Enterprise cloud applications provider Workday (NASDAQ:WDAY) delivered better-than-expected Q1 results, driven by a growing customer base. However, the company trimmed its full-year subscription revenue outlook, and this hurt investor sentiments. As a result, WDAY stock dropped over 11% in Thursday’s after-hours trading.
Interestingly, WDAY has an impressive earnings beat history, as it has missed expectations only once since August 2020.
WDAY’s Q1 Earnings Snapshot
The company reported adjusted earnings of $1.74 per share, which exceeded analysts’ estimates of $1.58 per share. Furthermore, the reported figure increased by 32.8% from the prior-year quarter. Meanwhile, WDAY delivered revenues of $1.99 billion in Q1, up 18.1% year-over-year, driven by higher subscription revenues. Also, the company’s top line exceeded Street’s forecast of $1.97 billion.
During the first quarter, Workday’s financial management and full platform customers increased by 20% in comparison to the same quarter last year.
Revised Outlook
For Fiscal 2025, WDAY expects subscription revenue to be between $7.7 billion and $7.73 billion, compared with the previous expectations of $7.725 billion to $7.775 billion. The company cited increased sales scrutiny and lower-than-expected customer headcount growth as key reasons for lowering estimates.
On the other hand, Workday raised its adjusted operating margin expectations to 25% from 24.5%, driven by increased efficiencies.
For the second quarter, WDAY expects subscription revenue of $1.9 billion, reflecting about 17% year-over-year growth. This compares unfavorably with the analysts’ expectations of $1.903 billion.
What Is the Forecast for WDAY Stock?
Workday’s focus on global expansion positions the company well for continued growth. Overall, Workday has a Moderate Buy consensus rating based on 19 Buy and 8 Hold recommendations. The analysts’ average price target on WDAY stock of $318.75 suggests an upside of 22.2%. Shares of the company have gained 10.3% in the past six months.
