NEW YORK- Workday Inc . (NASDAQ:) reported better-than-expected second-quarter results, sending its shares up 11% in premarket trading on Friday.
The cloud-based business software provider posted adjusted earnings per share of $1.75, beating analyst expectations of $1.65. Revenue for the quarter came in at $2.09 billion, slightly above the consensus estimate of $2.07 billion and up 16.7% year over year.
For the third quarter and full fiscal year 2025, the company expects third-quarter subscription revenue of $1.955 billion, representing growth of 16%. For the full year, Workday reiterated subscription revenue expectations of $7.7 trillion to $7.725 billion, up 17% year over year.
Most notably, management has revised its medium-term targets, indicating a stronger focus on margin expansion, with non-GAAP operating margins expected to reach 30% in fiscal 2027.
Commenting on the report, Piper Sandler analysts said they view WDAY’s annual subscription revenue growth forecast as cautious given the challenging macro environment.
The investment bank raised its price target to $285 from $262 “to reflect higher margins and multiple growth factors that could help insulate subscription growth in the mid-teens.”
In addition, JPMorgan analysts said the company’s revised medium-term framework “eliminates growth overhang for WDAY.”
“With the company now offering a revised mid-term growth + margin algorithm, we note that our growth forecast going into the report was already below the 17-19% level for Subs FY26 revenue growth, and while We are now resetting this growth. If interest rates are 180 basis points lower to a more achievable 15%, this downward revision will be rewarded with a margin expansion of almost 500 basis points in the coming years.”
Commenting on the results, Workday CEO Carl Eschenbach said, “Workday delivered a solid quarter of growth and operating margin expansion as companies of all sizes and industries around the world increasingly turn to Workday as their trusted partner as we navigate the future of Workday.” work.”
The company reported that trailing-twelve-month subscription revenue backlog grew 16.1% year-over-year to $6.80 billion, while total subscription revenue backlog increased 20.9% to $21.58 billion.
Workday slightly increased its fiscal 2025 non-GAAP operating margin guidance to 25.25%, up from previous expectations. The company also announced a new $1.0 billion share repurchase program.
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