Workday shares surge on strong Q1 results and raised margin outlook
First-quarter revenue climbed 13.5% to $2.54 billion, while the company lifted its full-year operating margin forecast to 30.5% amid accelerating demand for agentic AI products.
Shares in Workday rose more than 5% following the release of its first-quarter financial results, which demonstrated robust growth despite broader headwinds in the software-as-a-service sector. The company reported revenue of $2.54 billion, a 13.5% increase year-on-year that surpassed consensus estimates of $2.52 billion. Adjusted earnings per share also climbed 19% to $2.66, beating the consensus estimate of $2.51.
The performance was underpinned by significant adoption of artificial intelligence offerings. Workday’s new annual account value from agentic AI products surged 200% year-on-year, with annual recurring revenue from these services nearing $500 million. The company noted that its Flex Credit pricing model is gaining traction, supporting AI adoption among customers and simplifying monetisation.
Subscription revenue grew by more than 14% to $2.35 billion, contributing to a 15.5% increase in the 12-month subscription revenue backlog to $8.81 billion. Total subscription revenue backlog also expanded by nearly 11% to $27.3 billion. Management maintained its full-year subscription revenue outlook of between $9.925 billion and $9.95 billion, indicating growth of 12% to 13%.
Looking ahead, Workday forecast second-quarter subscription revenue growth of 13%, equating to approximately $2.455 billion, which sits slightly ahead of the $2.45 billion consensus. The company also raised its full-year operating margin outlook to 30.5%, up from a previous guidance of 30%.
Workday has faced considerable pressure over the past year, with shares more than halving as the broader SaaS sector sold off. Analysts noted the stock’s vulnerability due to ties with enterprise hiring and potential disruption from AI. However, the company’s forward price-to-sales ratio of 3.1 and forward price-to-earnings ratio of 12.3, based on fiscal 2026 estimates, suggest it may be trading at a discount relative to its growth trajectory.
This report was originally published by The Motley Fool and syndicated via Yahoo Finance.
