Shares of Guidewire Software sank late Thursday after the insurance-technology company's full-fiscal year guidance raised a red flag for Wall Street.

Guidewire stock declined 16% after-hours, after ending regular trading down 2.5% to $151.17.

The company, which provides a software platform to property and casualty insurers, posted adjusted earnings of 82 cents a share for the fiscal 2026 third-quarter ended April 30, compared with 55 cents a share a year ago and coming in above Wall Street's 74 cents a share forecast. Revenue grew 27% to $372.5 million, surpassing analysts call for $355.9 million.

Guidewire also reported that annual recurring revenue increased 19% to $1.147 billion in the fiscal third quarter. That total just missed Wall Street's $1.148 billion prediction.

"It's clear that our strategy and market position are resonating with insurers as they focus on modernizing core systems, migrating critical business functions to our cloud platform solutions, and adopting AI across our applications," CEO Mike Rosenbaum said in the earnings release.

Looking ahead, Guidewire expects to end the fiscal fourth quarter with annual recurring revenue between $1.229 billion and $1.237 billion, above the analyst consensus for $1.22 billion. The company forecasts revenue between $396 million and $406 million for the fourth quarter, compared with Wall Steet's $394.1 million expectation.

When it comes to the full-fiscal year, the company sees annual recurring revenue between $1.229 billion and $1.237 billion, with a midpoint of $1.233 billion. That midpoint is just below the $1.235 billion Wall Street expects for the fiscal year.

Annual recurring revenue is an important gauge for software companies, representing the predictable and annualized value of recurring subscription contracts. It shows revenue stability, proves customer satisfaction, and provides a baseline for company valuation.

Guidewire also raised its fiscal-year revenue outlook to $1.46 billion to $1.47 billion, up from its previous $1.438 billion to $1.448 billion guidance, and coming in above Wall Street's $1.44 billion view.