Workday's stock rallied in pre-market trading, climbing nearly 12% after the enterprise software company posted first-quarter results that beat Wall Street expectations and helped ease investor worries about rapid demand disruption from AI-focused rivals.
The Pleasanton, California-based company reported subscription revenue of $2.35 billion, a 14.3% rise from the year-ago period. Chief Commercial Officer Rob Enslin said net new business accounted for 40% of that subscription growth. Despite the quarterly strength, Workday left its annual subscription revenue forecast unchanged.
Quarterly total revenue reached $2.54 billion, topping analysts' average estimate of $2.52 billion based on data compiled by LSEG. Adjusted earnings per share for the quarter came in at $2.66, ahead of the consensus estimate of $2.51.
Market context and analyst reactions
Barclays analysts characterized the results as unlikely to be a wholesale change to the competitive thesis yet nonetheless offering comforting data points for investors assessing potential AI-led threats to traditional software vendors. Jefferies analysts added that Workday's position appears relatively shielded from AI disruption, citing the company’s roughly 80 million users, high retention rates, and its role as a system of record.
Workday has been integrating AI capabilities across its platform, including the March rollout of "Sana," the company's conversational AI layer, as part of its efforts to remain competitive in the evolving market.
Valuation and share performance
Workday's stock has declined more than 43% year-to-date, while the S&P 500 software and services index is down about 14% over the same period. On a forward 12-month basis, Workday’s price-to-earnings multiple stands at 10.93, compared with a peer multiple of 12.8 for Salesforce, according to the information provided.
Key takeaways
- Workday beat quarterly revenue and adjusted earnings expectations, prompting a near 12% pre-market stock move.
- Subscription revenue rose 14.3% to $2.35 billion, with net new business contributing 40% of that increase.
- Management maintained the annual subscription revenue forecast despite the quarter's outperformance.
Quoted perspectives
"We are not sure these results will be a thesis changer but provide comforting data points nonetheless," Barclays analysts said.
Jefferies analysts said they believe Workday is relatively insulated from AI disruption due to its 80 million users, strong retention, and status as a system of record.
Implications for markets and sectors
The report and subsequent share move have direct relevance for the enterprise software and broader technology sectors, where investor concerns about AI competition and platform resilience are influencing valuations and capital allocation decisions.