Workday's Outlook for Subscription Services Revenue Sends Stock Tumbling

Key Takeaways

Shares of Workday ( WDAY ) sank 8% Wednesday, a day after the human resources software firm predicted weaker-than-expected full-year subscription services revenue.

The company sees fiscal 2025 subscription services revenue of $7.703 billion. It had anticipated a range of $7.700 billion and $7.725 billion last quarter. Analysts surveyed by Visible Alpha were looking for $7.714 billion. Workday also believes non-GAAP operating margin will be 25.0%, which also missed some forecasts.

Q3 Results Top Estimates

In the third quarter, the company reported adjusted earnings per share (EPS) of $1.89, with revenue increasing 16% year-over-year to $2.16 billion. Both beat estimates.

Subscription services revenue gained 16% to $1.96 billion, with professional services revenue up 15% to $201 million.

Chief Executive Officer (CEO) Carl Eschenbach said the performance reflected "global momentum around our AI-driven innovations, and the strength of our partner ecosystem." Eschenbach noted that organizations increasingly are turning to Workday as they look for ways to cut back on costs.

Workday shares are down about 10% this year.