Workday, a prominent player in the cloud application sector focused on finance and human resources, witnessed a notable increase in its shares early Friday following the announcement of its fiscal second-quarter results. The company's earnings exceeded analysts' expectations, providing a robust outlook for its subscription revenue for the full year ahead. For the three-month period ending July 31, Workday reported adjusted earnings of $1.75 per share, marking an increase from $1.43 per share in the same period last year.
Analysts had anticipated earnings of $1.65, indicating a positive surprise for investors. Revenue also surged, showing a year-over-year increase of approximately 17%, reaching $2.09 billion—just above market expectations of $2.07 billion. Consequently, shares rose by an impressive 12% in premarket trading. Chief Financial Officer Zane Rowe expressed satisfaction with the performance, stating, "Our second quarter performance was ahead of our expectations across our key financial metrics." He emphasized the company’s strategy that involves striking a balance between targeted investments in growth areas while enhancing operational efficiencies. The revenue derived from subscriptions also grew significantly, rising 17% to $1.9 billion.
Professional services revenue climbed to $182 million, up from $163 million in the year-ago quarter. U.S. revenue constituted the bulk of the figures at $1.56 billion, whereas international revenue reached $524 million, as disclosed by Rowe during the earnings call, as captured in a Capital IQ transcript. Workday’s adjusted operating margin improved to 24.9%, up from 23.6% the previous year, illustrating the company’s effective management of costs.
Nevertheless, total costs and expenses increased to $1.97 billion, compared to $1.75 billion in the corresponding quarter last year. Looking ahead, Workday projects subscription revenue to hover around $1.96 billion for the current quarter, signaling an annual increase of about 16%. Additionally, the company forecasts an adjusted operating margin estimate of approximately 25.25% for this quarter. For fiscal 2025, Workday has maintained its optimistic projection for subscription revenue, forecasting figures between $7.7 billion and $7.73 billion, which would represent a year-over-year growth of 17%.
The adjusted operating margin for the year is expected to align around 25.25%, revising previous guidance of about 25%. Further insights from Rowe indicated that Workday anticipates an annual subscription revenue growth of around 15% for fiscal years 2026 and 2027. He remarked, "Over the past year, we've made good progress across our key growth areas.
While a number of these initiatives are still in their early development, they are already supporting growth in fiscal 2025 as well as for future years as they scale across our products and geographies." Price: $259.85, Change: +$28.77, Percent Change: +12.45.