Workday’s stock pops as it reports strong earnings beat and targets federal customer wins – News

Human resources and financial management software company Workday Inc.’s stock popped more than 12% in extended trading today after it posted strong quarterly results that surpassed analysts’ expectations.

The company delivered fourth-quarter earnings before certain costs such as stock compensation of $1.92 per share, easily beating Wall Street’s target of $1.78, while revenue rose 15% from a year earlier, to $2.21 billion. That also came in above the analyst’s consensus estimate, of $2.18 billion.

Net income for the period fell from $1.19 billion one year earlier to just $94 million, though the company explained the discrepancy. It noted that it had benefited from a deferred tax asset valuation allowance of $1.1 billion in the year-ago quarter, so the decline was not the result of any alarming issues on the business side.

Workday sells a cloud-based platform for human capital and financial management, helping businesses to manage their workforces and financial processes. Its tools encompass applications for payrolls, benefits administration and financial reporting.

Like many enterprises, Workday has been keen to expand the artificial intelligence capabilities of its platform. Last year, it rolled out a new version of Workday Illuminate, its flagship AI offering. It introduced generative AI agents that can help to automate business processes and workflows in areas such as recruitment, employee management, expense reporting, succession planning and more.

Workday Chief Executive Carl Eschenbach (pictured) said in a call with analysts that the company has seen enormous demand for Illuminate’s AI agents, which can work with minimal input from humans.

“AI is front and center in every conversation I have with customers, prospects and partners,” Eschenbach said. “They want to move beyond incremental productivity gains, and they’re also looking for ROI that helps them drive growth back into their business.”

The CEO added that about 30% of the company’s expanded deals with existing customers in the quarter related to at least one AI product, similar to the previous quarter. He told analysts that may improve, since the company has many new AI products in the pipeline, set to launch later this year.

Another big positive for Workday, at least so far, is Elon Musk’s Department of Government Efficiency, which has been tasked by U.S. President Donald Trump with slashing the federal government’s spending, Eschenbach said. He noted that the company has been laser-focused on federal sales for the last 18 months, and insisted its products could be just what Musk and his team are looking for.

“The systems they have, specifically their ERP, HCM and financial systems, are very antiquated,” the CEO explained. “In fact, the majority of them are still on premises, which means they’re inefficient. And as we think about DOGE and what that could potentially do going forward, if you want to drive efficiency in the government, you have to upgrade your systems.”

Under Eschenbach, who became Workday’s sole CEO last year, the company has made a lot of changes. Last month, he said the company will be laying off 1,760 employees, or around 8.5% of its total staff, to free up cash to invest in its AI research.

He has also made a number of executive changes, with the latest being to bring in former Google Cloud executive Gerrit Kazmaier as Workday’s new president of products and technology. He said Kazmaier is set to replace Sayan Chakraborty, who currently holds that post, but is set to retire after more than a decade with the company.

Prior to that, Eschenbach brought in former UiPath Inc. CEO Rob Enslin to serve as Workday’s new president and chief commercial officer.

Looking ahead to the next quarter, Workday issues a somewhat conservative forecast, saying it sees subscription revenue of $2.05 billion and an adjusted operating margin of 28%. Wall Street is looking for slightly more subscription revenue of $2.06 billion, albeit with a lower adjusted operating margin of 26.7%.

For fiscal 2026, Workday is shooting for $8.8 billion in subscription revenue and an adjusted operating margin of 28%. The revenue forecast is a tad higher than the number it provided three months earlier, and implies growth of 14% compared to fiscal 2025, where it delivered $7.718 billion in subscription sales.

The after-hours gain recorded today likely will mean Workday’s stock is essentially flat in the year-to-date, slightly off the pace of the broader S&P 500 index, which is up 1% so far.

Photo: News