MW Workday earnings brought 'what bulls were hoping to see,' and the stock is up

By Emily Bary

Workday's stock has fallen over the past year but one analyst thinks it's poised for a rebound

Workday Inc.'s latest earnings report had a few big positives that seemed to be resonating with investors Tuesday, as shares climbed 8% higher in the extended session.

To start, the workplace-software company beat expectations on its 12-month revenue backlog for the fiscal fourth quarter, which came in at $7.63 billion. Analysts tracked by FactSet were expecting $7.55 billion.

Additionally, Workday (WDAY) gave an outlook for subscription revenue that "seems reasonable," in the view of Evercore ISI analyst Kirk Materne. Workday expects $8.8 billion in subscription revenue for fiscal 2026, matching what analysts had been modeling.

Workday now expects 28% operating margins for the fiscal year, whereas its prior outlook was for 27.5%. That's another high point, according to Materne, and one that "demonstrates the company continues to focus on driving profitability."

The results and full-year outlook reflect "what bulls were hoping to see," Materne said in his note to clients.

Those developments overshadowed a weaker-than-expected forecast for the current quarter, as Workday models $2.05 billion in fiscal first-quarter subscription revenue, up 13%. The FactSet consensus was for $2.24 billion.

"In our view, setting a lower bar for F1Q given the macro backdrop was a smart move and helps reduce the risk of a slow start," Materne wrote.

In the latest quarter, Workday notched revenue of $2.21 billion. Subscription revenue came in at $2.04 billion, while analysts had been looking for $2.02 billion.

The company had a 26.4% adjusted operating margin in the latest period.

Following the results, Materne said Workday is still "one of our top 'rebound' ideas" for the second half of the year, though he expected some investor debate to persist, particularly around the revenue outlook. The stock is down more than 16% over the past year.

-Emily Bary

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February 25, 2025 17:02 ET (22:02 GMT)

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