Clearwater Analytics Holdings: Strong Growth, Strategic Acquisitions, and Attractive Valuation Drive Buy Rating

Clearwater Analytics Holdings reported a strong Q2 with a 22% increase in core revenue and a 32% adjusted EBITDA margin. The successful integration of recent acquisitions has positively impacted revenue and profitability. Shares trade at an attractive valuation relative to projected 2026 EBITDA estimates, making it a compelling investment opportunity. Analyst Dylan Becker maintains a Buy rating.

Clearwater Analytics Holdings (NYSE: CWAN) reported a robust second quarter (Q2) 2025, showcasing a 70.4% year-over-year (YoY) increase in GAAP revenue. The company's core business contributed to 22% growth in revenue, while the integration of recent acquisitions, particularly Enfusion and Beacon, significantly boosted overall revenue to $181.9 million [1].

Non-GAAP earnings per share (EPS) reached $0.12, surpassing analyst expectations by a cent. However, GAAP net income swung to a $24.2 million loss due to acquisition-related costs. The company's adjusted EBITDA jumped 74.6% YoY, but GAAP gross margin slipped to 65.1% as integration expenses weighed on results [1].

Clearwater's strategic acquisitions have expanded its capabilities, including front-office trading management and advanced risk analytics. The company's platform now covers all stages of the investment lifecycle, from trade execution to accounting and risk. Recent client wins, such as mandates from large European insurance groups and Asian-Pacific banks, demonstrate the appeal of the integrated platform [1].

Despite the strong financial performance, the company's debt rose sharply to $878.1 million, reflecting acquisition funding and higher ongoing interest costs. Free cash flow growth slowed to 4.0% YoY, indicating growing integration costs [1].

Looking ahead, management expects Q3 2025 revenue to reach $203–204 million, representing a 75–76% YoY increase, and projects adjusted EBITDA at about $65 million. For fiscal 2025, revenue is expected to be between $726–732 million, and adjusted EBITDA is forecast at $232–237 million [1].

Analyst Dylan Becker maintains a Buy rating on the stock, citing the company's strong performance and attractive valuation relative to projected 2026 EBITDA estimates [2].

References:
[1] https://www.nasdaq.com/articles/clearwater-cwan-q2-revenue-soars-70
[2] https://finance.yahoo.com/news/clearwater-analytics-announces-second-quarter-201500940.html