Workday shares surge on revised medium-term outlook, Q2 beat

NEW YORK – Workday Inc . (NASDAQ:) reported better-than-expected second-quarter results, sending its shares soaring 11% in premarket trading Friday. 

The cloud-based enterprise software provider posted adjusted earnings per share of $1.75, surpassing the analyst estimate of $1.65. Revenue for the quarter came in at $2.09 billion, slightly above the consensus estimate of $2.07 billion and up 16.7% YoY.

For the third quarter and full fiscal year 2025, the company expects third-quarter subscription revenue of $1.955 billion, representing 16% growth. For the full year, Workday reiterated its subscription revenue guidance of $7.700 billion to $7.725 billion, a 17% increase YoY.

Most notably, management revised its medium-term targets, indicating a stronger focus on margin expansion, with expectations for non-GAAP operating margins to reach 30% by fiscal 2027.

Commenting on the report, Piper Sandler analysts said they view WDAY’s annual subscription revenue growth forecast “as prudent given the challenging macro” environment.

The investment bank raised its price target from $262 to $285 “to reflect higher margins and multiple growth levers that could help insulate mid-teens subscription growth.”

Separately, JPMorgan analysts said the company’s revised mid-term framework “removes growth overhang” for WDAY. 

“With the company now providing a revised mid-term growth + margin algorithm, we note that our growth forecast going into the report had already been below the 17-19% level for FY26 Subs rev growth, and while we are now resetting this growth rate 180bps lower to a more achievable 15%, this downward revision is being rewarded by nearly 500bps of margin expansion over the next few years.”

Carl Eschenbach, CEO of Workday, commented on the results, saying, “Workday delivered a solid quarter of growth and operating margin expansion, as businesses of all sizes and industries around the world increasingly turn to Workday as their trusted partner in navigating the future of work.”

The company reported that its 12-month subscription revenue backlog grew 16.1% YoY to $6.80 billion, while total subscription revenue backlog increased 20.9% to $21.58 billion.

Workday slightly raised its expectation for fiscal 2025 non-GAAP operating margin to 25.25%, up from its previous guidance. The company also announced a new $1.0 billion share repurchase program.

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