Workday stock jumped after the software maker reported second quarter earnings and revenue that topped Wall Street consensus estimates and raised its operating margin outlook through 2027.
Pleasanton, Calif.-based Workday reported financial results after the market close on Thursday. Workday lowered its subscription revenue growth outlook to 15% from 18% through 2027. However, the software maker said it expects operating margins to improve to 30%, up from previous guidance of 25%.
"This margin expansion will come through more scrutiny on headcount growth and location, continued leverage from the company's partner channel, and additional investments in technology to drive efficiency across all business segments," said William Blair analyst Jake Roberge in a report.
"Importantly, the company will continue to invest in growth initiatives including international expansion, the financials opportunity, and new artificial intelligence-centered solutions."
For the quarter ending July 30, Workday earnings rose 22% to $1.75 per share from a year earlier on an adjusted basis. Revenue climbed 17% to $2.085 billion, including acquisitions.
Workday Stock: Guidance Light
Analysts expected Workday earnings of $1.65 a share on revenue of $2.072 billion. A year earlier, Workday earnings were $1.43 a share on sales of $1.786 billion.
WDAY stock fell more than 3% on the earnings release. After management's earnings call with analysts, shares reversed up. On the stock market today, Workday stock popped 12.% to near 260 before the market open.
For the current October quarter, the company said it expects subscription revenue of $1.955 billion at the mid point of guidance versus estimates of $1.966 billion.
The company sells software for human resources management, such as payroll tools. About 70% of revenue comes from human capital management products. Also, it has expanded into financial software.
Further, an investor day for Workday stock is slated for Sept. 17. The company could update long-term financial guidance at the event.
Heading into the Workday earnings report, shares were down 15% in 2024.
Also, WDAY stock holds an IBD Relative Strength Rating of 22 out of a best-possible 99, according to IBD Stock Checkup.
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