Workday shares fell 5% in extended trading on Thursday after the company reported a revenue beat for its fiscal second quarter but provided a revenue forecast for the full year that offered little upside surprise.
The company posted revenue of $2.649 billion for the quarter ended July 31, up 12.8% from $2.348 billion a year earlier and exceeding the $2.64 billion consensus estimate. Adjusted diluted earnings per share rose to $2.75 from $2.21, topping the $2.61 forecast. Adjusted net income increased to $677 million from $598 million, while adjusted operating income grew to $824 million, representing 31.1% of revenue compared with 29.0% a year earlier.
Workday’s 12-month subscription revenue backlog climbed 14.2% year-over-year to $9.034 billion, while total subscription revenue backlog rose 8.0% to $27.403 billion. AI-related contracts accounted for more than 25% of new annual contract value in the quarter, with over 5,500 customers using at least one of Workday’s organic AI agents, a 35% increase from the prior quarter.
Despite the strong quarterly performance, the company’s guidance for the third quarter and full fiscal year remained conservative. Workday forecast third-quarter subscription revenue at $2.515 billion, slightly above the $2.51 billion estimate, but its full-year subscription revenue outlook of $9.940 billion to $9.950 billion aligned closely with the $9.95 billion consensus, offering limited upside.
Workday also continued its share repurchase program, buying back approximately 9.8 million shares for $1.3 billion during the quarter. The board subsequently authorized an additional $4 billion in open-ended buybacks. As of July 31, the company held $3.403 billion in cash, cash equivalents, and marketable securities.
The muted reaction to the earnings beat underscored investor concerns over the company’s conservative full-year outlook, which failed to provide a meaningful upward revision to prior expectations.
