Workday Inc., a prominent player in human resources and finance software, has experienced a notable decline in its stock value, dropping as much as 11% in extended trading sessions following the release of its quarterly forecast, which fell short of analyst expectations. The company announced its predicted adjusted operating margin of 25% against an anticipated $2.03 billion in subscription revenue for the upcoming fiscal fourth quarter. Analysts, according to StreetAccount, had projected a slightly higher margin of 25.5% and revenue of $2.04 billion.

In its fiscal third quarter results, Workday reported an adjusted earnings per share of $1.89, surpassing the expected $1.76. Revenue for the quarter reached $2.16 billion, which also exceeded the anticipated figure of $2.13 billion. The company noted a year-over-year revenue increase of 16%, with subscription revenue hitting $1.96 billion, aligned with analyst consensus.

Workday’s financial performance demonstrated a robust net income of $193 million, or 72 cents per share, marking an increase from $114 million or 43 cents per share in the same quarter of the previous year. The adjusted operating margin for this quarter stood at 26.3%, above the expected 25.4%.

Despite this positive performance, the company is navigating challenges in securing deals in certain regions, as mentioned by Workday’s finance chief, Zane Rowe, during a conference call with analysts. In response to these challenges, Workday is setting its sights on expanding its presence within the U.S. government sector. CEO Carl Eschenbach remarked on the substantial opportunity in this area, noting that over 80% of human capital management (HCM) and enterprise resource planning (ERP) solutions remain on premises.

In a significant strategic move, Workday announced the appointment of Rob Enslin as president and chief commercial officer. Enslin, previously the CEO of UiPath, has an extensive background with roles at Google and SAP. Additionally, there are notable leadership changes as co-president Doug Robinson is set to retire.

The company is also innovating in the realm of artificial intelligence, planning to release agents designed to identify inefficiencies, manage expense reports, and update succession plans by early 2025. Eschenbach indicated confidence in these advancements, stating, "We think they’re going to have a nice impact on bookings and revenue as we go into the new year."

Looking forward, Rowe anticipates a rise in subscription revenue to $8.8 billion for fiscal year 2026, projecting a growth rate of 14%. As of the latest trading close, Workday shares are down 2% in 2024, contrasting with a 26% gain in the S&P 500 index during the same period.

Source: Noah Wire Services