How Lower Migration Costs Are Shortening Guidewire Software’s (GWRE) Sales Cycle

How Lower Migration Costs Are Shortening Guidewire Software’s (GWRE) Sales Cycle

Thu, August 20, 2026 at 5:49 PM GMT+3 4 min read

• GWRE +1.00%

Brown Brothers Harriman, an investment management company, released its Q2 2026 investor letter for the "BBH Select Mid Cap ETF". A copy of the letter can be downloaded here. In the quarter, the fund increased 9.7% on a total return basis compared to the Russell Midcap Index's 13.8% return. Artificial intelligence is a key factor influencing market performance, with high-valuation and high-beta companies consistently outperforming others. The portfolio saw gains from being overweight in technology and industrials but missed opportunities due to underweighting more cyclical stocks. At the end of Q2 2026, the Fund held positions in 27 companies, with 48% of assets concentrated in the top 10 holdings. The Fund's strategy focuses on companies priced below intrinsic value to ensure a margin of safety, rather than on whether valuations are high or low. Additionally, reviewing the Fund's top five holdings could help identify its best picks for 2026.

In its Q2 2026 investor letter, BBH Select Mid Cap ETF highlighted Guidewire Software, Inc. (NYSE:GWRE). Guidewire Software, Inc. (NYSE:GWRE) provides a platform for property and casualty (P&C) insurers. On August 19, 2026, Guidewire Software, Inc. (NYSE:GWRE) closed at $181.18 per share, reflecting a market capitalization of $15.08 billion. Guidewire Software, Inc. (NYSE:GWRE) posted a one‑month return of 37.91%, while its shares lost 14.98% over the past 52 weeks.

BBH Select Mid Cap ETF stated the following regarding Guidewire Software, Inc. (NYSE:GWRE) in its Q2 2026 investor letter:

"The Fund's largest detractors to performance in the quarter were Guidewire Software, Inc. (NYSE:GWRE) and Dar ling Ingredients Inc. (Darling). Guidewire declined -17.7% during the quarter, ending with a weight of 3.1%. Guidewire is the leading provider of core systems software to the property and casualty (P&C) insurance industry. Guidewire reported strong fiscal third quarter results (its fiscal year ends in July), with revenue growth of 27% and profitability well ahead of guidance, and management raised full-year guidance for both. The shares nevertheless declined because annual recurring revenue (ARR) growth of 19% finished at the midpoint of guidance, the first quarter since 2022 that ARR did not meet or exceed the high end of its guidance, as a couple of deals slipped past quarter end. We believe the slippage reflects timing rather than demand. The pipeline remains healthy, and management noted the fiscal fourth quarter is off to a good start and could be a record quarter. Fully ramped ARR continues to grow faster than reported ARR, and management expects it to grow above the 22% achieved in fiscal year 25, which supports continued growth into future years. While AI is perceived as a risk by the market, a modern core system is a prerequisite for insurers to deploy AI, and early customer pilots using AI tooling have reduced cloud migration costs by approximately 35%, lowering the largest cost barrier to modernization. We believe this migration will drive Guidewire's growth for the next decade, as the Company currently wins more than 80% of competitive requests for proposals (RFPs) but only 25% of industry premiums are running on its systems. In addition, Guidewire's pricing is tied to direct written premiums rather than employee headcount, which makes it a beneficiary of rising insurance premiums and insulates it from potential AI-driven seat reductions."

Guidewire Software, Inc. (NYSE:GWRE) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held Guidewire Software, Inc. (NYSE:GWRE) at the end of the first quarter which was 69 in the previous quarter. While we acknowledge the potential of Guidewire Software, Inc. (NYSE:GWRE) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Guidewire Software, Inc. (NYSE:GWRE) and shared Baron Opportunity Fund's views on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.