total | As a % of total | ||||||||||||||||||||||||||||||||||
| Amount | revenue | Amount | revenue | ($) | (%) | ||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Subscription and support: | |||||||||||||||||||||||||||||||||||
| Subscription | $ | 915,792 | 62 | % | $ | 667,436 | 56 | % | $ | 248,356 | 37 | % | |||||||||||||||||||||||
| Support | 55,093 | 4 | 63,860 | 5 | (8,767) | (14) | |||||||||||||||||||||||||||||
| License | 234,578 | 16 | 251,935 | 21 | (17,357) | (7) | |||||||||||||||||||||||||||||
| Services | 269,900 | 18 | 219,228 | 18 | 50,672 | 23 | |||||||||||||||||||||||||||||
| Total revenue | $ | 1,475,363 | 100 | % | $ | 1,202,459 | 100 | % | $ | 272,904 | 23 | % | |||||||||||||||||||||||
Subscription and Support
We anticipate subscriptions will continue to represent a significant majority of new arrangements, including customers migrating from existing term license arrangements to subscription services, in future periods. Due to the ratable recognition of subscription revenue, growth in subscription revenue will lag behind the growth of subscription orders and will impact the comparative growth of our reported revenue on a year-over-year basis. If we complete a higher percentage of subscription arrangements towards the end of a given period, our short-term growth rates will be negatively impacted. Due to the seasonal nature of our business, the impact of new subscription orders in our fourth fiscal quarter, our historically largest quarter for new orders, is not fully reflected in revenue until the following fiscal year.
Subscription revenue increased by $248.4 million compared to the prior year, primarily due to the impact of cloud transition agreements entered into and provisioned since July 31, 2025, new subscription agreements, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term.
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Support revenue decreased by $8.8 million compared to the prior year, primarily due to customers migrating from on-premise term licenses to subscription services. Support related to subscription arrangements is included in subscription revenue, as support is not quoted or priced separately from the subscription services. As customers enter into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognized will be impacted by allocations of the total contract value between the subscription, support, and license performance obligations. As a result, we expect that the small percentage of term licenses as a percentage of total new sales and customers migrating from term licenses to subscription services will result in lower support revenue in the future.
License
Revenue related to new term licenses and multi-year term license renewals is generally recognized upfront and, as a result, no additional license revenue is recognized until after the committed term expires. As a customer enters into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognized will be impacted by allocations of total contract value between license, subscription, and support performance obligations. License revenue growth has and will be negatively impacted as subscription sales are a significant majority of total new sales and as customers migrate from term licenses to subscription services instead of renewing their term licenses.
Term license revenue decreased by $17.4 million compared to the prior year, primarily due to agreements that migrate customers from a term license to a subscription service, partially offset by an increase in renewals. Ongoing revenue related to migration agreements is recorded as subscription revenue.
Services
Services revenue increased by $50.7 million compared to the prior year, primarily due to higher utilization of services employees and new subscription implementation and migration projects.
We expect our services revenue to fluctuate between periods due to changes in the volume, size, mix, and timing of our professional services engagements, and how quickly we deliver that work. Our services revenue and margins may also be affected by negotiated billing rates, utilization levels, and our use of subcontractors. Additionally, services revenue overall may continue to be impacted by investments in customer implementations and migration projects, including fixed fee or capped arrangements, to accelerate customer transition to the cloud. In these arrangements when a project extends longer than originally anticipated, the average billing rate we recognize may decrease, which can result in revenue adjustments and lower gross profit. As we continue to expand into new markets and develop new products and services, we have, and may continue to, enter into contracts with lower average billing rates, make investments in customer implementation and migration engagements, and enter into fixed price contracts, which could impact our services revenue and gross margins.
Cost of Revenue and Gross Profit
Our cost of subscription and support revenue primarily consists of personnel costs for our cloud operations and technical support teams, cloud infrastructure costs, development of online training curriculum, amortization of intangible assets, and royalty fees paid to third parties. Our cost of license revenue primarily consists of royalty fees paid to third parties and amortization of intangible assets. Our cost of services revenue primarily consists of personnel costs for our professional service employees, third-party subcontractors or consultants, and travel costs. In instances where we have primary responsibility for the delivery of services, subcontractor fees are expensed as cost of services revenue. In each case, personnel costs include salaries, bonuses, benefits, and stock-based compensation.
We allocate overhead such as information technology infrastructure and software expenses, information security infrastructure and software expenses, and facilities expenses to all functional departments based on headcount. As such, these general overhead expenses are reflected in cost of revenue and each functional operating expense.
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Cost of Revenue:
| Fiscal years ended July 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| Amount | As a % of total revenue | Amount | As a % of total revenue | ($) | (%) | ||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||||||||
| Subscription and support | $ | 265,203 | 18 | % | $ | 235,106 | 20 | % | $ | 30,097 | 13 | % | |||||||||||||||||||||||
| License | 1,982 | — | 3,624 | — | (1,642) | (45) | |||||||||||||||||||||||||||||
| Services | 260,810 | 18 | 211,676 | 18 | 49,134 | 23 | |||||||||||||||||||||||||||||
| Total cost of revenue | $ | 527,995 | 36 | % | $ | 450,406 | 38 | % | $ | 77,590 | 17 | % | |||||||||||||||||||||||
| Includes stock-based compensation of: | |||||||||||||||||||||||||||||||||||
| Cost of subscription and support revenue | $ | 13,814 | $ | 13,953 | $ | (139) | |||||||||||||||||||||||||||||
| Cost of license revenue | — | 136 | (136) | ||||||||||||||||||||||||||||||||
| Cost of services revenue | 24,583 | 20,759 | 3,824 | ||||||||||||||||||||||||||||||||
| Total | $ | 38,396 | $ | 34,848 | $ | 3,548 | |||||||||||||||||||||||||||||
Cost of subscription and support revenue increased by $30.1 million compared to the prior year, primarily due to increases in cloud infrastructure expense of $14.6 million driven by increased transaction volume on our cloud services, personnel costs of $8.9 million due to higher headcount, amortization of intangible assets of $2.0 million due to newly acquired intangible assets being amortized, and royalties of $1.7 million.
