Workday adds 8% on Q1 beat and raise; better-than-expected say analysts

Workday (NASDAQ:) shares surged more than 8% in early Friday trading after the company reported Q1 results, which were described as better-than-expected by Wall Street analysts.

The company reported of $1.31, better than the consensus estimate of $1.12. Revenue increased 17.4% year-over-year to $1.68 billion, compared to the consensus estimate of $1.67B.

Subscription revenues grew 20.1% year-over-year to $1.53B. Total subscription revenue backlog grew 31.6% year-over-year to $16.65B.

The company raised the low end of its fiscal 2024 subscription revenue guidance to $6.550-$6.575B, representing an 18% growth. Workday expects Q2 subscription revenue in the range of $1.611-$1.613B.

Furthermore, the company announced the appointment of Zane Rowe to CFO, effective June 12, 2023. Rowe served as a CFO of VMware (NYSE:) for seven years. Workday’s current CFO, Barbara Larson, will be stepping back to spend more time with her family, after a transition period.

Stifel analysts said the results were better than expected.

“The quarter and management’s forward pipeline/demand commentary point to a stronger environment than our 1Q checks, but continue to believe that without meaningful progress on the FINS and International fronts a return to 20%+ subscription growth could prove challenging,” they said.

Mizuho analysts said the results were “strong”.

“Workday remains in a strong position to become the preeminent vendor in the back-office suite over the longer-term,” they wrote in a note.

Both Mizuho and Stifel analysts raised the target on WDAY stock.

Additional reporting by Senad Karaahmetovic