Baron Asset Fund on Guidewire Software
Thesis
Guidewire declined after several new sales moved from the fiscal third quarter into the fourth quarter, which Baron views as a timing issue because those deals subsequently closed. InsuranceSuite is the core system of record for property and casualty insurers, and Baron estimates the core-system opportunity alone at nearly $20 billion of annual recurring revenue, roughly 20 times Guidewire's current size. AI is expected to expand the opportunity by adding automation and intelligence on top of the system of record while also improving Guidewire's own productivity. Baron expects adoption of new AI-enabled capabilities to accelerate over the coming year and believes this can support faster growth and improved profitability.
“We think the core-system opportunity alone represents nearly $20 billion of annual recurring revenue, or roughly 20 times Guidewire’s current size.”
Key risks
- Large software sales can shift between quarters
- Market concerns that AI could disrupt the insurance software business