Workday (NASDAQ:WDAY) reported quarterly revenue and adjusted earnings above analyst expectations while providing a third-quarter subscription revenue forecast broadly in line with consensus estimates.
The company’s shares initially declined in extended trading following the results before reversing direction to trade slightly higher.
Third-quarter subscription revenue forecast at $2.515 billion
For the third quarter, Workday forecast subscription revenue of $2.515 billion, slightly ahead of the $2.51 billion analyst estimate cited in the source material.
For the full fiscal year, the company expects subscription revenue of between $9.940 billion and $9.950 billion, broadly matching the analyst estimate of $9.95 billion.
Workday is also expanding its artificial intelligence offerings. AI accounted for more than 25% of new annual contract value during the quarter, while more than 5,500 customers were using at least one of the company’s internally developed AI agents, an increase of more than 35% from the previous quarter.
Revenue rises 12.8%
For the quarter ended July 31, Workday reported revenue of $2.649 billion, up 12.8% from $2.348 billion in the same period a year earlier.
Adjusted diluted earnings per share increased to $2.75 from $2.21.
The results exceeded analyst expectations of $2.64 billion in revenue and adjusted earnings of $2.61 per share.
Subscription backlog increases
Workday’s 12-month subscription revenue backlog increased 14.2% year over year to $9.034 billion.
Total subscription revenue backlog reached $27.403 billion, representing an 8.0% increase from the previous year.
Adjusted operating income rose to $824 million, equivalent to 31.1% of revenue, from $680 million, or 29.0% of revenue, a year earlier.
Adjusted net income increased to $677 million from $598 million.
Bank of America comments on AI initiatives
Bank of America analysts said Workday’s AI initiatives are “gaining traction but reacceleration is still elusive.”
“The company’s AI initiatives remain early-stage and may require time to drive meaningful financial impact. We lower our estimates to reflect a slower long-term growth trajectory and reiterate our Neutral rating and $205 PO,” they wrote.
The comments represent Bank of America’s assessment rather than company guidance.
Workday authorises additional $4 billion share buyback
Workday repurchased approximately 9.8 million shares for $1.3 billion during the quarter.
The company’s board separately authorised an additional $4 billion of open-ended share repurchases.
Workday ended July with $3.403 billion in cash, cash equivalents and marketable securities.