Workday shares jumped Friday after the company reported second-quarter earnings that topped analyst estimates and raised its outlook. WDAY stock ended the regular trading session up more than 5%.
Workday said late Thursday it earned an adjusted $1.43 per share from revenue of $1.79 billion for the three months ended July 31. The quarterly revenue marked a 16.3% increase from the same period last year for the Pleasanton, Calif.-based company.
Analysts expected Workday earnings of $1.26 per share on revenue of $1.77 billion, according to FactSet. A year earlier, Workday earnings were 83 cents a share on an adjusted basis for the second quarter, on sales of $1.54 billion.
Workday said subscription revenue for the fiscal second quarter increased 18.8% to $1.62 billion, compared with analyst estimates of $1.61 billion.
WDAY Stock Climbs On Earnings Beat
WDAY stock surged 5.4% to close at 236.97 on the stock market today. Workday sells software for human resources and finance departments, such as payroll tools.
"The strength of our Q2 results and momentum going into the second half of our fiscal year highlight the compelling opportunity ahead for Workday," Workday Chief Financial Officer Zane Rowe said in written remarks.
Rowe was named Workday's CFO in May. He added that Workday is raising its outlook for the fiscal year. The company is projecting subscription revenue of $6.58 billion at the midpoint of its range, representing 18% yearly growth. Analysts were projecting $6.57 billion before Workday's earnings.
For the current quarter ending in October, Workday officials predicted subscription revenue of $1.679 billion, based on the midpoint of its range. Before Thursday's report, analysts were projecting subscription sales of $1.68 billion in the October-ending quarter, according to FactSet.
WDAY Stock And AI Potential
Also, Workday's management said the company is seeing momentum in integrating artificial intelligence products into its offering. Workday's strategy in developing AI and machine-learning products dates back to 2014, noted Aneel Bhusri, Workday's co-founder and co-chief executive.
"We're currently building product capabilities that leverage generative AI for a variety of tasks," Bhusri said during a conference call with analysts. "Examples include natural language generation, content search, content summarization, content augmentation and document understanding. And we're looking beyond those use cases at how we can also leverage copilots, agents and conversational UI."
Bhusri added that the company will be previewing new AI capabilities at its investor day next month.
Solid Results, Conservative Outlook
In a note to clients, WDAY stock analyst Kirk Materne of Evercore ISI said the company delivered "solid F2Q results," highlighted by revenue growth above analyst consensus. But he added that the company's outlook for the second half of the year appeared potentially conservative.
"We are not overly surprised at the relative lack of upside to the top-line guide as we expected management to remain fairly conservative given (Rowe) is still very new to the seat, and the macro environment remains a bit of a question in the near term," Materne wrote.
Workday shares had advanced 38% on the year, coming into the earnings report.
WDAY stock holds a best-possible Composite Rating of 99 and a strong Relative Strength Rating of 94 out of 99, according to IBD Stock Checkup.
