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Workday Raises Full-Year Subscription Revenue Outlook Following Fiscal Second-Quarter Beat

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Workday Raises Full-Year Subscription Revenue Outlook Following Fiscal Second-Quarter Beat

Workday (WDAY) raised the low end of its full-year subscription revenue outlook after the finance and human resources solutions provider recorded fiscal second-quarter results above Wall Street's estimates.

Subscription revenue is now expected to come in between $9.94 billion and $9.95 billion for fiscal 2027, the company said late Thursday, reflecting a higher bottom end versus the prior estimate of $9.93 billion. The current consensus on FactSet is for $9.95 billion.

"While we're still in the early innings, demand for our agentic portfolio is building," Chief Financial Officer Zane Rowe said during an earnings call, according to a FactSet transcript. "We're focused on driving discovery and adoption through initiatives like our Lighthouse program, which we believe will benefit subscription revenue growth over time."

The stock fell 2.3% in the most recent premarket activity.

Workday is currently targeting subscription revenue growth for fiscal 2028 of about 11%, in line with its expected growth rate for the second half of the ongoing fiscal year, according to Rowe.

Oppenheimer said in a client note earlier this week that Workday's second-quarter setup appeared to be favorable for the company amid stable demand and robust momentum in agentic artificial intelligence products. The brokerage at the time said it expected the company to increase its fiscal 2027 guidance.

For the quarter ended July 31, Workday's adjusted earnings rose to $2.75 per share from $2.21 the year before, topping the Street's view for $2.61. Revenue climbed 13% to $2.65 billion, just ahead of the average analyst estimate of $2.64 billion.

Subscription revenue increased 14% year over year to $2.47 billion. The company ended the second quarter with a subscription revenue backlog of $27.4 billion, up 8% from a year ago, though the growth rate was impacted by continuous "mix shift towards customer base bookings versus net new, and the mix of industries that drove our net new bookings," Rowe said on the call.

Professional services revenue slipped to $178 million from $179 million.

For the ongoing three-month period, Workday anticipates subscription revenue of $2.52 billion, representing a gain of 12%. The Street is looking for $2.51 billion.

"We continue to prioritize investment in AI alongside strategic investments in the core while driving efficiencies across the business," Rowe told analysts.

Oracle (ORCL), which competes with Workday in the enterprise cloud software market, is expected to release its latest financial results next month.

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