Workday Stock Plunges 12% on Weak Guidance

Workday (NASDAQ:WDAY) reported first-quarter earnings that surpassed analyst expectations, with an adjusted EPS of $1.74, $0.15 higher than the consensus estimate of $1.59. Revenue also exceeded forecasts, reaching $1.99 billion compared to the anticipated $1.97 billion.

Despite these strong results, Workday's stock fell by 12% in pre-market today after the company provided a cautious subscription revenue guidance that unsettled investors. For the full fiscal year 2025, Workday projects subscription revenue between $7.700 billion and $7.725 billion, reflecting approximately 17% growth, with an adjusted operating margin of 25.0%. For the second quarter of fiscal 2025, the company expects similar subscription revenue growth of about 17%, with an adjusted operating margin of 24.5%.

The first quarter showed robust performance, with total revenues increasing by 18.1% to $1.990 billion compared to the first quarter of fiscal 2024. Subscription revenues grew by 18.8% year-over-year. Operating income also improved significantly, reaching $64 million, or 3.2% of revenues, up from a $20 million loss in the same period last year. Adjusted operating income rose to $515 million, or 25.9% of revenues, from $396 million a year ago.

Workday CEO Carl Eschenbach highlighted the solid revenue growth and adjusted operating margin expansion, while CFO Zane Rowe noted the alignment of first-quarter performance with expectations and the focus on efficiency, despite challenges such as increased sales scrutiny and slower customer headcount growth.