We expect the cost of subscription and support revenue to increase in absolute dollars due to a greater number of customers utilizing our cloud services, continued adoption of cloud-based and AI-related product features, growth in cloud customer transaction volume, and the impact of inflation and other macroeconomic events.
Cost of license revenue decreased by $1.6 million compared to the prior year, primarily due to a decrease in personnel costs of $1.3 million, and to a lesser extent, a decrease in royalties. Personnel costs associated with the development of online training curriculum are primarily focused on our cloud services, thus contributing to the decrease in cost of license revenue.
We continue to anticipate lower cost of license revenue over time as our term license customers transition to cloud subscription agreements.
Cost of services revenue increased by $49.1 million compared to the prior year, primarily due to increases in personnel expense of $27.6 million due to higher headcount, subcontractor expense of $14.1 million due to implementations involving our SI partners, and travel expenses of $4.0 million.
We had 670 cloud operations and technical support employees and 1,015 professional services employees as of July 31, 2026 compared to 606 cloud operations and technical support employees and 873 professional services employees as of July 31, 2025.
Gross Profit:
| Fiscal years ended July 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| Amount | Margin % | Amount | Margin % | ($) | (%) | ||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||||||
| Subscription and support | $ | 705,682 | 73 | % | $ | 496,190 | 68 | % | $ | 209,492 | 42 | % | |||||||||||||||||||||||
| License | 232,596 | 99 | 248,311 | 99 | (15,715) | (6) | |||||||||||||||||||||||||||||
| Services | 9,090 | 3 | 7,552 | 3 | 1,538 | 20 | |||||||||||||||||||||||||||||
| Total gross profit | $ | 947,368 | 64 | % | $ | 752,053 | 63 | % | $ | 195,315 | 26 | % | |||||||||||||||||||||||
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Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-09-08 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $160.52 | -$192,624 |
| 2026-08-31 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $204.44 | -$245,328 |
| 2026-08-27 | Peterson David Franklin | Chief Accounting Officer | Sell | -2,500 | $200.00 | -$500,000 |
| 2026-08-24 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $187.82 | -$225,384 |
| 2026-08-25 | Mullen John P | President | Sell | -1,800 | $188.46 | -$339,228 |
| 2026-08-19 | Mullen John P | President | Sell | -30,600 ×2 | $185.00 | -$5,661,000 |
| 2026-08-17 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $172.88 | -$207,456 |
| 2026-08-10 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $169.50 | -$203,400 |
| 2026-08-03 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $155.92 | -$187,104 |
| 2026-07-27 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $142.31 | -$170,772 |
| 2026-07-20 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $147.42 | -$176,904 |
| 2026-07-13 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $138.47 | -$166,164 |
| 2026-07-09 | King James Winston | Chief Admin Officer, Gen Couns | Sell | -1,684 | $130.64 | -$219,998 |
| 2026-07-06 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $131.63 | -$157,956 |
| 2026-06-29 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $124.29 | -$149,148 |
| 2026-06-22 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $105.67 | -$126,804 |
| 2026-06-22 | Cooper Jeffrey Elliott | Chief Financial Officer | Sell | -1,348 | $105.67 | -$142,443 |
| 2026-06-16 | King James Winston | Chief Admin Officer, Gen Couns | Sell | -999 | $118.74 | -$118,624 |
| 2026-06-16 | Peterson David Franklin | Chief Accounting Officer | Sell | -246 | $118.74 | -$29,211 |
| 2026-06-16 | Cooper Jeffrey Elliott | Chief Financial Officer | Sell | -2,594 | $118.74 | -$308,019 |
| 2026-06-16 | Mullen John P | President | Sell | -4,292 | $118.74 | -$509,645 |
| 2026-06-16 | Rosenbaum Michael George | Chief Executive Officer | Sell | -5,830 | $118.74 | -$692,272 |
| 2026-06-15 | Rosenbaum Michael George | Chief Executive Officer | Sell | -1,200 | $123.85 | -$148,620 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-12-03 10-Q expected by 2026-12-08 (in 82 days)
- ~2027-03-05 10-Q expected by 2027-03-10 (in 174 days)
- ~2027-06-04 10-Q expected by 2027-06-09 (in 265 days)
- ~2027-09-10 10-K expected by 2027-09-22 (in 363 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-09-11 10-K Annual Report
- 2026-09-03 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-07-22 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-06-05 10-Q Quarterly Report
- 2026-06-04 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-06 10-Q Quarterly Report
- 2026-03-05 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-08 8-K Other Events; Financial Statements and Exhibits
- 2025-12-04 10-Q Quarterly Report
- 2025-12-03 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-11 10-K Annual Report
- 2025-09-04 8-K Earnings Release; Financial Statements and Exhibits
- 2025-07-29 8-K Officer/Director Change
- 2025-06-04 10-Q Quarterly Report
- 2025-06-03 8-K Earnings Release; Financial Statements and Exhibits