What They Do
Clearwater Analytics provides cloud-based investment accounting and reporting software for asset managers, insurance companies, and corporations managing investment portfolios. They solve the back-office complexity of tracking, reconciling, and reporting on billions in investment assets through a single platform. The company generates recurring revenue through SaaS subscriptions based on assets under management and number of users.
Investment Thesis
**Massive market expansion** — Recent acquisitions have expanded their Total Addressable Market to $23B, with asset management becoming their largest booking segment for the first time**AI-driven margin acceleration** — 800+ AI agents deployed across $10T+ in assets are driving gross margins to 82% for steady-state clients, hitting 2027 targets two years early**Cross-selling momentum building** — 70% year-over-year growth in bookings for core modules (risk, alternatives, analytics) as they evolve from pure accounting to comprehensive investment platformKey Risks
**Integration execution** — Successfully combining three major acquisitions while launching an integrated front-to-back platform by H2 2026 is operationally complex**Enfusion commercial model transition** — Changing pricing structure for acquired Enfusion business throughout 2026 could disrupt client relationships and growth trajectoryGrowth Story
Revenue is projected to grow from $731M in 2025 to $1.119B by 2027, representing 24% compound annual growth. The company is expanding beyond traditional investment accounting into front-office portfolio management through acquisitions, creating a $23B TAM opportunity. Growth is accelerating through cross-selling advanced modules to existing clients and penetrating new segments like hedge funds and alternatives.
Profitability Profile
Gross margins have reached 78.5% and are expanding rapidly toward 82% for core clients through AI automation. Adjusted EBITDA margins hit 34.5% in Q3 2025, up 140 basis points year-over-year despite integrating lower-margin acquisitions. The company is generating strong free cash flow while simultaneously investing in product integration and debt paydown.
Competitive Position
Clearwater's single-instance, multi-tenant cloud architecture creates a significant technological moat, enabling superior AI deployment and cost efficiency versus competitors' fragmented systems. They compete with legacy providers like SS&C and newer entrants, but their unified data model across 4,000+ data sources and comprehensive asset class coverage differentiates them. The integrated platform launching in 2026 will directly compete with front-to-back solutions from BlackRock Aladdin and SimCorp.
Recent Momentum
Q3 2025 delivered exceptional results with 77% revenue growth to $205M and ARR reaching $807.5M, driven by the first full quarter of acquisition integration. Management called the $70.7M adjusted EBITDA performance "stunning" as margins expanded despite lower-margin acquisitions. The company entered Q4 with their best pipeline in company history and accelerating cross-sell momentum.
What Wall Street Thinks
Analysts are bullish on the integration story and margin expansion potential, with 2026-2027 estimates reflecting confidence in the cross-selling opportunity. The recent earnings beats have been modest, suggesting realistic expectations, while the focus has shifted from pure growth to profitable scaling. Debate centers on execution risk for the integrated platform launch and timing of Enfusion's commercial model transition.
The Bottom Line
Clearwater is transforming from a pure investment accounting provider into a comprehensive front-to-back investment platform, with AI-driven automation creating a widening competitive moat and accelerating profitability that's hitting long-term targets years ahead of schedule.
