Guidewire Software Inc. (GWRE) experienced a significant sell-off on Friday, with its stock plummeting 5.28% in intraday trading. The sharp decline followed the company's fiscal second-quarter 2025 earnings release, where it reported mixed results and provided an updated outlook for the full year.

For the quarter ended January 31, 2025, Guidewire reported non-GAAP earnings per share of $0.51, up 11% year-over-year but missing the Zacks Consensus Estimate by 1.9%. However, the company's revenue of $289.5 million surpassed expectations, increasing 20% year-over-year and exceeding the high end of its guidance range.

Guidewire's Guidewire Cloud continued to gain traction, with 12 new deal wins in the quarter, including four for the full InsuranceSuite Cloud, one for InsuranceNow, and the remainder for one or two core applications. Annual recurring revenue (ARR) reached $918.1 million, reflecting a 6.3% year-over-year increase.

Encouraged by the strong performance in the first half of the fiscal year, Guidewire raised its full-year 2025 guidance. The company now expects ARR to range between $1 billion and $1.01 billion, up from the previous projection of $995 million to $1.005 billion. Total revenue guidance was also raised to $1.164 billion to $1.174 billion, and non-GAAP operating income guidance was lifted to $175 million to $185 million.

Despite the raised outlook, Guidewire's stock experienced a significant sell-off, suggesting that investors were disappointed with the company's performance and guidance. While the revenue beat and increased guidance were positive factors, the earnings miss and potential concerns about the strength of the outlook may have weighed on investor sentiment. Additionally, the lack of significant positive catalysts or news events could have contributed to the market's negative reaction.