Enterprise software maker Workday reported third-quarter earnings and revenue that topped analyst estimates. The company raised its fiscal 2024 revenue outlook for WDAY stock, which moved into a buy zone on Wednesday.
Workday reported Q3 results after the market close on Tuesday.
"Management also initiated fiscal 2025 subscription revenue guide at 17% to 18%, in line with street estimates combined with margin expansion," said Jefferies analyst Brent Till in a report.
For the quarter ending Oct. 31, Workday earnings rose 57% from a year earlier to $1.56 a share on an adjusted basis.
Revenue climbed 17% to $1.87 billion, including acquisitions.
Analysts expected Workday earnings of $1.41 a share on revenue of $1.85 billion. A year earlier, Workday earnings were 99 cents a share on sales of $1.6 billion.
WDAY Stock: Subscription Revenue
The Pleasanton, Calif.-based company said subscription revenue rose 18% to $1.69 billion, topping estimates of $1.68 billion.
"Following our continued momentum in the third quarter, we are raising our fiscal 2024 subscription revenue guidance to $6.598 billion, representing 19% year-over-year growth," said Zane Rowe, Workday's chief financial officer, in the earnings release. "We are also raising our fiscal 2024 non-GAAP operating margin guidance to 23.8%. Our focus is centered on investing to drive durable long-term growth while expanding margins."
On the stock market today, WDAY stock popped 11% to close at 263.49. According to IBD Stock Checkup, WDAY stock has formed a cup base with an entry point of 252.72.
The company sells software for human capital management, such as payroll tools. Also, it has expanded into financial software.
"Overall, we think the elevated investments in financials, Europe/Middle East and partner channels are starting to bear dividends, resulting in slight acceleration in backlog growth and fueling strong pipeline," said TD Cowen analyst Derrick Wood in a report.
Workday Stock: Lowered Outlook
Heading into the Workday earnings report, shares had advanced 41% in 2023.
In September, Workday lowered its outlook for subscription revenue growth through fiscal 2027 at an analyst day. Workday told analysts Wednesday it now expects subscription revenue growth in a range of 17% to 19% in the next three fiscal years, down from its earlier target of 20%.
WDAY stock tumbled on the news but has clawed back to trade 6% below an entry point.
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