10-Q: Clearwater Analytics Reports Q1 2026 Results Amid Merger

Clearwater Analytics Holdings, Inc. reported a net loss for the first quarter of 2026, with revenue significantly increasing year-over-year, while navigating a pending acquisition.

Summary

• Clearwater Analytics Holdings, Inc. reported a net loss of $2.8 million for the first quarter ended March 31, 2026, a decrease from a net income of $6.9 million in the same period of 2025.
• Revenue for the quarter significantly increased by 74% to $221.2 million, up from $126.9 million in Q1 2025.
• The company is proceeding with its acquisition by an investor group led by Permira and Warburg Pincus, valued at approximately $8.4 billion, with an expected closing in the second quarter of 2026, pending regulatory approvals.
• Adjusted EBITDA was $77.4 million, a substantial increase from $45.1 million in Q1 2025, indicating strong operational performance.
• The company experienced a significant increase in operating expenses, particularly in cost of revenue, research and development, and sales and marketing, largely due to recent acquisitions and headcount growth.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed result; while revenue and operational efficiency (Adjusted EBITDA) show strong growth, the net loss, increased expenses, and significant rise in interest expense are concerning, especially in the context of a pending acquisition.

Positives

• Revenue increased by 74% to $221.2 million in Q1 2026 compared to $126.9 million in Q1 2025.
• Annualized Recurring Revenue (ARR) reached $871.8 million as of March 31, 2026, up from $493.9 million in Q1 2025.
• Gross revenue retention rate remained strong at 97% for Q1 2026.
• Net revenue retention rate was 108% for Q1 2026, indicating growth from existing clients.
• Adjusted EBITDA increased by 71.8% to $77.4 million in Q1 2026 from $45.1 million in Q1 2025.
• The company has secured all required regulatory approvals for the merger, except for FIRB approval in Australia.

Negatives

• The company reported a net loss of $2.8 million for Q1 2026, compared to a net income of $6.9 million in Q1 2025.
• Cost of revenue increased by 123% to $75.7 million, outpacing revenue growth.
• Operating expenses increased significantly, with Research and Development up 53% and Sales and Marketing up 136%.
• Interest expense increased dramatically by 1,276% to $12.6 million due to new borrowings under the 2025 Credit Agreement.
• Cash and cash equivalents decreased by $9.7 million to $81.5 million from $91.2 million at the end of 2025.

Risks

• The proposed merger may not close or could be delayed, potentially causing financial and operational disruptions and a decline in stock price.
• Lawsuits related to the proposed merger could delay or prevent its completion.
• The company operates in a highly competitive industry, which could negatively impact financial performance.
• Revenue is highly dependent on fees based on the value of assets on the platform, making it susceptible to market volatility and economic downturns.
• Prolonged sales cycles for large institutional clients can lead to substantial upfront sales costs and less predictable revenue.
• The company faces challenges in sustaining its considerable revenue growth and attracting/retaining top talent.
• Failures or disruptions in cloud-based services or IT systems could harm the business.
• Failure to successfully integrate acquisitions could strain resources.
• Intellectual property and proprietary technology may not be adequately protected.
• Provisions in the company's charter and bylaws could delay or prevent a change of control or management changes.
• The merger may divert management's attention from ongoing business operations.

Future Outlook

The company expects to continue investing in sales and marketing for international expansion and in research and development to maintain its technological advantage. The merger with the investor group led by Permira and Warburg Pincus is expected to close in the second quarter of 2026, subject to regulatory approvals.

Management Comments

• "Our future growth is dependent upon our ability to continue to add new clients, and in 2025 we added over 1,000 net new clients through organic growth and acquisitions."
• "We have enjoyed consistent gross revenue retention rates of at least 98% in 27 of the past 29 quarters."
• "Our relationships with our clients expands as these clients add more assets to our platform, with our quarterly net revenue retention rates (as defined below under Key Operating Measures) between 114% and 109% in 2025."
• "We believe that the value provided by our platform is equally applicable to asset owners and asset managers outside of North America, and there is a significant opportunity to expand our client base and usage of our platform internationally."
• "While we believe we will be able to reduce our research and development expenses as a percentage of revenues as we achieve greater scale, our priority is to maintain and grow our technological advantage over our competitors."

Industry Context

StockSavvy.ai notes that Clearwater Analytics' Q1 2026 results reflect a dynamic period for the investment management technology sector, characterized by significant M&A activity and a continued push towards cloud-native, AI-powered solutions. The company's substantial revenue growth and strong retention rates highlight the demand for its comprehensive platform, even as it faces increased operating costs and interest expenses due to recent acquisitions and debt financing. The pending acquisition by a private equity consortium signals a broader trend of consolidation and strategic investment in the fintech space.

Comparison to Industry Standards

• Clearwater Analytics' gross revenue retention rate of at least 98% in 27 of the past 29 quarters significantly exceeds industry benchmarks for SaaS companies, which often range from 85-95%.
• The net revenue retention rate of 108% for Q1 2026 indicates successful expansion within the existing client base, a key indicator of product stickiness and value, outperforming many competitors who may struggle to achieve net retention above 100%.
• The company's reported NPS score, while not quantified in this filing, is stated to be industry-leading, suggesting strong customer satisfaction compared to peers in the investment management software space.
• The significant increase in revenue (74% YoY) and Adjusted EBITDA (71.8% YoY) demonstrates robust growth, though the concurrent net loss and increased operating expenses highlight the cost pressures and integration efforts common in a rapidly growing, acquisitive company within the fintech sector.

Legal Proceedings

• No legal proceedings are currently believed to have a material adverse effect on the company's results of operations, financial condition, or business.

Stakeholder Impact

• Shareholders: The pending acquisition at $24.55 per share offers a cash exit for Class A shareholders. The overall financial performance and merger progress will influence share price.
• Employees: The company continues to invest in headcount growth and equity-based compensation, indicating a focus on talent retention and motivation, though increased operating expenses may impact future profitability.
• Customers: Strong retention rates suggest continued satisfaction. The integration of acquired companies aims to enhance the platform's capabilities, potentially offering more comprehensive solutions.
• Creditors: The increased debt load from the 2025 Credit Agreement will impact debt servicing obligations, though the company believes its cash flow and available credit are sufficient.

Next Steps

• Complete the acquisition by the investor group led by Permira and Warburg Pincus, expected in Q2 2026.
• Obtain FIRB approval for the merger.
• Continue to integrate Enfusion and Beacon operations, control processes, and information systems.
• Focus on growing the client base organically and inorganically.
• Expand relationships with existing clients through cross-selling functionalities and services.
• Invest in international expansion and product innovation.

Key Dates

Recommendation

The company demonstrates strong revenue growth and operational efficiency (Adjusted EBITDA), alongside high client retention. However, the reported net loss, significant increase in interest expense due to debt financing, and the uncertainty surrounding the closing of the pending $8.4 billion acquisition warrant a cautious 'hold' rating. Investors should monitor the progress of the merger and the company's ability to manage its increased cost structure.

Keywords

Clearwater Analytics, SEC Filing, 10-Q, Financial Results, Investment Management Software, SaaS, Merger, Acquisition, Revenue Growth, Adjusted EBITDA, Q1 2026