Workday Exceeds Expectations in Q4

by Warren Seah

Workday has reported better-than-expected profits for its fiscal fourth quarter that ended on January 31. The company, known for providing financial and HR software solutions to large enterprises, announced quarterly revenue of $1.922 billion, surpassing both their own forecast of $1.91 billion and the Street’s consensus estimate of $1.917 billion as tracked by FactSet.

Positive Financial Highlights

  • Subscription revenue reached $1.76 billion, demonstrating an 18% increase from the previous year.
  • Adjusted earnings per share stood at $1.57, exceeding Street estimates by ten cents.
  • Non-GAAP operating margin reached 24%, slightly surpassing the company’s target of 23.5%.

Strong Cash Flow and Share Repurchase Activity

In the January quarter, free cash flow totaled $948 million, significantly higher than the consensus estimate of $745 million. Workday mentioned that this quarter benefited from $100 million in customer payments that arrived earlier than anticipated. In fiscal 2024, the company executed a stock buyback totaling $423 million.

End-of-Year Results and Future Outlook

For the full fiscal year ending in January 2024, Workday reported revenue of $7.26 billion, marking a 17% increase from the previous year and slightly surpassing guidance. Adjusted profits for the full year landed at $5.84 per share, slightly above the consensus estimate of $5.75.

Workday has reaffirmed its fiscal year 2025 guidance, expecting subscription revenue to range between $7.725 billion and $7.775 billion, reflecting a 17% to 18% growth rate. Additionally, the company now anticipates a full-year non-GAAP operating margin of 24.5%, an improvement from the fiscal 2024 level.

Workday Announces Strong Growth and Acquisition of HiredScore

In the latest financial quarter, Workday has reported an impressive 18% growth in subscriptions, aligning with market expectations. This growth is further amplified by the inclusion of a leap day, contributing an additional percentage point to the overall growth.

Acquisition of HiredScore

Workday has made waves with its recent acquisition of HiredScore, a cutting-edge start-up from New York specializing in “AI-powered” talent software. While the terms of the acquisition remain undisclosed, this move demonstrates Workday’s dedication to enhancing its technological capabilities.

Optimistic Outlook for the Future

Workday’s Chief Financial Officer, Zane Rowe, expressed confidence in the company’s performance, particularly highlighting robust growth in subscription revenue throughout the fourth quarter. Describing the quarter as a “clean print,” Rowe emphasized the significant progress Workday is making in its industry.

Embracing Artificial Intelligence

Emphasizing the importance of integrating artificial intelligence (AI) into its offerings, Workday aims to enhance customer experiences by incorporating AI elements across its product portfolio. While these advancements are still in their early stages of monetization, customers can expect enhanced win rates and satisfaction as Workday’s AI capabilities evolve. Certain AI-intensive modules may incur additional charges, signaling exciting developments to come in the near future.

Stock Performance

Heading into the quarter, Workday shares have experienced substantial growth, boasting a 12% increase over the year and an impressive 68% surge over the last 12 months.

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