Workday Shares Slide as Revenue Misses Wall Street Targets
The enterprise software company's stock fell despite beating earnings estimates and raising its full-year subscription revenue forecast.
Workday, Inc. (WDAY) saw its shares decline approximately 4.25% in after-hours trading on Thursday after the company reported second-quarter revenues that fell short of analyst expectations, overshadowing an earnings beat and an increased annual forecast.
The enterprise cloud applications provider announced total revenues of $2.348 billion for its fiscal 2026 second quarter, a 12.6% increase year-over-year but below the Wall Street consensus of $2.389 billion. The miss on the top line appeared to be the primary driver for the negative investor reaction.
On the bottom line, Workday reported non-GAAP diluted earnings per share of $2.21, surpassing analyst estimates of $2.157. The company demonstrated strong growth in its subscription backlog, a key metric for future revenue, which rose 17.6% year-over-year to $25.37 billion.
Despite the immediate market reaction, Workday's leadership expressed confidence and raised its outlook. "Workday delivered another solid quarter, driven by our AI and platform innovation, international momentum, and an ecosystem that continues to grow alongside us," said CEO Carl Eschenbach.
The company increased its guidance for full-year fiscal 2026 subscription revenue to $8.815 billion, representing 14% growth. It also boosted its non-GAAP operating margin forecast to approximately 29%.
"Our second quarter results reflect the strength of our platform and our continued progress across several of our growth initiatives," stated CFO Zane Rowe, attributing the revised guidance to first-half momentum and the recent acquisition of AI recruiting software firm Paradox.
The report highlights the market's intense focus on top-line growth for software-as-a-service (SaaS) companies. While profitability exceeded expectations, the failure to meet revenue targets was enough to send shares lower, indicating that investors are closely watching for any signs of a slowdown in sales momentum.