Clearwater Analytics (CWAN +0.18%), a provider of cloud-based investment accounting and analytics solutions, reported its second-quarter 2025 earnings on August 6, 2025. The key news from the release was the sharp rise in GAAP revenue, driven by recent acquisitions, particularly Enfusion and Beacon, with GAAP revenue coming in at $181.9 million, compared to the consensus estimate of $174.1 million. Non-GAAP earnings per share (EPS) reached $0.12, a cent above the $0.11 analyst forecast. While the company exceeded expectations for both GAAP revenue and adjusted EPS (non-GAAP), the quarter also saw significant GAAP net losses, margin dilution, and expanded debt levels as acquisitions were integrated. Overall, the quarter marked a major inflection point for the company as it began integrating new businesses at scale, adding both opportunities and new risks.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.13 | $0.11 | $0.10 | 20.0% |
| Revenue (GAAP) | $181.9 million | $174.1 million | $106.8 million | 70.3% |
| Non-GAAP Gross Margin | 77.4% | 77.5% | (0.1) pp | |
| Adjusted EBITDA | $58.3 million | $33.4 million | 74.6% | |
| Free Cash Flow | $44.1 million | $42.4 million | 4.0% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Success Factors
Clearwater Analytics offers cloud-based software for investment accounting, reporting, risk management, and compliance. At its core is a single-instance, multi-tenant platform that enables clients to access real-time investment data and analytics across asset classes. This approach simplifies reporting, improves accuracy, and reduces costs by automating complex processes that are typically handled by in-house teams or legacy systems.
Recently, the company has focused on expanding its capabilities. Key moves include acquisitions that bring new technology and broader functionality, such as front-office trading management and advanced risk analytics. Success depends heavily on the seamless integration of these new businesses and the continued adoption of its core platform by institutions needing robust compliance tools, analytics for alternative assets like hedge funds and private equity, and scalable investment operations.
Quarter in Review: Financials, Integration, and Client Wins
Headline GAAP revenue climbed 70.4% year over year, far outpacing the levels seen in earlier periods. This jump was driven mainly by contributions from acquired businesses, notably Enfusion, which brought front-office trading and portfolio management tools, and Beacon, known for its risk analytics software. The company’s core business, which excludes newly acquired operations, grew revenue by 22%—still solid, but less than the combined figure including acquisitions.
Adjusted EBITDA, a measure of profitability that removes certain non-cash and irregular charges, jumped 74.3% year over year. However, profit margins (non-GAAP gross margin) slipped to 77.4%, compared to 78.9% for standalone, pre-acquisition Clearwater in Q1 2025, illustrating that the new businesses currently operate at lower adjusted EBITDA margins (18%) and need operational improvement to reach legacy profitability. Non-GAAP gross margin held steady year over year at 77.4%, versus 77.5% in Q2 2024. GAAP gross margin dropped sharply to 65.1% as integration and acquisition-related costs weighed on results.
Net income, on a GAAP basis, moved from a slight profit to a $24.2 million loss. The company attributed this shift to higher operating expenses related to integration, transaction costs, and increased equity-based compensation. These one-time and ongoing costs highlight the near-term challenges of building a larger company via multiple acquisitions. Dilution from shares issued for these deals also pushed the weighted share count up by 24% from Q2 2024 to Q2 2025.
The integration of technology platforms remained a strong focus. Newly acquired Enfusion has brought a front-office system for order and portfolio management, complementing Clearwater’s middle- and back-office strengths. Beacon, meanwhile, adds risk modeling and analytics capabilities. By combining these, Clearwater’s vision is to offer a platform that covers all stages of the investment lifecycle—from trade execution to accounting and risk. Recent wins included mandates from large insurance groups in Europe such as Versicherungskammer, and a major Asia-Pacific bank, providing evidence that the integrated platform appeals to large global institutions. A strategic partnership with Bloomberg, integrating with its Asset and Investment Manager (AIM) system, also aims to broaden reach among institutional clients.
The company continues to drive recurring revenue, with Annualized recurring revenue (ARR) reached $783.5 million, an 83% increase year over year as of June 30, 2025. However, the gross revenue retention rate edged down from 99% to 98%, meaning a slightly higher percentage of customers reduced or left their business, as reflected by the gross revenue retention rate of 98% compared to 99% for Q2 2024. Net revenue retention held flat at 110%, showing that the business is still able to expand within its client base. Free cash flow increased just 4.0% year over year, indicating growing integration costs and interest expense from higher debt levels, which rose to $878.1 million (GAAP, as of June 30, 2025), up sharply from $45.2 million (GAAP, as of March 31, 2025). This step up in debt reflects acquisition funding and has introduced higher ongoing interest costs.
The company achieved its $20 million synergy target—a measure of cost-saving and operational benefit—one full year ahead of schedule. This supports the management’s claim that integration is progressing quickly. Material one-time expenses related to integration and equity compensation affected both margins and net income, and these are likely to remain meaningful in the next several quarters.
Growth in operating expenses was also notable compared to Q2 2024. This increase is tied to scaling the broader company and integrating new operations, but it also signals a period of heavy investment as management works to realize cost and growth benefits from recent deals.
Outlook and What to Watch
Management provided an outlook that signals ongoing expansion in the coming quarters. For Q3 2025, revenue is expected to reach $203–204 million, representing an increase of roughly 75–76% from the prior-year quarter, and adjusted EBITDA is projected at about $65 million (margin stable near 32%). For fiscal 2025 as a whole, revenue guidance stands at $726–732 million for the full year 2025, a year-over-year growth rate of 61–62%. Adjusted EBITDA for FY2025 is forecast at $232–237 million, with margins expected to remain in the ~32% range. These figures are modestly ahead of prior consensus and reflect anticipated contributions from acquisitions, but management is not including significant cross-selling synergies in its short-term assumptions.
As the company moves further into its integration roadmap, investors may want to track several themes: progress toward improving the margins of acquired businesses, retention rates for both core clients and the broader business, realization of new client wins in Europe and Asia-Pacific. The growing gap between GAAP and adjusted results highlights dependence on non-GAAP adjustments. Continued GAAP losses and expanded operating expenses will be important areas for monitoring, alongside the timeline for realizing operational and technology synergies. Management did not announce any changes to its dividend policy.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
